by RItmbarah Arora
The fast spreading COVID-19 has taken over news headlines, causing markets to fall and entire towns to be quarantined. Not only is it sickening large numbers of people, it is also impacting supply chains as air and cargo transport get suspended in China and elsewhere.
During the result season, several firms included discussions on the corona virus with analysts. Management across companies were counting on factories in China to reopen on Feb 10. However in many regions, shutdowns continue. Here’s a list of major companies saying that they may see an impact in their business because of the epidemic.
Cipla (Pharmaceutical and Biotechnology)
Umang Vohra, Managing Director and Global CEO of Cipla said on corona virus, that 45 days is key in the timeline. “A lot of our pharma value chain is linked to China. Well, not just for Cipla, it is linked for the entire pharmaceutical industry. I think a lot of us in the pharmaceutical industry have some stock cover available."
He added, "But I think if this corona virus thing continues for more than a month or 45 days, that will begin to create a huge amount of issue for the pharma sector, for those supplies which are dependent on China. Not everything is dependent on China, but China has a significant value chain linkage for all pharma companies”.
Aurobindo Pharma (Pharmaceutical)
Swami Iyer, CFO of Aurobindo Pharma said, "With regard to the shortages, at this point of time, we have been managing well, and we have stocks to meet the demand. But there is another aspect to it which is the corona virus. I think as we go forward, there will be some discussion if there is an uncertainty there, but all that I can say is that we have been able to meet the demand for the US".
Advanced Enzyme Technology (Pharmaceutical)
"Nobody knows," according to VL Rathi, Chairman of Advanced Enzyme. He said, "It is a global effect. So we do not know, you do not know and I do not know what is going to have an effect of corona virus or all these kind of things. They are looking in the way of restoring back again, but time will tell".
Lupin (Pharmaceutical)
Lupin says that disruption is limited in the short-term, but will build up quickly in the long-term. Nilesh Gupta, Managing Director of Lupin commented, "We are not getting visibility on shipment of containers or the like. Obviously, the country is in the state of lock down. But from our perspective, if this gets eased out in the next 3, 4 weeks, we don't see an issue, and we will be able to manage without any significant disruption at all."
"If it's 3, 4 months rather than weeks, definitely, there would be disruption on some of the APIs, especially for ROW geographies like our cephalosporins because Pen-G is one of the key supplies that everybody buys from China. And there isn't an ability to respond to such kind of acute shortages very quickly. So obviously, we are expecting a sooner rather than later solution on some of these things".
Bharat Forge (Automotive)
Bharat Forge is seeing disruptions, management noted. This will be a common factor across the auto sector. Amit Kalyani, Deputy Managing Director said, " On top of everything else we have this whole coronavirus business which is difficult sitting in India to understand what is the impact of that but 30% of the global supply chain for manufactures goods comes out of China. And about 20% of manufactured goods are purchased by China. So, if you put a stop on it for 30 to 45 days it is quite a big impact".
Amber Enterprises (Air-Conditioning Equipment Manufacturer)
Management noted that "compressors are coming from various plants not only from China but also South Korea." Both these regions have been impacted with quarantines for the coronavirus. Amber Enterprises had covered for extensions until 10th February of quarantines. Beyond that, management noted, "we may also see some impact."
Renaissance Global(Jewellery)
Renaiisance Global has signed an agreement with LFX to launch in China in the first half of 2020. The company noted, "Our distribution plans will get delayed slightly due to the coronavirus. So, we were anticipating rollout in May, June of the calendar year ’20. However, this may get pushed back by two or three months depending on how the coronavirus plays out."
Impact on numbers: negligble
SH Kelkar (Manufacturer of Aroma Ingredients)
Management discussed a coronavirus related spike in raw material costs: "We have seen a huge price spike in the markets for lot of raw materials under the disturbance but these are more of panic-buying and because the production operations is key, if they restore before end of February to normal levels, I don’t anticipate there will be any major change in raw material pricing thereafter."
"At this point, there is no disturbance for us till April. As I alluded, we have covered all the raw materials, they are all in our godowns or in the ports. But we will relook this at the end of February and put out any notice if there is any significant change."
Borosil(Houseware)
it will have an impact for sure," management said on the virus. "Positive or negative I do not know yet. Our inventory planning is quite good so we have sufficient inventory to cover short-term disruptions whereas others may not. So, in the short-term it may be quite positive."
"In the long-term, it really depends on how bad the virus situation gets. If it starts impacting people in India and people do not go to markets to buy, then of course it will have a negative impact. So, any virus is a bad thing so we want it to go away as quickly as possible obviously. It is too early to really say what kind of impact it will have, but it will have an impact and we are following it very closely - virtually on a day-to-today basis."
Sudarshan Chemicals (Chemicals)
"Raw material prices were fairly stable this quarter," the company noted, "However, with the worsening of coronavirus crisis we may see some adverse movement in prices of a few raw materials."
"Most of our Chinese vendors have resumed their production; however, material movement from the plant to port is expected to resume only after the highways are opened, which is about mid-February. We continue to monitor the situation very closely. We expect to have a very normal quarter without many disruptions. We also expect that this may give good opportunity for Sudarshan in the mid-term and long-term products."
Godawari Power & Ispat (Iron Ore and Steel)
"Prices jumped arply by end of December. And it has closed almost to about 540 dollars in industrial markets," Godawari management said. "The short-term prices will further be determined by the outbreak of the Corona virus. And, you know, the near-term prices will definitely be determined by that."
Gujarat Borosil (Glass Manufacturer)
We cannot rule out the possibility that shipments of solar glass from China might be delayed. We cannot rule out that possibility, because we are hearing that a lot of workers had gone home for the Chinese New Year and they might not be allowed to reenter certain cities and so on and so forth. So the fact is that there is a lot of disruption in China
Lumax Industries (Auto lighting and ancillary)
In order to ensure, there is no BS IV stock left after March 31, 2020 automobile companies have already started aligning their productions accordingly.
However, Lumax notes that "due to the recent Coronavirus epidemic and also going forward certain volatility in the global environment, the demand can be muted and therefore we are cautious on the forecast. Lumax being a market leader in lighting, the top three customers constitute Maruti Suzuki, Honda Motor Scooters and Hero MotoCorp. However, these OEMs have shown significant decline in their revenues, which has also adversely affected the revenue growth of the company."
Solar Industries (Explosives Manufacturer)
Solar Industries remained cautious about near-term forecasts, with coronavirus impacts adding to the risks. "Though we are very confident of pickup in domestic and economic activities, led by revival in investment cycles, higher coal production, higher capex spending announced in the budget 2021, but continued unseasonal rains, global slowdown and the recent Coronavirus threat are posing risk in the near term."
Rico Auto Industries (Automotive)
Rico Auto expects the impact to be significant on component supply. "This quarter will be tough and now because of the Coronavirus which is happening in China and impacting the globe, what ultimate impact it will have I think we have all still trying to judge but we all feel that it will have a major impact. (a) It could be the lot of logistics that will be impacted, lot of imported components which comes in from China would get impacted and not necessarily the mechanical components even the electrical and electronic components which comes from China".
Godrej Agrovet (Agribusiness)
Godrej Agrovet is expecting a demand impact from the virus outbreak. The management noted, "coronavirus will result in a lower demand for palm oil and it will also have a lower demand for diesel."
Dhanuka Agritech (Agrochemicals)
Dhanuka management said supply disruptions are happening with the quarantines. "The coronavirus is as unpredictable as anything else as of now, but certainly the supply chain will have its impact." They added with some optimism, "What we are seeing in last few days a bit of China supplies opening up, but I think the entire stabilization will take at least one to two weeks more."
TD Power Systems (AC Generators)
Management noted no immediate effect on the bottomline, "Copper price has just recently dropped because of this coronavirus problem and the scare is like, maybe just to a couple of weeks old, it is not going to impact. So we have booked a lot of copper recently when the prices have dipped in the past two weeks, we booked a big chunk of copper which will start affecting the number."
"Once the copper comes into our production system, it could be somewhere around April-May and then the sales would take place a couple of months later. So it is not going to have any immediate effect on the bottomline."
TCPL Packaging (Packaging)
Saket Kanoria, Managing Director of TCPL Packaging expects some impact on commodity prices, and said, "I would not like to have a guess of whether this is now going to be the new benchmark because raw material prices are quite volatile and there could be some increase in the near future because there is huge uncertainty with respect to China and the coronavirus".
"What impact that has to the rest of the world is completely unknown at the moment. It is not that we as a company import much from China, but it affects all commodity pricing for which right now we do not have any clarity".
Balaji Amines (Chemicals)
Ram Reddy, Managing Director said that the timelines for the Chinese industry to restart has been shifting, "China declared that they will open from February 10. If they open there will not be any major impact. If they don't, yes there will be some impact in the prices. Prices will go up."
"We may have advantage in some products which are not coming from China. However if some matching raw material are not coming, then again our product may suffer, so that will be negative".
Blue Star (Electronics)
"We usually try to stock up a little in advance in the normal course which we have done in the current year as well," management noted, "So as far as Q4 supplies are concerned, we have either received the raw material or some materials are in transit and we expect the shipments to be received within February and early March".
" If it tends to be a very short-term phenomena, then probably everything will get caught up and we are not at this point of time visualizing significant impact in Quarter 4."
Aegis Logistics (Logistics)
Anish Chandria, Vice Chairman & Managing Director commented, "All I would say in terms of overall Aegisbusiness, given that it is highly concentrated as far as LPG and petroleum and many other things apart from chemicals, even if the worst happens, it would have a very minor impact on Aegis. But even if there was any impact in terms of chemicals, it would have a very minor affect as far as Aegis because, as I said, our business is chemicals, is relatively small part of the volumes now. But difficult to predict exactly what would happen".
