COVID-19: Realigning your borrowing requirements

The Indian economy is grappling with a sharp reduction in economic activity. The GDP growth estimates have been cut down to 3.5% for FY2020-21 and businesses are expected to face considerable liquidity challenges amidst concerns of weaker demand for next few quarters.

While policy makers and the Reserve Bank of India have announced economic assistance for businesses with the objective of easing liquidity in the system and ensuring no defaults in the short term, the relief provides discretion to lenders and is primarily a deferment of liability and not a waiver.

In such a scenario, organisations themselves should take proactive steps to realign their borrowing requirements.

Borrowers need to HALT and consider the following priorities during these uncertain and challenging times:

Short term priorities

• Evaluate actual impact and prepare for bounce-back scenarios
• Manage cash and liquidity and debt obligations
• Ensure cost discipline in the organisation
• Test and revise financial plan

Other priorities

• Address issues in banking facilities, including working capital issues and term loan related issues in the current situation
• Arrive at a funding gap/resolution package after evaluating vital parameters such as EBITDA, capex commitment, debt profile and short-to-medium term debt commitments
• Put in place a short and medium-term revival plan/approach over next 3-6 months and 6-12 months.

To help us understand your borrowing requirements and how we can help, please download and complete this brief form and email it to us.

Grant Thornton’s Recovery & Reorganisation practice can help you realign your borrowing requirements and navigate various liquidity challenges during the ongoing COVID-19 crisis.