In this pandemic, there is no doubt that most of the Companies are facing crunches or are on the verge or in the process of declaring bankruptcy
Shipra Walia/Noida
The whole world is looking forward to the end of the pandemic. Industries and people have started looking forward to the business openings and ways to get back on track.
Though, the process of opening and coming back on track itself needs to have a process to be outlined, the utmost concern on this date is to plan the pandemic industries will face after this pandemic.
The International Monetary Fund (IMF) has predicted negative per capita income growth in 170 countries and a 3% contraction of the global economy in 2020, if the coronavirus will recede in the second half of 2020.
The Government of India on 12 May 2020 announced reform package of INR 20,00,000 crore which will benefit all sectors. The benefit is not directly in the form of cash distribution but covers various measures like government guarantee, loss coverage, reduced cost on withholding or retirement costs, decriminalisation of certain procedural compliance lapses, listing of Non-Convertible Debentures etc.
In this pandemic, there is no doubt that most of the Companies are facing crunches or are on the verge or in the process of declaring bankruptcy.
Going forward due to decrease in lending interest rates and encouragement to the investments modes or tax incentives in a country based on investments, PE investments, FDI or cross border M&A will have another face of achievements.
However, a greater challenge faced will be the valuations of the shares/business. Thus, it will be of utmost importance for business (s) to analyse that the capital supports or the acquisitions of business going forward will be favourable for both acquirer & transferor or will they lead into unfavourable distress selling/losses.
The recent capital infusion by Facebook and other players in Reliance Jio is the best example of the prevalent opportunities in this time. Through mergers and acquisitions, world has endured and recovered from past economic crises, including the burst of the dot-com bubble in 2000-2002 and the Great Recession of 2007-2009.
The impact of Covid-19 is not only financial but also on planning and strategies of the companies including the long-term self-dependency plans.
The methodology of the due diligence will change, valuations will have to consider the pandemic, future projections basis will change, third party approvals on transactions may be mandatory.
