Impact of COVID 19 on different sectors of the Indian economy

TANMAY TRIVEDI
IMPACT OF COVID 19
ON SPECIFIC SECTORS OF THE INDIAN STOCK MARKETS

INTRODUCTION
• Stock Markets around the world have been reeling
under the pressure of the COVID 19 pandemic. And
the Indian stock markets have been no exception.
• The Indian stock markets have reflected the
sentiments this pandemic unleashed upon investors,
foreign and domestic alike. Companies have scaled
back; layoffs have multiplied and employee
compensations have been affected resulting in
negligible growth in the last couple of months.
• To highlight the impact that COVID had on our
markets, here is a small piece of data to build upon.
BOURSES
INDICES as on
14th January,
2020
Indices as on 23rd
March, 2020
NIFTY 50 12,362 7,610
SENSEX 41,952 25,981

SECTORS UNDER STUDY
For the purpose of this study, I focused on three particular sectors of the Indian economy.
1. Real Estate
2. Pharmaceuticals
3. Retail

METHODOLOGY
To properly analyse the three sectors and the companies within, I used the following
tools:
• Charts
• Moving Averages
• EPS
• Book Value per Share
• P/E ratio
• Analyst Recommendations

THE REAL ESTATE SECTOR
COMPANIES UNDER
CONSIDERATION
The impact of the novel Coronavirus on Indian real
estate has been unprecedented. In the first three
months of its outbreak, it brought construction
activities to a halt and significantly eroded the market
of its potential buyer- base. With property
transactions dipping to near-zero during the nation-
wide lockdown between March and June 2020, the
realty sector faced some of the most challenging
times ever. The interdependence of supply chains,
migration of labourers, cost overruns, and liquidity
constraints came to fore and emerged as some of the
looming challenges.
S
NO.
COMPANY
1 DLF LTD.
2 GODREJ PROPERTIES LTD.
3 OBEROI REALTY LTD.

DLF LTD.
• The impact of COVID 19 on the company was reflected in its results for the first quarter of the
year, when the company reported a Net Loss of Rs. 71 Crores. The company’s comments on the
road to recovery highlights the long term focus of the firm, “Q1 FY21 is expected be a washout,
owing to the extended lockdown and lack of short-term visibility for the buyers," DLF said. “We
anticipate that some semblance of normalcy will return towards Q3 FY21.”
• As regards the response to the virus, DLF said it will not sack any employee and rather give
annual increments to staff up to certain grade, amid market concerns about job losses in the real
estate sector due to adverse impact of lockdown and coronavirus outbreak.
• The company announced that it has paid salaries to all workers and daily-wagers working directly
with DLF, or indirectly through its active contractors for the month of March and will also pay for
April.

DLF LTD.
• The moving averages for the company
over different periods of time and the
analyst recommendations are
summarised in the tables:
• Other indicators that I looked at were:
• Basic EPS: Rs. 9.34
• Diluted EPS: Rs. 9.24
• P/E Ration: 29.43
• Book Value per share: Rs. 139.23
Days BSE NSE
30 158.32 158.36
50 157.92 157.94
150 147.59 147.59
200 166.90 166.90
REPORTING
AGENCY
DATE STATU
S
COMMENTS
HDFC Securities June ‘20 BUY Well Placed to ride headwinds
HDFC Securities August
‘20
BUY Stable Performance

GODREJ PROPERTIES LTD.
• The executive chairman of Godrej Properties, Adi Godrej announced the company’s
outlook on the pandemic as an opportunity. The real estate mogul announced that despite
the grim state of the economy, the company expects to repeat a performance of last
year’s sales when bookings crossed Rs. 5,915 crores. Godrej expressed confidence that
the company would have another good financial year in sales perspective despite the
current situation.
• However, the situation of the company’s cash flows and the speed of construction would
pose quite a challenge for Godrej’s expectations.

GODREJ PROPERTIES LTD.
• P/E Ratio: 139.49
Days BSE NSE
30 900.55 900.89
50 895.62 895.85
150 807.27 807.12
200 859.78 859.85
REPORTING
AGENCY
DATE STATUS COMMENTS
ICICI Securities July ‘20 Reduce Downgraded from BUY.

OBEROI REALTY LTD.
• The impact of the COVID 19 Pandemic has been mixed on Oberoi Realty. Firstly, the company paid
off a debt of Rs. 125 Crores with interest, before its due date, in the month of April. Later, during the
month of June, the company laid off 75 employees, saying replacements for the employees laid off
would be hired straight away. On the 20th of October, the shares rallied 15% to Rs. 446 which was
the sharpest intra day rally in the past six months. For the July-September quarter, Oberoi Realty’s
revenue dipped 35.7 per cent year on year (YoY) to Rs 316 crore. EBITDA (earnings before interest,
taxes, depreciation, and amortisation) declined 12 percent YoY to Rs 187 crore. However, EBITDA
margins expanded 1,570 basis points to 59.0 percent.
• "We are evaluating opportunities to buy land in Mumbai, NCR and Bengaluru. We are seeing how
this (Covid-19 pandemic) plays out. We will take a call later," said Vikas Oberoi, chairman and
managing director.

OBEROI REALTY LTD.
• The moving averages for the
company over different periods of
time and the analyst
recommendations are summarised in
the tables:
• P/E Ratio: 66.36
• Book Value per share: Rs.
237.33
Days BSE NSE
30 408.30 408.39
50 396.39 396.45
150 368.63 368.64
200 406.33 406.35
REPORTING
AGENCY
HDFC Securities October
‘20
BUY Sharp recovery
ICICI Direct October
‘20
BUY Commercial Asset stake sale a key
catalyst
Motilal Oswal October
‘20
BUY Some recovery visible with arrival
of festive season

SUMMARY
• To summarise the sector’s performance, we finally compare the three companies with the NIFTY
Realty Index.
• The NIFTY REALTY index is designed to reflect the performance of real estate companies that are
primarily engaged into construction of residential and commercial properties. The chart plots the
closing values for the index over the year.

THE PHARMACEUTICAL SECTOR
• From sharing libraries of proven treatments with academics
and others to see if they can mitigate the worst effects of the
novel coronavirus to offering access to expertise, research
findings, manufacturing capability and embracing risk-sharing
with the public sector, the pharmaceutical sector around the
world has evolved.
• At the same time, firms in the sector have had to accept
disruption to ongoing clinical trials, redeploy hundreds of key
staff so as to focus urgently on COVID-19 and try
nevertheless to continue researching and producing
treatments and medicines, new and proven, for other life-
threatening diseases.
• Global supply chains have undergone huge disruption
(delays, stock outs, etc), not least as some governments
have favoured economic nationalism.
COMPANIES UNDER
CONSIDERATION
S
NO.
COMPANY
1 SUN PHARMACEUTICAL INDUSTRIES LTD.
2 DR. REDDYS LABORATORIES LTD.
3 CIPLA LTD.

SUN PHARMACEUTICAL INDUSTRIES LTD.
• The impact of COVID 19 has been good for Sun Pharma. With the general increase in demand for pharmaceutical
products, the company aims to increase its market share with the pandemic. The company’s MD, Dilip Sanghvi,
discussing the impact commented "Our endeavour will be to gain market share in each of our business by doing
better. Despite the near-term uncertainties related to COVID-19, we hope to be able to do better consistently,”
• Sanghvi also added that the company is also looking at supply chain protection, ensuring optimum utilisation of its
factories and working closely with vendors to ensure continuity of supply while at the same time continuing focus
on improving productivity throughout.
• In times of COVID-19, the Mumbai-based company also looks to focus on cash preservation and finding a way to
reduce the overall debt for the company, Sanghvi said. "You will see that the total borrowings have come down by
almost USD 400-plus million (about Rs 3,000 crore) in one year. And we will continue the same focus reducing the
overall debt," he noted. The bottom line is “Things were going in the right direction, but COVID-19 pandemic has
put a new challenge for the company,” he said.

the tables:
• P/E Ratio: 38.75
204.75
REPORTING
AGENCY
Prabhudas
Liladhar
August
‘20
HOLD We expect US business will continue
to face challenges for SUNP
ICICI Direct August
‘20
BUY US drags down revenues but
margins improve
ICICI Securities May ‘20 BUY Speciality gaining traction
Days BSE NSE
30 503.16 503.19
50 511.12 511.15
150 481.06 481.10
200 464.90 464.94

DR. REDDYS LABORATORIES LTD.
• The impact of COVID 19 on Dr. Reddy’s Labs has been majorly fruitful. Lately, in the month of September, Dr Reddy's
Laboratories announced the launch of Remdesivir under the brand name Redyx for Indian markets. The launch is part of a
licensing agreement with Gilead Sciences Inc that grants Dr Reddy's the right to register, manufacture and sell Remdesivir, a
potential treatment for COVID-19, in 127 countries including India.
• "The launch of Redyx reaffirms our commitment to bringing in critical medicine for patients suffering from Covid-19 in India," said
M V Ramana, Chief Executive Officer for branded markets (India and emerging markets) at Dr Reddy’s.
• A more holistic view of the impact of COVID 19 on Dr. Reddy’s is evident in Mr. Saumen Chakraborty, CFO at Dr.Reddy’s
comments on the crisis. “Initially, there was some disruption on the logistics side during the last week of March, when the
lockdown was first imposed in India. As the interstate travel was restricted, the supply was disrupted. A few issues also came on
the procurement front, albeit insignificant. A similar story emerged in the international markets, where the freight costs went up,
and proved to be additional expenses due to Covid19. But subsequently, the supply chains improved over a period of time, and
now normalcy is restored in all logistics. Covid-19 disruptions, therefore, on the logistics side are over. ”
• “We have to wait and watch the real impact of Covid-19 before thinking about the outlook. It will be difficult to comment on the
numbers. The impact needs to be assessed on the entire industry first and then the pharma sector specifically. This point in time,
we can only see we would grow at a better rate than the industry, which is the case in the last few years.

DR. REDDYS LABORATORIES LTD.
• Diluted EPS: 121.99
• P/E Ratio: 24.77
Days BSE NSE
30 5021.65 5022.72
50 4782.04 4782.90
150 4192.97 4193.48
200 3913.12 3913.54
REPORTING
AGENCY
Prabhudas
Liladhar
October
‘20
ACCUMULAT
E
IPM growth crawling forward
to low single-digit
Axis Securities October
‘20
BUY Accelerating the
transformation.

CIPLA LTD.
• The impact of COVID 19 on Cipla is visible on the company’s financial statements Cipla Ltd posted a
33% decline in its consolidated net profit for the January-March quarter to ₹246 crore as the
company’s operational performance was weakened by the covid-19 disruption and high base for sales
last year. On the results for the quarter, the company’s CFO, Kedar Upadhyay, commented, “Our
purchased finished goods are for generics business, and about 30-40% of the prescription business
and over the last few months, we have shifted some of the other market supplies as well to contract
manufacturers. So depending upon the mix, it (cost on purchase of stock in trade) has gone up. There
is nothing unusual there”.
• The above comments were made during an investors conference call. On the same call, the CEO, Mr.
Umang Vohra, remarked that the company’s product inventory at the stockist level had reduced
sharply in the last week of March due to panic buying, especially of chronic medicines, but had
somewhat recovered in April as the buying subsided.

CIPLA LTD.
• Diluted EPS: Rs.19.16
• P/E Ratio: 26.96
Days BSE NSE
30 770.45 770.46
50 758.80 758.82
150 663.05 663.04
200 607.83 607.85
REPORTING
AGENCY
Prabhudas
Liladhar
October
‘20
REDUCE FDA issues CRL to IV Tramadol ;
Setback for specialty portfolio in US.
Axis Securities August
‘20
NEUTRAL Robust India sales, better operating
leverage drive earnings

SUMMARY
• To summarise the sector’s performance, we finally compare the three companies with the NIFTY
Pharma Index.
• The NIFTY Pharma Index is designed to reflect the behaviour and performance of the
pharmaceutical sector in India

THE RETAIL SECTOR
•The lockdown to prevent the spread of coronavirus in the
country has greatly affected retail business. Most stores, except
stores selling essential food & grocery, have been shut across
the country. Garments, saris, electronics, mobile phones,
furniture, hardware etc. almost all stores are closed. Non-
Grocery/food retailers are reporting 80 per cent to 100 per cent
reduction in sales.
•The shift in consumer behaviour from offline shopping to online
as people who were previously averse to online buying are now
being compelled to explore online due to the restrictions in force.
Organisations should closely follow consumer patterns and have
an adaptive business model to stay relevant.
•Another shift in buying behaviour, especially for millennials is
that they may choose to purchase only what they really require
and hence buy less than they would earlier.
COMPANIES UNDER
CONSIDERATION
S
NO.
COMPANY
1 Avenue Supermarts Ltd.
2 Future Retail Ltd.
3 V Mart Retail Ltd.

AVENUE SUPERMARTS LTD.
• Avenue Supermarts represents the parent organization for the popular Indian grocery chain D Mart.
• As impressive as all that data was, the impact of COVID 19 on DMART has been nothing but grim.
• The company reported 38% decline in its consolidated net profit for the quarter ending 30 September at ₹199 crore
as coronavirus pandemic continues to affect its operations. It was ₹323 crore in September 2019. Consolidated
revenue decreased by 11% to ₹5,306 crore as against ₹5,991 crore in the year-ago period. Consolidated PAT
margin stood at 3.7% in Q2FY21 as compared to 5.4% in Q2FY20.
• Very recently in an interview, Neville Noronha, the CEO and MD of the company remarked, “Lockdown restrictions
due to Covid-19 were further eased during this quarter. Within the continued uncertainty from Covid-19, our
business has seen improvement and it continues to gradually progress towards pre-pandemic levels. Month-on-
Month sales have improved during this quarter – August was better than July and September was better than
August. The highlight being that footfalls continue to be significantly lower than pre-Covid levels but basket values
are significantly higher than pre-Covid levels. Both these data points are trending towards pre-Covid levels. Footfalls
are getting better and basket values are reducing month over month”

AVENUE SUPERMARTS LTD.
• P/E Ratio: 149.14
REPORTING
AGENCY
Prabhudas
Liladhar
October
‘20
BUY improving visibility & Ecom focus
ICICI Direct October
‘20
BUY Essentials back on growth trajectory;
discretionary category recovery
gaining gradual traction
Motilal Oswal October
‘20
NEUTRAL Gradually on path to recovery
Dolat Analysis and
Research Themes
October
‘20
REDUCE King of the castle
Days BSE NSE
30 2088.65 2089.45
50 2161.50 2161.91
150 2210.09 2209.38
200 2193.98 2193.26

FUTURE RETAIL LTD.
• Kishore Biyani, the founder and CEO of Future Group (and Future retail), had played down the
impending threat of Covid-19 during a presentation back in March, made to analysts worried about
the high leverage across Future Group companies. He had reasoned that a combination of hot
weather and young demographics would keep the economy insulated from the impact of the virus.
Fast forward five months, and Biyani is close to losing his retail empire.
• The reason behind the sale, as explained by Kishore Biyani, was COVID. “In the first 3-4 months, we
lost nearly Rs 7,000 crore of revenue", and there was no way the company could have survived after
losing such an amount”, Biyani said that the store closures in the first three-four months were what
pushed him into selling his business to Mukesh Ambani’s Reliance.
• "The problem is rent doesn’t stop, interest (on debt) doesn’t stop... We did too many acquisitions in
the last six-seven years... I thought there was no other answer but to exit," he said.

FUTURE RETAIL LTD.
time are summarised in the tables:
• P/E Ratio: -5.5
Days BSE NSE
30 85.39 85.38
50 98.61 98.60
150 98.48 98.38
200 152.10 151.97

V MART RETAIL LTD.
• The impact of COVID 19 and the subsequent lockdowns was more of a hindrance on V mart
than anything else. V-Mart Retail has put on hold its expansion plans for at least the next
three months, seeing the current Covid-19 situation, said its Chief financial Officer Anand
Agarwal, back when the lockdowns first started. The CFO also shared V-Mart has no plans to
trim its workforce nor reduce salaries stressing the company would abide by the government’s
directive on the same.
• However, the company has been witnessing a positive recovery trend in sales across all its
locations, as and when store operations have resumed in an uninterrupted manner. This is
indicative of resilience in consumer demand in the company’s markets, and also V-Mart’s
established reputation as a trusted retailer. Moreover, with the festive season coming up, the
company is hoping for to hit pre covid levels of sales with improved and more efficient
workings.

V MART RETAIL LTD.
the tables:
252.78
Days BSE NSE
30 1990.88 1991.46
50 1959.49 1959.47
150 1787.60 1787.28
200 1853.68 1854.06
REPORTING
AGENCY
DATE STATU
S
COMMENTS
BOB Capital
Markets Ltd.
September
‘20
SELL Revival hopes pinned on Q3
Festive Season

SUMMARY
• Indian stock markets don’t have an index specifically for the retail industry.
Hence, the graph on the next slide compares all the three companies without a
benchmark index.

Impact of COVID 19 on different sectors of the Indian economy

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