Extended ECLGS can infuse over Rs 40k-cr liquidity: Crisil

The Emergency Credit Line Guarantee Scheme (ECLGS) would benefit the low resilience sectors, such as hotels, gems and jewellery, travel, and real estate, the most, since their accruals are expected to fall sharper at 23% this fiscal. But tthe additional liquidity afforded through the scheme for the 26 affected sectors would be much higher at almost 10 times of cash flow contraction due to the Covid -19 induced pandemic, a Crisil study said.

Companies in high-resilience sectors such as dairy, information technology, FMCG, chemicals, and pharmaceuticals are seen less impacted, with the decline in their cash flow restricted to 10%. These sectors, too, would benefit from the ECLGS with additional liquidity being created of about five times of their cash flow squeeze. Other debt heavy sectors such as textiles and steel will also have similar additional liquidity against their cash flow decline.

The ECLGS 2.0 has been extended under Atmanirbhar Bharat 3.0 scheme to eligible companies in 26 stressed sectors identified by the K V Kamath Committee. ECLGS can potentially infuse Rs 40,000-crore liquidity to the Crisil-rated eligible companies including those in health care sector. This infusion would be sufficient to help those hit by the sharp decline in cash flows for the pandemic.

“Borrowing under the ECLGS 2.0 scheme can provide additional liquidity equal to 3.5 times the cash-flow contraction for the sample set. This will help them overcome temporary liquidity challenges. Also, the one-year moratorium available under the scheme will provide further room for companies to stabilise their cash flows,” Subodh Rai, Crisil Rating’s senior director, said.

Under ECLGS 2.0, companies with outstanding loans of between Rs 50 crore and Rs 500 crore are eligible for additional credit of up to 20% of their outstanding debt as on February 29, this year. The tenure of such additional credit would be five years, including one-year moratorium on principal repayment.

The average cash flow of such companies is seen contracting 17%, or by Rs 11,000 crore, compared with the pre-pandemic assessment for the current fiscal, the Crisil Rating study said.

Of the Crisil’s rated portfolio, 1,414 companies from 26 sectors were found eligible for ECLGS 2.0. Their total outstanding debt stood at Rs 2 lakh crore as on February 29 this year. It is assumed that all eligible companies will avail of the entire fund-based debt facility available under the scheme, the study said.