Credit and Finance for MSMEs: The moratorium and emergency credit scheme ECLGS had supplied the considerably-necessary monetary assistance for the duration of Covid-19 to the hospitality sector even as the sustenance of the demand pickup in the current months remains to be seen as the effect of a possible third wave can not be ruled out, according to credit rating agency ICRA. Around 70 per cent of the organizations in the agency’s hospitality portfolio had availed moratorium for the duration of the 1st wave of the pandemic last year, although it was only 39 per cent of rated debt.
ICRA stated it continues to have a adverse outlook on the Indian hotel business, “as the sustenance of the demand pickup in the recent months remains to be seen. A potential third wave and its impact on travel and hotel occupancies cannot be ruled out. Further, the revenue per available room (RevPAR) is still significantly lower than pre-Covid levels. About 63 per cent of ICRA’s ratings are also on negative outlook currently,” ICRA stated in a current statement. The business had raised about Rs 660 crore of equity in FY2021 and had announced Rs 3,300 crore of equity/fundraising plans in FY2022.
The sector, which has a quantity of MSMEs and tiny organizations, witnessed recovery at a ‘sharper pace’ post the second wave in comparison to the lockdown in 2020 due to relaxations in restrictions in Q2 FY22. While partial lockdown, as properly as travel restrictions in lots of states in April and May 2021 following Covid 2., led to ICRA sample of organizations reporting a 56 per cent decline in their revenues on a quarter-on-quarter basis, in line with the ratings agency’s estimates, nonetheless, the latter stated that the revenues are anticipated to strengthen by 85- 90 per cent sequentially in the lately concluded Q2 FY2022.
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“Demand in the last few months has come from staycations, weddings, and travel to driveable leisure destinations, and from special-purpose groups. There is the new trend of biscations (which is working from a resort) that is picking up. Business travel pickup has been mainly to project sites/manufacturing locations from specific sectors. The Covid-related demand which was prevalent April mid to June mid, waned from July and we are seeing real demand pick up,” stated Vinutaa S, Assistant Vice President and Sector Head, ICRA Limited.
The Finance Ministry in March this year had extended the ECLGS scheme to cover organizations in hospitality, travel & tourism, leisure & sporting sectors which had, as of February 29, 2020, total credit outstanding up to Rs 500 crore and overdues, if any, for 60 days or much less, on that date. The scheme, which mostly caters to MSMEs, has now been extended till March next year. Over Rs 2.86 lakh crore ECLGS loans have been sanctioned as of September 24, 2021, when out of total guarantees issued, about 95 per cent have been for loans sanctioned to MSMEs, the ministry had stated in its statement on Wednesday.
Importantly, organizations in hospitality, travel & tourism, leisure & sporting sectors, which had previously not availed ECLGS, can now avail credit assistance up to 40 per cent of their credit outstanding as of March 31, 2021, to the maximum of Rs 200 crore per borrower, according to the modifications announced by the ministry in the scheme on Wednesday.