Firms see Covid as top risk

Mumbai: Covid-19 has emerged as the number one risk among the various risk factors disclosed by companies launching their initial public offerings, according to their red herring prospectus.

Be it equity or debt offerings that recently hit the primary market or are in the pipeline, companies across the sectors are disclosing the ways in which Covid-19 could have a material impact on their businesses, along with sharing the negative impact of the pandemic on their businesses since March 2020.

"The extent to which the coronavirus disease may affect our business and operations in the future is uncertain and cannot be predicted. It caused a material decline in general business activity and consequently a slowdown in the sale of units at our residential developments and in obtaining or renewing lease commitments for our commercial developments," Macrotech Developers said before its IPO hit the market.

"As a result of the Covid-19 pandemic, our revenue from operations contracted by 37.10 per cent," disclosed Rate Gain Travel Technologies whose IPO closed last week. "The global economy and the financial system has experienced, and will continue to experience, a period of volatility and uncertainty towards a global recession affecting all the markets in which we operate," Rate Gain warns investors in its prospectus.

Also Covid-19 may have the effect of heightening many of the other risks that companies as risk factors while going public- like the ability to generate sufficient cash flow to service their indebtedness and comply with agreements that govern their indebtedness.
Companies also cite heightened cyber-security risks with a large proportion of their employees working from home.

Pharma companies faced supply chain issues that hampered their ability to service their clients though they were allowed to operate under essential services by the government.

"Between February and June 2020, port and airport closures around the world resulted in disruptions in international freight shipments of raw materials to us and of our products to our customers. During this time, we also faced logistical challenges in India due to the restrictions on the movement of people and goods. As a result, we experienced delays in our manufacturing and product delivery timelines, and had to adjust our arrangements with our customers and suppliers accordingly," says Emcure Pharmaceuticals in its draft red herring prospectus filed with Sebi.