to log a revenue contraction of 17-21 per cent this fiscal. Among key sectors, consumer discretionary and construction are expected to see revenue contraction of more than 20 per cent each.
Given the pandemic-induced demand destruction, the Ebitda (earnings before interest, taxes, depreciation and amortisation) margin for MSMEs
overall is expected to decline from 7 per cent on average in the last four fiscal years to 4-5 per cent this fiscal, despite a slide in commodity prices.
A case in point is transport operators, which face weak freight demand and low capacity utilisation, resulting in margin deterioration despite lower fuel prices.
Despite factoring in the moratorium benefit, interest cover is expected to halve from 2.4 times in the last four fiscal years to 1-1.5 times in the current fiscal, owing to a decline at the operating level. In the absence of the moratorium benefit, interest cover would have slipped significantly below 1.
Our analysis indicates that working capital days tend to stretch by 15-20 per cent in years of low growth, compared with those of normal growth.
The increase in working capital would be the highest for MSME sectors with higher B2B sales and share of exports. Accordingly, gems and jewellery, textiles, readymade garments and EPC real estate would witness the highest impact on working capital in FY21.