Covid takes toll on small cos, wage bill falls up to 5%

New Delhi: The pandemic guided economic disruptions are pushing companies to become leaner and meaner as a survival strategy to counter falling revenues.

A large number of companies with a turnover of up to Rs 500 crore have reduced their employee expenses between 1-5 per cent in the April- June quarter of the current financial year. The expenses have fallen on account wage and job cuts as companies, particularly smaller ones, continue to face shrinking businesses with Q1 revenue falling up to 14 per cent.

According to SBI Ecowrap analysis of results of more than 3,700 listed entities, reduction in employee cost up to 5 per cent has been seen in companies with turnover of up to Rs 50 crore. These are the companies that have also seen their Q1 FY22 revenue falling by 13.6 per cent.

The cut in employees expenses reduced as the size of the companies increase. Accordingly, companies with turnover of Rs 50-100 crore have seen their employees expenses falling by 1.3 per cent, between Rs 100-500 crore the fall is about 1 per cent.

Conversely, larger companies with turnover of over Rs 500 crore, the employee expenses have actually risen by 2-3 per cent in Q1FY22 as compared to Q4FY21 even though they have taken a bigger hit of over 13 per cent in their April-June quarter revenues.

"The pandemic has impacted smaller companies the most who are resorting to survival strategies by cutting their cost and employees expenses to remain operational. For larger entities, manpower retention seems to be the strategy and economic recovery brings with it the hope that businesses would grow and cement would pick up," said an economist with four big audit firms asking not to be named.

On an overall basis, the Ecowrap study suggests that these has been an overall around 9 per cent de-growth in revenue and around 2 per cent growth in employee cost has been reported in Q1FY22 as compared to previous quarter i.e. Q4FY22.

With GDP growing at 20.1 per cent in Q1, fresh hopes have emerged for the accelerated recovery of the economy. If this stands true and the country is able to overcome any new wave of the pandemic without much disruptions, the corporate sector could hope to recoup their falling revenue and start moving on the path of higher top line and bottom line.

According to SBI Ecowrap a rebound in the announcement of new infra projects by both the Central and State Government agencies has helped the infrastructure sector maintain its steady growth observed since Q2FY21. New project announcements scaled a new high in July 2021. In the month 988 projects worth Rs 1.45 lakh crore were announced. The last instance where a total number of new projects announced crossed the 900-mark was way back in January 2019 when 926 projects announcements were seen.