The COVID-19 crisis is highlighting the strengths and weaknesses of India’s large businesses, and pointing the way to new strategic directions.
The COVID-19 crisis has brought new urgency to some of corporate India’s long-standing challenges. Writing for McKinsey & Company, Rajat Dhawan says the companies that act now to address these will emerge stronger from the crisis. He addresses five priorities:
- Make balance sheets and cost structures more resilient
- Reshape business portfolios for greater value creation
- Embed digital and analytics to transform legacy businesses and build new ones
- Build greater safety, flexibility and productivity into operations
- Embrace systems thinking in corporate decisions.
1) MAKE BALANCE SHEETS AND COST STRUCTURES MORE RESILIENT
A common challenge among large businesses in India is that it’s become risky to finance growth with debt. As much as 43% of India’s long-term debt is held by companies with an interest coverage ratio of less than 1.5. At these levels, companies spend the predominant share of their earnings on servicing debt.