Asian Paints, the largest paint maker in the country, has sought credit period extension from its business partners in view of the present lockdown situation in the country. The intimation by the company in this regard was sent before the extension of the lockdown period by the Prime Minister on Tuesday.
In its intimation to business partners the company has sought extension of payment terms by 30 days in addition to the credit period currently available. Hence, the payments that are currently in process shall also get paid after additional 30 days of credit.
“During the lockdown, we continue to work from home and strived to ensure that our business partners are not impacted and continued to process transactions and make payments wherever they were due. However, the situation has now become extremely difficult as cash flows have been severely impacted with virtually no inflows. In this context, we seek your support and cooperation with an increase in payment terms by 30 days over and above the currently prevailing payment terms. Hence, the payments that are currently in process shall also get paid after additional 30days of credit,” says a letter from a senior official of Asian Paints.
This step by the market leader has taken the people in the paint industry by surprise and expect similar steps by others in the industry too. This also shows that lockdown has severely affected the cashflow of the companies, including the blue-chip companies. The situation is likely to worsen further as the lockdown has been extended by another 18 days by the Prime Minister on Tuesday. According to analysts, 40 days of standstill without any business, sales, production and inflows would affect adversely the operations of any business and the government should start acting right now to tackle the post-lockdown scenario. “Otherwise such actions (as the one by Asian Paints) will have cascading effect and may lead to liquidity crisis,” an analyst with a foreign broking firm warned.