annual-report-FY2021

63 MAHINDRA & MAHINDRA LTD. INTEGRATED ANNUAL REPORT 2020-21 As the year 2020 drew to a close, the ramp up of global vaccination drive provided optimism about a strong vaccine-led growth recovery in 2021. However, this crisis will likely leave scars well into medium term as labour markets take time to heal, investment is held back by uncertainty and Balance Sheet problems. As per the latest IMF estimates, the global economy is expected to rebound by 6% in 2021 but would moderate to 4.4% in 2022 for the aforementioned reasons. The global community still confronts extreme social and economic strain, with the rising human toll worldwide amidst the resurgence of COVID-19 wave. Moreover, burgeoning debt and deficits, rising inflation and impact of unwinding of quantitative easing are some key risks that persist. On the domestic front, India also witnessed sharp slowdown during the year. The Central Government announced strict nationwide lockdown in March 2020, which was followed by several localized lockdowns across States during the course of the year. Reserve Bank of India further cut repo rate by 40 bps in the Financial Year 2020-21, having already cut the rates by a cumulative of 160 bps in the preceding year. Moreover, RBI announced several liquidity boosting measures including targeted long-term repo operations, moratorium of loans, etc. The interest rates had fallen sharply in money market due to the liquidity glut, resulting in real lending rates to fall to decade lows. Extraordinary, novel and out of box measures taken by Reserve Bank of India to mitigate the impact of pandemic have anchored financial stability and cushioned the damaging effects of COVID-19 on economic activity. Indian economy experienced subdued 1 st half of Financial Year 2021, however it started seeing good recovery in 2 nd half of Financial Year 2021. Sensex reflected growth sentiments as it wrapped 2020 on a bullish note by gaining 16% from a record low of March 2020. However, after close to six months of a receding case count, India is witnessing a rise in the COVID-19 cases and the resultant partial/complete lockdowns by States, to counter the rising cases, is expected to dent the ongoing economic recovery. The Financial Year 2020-21 has been a roller-coaster ride for the rupee due to COVID-19. The pandemic induced massive sell-off in the equity market led the rupee breach record low of 76.90. However, easing of lockdown restrictions, infusion of stimulus by Government and central banks all over the world, optimism over vaccine, enthused investors resulting in sustained foreign fund inflows, helped rupee vault back to 72 zone. In the Financial Year 2021, Foreign portfolio investment (FPI) in India was at a 6-year high with record inflows into the equity markets and marginal outflows from the debt markets. The total FPI inflows into the equity, debt and hybrid markets during the Financial Year 2021 was at $36.1 billion compared with the previous two years of outflows of $5.5 billion in the Financial Year 2019 and $3 billion in the Financial Year 2020. Your Company continued to monitor the liquidity situation carefully. Given the unprecedented impact that COVID-19 had on the business, the Company borrowed funds to shore up liquidity as a precautionary measure. During the year, your Company raised long term borrowings of Rs. 5,536.59 crores by way of a mix of both, market instrument like Non-Convertible Debentures and Bank Loans. Additionally, short term borrowings of Rs. 2,376.90 crores were raised by issuance of Commercial Papers and availing of bank lines during the year. This ensured sufficient liquidity to manage the adverse effects of pandemic. Since the economic activity improved from June-July 2020, your Company saw robust operating cash flows. As the year drew close to an end, sufficient liquidity prompted pre/ repayment of some of the borrowings. During the year, your Company repaid Rs. 3,387.41 crores of the total borrowings (long term, short term borrowing and lease liabilities). As on 31 st March, 2021, Rs. 7,642.07 crores of Long-Term borrowing (including current maturities and lease liabilities) and Rs. 24.74 crores of Short Term borrowing was outstanding. With a high liquidity level of Rs. 10,743.89 crores as at 31 st March, 2021, your Company is better placed to tide over the impact of the re-surge in COVID-19 cases on the business, if any. The Company’s Bankers continue to rate your Company as a prime customer and extend facilities/services at prime rates. Your Company follows a prudent financial policy and aims not to exceed an optimum financial gearing at any time. The Company’s total Debt to Equity Ratio is 0.22 as at 31 st March, 2021. Your Company has been rated by CRISIL Limited (“CRISIL”), ICRA Limited (“ICRA”), India Ratings and Research Private Limited (“India Ratings”) and CARE Ratings Limited (“CARE”) for its Banking facilities. All have re-affirmed the highest credit rating for your Company’s Short Term facilities. For Long Term facilities and Non-Convertible Debenture (“NCD”) programme, CRISIL, ICRA and India Ratings have re-affirmed their