Mumbai: Companies with assetlight business models and high offbalance sheet obligations are likely to be impacted by the new accounting standard on leases — which came into effect from April 1, said brokerages.
According to Edelweiss, profits and return ratios of companies with asset-light business models such as retail, multiplex, airlines, and logistics and warehousing sectors would be impacted the most.
Telecom, hotels, and hospital sector companies will also be affected by the accounting change as they have high off-balance sheet lease obligations, Edelweiss said.
Ind-AS 116 sets out principles for recognition, presentation and disclosure of leases. The new accounting norms have been notified by the corporate affairs ministry.
The key change that has been introduced is the elimination of classification between operating and finance leases, which means that all leases on a lessees balance sheet will be recognised.
The balance sheet of asset-light companies will expand sharply as a result, the brokerages said.
Most aviation companies acquire aircraft via lease while retail and multiplex companies in the organised space operate mainly from leased premises, the analysts said.
Healthcare sector companies such as hospitals and diagnostic service providers acquire equipments on lease. Similarly, hotels acquire immovable properties and vehicles on operating lease.
Telecom companies will have to recognise agreements for sharing passive infrastructure in balance sheet, which were till not kept offbalance sheet, said analysts.
Motilal Oswal said 20 companies have rentals in excess of 5 per cent of revenues within BSE 500 companies, and they will be the most impacted. The companies that will be impacted include Jet Airways (India), SpiceJet, Bharti Infratel, Future Lifestyle, Coffee Day Enterprises, Inter-Globe Aviation, Inox Leisure, PVR, Blue Dart Express, Gujarat Fluorochemicals, Firstsource Solutions, Read More – Source