Q1’18 survey: CFO optimistics on fund raising

Chief Financial Officers (CFOs) in India are optimistic about the overall financial health of their respective companies, but are undecide on capex due to demonetization.

The Dun & Bradstreet surveyed covered financial and macro-economic conditions for Q1 2018 (Jan-Mar of the calendar year 2018), comparing the situation to a year ago.

It covered the business risk environment and the macroeconomic scenario in the country.

Commenting on the findings of the survey, Manish Sinha, Managing Director – India, Dun & Bradstreet, said: “Optimism levels amongst CFOs has increased to a five quarter high and has been rising steadily since the last two quarters.

“Expectations that increased thrust on rural and social sector in the budget could uplift the rural demand and drive the consumption growth had added to the optimism levels,” he said.

Even as the impact of demonetization on demand has been tapering off, companies are yet to enter in the capex cycle.

“However, our survey finds that CFOs are optimistic about raising funds both short term and long term.

“Besides, there is a decrease in the perception of financial risk on company’s balance sheet, probably buoyed by the upturn in the prospects in the global and domestic economy,” said Sinha.

The Reserve Bank of India has also geared up to fast track the Non-Performing-Assets (NPA) resolution, the much-needed move to strengthen the economy,” he noted.

“This along with expected improvement in domestic demand are likely to help optimism levels going ahead,” observed Sinha.

The survey revealed interesting facts about CFOs’ perspective on the overall business climate in the country:

The Composite CFO Optimism Index stands at 117 during Q1 2018, an increase of 7.7% on a q-o-q basis;

Optimism levels both for financial performance of the company and macroeconomic scenario witnessed an increase for the 2nd consecutive quarter;

Optimism levels for macroeconomic condition is the highest in three years;

Optimism level amongst CFOs in the industrial sector is the highest in 11 quarters and in the services sector, it is the highest in 5 quarters;

39% of CFOs in the industrial sector indicated need for raising short term funds – highest in nearly 4 years;

34% of CFOs indicated need for raising long term funds in Q1 2018 – highest since Q3 2015;

The percentage of CFOs who expect a decrease in the level of financial risk on company’s balance sheet is 13-quarter high in the services sector;

61% of CFOs expect overall scenario for mergers and acquisitions to be favourable in Q1 2018 – highest since Q4 2014;

For four consecutive quarters, CFOs have stated that reducing cost has been their top priority while dividend declaration has been their least priority;

Effective recovery system has been the most preferred risk management tool by CFOs for four consecutive quarters;

Tightening credit appraisal mechanisms (29%) and Hedging (29%) are the least preferred risk management tool by CFOs for the next six months. fii-news.com