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Voice of CFO Survey
November 2012
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of CII & McKinsey & Company is strictly prohibited
Summary Statistics from 32 CFO respondents (1/2)
believe India’s FDI attractiveness and economic and fiscal policies will be same or better than last year
believe corruption and bureaucracy will be worse than last year
believe their company’s top-line growth will be same or more than last year
CFOs believe corporate India’s bottom line growth will be negative in the coming year
believe GST, New Companies Act and IFRS are steps in the right direction
believe GAAR is a step in the wrong direction
CFO believes India’s GDP growth will be >7%
believe India’s GDP growth will be <6%
© Confederation of Indian Industry
Summary Statistics from 32 CFO respondents (2/2)
‘India now has dubious distinction of being amongst the most corrupt governments in the world’
‘Bring transparency in governance, zero tolerance in corruption’
‘Uncertainty in regulations is a cause of concern’
‘Faster implementation of policies is required’
‘When it comes to the convenience of running the business, India is at the bottom of the list’
‘Government has initiated many landmark reforms in the last 3 weeks and these measures will go a long way in restoring investor confidence and keeping a upward trajectory in GDP growth’
‘The government should continue the reform agenda initiated by it’
‘We welcome the constitution of the PMO committee for the IT sector for resolution of disputes in a speedy manner’
‘GST is a great opportunity to give India a clean, efficient and effective indirect tax regime’
© Confederation of Indian Industry
Global events that will have a negative impact on India
SOURCE: Voice of CFO survey © Confederation of Indian Industry
Global events that will have a positive impact on India
SOURCE: Voice of CFO survey © Confederation of Indian Industry
Outlook of the Indian economy remains “cautiously optimistic”
SOURCE: Voice of CFO survey
Expect it to remain range bound 6-8%
Inflation
Remove supply constraints
‘Address supply side bottlenecks in logistics’
‘Arrest the artificial hoarding of commodities by traders’
Encourage agricultural produce
‘Enhance efficiency on the supply side - agricultural productivity
Reduce wasteful govt expenditure
‘Reduce non planned and unproductive government expenses’
Suggested measures to improve include …
Expect a 5-6% GDP growth next year
Economic growth
Encourage FDI
‘Open out the Economy by allowing FDI in Retail & Insurance’
‘Take firm decisions on FDI’
Focus on infrastructure
‘Revive infrastructure projects viz. power’
‘Give tax exemption for Infra projects’
Simplify taxation and Implement GST
‘Rationalize tax structure to reduce cascading effect’
‘Clear GST’
Expect it to be 50-55
Exchange rate (INR / USD)
Encourage capital inflows
‘Allow lower withholding tax for all FII investments in debt’
‘Relax norms for FIIs to invest in Indian equities’
Control fiscal deficit
‘Decontrol petrol & diesel prices thereby reducing consumption & Forex outgo thereby reducing Current Account deficit’
Encourage exports
‘Provide impetus to exports including fiscal incentives’
© Confederation of Indian Industry
Apart from GAAR, CFOs believe recent policy changes are in the right direction
SOURCE: Voice of CFO survey
% responses with ‘Yes’
48
79
96
100
100
100
New Companies Act
GST
GAAR
DTC
Land acquisition policy
IFRS
36
40
46
10
58
38
52
32
31
20
15
42
2512
100% =
2646
260
2070
2623
2528
Low Medium High
Step in the right direction Perceived impact on business
‘Speedy implementation should be done for GST’
‘Subsume all Central, State and Local Level indirect taxes on supply of goods and services in to GST’
‘DTC policy should be transparent and should not have room for bureaucracy & corruption’
‘Reduce Corporate Tax Rate to 22%, make it compete with HK and Singapore’
‘Land Acquisition Policy should facilitate quick acquisition instead of creating bottlenecks and bureaucratic hassle’
‘Mandate the international version for IFRS’
‘Timing of implementation should be aligned with major advanced economies’
Illustrative quotes
‘GAAR should be deferred as it may have adverse impact on business sentiment and capital flows’
‘IFRS can simplify the process of raising capital in the overseas markets’
© Confederation of Indian Industry
What will be better compared to last year? What will be worse?
SOURCE: Voice of CFO survey
1.8
1.5
1.6
1.7
1.9
2.1
2.2
Bureaucracy & corruption
Job opportunities
Security & social harmony
Regulatory climate
Confidence in economy
Stable economic & fiscal policies
FDI attractiveness
1 = worst, 3 = Better
Compared to last year
Stable and clear policies
‘Provide a transparent, stable, efficient and secure business environment and consistent policies’
‘Provide stable investment & tax policies. Give clarity on land, environment, power and other FDI rules’
Measures to further improve FDI
Easier approvals
‘Provide single window clearance to Foreign Investors’
‘Fast track clearance of proposals based on merits’
Open sectors
‘Increase & allow FDI in major sectors like multi-brand retail, civil aviation, insurance & pension
© Confederation of Indian Industry
Majority of the CFOs are confident of beating last year’s performance
SOURCE: Voice of CFO survey
Percent
58
54
50
37
31
20
17
5
8
6
6
18
46
46
0
8 23 15 4
Topline growth 4 15 23 4
Contribution to exchequer
Equity Issuance
4 12 23 4
24 35 35
Inventory build up 17 22 39
Dividends
0 38 12 4
ROCE 0 35 15 4
PAT growth
0 23 59 0
Capex 12 28 32
Employment 15 12 38 4
Debt issuance 16 21 21
ROE
Significantly lesser
Less
About the same
More
Significantly more
Key challenges voiced
Slowdown in growth
‘Global uncertainty is impacting growth’
‘Very low business demand due to lower domestic capex’
Higher costs/lower margins
‘Rise in fuel prices and talent costs’
‘Increased rates of Interest i.e. high borrowing cost’
Currency risk
‘Exchange fluctuation and hedging is a big challenge’
‘Managing uncertainty of Fx is becoming even more difficult’
© Confederation of Indian Industry
What are the priorities for CFOs in the next 12 months
SOURCE: Voice of CFO survey
Key priority areas for CFOs
1 = low priority, 10 = high priority
1.4
2.2
3.1
4.3
4.6
4.6
5.5
5.9
7.1
8.4
Reduce leverage
Going international
Entering new markets
Introducing new products/services
Cost reduction
New acquisitions
Share buyback
Reduce dividends
Dispose assets
Capital raising
‘Controlling spending, improving profitability and managing cash flow effectively is a top priority’
© Confederation of Indian Industry
THANK YOU
© Confederation of Indian Industry
