Hope prevails amidst challenging times for Indian CFOs

Mumbai, 15 April 2014: CFOs across industry verticals say that the continuing economic uncertainty together with the upcoming elections and current regulatory regimes bringing in increased scrutiny by the government are creating challenges in managing stakeholder perceptions and sustaining growth and profitability.  However, more than two-thirds (68%) of the CFOs continue to be positive and hopeful about the near future (next few months to more than a year ahead).

The CFO Survey 2014 conducted by Deloitte in India has revealed that CFOs in India view slowdown in the domestic economy (61%) as one of the key economic concerns followed by rupee depreciation (47%), inflation (38%) and  government attitude and ability to bring about economic reforms (37%).

“While inflation and rupee depreciation continue to be key causes of concern, CFOs perceive the government’s inability to bring about economic reforms at desired levels, and the increased scrutiny by the government for regulatory compliance as some of the other critical challenges to be dealt with by the Indian organizations”,  said Sanjoy Sen, Senior Director, Deloitte in India. “However, despite the many risks and challenges, CFOs are designing strategies to steer through the turbulent times by focusing on revenue growth, value preservation, and cost containment while taking steps to enhance operational scalability”.

Drilling down to industry-specific challenges, slowdown in the domestic economy and high inflation are termed as the top most macro-economic challenges across all industry verticals (Consumer Business, Energy & Resources, Financial Services, Life Sciences and Healthcare, Manufacturing and Technology, Media & Telecommunication.  

Rupee depreciation surfaced as the next reigning challenge with CFOs from Energy and Resources) industry expressing it as their biggest macro-economic challenge (22%), closely followed by Technology, Media & Telecommunications (20%). Respondents representing Manufacturing and Consumer Business sectors expressed almost a similar extent of concern (16%-17%) towards the falling rupee. CFOs also suggested inflation to be a growth deterrent across industry verticals.

Bearing the current scenario in mind, the community of Indian CFOs is optimistic and seems to be gearing-up for better times ahead. According to the 2014 Deloitte India CFO Survey, around 68% CFOs believe that the economy is likely to take a positive turn over the next few months, thus reflecting an optimistic outlook regarding the future state of economy, beyond the one year horizon, as compared to 44% recorded in 2013.

The Deloitte survey has also revealed that the CFO continues to expand beyond the traditional financial domain of being an operator or steward to more strategic and catalyst aspects. The proportion of time spent by CFOs on strategist and business catalyst roles continues to increase progressively and currently dedicating almost 52% of their time towards these roles.

“This depicts how Indian CFOs are working alongside CEOs/top management to advice on strategic initiatives pertaining to growth, cost containment, funding options, pricing and market-related decisions, financial feasibility of projects etc”, added Sanjoy Sen.

Almost 98% of CFOs are of the view that the new Companies Act would affect their roles in different ways. Disclosure and approval of Related Party transactions has been considered as the most impactful provision by 53% CFO respondents. This is followed by the requirements around Corporate Social Responsibility (CSR) activities (46%), and specific clauses pertaining to duties of directors (36%).

The Deloitte India CFO Survey 2014 is based on responses from over 100 CFOs, spanning listed and unlisted companies, across sectors, with revenues of less than INR 250 crores to larger companies with revenues greater than INR 2,500 crores. The report provides perspective on how CFO opinions are evolving with respect to the changing economic and global scenarios, slowing consumer demand and increasing organizational pressures to maintain margins and profitability.