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2015 India Corporate Treasury Survey

Market volatility major concern for corporate treasurers: Deloitte India Survey Report

Mumbai, July 6, 2015: 56% of corporate treasurers in India continued to rank unmanageable volatility in financial markets as their largest worry according to the Deloitte 2015 India Corporate Treasury survey report. While this is a concern for treasurers across industry sectors, it is higher in the consumer business and the energy and resources sector.

Treasurers reported that lack of adequate information from business units continued to be their biggest challenge in managing global cash flows. They also attributed forex and commodity price variability as reasons for difficulties in cash flow management. While they appear to be at ease with RBI regulations, they find taxation laws and the new Companies Act affecting cash pooling, besides lack of quality talent in the market-place as key external business challenges. More than 48% of the respondents considered lack of clear view on exposures as the single largest internal challenge.

“From being a manager of liquidity and financial risk, the role of corporate treasurers is evolving to that of a strategic advisor to support enterprise growth.” said Muzammil Patel, Senior Director, Deloitte in India. In order to embrace this new role, the corporate treasury of the future will need to address different facets of strategy, operations and management related to business and shareholder treasury. Creating a robust treasury framework with functions such as treasury transformation, performance management, and predictive risk management are at the heart of enabling this transition.”

Key findings from the report are as follows-

Emerging role of corporate treasury function- Managing cash flow risk and P/L volatility has traditionally been the focus area of the corporate treasury function. More than 86% of the respondents confirmed that their treasury function has currently been tasked with this aspect. 78% of the respondents believe that managing financial risk will continue to be among their top three priorities. The role of treasury as a financial risk manager appears cemented but corporate treasuries are evolving into holistic risk, liquidity and capital management functions. More than 70% of the respondents considered funding long-term growth, financing working capital and optimizing return of surplus as core to their treasury function.

Changing landscape of financial risk management- The role of Board and senior management in overseeing hedging programs has increased. More than 56% of the respondents operated on a mandate based hedging program with specific instructions from the Risk Committee or Board. Only 6% of the respondents had an opportunistic program based on market movements. The need for a structured hedging program was clear among respondents with only 11% indicating that they had no hedging program in place.

Working capital management- Nearly 70% of the respondents believed that reducing working capital utilization through stronger monitoring is one of their top two priorities. More than 83% of the respondents believe that investment in technology and reporting systems will prove to be a key differentiator in effective working capital utilization and monitoring.

Addressing business surpluses and their impact on return on equity: Treasurers are divided on the consideration of dividend and share buyback programs on cash deployment horizons. Still 51% of those surveyed do not view dividend payments and share buybacks as important part of cash deployment decisions. Treasurers responded that improving monitoring over idle cash and pooling cash across entities are their most important priorities for enhancing returns of surpluses. 73% of treasurers responded that tax planning was an integral part of their cash pooling and deployment strategy.

Gearing to support enterprise growth priorities: For supporting long-term growth, treasurers now forecast an increasing role in optimizing leverage thereby enhancing returns on equity, managing investor relations and raising equity capital. More than 67% of treasurers continue to believe that aligning business cash flows with debt servicing obligations is critical and 65% also believe in optimising leverage and enhancing return on equity. External commercial borrowings continue to be the instrument of choice for funding long-term growth.

Responses to the Corporate Treasury Survey were received from 63 leading companies in India. The respondent profile covered Chief Financial Officers and Corporate Treasurers. The survey covered a wide array of industries which includes Manufacturing, Energy and Resources, Consumer Business, Technology, Media and Telecommunications, Life Sciences and Healthcare.

Notes to the editor for reference purposes only:

This press release has been given by Deloitte Touche Tohmatsu India Private Limited

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

©2015 Deloitte Touche Tohmatsu India Private Limited. Member of Deloitte Touche Tohmatsu Limited

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