By Dr. Arun Singh,
Lead Economist
Dun & Bradstreet India
13-Nov-18

CFO Optimism Index

Dun & Bradstreet Composite CFO Optimism Index: Dun & Bradstreet Composite CFO Optimism Index declined by 17.0% on a y-o-y basis

72% of CFOs expect availability of funds in the market to decrease or remain the same - highest in 27 quarters

Mumbai, November 13, 2018: Dun & Bradstreet, the world’s leading provider of global business information, knowledge and insight conducted a pan India survey of Chief Financial Officers (CFOs) in which they were asked about their confidence in the overall financial and macro-economic conditions for Q4 2018 (Oct-Dec of the calendar year 2018), as compared to the same quarter of the previous year. The survey reveals how optimistic the CFOs are with respect to the overall financial health of their respective companies, the business risk environment and the macroeconomic scenario in the country.

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

§  The Composite CFO Optimism Index declined by 17.0%, on a y-o-y basis, to 90.2 during Q4 2018 - lowest in 19 quarters

§  Optimism levels for financial performance of the company is the lowest in 19 quarters while optimism levels for macroeconomic scenario is the lowest in 18 quarters

§  Optimism level amongst CFOs in the industrial sector is the lowest in 20 quarters.  Barring Q2 2018, optimism level in the services sector is the lowest in 18 quarters

§  45% of CFOs expect level of financial risk for corporate sector to increase in Q4 2018 – highest in 20 quarters

§  43% of CFOs expect cost of raising funds to increase - barring Q3 2018, it is the highest in 19 quarters

§  72% of CFOs expect availability of funds in the market to decrease or remain the same - highest in 27 quarters

§  57% of CFOs in the industrial sector expect a decrease or no change in the liquidity position of their companies in Q4 2018 - highest in 5 quarters

§  72% of CFOs in the services sector expect risk appetite in the current scenario to decrease or remain the same – highest in 10 quarters

§  40% of CFOs in the services sector have indicated overall scenario for mergers & acquisitions to be favourable - lowest in 18 quarters

§  Percentage of CFOs stating reducing cost (40%), organic expansions (8%) and dividend declaration (2%) as their priority in the next six months is the lowest in 27 quarters

§  37% of CFOs have stated to adopt hedging as their risk management tool for the next six months, highest in 7 quarters

Commenting on the findings of the survey, Manish Sinha, Managing Director – India, Dun & Bradstreet said that “The survey for Dun & Bradstreet CFO Optimism Index for Q4 2018 was conducted during September 2018, the month when the NBFC crisis was at its peak. This timing had an impact on CFO optimism levels, along with some other factors: cost of funds, availability of funds and liquidity position of the companies. The overall CFO optimism level reflects the rising borrowing costs for corporates and concerns over liquidity in the market. Over the last one year, interest rates have increased across the board from 50 basis points in the repo rate to 186 basis points in the corporate bond market. Further, the US Federal Reserve has raised the fed funds rate by 100 basis points. Our assessment is that apprehensions over geo-political issues, rupee depreciation, input price pressures, events related to NBFCs and state and general elections are likely to weigh upon the sentiment of the CFOs in 2019.”

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