Mumbai, March 17, 2021: A recent survey of Chief Financial Officers (CFOs) in India, conducted by data and analytics firm Dun & Bradstreet, found that the confidence in financial and macro-economic conditions has increased. The pan-India survey compared confidence levels from Q1 2021 (Jan-Mar of the calendar year 2021) with the previous quarter. Based on the responses, the Dun & Bradstreet Composite CFO Optimism Index showed an increase of 23.6%, on a q-o-q basis to 121.2 during Q1 2021.
Dun & Bradstreet Composite CFO Optimism Index analyses the optimism level of CFOs on 12 parameters: operating margin, liquidity position, level of financial risk on company’s balance sheet, risk appetite, need for raising short term and long term funds, cost of raising funds, availability of funds, domestic and global macroeconomic scenario, overall scenario for mergers and acquisitions, and level of financial risks for corporate sector as a whole.
The survey also revealed the following insights on the overall business climate in India:
Optimism level for financial performance of companies and the macroeconomic scenario increased by 30.7% (q-o-q) and 13.7% (q-o-q) respectively
On a sectoral level, optimism level increased by 14.4% (q-o-q) in the industrial sector and by 27.4% (q-o-q) in the services sector
Seven of the eight parameters under the financial performance sub-index improved in Q1, 2021 on a q-o-q basis
Percentage of CFOs who have indicated the need for raising short-term funds (45%) and long-term funds (53%) is the highest since the index was instituted in Q2, 2012
65% of CFOs expect an increase in the operating margin of their companies, highest in two years
78% of CFOs expect the domestic macro-economic scenario to be favorable during Q1 2021, highest since Q2, 2015
53% of CFOs expect the global macro-economic scenario to be favorable during Q1, 2021, highest since Q1, 2015
52% of CFOs expect the overall scenario for mergers & acquisitions to be favorable during Q1, 2021, highest since Q4, 2018
Commenting on the findings of the survey, Arun Singh, Global Chief Economist, Dun & Bradstreet, said “Increased optimism levels amongst CFOs provides a signal for a recovery in the Indian economy. Data on some of the leading indicators like automobile sales and freight traffic are supporting the recovery theory.”
“Elevated optimism levels could be the result of the many positive developments during the past few months. Announcements made in the Union Budget for FY22 along with the steps taken towards improving the ease of doing business, and policies for making the corporate regulatory environment robust have uplifted the optimism levels. Timely measures taken by the government in the recent past, healthy performance of the stock markets, and the swift roll-out of the countrywide COVID-19 vaccination have added to the optimism levels. More than 50% surveyed CFOs are looking forward for raising long-term funds, further supporting the increased risk appetite of the respondents. Going ahead, the implementation of various policy and regulatory measures announced in the Budget are expected to keep the sentiment elevated.”
About the CFO Optimism Index
The Dun & Bradstreet Composite CFO Optimism Index, which has been tracking the changing sentiment of CFOs since 2012, is a leading indicator of the Indian financial market as it helps in predicting the performance of Sensex three months in advance.
For conducting the survey, a sample of companies belonging to basic goods, capital goods, intermediate goods, consumer durables, consumer non-durables and the services sector is selected randomly from Dun & Bradstreet’s commercial credit information file. The sample selected is a microcosmic representation of India’s business community. All the respondents in the survey are asked a set of questions regarding the financial performance of their companies and the overall macroeconomic scenario for the corporate sector in the forthcoming period. The CFOs are asked to state their expectations as to whether the specified parameters pertaining to their respective companies and the overall macroeconomic scenario will register an increase, decrease or show no change in the ensuing quarter as compared to the same quarter in the previous year. Two broad indices, optimism at the company level and optimism at the macroeconomic level, each consisting of 8 and 4 sub-parameters respectively, are then designed.