Transcript Title

Voice of CFO Survey
November 2012
CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission of CII & McKinsey & Company is strictly prohibited
Summary Statistics from 32 CFO respondents (1/2)
CFO believes India’s GDP
growth will be >7%
believe India’s GDP growth
will be <6%
believe GST, New Companies
Act and IFRS are steps in the
right direction
believe GAAR is a step in the
wrong direction
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 topline growth will be same or
more than last year
CFOs believe corporate
India’s bottom line growth will
be negative in the coming
year
© Confederation of Indian Industry
Summary Statistics from 32 CFO respondents (2/2)
‘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’
‘India now has dubious distinction of
being amongst the most corrupt
governments in the world’
‘The government should continue the
reform agenda initiated by it’
‘Uncertainty in regulations is a cause
of concern’
‘We welcome the constitution of the
PMO committee for the IT sector for
resolution of disputes in a speedy
manner’
‘Faster implementation of policies is
required’
‘GST is a great opportunity to give
India a clean, efficient and effective
indirect tax regime’
‘Bring transparency in governance,
zero tolerance in corruption’
‘When it comes to the convenience of
running the business, India is at the
bottom of the list’
© 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”
Economic growth
Expect a 5-6% GDP
growth next year
Exchange rate (INR / USD)
Expect it to be 50-55
Inflation
Expect it to remain
range bound 6-8%
Suggested measures to improve include …
Encourage FDI
‘Open out the Economy by
allowing FDI in Retail &
Insurance’
‘Take firm decisions on FDI’
Encourage capital inflows
‘Allow lower withholding tax
for all FII investments in debt’
‘Relax norms for FIIs to
invest in Indian equities’
Remove supply constraints
‘Address supply side
bottlenecks in logistics’
‘Arrest the artificial hoarding
of commodities by traders’
Focus on infrastructure
‘Revive infrastructure projects
viz. power’
‘Give tax exemption for Infra
projects’
Control fiscal deficit
‘Decontrol petrol & diesel
prices thereby reducing
consumption & Forex outgo
thereby reducing Current
Account deficit’
Encourage agricultural
produce
‘Enhance efficiency on the
supply side - agricultural
productivity
Simplify taxation and
Implement GST
‘Rationalize tax structure to
reduce cascading effect’
‘Clear GST’
SOURCE: Voice of CFO survey
Encourage exports
‘Provide impetus to exports
including fiscal incentives’
© Confederation of Indian Industry
Reduce wasteful govt
expenditure
‘Reduce non planned and
unproductive government
expenses’
Apart from GAAR, CFOs believe recent policy changes
are in the right direction
Step in the right direction
100
New Companies
Act
100
IFRS
100
GAAR
36
12
48
52
40
28
42
46
25
31
10
70
0
25
32
46
23
96
79
High
100% =
GST
DTC
Medium
Perceived impact on business
% responses with ‘Yes’
Land acquisition
policy
Low
26
20
58
38
20
26
15 26
‘IFRS can simplify the
process of raising capital
in the overseas markets’
‘GAAR should be
deferred as it may have
adverse impact on
business sentiment and
capital flows’
Illustrative quotes
‘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’
SOURCE: Voice of CFO survey
‘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’
© Confederation of Indian Industry
‘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’
What will be better compared to last year? What will be worse?
Compared to last year
Measures to further improve FDI
1 = worst, 3 = Better
2.2
FDI attractiveness
Stable economic &
fiscal policies
2.1
Confidence in
economy
1.9
1.8
Regulatory climate
Security &
social harmony
Job opportunities
Bureaucracy &
corruption
SOURCE: Voice of CFO survey
1.7
1.6
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’
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 multibrand retail, civil aviation, insurance & pension
1.5
© Confederation of Indian Industry
Majority of the CFOs are confident of beating last year’s performance
Percent
Contribution to
exchequer
4 12
Topline growth
4 15
PAT growth
8
ROCE
About the same
Less
More
Significantly more
Key challenges voiced
58
23
50
15
35
4
54
23
23
0
Significantly lesser
46
15
Slowdown in growth
4
‘Global uncertainty is impacting growth’
4
‘Very low business demand due to lower
domestic capex’
4
Higher costs/lower margins
ROE
0
38
Debt issuance
16
Employment
15
Capex
12
Dividends
21
12
Equity Issuance
17
32
24
20
8
17 6
39
35
4
18 0
59
22
5
31
38
28
4
37
21
0 23
Inventory build up
46
12
35
6
‘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’
0
SOURCE: Voice of CFO survey
© Confederation of Indian Industry
What are the priorities for CFOs in the next 12 months
Key priority areas for CFOs
1 = low priority, 10 = high priority
8.4
Cost reduction
Introducing new
products/services
7.1
Entering new markets
5.9
Going international
5.5
New acquisitions
4.6
Reduce leverage
4.6
Capital raising
4.3
3.1
Dispose assets
2.2
Reduce dividends
Share buyback
SOURCE: Voice of CFO survey
1.4
© Confederation of Indian Industry
‘Controlling
spending, improving
profitability and
managing cash flow
effectively is a top
priority’
THANK YOU
© Confederation of Indian Industry