CFOs optimistic about Indian economy as companies prepare for slew of regulatory changes
MUMBAI: Two thirds of the chief financial officers (CFOs) in Indian companies seem to be optimistic about the future of their business, a new research report points out.
Even though 74% of CFOs are optimistic about increase in revenues in the next one year, given the uncertain global economy and growth being concentrated in certain sectors of the domestic economy, the CFOs were almost equally divided on whether it was the right time to take risks, a Deloitte research pointed out.
Most of the CFOs are under pressure from not just macroeconomic and changes in the sector outlook but even a slew of regulatory frameworks being introduced by the government. In the next few months many companies are required to follow a lot of changes.
About 50-60% time of all support functions like tax, regulations and compliance is going in identifying and analysing change in requirement and updating the management say industry experts. As companies and banks face a maximum number of regulatory changes they have to comply within a year ever, from GAAR (General Anti-Avoidance Rule) to GST (Goods and Services Tax) and audit rotation to Ind-AS (Indian Accounting Standards), this core team can help companies pre-empt and analyse how one change may have an impact on the other and overall company strategy.
According to the research, 58% of the CFOs believe their capital expenditure will increase over the next one year giving credence to the fact that there were some green shoots of recovery in the investment cycle. More than 60% of the participants believe that they have seen an improvement in the investment climate over the past one year.
Both working capital requirements and cash holdings are expected to increase for companies over the next one year, which probably implies that they expect a higher inflation in both goods and services. On the availability of credit the responses were mixed with a majority of CFOs saying that credit was available at a higher cost. This seems to be counterintuitive in a year when the borrowing cost for banks have come down. However, this could possibly be based on the belief that banks would find it hard to lend due to the impending structural constraints and increasing risk aversion in the face of the ensuing slowdown in a number of sectors, the report added.
Even though 74% of CFOs are optimistic about increase in revenues in the next one year, given the uncertain global economy and growth being concentrated in certain sectors of the domestic economy, the CFOs were almost equally divided on whether it was the right time to take risks, a Deloitte research pointed out.
Most of the CFOs are under pressure from not just macroeconomic and changes in the sector outlook but even a slew of regulatory frameworks being introduced by the government. In the next few months many companies are required to follow a lot of changes.
About 50-60% time of all support functions like tax, regulations and compliance is going in identifying and analysing change in requirement and updating the management say industry experts. As companies and banks face a maximum number of regulatory changes they have to comply within a year ever, from GAAR (General Anti-Avoidance Rule) to GST (Goods and Services Tax) and audit rotation to Ind-AS (Indian Accounting Standards), this core team can help companies pre-empt and analyse how one change may have an impact on the other and overall company strategy.
According to the research, 58% of the CFOs believe their capital expenditure will increase over the next one year giving credence to the fact that there were some green shoots of recovery in the investment cycle. More than 60% of the participants believe that they have seen an improvement in the investment climate over the past one year.
Both working capital requirements and cash holdings are expected to increase for companies over the next one year, which probably implies that they expect a higher inflation in both goods and services. On the availability of credit the responses were mixed with a majority of CFOs saying that credit was available at a higher cost. This seems to be counterintuitive in a year when the borrowing cost for banks have come down. However, this could possibly be based on the belief that banks would find it hard to lend due to the impending structural constraints and increasing risk aversion in the face of the ensuing slowdown in a number of sectors, the report added.
