D&B composite CFO optimism index is at a 5-quarter high

Dun & Bradstreet, the 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 Q1 2018 (Jan-Mar 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 stands at 117 during Q1 2018, an increase of 7.7 percent on a q-o-q basis
• Optimism levels both for financial performance of the company and macroeconomic scenario witnessed an increase for the 2nd consecutive quarter.
• Optimism levels for macroeconomic condition is the highest in 3 years.
• Optimism level amongst CFOs in the industrial sector is the highest in 11 quarters and in the services sector, it is the highest in 5 quarters.
• 39 percent of CFOs in the industrial sector indicated need for raising short term funds – highest in nearly 4 years.
• 34 percent of CFOs indicated need for raising long term funds in Q1 2018 – highest since Q3 2015.
• The percentage of CFOs who expect a decrease in the level of financial risk on company’s balance sheet is 13-quarter high in the services sector
• 61 percent of CFOs expect overall scenario for mergers and acquisitions to be favorable in Q1 2018 – highest since Q4 2014
• For four consecutive quarters, CFOs have stated that reducing cost has been their top priority while dividend declaration has been their least priority.
• Effective recovery system has been the most preferred risk management tool by CFOs for four consecutive quarters.
• Tightening credit appraisal mechanisms (29 percent) and Hedging (29 percent) are the least preferred risk management tool by CFO for the next six months.

Commenting on the findings of the survey, Manish Sinha, managing director – India, Dun & Bradstreet stated that “Optimism levels amongst CFOs has increased to a five-quarter high and has been rising steadily since the last two quarters. Expectations that increased thrust on the rural and social sector in the budget could uplift the rural demand and drive the consumption growth had added to the optimism levels. Even as the impact of demonetization on demand has been tapering off, companies are yet to enter in the capex cycle. However, our survey finds that CFOs are optimistic about raising funds both short term and long term. Besides, there is a decrease in the perception of financial risk on company’s balance sheet, probably buoyed by the upturn in the prospects in the global and domestic economy. The RBI has also geared up to fast-track the NPA resolution, the much-needed move to strengthen the economy. This along with expected improvement in domestic demand are likely to help optimism levels going ahead.”