CFO optimism level falls in Q2: D&B survey

The optimism level of chief financial officers (CFOs) of companies in India fell sharply to 53.1 for the second quarter of 2013 from the level of 59.4 during the first quarter of the year. It is also lower than the 57.5 range during the previous year quarter, global provider of business information Dun & Bradstreet said in its latest survey of corporate financial chiefs.

More than 85 per cent of the CFO perceives the level of financial risks on company's balance sheet to increase or remain unchanged during Q2 of 2013 as compared to the previous year quarter while around 44 per cent of the CFOs expect the level of financial risks on company's balance sheet to increase which is a five quarter high, according to the survey.

Around 26 per cent of the CFOs have revealed that the overall scenario for mergers and acquisitions remain unfavourable during Q2 of 2013 as compared to only 10.5 per cent during Q1 of 2013. The percentage of CFOs indicating concerns on this parameter is the highest since the past five quarters.

Only 45.8 per cent of the CFOs expect an increase in the liquidity position of their companies during Q2 of 2013 as compared to 48.1 per cent during Q2 of 2012. Moreover, only 43 per cent expect an increase in the operating margin of their company during Q2 of 2013 as compared to 59.8 per cent during Q2 of 2012.

Around 36 per cent of the CFOs indicated an increase in risk appetite for Q2 of 2013, marginally up from 28.9 per cent of the CFOs indicating an increase during Q1 of 2013.

Further, CFOs have indicated an increase in their requirement for both short term and long-term funds. Around 41.1 per cent of CFOs have indicated an increase in need for long-term funds as compared to 34.2 per cent during Q1 of 2013. While 44.1 per cent indicate an increase in need for short term funds during Q2 of 2013, slightly up as compared to 40.0 during Q1 of 2013.

In line with the previous survey, a higher percentage of CFOs have indicated reducing cost and cash flow management to be their priorities during the next six months.

Effective recovery system followed by effective portfolio management and increase in close monitoring of strategic accounts remain the most preferred tool for risk management for the next six months, the survey noted.

''The CFO survey conducted by D&B India reveals that the optimism levels among the CFOs have fallen significantly as concerns among CFOs have increased regarding the level of financial risk on their balance sheet. Confluence of factors such as the political uncertainty, emergence of the debt crisis in Cyprus, deteriorating investment condition, increased number of shelved projects, substantial moderation in GDP growth and significant widening of the current account deficit had dented the business sentiment.

While the optimism regarding the operating margin of the companies have fallen among the surveyed CFOs, increasing number of CFOs perceive overall scenario for mergers and acquisitions to remain unfavourable in the near term. Continuation of the reform measures is crucial to support the revival of the sentiment among the corporate sector going forward,''

Arvind Raghav, director-risk management solution, Dun & Bradstreet India, commented.

Dun & Bradstreet conducted a pan India survey of corporate CFOs in which they were asked about their confidence in the overall financial and macro-economic conditions for the second quarter of 2013 (Apr-Jun of the calendar year 2013), 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.