Note ban, GST pull business confidence of CFOs to 1.5-yr low in Q3: Survey

Only 41% CFOs expressed optimism about liquidity position of their firms, lowest since Q2 2014

Amid subdued demand after goods and services (GST) implementation and demonetisation woes, the business confidence in India’s chief financial officers (CFOs) touch one-and-a-half-year low in the July-September period, reveals a survey.

The Composite CFO Optimism Index for Q3FY17 declined by 11 per cent year-on-year and by 5.7 per cent on a quarter-on-quarter basis, says Dun & Bradstreet Composite Optimism Index for Q1 2017.

Only 41 per cent of the CFOs expressed optimism about liquidity position of their companies — the lowest since Q2 (April-June) 2014.
 

Photo courtesy: www.dnb.co.in

The study, which covered 300 respondents, said that optimism among the CFOs deteriorated more for the financial performance of their companies compared to overall macroeconomic conditions. Fifty-seven per cent of CFOs expects selling prices to remain unchanged.

Optimism on net sales and net profits were found to be lowest in 33 quarters, barring Q1 2017. However, optimism on the level of inventory was at a seven-quarter high.

While construction sector is the least optimistic, intermediate goods emerged as the most optimistic sector.

Key takeaways from Dun & Bradstreet Composite Optimism Index for Q1 2017:

• Business Optimism Index stands at 72.1 during Q3 2017, a decrease of 13.3 per cent as compared to Q3 2016

• Optimism for volume of sales stands at 63 per cent — a decrease of 15 percentage points as compared to Q3 2016

• Optimism for new orders stands at 65 per cent — a decrease of 5 percentage points compared to Q3 2016

• Optimism for net profits stands at 55 per cent - a decrease of 16 percentage points as compared to Q3 2016

"Concerns related to subdued domestic and weak external demand, strain in the corporate balance sheet, stressed assets in the banking system and the pressure on public finances appear to have contributed to the lower optimism level," Manish Sinha, managing director of Dun and Bradstreet told PTI.

Further, strain on the corporate balance sheet has added to the already weak risk appetite of the CFOs. Consequently, their expansion plans remain muted, which also has an impact on the optimism score.

Sinha added: "Remonetisation measures, restocking after GST implementation, the onset of the festive season, state pay commission hikes and the lower lending rates might result in some tailwinds for the CFO Optimism scores".

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.