Slowdown could last 2 yrs, India Inc still optimistic: E&Y

India Inc expects the ongoing slowdown to continue for the next two years, but even then many corporate houses are confident of achieving at least 10 per cent growth in this fiscal.     

According to a survey by consultancy firm Ernst and Young (E&Y) titled 'Opportunities in Adversity: India Inc's response to the financial downturn', 65 per cent of the respondents said they expected the slowdown to continue for at least two more years, while nearly 27 per cent saw the slowdown lasting 6-12 months.     

The survey, which interviewed over 120 top management executives, found that 46 per cent of the respondents were confident of achieving at least 10 per cent overall growth in FY'10.      

"Organisations are relatively more optimistic about their own prospects as they have greater influence on their own performance, while they are more cautious on the macro-economic outlook as it is dependent on many additional factors," E&Y Partner and National Director (Markets) Sunil Chandiramani said.     

"The last few months have been extremely tough and we have seen an increasing number of companies respond to these challenges with a slew of measures," he added.

Reflecting confidence in corporate prospects for FY'09, which many companies are yet to close, 42 per cent of the respondents said they would achieve 90 per cent of their targets, while 43 per cent were looking at meeting 70-90 per cent of their targets.     

Only 15 per cent said they would not attain more than 70 per cent of the targets, the survey added.     

A number of issues, ranging from increasing pricing pressure to slowdown in order bookings, have dogged corporates and they are focusing on cost reduction. About 71 per cent of them have re-evaluated business plans to preserve cash.

Companies have also laid 'high' emphasis on rightsizing (which includes redeployment and workforce sharing instead of layoffs), with 69 per cent opting for this step as a cost-cutting measure. Another 61 per cent indicated a 'high' possibility of a hiring freeze.    

The respondents showed a preference for term loans from banks (69 per cent), debt or equity from group entities (61 per cent) and mezzanine finance (which gives lenders the right to convert to ownership in case of default) (37 per cent), instead of accessing the capital market (10 per cent) and going in for private equity (20 per cent).     

A majority of the respondents (63 per cent) expected consolidation and were looking at mergers and acquisitions (58 per cent) for business growth.

The survey said the non-availability of leverage options had curtailed cross-border acquisitions significantly and with the global economy slowing faster, Indian companies have become more cautious.     

On the other hand, inbound M&A is expected to pick up as multinationals look to expand presence in the Indian market, and that activity could see a growth rate of more than five per cent, the survey added.