Clouds of recession shedding off

India Inc ushers into its 63rd year of independence, gearing up for the next phase of high growth

Having confronted the recent credit crunch in the wake of global financial crisis, Privately Held Businesses (PHBs) in India seem to restore their optimism while the economic indicators start taking a positive curve.

The Grant Thornton International Business Report (IBR) 2009 finds Indian PHBs amongst the most confident businesses globally, with access to finance not being a significant issue anymore. However, the cost of capital is still a concern in the present business environment.

Moreover, the survey reveals that the turmoil in the financial markets has reduced the appetite of PHBs to raise capital through a public listing, with the proportion of respondents globally planning a listing in the medium term falling from 22% to a meagre 10%. The steepest fall is observed amongst the BRIC economies, but a fifth or more of PHBs in India, Brazil and mainland China still expect to undergo a public listing in the next three years.

Vishesh Chandiok; National Managing Partner, Grant Thornton India commented “Privately held businesses have done extremely well to adjust to the so- called ‘new normal’. Being generally family managed, these businesses have the advantage of taking a long term view of their businesses instead of focusing on short term quarter on quarter profitability, and the ability to take quick decisions when course corrections are required. Access to finance has eased up and I believe a large quantum of Global capital will be directed towards India from next year which will further set the scenario for rapid growth.”

Expectations regarding profitability have been severely dented by the downturn with the global balance of -5 per cent reflecting the difficulties businesses expect in the year ahead.

The majority of countries in the survey show negative balances, with Hong Kong lowest on a balance of -52 per cent followed by Japan and Taiwan, both at -45 per cent. In Latin America expectations are mixed with Argentina (-43 per cent) and Chile (-41 per cent) contrasting with Brazil (+19 per cent) and Mexico (+15 per cent).

Most positive is Vietnam, in line with very upbeat revenue expectations, followed by India and the Philippines.

The employment prospects are also on improving on a significant note. Among the larger economies, India (+28 per cent) shows the healthiest employment expectations, buoyed by still optimistic perceptions of the economic background.