CFO optimism in Jul-Sep rises; monsoon, raw material costs key going forward

Optimism level among India's chief financial officers for the July-September period has improved as compared to the previous quarter and going forward distribution of rainfall, raw material costs and revival in demand will be the key deciding factors, says a report.

The Dun & Bradstreet Composite CFO Optimism Index for the third quarter of this year remained unchanged on a year-on-year basis but increased by 9.6 per cent on a quarter-on-quarter basis.

"It appears the risks from the stressed assets in the banking system and the fluctuations in currency have been outweighed by positive performance in some indicators such as increase in bank credit, sales growth in automobile sector, increase in air passenger traffic, improvement in construction activity and buoyant capital markets," said Manish Sinha, Managing Director India, Dun & Bradstreet.

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.

"Looking ahead, the next quarter's CFO optimism level will depend a lot on the monsoon, specifically the sufficiency and distribution of rainfall. This is in addition to the standard parameters like raw material costs and revival in demand," Sinha said.

Around 38 per cent of CFOs have stated risk management to be their priority in the next six months, and close monitoring of strategic accounts is the most preferred risk management tool by CFOs for the next six months.

"The CFOs have raised concerns on increase in cost of funding and availability of funds. The recent policy rate hike and pressure on government finances emanating from high crude oil prices could have weighed on the sentiment," Sinha added.

As per the survey, 44 per cent CFOs stated cost of raising funds from the market to increase highest since the January-March quarter of 2014, while only 32 per cent of CFOs said that availability of funds in the market will increase lowest since the January-March quarter of 2014.