Hunt for CFOs heats up as firms look at expansion, fund raising
Mumbai: For six months now, a Bangalore-based mid-sized hotel chain has been looking for a CFO. The slowdown over the past few years has seen the company’s financials come under pressure: room tariffs have fallen, sales are down, and, like any other borrower, it has a fraught relationship with banks, although it sees growth returning now.
“Our earlier CFO’s job was not very complex, but now we need a CFO who is both a fire-fighter and strategist to help the hotel emerge from the slump and grow as we plan to acquire new properties,” said the HR head of this hotel who requested anonymity and did not want her firm to be named.
The hotel chain is among several mid-sized and start-up firms that have given mandates to search firms such as ABC Consultants, RGF Executive Search, Lighthouse Partners, Manpower Group, Antal International to hire CFOs. The number of such mandates has increased by at least a third in recent months, say executives at the search firms.
“Demand for CFOs from sub-Rs.1000 crore (in sales) companies has doubled for us compared with two years ago,” says Shiv Agrawal, managing director, ABC Consultants, adding that the company has received six-eight mandates in the past three months alone.
Some of the demand is coming from start-ups that are growing rapidly and are looking for fresh investments and funding.
Online lingerie retailer Zivame.com, Pokkt.com, a platform that helps app developers monetise their offerings, and RezNext Global Solutions Pvt. Ltd, which connects customers with hotels, are among the firms that have given out mandates to hire CFOs.
“We are business and tech guys who are focused on running the business,” says Rohit Sharma, founder of Pokkt, which raised $2.5 million in July. Looking to close another round of funding in two months, Sharma believes the time has come to hire a CFO.
E-commerce firms and start-ups have typically had trouble hiring CFOs, as most established finance heads don’t want to jump into the relatively high risk start-up world. After having its CFO post vacant for nearly 18 months, e-commerce giant Flipkart India Pvt. Ltd is likely to hire former Tata Communications finance chief Sanjay Baweja for the job.
“We received a lot of applicants, but we are looking for the right person, as we cannot afford to make mistakes,” said Richa Kar, founder of Zivame, which has raised $6 million in Series B funding last year and has been looking to a hire a CFO for six months now.
Investors, too, are pushing start-ups to find professional CFOs.
“While most companies we meet are run by strong entrepreneurs, they usually have not paid a lot of attention to the finance function. Therefore, after we invest in the company, one of the first searches we embark on usually is for a CFO. More than 50% of the companies we invest in, we help improve their finance function by first helping hire a CFO,” said Abhay Pandey, managing director of Sequoia Capital India.
Tougher compliance and governance norms put in place by the new Companies Act that was passed last year are another reason for the sudden demand for CFOs. Among other changes, the Act now makes it mandatory for a CFO to sign off on a firm’s profit and loss account; earlier, the Company Secretary could do so.
“We were not keen to fill this position earlier, as we were managing with our finance team, but with tighter corporate governance norms in addition to our pan-India expansion plans, we felt the need to fill that position,” said R.P. Trivedi, HR head, of the five-decade old VRS Foods Ltd, a Delhi-based dairy company, which is looking for a CFO.
Still, there is a limited pool of highly-skilled CFOs. Of the 65,000 firms above Rs.100 crore, only 10% have a CFO, says Deepak Narayanan, co-founder, MyCFO, which provides chief financial officers for temporary assignments. The shortage of trained professionals and the increased demand and responsibility has also meant that the salary of a CFO has gone up by about 20%, says Agrawal of ABC Consultants.
As Narayanan says, “It is a good time for skilled finance professionals, as there is a real war for talent amongst companies.”