Slowdown effects have been mild so far

Slowdown effects have been mild so far

Mumbai: The men who manage the finances of some of India’s best-known companies admit that the economy is slowing. Their companies are feeling this, albeit mildly in some cases, and they are deferring investments because of high interest rates (although they add that this will be a temporary problem because interest rates are peaking).

The survey of 170 chief finance officers (CFOs) carried out by Mint and Yes Bank Ltd last week is especially significant when seen in the background of Monday’s release by the government of factory output data that indicates a slowdown.

Also See | Slowdown effects have been mild so far (PDF)

The CFOs surveyed include Y.M. Deosthalee of Larsen and Toubro Ltd, Koushik Chatterjee of Tata Steel Ltd and Uday Phadke of Mahindra and Mahindra Ltd. Half of them expect the Indian economy to grow by 7.5% in 2011-12.

The CFOs responded to 22 questions under three broad themes—economy and growth, health of Indian firms, and transparency and corporate social responsibility.

Despite their mild pessimism regarding the economy, most CFOs surveyed said the slowdown has so far had only a mild impact on their companies. And while many admit that high interest rates are delaying new investments by their companies, at least half say they are, indeed, going ahead with them. At least half the CFOs surveyed expect investments to begin picking up from the fourth quarter of the current fiscal year, but at least one-third think it will happen only in the next fiscal year.

Government policy, the CFOs said, is the biggest hurdle when it comes to investments, specifically citing foreign investment rules, land acquisition policies and other key reforms.

While nearly one-third of participating CFOs expect their firms to raise equity in the current fiscal, about one-fourth see that happening in the next fiscal year. Interestingly, despite the rush for equity capital, private equity is clearly not a preferred option —over half the CFOs surveyed have no plans of seeking capital from these funds. Debt is preferred, with most looking to raise it at home, followed by overseas debt.

Graphic by Sandeep Bhatnagar/Mint