CFOs confidence in financial conditions has decreased but optimism for macro-economic conditions has increased over the previous quarter, said a survey by Dun & Bradstreet India. The composite CFO optimism index remained unchanged on a quarter-on-quarter basis and 48 per cent of CFOs stated an increase in demand for short term funds which is the highest since Q2 2012, the survey said.
Further, it stated that 52 per cent of CFOs are optimistic for mergers and acquisitions, which is the highest in five quarters. Also, only 12 per cent of CFOs expect the level of financial risk on their balance sheet to decrease in Q2 2023, lowest since Q2 2012. “The CFO Optimism Index for the services sector surged to a four-quarter high, while it fell for the industrial sector from the previous quarter,” it said.
“Optimism among CFOs remained largely unchanged in Q2 2023 compared with the previous quarter. The increase in optimism for funding needs was mainly offset by a perceived increase in the level of financial risks along with a fall in optimism for profitability and liquidity position,” said Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet. He further added, “Profit margins are likely to be affected by increasing financing and labor costs. Besides, businesses will experience challenges due to weak external demand and the probable impact of the heatwave and El Nino on rural demand.”
Further, a surge in the need for short-term funds, an indicator for working capital, could also indicate tightening of cash flow conditions as optimism for liquidity and profitability fell sharply from the year-ago value
The Dun & Bradstreet India Composite CFO Optimism Index analyses the optimism level of CFOs on 12 parameters: operating margin, liquidity position, level of financial risk on company’s balance sheet, risk appetite, need for raising short-term and long-term funds, cost of raising funds, availability of funds, domestic and global macro-economic scenario, overall scenario for mergers and acquisitions, and level of financial risks for businesses.