Cover Story : Digital Change: The Role of Finance in Creating Value

Rapid change in the external environment makes it incumbent on CFOs to be involved in all aspects of their company’s operations. Going forward, the strategic expectations from CFOs will become more pronounced, requiring a much more diverse, multidisciplinary skill-set to meet those demands. Vivek Karve, CFO of Marico, is that rare Finance professional who also has an excellent strategic sense and a great understanding of business.  +Read

---

From The Editor : Two Cheers

The outcome of the Karnataka assembly elections was a combination of regrets, surprises and sheer delight, for its three main participants. The BJP having nearly won, eventually didn’t. It regretted being unable to tie up what it believed were loose ends and despite having the largest seat share in the assembly, being unable to form Government. The Congress, on the other hand, would have been surprised by the margins of its losses.  +Read

---

Big Picture : Global Outlook

 

Global growth has had a strong start this year, but populism and the winding down of QE present risks

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

The global economy had a strong start to 2018 according to our favourite measure. Exports for the A/P14 covered by the Asia Brief grew 11.7%yoy in Q1’18 followed by 10.9%yoy in April, which is in line with full 2017 growth of 10.7%. Keep in mind that’s after five straight years when A/P14 exports fell by an average 0.8%pa. As Asia makes a lot of the world’s goods, this measuring stick suggests sustained strong demand in Q1’18 after the 2017 recovery.  +Read

---

From The Editor : At least a small step forward

On Sunday the 10th June, the United States’ Air Force One, ferrying President Donald Trump, landed at Singapore’s Peya Lebar Airbase at 8.20 PM for a summit with Kim Jong-Un, of North Korea. This followed weeks of uncertainties, cancellations and reinstatements. Eventually, the two men met on the 12th June at the Capella Hotel in Sentosa Island, initially for a one-on-one with interpreters followed by an enlarged, more formal bilateral session with other advisers.  +Read

---

Think Tank - Financing : The Transparency And Governance Mantra

In recent times, a key remit of governments the world over is to demand higher levels of governance from industry. In India, that finds reflection in multiple forms as our government and regulators seek to ensure fairness and transparency in corporate functioning and financial reporting. The newly constituted National Financial Reporting Authority is a response to hold both auditor and eventually, their customers, to higher levels of scrutiny. Even more recently, SEBI accepted almost in majority the recommendations of the Kotak Committee to enhance the efficiency of corporate governance norms in India’s listed corporations through higher disclosure requirements with an end goal to minimise the information asymmetry between a company’s managers and its shareholders.  +Read

---

Cover Story : Leading Transformation In The Digital Age

IMA India’s peer group programmes have long sought to lead thought on future trends in business through maximising the power of collective wisdom inherent in its membership. A key element of the same is the cross-fertilisation of experience and perspectives not just within the CFO Forum, but between the CFO Forum and IMA’s other peer networks; those for CEOs, CMOs and CHROs. Over 500 Heads of HR form IMA’s CHRO Forum as a foil to the 900-strong CFO member community.  +Read

---

From The Editor : All That Glitters

In the editorial of the February 2018 edition of CFO Connect, “Different Strokes”, I referred to the benefits of the redeployment of savings from gold to financial instruments. The surge in yields for households could conceivably be anywhere between 1.5% and 6% of annual income. Moreover, there are tangible savings when money is borrowed from banks and micro finance companies, instead of traditional informal sources that a large chunk of the rural population currently depends upon. The reduction in interest cost could lie between 2% and 4% of income per annum. Even real estate investments, especially those in utilised commercial properties create economic churn and are therefore, productive. However, what is completely unproductive from even the most generous benchmarks is gold. 

 

---

Cover Story : The Real Deal: M&A For Lasting Shareholder Value

Over the course of the last two decades, M&A has become a core route for organisational expansion in India. CFOs are in a unique position to contribute significantly during the M&A process, given their ability not only to vet identified targets through due diligence, but to take the process through to post-close execution. CFOs are expected to balance financial analysis, corporate aspirations, and cultural issues to effectively manage acquisitions and deliver the promised shareholder value. In turn, that requires a holistic set of capabilities, both technical and leadership oriented. Sushil Agarwal, Group CFO of the Aditya Birla Group (ABG), is one such CFO who has played a major role in restructuring the organisation over the years to create lasting value.   

 

---

Big Picture : India Outlook

 

The BJP continues to expand its political footprint while the economic recovery gathers steam

 

The BJP achieved more victories in recent ly concluded assembly elections in 3 north eastern states. In Tripura, it trounced the Congress and the incumbent Left front to win 43 out of 59 seats. In Nagaland, its coalition NDPP won 29 out of 60 seats while in Meghalaya it partnered the winning NPP coalition. Historically, the BJP has been non-existent in the three states and it is Narendra Modi’s mass appeal and Party President Amit Shah’s organisational skills that have brought about the change in fortunes. On another count, the party suffered a blow as one of its partners, the Telugu Desam Party (TDP), exited the National Democratic Alliance (NDA). The dispute stemmed from the TDP’s demand for special treatment for its state of Andhra Pradesh which the BJP maintained would breach constitutional propriety. 

 

---

Big Picture : Global Outlook

 

Prepare for upside surprises in demand, for shortages in supply, rising inflation and interest rates, and for a strong dollar

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

Three days before the US stock market correction in February, we headlined the Asia Brief with “The key messages in this month’s Asia Brief are to prepare for upside surprises in demand, for shortages in supply (of goods, services, and people), for more inflation and rising interest rates, and for a return to a strong US$ by mid-2018”. We wrapped up the global outlook by suggesting that this should have little impact on stock markets, although they were clearly ready for a correction. Oh, if we could just go back and rewrite that last bit given the 10% fall for the S&P500 a few days later. However, we are happy to stick with the headline sentence. This month’s review of markets finds most indicators pointing to sustained global demand growth. The main takeaway is that volatility has returned to global capital markets and that major currencies (US$, Euro, and Yen) are moving, and companies operating in Asia need to take both into account. 

 

---

 

 

From the Editor : Changing Tides

 

Global bond yields have, over the past few months, started to rise as markets expect inflation to perk up and central banks shift gears towards a more hawkish monetary stance. The United States Federal Reserve, a few months ago, declared its intent to start the process of unwinding its previous bond purchases and therefore shrink liquidity. US bond yields consequently spiked to 2.74 per cent. German treasury bills too have risen from 0.41 per cent to 0.77 per cent over the past twelve months, prodded by comments from Mario Draghi, the head of the European Central Bank, that future bond purchases by the ECB will begin to moderate.   

---

Cover Story : Opportunity in Adversity: Building Ashok Leyland 4.0

 

From time to time in their professional lives, CFOs are instrumental in driving radical internal change, and even business transformation in the organisations they steward. Gopal Mahadevan epitomises that capability. When Mr Mahadevan joined Ashok Leyland in 2013, the industry was in the midst of a crisis and the firm beset by falling sales, shrinking margins, and plummeting share prices. Working closely with the Managing Director and other function heads to effect a turnaround, Mr Mahadevan’s focus was solely on profitability and cash flows – a message that had to be instilled across the business. Unviable lines were shut, Management Information Systems revamped, working capital reduced and the company effectively restructured.   

 

---

 On My Mind : Making Sense of this Year’s Budget

 

This is perhaps the Budget with the widest sweep since Independence – in terms of the percentage of people whose lives it will impact, mostly positively. Our Budgets, both pre- and post-reforms have shown excessive focus on industries, stock markets, and on standard deductions and personal investment incentives for the salaried class. Not many of them would have had an impact on more than 20 per cent of the people.

 

Budgets have mostly been elitist. The economists’ macro sense stopped with fiscal deficits and growth numbers, and hardly cared of how benefits were delivered at the door step of the common or poorer man. 

---

From The Editor : Different Strokes

 

As explained in IMA India’s recent economic updates, we expect gross domestic product to rise by 6.4 per cent in 2017-18 and a slightly higher rate in the coming year. Output understandably took a bump in the wake of demonetisation and the subsequent roll-out of goods and services tax (GST). However, we believe these are largely behind us and recovery, going forward, should be robust and sustained. The fact is, consumption has been strong and constitutes the principal driver for growth with investment lagging behind. 

---

Cover Story : Drivers of Transformation

 

In conversation with Adit Jain, Chairman and Editorial Director, IMA India

 

There was once a time when economists used to say that even if everyone were to fall asleep, the Indian economy would still grow at 6 per cent. Few would have realised just how low things could sink – almost no one could have imagined the several quarters of barely 4 per cent growth seen during the UPA-II years. The more recent ‘slide’ to 5.7 per cent in the first quarter of FY18 is more understandable, driven as it was by the twin shocks of demonetisation and the GST. 

 

---

On My Mind : Brands: When the Promise is not Kept

 

A few months ago, an appalling incident flashed all across social media of a passenger being manhandled - even that is an understatement - by a leading airline’s staff. It was shocking on multiple levels. First, that educated youth – India’s hope, India’s future, with good jobs and assured incomes – can be so beastly. What can we then expect of those deprived of the opportunity to earn a decent living by dint of fortune? Second, there are questions around the passenger himself – someone who may well represent the entitled, arrogant Indian. In airport after airport, we see high-handedness among those of us who travel frequently. 

---

 

On My Mind : A Conflicted World: Recasting The Future

 

For most people, wars happen on the idiot box or in newspaper columns, but Dexter Filkins has spent a large part of his life covering its gruesome reality, in places like Iraq and Afghanistan. He has been shot at, kidnapped, and attacked by mobs. He also, since 9/11, lost 18 of his colleagues in conflict zones – some of whom have died right next to him. Recounting his experiences reporting on wars in India and the Middle East, he also provided a forward view on US foreign policy. 

---

Big Picture : India Outlook

 

A resilient economy will face rising inflation as a headwind in 2018

 

After a narrow election win in Gujarat in December, the ruling BJP will be tested in four large states in 2018, three of which it currently holds. The Congress, the lead opposition party and until recently in decline, did better than expected in Gujarat by targeting specific communities and rural voters and patching up alliances with rising local parties. It will hope to build on this strategy in the coming state elections by focussing on distressed voter groups and leveraging popular beliefs about inadequate job creation. 

 

---

Big Picture : Global Outlook

 

The Risk is now on the Upside

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

The key messages in this month’s Asia Brief are to prepare for upside surprises in demand, for shortages in supply (of goods, services, and people), for more inflation and rising interest rates, and for a return to a strong US$ by mid-2018. 

---

Cover Story : Resetting The Rules The IMA India 2017 Tax Summits

 

Tax-related matters lie in the most strategic domain today. In recent times, India’s tax landscape has witnessed unprecedented changes, and there are clear indications of more ‘mega changes’ in the next two-three years. The GST is one of India’s single-biggest reforms to date. Not only will it transform the entire indirect tax landscape – improving compliance, making possible lower rates of direct tax, and boosting government revenue – but it will also make for significant operational efficiencies at the firm level. It is crucial, therefore, to take stock of how companies, business models, and the broader environment are evolving in response to it. 

---

From The Editor : Uday: A Federalist Success Story

 

Electricity distribution has been disastrously managed over the last three decades and in 2015 was on the verge of absolute collapse. Underpriced power, operational inefficiency, broken equipment, rampant theft and political meddling had resulted in distribution companies (discoms) hoarding losses of Rs 4 trillion on their books. They were incurring damages of Rs 0.60 per unit of power sold, had outstanding receivables of Rs 0.96 trillion (almost a fourth of revenue) and were losing 25 per cent of their output to Aggregate Technical and Commercial (AT&C) losses, a proxy for theft. Most discoms were bankrupt and unable to generate cash even for routine expenses. Banks refused to extend working capital loans and generation companies, which were collectively owed Rs 1.3 trillion, were threatening to cut off supplies. Few would remember that at one point interim court orders and desperate pleas by politicians were the only reasons households were still receiving electricity in some states. In short, the situation amounted to what is generally described as a nightmare.  

---

On My Mind : 

 

For over two decades, Padma Shri awardee, Vijay Amritraj was one of the most famous tennis players in the world. He was Asia’s top player for fourteen straight years, and a bulwark of India’s Davis Cup team, often as Playing Captain. Over the course of an illustrious career, he beat the world’s best, including Borg, McEnroe, Lendl, Connors, Newcombe and Smith. He brought glory to India as only sportsmen who play at the top of their game, but always with dignity, can. When he played, he lifted the sights of the next generation of tennis players in the country, and he made Indian audiences proud as again, only top quality sportsmen can. 

---

Big Picture : India Outlook

 

Two crucial state elections have just been completed, and all eyes will now be on the February Union Budget

 

The BJP won two important state elections in December – Gujarat and Himachal Pradesh – retaining power albeit with a lower majority in the first and unseating the Congress with a thumping majority in the second. The opposition claimed a moral victory in Gujarat on account of its improved scores but the fact remains that it was the BJP’s sixth consecutive victory in the state extending an unbroken stint of 22 years. Only one other Indian state has ever given a longer mandate to an incumbent (West Bengal, from 1978 to 2011). That said, Mr Modi’s last minute campaigning was a major reason for the win implying that his personal popularity remains the pillar on which the BJP’s success continues to ride. This will remain a critical factor in the 2019 national election as well as the 13 state assembly elections scheduled prior to it. 

---

Big Picture : Global Outlook

 

The current global upturn is less strong than prior recoveries, and differs with them in several important ways

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

2018 is set to be a second straight year of better global growth after the five years to 2016 delivered 3.4 per cent pa growth, lower than the two-decade average to 2011 of 3.7 per cent pa. The IMF’s latest forecast puts 2017 growth at 3.6 per cent rising to 3.7 per cent in 2018. While the upturn isn’t as strong as prior recoveries, when growth would hit 4.5 per cent+ for a year or two, a better balance between supply and demand has emerged, as capacity has been cut (even in China), and prices and profits have improved. The quality of the recovery has felt good for most companies, and stock markets have done very well, with the DJ Global index up 21 per centytd. In a few sectors, such as chemicals and IT components, shortages have even emerged. 

 

---

 

Cover Story : Customer Centricity And Innovation: Enabling Profitable Growth

 

In a business environment where frequent and large market fluctuations are the new norm, CFOs – given their unique, enterprise-wide vantage point – can be the CEO’s strongest ally against volatility. Finance can bolster organisational performance through critical initiatives such as business performance monitoring and forecasting, strong risk management, and high-levels of controls and transparency. However, the success of these initiatives depends on highly standardised and effective finance processes. This only adds to the CFO’s already action-packed agenda, and demands smarter, faster decision-making to reduce costs, drive revenue, identify new opportunities, and sustain growth. A fine example of this new paradigm is SKF India, which has evolved from being a pioneer ball bearing manufacturing company to a knowledge-driven integrated solutions provider, helping customers achieve sustainable and competitive advantage. One of the key people behind SKF India’s high growth standards is Chandramowli Srinivasan, Chief Financial Officer at SKF India. 

---

 

From The Editor : Irrational Exuberance

 

Over the course of the last few years American equities, reflected in the value of the Dow 30 index, have spiked and some would argue, beyond reason. So has the more representative S&P 500, together with bonds and property. A quick scan of the PE ratios of the S&P 500 index since 1926 reveals 10 instances when sceptics may have had cause for concern that a bubble was forming. The most significant amongst these were the crash of 1929, the dotcom bust of 2001 and finally, the collapse that followed the global financial crisis of 2008. The cyclically adjusted price-earning ratio of US equities now stands at 30, which is irrational from many benchmarks. The only time it was higher, was just prior to the GFC. 

---

 

On Your Mind : The Annual Business Performance Survey: Whither the Rupee - and Hedging Strategies?

 

2017 has seen the Indian currency go on a rollercoaster ride, with the Rupee gaining as much as 6 per cent against the USD in the first half of the year, but then depreciating by 2 per cent in the second half on the back of falling capital flows. Looking ahead, this turbulence is likely to sustain - a view supported by many of the over 250 companies who responded to IMA's Annual Business Performance Survey, which was run in November 2017. 

---

 

Cover Story : The Strategic CFO : Creating Value in a Dynamic Business Environment

 

In today’s world, for organisations to stay relevant and build scale, CFOs must possess specialised skills, including the ability to navigate inorganic growth paths. M&A as a route to acquire unique capabilities or product portfolios, or indeed, to expand internationally, will see considerable activity, but in ways markedly different from the last phase of Indian industry’s expansion. The CFO’s position is crucial to the success of an M&A deal. From the identification of targets, to due-diligence, risk mitigation, fund-raising and post-close execution, CFOs are expected to have well-rounded capabilities that help effectively manage acquisitions, and deliver the promised shareholder value. Jatin Khanna, CFO of Max India, is one such multi-faceted individual who has actually delivered to promise. 

---

 

From The Editor : A Fair Acknowledgement

 

Over the past few months, there has been growing debate on the per formance of the Modi administration. Sceptics have argued that things are stumbling and have used events such as the aftermath of demonetisation, GST implementation slippages and more recently, a drop in GDP output, as the basis of their contention. Be that as it may, the fact is India’s structural parameters are presently more robust, substantiated in clear terms by Moody’s recent upgrade. Its local and foreign currency paper is now rated Baa2 from Baa3, placing its economy in the same category as Italy, Spain and the Philippines. Moody’s decision reflects its assessment that structural initiatives of the administration will in the longer term enhance India’s growth potential, reduce the government’s debt burden and provide greater stability against macroeconomic shocks. Interestingly, Moody’s last upgrade took place 14 years ago during the Vajpayee era.  

---

On Your Mind : The Q3FY18 BCPI: A Steadying Ship?

 

Preliminary results from IMA’s latest quarterly Business Confidence and Performance Index (BCPI) survey point to a nascent revival in business sentiment in the third quarter (October-December) of 2017. Responses from over 75 companies spanning the gamut of industry in India suggest a fairly buoyant outlook – in terms of both the macro-economy and business conditions.   

---

 

Big Picture : India Outlook

 

Bad debts continue to choke lending and investment growth in India

 

Prime Minister Narendra Modi’s main challenge as the 2019 elections approach is economic rather than political. His BJP has enough support in parliament to pass laws, the opposition Congress Party is in disarray with a weak leader and the BJP is well placed for the year-end contests in the Himachal Pradesh and Gujarat state elections. Instead, the main threat is a slump in growth to 5.7 per centyoy in Q2’17 from a 7.4 per cent average for the decade to 2016. That has undermined employment growth, which will hurt Mr Modi with the younger Indians who voted him into office. The introduction of the GST from July contributed to the slump but the biggest factor is a banking system choked with bad debt and a related slump in lending and business investment. 

---

 

Big Picture : Global Outlook

 

Improving global macro-economic conditions justify an upward revision in growth forecasts

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

We are lifting our forecasts again – a step taken most months this year - as growth continues to surprise on the upside and the outlook into 2018 is improving. Four developments account for this. First, years of ultra-low interest rates and quantitative easing (QE) by central banks in the US, EU, and Japan have helped households and corporates in the advanced markets repair their balance sheets and lift their demand. Second, China stabilised its growth and returned as a major commodity buyer, which helped other emerging markets (EM). Third, we were lucky: energy prices and inflation have stayed low, and crises that might have hurt financial markets were avoided. Finally, the net outcome is a synchronised upturn in 2017 covering the 35 advanced economies and the 10 largest EMs. That contributes to the acceleration in growth and suggests the upturn will expand into 2018. 

 

---

 

Cover Story : Creating Shareholder Value: The CFO’s Ambit

 

A CFO’s role in any successful turnaround goes well beyond being just a ‘super costcutter’. When the business context is one of high debt and leverage, it demands a dual focus on expansion, as well as the ability to improve capital structures. One company that has been a stellar ‘out performer’ on this score is the Future Group. CFO Connect covered Future’s dynamic approach to financial re-engineering at length in a 2015 issue. This article, however, reviews the strategy that has made it stronger and leaner, and at the same time, allowed it to create massive shareholder value. In the last three years, revenues have grown at a compounded 33 per cent, its leverage ratio has dropped from 6x to under 2x, and its ratings have moved up two notches. [Strikingly today, market cap has already surged from Rs 36 billion to Rs 500 billion – a whopping CAGR of more than 110 per cent over 3 & ½ years. 

---

 

From The Editor : Financial Flutters

 

A lacklustre performance of the economy in the April-June quarter created a sense of unease amongst industry watchers. More recently, the media was abuzz with news about the Government’s intent to pump prime the economy with a spending binge in the hope that private capital would follow. Quite expectedly the markets panicked on the premise that the treasury would exceed its fiscal targets. Equities fell 2.5 per cent, bond yields spiked 10 basis points and the Rupee dropped by about 1 per cent to 64.8 to the dollar. Subsequently, the Finance Minister took pains to clarify that Government incentives would take a form where targets on deficits would remain sacrosanct. There is no doubt that the IMF and other forecasters will revise India’s growth outlook for 2017-18. I suspect growth in this fiscal year will be below 7 per cent. 

---

On Your Mind : The Q2FY18 BCPI: Stronger Sales and Profit Growth in Q2

 

IMA India’s most recent Business Confidence and Performance Index (BCPI) survey finds a big, all-round drop in expectations on all the main performance measures: sales, order books, profitability, capacity utilisation, and net hiring. However, the majority firms expect Q2 (July- September) to have been better than Q1, especially on the sales and profitability fronts. At the median, firms expect 5-10 per cent sales growth in Q2 (Chart 1), up from less than 5 per cent in the previous three months. Encouragingly, fewer companies – 16 per cent, down from 26 per cent in Q1 – expect negative revenue growth in the Septemberending quarter. Going forward, median sales growth is projected to stay in a similar, 5-10 per cent range in the second half of FY18, as in H1. Meanwhile, margins may have been under pressure in H1 – with the median firm expecting less than 5 per cent net profit growth (Chart 3) – but this improve in the second half, with the median moving up to 5-10 percent. 

---

Big Picture : India Outlook

 

India faces issues with GST implementation, and in pushing through important structural reforms

 

With GDP growth slowing to a low of 5.7 per cent yoy in Q2’17, concern is growing that Prime Minister Narendra Modi’s drive to reform India and lift its growth – as he did for Gujarat as its Chief Minister over 2001-14 – has stalled. There are two problems. First, problems with GST implementation may have been under-estimated and they may undermine growth. Secondly, little is being done to fix fundamental problems that have led to a collapse in domestic investment (such as bad bank debts, arcane labour laws and problems with acquiring land). At present, popular support for Mr Modi remains strong but the pain of GST implementation could cost him his crucial support base in the massive small business and trading community. Six state elections over the next year, including Gujarat and Karnataka, will show whether the Modi bandwagon has stalled. 

---

 

Big Picture : Global Outlook

 

A synchronised recovery is lifting markets across the globe

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

Despite the confusion and noise of global politics, two important economic developments are underway. The first is a synchronised global recovery that has picked up all 35 OECD countries (the advanced economies) and 10 of the largest emerging markets (EM). That is producing the best demand we’ve seen in six years, and translates into a strong lift in Asia’s exports, which has surprised us by maintaining its pace through the first two months of Q3’17. As a result, we are likely to continue with modest upgrades to our GDP forecasts for most Asia/Pacific markets over the next few months. The second development is a consistent signal from central banks in the US, the Euro area, and the UK that they intend to end quantitative easing (QE) soon, despite being quite a distance from inflation goals set at the start of QE. 

---

 

Cover Story : Direct Tax - The Flux of Transformation

 

There is both uncertainty and change in the crucial arena of direct taxes. At one level, global taxation is transforming, with governments the world over becoming more protectionist with a view to safeguarding the interests of domestic industry. Global businesses continue to face challenges on transfer pricing on the count of both treaties and operational issues. Domestically, the government’s intent to reduce tax rates is facing off against the need to raise tax revenues. Meanwhile, personal income taxes are seeing a rising focus on reducing the burden on those in lower income brackets. How those shortfalls will be made up, and the extent to which those in higher earning brackets will pick up more of the burden, remains to be seen. 

 

---

From The Editor : Remove the Veil

 

On a certain date each year in October, just past the midnight hour, the Government of the Kingdom of Norway posts online the annual tax returns of all its citizens. The list contains every taxpayer’s total income and the tax paid. Any Norwegian can discover at the click of a button, how he compares with his neighbour, with the yes-man who plods away across the aisle at the office or indeed the local politician who rants about a more equitable society. Sweden and Finland have a similar arrangement and, as on dozens of other counts, the three Nordic States stand apart from the rest of the world. Dodgers can duck the taxman but not public scrutiny, or so the logic goes. 

 

---

On Your Mind : A Steep Climb-down

 

Dropping nearly ten points to 59.1, IMA’s Business Confidence and Performance Index (BCPI) has touched a seven-quarter low. A pull-back in corporate expectations is evident across the board, with the subindices for business performance, the macro-economy, and especially capital expenditure all receding. Sector-wise, all eight of our sectoral groupings saw drops from their early-2017 levels, with the fall especially marked in six sectors – the exceptions being BFSI and IT. 

---

Big Picture : Global Outlook

 

A harmonised global upturn

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

Most of the trade, production, price, and PMI data released through August continues to point to a consolidating global recovery. That’s leading to a gradual lift in global forecasts from major institutions, with a recent notable comment from the OECD that all 45 of the economies it tracks will be expanding at the same time this year. That last happened in 2007, and has only occurred twice before in the last five decades (the late 1980s and before the 1973 oil price hike). That doesn’t mean a boom or even a return to the 3.8 per cent pa average growth rate in the two decades to 2008. In July, the IMF lifted its global growth forecast to 3.5 per cent this year and 3.6 per cent for 2018. However, it does mean four things. 

---

Cover Story : Fostering Finance Talent

 

In today’s fast-paced and complex environment, the remit of Finance employees is wider than ever, and many are called upon to act as internal advisors and business partners, going well beyond their traditional book-keeping-and-controls role. The need for well-rounded talent, especially those who can support decision-making is greater than ever. In response, more progressive CFOs have taken true ownership of the Finance talent agenda by considering the implications of business changes on their staffing needs, and by ensuring qualified resources are in place to meet both current and future business requirements. A fine example of a well-regarded talent steward is S Kannan, CFO of Arvind Lifestyle. 

 

---

From The Editor : The Way Forward on GST

 

On the 1st of July, India transitioned to a Goods and Services Tax (GST) regime where a multitude of indirect taxes were replaced by a single levy. So far, it is still a policy in the making with new rules emerging on a frequent basis, necessitating repeated changes to ERP systems and accounting protocols. Clearly, everybody is learning on the job. The GST seeks not only to simplify the tax chain but, more significantly, to widen the tax net. India’s large ‘informal sector’ has historically enjoyed a tax arbitrage which the GST seeks to eliminate. It is possible that the Government, aware that GST was bound to happen, demonetised 86 per cent of currency in circulation as a means also to induce small businesses to transcend into the formal economy. The GST will now compel them to do so. 

 

---

On Your Mind : The Highs and Lows of GST

 

The latest round of the Business Confidence and Performance Index (BCPI) Survey was conducted at the end of June, just before India moved to the GST regime. IMA queried member corporations on their expectations for the macro economy and for their firm’s performance and preliminary results suggest an industry that is guarded in its outlook, particularly in view of the uncertainties that the transition to GST may entail. 

---

Big Picture : Global Outlook

 

On track for a boost in growth

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

Three substantial changes stand out in 1H’17, and collectively they leave the world on track for the best lift in growth in six years, even though the pace will be modest when benchmarked to prior decades. The first is the collapse of the Trump administration in the US, which has undermined US growth and the US dollar. According to our calculations, and those in the IMF’s July world outlook update, the lost impetus from the US has been more than offset by better growth in the Euro area and in China. For the 14 markets that we cover in Asia, that’s meant a strong rebound in commodity volumes and prices, and continuation of the late 2016 export recovery through to mid-2017. 

---

Cover Story : Productivity, Cost Effectiveness and Profitability: The CFO Mantra

 

A return to growth…

 

India’s economic growth paradigm is on a sure footing. At 7.1 per ent in the fiscal year 2016- 17, India is one of the world’s fastest growing economies. FDI – USD 42 billion in fiscal 2016-17 - is at an all-time high and there is a sense of overall buoyancy across industry. A good monsoon should aid the return of demand in rural India, adding a further fillip to growth.

 

The uptick in growth has been caused by many elements, beginning with the first prerequisite – confidence, in India’s economic resilience and in a government that the Centre that is seeking to unlock growth and balance the need for greater equity. Luck favours the prepared and an overall environment of benign inflation – CPI inflation is at an average of 4.5 per cent at the current juncture - has aided both government and country to sustain this return to growth. The government’s focus on fiscal discipline is also lending itself to more tempered inflation.  

---

From The Editor : Keeping it slack

 

A few weeks into the Trump Presidency, bond markets in America jumped with yields spiking from 1.7 per cent in November 2016 to 2.5 per cent a few weeks later. Markets anticipated a reversal of the interest rate cycle with expectations of higher economic growth driven by a combination of tax cuts and a spending stimulus. This was based on promises during Mr Trump’s election campaign and subsequently reinforced by his new administration. With a rise in the payroll and falling unemployment, the United States Federal Reserve hiked interest rates by 50 basis points in two separate tranches, with prospects of further hikes during the year. Economic output was expected to climb from 1.8 per cent in 2016 to 2.9 per cent this year.  

---

On Your Mind : Positive Signs Despite the Gloom

 

The results of IMA’s Q1 FY18 Business Confidence and Performance Index (BCPI) Survey reflect a slowdown in growth in October - December 2016 (i.e., during the demonetisation period). Across our eight major sectoral groupings, business performance had taken a sharp downswing, compared to what firms had expected in the previous edition of the survey. However, things are looking better now, with a significant proportion of firms indicating stronger performance in January-March 2017, and a positive outlook for April-June.  

---

Big Picture : Global Outlook

 

Have we underestimated 2017 growth?

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

Each month, we aim to spot the trends that will deliver growth over the next few years. Our concern this month is whether we’ve underestimated growth in 2017, as Q2 indicators are running strong. We’ll need to keep an eye on the upside risk, and we’ll focus on that in next month’s Brief. Meanwhile, we’ll stick with the two main elements of our commentary over the last few months. The first is our warning that the current surge in Asia’s exports will be short-lived. As we talk with our big manufacturing clients, it seems that inventory catch-up is a major driver of better demand after five years in which companies ran low inventories.  

---

Cover Story : Driving Profitable Growth

 

The CFO’s role today is that of a strategic business partner – one capable of providing insight, managing risk, and ensuring that the organisation fully realises its growth plans. Urbanisation, demographic change, a shifting global economy, and technological disruption all mean that ‘enabling growth’ is harder than ever – which in turn makes the CFO’s role more critical. Sugata Sircar, Chief Financial Officer and Country Finance Partner of Schneider Electric (SE) India, is a fine example of a ‘multidimensional CFO’, with responsibility to drive business growth, improve business processes, mitigate risks, engage with local Boards, interact with investors and groom future talent.  

---

From The Editor : Currency Gains

 

On Monday, the 29th May the rupee traded cheerfully at 64.50 against the US dollar. It has in fact been on an upward trend rising by 5.5 per cent since the start of this year and a remarkable 6.3 per cent since November 2016. As things stand, markets expect it to hold ground over the coming 6-8 months. Thereafter, it is possible that a correction may happen should reversals of the US dollar carry trade resume in intensity. This depends on economic and fiscal policies of the United States administration as well as political developments in Europe.

---

On My Mind : Navigating a Sea of Challenges

 

For CFOs, the past two years have brought a number of stringent new regulatory and compliance requirements. To begin with, there was the introduction of the long-debated Companies Act 2013 and its strict rules on related-party transaction. Terms such as ‘arm’s length transaction’ and ‘in the ordinary course of business’ spurred endless debate – to the extent that some started questioning whether buying a TV set or a refrigerator from a subsidiary of a related party would come under the ambit of these rules.  

---

Viewpoint : Corporate Affairs

 

Board Charters - A Guiding Tool

 

A Board Charter is a document that defines the role, responsibility and authority of the members of the Board, both individually and collectively. Such documents are designed to be used along with an organisation’s existing corporate governance codes. They aim to serve as a model for Board members in untoward incidents that call for difficult decisions. As a top-level policy document, a Charter also serves as a reminder to Board members of the organisation’s permissible legal framework, within which it must operate.  

 

---

Think Tank : Getting the Promoter - CFO Equation Right

 

Why do promoter-CFO relationships fail so often? S Venkat offers some insights

 

For most family-managed businesses that are professionalising or raising private capital, getting the CFO appointment ‘right’ is a critical prerequisite. Equally, CFOs who are keen to generate real impact, or even to produce transformational results, love to work with promoter-led companies. Unfortunately, despite this mutual ‘need’, CFO ‘mortality rates’ in family-run businesses remain very high.

 

What learnings can we derive from the not-so-successful ‘CFO at FMB’ experiments, and what can be done to improve the success rate, going forward? This can be broken into two parts: where CFOs go wrong, and where promoters do.

---

Viewpoint - Corporate Affairs 

 

Doing Business with Social Responsibility

 

Profit should not be the sole motivator for any business enterprise. Equally important is to adopt responsible business practices that are in the interest of society and the environment. The push to do this might come either internally or from regulation – and in India, the tone was set a few years ago by the National Voluntary Guidelines (NVG) for Corporate Governance, which were based on the Global Reporting Initiative Guidelines. Focusing on sustainability, the NVG urged businesses to ‘give something back’ to society; to be responsible and accountable for their actions; and to be sustainable, not only in themselves, but also in relation to the environment in which they operate.  

---

Big Picture : India Outlook

 

Modi’s victory in UP sets the tone

 

Despite last November’s demonetisation, the ruling BJP did well in state elections in March, notably winning in Uttar Pradesh (UP, India’s largest and one of its poorest states). That will help shift the balance of power at the national level, where PM Narendra Modi’s reform programme has been frustrated by opponents in the upper house. The March results also underscore the decline of Congress— the major opposition party—and suggests that Mr Modi should win a second five-year term in 2019. It may also contribute to firmer national growth by bringing better government to UP. Yogi Adityanath, UP’s new Chief Minister, should improve administration in what has been one of India’s worst governed states. Better state administrations, in which Mr Modi played a part when he was Chief Minister of Gujarat, is critical to lifting India’s growth.  

---

Think Tank : Reducing Business Costs With Technology

 

Streamline your work and bring down costs with the help of technology, writes Bhavin Turakhia

 

For the longest time, organisations lacked access to cuttingedge workplace technologies. Engulfed in paperwork, Finance departments would manage tasks like employee benefits and vendor- and expense management manually, and human intervention was often required to ensure accuracy. Running these programmes efficiently meant huge investments of time and money. Today, though, we are well past this stage. Technology has become a huge enabler that not only streamlines work, but also substantially reduces operational costs. 

---

Insight : Financial Markets: A World of Risk

 

Jayanth Varma looks at the four major global areas of risk to watch out for in 2017

 

After the rollercoaster year that was 2016, and with the tenth anniversary of the GFC just around the corner, one might expect that the worst is finally over for financial markets. Yet almost by the day, more bad news seems to crop up. This raises the possibility that 2016 was merely a curtainraiser for what lies ahead. Over the next 12-24 months, there are four major global risks to watch out for: Donald Trump’s economics; Europe’s politics; China’s economic rebalancing; and the geopolitics around the South China Sea. How these risks play out and interact with each other will shape the domestic and world economies, as well as financial markets, in 2017 and beyond.  

---

From The Editor : Guardians of the Angel

 

The subject of the constitution of Boards and their effectiveness has been hashed for years in academic journals and business magazines. There are, in fact, enough insights on this to sink a ship. This piece will not preach the gospel nor repeat well-established truths. It simply offers some observations on the facets and responsibilities of Boards, specifically in Indian family-run businesses.  

---

On My Mind : Consolidation in The Financial Services Industry

 

The RBI has taken many steps in the last few years to increase competition in the Indian financial services space. Its main purpose has been to force the industry to offer innovative new products and technologies, and to bring financial inclusion to rural areas. However, this has also resulted in increasing consolidation in the industry, as well as a growing overlap of products being offered by various players.  

 

---

Cover Story : Shifts in The World Order

 

India’s economic growth paradigm has been steady but the risk is on the downside. Today, the variables are higher than ever – demonetisation and its impact are illustrative; wary private investment signalled by a shrinking capital goods sector equally so. Growth will still be led by consumption in the next few months as even government investment remains tentative. Of equal – and in fact, rising – import are accelerating developments in the global economy. Today, a clear outlook on transformative trends in the global environment and how those integrate with India’s domestic economic impulses of demand, policy and investment, is fundamental. Whilst the US is returning to growth, the surge in both the US Dollar and US financial markets will impact India and the rest of the world. Unevenness of growth across Asia and most emerging markets will again have implications, as will the manner in which China negotiates its hard landing.  

---

Big Picture : Global Outlook

 

A soft but broad global upturn in 2017

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

 

The IMF has just released its semi-annual World Economic Outlook (WEO), and for the first time in four years it has lifted— marginally—its forecast for the year ahead, in this case raising global growth for 2017 to 3.5 per cent from a forecast of 3.4 per cent last October. The biggest gains are in advanced economies, up 0.2 percentage points (pp) to 2 per cent, led by a 0.9pp lift for the UK (to 2 per cent), a 0.6pp rise for Japan (to 1.2 per cent), and 0.2pp rise for the Euro area (to 1.7 per cent). The US forecast is up just 0.1pp to 2.3 per cent for 2017, but gets a big lift in 2018 of 0.4pp to 2.5 per cent. For the rest of Asia, China is up 0.4pp to 6.6 per cent in 2017, India is down 0.4pp to 7.2 per cent, and the five biggest ASEAN economies are slightly down 0.1pp to 5.0 per cent. That’s mostly how our own forecasts have moved, with notable increases for Japan and China, and a cut to the India forecast. The gains are widely spread around the world, and reflect the gradual repair of balance sheets some eight years after the global financial crisis, the ensuing lift in demand for manufactured goods, services, and commodities, and strong stimulus in China.  

---

People : Keeping the Faith

 

Bodapati Bhaskar talks about what it takes to be at the helm of affairs and keep his calm

 

Anyone who has transited through Bengaluru’s swanky international airport will have a sense of the kind of work that must go on behind the scenes. As India’s third-busiest airport, it caters to over 22 million demanding passengers a year. And hemming together a team that ensures that every passenger passes through with a smile is Bodapati Bhaskar, Senior Director Senior Director & Head of Executive Committee, Bangalore International Airport Limited. Since joining the company in 2010, he has led many of the major activities at the Airport, and has played a key role in the ‘tariff revolution’ that BIAL has helped lead.  

---

Think Tank : Beyond The Boardroom Battle

 

Durgesh Singh and Abhishek Sarkar dwells on the impact of the Tata Sons and Cyrus Mistry dispute on India’s corporate governance norms

 

Corporate governance deals with the processes, relations and mechanisms through which companies are directed and controlled. With regards to companies having a concentrated shareholding, dissonance among promoters and minority shareholders are widespread, making it imperative for sound corporate governance norms. The emphasis on corporate governance by the legislature has been evident in recent years with the introduction of the Companies Act of 2013 and the Securities and Exchange Board of India (Listing Obligat ions and Di sclosure Requirements) Regulations of 2015 (SEBI Regulations). These measures have targeted the most common issue – disputes between minority shareholders and promoters. Although the strengthening and codification of corporate governance has been a welcome change, the murky Tata Sons-Cyrus Mistry affair has thrown up new questions regarding the viability of such norms.  

---

From The Editor : A New Choice

 

The results of assembly elections held in the five states of Punjab, Goa, Manipur, Uttar Pradesh and Uttarakhand took everyone by surprise, including the contestants themselves. Defying expectations of a close three-way fight in the all-important state of Uttar Pradesh, the BJP swept the state with an unprecedented majority. It won 312 seats out of 403 relegating the incumbent Samajwadi Party (SP) to a distant second with only 56 seats and the BSP, with 19, to an irrelevant third. A similarly emphatic victory was achieved in Uttarakhand with the BJP winning 57 out of 70 seats and the Congress being reduced to an obscure second with 11 seats. In Goa, despite a degree of anti-incumbency the BJP achieved a respectable position while in Manipur, it rocketed from zero to 21 seats (out of 60).  

---

Cover Story : Transforming Compliance into Global Competitive Advantage

 

CFO capability to set standards of governance and ensure adherence to compliance is today demanded not just by regulators, but also by shareholders. Regulations, laws, and norms are necessary for governance, but by themselves they are often ineffective, unless they are driven within corporations both for the letter and the spirit of these norms. The role of a CFO as a corporate governance leader is, therefore, critical in achieving the desired levels of governance while also ensuring business outcomes. The world over, markets reward organisations that are run with a ‘higher conscience’ – those that take into account the needs of all stakeholders. Wipro is a fine example of this, enjoying both a strong reputation and an impressive bottom line. Leading the way in setting its high standards of governance are Jatin Dalal, Wipro’s Chief Financial Officer, and Dipak Bohra, its Senior Vice President and Head of Controllership.  

---

People : Building up Others

 

“Believe in yourself. Believe that ‘you can’, and ‘you will,’’ Aksh Rohatgi talks about what makes his journey worthwhile.

 

Hands-on, transparent, fair, and a versatile leader – these characterise Aksh Rohatgi, the CFO of ISS Facility Services. He believes leadership is all about building and empowering others. Upbeat and full of beans at 41 years of age, he has a lot going for him. Leading a team at one of the largest facilities management service provider in the world is no small task, but he does this with passion.  

---

On My Mind : The Employee Manual for Succeeding in Multinational Companies

 

Having worked in American MNCs for the past twenty years, I can now say with confidence that I have learnt not only to survive, but also to thrive within an MNC corporate culture. Two decades ago, as a young entrant into the hallowed Portals of the MNC, things were not easy for me. The ‘perform or perish’ culture was debilitating, the impossible timelines demanded the highest level of multitasking skills, and work-life balance seemed like a thing of the past. Yet, I survived, and learned to cope with the turbid ebb and flow of chaotic energy. Survival in a MNC in India is a course by itself. This is my attempt to share some learnings of what it takes to survive, even thrive, in such settings.  

---

From The Editor : Prudent Policy

 

When Finance Minister Arun Jaitley proclaimed in Parliament, whilst presenting the Budget for 2017, that he intended to stick to fiscal targets the markets were overjoyed and harboured expectations of a cut in interest rates by the Reserve Bank. What may have added to their jubilation was the belief that since banks were flushed with funds post-demonetisation, a reduction in pricing should logically follow. Regrettably, that did not turn out to be the case.  

---

Cover Story : GST - Changing The Operating Paradigm Of Business

 

The onset of the GST will mark a most fundamental change in India’s business operating environment. An altogether new operating paradigm for industry, GST will impact at the core how business conducts itself – from warehousing to operations to retail. CFO focus will be invested in change management within the firm and strong education and engagement with vendor bases. With the broad contours of the GST largely in place, IMA’s India CFO Forum brainstormed, at its 21st Annual CFO Roundtable in Mussoorie in February, and at core CFO discussions in key chapter cities, the areas of focus for organisational readiness. This issue’s cover story concentrates then on the core focus areas of operationalising GST, arguably among the greater transformation exercises that Indian industry has undertaken in recent memory.

---

Insight : India’s Political Map: An Overview

 

With key state election results due later this month, Mahesh Rangarajan surveys the Indian political landscape

 

The 2014 elections ended a quarter-century of minority and coalition governments headed by either one of India’s two main political parties, the Congress and the BJP. Quite unexpectedly, voters left the Congress with just 44 seats, relegating it to third place in as many as 300 constituencies and bringing the BJP into power by simple majority. Today, Mr Modi’s dominance as an individual within the government and his party is predicated on this dramatic victory, as well as a changed political context more generally, in which there is quite literally no alternative, at the individual or party level at the Centre, to the BJP and Mr Modi. This is in sharp contrast to Mr Vajpayee’s term, where the need for consensus with the Congress, itself a towering presence then, was strong. Today, that context is completely reversed.  

---

Viewpoint : Corporate Affairs

 

Time to Consider Dispensing with the NRC?

 

The constitution of a Nomination and Remuneration Committee (NRC) was first mandated in the 2013 Companies Act for all listed firms,as well as for certain other prescribed types of companies. Specifically, it applies to all public companies with a paid-up share capital of Rs 10 crores or more, a turnover of Rs 100 crores or more, or aggregate outstanding loans, borrowings, debentures or deposits exceeding Rs 50 crores or more. (Previously, listing agreements might mention a ‘Remuneration Committee’, but actually constituting one was not mandatory.)In September 2015, SEBI amended its LODR Regulations to bring these in line with the Act.  

---

From The Editor : The Silver Lining

 

With a tax-to-GDP ratio languishing around 16 per cent, India’s resource base is not nearly enough to fund its development needs. It is below the emerging market average of 21 per cent and substantially lower than that of the OECD at 34 per cent. With the primary intent of correcting this imbalance, the Modi administration ventured ahead with a move to demonetise 86 per cent of cash in circulation. There have been damaging consequences in the short term on consumption and consequently economic output, but in the longer term the benefits may well outweigh these. Ultimately, the government hopes that cash as a percentage of retail transactions will reduce. Estimates vary, but many economists believe this is as high as 80-90 per cent. Scandinavian countries on the other hand have moved completely digital.  

---

Big Picture : India Outlook

 

Can Mr Modi regain ground?

 

Elections for five states between February 4 and March 8 will give some 160 million voters a chance to indirectly pass judgement on Prime Minister Narendra Modi’s national government. The biggest contest is Uttar Pradesh (UP, 134m voters), where a win for Mr Modi’s BJP would help it regain political momentum at the midway point to the 2019 national polls. While Mr Modi’s demonetisation on November 8 would have hit rural UP, late 2016 opinion polls showed UP voters backing the drive to clamp down on black money.  

---

Big Picture : Global Outlook

 

How much better might 2017 be?

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA It would be a mistake to attribute this year’s better global growth outlook to reflation hopes tied to Donald Trump’s win in the US elections, although that clearly boosted US stocks and the dollar. Instead, 2017’s improved outlook is anchored in a lift in global growth that started in mid-2016 and both broadened and accelerated in November. It is strikingly apparent in exports reported for the 14 AsiaPacific markets that we cover, which swung to 5.3 per cent yoy growth in November after falling 4.7 per cent ytd in the first 10 months (USD basis, see the Regional page). It is also apparent in higher commodity prices (gold bugs will be disappointed with the precious metal’s 8 per cent yoy rise for December compared to gains of 95 per cent for iron ore, 74 per cent for zinc, 44 per cent for tin and 20-30 per cent for copper, lead and nickel). Companies also noticed it, with Markit’s global purchasing managers’ index for December at a 13-month high of 53.4 (based on a two-and-a-half-year high for the manufacturing PMI and the services PMI matching November’s 12-month high). Two further points worth noting from Markit’s global survey: job creation accelerated to a 19-month high and cost inflation hit a 63-month record (as might be expected given fast rising metal prices).  

---

Cover Story : A New Beginning: SCI's Turnaround Story

 

The role of a CFO in a turnaround is more critical than at any other stage in a company’s lifecycle. Rapid technological disruption, more informed consumers, a volatile business environment and increasing government intervention in certain sectors make this time more challenging. Successful turnaround CFOs are not just super cost cutters. Instead, they are expected to manage disruptions, identify and invest in business models, products, and services that will lead to sustainable, profitable growth. Harjeet Kaur Joshi, CFO of The Shipping Corporation of India (SCI), and winner of IMA’s Tenth India CFO Award for ‘Excellence in Finance to Enable a Turnaround’ is one such example of a turnaround CFO who successfully transformed a loss making Navratna PSU into a profit making corporation, earning the respect and confidence of executive management, the market, and shareholders. 

---

On My Mind : The Inventory Conundrum

 

Late one afternoon, a couple of years ago, I was sitting in a management review meeting discussing a huge inventory buildup. The problem statement seemed classical in many ways: Volatile demand, limited visibility from customers, a supply chain that included multiple factories and a large share of imported raw materials with long lead times, and more than 3,000 active SKUs.

I am sure this is a typical problem faced by component manufacturers that supply to OEMs. Being at the lower end of the value chain, the pendulum swings most at this level when demand fluctuates. We had to find a solution quickly as the situation was threating to suck out huge amounts of cash.  

---

Insight : The Digital Generation and Learning: Engagement Paradigm

 

Ganesh Natarajan argues that the changing nature of business is prompting employees to take ownership of their careers – and more

 

One of the biggest challenges for the modern CHRO is to create a virtuous cycle for today’s digital generation and their own organisation. Two related elements are key in this paradigm. The first is how to engage this pool, which views commitment and individual aspiration – and collective goals – in ways markedly different from the past, and with the clarity of maximising one’s development and learning. The second is then building a nimble and fast learning mechanism that responds to these hyper-personalised expectations, and yet, creates value and learning in a way that is easily absorbed. The use of technology and digital platforms is one answer.  

---

Insight : Digital Payments: The Route to a Digital India

 

Manish Dewan shares his insights into India’s rapidly changing payments industry

 

Even among developing countries, India is an oddity, with over 90 per cent of all its transactions still cash-based. Thus, even as the government’s decision to demonetise 86 per cent of India’s cash was taken with the best of intent, in the near term, it will cause great inconvenience, and has implications for consumption, and therefore growth. The longerterm impact, however, will be even more significant. In the best case, it could actually shift the needle in an area of persistent malaise: corruption, and the black economy. It could also give a strong fillip to the government’s aim – evident in its thrust on payment banks, UIDlinked accounts, and so on – to convert India into a digital economy. This is important, also, because cash transactions come at a cost: an estimated 2 per cent of GDP, in India’s case.  

---

Insight : Leadership, Succession and Boards: The Ask of Alignment

 

The Board plays a paramount role in company leadership and succession planning, says Dr Santrupt Mishra

 

The stewardship of organisations is the heaviest, and yet also possibly the most rewarding burden of all. Without question, decision-making and ‘final calls’ must, at the end of the day, be the prerogative of the person at the helm of affairs. However, judgement, if it receives high quality input and advance, can deliver manifold higher gains. The Board’s role in providing that guidance is paramount, as is the ability of the organisation’s leadership to develop a rhythm of succession planning in line with long-term goals. However, this requires robust structures, checks and balances that provide harmony and stability to the leadership process.  

---

Big Picture : India Outlook

 

Can Demonetisation weaken PM Modi?

 

Prime Minister Modi’s surprise demonetisation move on November 8 has changed India’s short term policy outlook. Since then, the government has lost momentum in parliament in the face of opposition protests over demonetisation that have halted progress on bills. That includes enabling bills for the GST, which the government had committed to implementing on April 1, 2017. Finance Minister Arun Jaitley now hints of implementation sometime before September 2017, as that is when a constitutional amendment, which has already passed, will end the ability of states to impose many current taxes. While that should force New Delhi and the states into quick agreement, arguments continue over implementation and the issue of dual control. More broadly, the government’s constant amendments to the demonetisation program is hurting poorer consumers and small businesses (one newspaper has counted 63 changes in 43 days) although the government has justified this as necessary to counter attempts to circumvent the system. 

---

Big Picture : Global Outlook

 

A better and brighter 2017

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

While many want the world economy to lift by 4.5 per cent or more in the new year, a modest lift to 3.8 per cent growth is more likely. That would be stronger than any of the last five years, and right on the average for the two decades to 2015. For many, that’s still uncomfortably slow, as demand won’t be strong enough to support strong price growth for commodities and most manufactured goods, or to help heavily indebted countries and companies repair their balance sheets. So, big risks in emerging markets (low commodity prices and large debts for some) and in the Euro area (Italian banks struggling with large non-performing loans and low growth) will remain. The big gains for the global economy at the close of 2016 are in three areas: a promised swing in US fiscal policy to reflation; stabilisation or modestly higher commodity prices; and better growth in emerging markets (EM, note that the MSCI EM equity index has returned 25 per cent since the slump in January 2016).  

---

From The Editor : Oh, The Mighty Dollar

 

At a G-10 meeting in Rome in late 1971, John Connally, the Secretary of Treasury in the Nixon administration proclaimed to his astonished peers, “the dollar is our currency but it’s your problem”. The meeting was another nail in the coffin of the Bretton Woods system. Global financial markets have exploded manifold since Mr Connally’s comment and the dollar has been pivotal to their rise. More recently, since the lows of 2011, the greenback has risen 40 per cent against a basket of currencies. After the Trump victory, contrary to previous expectations, it jumped even more.  

---

Insight : India’s Start-up Ecosystem: New Realities

 

Having gone through a full boom-bust cycle, India’s start-up environment has today achieved a level of maturity and sophistication that bodes well for the future, says Kashyap Deorah

 

India’s start-up environment is morphing. Finance and technology have poured in over the last few years, while at the same time, valuations – once sky-high – are becoming more realistic. E-Commerce, long the bugbear of talent heads in other businesses, is also seeing early signs of consolidation, and the end is in sight for unsustainable practices like heavy discounting. Having gone through at least one boom-bust cycle, the overall start-up ecosystem is acquiring a certain maturity, though it does still has some way to go in that respect. Government policy has become more supportive, even as a lack of clarity on some critical issues remains an impediment. 

---

Viewpoint | Corporate Affairs : Issuing Notices of Board Meetings: A Key Requirement

 

The affairs of a company are managed by its Board of Directors, and collective decisions are taken at a duly-convened Board meeting. The 2013 Companies Act mandates that the Board shall hold a minimum of four meetings every calendar year, and that not more than 120 days shall pass between any two Board meetings.

The Secretarial Standard on meetings of Board of Directors (SS-1) issued by The Institute of Company Secretaries of India, as approved by the central government, prescribes a set of principles for convening and conducting such meetings, and on related matters. It also requires companies to hold meetings in every calendar quarter.  

---

Cover Story : India’s Labour, Education, Skills And Employment: The Critical Quadrant

 

Nearly 748 million Indians – nearly twothirds of the country’s population belong to the working age group of 15-60. This is set to accelerate by another 47 million by 2021 on net, accounting for a massive 260 million addition to the workforce (and a reduction by 213 million Indians who will move beyond the age of 60 by then). If you consider the happy reality of longer average life spans, the total number moves beyond 795 million. These are the number of Indians who will be available for work, giving the world its highest working age population globally.  

---

Think Tank : Risk and Innovation: Going Hand in Hand

 

Robust risk assessment and mitigation, combined with market insight, are what help product innovation succeed, says Chitresh Gupta

 

Understanding and evaluating risk demands the ability to see far into the horizon, identify the pros and cons, and especially, to take responsibility for the ‘what if.’ According to Robert Brand, author of the book Rules of Innovation, if there is no risk, there is no innovation. As he writes, ‘Risk taking is the second rule of innovation after the first, which is inspire and initiate. Without risk, there can be no innovation.  

---

Think Tank : Exploring the Wealth of North-East India

 

Naveen Verma explains why this long-neglected region is an unexplored paradise – for business as much as for tourists

 

From infrastructure and tourism to horticulture and organic farming, North-East India is seeing a huge spurt of activity across multiple focus area. Partly, this is the result of a big rise in government developmental spending in the region, which has jumped 35 per cent in the three years since 2013-14. More importantly, the North-East states have massive underlying potential. All of this will have important implications for companies that either already serve in this region, or plan to do so in the near-to-medium term.  

---

Think Tank : Making a Success of the Smart Cities Programme

 

It takes more than just technology to make a city ‘smart’, says Ashish Tandon

 

India is on the threshold of becoming an economic superpower. The government fully realises the country’s enormous potential, and is promoting it globally through campaigns like Make in India and Incredible India. Eventually, this will create opportunities for India, where other countries, including Asian ones, will be looking to it for short- and long-term solutions in manufacturing, education, healthcare and wellness. However, this will require a big push in terms of urbanisation and the quality of city-level infrastructure.  

---

Think Tank : Walking the Skill-development Tightrope

 

Vocational training needs to be the lead character is India’s growth story, writes Sanjeev Duggal

 

Well begun is half done, goes the old English adage. It certainly holds true of the Skill India mission, a much needed initiative that seeks to chart a new course for India. In recent years, the government has brought in a slew of important policy changes in the area of skilling. Over 1,500 courses have been aligned to the National Skill Qualification Framework (NSQF), and comprehensive reforms to the Apprenticeship Act could also be a game-changer. Further, the Ministry of Skill Development and Entrepreneurship has signed MoUs with various ministries to leverage the existing infrastructure and opportunities for skill development across sectors. It has also identified 52 ‘Skill Centres’ in Indian Railways premises, 12 of which are already operational.  

---

From The Editor : The Owlets Whoop to the Wolf Below

 

In the aftermath of a Trump victory in elections across the border, Mexico’s President Enrique Pena Nieto painstakingly reassured its citizens and foreign investors that his country was on solid footing. With low inflation and respectable public finances, Mexico was assured of economic stability. Despite some misgivings by the Trump campaign and Donald Trump’s threat to tear up the North American Free Trade Agreement, Mr Pena Nieto argued, its strategic partnership with the United States would remain intact. However, that was not quite the way the markets saw it. The Peso was amongst the hardest hit currencies in the hours after it became evident that Mr Trump would step into the White House as America’s 45th President. It plunged 12 per cent, hitting a record low against the US dollar.

---

Big Picture : India Outlook

 

Demonetising: the route to flash out black money?

 

PM Narendra Modi has staked his political future and the health of the economy on an effort to curtail India’s black economy, which estimates put at 10-30 per cent of GDP. It is telling that only 30m Indians pay income tax and that the ratio of tax revenue to GDP is much lower than that of countries with better compliance. The November 8 replacement of 500 and 1,000 rupee notes, representing 86 per cent of currency by valuation, is popular with India’s middle class and corporates, most of whom are tired of the associated corruption and contortions required in daily life and business.  

---

On My Mind : The Reality of Indian Healthcare

 

India is a dynamic and growing country. When it comes to healthcare, however, many patients are unable to afford or access the healthcare they need. Today, people are starting to demand the same access and clinical outcomes that more developed countries fund and enjoy. Why should India be disadvantaged, when innovative treatments are at our disposal that can enable longer, better lives, or even cure certain devastating diseases? The growing burden of disease is putting healthcare systems under pressure to fund and provide treatment to patients. This pressure on healthcare systems is found around the world, so India is not different when it comes to recognising affordability and access challenges to the healthcare system.  

---

Big Picture : Global Outlook

 

The Trump bump

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

Donald Trump’s win in November’s elections sets the US on a more expansionary path, provided he proves to be a capable president who finds a way to work with a Republican Party controlled Congress. Within the blizzard of his contradictory policy statements on how to make America great again, a central theme has been an expansionary fiscal policy that mixes a major infrastructure program with tax cuts and deregulation. In many ways, that has been a move that the IMF has urged on advanced countries that have been struggling with weak growth and deflation. It is also what US Federal Reserve chair Janet Yellen and some other central bank heads have been calling for over the last year if you read between the lines of their commentary.  

---

Cover Story : On The Right Track

 

Many more start-ups fail than succeed in today’s business environment. Consequently, the CFO’s role in such companies varies from that in a more established one. Specifically, it is about addressing a wide range of issues: capitalising the company whenever possible, mitigating risk at every stage, planning and forecasting with great rigour, and continuously enhancing the trust of investors. Sudesh Chinchewadi, CFO of Vistaar Financial Services and this year’s winner of IMA’s India CFO Award for ‘Excellence in Finance in a Start-up’ is a particularly fine example of how one can build a successful company from scratch.

---

From The Editor : A Double-edged Sword

 

Following the global financial crisis, central banks in America, Europe and Japan ratified an unusual response through a colossal quantitative easing programme. What ensued was a bloating of their balance sheets with an estimated USD 7 trillion in government bonds that bear negative returns. Some would argue that they were left with little choice but to tinker with untested strategies, in the hope of prodding the economic system out of recession.  

---

Cover Story : Cost Management: Unlocking Competitive Advantage

 

Cost management is a perennial issue, but the intelligent management of cost goes beyond shortterm tactics, and into the realm of strategy. Today, the ability of organisations to sustain margins has been impacted by an uncertain global economy, a slow-recovering Indian economy and volatile currency markets. Going forward, crucial changes such as the GST will fundamentally alter the way businesses operate, and how they manage their costs. As co-pilot and navigator for the CEO’s efforts on sustained and profitable growth, the CFO’s ability to manage cost intelligently, without compromising on growth-oriented investment, will define the firm’s leadership on cost, and importantly, on the internal generation of cash.  

---

Big Picture : India Outlook

 

Modi and team reigns

 

PM Narendra Modi’s BJP-led government is in a stronger position as it approaches the midway point in its first five-year term thanks to the fragmenting of the Congress Partyled opposition. The Congress itself is bedevilled by weak leadership under Rahul Gandhi, while the rest of the opposition divides into strong regional parties that do not always work well together. Half a dozen state elections in 2017 should highlight the shift in momentum. The biggest of these is Uttar Pradesh (UP) where a close three-way fight is likely between the two local parties and the BJP, followed by Punjab where the current SAD government (a BJP-ally) will face anti-incumbency pressures.  

---

Big Picture : Global Outlook

 

Better growth ahead?

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

2016 is closing with hints of better growth next year, repeating a pattern that has inevitably faded into persistent weak global growth for each of the last five years. The “new normal” of weak global growth has been accompanied by surprisingly weak trade growth and strong deflationary forces that reflect an oversupply of commodities, many manufactured goods, and some services (like shipping).  

---

Cover Story : Nurturing Finance Talent

 

If there is one key ask of Finance by business today, it is a guidancecentric, judgment-based framework that enables high quality decisionmaking beyond the capacity of numerical reporting. More than ever, this calls for well-rounded finance talent, especially the kind who can understand the business and act as effective business partners to drive growth. In a dynamic and complex environment, where regulatory and competitive pressures can be intense, CFOs are prioritising the development of finance talent with renewed vigour, and going out of their way to acquire, develop and retain quality people. Manish Vora, CFO of Johnson & Johnson, and this year’s winner of the ‘Excellence in Talent Management’ category in IMA’s India CFO Awards, is a particularly fine example of what it means to truly steward the company’s talent.  

---

From The Editor : The Silent Revolution

 

Over the last few years, incredible changes have been taking place within India’s financial system. While regulatory and media attention has largely focussed on banks, their stressed balance sheets and the need for fresh capital, a silent revolution of sorts is unfolding in the retail segment. Indian consumers have taken eagerly to newage digital payments systems – electronic funds transfers (EFTs), Immediate Payment Services (IMPS), mobile banking and pre-paid payment instruments (PPIs) such as m-wallets, vouchers and pre-paid cards – with surprising agility.  

---

Big Picture : India Outlook

 

Modi gains an edge in Parliament

 

India has six months to get ready for a goods and services tax (GST) on April 1, 2017. The switch to a GST will be the biggest test of India’s bureaucracy and corporates in decades. Key decisions, including the GST rate, have yet to be made. Disputes over the implementation will undoubtedly get caught up in upcoming state elections for Punjab, Uttar Pradesh, and Goa. The GST should be a boost for growth, while also providing a badly needed lift in public revenues by broadening the tax net. The manufacturing sector should do best, with a reduction in tax and fewer barriers to inter-state commerce. By contrast, the service sector faces a rise in tax and extra complexity.

---

Big Picture : Global Outlook

 

Need of the hour: getting over weak growth

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.

There’s little sign that the global economy will break free of weak growth at any time in the next 15 months. The unprecedented monetary stimulus of the last few years may well have prevented a steeper downturn, if not a global recession, but it does not have the power to lift growth for those countries in which trend growth has slumped. At the global level, it is simply a matter of excess supply of most commodities, manufactured goods, services (notably shipping), and savings to the current levels of demand.

---

Think Tank : Returning to Profitable Growth

 

From trimming employee costs to changing its reporting structures, Ashok Leyland did all of this and more to get back on the growth path.

 

More than at any time during the corporate life cycle, the CFO must come to the fore during a turnaround phase. When the numbers start to indicate that all is not well, and when the organisation enters unknown waters, it is the CFO who must stand tall and help lead the way. Given India’s rapid growth trajectory of the past two decades, few CFOs have had the experience of turnaround situations, or with a cash crisis that might jeopardise the company’s very existence.

---

Insight : Governance and HR: Rising Inter-Linkages

 

A core element of strategy guiding CHROs, as they seek to build lasting differentiation as a function in specific, and as an organisation at large, lies in the area of governance. Regulation has driven this up the priority agenda of both Chief Executives and Boards. The best companies, however, ensure paramount focus on governance, on how Boards review performance and guide strategy, and how the C-suite executes on its responsibility.  

---

Big Picture : Global OutlookGlobal Outlook

 

The Global and Regional Outlook is extracted from the Asia Pacific Executive Brief, a service of IMA ASIA.  

---

On Your Mind : Soft Spends Gain Momentum

 

The results of IMA’s Business Confidence and Performance Index (BCPI) Survey, conducted in May-June 2016, suggest a brightening outlook – at 64.2 in Q1 (April-June), the headline BCPI was at a one-year high.  +Read

---

From The Editor : A Credit Quandary, But Much More

 

Analysts have bickered that despite the efforts of the government and the Make in india initiative, investments have failed to nudge ahead proportionately. This reflects in the stunted growth in credit to the industrial sector, which fell from 25 per cent in March 2011 to 5 per cent in July 2014 and to a puny 1 per cent in March 2016. Consequently, the industrial economy has stuttered and the more reflective capital goods index is even worse off.  

---

Big Picture : India Outlook

 

PM Narendra Modi’s government thinks it now has the numbers to push the long delayed GST bill through the upper house. That would be a big step towards turning India’s 29 states into a national market, and will remove operational challenges for many corporates.  

---

Cover Story : Balancing ROIC And Growth To Build Value

 

Growth is the lifeblood of any business, as indeed, possibly its raison d’être, but a sole focus on growth isn’t always the most sustainable way to create value for shareholders. Return on Invested capital (ROIC) is often just as important – and in times like now, perhaps even more so – as a measure of value creation. When ROIC is high, growth typically generates additional value. But if ROIC is low, the blind pursuit of growth can often be counterproductive.  

---

Cover Story : A Lifetime of Excellence

 

Homi Rustam Khusrokhan is unique in the corporate world. Suave, gentle and kind are the words that best describe this soft-spoken man. To those who know him personally, he is also ‘the nicest man that ever lived.’  

---

Think Tank : Creating Brand Value

 

Brands, audiences, demographics, markets – a set of words that seems to come out of a business-school lexicon. But if – for just a moment – we choose to move away from the jargon and strip away layers of complexity from brand concepts, the truth stands out clearly.  

---

After Hours : Travelling with the Wind

 

Abhilasha Ojha Captures the euphoria of flying up in the Australian skies. 

---

From The Editor : Reset one, reset two, reset three...Reset one, reset two, reset three...

 

Bad news they say comes in ‘threes’. But for the global economy that would be an underestimate. The IMF, in its most recent update, further downgraded its global growth forecast for 2016 to 3.2 per cent. Over the past few years, successive updates have emphasised risks, and revisions have inevitably been negative. It is not hard to comprehend why IMF economists feel this way. Global asset prices have seesawed – between July 2015 and January 2016, USD 16 trillion was wiped out from equity and bond markets. Whilst more recently there has been some recovery, nobody is convinced that the worst is over.  

---

On Your Mind : The Changing Role of the CFOThe Changing Role of the CFO

 

To varying degrees, most companies now run a ‘global’ business – which makes them susceptible to shifting raw material prices, exchange rate fluctuations, and differences in economic growth across multiple geographies. Additionally, there are complexities involved in making products/services or employing resources in one market, ‘delivering’ these products and services in another market, and accounting for all of it in the home market.  

---

Big Picture : India OutlookIndia Outlook 

 

There is no almost chance that Narendra Modi’s BJP government will gain the support of India’s upper house in the remainder of his current term to 2019. However, over the next three months, 68 upper house MPs will retire by rotation and will be replaced by new ones from different parties. As a result, the combined strength of the BJP’s three biggest opponents can potentially fall below a critical threshold wherein they can no longer block legislation all by themselves. If the BJP can win over all the other parties it can theoretically override the opposition in the upper house.  

---

                                                                                                                                                                                                                                                             CFO Connect Website 

 

Archives

July 2018 June 2018 May 2018 April 2018

view more