CFO - Investors’ True Insider!

CFO - Investors' True Insider!

The CFOs are privy to the true picture of the company and are, therefore, the true insiders of investors. Today's CFOs are actively involved in formulating and implementing policies and strategies for maximising shareholders' wealth. Nikita Singh and Yogesh Supekar talk to the leading CFOs in India to find out what matters most to the financial wizards when it comes to creating shareholders' wealth.

The Chief Financial Officer's (CFO's) role in a corporate set up has been changing over the last couple of decades. The CFO, from being merely a financial wizard, is now seen more as a "Strategy" person and a business leader who has control over all the major issues (financial and nonfinancial) in the company.

The CFOs have hands-on approach on majority of the dealings of the company and are the ones who have complete information on all aspects of the business. Today's CFO can be seen as a Financial Strategist & Business Advisor to the CEO. It is no longer enough for CFOs to be reporting numbers and managing financial function.

Today's CFO is seen applying critical thinking skills along with financial acumen to the long-term goals of the organisation. The CFO is also a team player who takes the ownership of the financial results of the organisation. The CFO's role involves taking tough calls that others in the organisation do not or cannot take.

As a team leader responsible for building a team of experts in business and finance, a CFO also needs to be good people manager. When it comes to interacting with external parties, the CFO needs to have diplomatic skills. A good CFO will normally inspire the people from outside of the company and generate confidence amongst the stakeholders on the company's ability to perform. CFO is, on most occasions, the senior person in the company who will vouch for financial viability of the company. Thus, for customers, vendors, shareholders and the bankers, CFO is the face of the company's sustainability.

The role of a CFO is increasingly becoming flexible nowadays and a CFO is often seen multi-tasking. Increasingly, the CFO is becoming a multi-functional senior management officer with mastery in finance Few years back, a CFO was seen as a forecaster of all the financial requirements of the organisation and one who had a tab on all upcoming and contingent liabilities. These days the role of a CFO has become parallel to that of the CEO. The role played by CFO complements that of the CEO.

The today's CFO is under a lot of pressure as he is required to manage lot of transformational challenges. In the current environment, where the compliance rules are getting stricter and internal control needs to be maintained at high levels, the work is cut out for the CFOs. The CFO is also responsible for building a team of financial experts with advanced analytical and communications skills who can collaborate and help other departments use data to make sound strategic decisions in a volatile business environment. No wonder, forward looking analysis has become a norm rather than an exception for a CFO.

Top Priorities for CFOs 

While the CFOs in different geographic regions may be faced with different unique challenges there are few common priorities faced by the CFOs. The CFOs of MNCs are increasingly seen as drivers and executors of global strategy. This means that the CFOs have to constantly re-evaluate the business strategy and the direction adopted by the company. The CFO has to be aware of the competitive landscape in various geographies and is often instrumental in recognising the potential new business models.

One of the topmost priorities for a CFO is ensuring total compliance with the changing regulatory environment. In the near term, certain set of companies dealing with retail consumers are facing minor disruptions in the entire supply chain due to the GST implementation and the CFOs are focused on ensuring smooth transition.

Based on our interaction with CFOs across various industries, we find that the most important priority for the CFOs is to increase the market share while controlling the costs. A CFO has to walk the tight rope and has to strike balance between growth strategy and the cost-cutting (expenditure) strategy. Among the important priorities is also to use technology optimally and have access to company-wide data for faster and better decision-making. The data analytics seem to be very useful for CFOs and digitisation is helping CFOs access data better and faster, thus helping them make better decisions.

Digital transformation is a must and appears to be a basic requirement for the CFOs. The digital drivers are leading to the transformation of the finance function as processes are streamlined through digitisation and robotisation. While robotisation may be the future of streamlined accounting processes, it may provide opportunities to organisations to reduce costs and save money for the companies.

A recent survey conducted by Deloitte,UK, indicates that the CFOs in that region are seeing risk appetite waning as uncertainty rises owing to Brexit. The growth in the UK and Brexit remain the biggest concerns for CFOs in the UK and are prioritising cost control and cash flows. Indian CFOs, on the other hand, remain highly optimistic on the economic outlook and growth opportunities in India

Among the several top priorities, the two top priorities are Performance and Risk Control. Risk management is one of the core functions for the CFOs.

Considering the important function that a CFO performs in the day-to-day functioning of a company and the ever-increasing contribution by CFOs in terms of strategy inputs, we thought of hearing out the business leaders themselves. From backroom accountants to boardroom advisers, modern CFOs want to make a bigger impact on the business operations of a company The CFOs are transforming themselves into business advisers.

Predictive analytics is another priority area for the CFO and cash-flow forecasting is one of the main areas used in the finance function

Our interaction with the leading CFOs of Corporate India reveals what the financial wizards think about the economy at the current juncture. These insightful insiders talk about their company's growth prospects and how they think the company will perform. The CFOs also highlight their key achievements while talking about the key challenges faced by them. Many CFOs have also highlighted the financial aspects that an investor should look at before investing in the stock market. Read on to know about the near term top strategic priorities and initiatives of the leading CFOs in India.

Jayesh Jain
CFO, PNB housing

 

''The CFO's role has become more future-focused and visionary''

As a CFO, what are your three key priorities in long term? 

Firstly, effective FY18-19, IND-AS is also becoming applicable to the NBFCs/ HFCs and hence PNB Housing Finance. The adoption of Ind-AS is a huge task and remains my key priority for this year to ensure smooth transition of the accounting standards.

Secondly, the priority is to manage costs and profitability against the backdrop of the economic change and specific industry pressures, whilst driving growth.

Thirdly, with changes in the way we do our business, digital transformation is becoming an integral part of the business landscape for almost all the industries including the housing finance industry. Over the next few years, we would evaluate the impact of the implementation costs and revenues arising from the digital intervention. While digital transformation is necessary, its timing and effective cost–benefit analysis has to be considered, else it may adversely impact the profitability.

Can you highlight a strategic initiative which paid off well for your company during your tenure as a CFO with PNB Housing? How did it help the company and the investors who have parked their money in your company's stocks? 

Considering the role and responsibility of a CFO, s/he is involved in various cross-functional domains and strategic decisions on very frequent basis. One such decision which I had to make was pricing the IPO of the company, which has to be just right, not very high and not very low. I am glad to share that we had a successful IPO.

Please mention the key challenges you have faced in your current role as a CFO. 

One of the most challenging task which I faced in my current role was to raise equity capital of 3,000 crore through an IPO of the company. It was a testing time, as the gearing ratio of the company was at a very high level and equity funds were critical to run the operations. The IPO process involved several critical aspects, including regulatory approvals, appointment of intermediaries, finalisation of Red Herring Prospectus and agreements, fulfilling SEBI (Stock Exchange Board of India) compliances, investor roadshows, etc in a time-bound manner.

We had a successful IPO with many firsts. It was the largest IPO by an HFC in India and the second largest IPO in 2016, which was oversubscribed by over 20 times. It also met the largest QIB demand in the last 5 years, with participation from several quality long-only institutional investors, which is something I am very proud of.

Another challenge is for the finance team to step up and contribute as a strategic partner to the wider business, finding and retaining the right talent. This includes improving performances, developing existing staff and making new strategic hires that are capable of helping fulfil the digital agenda.

We keep hearing about CEOs more through media and other such modes of communication. The CFOs apparently live behind the curtain but play a very crucial role when it comes to wealth creation for the individual investors and the company. How do you think will CFOs role change in the companies in India in future?

The role of CFO has been changing and becoming broad-based in the last few years. From holding a fiduciary role and handling function like treasury, accounting, planning and compliance, now CFO's role has become more future-focused and visionary.

 The CFO is now expected to get involved in strategic decision-making process with a focus on value realisation. With the advancement of technology, the CFO in addition to the management of evolving technology and streamlining operations, is also responsible for managing fraud detection, regulation and compliance. For many key aspects of the business, the CFO is an architect of what to do and how to do it.

Can you tell us about your company? 

PNB Housing Finance Limited is a registered housing finance company with National Housing Bank (NHB). The company is the fifth largest housing finance company by loan assets and the second largest by deposits in India, while also being the fastest growing HFC in India with a hub and spoke target operating model.

PNB Housing, as of March 31, 2017, had an AUM of 41,492 crore. It had one of the lowest gross NPAs and the cost of borrowing at 0.22% and 8.55%, respectively. The company also enjoys the benefit of strong parentage of Punjab National Bank, the second largest public sector bank in the country. The company is headquartered at New Delhi with branches in major cities across India.

Know Your CFO 

For me leadership is…A Clear Vision
For me competition is…Healthy and Gets the best out of you
For me success is… Job Well Done
For me my team is… Mantra to Success
For me growth is…Value Addition
For me business is…Sustenance

Nayan Mehta
CFO, BSE

''CFO has to remain an objective voice on financial performance of the company''

What are the three key challenges faced by you as a CFO? Please mention your top three priorities as CFO in implementing the business strategy? 

Over the last few years, there has been a paradigm change in the regulatory landscape. Indian GAAP has been replaced with Indian Accounting Standards (Ind-AS). Income Computation and Disclosure Standards (ICDS) have become applicable. The biggest change of all is implementation of Good & Services Tax (GST) in India. Though GST is the most important reform in the financial sector, the same has necessitated changes in many processes and controls in BSE's commercial operations.

BSE, being a stock exchange, is a quasiregulatory organisation and operates under a regulated framework. BSE is a systematically important market infrastructure institution and places top priority to compliance and corporate governance. However, BSE's investors focus on stakeholder valuation and this requires that appropriate commercial and strategic decisions are taken without diluting its role and responsibility as a stock exchange in any way. BSE has a significant corpus of investible funds which are invested in taxable and tax-free bonds, fixed deposits and mutual funds. The yields on these investments have been decreasing steadily over the last few years, necessitating change in investment strategy.

Top priorities for implementation of business strategy are strengthening enterprise-wide risk management framework, continuing focus on regulatory compliance and strengthening of data management to enable robust predictive analytics and decision support systems.

Please share with us the most difficult task you have singlehandedly managed at BSE. 

Taking up an ERP implementation mid-way at BSE and successfully completing the same has been one of the most difficult task managed by me at BSE.

While studying the financials of a company, which aspects you think need to be focused on by the individual investors? 

An individual investor should focus on earnings at cash and net level, revenue growth, debt levels and company's ability to service debt.

How has the role of CFO evolved over the years and How is CFO in general influencing the strategy adopted by the company?

The traditional role of the CFO has been to keep record of the financials of an organisation. Financial accounting, audit, tax, treasury, budgeting, cash flow management and control have been traditional functions. Today's CFO has many roles beyond finance. He should not only be a financial expert, but he should also be a performance leader with strategy in mind, action oriented with focus on control and efficiency in operations. The CFO has to remain an objective voice on financial performance and also contribute to operational decision-making as well. Now CFOs also manage or materially support information technology, investor relations, real estate and strategic M&A – and some are involved in commercial activities. The CFOs are increasingly contributing to organisational strategy and are meeting unprecedented demand for their unique perspective and discipline.

''Retention of business growth by way of strengthened product and business mix is a key challenge''

Arup Thakur, Director & CFO , Pincon Spirit

As a CFO, please elaborate on your top three priorities. 

a) Market consolidation by further brand positioning resulting into increased profitability b) Strengthening pan India presence c) Increase in own fund base to lower debt equity

Please highlight a strategic initiative which paid off well for your company during your tenure as a CFO? How did it help the company and also investors having parked their money in your company's stocks? 

Identifying market based on economic profile of the Indian demography and positioning product range at various price band proposition starting from entry level to mid level and at semi premium segments whereby having participation in the entire value chain. Having presence in entire value chain and a spread-out market base has enabled the Company to achieve a better visibility and a sustainable market base. I believe the above has enabled the Company for business risk mitigation, lesser susceptibility to market volatility, interactive correction to adapt for Government regulatory changes and all this taken together would be comfortable protection for investors having parked their money in Company's stocks.

As a CFO what are the key challenges faced by yourself in achieving the company vision and mission? How did you really overcome it? 

The challenges faced are : Retention of business growth by way of strengthened product and business mix, deeper market penetration, strengthened distribution chain, consolidation towards pan India business presence, better gearing for lower debt equity ratio and also to reduce working capital cycle.

By having a result oriented team comprising of personnel having vast experience in the respective segment coupled with proper HR policy we do overcome such challenges.

We keep hearing about CEOs more through media and other such modes of communication. CFOs apparently live behind the curtain but play a very crucial role when it comes to wealth creation of the individual investors, company he/ she is working for. Do you feel deprived of limelight at times? How about CFOs being faces of the companies in India in future? 

Over the years, I feel CEO's and CFO's should work as a complimentary factor to each other with unified vision for ultimate achievement of corporate goal.

At Pincon, I have come across this perfect state of functioning. CFO's, nowadays, are definitely crossing the barriers of only managing the financial parameters of a Corporate in India and they are actively participating and contributing to various other overall business aspects and rightly proving themselves to be the face of a Corporate.

Numbers are the primary things that you play with at work. People in the outside world have a feel that CFOs are the set of people who only understand numbers and kind of away from other aspects of life. How much is this true, up to what extent? What further needs to be done to ensure CFOs in India get their dues? 

My comments against Q4 shall stand good here too.

Any necessary information about your organization you would like to include 

Pincon has retained itself to be a fast growing corporate in India and its business mix in liquor and FMCG (edible oil) with parallel double digit growth record in both the segments has enabled Pincon to be in a much better business risk mitigation proposition as compared to many other peers.

''A CFO has to be very practical in thought and clinical in execution ''

Ajeet K Agarwal
Director Finance, REC

Q. As a CFO, can you please elaborate on your three key priorities ? 

I believe that the CFO of a company is the common thread that works as a connect between the Board of Directors and all the functional departments to ensure that the business activities are carried out as planned while ensuring financial propriety at the same time. The CFO is involved in all the aspects of business and is privy to a 360 degree view of the company

As the CFO of Rural Electrification Corporation Limited (REC), my key priorities for the next three years is to look into the following:

a) REC is a ‘Navratna' Public Sector Enterprise and an NBFC — Infrastructure Finance Company,in existence for more than 48 years. It borrows funds from domestic and international markets and lends to the Indian power infrastructure sector. It is anticipated that low interest rates will be the new norm for financial markets. While on the one hand, it will give REC an opportunity to raise funds at lower cost, on the other, we might have to consider re-pricing on our lending side. To be able to raise funds from domestic and international markets through the right product mix at the most favourable time is the key to reducing our cost of funds.

b) The business of lending and borrowing comes with the risk of cash flow mismatches, which can result in high fund idling cost or high contingency situation wherein there is a dearth of funds. Thus for a CFO, effective treasury management or fund management through latest financial planning and analysis (FP&A) tools and processes acquires importance. It is crucial for reducing the cost of idle funds and to arrange for bridge finance or short term funds so that we have an effective contingency plan in place.

c) Another key responsibility as a CFO of a public sector company is to maintain high quality corporate governance standards. REC is listed on the NSE and BSE, and our international debt issuances are listed on the London Stock Exchange and the Singapore Stock Exchange. The investors have continuously entrusted their confidence upon REC due to the high standards of corporate governance REC has set. As a part of internal vigilance, we are subject to internal audits, statutory audits as well as audit by the Comptroller and Auditor General of India (C&AG). Our Board comprises of independent directors who have impeccable records in their professional areas and are experts in their fields. As the in-charge of the financial activities of the company, I shall focus on maintaining high standards of corporate governance and transparency.

Q. Please highlight a strategic initiative which paid off well for REC during your tenure as a CFO. How did it help REC and also investors who have parked their money in your company's stock? 

During my tenure as CFO of REC, I have put forward various steps to maintain the quality of assets. Various initiatives have been taken to contain stressed assets and to revitalize them, some of which are implementing flexible debt restructuring, strategic debt restructuring, and Scheme for Sustainable Structuring of Stressed Assets (S4A). The corporation will continue to reap the benefits of these initiatives in the future. Moreover, attention has been directed towards improving the recovery mechanism of company's dues through various structural changes, including playing a crucial role in implementing UDAY, the Government of India's ambitious scheme. REC is the nodal agency for the scheme which has the potential to turn around the power sector by improving the financial health of state Discoms. REC's NPAs are one of the lowest amongst its peers.

Further, I have always emphasized on exploring new avenues and sources to raise funds, be it domestic or international. As a consequence, REC has been able to diversify its borrowing mix from earlier being limited to 54EC Capital Gains Tax Exemption Bonds to now having a mix of products such as Institutional Bonds, Subordinate Debt, Zero Coupon Bonds, Term Loans, Commercial Papers, Foreign Currency loans in the form of Syndicated/Bilateral Term Loans, Foreign Currency Bonds,Official Development Assistance Loans. To reduce the cost, REC has entered into various derivative instruments such as swaps/options/forwards etc. Therefore, REC has been able to maintain its cost of funds which is one of the lowest as compared to its peers.

Through all these initiatives REC has been able to maintain its NIMs, which are one of the best in the industry. REC's PAT has grown manifold from nearly 3,800 crore in 2012-13 (the year I took the charge as CFO) to 6,250 crore in 2016-17, i.e. an increase of ~64% in a span of 5 years. The shareholders have always kept their faith in REC's shares and have participated in its growth story. This is evident from the fact that in the last one year REC's stock has delivered a return of 91% as compared to 14% by Nifty50 and BSE Sensex. Moreover, Foreign Portfolio Investors (FPI) continue to remain invested in REC and hold nearly 23% of the equity share capital. REC's stock has been included in Morgan Stanley Capital International (MSCI) India Index as per an announcement on May 16 with effective date for the rebalancing being June 1, 2017.

Q. How did you overcome the key challenges faced by you in acheiving the company's vision and mission? 

I think one of the most challenging jobs of a CFO in any organization is to maintain a balance between business performance and earnings growth. The role of a CFO is very strategic and involves decision-making that has a direct impact on the overall business. While I enjoy working with people and value their contributions, a CFO has to be very practical in thought and clinical in execution. I believe I am a calculated risk taker. Having to put the larger interests of the organization before the people is a tough decision and communicating it in the right manner is a challenging task.

Q. We keep hearing about CEOs more through media and other such modes of communication. The CFOs live behind the curtain but play a very crucial role when it comes to creating wealth for individual investors of the company. Do you feel deprived of the limelight at times? How about CFOs being faces of the companies in India in future? 

In my opinion, the growth of any organization depends on the collective wisdom and decision-making of its key managerial personnel,including CFO. In any case, the credit for a profit-making company will always be attributed to its financial control, budgeting, revenues, cost mitigation which are essentially the domain of finance. I firmly believe that there are CFOs who can be the face of their companies. The CFOs are an integral part of the management team and form an interface between the organization and its various stakeholders. They are already the face of their companies.

Q. Numbers are the primary things that you play with at work. People in the outside world have a feeling that CFOs are a set of people who only understand numbers and are kind of away from other aspects of life. How much is this true? What further needs to be done to ensure CFOs in India get their due? 

It is true that if you do a certain thing day in and day out, you tend to encore it in other areas of your life. However, it is not necessarily true that CFOs, who are masters in numbers,tend to do away with other aspects of life. This special feature on CFOs is a welcome initiative to give the legitimate dues to the CFOs

Walking the tightrope of growth and expenditure is the biggest challenge for a CFO

Dr P. Alli Rani
Director (Finance), CONCOR

Q. What according to you is the most challenging part of being a CFO? 

I think it is quite obvious. A CFO is responsible both for growth and expenditure or management of finances (cost cutting). Growth would require a different kind of mindset and as far as expenses are concerned, when cost cutting is expected, it requires a different kind of mindset. To walk this tight rope is the biggest challenge.

Q. What are the most significant duties of a CFO on a day-to-day basis? 

Generally, for any CFO, it would be the best management of financials. Whether it is for maximising revenues or MIS for decision making. If you talk about CFO's duties in a government set up, then it would be different from the duties of a CFO in private sector. In a government set up, a CFO would be very much bound by government regulations. I am not talking about compliances that all companies need to follow. I am talking about government's regulations. There are internal checks. There are various kinds of guidelines relating to, for example, a simple matter like tender. In tenders in a government set up, it is always the lowest tenderer. In the private sector, the lowest tender is not important. Other matters can take precedence like the best and the most reputed, credibility or even relationships may have precedence. But in the government set up, it will have to be the lowest tenderer. These are the points of differences. Secondly, the funds. In the government sector, funds are more easily managed by the CFO. There are government's guidelines like 'you should do this' or 'you can't do that' with funds. You have to comply with government regulations because ultimately those are government's funds. But in the private sector, it is up to the CFO to maximise the returns to the shareholder by any kind of investment which he or she thinks can maximize returns.

Q. Can you please highlight your three near-term priorities as of now in your company? Whether it is growth, cost cutting, technology or something else? 

Definitely, the topmost priority is to increase the market share of rail transportation. Second, to become the first choice for our customers. Third, to integrate logistics services at one point and thus cut costs for our customer.

"There are government's guidelines like 'you should do this' or 'you can't do that' with funds. You have to comply with government regulations because ultimately those are government's funds. But in the private sector, it is up to the CFO to maximise the returns to the shareholder by any kind of investment which he or she thinks can maximize returns."

Q. Is GST impacting the way your company does business? Do you think GST will be a game changer for your industry and your company in particular? 

Yes, it has a potential to be a game changer. If it is implemented in its true spirit, then I believe it will be a game changer. But, of course, there will be implementation difficulties, especially with new systems like e-way bills that may be difficult in the Indian context. But if we can pull it off, it can be a game changer.

Q. Has GST stalled any operations of your company? 

I don't think for an established company like ours GST can stall operations. We are already a digitalized company. We are also a tax compliant company, so to shift from one tax system to another tax system is not difficult at all.

Q. How was your role influencing the business strategy of the company? Can you share with us a significant episode in your career as a CFO where you influenced a particular solution to a business problem deciding a new business model or a business strategy? 

I think in our company, like in any other company, decisions are very much governed by the Board. When an important decision has to be made, as a Navratna company, our board has been given a lot of power, so we are able to go ahead in decision making in a very quick manner.

As far as my role is concerned, I always make sure that whenever a project or new models are conceived by the executives, I alert them of possible hazards. In fact, this role has been recognised by the company and hence in my company, I am in-charge of risk management as well. I make sure we go self-prepared when we take a new path, aware of all risks, especially financial risks.

Q. How important is it for CFO to embrace the technology? 

It can never be overemphasised. It is very important. We brought in digitalization quite early in our Company. Without embracing technology, a CFO cannot contribute fully.

Q. How is digitisation helping you in your job? Is it making it difficult or is it adding another role? What is your experience? 

In my company, the financial functions are totally digitalized. Every transaction is made on a digital system only. It helps management not only in adequate checks and controls, but also facilitates quick MIS information on what is happening. My hand is constantly on the pulse of the financials, since my financial functions are totally digitalized.

"GST has a potential to be a game changer. If it is implemented in its true spirit, then I believe it will be a game changer. But, of course, there will be implementation difficulties, especially with new systems like e-way bills that may be difficult in the Indian context. But if we can pull it off, it can be a game changer."

Success of IIL lies in its integrated approach 

Sandeep Aggarwal
CFO, Insecticides (India) Ltd.

Insecticides (India) Ltd. is a fully integrated company, which is working in the field R&D, technical synthesis, formulation, brand building and market development and farmer contact. This makes the company grow in all quarters complimenting each other and less dependent on others.

What are the new product launches that investors can expect this fiscal from Insecticides(India)? 

This year, we will be launching around 5-6 new products, out of which one product has already been launched in Q1 as Kayakalp and the other products are undergoing the registration process. Several of the products will be launched as combination products and these will be manufactured exclusively by IIL.

What is the growth witnessed in high-margin products such as Maharatna, as you call them, in the latest quarter? Do you expect the growth momentum to continue in these high-margin products? 

Maharatna range of products usually gets the maximum sales in the first half of the financial year. Some products like Bispyribac have done well in the first quarter, so they will do well in the next quarter as well, which is the best quarter for our company. The expected turnover would be around 75% from these brands of B2C sales.

How has been the market response to the newly-launched postemergence herbicide, Green Label, for paddy? 

Last year, we launched Green Label in both business-to-business and businessto- customer operations. The combined turnover from both the B2B and B2C businesses was around Rs90 crore in the very first year. The response was quite good. We have already done a turnover of more than Rs100 crore from Green Label in the first quarter of the current fiscal.

Is the penetration of agrochemicals increasing in India? 

Yes, it is increasing with the awareness among farmers and, no doubt, the companies are playing a vital role in the same.

What product mix strategy is being adopted in order to improve EBITDA margin? 

Practically, we are a generic product company as of now, so we are targeting to close 15-20 products which are either not contributing anything or contributing very less to the EBITDA margin. So we are trying to come up with 5-6 new products with good EBITDA margin, the combination of which will result in a good EBITDA margin. We look forward to change the product mix by adding the new generation molecules which will contribute handsomely and reducing generic molecules.

How is GST impacting your product pricing? 

GST has impacted initially and we can say that the first quarter has been affected by 15% due to this. But, in the long run, I see that this will be beneficial for the consumers at large as the rates of inputs will come down and the additional input tax credit will help in reducing the rates.

How has the company performed in the first quarter of the current fiscal? Despite all odds due to GST, the company has grown by 16% in Q1 due to proper planning to combat the same well in time. The profits have also grown by 65% due to strategy of changing the product mix and we look forward to a good financial year.

A modern CFO is a driver and executor of business strategy 

Shalibhadra Shah
Group CFO, MOFSL

Q. What are the top three key challenges faced by you as a CFO? Please mention your top three priorities as CFO in implementing the business strategy? 

The top three key challenges:
1. Managing evolving technology The finance function is changing and new technologies have allowed for increasing levels of finance process automation. In this new era, where finance is the key collaborator to the business, digitisation provides the data analytics needed for critical decision-making and to evaluate and discover incremental business opportunity.

2. Changing regulatory environment When it comes to regulation, the only certainty is change. With the continuously evolving and changing regulatory landscape by various regulatory bodies such as SEBI, RBI, IRDA, Income tax, GST, accounting, auditing, Companies Act, to continuously keep up with changing government regulations is set to remain a challenging territory.

3. Talent management Finding and retaining the talent needed to drive various functions like finance and treasury, risk, financial accounting and reporting, tax (direct and indirect), compliance, technical specialities like IND-AS, GST, etc continue to be challenging. For the finance team to step up and contribute as strategic partner to the wider business, it is very critical to develop existing staff, and also making new strategic hires capable of helping to fulfil the digital agenda. It needs a clear view of existing talent on a continuous basis, skill sets required for the future and a succession plan to ensure key roles are always covered.

Top 3 priorities as CFO in implementing business strategy
1. Chief Opportunity-cum Chief Investment Officer : The key priority is to build a solid fact base around the company's businesses and its markets and use this fact base to facilitate strategic conversations with business unit leaders and management team. This would consistently identify profit growth opportunities and partner with business to develop execution plans to drive those profit improvements into the P&L and providing useful context/compare one investment opportunity versus another to ensure the highest return.

2. Rethink roles and skill Finance department needs people at all levels with advanced analytical and communication skills, people who can help all other departments use data to make sound strategic business decisions and can collaborate with colleagues in other departments, especially around operational imperatives

3. Automate continuously, embrace evolving software tools that would help my people monitor things on real-time basis such as operations, compliance, risk, cash flow management, freeing them to do higher level analytical, business development and other work.

Q How has the role of CFO evolved over several years? How is CFO in general influencing the strategy adopted by the company? 

The CFO's role is no longer a traditional finance executive in charge of balance sheet or a typical bean counter role. The CFO should now certainly delegate those responsibilities, including accounting, compliance, balance sheet management, and the treasury function–to a capable deputy. Doing so will enable the CFO to spend more time and energy being a partner to the management team and driving value in the business.

Furthermore, the CFO connects the dots by providing an understanding of how the different parts of the organisation come together to create value and the trade-offs in the strategy adopted. A modern CFO, as a driver and executor of business strategy, must constantly re-evaluate business—its strategic direction, the competitive landscape, potential new business models and how operational structures, processes and approaches need to change to support strategy adopted by the company.

1. Cost and profitability management. The day-to-day management of costs and company profitability remains one of the key priority. The real challenge though is managing costs and profitability against the backdrop of economic and regulatory changes and specific industry/business pressures, whilst driving growth 

2. Supporting decision making is the number one priority. This marks a move away from traditional finance objectives of the past. Now, as a CFO, I need to do more with financial and operational data to help top management make critical decisions and indeed the role is morphing into as business adviser. 

3. Agility for any business strategy. Every key business strategy obliges confidence to the board in the company's ability to manage unforeseen business obstacles This has to be backed by updated financial planning tools and data analysis. Being able to pull data from multiple sources into a single report would greatly improve productivity and agility. As would the ability to produce better dashboards and data visualisations.

Q How has GST impacted your operations? 

GST regime has resulted in increase in operational and compliance burden. Hitherto financial services industry had only one centralised registration under service tax; however, under the GST, due to our widespread geographical presence across pan-India, we have to undergo state-wise compliance of filing returns, availing input credits and other compliances. For example our retail broking and distribution arm had to file only two hal —yearly returns earlier, however, now they would have to check and file at least 37 returns per state under the GST regime. Definitely, technology is playing a big role where we are fully automating these compliances. Moreover, all our channel partners across every business have to compulsorily register for the inter-state services provided by them to us and we are also aligning them to the GST-related process and compliances.

Q Please share with us the most difficult task you have singlehandedly managed at Motilal Oswal Financial Services Ltd. 

The most difficult task I have worked was to work 360 degree around the organisation, ability to embrace change and make robust process and integrate/ bring in use of technology to support end-to-end financial reporting and analysis across each of our businesses

Q While studying the financials of a company, which aspects you think need to be focused on by individual investors? 

a. Operating Profit Margin (OPM) The OPM shows operational efficiency and pricing power. It is calculated by dividing operating profit by net sales. The higher the margin, the better it is for investors. While analysing a company, one must see whether its OPM has been rising over a period. Investors should also compare OPMs of other companies in the same industry. 

b. Dividend Policy & Yield: Whether the company has a stated policy of distributing dividend out its profits. Investor should look at whether the company should have a clearly stated dividend policy, Even SEBI has now mandated listed companies to have a clear dividend policy in place. A high dividend yield could generally signify a good long-term investment 

c. Return on Equity (ROE): An ROE of 15% to 20% is generally considered good. 

d. P/E Ratio : The price-to-earnings, or P/E, ratio shows how much stock investors are paying for each rupee of earnings. It shows if the market is overvaluing or undervaluing the company. One can know the ideal P/E ratio by comparing the current P/E with the company's historical P/E, the average industry P/E and the market P/E. For instance, a company with a P/E of 15 may seem expensive when compared to its historical P/E, but may be a good buy if the industry P/E is 18 and the market average is 20. 

e. Cash-flow statement: Whether the company also generates sufficient cash from operating activities as compared to profits in P&L and whether the cash generated from operations is further utilised for investing opportunities to create a sustainable return on equity (ROE) 

f. Leverage Levels : The debt-equity ratio, interest coverage ratio and the cash/near to liquid assets with the company and compare with industry standards. 

g. Auditors Report : Whether it is a clean report or it has any emphasis on matter or reservations/qualifications 

While financial ratio analysis helps in assessing factors such as profitability, efficiency and risk, added factors such as macro-economic situation, management quality, digitisation, key people retention and industry outlook should also be studied in detail while investing in a company stock.

❝Integrating technology into operations helps mitigate risks and drive growth❞ 

Subrata Nag, Executive,
Whole-time Director and CFO, Quess Corp Ltd 

Q. In your opinion, what is the most challenging part of being the CFO of Quess Corp Limited? 

Due to evolving technological trends and commercial dynamics, businesses are constantly facing fresh challenges. The role of the CFO is also changing due to this influence and it is thus not limited to the passive control of numbers, revenues and costs, unlike in the past. This is especially true in the case of a large company like Quess Corp Limited. Our operations are spread across 65 offices in 34 cities in India, North America, the Middle East and the South East Asia. As a result, ensuring seamless operations across multiple teams and stakeholders is a challenge we frequently tackle. 

Our focus also remains on promoting innovation, minimising risk and ensuring our long-term financial goals are met. Driving business fundamentals and value creation through leadership and tactical thinking are also at the top of our priority list. Creating value through innovative thinking, creative problem solving and adherence to best practises is another key area where we tackle dynamic challenges. 

Quess Corp Limited being in the growth phase, making decisions on the hiring policy, handling the GST transition in India and managing trade barriers are also a few challenges we face as of today. 

Q. Please mention your top three priorities as the CFO of Quess Corp Ltd. 

In addition to being the CFO, my role at Quess Corp Limited is also that of a strategy driver and executor. Thus, one of my key focus areas is to constantly evaluate the priorities of our business, manage the direction it is headed and ensure operational processes are supportive of growth. As a growing organisation that has recently ventured into new territories, including security and infrastructure management, we understand that we cannot afford to let growth become an impediment to flexibility. Thus, the willingness to remain agile as we tackle new challenges is also at the top of our priority list. Being a part of an increasingly digital world, preparing ourselves for new trends and adapting to new technological innovations is also a main concern. 

In summary, it is managing growth while remaining agile, generating free cash flows, and creating long term values for our investors by adjusting to changing industrial needs is what we strive for. 

Q. How important is it to embrace technology for CFOs? 

Innovation is all about accepting change and leveraging it to create more efficient processes and products. Although risky, constant innovation is the only way to survive in today’s dynamically changing technological environment. Technology is a great enabler, making way for new trends and increasing our outreach farther than ever. Financial budgeting solutions and digitised processes that provide data-backed insights translate to smart decision-making, putting CFOs at an advantage. Integrating technology into operations also helps mitigate risks and enable financial decision makers drive growth from a vantage point. 

Q. Please share with us your outlook on the Indian economy at this juncture. 

The Indian economic forecast remains positive. India will remain the fastest rising economy. After gradually recovering from demonetisation, the growth projection seems to be strong. Increased public wages and pensions will enable consumption. With the implementation of the GST and increased ease of doing business, the future looks promising. Reinstating credit discipline and cleaning up banks' balance sheets will play a pivotal role in supporting the credit growth needed to finance business investment. From the larger perspective, one can expect this year to be one that of reckoning and growth. From Quess’s perspective, we see a more robust growth phase in the business service sectors in the coming years.

CFO must focus on how the company can enhance shareholders' wealth 

R K Jain
Group President (Corp. F & A), Uflex Limited

Q. How has the outlook changed for Uflex in the last one year? What are the challenges faced by your company? 

As far as outlook of the company is concerned, there have been several positive developments towards innovation. We are on the path of growth and shall continue on the growth curve in times to come. With the macro level indicators also improving for the better, the overall outlook remains positive. To give a sense of completion to the narrative, one must factor in consumerism and the way it is panning out in India, in particular.

 Consumerism has a great and direct bearing on the flexible packaging industry and considering the fact that consumerism in India is likely to grow manifold, the times ahead shall be far more promising. It is just the beginning that our country has started unleashing the power of consumerism, so to speak. The economic power of the people and their affordability is steadily increasing. This will further enhance consumerism and have a positive impact on our industry.

I don't see any new challenges as such. It is just that our company has to continue to meet and exceed the expectations of our clients globally. Innovation to create value added differentiation is the cornerstone of our global business strategy. Customers prefer buying from us, given that we are fully integrated flexible packaging materials and solutions company. This is an ongoing and evolutionary process. We just have to focus on our business efficiencies and grow both in domestic as well as international markets. We are very positive and bullish about the future.

Q. How has the role of a CFO evolved over the past several years? How is a CFO in general influencing the strategy adopted by the company? 

The role of a CFO has enlarged over the years. CFO is pivotal personnel for any business. S/he has to go hand-in-hand with the CEO in terms of development of future plans and chalking out domestic and international strategies, in addition to managing the traditional functional role of managing finances — the lifeline for any organisation. The CFO should be extremely agile and proactive so that the company is able to grow. After all, that is the main objective of the company; the CEO or the top management for that matter. In the past few years, major changes have taken place in the functional ambit of a CFO. Now the role of a CFO is no longer confined to statistical functions, or accounting /supervising and steering the MIS for that matter. The role of CFO undoubtedly has become much bigger and more important in contemporary times. Be it business strategy, mergers or acquisitions, strategic management, risk management, corporate governance or strategic communications CFO has an increasingly important role to play.

Q. What is the most difficult aspect of being a CFO? 

A CFO must focus on how the company can enhance shareholders' wealth. The return on capital employed (ROCE) is a very important parameter that Investors keep a watch on. Therefore, investors' perspective has to be always kept in mind while devising the overall business and financial strategies. Further, the CFO has to be forever on the toes to see how to reduce the overall financial risk. That in fact is an integral part of overall risk management where CFO plays a very significant role.

Q. How important is it for a CFO to embrace technology? 

The day and age we live in, life is unimaginable without technology and there is absolutely no denying this. In all aspects, whether it is process management, increasing the productivity or enhancing the operational efficiency, technology is critical at every stage. Newer technology must be adopted from time to time in the best interest of the company.

Q. While studying the financials of a company, which aspects do you think need to be focused on by individual investors? 

In my view, investors focus on the financial parameters like ROCE, debt/ EBITDA ratio, free cash flows, payout ratio, etc. These are the important factors a prudent investor would always look at, in addition to the operating performance and governance quality. Despite performing quite well in operating parameters, a company might not be performing to the satisfaction of the shareholders in terms of financial performance, so to speak. For example, there can be instances when the capital deployed is not being efficiently used in a company. The investors keenly observe all of this while making informed choices to invest their hard-earned money.

Q. What is your outlook on Indian economy as of now? 

Indian economy is booming and the outlook remains bullish. The current government is doing all that it can to take India to newer levels of excellence, be it policy creation or implementation, for that matter. Let's take GST, for instance. It has become one of the biggest tax reforms of independent India and will benefit the overall business across the country in times to come. Changes do not happen overnight. It will be only fair and prudent to give a gestation period of 3-5 years to any new government before we see a complete transformation in our country. I think the basic foundation is being laid and we are headed in the right direction.

"The day and age we live in, life is unimaginable without technology and there is absolutely no denying this. In all aspects, whether it is process management, increasing the productivity or enhancing the operational efficiency, technology is critical at every stage. Newer technology must be adopted from time to time in the best interest of the company. "

CFO is the face of the company to debt and equity market investors 

Kapil Krishan
Group CFO, Manappuram Finance

Q. What are the three key challenges faced by you as a CFO? Please mention your top three priorities as CFO in implementing the business strategy? 

My topmost priority as CFO is to make sure that we always get adequate funds at the lowest possible cost because availability of funds is critical for the financing business.

My other priorities include ensuring that all our verticals and businesses have complete financial discipline, including timely and accurate internal reporting of MIS. Further, communicating our performance to debt and equity investors is no less important.

Q. Please share with us the most difficult task you have singlehandedly managed at Mannapuram Finance Ltd. 

As the Group CFO of a very large company, I don't think it will be right on my part to make claims about "singlehandedly" achieving things. It is ultimately the teamwork and management vision that delivers results.

However, I can definitely point out that when I joined Manappuram Finance four years ago, our average cost of funds was 13 per cent and our shares were trading at 0.5 times price-to-book ratio. By communicating relentlessly with both debt and equity investors and with improvement in the company's profitability and risk mitigation efforts, investors have renewed their confidence in us and our average cost of funds is now 9.4 per cent, while our share trades at 2.5 times price-to-book ratio.

Q. While studying the financials of a company, which aspects you think need to be focused on by individual investors? 

From an individual investor's perspective, I would give a lot of importance to the return on equity (RoE). Besides, positive cash earning and stability and visibility of growth would also matter a lot.

Q. How has the role of CFO evolved over several years? 

These days, the CFO is being given increasing importance to ensure that financial reporting is done properly. Besides, he plays an important role as the face of the company to investors from the debt and equity markets.

Q. What is your outlook on the Indian economy at this juncture? 

We appear to be doing a lot better than most other economies in the world. I think significant steps are being taken to build on infrastructure and remove the bottlenecks to ensure long term and sustainable growth. Putting it all together, I would say the future looks bright.

CFO has to strike a right balance between organisational growth and cost controls 

Naresh Bhansali
CEO — Finance, Strategy & Business Development and CFO, Emami

Q. In your opinion, what is the most challenging aspect of being a CFO? 

The most challenging part is to strike a balance between the conflicting objectives. You come across many different situations. While organisations and businesses aspire for growth, you have to keep control of the costs. One has to understand what is required for the growth and what is required to be controlled and then strike a balance between the two. On the top of it, a CFO also has to ensure that all the compliances are of the highest order, all the processes are in place, and any breach is not tolerated. These are the important challenges of a CFO. They also contribute to organisation strategy and growth. They have to keep a close eye on the initiatives and progress of the organisation. Where the CFO feels that the progress is not aligned objectives set for the growth, then he will immediately have a discussion to ensure corrective action.

Q. How is the GST impacting your business right now and do you think GST will be a game changer going ahead? 

The GST is a progressive economic reform. It is also a major channel disruption. It has changed the way business is done by all the stakeholders in the total value chain. It has impacted wholesalers and rural distributors the most. If you look, significant de-stocking has already happened in the first quarter of FY 18. If fact, in May & June there was a huge lull in the market, but the restocking has gradually started though it is still taking lot of time. People at retailer and distributor level are not accustomed to working electronically using internet and this has increased their cost of compliance. These, I believe, are temporary for them. However, the same is also a cause for the reluctance of retailers to come into the mainstream to do a full-fledged business like the way they were doing earlier. I think gradually things will improve and compliance will improve. They will also find out the most economical way of doing business. But it would take a little more time than expected. We earlier thought that everything will settle within a month or so, but it appears it would take a little more time.

Q. Kindly give us an insight into how a CFO influences the business strategy of a company? Can you share any significant episode from your career as a CFO where you have contributed to a strategy as a CFO? 

Unless you become a part of the strategy, you cannot become an impactful CFO. You have to contribute to the strategies and growth initiatives of the organisation. On the outset, I must say, a CFO has to influence every business strategy of the company. Consider a situation where the business team presents a case for investment. For example, the business team comes with a proposal to expand the sales distribution on the ground.

To increase the distribution it takes a lot of time. You have to employ lot of people, You have to employ lot of distributors. Establish robust process and automations. This cannot be done overnight. One has to start taking planned steps and gradually over a period of 2-3 years, you can build a robust distribution system. 

The research team may give a proposal to invest in a strong distribution and expand this distribution system. At that point of time, such initiatives are for the long-term growth of the company, but these will immediately impact the bottom line of that year. The benefits will not come immediately in the same year or even the next year. 

So one needs to decide how to ensure the long-term benefits as resources start flowing in and costs increase. In such a case, the CFO has to study the total plan meticulously and ensure that the whole plan is divided into milestones, so that one can review the progress at every milestone and ensure that the milestones get achieved in a meaningful way and on time. If there is something where the things are not happening as it was in the schedule, a CFO needs to discuss the strategy with concerned stakeholder and ensure that corrective actions are taken. The corrective actions could be many. It could be the revisiting strategy and goals, implementation of pilot project before the complete roll out, scale up or scale down of the resources and so on. So based on the progress and the objective, one need to be very agile in taking out a proactive judgemental call.

Therefore,CFO need to participate and often steer this kind of decision or thinking. So that’s the role of a person who participates in strategy not only from financial angle but also from business angle. 

For any big initiative, like say, acquiring a business or a brand—strategic orientation is very important. In 2008-9, we acquired a company called The Zandu Phamaceutical Works Ltd and in 2015-16, we acquired another business under the brand Kesh King. These kind of acquisitions require a lot of brain storming, validation of ideas and understanding the business case in detail so as to make it successful and if something goes wrong, one has a risk mitigation plan in place as stakes involved in such cases are very high. The job of CFO is to validate the business case and do proper valuation, and once the acquisition is done, ensure that integration and other steps are taken as per the envisaged plan. If these things are not done smartly, it may impact the company adversely, and if done smartly, it may impact so positively that it starts reflecting into profits and wealth instantly. 

Q. Does a CFO need to embrace technology? 

It is very important to embrace technology and make meaningful use of data and information. You get lot of information across the organisation and you need to channelise all the information and put them in a meaningful way so that you can take timely and appropriate decision. For this, technology plays a very important role. In our kind of an organisation, we have taken many initiatives to reduce manual interventions for faster decision-making. Technology can help improve performance substantially by increasing sales, reducing various costs and improving efficiencies. 

Q. If you were to advice an investor, which aspect of balance sheet and financials of a company an investor should look at?

There are many angles to it. An investor needs to look at many things, but I can mention few of the important ones. Based on the industry, the important items may also change. If you look at a technology-based company, then the way you look at it may be different than the one for a consumer company. There are some areas which are universal for any company, like, the past financials, past track record, future outlook etc. investor should look for the reasons as to why should the company grow? What are the levers of growth of the company? Why it has succeeded till date and why will it succeed in the future. Who are the promoters of the company? What are the current P/E multiples? The business may be very good, but if it is available at a very high cost or if the multiples are too high, then the investors may not get into it. So if you look at pharma, consumer or retail businesses, the multiples are very high. The businesses are very good, but since the multiples are very high, the investors may probably wait and buy when the multiples reduce. There can be many other areas too specific to industry and/ or company. 

Q. How optimistic are you on the Indian economy right now? 

Highly optimistic..! India is a huge country. The growth would come through consumption. Apart from this, if you look at the GDP growth, the rural economy, the stability of the government, the geopolitical situation, the monsoon— all these are positive. On top of it, the demography, the young population, the average age of the people today is, I believe, 24-25 or maybe below 30 years. That also drives a lot of consumption. All these are factors which are favouring the economy and which are good for the growth of any industry. 

Q. How about your company’s growth outlook? 

Where do you see your company in the next 3-5 years? We have always delivered in the past. We have outperformed our peers. If the peers were at 'x', then we have delivered at least 20% more than the average 'x' and we will continue to grow at such a pace. We will continue to outperform the market.

The role of a CFO is strategic in nature and closely aligned to business requirements 

Sudhir Bhargava
CFO, CL Educate

Q. Please mention your top three priorities as a CFO of CL Educate. 

The top priority is to manage cash flow and ensure capital availability for business expansion. Second is to ensure profitable and sustainable growth through solutions which complement the business. Third is to manage risks while transforming the business.

Q. How do you think the role of a CFO has evolved over the years? 

The role of a CFO is strategic in nature and closely aligned to business requirements. It also demands cognisance of and managing expectations of varied stakeholders - customers, investors, employees, owners, regulators and auditors.

Q. How important do you think it is for a CFO to embrace technology? 

In today's technology-driven world, technology has become a strategic tool in decision-making. If harnessed well, it can help address increased complexities of business by providing relevant data for key decisions. The CFO needs to educate/upgrade himself or herself on what all technology offers, what is suited for a business and how it can be leveraged for growth and managing risks.

Q. What has been your biggest achievement and the biggest challenge as a CFO of CL Educate? 

Capturing the business correctly into financial numbers and the balance sheet over the years while communicating the risks to all stakeholders- internal or external is a key achievement. In March 2017, listing of the company on the stock exchanges in India was another landmark. The challenge has been the vast sea of changes in the regulations and demands on reporting and transparency. These challenges have also been an opportunity and helped in decisions and growth.

Q. Please share with us your outlook on the Indian economy. 

India should sustain good growth year-on-year on the back of sustained reforms and progressive regulations. Further, the demographics can offer an immense economic opportunity, if harnessed well. A conducive business environment sustained over the years will be beneficial for the growth of the economy.

The CFOs should come out from numbers and become business-oriented managers 

Neeraj Jain,
CFO, Cosmo Films

What are your top three key priorities in long run as a CFO? 

The top three priorities are: • Facilitate company's growth by ensuring that cost-effective finance is available all the time, • Expediting cash realization from business (i.e. shorten the working capital cycle), • Managing business risks, including forex, operational and strategic risks, in the rapidly changing global environment.

Please highlight a strategic initiative which worked for your company during your tenure as the CFO of Cosmo Films? How did it help the company and also investors who have parked their money in your company's stocks? 

One strategic key initiative Cosmo Films took few years back was to focus on value-added films and parallel cost rationalisation. The initiative paid off very well for us. Today, with focus on valueadded films and product development, we are a company known for providing speciality solution for packaging and this is going to be key differentiating factor for us in years to come.

As a CFO what are the key challenges faced by you in achieving the company vision and mission? How did you overcome them? 

Our company's vision is "to become most preferred global brand in product segments in which we operate". To achieve this, one needs the best talent, robust business processes and globally recognised standards. I think getting all these working well together in a rapidly changing business environment has been challenging. Now after a couple of years of focused work, we can say the company has started achieving satisfactory results on the same.

Profitable growth today requires the ability to respond to rapidly changing Indian and global environment. We at Cosmo Films are trying to maintain organisational flexibility and risk management for strategic growth objectives.

We keep hearing about CEOs more through media and other such modes of communication. The CFOs apparently live behind the curtain but play a very crucial role when it comes to wealth creation of the individual investors and the company. Do you feel deprived of limelight at times? How about CFOs being the faces of companies in India in future? 

Today,the CFOs are not only working behind the curtain, but are emerging as the company's key communicators along with CEOs. There are several companies in India including Cosmo Films where CFOs represent the company to the public. Further, I see the role of the CFO to develop in the future.

The numbers are the primary things that you play with at work. People in the outside world have a feel that CFOs are the set of people who only understand numbers and kind of away from other aspects of life. How much is this true, up to what extent? What further needs to be done to ensure CFOs in India get their dues? 

The CFOs need to come out from just numbers and become business oriented managers who develop high business acumen and financial discipline. This is an emerging requirement of today's CFO's role. Once the CFO does this, everything is taken care of and the CFO gets his due.

Any more information about your company you would like to share? 

Cosmo Films today is a global leader in speciality films for packaging, lamination and labeling applications. Its films offerings include biaxially oriented polypropylene (BOPP) films, cast polypropylene (CPP) films and soon to be offered biaxially oriented polyethylene terephthalate (BOPET) films. Today, the company is the largest exporter of BOPP films from India and is also the largest producer of thermal laminating films in the world with plant-cum-distribution centres in the U.S, Korea and Japan and global channel partners in more than 70 countries.

The CFO's role has broadened from being a bean counter to assisting the CEO in formulating and implementing strategy 

M. Santhi Priya,
Group CFO and Whole Time Director, Virinchi

Q. What are the three key challenges faced by you as a CFO? Please tell us about your top three priorities as CFO in implementing the business strategy. 

Currently our organisation is in a growth phase with growth coming from existing information technology business as well as from diversification into healthcare delivery. Given the stage of our company, the key challenges faced by me as Group CFO are:
→ Allocation of funds for capital expansion which will address future growth in revenues and profits
→ Balancing capex requirements with organic growth in the form of working capital management to service the current business requirements, which involves close coordination with business team in timely billing and collections
→ Managing manpower and administrative costs which significantly impact the bottomline

The top priorities as a CFO in implementing business strategy are:
→ Growth in revenue and margins by assisting the business development team in focusing on profitable projects/clients and bidding           for new projects
→ Assisting the management in narrowing down on inorganic growth opportunities and unlocking/ creating wealth through corporate       reorganisations
→ Ensuring funds are available in time at reasonable cost to ensure growth through diversification as well as meeting organic growth         requirements.

Q. Please share with us the most difficult task you have managed at Virinchi. 

It was in the initial stages when I joined the group. The most difficult task was in ensuring that processes were put in place for the regulatory compliances, internal controls and tax compliances.

Q. While studying the financials of a company, which aspects you think need to be focused on by the individual investors? 

On the qualitative front, individual investors need to carefully read through the Directors' Report and Management Discussion and Analysis, which would give an idea on the actions taken by the company to survive and grow in the markets it is operating in. These will help in putting the financial performance of the company in perspective along with providing pointers on future growth opportunities. On the quantitative front, on P&L side, they need to analyse the changes in revenues and profits and if there is a growth, based on the qualitative analysis, understand if it is sustainable in nature. On the balance sheet side, they need to analyse the investments made by the company and the sources of funding and if the returns will be reflected in the immediate/foreseeable future.

Q. How has the role of CFO evolved over several years? 

Over the years, the role of the CFO has broadened from being a bean counter to one who can assist the CEO in effectively formulating and implementing the strategy adopted by the company. In the project stage, the CFOs have started playing a critical role in formulating the procurement strategy given their insight into the fund position of the organisation. In the case of operations, the CFOs have been in a position to offer feedback to the COOs in managing client engagements/relations for maximising the margins. The CFOs in conjunction with the Company Secretary can assist the CEO/Board in taking up corporate finance related activities to enhance wealth creation for all stakeholders of the organisation.

Q. How important is it for the CFO to embrace technology? 

Now most of the businesses in the country across sectors are driven by technology relevant to their business. For example, in the case of healthcare, the latest of the diagnostic equipments and technology for intervention clinically/ surgically are routinely deployed, and the CFO has to understand the impact on operations and the consequent returns and the timeframes.

In addition, over a period of time, all businesses have adopted information technology solutions to facilitate their business activities. The larger organisations in manufacturing and all organisations in the BFSI space have adopted enterprise applications with business intelligence layer. In the case of smaller organisations, at least in the case of F&A function, IT solutions have been deployed. Given the above, the CFO had to become tech savvy to effectively discharge the business as well as the monitoring and control function.

The strategic role of CFO is well in place in corporate management to supplement CEO 

Dr Hasmukh. B. Patel
Executive Director (F) & CFO, Gujarat Alkalies and Chemicals

Q What are the top three key challenges faced by you as a CFO in implementing the business strategy? 

The challenges in implementation of any business strategy for CFO amongst many (which I had come across to experience) include the following: (a) Risk matrix up-down gravity in a business cycle of rise and fall. (b) Gaps in collaborative internal support in a meaningful manner including Board considerations. (c) CEO-CFO competing for larger share of success and not for failures. (d) Understanding success or failures of your peers on key deliverables. (e) Threat of compliance and governance risks.

Q How has GST impacted your operations? How is GACL adopting changes in the GST era? 

We have implemented GST on dot with no gaps or lapses. The testing period would be the next three months, when the scheduled targets and compliances are flawlessly adhered to under GST law. It is a positive change/tax reform, which is on e-mode with minimal paper work with built-in checks and balances to add in ease of doing business across Indian market.

Q Do changes in the US accounting standard change the way you report your financials? 

We report financials on IND AS base now. Accounting standards in US are undergoing many changes with challenges to global trade practices and disclosures. The new standards are based on one overarching principle. Companies must recognize revenue when goods and services are transferred to the customer in an amount that is proportionate to what has been delivered at that point. It may pose problems in the digital economy, where service relationships can change drastically over time. These discrepancies create incongruent accounting results for economically similar transactions, rendering broad comparisons nearly impossible. These problems in particular are likely to be acute for software-as-a-service (SaaS) companies.

"The role of CFO is no more merely to deal with number crunching exercises, but far more significant to face challenges of overall business intricacies and to prove as business leader and value creator. The strategic role of CFO is well in place in corporate management domain to supplement CEO."

Q Please share with us the most difficult task you have singlehandedly managed at your company? 

This is a difficult to answer or say and describe as single-handed success to overcome difficult business challenges. It is the collective areas where proven CFO leadership is at its core:
(1) To identify and address the business cycle impacts (domestic/global).
(2) Foreign loans-non hedge decisions.
(3) Cost control in fluctuating markets for input costs-like power, single source suppliers, unorganised cartels and no pass though       of costs changes to customers/clients.
(4) Stricter compliance of multiple tax laws and complex regulations.
(5) Beating year-on-year performance track for topline and bottomline.

Q While studying the financials of a company, which aspects you think need to be focused on by individual investors? 

In my view, investors as stakeholders should focus on the following:
(1) Track record of promoters.
(2) Proven industry segment with consistency, continuity, planned performance and improved scale of operations, combined with      quality based business practices.
(3) Return on net worth.
(4) Market share
(5) Receptivity to stock market for ease of liquidity on time scale for returns/ rewards to investors.
(6) Matching CAGR in key parameters like: topline, EBIDTA, PBT, PAT etc.

Q Broadly speaking how has a role of CFO evolved over several years? How is a CFO in general influencing the strategy adopted by the company? 

The role of CFO is no more merely to deal with number crunching exercises, but far more significant to face challenges of overall business intricacies and to prove as business leader and value creator. The strategic role of CFO is well in place in corporate management domain to supplement CEO. It has now become interdependent role. The corporate goals are aligned/structured in such a way that corporate key roles/ challenges turn to opportunities for organic and inorganic growth with wisdom and prudence in business performance. The risks matrix for business structure/plans gets identified and the role of CFO emerged as a catalyst to business processes.

Q How do you manage your personal equity investments? 

By and large, it is with long term base with fundamentally valued scrips on risks and return basis. Equity swap at regular intervals to newer segments are also done amongst the class of equitybased assets. No mutual funds are preferred as a route for personal investments and wealth creation.

"The corporate goals are aligned/structured in such a way that corporate key roles/ challenges turn to opportunities for organic and inorganic growth with wisdom and prudence in business performance. The risks matrix for business structure/plans gets identified and the role of CFO emerged as a catalyst to business processes."

The CFO has to play a crucial role in assisting the CEO to maximise wealth for the shareholders 

V Vallinath,
CFO, Visaka Industries

Please mention your three key priorities as a CFO.
1. Grow topline to Rs1500 crore without compromising on margins
2. Reduce debt while making investments for growth.
3. Introduce IT-enabled systems and processes to de-risk the company in all respects and make it comparable to a world class company.

Please highlight a strategic initiative that paid off well for your company during your tenure as a CFO with Visaka? How did it help the company and the investors who have parked their money in your company's stock? 

I have been the CFO of Visaka since 1997. There are many strategic initiatives out of which I will attempt to name a few. First to turn our focus to rural India for cement asbestos business. Result: grew fast and catapulted the company from seventh position in the industry to the second position,while creating an all-India footprint. Introduced some of the best systems and processes for our various functions to support this aggressive growth process which helped derive advantage from the growth. The recent initiative to embark onto V-Next products business and becoming a market leader within a very short time. This, in my opinion, will be a strategically wonderful move for the company for a very long period of time.

As a CFO, what are the key challenges faced by you in achieving the company's vision and mission? How did you really overcome them? 

I do an in-depth and incisive analysis of the businesses we want to enter, pick the best and implement them right. While doing this, I ensured that I kept the long term view in mind, on margin sustainability and also scalability. Any analysis is from an economy-industrycompany standpoint. Various risks are mitigated and/or managed well. Ensuring proper cash flow management,while reducing the interest costs is another challenge. We made very few mistakes in our journey so far and have been a consistently profit-making, dividendpaying company for the last 30 years. Our debt is low, asset base strong, brand recall very good. We enjoy a significant no. 1/no. 2 position in all the businesses we operate.

We keep hearing about CEOs more through media and other such modes of communication. The CFOs apparently live behind the curtain but play a very crucial role when it comes to wealth creation for the company and the individual investors. Do you feel deprived of the limelight at times? How about CFOs being faces of the companies in India in future? 

Not always. However, a CEO has the overall responsibility for any company and the CFO has to be his trusted support system. The CFO has to play a crucial role in assisting the CEO to maximise wealth for the shareholders. I have significant freedom of communication and working. In all good and big companies, it is the CFO who is the face of the company to the investors and the CEOs meet only a few big investors. Our company is comparable to such great companies.

Numbers are the primary things that you play with at work. People in the outside world have a feeling that CFOs are a set of people who only understand numbers and are kind of away from other aspects of life. How much is this true? What further needs to be done to ensure CFOs in India get their due? 

This is a misconception. Numbers are only outcomes of the various initiatives that are taken by the company. The initiatives are the result of analysis, brainstorming and thorough planning and course correction from time to time. This is where a CFO with a background of economics, finance and operations research can contribute and this is where my heart is. Regulations have to change to increase importance of CFOs in companies, since they almost always have a thorough overview on everything,although it depends on individuals.

Any necessary information about your organization you would like to share with us? 

We expect our V-Next business to be the big growth driver for the next two decades.

The accountant's job has become very complex in India 

P Jagan CFO,
Swelect-Energy systems

Q. What are your top three priorities as a CFO? 

One is to adhere to accounting standards. Second is to adhere to tax laws. There should be tax compliance. When you take up income tax assessment, what is there in the accounting standards you account, and ultimately when it comes to assessment the income tax officer may take a different stand. So it can be challenging for the finance department to address the issue and come out with a clean chit.

Third would be to manage the cash flow in a situation when your inflows are not exactly matching with your outflows. Because the economy is not behaving the way it should, no matter how much importance you give to the budget etc, sometimes all your calculations go for a toss.

Q. Do you think the role of a CFO has changed from being merely a finance manager to more of a strategy person in a company? 

Yes, it has changed immensely. What it used to be 20 years ago is not the reality now. one has to be conversant with the accounting systems because there are lot of things that are happening in the computer world. Standards are changing. For instance, in our organisation, the accounting standard implication has changed. Being a listed company, we are obligated to follow Ind AS. So the treatment related to several items is different than what it was for old accounting standards.

One has to be updated with what is happening around. With GST coming in, there are a lot of challenges and ramifications.

Q. How has GST affected your operations? 

In a sense, a lot of interpretations have to be adopted before you can finalise the GST tax for final product. Solar industry, for instance, is not a simple product. It's a project! In a product you can come out with a GST rate. But when it comes to solar industry, when you are trying to put a solar plant for a customer, it becomes really challenging, and since everything is not explicit, we have to read between the lines, try to elicit opinion from experts, while not every expert is confident enough to issue an opinion, but based on material available and based on our prior experience, we take a stand on it. One year down the line, maybe the officers may take a different stand, but we are hopeful that what we intend to adopt will fall in place. In addition to that, when you import, there is not much clarity on solar products. We may consider 5% GST rate, but the officer refuses to understand. Not everything is laid out in black and white, e.g. solar cell. Nobody is clear. I may say that it is coming with a solar device. The officer refuses to understand. That way, you may end up paying more amount in the form of duty, and when it comes to utilisation, you may end up paying 18% GST but, on the contrary, your product will attract only 5% GST. This will result in capital blocking. This has been addressed by few other customers as well. On the one hand, there is one tax, which is welcome. But since there is no clarity you may end up paying more tax and blocking capital. By the time you file an application for refund and are eligible, a lot of time would have gone by, and that way, a lot of business opportunity may get closed. It's a good move, but there should be more clarity.

Q. Do you see any disruption happening in your industry due to GST? 

In a solar industry, where somebody has to do an installation at a remote place, you cannot identify and find out who is the registered dealer. The challenge is when you have too many transactions with these dealers as a service issuer you are obligated to pay GST under reverse mechanism. This is going to be a pain in the neck. And the relief given in the form of 5000 per day i.e. the maximum up to which you can have dealings with an interested dealer. Which means you have to have a tap on the participants with whom you are interacting. All of us have written to the vendors and have confirmed for ourselves that we are dealing with only registered dealers. But there will be cases where you may not have the option to choose the vendor on other side. That way, there will be handful of transactions and, in addition to that, any consultation transaction with the customer where he was under the threshold limit in earlier service tax law he would not have got registered and we would not be obligated to pay under reverse mechanism. With the advent of GST, irrespective of the nature of service, he will not be obligated to get registered.

On the contrary, you are obligated to remit. Which means you have to find out under what rate your product will fall and then do your home work, and at the end of the month, you have to reckon all that to a lot of reconciliation and then remit. As per the new law, you have to pay GST on advances received from customers. In a solar environment, in most of the cases, you have to collect advances from customers and run the business. You will also have too many accounting obligations coming in.

You have one tenure as per GST, one tenure as per books. In income tax, you have one more standard. This is ensuring long time work for accountants, not making our life any simpler. I am saying as a whole. GST comes out with one ruling. Income tax says I will not accept what company laws says. There you get into lot of litigations. Everything comes to a stalemate in a shorter time frame. The accountant's job has become very complex as far as India is concerned.

Q. Are you trying to say more capital is required post-GST to run your business? 

Maybe, until such time you come to a conclusion whether this product is going to attract 18% or 5%. In fact, I had somebody else on other line where they are facing a problem with reference to convincing the customs officer with reference to import of one particular product. I was about to call somebody and get this clarified. Problems are going to be there. As long as there is no clarity, this product is not mentioned as part of the schedule, we make different interpretations, for reasons knownunknown, if I am not able to convince him, I end up paying 18%. This is going to add trouble. And more so, the repercussions on solar industry are not taken into consideration. Time will tell.

Q. Can you highlight one of the most important tasks you singlehandedly managed as a CFO? 

We have been instrumental in achieving mergers of entities within the group in the last 2-3 years.

Q. While studying the financials of a company, which aspects do you think need to be focused on by individual investors? 

On the financial side, profit before tax (PBT), profit after tax (PAT), any note in the contingent liability statement: if there is a mention about a huge debt. For example, you take Nokia or Vodafone, there is a huge liability mentioned. In that case, a reader should be able to comprehend that of the cash reserves of 400 crore available, if they have Rs 1600 crore liability that may go against the company, then you are in for a shock. Other than these, the investments that have gone into its subsidiaries and joint ventures. Are they really profitable? Look at the consolidated financial statements, where do they really stand? Is there any provision made for investments in the subsidiaries? These things can be focused on.

"In a solar industry, where somebody has to do an installation at a remote place, you cannot identify and find out who is the registered dealer. The challenge is when you have too many transactions with these dealers as a service issuer you are obligated to pay GST under reverse mechanism."
 
Hedging — Creating Value For Your Business 

Mahavir Vaid
Director, Nav Bharat Metalic Oxide Industries

Hedging, if used correctly,is a very important tool that insulates you from the vagaries of commodity price movements.

As we live in volatile times, where risk is all pervading, often the risk associated with price movements is ignored. While risks relating to health, life, property,etc. are addressed through insurances, price risk figures very low in the list of priorities of most corporates.

The last decade or so has been an extremely volatile period for the commodity markets. From gold to oil to most of the industrial metals, which form a large consumption group in the raw materials segment, have all seen wild fluctuations.

How does it all add up? It all has a direct impact on your business margins. Corporates often work on the annual averaging price formula, have certain price escalation clauses with their prices if the price movement is very high. Some have certain "natural hedges" which insulates their price risk to some extent. However, all these tools do not insulate them totally from the impact of price movements.

In such cases, a recommended way of protecting your business margins by locking in your raw material costs is by using the futures market. The futures market is often associated with speculation. However, for an industry that would like to systematically and in a disciplined fashion insulate itself from the vagaries of commodity prices, it is one of the best cost engineering methods to be adopted.

The dynamics of metals prices directly affect the manufacturers,as the manufacturers have to generally commit on a fixed price for selling their final product. The procurement of metals, which is their raw material for their final product, needs to be done at the right price to keep their profit margins intact. The problem with smaller industries is that they anyway operate at very thin business margins, hence the right input pricing becomes a crucial factor in maintaining their business margins.

At Navbharat, we took a conscious decision to insulate ourselves from raw material price fluctuation as it was having a major impact on our business margins. Risk factoring is the term which we at Navbharat would like to use when we talk about hedging on the domestic commodity exchange MCX.

Generally, we prefer to take futures position for the metal in stocks or in transit, here specifically zinc as that is the raw material we use, since it offsets our risk of losses on the physical purchases of zinc that we do. MCX offers zinc contracts in two denominations — a 5 MT contract and a mini contract of 1 MT. We take position in any of them, depending on our requirement. We create a futures position on any of these contracts as soon as we book the metal and then close this position, or what is called as ‘squaring off' the position in market terms, as soon as the metal reaches our warehouse. This helps us to lock in our prices as soon as we get the order. There are times when we incur a loss in the futures position. However, this is offset by the profit we make in the physical markets. Similarly, if we are incurring a loss in our physical books, having taken a position in the futures markets helps us offset the loss in the physical books by making a profit in futures and vice versa. While the positions may not be completely offset, the loss we incur due to unfavourable price movement is limited to some extent. Hence this keeps our business margins protected.

We are in infact planning to train our staff on how to effectively use hedging as a tool to benefit in order to keep our margins protected and factor the same via hedging. Although it is easier said than done, it also requires a lot of in-depth knowledge of the international market price fluctuations in metals and its impact on the domestic markets. As metal prices are based on London Metal Exchange (LME) prices and India is a mere price taker, we have to study the LME market on a regular basis and the overall demand-supply scenario in the world markets. Our thought process is very market-driven and practical in its approach. We take our futures position as per the behaviour of the domestic as well as international markets. A very important aspect in this is the dynamics of currency price movement. Working on MCX gives us a natural currency hedge, as MCX offers LME prices reflected in INR terms. Besides, the zinc contracts on MCX settle on the LME CSP prices at the end of the month, giving the market a natural direction to follow the LME prices.

In general, many corporates may not prefer to hedge in the domestic commodity exchanges, thinking it is fraught with risks and also due to lack of knowledge on risk management practices. However, at Navbharat,we strongly believe that if proper knowledge and training is imparted to people on the benefits of hedging, then it is a completely winning proposition. While we are talking in relation to non-ferrous metals, which is our core product, hedging benefits can be also enjoyed by other industries that have exposure in other commodities as the MCX has a large number of commodity futures contracts. .

To conclude, we would like to say that hedging, if used correctly,is a very important tool that insulates you from the vagaries of commodity price movements.

"We are in infact planning to train our staff on how to effectively use hedging as a tool to benefit in order to keep our margins protected and factor the same via hedging. Although it is easier said than done, it also requires a lot of in-depth knowledge of the international market price fluctuations in metals and its impact on the domestic markets."