Achche din are here again for India Inc!

17 Jul,2014


By Shubham Mukherjee & Namrata Singh


The Boardroom discussion at India Inc which was limited to cost-cutting, productivity and operational efficiencies has suddenly given way to growth in a 180-degree swing, which is being heralded as the birth of a new corporate cycle. Improved sentiment and sensing a fresh buoyancy in the economy, companies across sectors are now approaching consultants with various demands which point to a single agenda – that of growth.


Even a few months back, the tone was quite different. No company was confident enough to talk about growth initiatives even though some have been talking about the economy bottoming out for a while now. Given a situation where policy paralysis, delayed clearances and corruption scandals ruled, consolidation and rationalization were the operative words and doors were slammed on any talk of a long-term plan for growth.


Today, a contrasting picture has emerged. Leading consultancies are busy getting plans ready, making strong pitches for M&As, raising finance, planning IPOs and cross-border listings. And, all this is being driven by the companies themselves.


“More of our clients are engaging in early discussions on growth while so far, there was a significant emphasis on operational and cost efficiencies and performance improvement,” Sri Rajan, MD, Bain & Company India, said. He believes it’s driven by the change in mood among business leaders who are more optimistic about the domestic economy and its prospects since May. This was around the time they sensed a change in the government at the Centre.


Mr Rajan is not the only one in the consulting community benefiting from the improved sentiment. Others such as KPMG, PwC, Deloitte and EY are among the few which are experiencing the trend reversal.


“In this new era of optimism, professional services requirements of companies are increasing considerably. The regulatory environment, the optimism in investing in India and the overall need to be profitable are driving these engagements,” said Richard Rekhy, CEO, KPMG in India.


A manufacturing company recently approached Deloitte for chalking out a topline growth plan for the next three years. The company wants to ensure its supply side is beefed up as it expects the demand to go up significantly. “A year and a half back, clients would often ask us to put ideas on long-term growth on the backburner. They were more interested in short-term margins and managing cost structures. The mood is shifting and companies are now more bullish about growth,” said Ambar Chowdhury, MD, Monitor Deloitte India.


The last time companies talked about growth was during the period 2006 to 2008 and then again between 2010 and 2012. “We did a lot of work around growth, including growth abroad, in the 2006-to-late 2008 period as the economy was rapidly growing; then there was a shift to cost and operational efficiency from late 2008 to around early 2010 as the global recession impacted India too. The economy picked up again in 2010 and the conversations steered to growth till late 2012,” Rajan said. Consulting on growth stopped in the last quarter of 2012.


“There is a renewed business confidence among CEOs in India now and they are looking to increase investments for growth and better manage the complex problems that businesses today encounter,” said Deepak Kapoor, chairman, PwC.


Harsh Goenka, chairman, RPG Enterprises, puts it in perspective. “We expect the demand to pick up now. The new government has inspired confidence and sentiment has improved. The Budget has been received well and so we can anticipate the growth focus returning.”


Simultaneously, companies across industries are also engaging consultants to address the evolving regulatory challenges which come up in chasing growth. Ram Sarvepalli, leader, advisory services, EY in India believes some positive thinking on the investment front has been triggered by expectations of the government deregulation and FDI in new areas. “Companies are also keen on looking at opportunities outside India in terms of trading routes and given that assets are still cheap in markets like Europe, global acquisitions are back on the agenda of many companies,” said Mr Sarvepalli.


However, there is one fear. What if things don’t turn out as expected? Mr Chowdhury of Monitor Deloitte says clients are cognizant of the uncertainties involved and are planning for multiple scenarios. They are advised on how to keep their plans flexible so that they can ramp up when demand increases and pull down if demand fails to pick up. So being nimble and flexible are areas where companies would need to focus as they chase growth.


Source:The Economic Times

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