Ernst & Young India - India Inc optimistic about growth; Ernst & Young Survey

•At atomic 10% advance in businesses accepted for FY10 by 46% respondents
•Three-fourth respondents address alone a low to average appulse of abatement
•Cost reduction, hiring freeze, article and forex accident administration boss accumulated agendas
•Term loans from banks, debt/equity from accumulation companies appear as adopted agency of adopting basic
•Majority apprehend consolidation, 47% accept assets are undervalued

Mumbai/ New Delhi, 5 May, 2009 : – As the contempo fourth division after-effects of India Inc accept demonstrated, not the absolute accumulated area has been appropriately afflicted by the downturn. In a latest analysis of 121 c-suite professionals by Ernst & Young, blue-blooded “Opportunities in Adversity: India Inc’s acknowledgment to the banking downturn” alone 25% of the respondents appear a “high” appulse of the slowdown, with three-fourth experiencing a “low” to “medium” impact.

Reflecting aplomb in accumulated prospects, 42% of the respondents accept said they would accomplish 90% of their targets for FY09, while 43% are analytic to accommodated 70-90% of their targets. Only 15% said that they will not attain added than 70% of the target. On the business angle for the advancing year, about bisected (46%) the respondents adumbrated that they will accomplish atleast 10% advance for the aeon concluded 2010, admitting in a accompanying question, 65% said they apprehend the arrest to abide to upto at atomic two years more. Nearly a third of the sample (27%) anticipate that the continuance of the arrest would be 6-12 months.

“The endure few months accept been acutely boxy and we accept apparent an accretion amount of companies acknowledge to these challenges with a bulk of measures. Organisations are almost added optimistic about their own affairs as they accept greater access on their own performance, while they are added alert on the macro-economic angle as it is abased on abounding added factors, “ says Sunil Chandiramani, Partner & National Director – Markets, Ernst & Young.
The acuteness of the arrest has acutely varied. Nearly three-fourth (72%) of the respondents said they faced accretion appraisement burden from their customers, while 66% acerb adumbrated that there has been a arrest in adjustment bookings. Around 56% encountered greater time lag in accepting orders, with a third of the orders accepting cancelled. More than bisected (52%) are actively rethinking expansions and forays into new markets, while 38% said they were acerb reconsidering ablution new artefact offerings.

Reducing operational and humans amount
Cost reduction, banknote bearing and clamminess accept been at the amount of accumulated India’s acknowledgment to the downturn. A abundant 85% of respondents abreast they accept accustomed the accomplished antecedence to amount abridgement to accord with the downturn; while 71% accept re-evaluated their business affairs with the focus alive from advance to attention cash.

More than three-fourth (76%) said it was their accumulation chains which were the a lot of acceptable to be explored from a cost-reduction perspective, 57 % voted for basement abutment casework such as absolute estate, accepted administration; followed by bartering and promotions, area 51% accept accomplished cuts; and 46% accept abrupt sales and administration costs.

On managing humans costs, 69% of the respondents laid “high” accent on rightsizing (not to be apprehend as lay-offs), such as redeployment, workforce administration etc, while a ample majority (61%) adumbrated a “high” achievability of a hiring freeze. Equally acceptable numbers of respondents aggregate that they are adopting measures such as centralized redeployment, abbreviation activity amount (salary, bonuses etc) and relocation. Around 71% of the respondents gave “medium” to “high” antecedence to abbreviation labour costs such as bacon and bonuses.

The analysis says that while companies are exploring the advantage of absolute manpower costs, this poses a astringent blackmail of an adverse appulse on the action levels of organisations’ analytical aptitude as able-bodied as their retention. The charge is to acuminate the bond amid alone achievement and capricious pay, highlights the survey. In this context, it is absorbing to agenda that 61% of respondents gave “low” alternative to abbreviation or eliminating training and added costs accompanying with agent programs,

Says Sanjay Chakrabarti, Partner, Markets, who led the initiative, “ arch companies have to bang a antithesis amid convalescent operating efficiencies and acquirement advance and amid acid costs and advance in aptitude and action improvements to adapt for the future.”

Treasury and banking accident administration
Underscoring the basic role played by treasury and banking accident management, 85% adumbrated that acceptable banknote and clamminess administration helped accord with the abatement added effectively. Companies accept added looked into addition sources of liquidity, inventorying of all debt covenants, ecology acquiescence and because options to renegotiate covenants, accepting acceptance to concise accounts accessories or credit, and communicating proactively with lenders.

About 62%, led by the IT&ITES segment, gave “high” weightage to adopted barter accident management. Respondents from the accomplishment area fatigued on an able amount accident administration system.

According to the report, the charge for article accident administration is now accepting acquainted added than anytime before. Today, there is still boundless abridgement of capabilities. Further, babyminding of the article amount accident administration action is analytical to ensure that accident administration is consistently connected with the accident aesthetics and appetence of a company. This requires connected captivation and blank by the chief management, accident administration board and the board.

In preferences for accessible costs options, the basic bazaar and clandestine disinterestedness are mostly out of favour with alone 10% and 20% respondents allotment these options respectively, as compared to appellation loans from banks (69%), debt or disinterestedness from accumulation entities (61%) and balustrade finance, which gives lenders the appropriate to catechumen to buying in case of accommodation absence (37%), accepting rated as the added adopted choices.

Majority expects consolidation; believes assets are undervalued
A majority of the respondents (63%) apprehend alliance and are analytic at M&A (58%) as a cardinal accommodation for business growth. Further, about bisected the respondents (47%) accept that the arrest has resulted in undervaluation for their industry and 31% acquainted that assets were accurately valued. Yet, admitting accumulated leaders’ appetence for acquisitions and affability of these assets, the abridgement of clamminess is currently adverse transactions.

The non-availability of advantage options has concise cross-border acquisitions decidedly and with the all-around abridgement slowing faster, Indian companies accept become added cautious. On the added hand, entering M&A is accepted to aces up as multinationals attending to aggrandize their attendance in the Indian market, which could still accomplish added than 5% growth.

“We apprehend changes in the way deals are financed and executed. With low leveraging ability, apostle contributions becomes added important, and banks may crave added abundance from borrowers. Maximum debt levels are acceptable to 2.5/3 times EBITDA (post acquisition) as compared to levels of 4-5 times, structured through a ambit of debt instruments. As basic is rationed, there could be instances of partnering added investors and with the airy market, due activity appropriate above-mentioned to the accord is acceptable to rise,” says the report.

The address added adds that M&A action is acceptable to be bedeviled by all-share mergers. PE investors will become added careful absorption primarily on listed companies, which can bear actual profits.

It adds that afflicted sales are acceptable to go up on anniversary of avenue from non-core assets, managing of accessible FCCB redemptions and shares apprenticed by promoters to accession funds, which may be off-loaded either in the bazaar or to added cardinal buyers if promoters abort to accommodated their obligations.

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