CFOs see higher sales in festive season after GDP grows 7.8% in Q1, ETCFO

<p><strong>CFO see higher sales in festive season after GDP grows 7.8% in Q1</strong></p>
CFO see higher sales in festive season after GDP grows 7.8% in Q1

Finance heads of India Inc have cheered the fastest growth of 7.8% in a year in the Q1 of the current fiscal and expect this to translate into higher sales in the upcoming festive season.

Uno Minda, one of the biggest auto ancillary components makers, sees the GDP turnaround indicating that Indian consumers are embracing their power to drive the economy forward.

“With robust economic conditions prevailing, there is a surge in demand across various sectors, especially in the auto industry, as noted in PV segment for its best-ever first-quarter wholesales up 9% YoY – just 4,006 units away from the million mark – in April-June 2023. The positive growth outlook for this sector stems from the fact that a rise in household incomes, support from government expenditure, WPI turning negative for Q1 subsiding the cost push pressure and improved living standards have bolstered purchasing power among individuals, leading to heightened interest in owning vehicles,” Sunil Bohra, Group CFO and CEO Safety and Comforts Systems Domain, Uno Minda told ET CFO.

He added that as India continues on its path of progress and development, it becomes increasingly evident that these encouraging trends will propel not only the auto industry but also several other key sectors towards even greater success and prosperity.

CFOs of service sectors are, therefore, optimistic for the industry they represent with Q1 FY24 growth being led by the services sector.

<p>The Indian economy's growth at 7.8% in 1Q of FY24 was among the fastest growing economies. <br /></p>
The Indian economy’s growth at 7.8% in 1Q of FY24 was among the fastest growing economies.

The Indian economy’s growth at 7.8% in 1Q of FY24 was among the fastest growing economies. Driven by the recovery in private consumption with a rise of 6%, and a sharp jump in government capex expenditure, once again services continue to outpace industry performance with strong traction in contact-intensive activities like trade, hotel, transport and communications along with finance and real estate services. GDP showed early signs of investment green shoots.

E-commerce to drive

“We have been seeing moderate growth in the e-commerce business for some time and with the festive season coming in, with strong GDP growth, we will see significant growth in e-commerce especially in Q3 and Q4 for the industry, Rahul Agarwal, CFO, unicorn logistics firm XpressBees told ETCFO.

His optimism draws from the operational reach of his company, which caters to 95% of the pincodes in India out of close to 100% serviceable pin codes in the country.

“In Q1, manufacturing growth was moderate, and we can see strong service growth momentum to support GDP growth in FY 24,” he said, adding consumption may remain resilient in the fiscal.

Manufacturing drag effect

Kishore Nuthalapati, CFO of Hyderabad-based BEKEM Infra Projects, said the Q1 GDP growth rate of 7.82% is a positive indication that overall economic growth is intact. The major support for the growth is from agriculture and related sectors, and financial & real estate services, both of these industrial sectors constitute about 40% of the GDP volume. But there are few weak spots.

India’s April-June manufacturing sector grew at 4.7% in the last quarter compared to 4.5% in January-March quarter of fiscal 2022-23 and 6.1% in April-June 2022.

Agriculture sector growth increased to 3.5% on a year-on-year basis, compared to a growth of 2.4% growth in April-June 2022. The agri sector reported a 5.5% growth in the preceding January-March quarter of fiscal 2022-23.

“However, the deceleration of growth in the manufacturing sector and construction is a concern”, the CFO expressed. BEKEM is a leading infra firm in hydro-mechanical construction projects such as irrigation, dams, barrages, reservoirs, and power plants.

Catalyst of growth

Online Visa Consultancy and outsourcing services company BLS International too is hopeful of higher disposable incomes due to growth resulting in more demand for its services.

“BLS stands ready to reap substantial benefits from this prevailing trend. This will primarily manifest through a surge in demand for the services we provide, including Visa processing, banking, and assisted e-commerce. Our Business Correspondent (BC) business operating in rural and semi-urban areas will also surge as more individuals experience a rise in disposable income, we anticipate a substantial increase in foot traffic at our banking service centres. Furthermore, this boost in disposable income will positively impact our other service offerings, such as assisted e-commerce, travel, and visa services, among others. In essence, the impressive performance of the Indian economy is poised to drive a substantial surge in demand for our services”, Amit Sudhakar, CFO, BLS International Services Ltd.

BLS International, which is listed on both BSE and NSE, became the National Business Correspondent of SBI two years ago for delivering last-mile banking services to the tier 2 & 3 cities.

“In tier 2 and 3 towns, which have yet to fully adopt digital payments, we anticipate a growing influx of individuals seeking our banking services through our Business Correspondents (BCs) or Customer Service Points (CSPs). Furthermore, during festive periods, we expect a surge in travel and an uptick in demand for our various other services. It is clear that economic growth will consistently serve as a catalyst for the increased demand for our services”, the CFO said.

DP World, a multinational logistics company based in Dubai, United Arab Emirates, specialising in cargo logistics, port terminal operations, maritime services, also sees the GDP growth of first quarter as encouraging.

“The GDP growth is in line with estimates and its upward trend is driven by government spending on capex, private sector investments and backed by healthy balance sheets of banks and their willingness to lend”, Hemant Kumar Ruia, CFO Subcontinent, DP World said.

Deepali Mathur, head of Finance, luxury fashion brand House Of Mayah said, “The Q1 2023 growth in India, driven by investment activities, service sector demand, and government expenditure, is more likely to impact the increased demand during the festival season”.

She added that increased investment suggests business expansion contributing to higher disposable income and with government expenditure it can further stimulate demand for products and services. The combination of these factors is likely to create a conducive environment for heightened consumer confidence and purchasing behaviour during festivals.

  • Published On Sep 4, 2023 at 03:08 PM IST

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