The rupee has fallen 14.3% this year, to be the worst performer in Asia. On the face of it, a falling rupee is likely to give a definite edge to exporters. But except for IT and diamond sectors, not everybody is so sure-footed.
IT to benefit from slide
For IT outsourcing industry, the recent currency movements are in its favour, said K Venkatesan, finance controller of Happiest Minds Technologies . He said that there is a positive impact on operating margins and bottom lines. Every percentage dollar gain results in around 30-40 basis points increase in operating margins.
The dollar converted rupee revenues also get a boost owing to the weakening of the rupee. Ganesh Murthy, CFO of Mphasis , feels that the rupee could hover around these levels till March. Suresh Singh, marketing head of Anthelio Business Technologies, said that the subdued capital inflows crisis and hike in crude prices, means that the rupee might weaken further and perhaps recover only in the next financial year.
FCCBs may hurt pharma
Pharma companies having most of their exports in dollar denomination stand to gain from the rupee depreciation. However, companies that have raised funds through foreign currency convertible bonds (FCCB) or taken any dollar-denominated debt may take a hit. Nitin Parikh, chief financial officer, Zydus Cadila Healthcare , said, “The impact of a weak rupee depends on a pharma company’s position in terms of foreign exchange currency loans and forward booking among other factors. The slip in rupee will help large export orientation earnings. As far as the impact on domestic business goes, it will affect companies which import raw materials.”
Janmejay Vyas, chairman and MD, Dishman Pharmaceuticals & Chemicals, said, “The depreciation of rupee will have a two-sided impact on pharma companies like us, which have acquired foreign companies and are dealing with foreign currency. On the one hand, mark-to-market losses will increase , leading to pressure on margins, on the other hand, exports will be beneficial.”
Leather cos not smiling
An increase in dollar to rupee is good for leather exporters in the short-term , but over the long-term it is not impressive, said Rafeeque Ahmed, chairman , Council for Leather Exports . “We will lose margin on raw materials imports. Mostly, the industry hedges exchange rates on exports but they do not do that on imports, which could affect us,” he said.
Not much for apparel cos
Garment exporters see limited gains from the depreciation of the rupee as many have hedged their exposure at lower levels. “Most big exporters have taken forward covers at around Rs 48 levels and so there would not be any significant gains,” says Premal Udani, chairman, Apparel Exports Promotion Council (AEPC). “Poor demand , especially in Europe, has also added to their woes.”
However, exporters concede that the weak rupee has made their products a lot more cost competitive vis-a-vis rivals such Bangladesh and China. The sharp fall in the rupee would also help exporters with unhedged orders to make “good enough” profits.
Diamonds & gems makers look to capitalize
For the diamonds and gems industry , the falling rupee coincides with the peaking demand during the Christmas-New Year season. Diamantaires in Surat, the world’s biggest diamond cutting and polishing centre, are hoping to cash in on the weakening rupee. Diamond companies import rough diamonds, paying cash and the rupee depreciation helps the industry pay out lower on imports than what it earns through export. “The dipping rupee helps the industry in all the merchandize and non-merchandize jewellery export as it hedges its risk against raw material well in advance,” said Rajiv Jain, chairman of Gems and Jewellery Export Promotion Council
Source:http://timesofindia.indiatimes.com/business/india-business/IT-gems-shine-but-garment-makers-jittery/articleshow/10824374.cms
