The steep depreciation of nearly 12.5 per cent in the value of the rupee against the US dollar over the last two months is set to negatively impact the profitability of sectors like auto, cement, capital goods and utilities, particularly power utilities, in this fiscal.
However, the weakening rupee is expected to benefit information technology (IT) companies, due to higher realisations from export earnings, and metals and mining companies, whose realisations are based on global prices.
The domestic currency closed the week at Rs 49.34 per dollar, after touching a low of Rs 50 per dollar. At Rs 50 per dollar the rupee has weakened by about 14 per cent from the July last week low of Rs 43.8550, while it had shed only 12.51 per cent to its weekend's closing rate.
Ajay Parmar, head-research (institutional equities) of Emkay Global Financial Services, found in a study that 76 out of 160 companies under their coverage are getting impacted by the depreciation of the rupee - both gainers and losers.
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"Though the average impact on earnings calculated on 76 firms is only + 1.1 per cent of 2011-12 earnings estimates, the overall range is significantly wide with outliers at + 24.7 per cent and -15.2 per cent," said Parmar.
Among the companies that would be negatively impacted are auto firms, which are net importers of high-end components, cement and power companies, which have to pay more for imported fuel and capital goods firms, which are net importers.
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Companies in the power sector have also to grapple with their high foreign debt levels.
The IT pack's HCL Technologies and Infinite Computer Solutions are expected to be the major gainers on the profitability front at 16 per cent and 10 per cent, respectively. IT majors like TCS, Wipro and Infosys are expected to clock gains of 6.9-7.2 per cent in 2011-12.
However, Maruti Suzuki (15.2 per cent), India Cements (8.4 per cent) and Apollo Tyres (6.5 per cent) were identified as the major losers from among the firms tracked by Emkay.
"The impact of the rupee on the balance sheet is more pronounced than on earnings. The impact on balance sheet is largely led by foreign currency loans. However, some companies are also getting impacted by the unhedged exposure from receivables and payables, branch offices and associated operations in foreign countries," said Parmar. However, the impact of foreign subsidiaries was not considered for the study.
The impact of the depreciation of the rupee on the balance sheet is prevalent across all sectors, except IT and cash-rich companies.
Jubilant Life Sciences, Bharti Airtel and Blue Star are affected companies, in the range of 9.4 per cent to 5.4 per cent.
The depreciation of the rupee hastened as the US dollar strengthened against major currencies like euro, British pound and Japanese yen, over the last few weeks. It was triggered by fears of a possible Greek default and its possible impact on euro as a currency and euro zone nations.
The dollar, which itself was sinking on fears of a possible double dip recession in the US, gained prominence as a safe haven asset compared to the alternate currency, euro, losing steam.
Though foreign exchange experts expect the rupee to settle at around 47 per dollar in three to four months, they are not ready to take a view on the weakness of the rupee in the short term.
Courtesy: Mail Today