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Largest ratings agency Crisil today warned the 4 per cent appreciation in the rupee will impact the June quarter sales of exporters by up to 3 percentage points and profits by up to 1.50 per cent.
"The sharp appreciation in the rupee against the dollar in recent months is likely to have dented the first-quarter (current fiscal) profitability of exporters that source locally and have limited pricing power," it said.
The rupee is steadily appreciating against the dollar for the past few months and moved from 65.03 on April 3 to 64.58 on June 30 against the dollar.
Leather, textiles, meat, seafood and basmati rice are the most vulnerable with an impact of up to 3 percentage points of net sales, while the same for pharmaceuticals and agrochemicals will be much lower at 1.50 per cent.
Gems and jewellery, and the information technology sectors will have minimal impact of the rupee strengthening as they have import outgoes and extensive hedging, respectively.
On the bottomline front, the agency said the net profits will be impacted between 0.50-1.50 per cent only because of the foreign currency loans taken by most exporters, it said, adding 50-90 per cent of borrowings are foreign currency denominated.
The agency, however, said the credit profiles of exporters will only see a marginal impact as the leading exporters in IT, pharmaceuticals and agrochemicals sectors have a high operating margin of 15-25 per cent which can help them absorb forex losses.
However, it warned that if the appreciation continues, there may be some reverses.
"While a majority of exporters have weathered the forex storm so far, any significant rise in the rupee from here would impact credit profiles of exporters in the vulnerable sectors," its senior director Anuj Sethi said.
He added that the rupee's relative strength versus competing currencies, and business challenges constrain the competitiveness of exporters in some sectors.