Rupee depreciation to hit consumer companies: Anand Rathi

Light Liquid Paraffin, Linear Alkyl Benzene, wax & packaging material are major crude oil-linked imported raw materials for consumer companies

Consumer companies are likely to be hit by the deprecating rupee due to their dependence on imported and crude oil linked raw materials, said domestic brokerage Anand Rathi in a report.

Light Liquid Paraffin (LLP), Linear Alkyl Benzene (LAB), wax and packaging material (HDPE) are the major crude oil-linked imported raw materials for consumer companies.

Besides imported raw material like palm and edible oils, packaging material is the biggest imported raw material and makes up about 9% of sales of consumer companies, said the broking house.

“The about 10% rupee depreciation in the past two months is expected to raise raw material costs for all the companies after a one or two quarter lag and may squeeze 2013-14 earnings 3-4%,” said the Anand Rathi report.

According to the broking firm, paint companies and Pidilite will bethe maximum impacted by the falling rupee.

It says companies like Dabur, Marico, Hindustan Unilever, Asian Paints and Pidilite too will be hit but the impact will be mitigated as 10-20% of their sales comes from international business.

Anand Rathi is positive on the prospects of food companies, which it believes will see little impact of weaker rupee on their earnings.