Rouble Rout To Hit Pharma, Agri Companies
The devaluation of rouble is set to have an adverse impact on some of the major Indian corporates in the pharma and agri sectors like tea and coffee, having an export exposure to Russia.
In terms of imports, domestic aluminium and steel producers and newsprint manufacturers will be uncompetitive as they will be severely affected owing to lower landed cost.
The pharma industry is the major exporter to Russia constituting around 14 per cent of the total exports. Companies such as Ranbaxy Laboratories (RBL), Sun Pharma, Dr Reddy's Laboratories (DRL), Hoechst Marion Roussel (HMR) have major export exposure to that market.
When contacted, sources in RBL said, "The rouble devaluation is likely to bring about a slowdown in demand pattern till the market adjusts to new pricing levels."
"DRL will be affected badly since the company has an export exposure of around Rs 60 crore which is around 18 per cent of the company's turnover," said Ajay Parmar, head of research, KJMC Capital Market Services. In the last one year, DRL's disclosure to Russian markets has increased by 100 per cent, he indicated.
A Sun Pharma spokesperson said the company in the current year has reduced its exposure in the Russian market since they have a marketing team stationed there to oversee. Sun Pharma's export range includes few formulations which are not manufactured domestically hence it may be a compulsion for them to import these drugs, she indicated.
However, Asit Kothari, head of research at Smiffs Securities said, "The pharma exporters who have their exports in dollar-denominated terms will be least affected." He cited a major problem on the receivable front. Executives from Ranbaxy said, "Receivable cycle of the company may become longer by about 30 days. This may stabilise in the next four-six months."
Another major commodity player to be hit will be Nestle which exports coffee. Rajesh Kothari, senior analyst with KJMC said Nestle has an exposure to the tune of Rs 250-270 crore comprising 80 per cent of it's total exports. However, he pointed out that the company in the current year is cutting down it's exposure to the Russian market and looking for some other new markets like the US and some European countries. The other players to be hit due to reduced exports will be some tea exporting companies like Tata Tea and Goodricke.
On the imports front, the aluminium producers Hindalco and Nalco may be forced to cut down their prices due to cheap imports. The non-ferrous metal imports contribute around 27 per cent of the total imports from Russia. The other major industries affected due to cheap imports will be iron and steel and newsprint, constituting around 13 per cent and 12 per cent, respectively, of the total imports from Russia. The steel and newsprint industry already suffer owing to poor demand and sluggish prices in the domestic market.