Windfall awaits telecom firms

Indian telecom companies are likely to get a windfall of Rs 100-150 crore when they announce their first quarter results during this week. The unexpected profits are due to the rupee appreciation, which had a negative impact on IT companies.

According to analysts, the two major companies "� Bharti Airtel and Reliance Communications -- are expected to rake in Rs 100-150 crore additional profits due to foreign exchange gains. For the Aditya Birla group company, Idea Cellular, the additional profit could be around the Rs 40-50 crore levels.

With the telecom companies' capex mainly going into equipment imports, the rupee appreciation would result in foreign exchange gains as the companies pay in dollars. The Indian rupee started appreciating against the dollar from April, rising 7 per cent this year compared with the same period last year.

Says Sumit Modi of Emkay Shares, "The majority of the active components are imported by the operators for which they pay in dollars. Therefore, the operators would benefit from the rising rupee to the extent of capex on active components."

Anshuman Thakur, assistant director of the investment banking firm N M Rothschild & Sons, agrees: "This quarter, the telecom companies will definitely get a windfall due to the rupee appreciation, with majors Bharti Airtel and Reliance Communications slated for big benefits".

At present, the rupee stands at 40.35 to a dollar, and the gains would depend on the date when the contracts were signed and the rollouts made by these companies.

Idea Cellular has posted a consolidated net profit of Rs 308 crore today. The net profit during the previous quarter ended March 31 was Rs 133 crore. Bharti Airtel and Reliance Communications too will announce results this week.