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Rating agency Crisil’s research division highlighted the pangs of the falling rupee, especially for blue-chip companies and oil marketing companies in a report on Wednesday.
It suggested that many large-cap companies remain vulnerable since a significant part of the debt raised by companies in the Nifty-fifty universe, outside of banking and financial services companies, is vulnerable.
Mukesh Agarwal, President, CRISIL Research said that a significant portion of the debt of blue-chip companies is not in rupees.
“For companies in the CNX Nifty (excluding banking and financial services), around 40 per cent of debt is denominated in foreign currency. In total, corporate India had forex debt outstanding of over $200 billion as of March 2013, of which close to 45 per cent is short-term debt. Moreover, only half their forex exposure is hedged. Persistent weakness in the rupee and heightened volatility has reduced the benefits of borrowing overseas,” he said in a statement.
Sectors hit by the rupee’s fall would include automobiles, auto components, airlines, consumer durables, oil marketing companies (OMCs), and fertilizers, according to Crisil. In the case of OMCs, the under-recoveries could touch Rs.1.05 lakh crore for the financial year ending in march 2014, according to estimates.
Prasad Koparkar, Senior Director, CRISIL Research suggested that export-oriented companies may not gain a great deal.
“Demand growth and competitiveness, rather than currency movements, are more critical to determining growth and profitability.
Our view is corroborated by the modest performance of exportoriented industries in 2012-13, a year in which the rupee depreciated by 14 per cent against the dollar on a year-on-year basis. Around 180 listed export-oriented companies reported a marginal 1-2 per cent growth in revenues in dollar terms and 60-bps rise in EBITDA margins in 2012-13, despite a weak currency,” he said in the release.
Our view is corroborated by the modest performance of exportoriented industries in 2012-13, a year in which the rupee depreciated by 14 per cent against the dollar on a year-on-year basis. Around 180 listed export-oriented companies reported a marginal 1-2 per cent growth in revenues in dollar terms and 60-bps rise in EBITDA margins in 2012-13, despite a weak currency,” he said in the release.
