The Hindu Business Line : IT, ITeS cos bid to offset impact of rising rupee

New Delhi May 17 Enhanced hedging cover, denominating a higher share of revenues in euros or pound sterling, upward revision of billing rates... well, these are broadly the strategies that IT and BPO majors are adopting in their effort to offset the impact of the rising rupee.

According to Mr Srinivas Vadlamani, CFO of Satyam Computers, every one per cent appreciation in the rupee vis-à-vis the US dollar pares margins (earnings before interest, depreciation and tax as a percentage of sales) by roughly 30 basis points.

Mr Vineet Nayar, President and CEO, HCL Technologies, puts the figure at around 35 basis points. Simply put, the 10 per cent-odd appreciation in the rupee since early March would have reduced margins of top IT companies by 3-3.5 per cent.

So, how are they going about cutting their losses?

Increase offshore work

Satyam Computers, for one, is looking to increase its offshore work, employing more entry-level professionals that would help it reduce average delivery costs. "We are looking to increase the offshore component of our business in contrast to other centres where we offer onshore services," said Mr Vadlamani. Further, Satyam, which had earlier a forex hedge cover of $300-400 million for about six months, has recently revised it to $620 million for the same period.

Wipro, on its part, has started changing its billing from the dollar to euros and pound sterling. "We try to balance the portfolio of our billings on a continuous basis. For instance, some of our clients are global for whom we offer services in the US and other regions. So, for services offered in other regions, we have started billing in local currency," said Mr Rajesh Ramaiah, Corporate Treasurer. Similarly, Integreon, a Mumbai-based outsourcing company, has converted its billing into euro and pound sterling for its European clients.

Revising prices

Companies such as iGATE and WNS are working on strategies to pass on the cost of the appreciating rupee to their customers in the US by revising prices. "We have started talking to customers to revise prices," said Mr Arjun Singh, CFO, BFSI, WNS. iGATE, however, has chosen the wait and watch approach. "We are already covered up to Oct-November. So, unless we see a better rate in the forward market, we will continue to watch," said Mr N. Ramchandran, CFO, iGATE. EXL Services is looking to set up delivery centre in other locations to reduce rupee denominated costs, said Mr Rohit Kapoor, President, EXL Services.

More Stories on : Information Technology | Forex | Outlook | Satyam Computer Services Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Bajaj forms 2 separate cos for auto, financial services

Entry-level BPO salaries steadying

Fighting the inflation blaze

`Fiscal sops alone will not attract industry'

IT, ITeS cos bid to offset impact of rising rupee

Dabur Pharma eyes global buys

Tea output drops sharply in March; exports recover

Bajaj Auto Q4 net down 4% at Rs 308 cr

Tata Steel Q4 net surges 41%

Some relief for investors from two wheeler woes

Fallout of SC ruling: 49 new GM cotton strains cleared

HDFC Bank may enter market for raising Rs 4,200 cr

Barclays goes to non-metro centres; launches three retail branches

A new journey begins for Bajaj brothers