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Kumar Shankar Roy

The benefits and the down side of rupee appreciation showed up in the June quarter results of the top 30 companies that constitute the Sensex. A quick analysis shows that the net profit of these 30 companies put together grew by 35 per cent, while their revenues increased by 20 per cent, when compared with the corresponding quarter last year.

Manufacturing biggies such as Tata Motors, Tata Steel, L&T and pharma company Ranbaxy Labs reaped the benefits of an appreciating rupee.

While for L&T (forex gain of Rs 133 crore) the effect was to double its earnings, in the case of Tata Motors, the forex gain of Rs 205 crore came in handy to shore up the bottomline.

The appreciation in the rupee helped companies with significant dollar-denominated loans as servicing costs fell proportionately.

On the other side, there were those, predominantly from the IT sector, whose earnings growth was dented just that bit by the rising rupee. A good example of this is Infosys Technologies.

Tata Consultancy Services managed to emerge relatively unscathed by hedging its forex transactions efficiently.

There were four companies that doubled their earnings — Ambuja Cements, L&T and telecom biggies Bharti Airtel and Reliance Communications. Each of these reported over a 100 per cent rise in their earnings.

While it was a stellar growth in subscriber additions that helped Bharti Airtel and Reliance Communications, it was a one-time profit from land sale that helped Ambuja to post a 168 per cent growth in its earnings.

With investments in infrastructure increasing, L&T’s engineering and construction (E&C) segment buoyed its earnings and emerged as its main money-spinner.

Three of the four automobile companies in the Sensex — Bajaj Auto, Mahindra and Mahindra (M&M) and Tata Motors — had a forgettable quarter. Bajaj Auto’s net profit fell for the second quarter in a row dipping by 15 per cent compared with the April-June 2006 period. M&M’s earnings also fell 6 per cent on higher input costs and lower realisations from export sales following the strong rupee.

Tata Motors also had a difficult quarter with earnings growth driven mainly by forex gains. Maruti Udyog was the only company to report good earnings growth primarily driven by rising sales of the Swift and good market response to the new Suzuki SX4 which was launched in May.

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