The Hindu Business Line : IT cos look to gains from rupee weakness

Bangalore, Sept. 17 Indian IT companies are optimistic they can take advantage of the present weakening of the rupee against the dollar even though it had led to foreign-exchange related losses in the previous quarter.

Now that the rupee has depreciated further compared to the first quarter, some companies said it would actually act in their favour, and they would partially benefit from it.

Mr Rajendra Shreemal, Head of Treasury, Wipro Ltd, said the company might not be able to take complete advantage of the rupee depreciation as it has taken hedges for parts of the annual revenue. Wipro can benefit for that part of the revenue which is not covered, he added.

As of June 2008, Wipro has hedged $2.6 billion within a range of Rs 39.5 to Rs 45 a dollar. For the first quarter, Wipro reported revenue of $1.06 billion for its IT services business.

Cheer to industry

Analysts also believe the fall in rupee value would bring cheer to Indian IT industry. “Its kind of good news,” said Mr Harit Shah, an analyst with Angel Broking. It would offset some of the effects of the slowdown. The economic environment is still quite challenging, he added.

IT and R&D services provider MindTree Ltd has hedged 50 per cent of its annual revenue and said it would get the full benefit of rupee depreciation on the other part.

Mr Rostow Ravanan, Chief Financial Officer, MindTree, said, “The impact will not be as forceful as in the first quarter. It will not result in negative profit-and-loss sheet for the quarter.”

He said the company would maintain its revenue and profit guidance for the year. In the first quarter, the sudden depreciation of the rupee resulted in a provision of $12 million on MindTree’s outstanding derivative instruments. Consequently, the company reported a net loss of $3.2 million.

‘An opportunity’

Subex Ltd said foreign-exchange related losses for the quarter would be about Rs 2-3 crore, while it was about Rs 5 crore in the previous quarter. Mr Subash Menon, CEO of Subex, said the impact on the company would be minimal. He said Subex had not hedged strongly.

It has hedged about $8-10 million at Rs 41 to Rs 42 a dollar, he said.

For the first quarter, the company reported a net loss of Rs 65.63 crore on revenue of Rs 135.93 crore.

Mr Menon said the weakening rupee is an opportunity for the IT industry.

“Now that the rupee has depreciated to this level, one can hedge at this rate and take advantage,” he added. Infosys Technologies Ltd declined to comment on the issue because they have entered the silence period.

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