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Knitwear exporters in Tirupur say they did not expect the rupee to fall to 55-56 levels against the dollar.
While the fall in the currency's value should have brought cheer to the exporters, they are puzzled by the steep decline of over 10 per cent against the dollar in the last two months.
A cross section said they had hedged the receivables at Rs 48 to a dollar in January, as this seemed a convincing rate then.
The Tirupur Exporters' Association President, Mr A. Sakthivel, said that a drop of 3-4 per cent was normal, but when the rupee moved beyond that range, the buyers started asking for a reduction in the price, as at present.
According to him, exporters by and large booked a third of the receivables at the rate prevailing on the order-booking date. “It is at no risk; we go for forward booking on 33 per cent of the receivables, which amounts to limiting our risk exposure to that extent and on the remaining 33-34 per cent of the receivables, we leave it open and take a chance. We try and even out our risk exposure,” he said.
The Indian rupee ended last week on a stronger note at 55.37 levels. Market sources expected the intra-day range for the rupee at 55.00-55.50 against the dollar.
While a majority of garment exporters spoke only of forward cover, the Managing Director of Warsaw International, Mr Raja M. Shanmugham, said that Packing Credit in Foreign Currency (PCFC) served as a natural hedge against risk.
“I have been advocating to fellow exporters here to avail PCFC instead of Packing Credit in Indian Rupee, for PCFC is available at 4-5 per cent whereas, the latter is given at 11-12 per cent interest. I have been availing PCFC since December last, and have been able to reduce my cost of funds drastically, from a level of Rs 15 lakh a month to Rs 5-6 lakh. Savings potential is huge,” he added.
According to Mr Shanmugham, PCFC would be the ideal option for the exporter at this juncture.
To a query on order flow, he said: “Orders are coming our way, but because of the tight fund position, we are in a fix.”
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