S&P Global Ratings has said nearly 50 per cent of the companies it rates have got a bottom line boost on account of rupee depreciation. Companies such as Bharti Telecom, Wipro, Infosys, and HCL Technologies are seeing better profitability.
“Much of our rated India corporate portfolio has a sizable US-dollar linked revenue and, therefore, is not exposed to rupee depreciation. This encompasses entities in the IT, metals, and chemicals sectors. About half of the firms we rate have got an EBITDA boost from currency weakening,” the agency said in a report released on Thursday. EBITDA or earnings before interest, taxes, depreciation and amortization is a measure of a company’s operating profitability.
Domestically-driven sectors, such as telecom, are also well placed to withstand rupee depreciation due to their hedging policies. “Bharti Airtel has swapped half the principal of outstanding dollar debt -- and all its interest expense -- on this debt over at least the next 12 months,” the agency said.
OT firms such as Wipro, Infosys, and HCL Technologies that export services denominated in dollars but whose costs are largely in rupee, are clear winners. “Local metals firms such as Vedanta Resources has also got an earnings gain. The company has guided that annual EBITDA will rise by about $50 million every time the Indian rupee (INR) drops Re 1 against the dollar,” S&P said.
It said infrastructure entities are most exposed to currency risk among Indian corporates and renewable players, in particular, have high capex spending and a heavy reliance on dollar debt. Still, a supportive onshore funding environment, has also helped Indian companies manage the weaker offshore funding markets. Key onshore benchmark rates have risen about 200 basis points in the year-to-date, less than that seen in many offshore markets.
“This has made local markets an attractive alternative source of capital. This will give rated issuers a funding option to repay offshore bonds becoming due through 2024,” it added.
The Asia-Pacific is in the middle of a set of rapid interest rate hikes coming out of the US. “We expect the macro pressures to build on regional foreign-exchange rates, as apparent in widening current account deficits emerging in many countries. Firms that have difficulty passing on their higher input costs, including currency impact, to their customers, are more vulnerable,” said S&P Global Ratings credit analyst Simon Wong.