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The rupee sank to a low of Rs 54.455 on Wednesday, which was one of the reasons why the Indian stock market tumbled. However, there are companies that will gain from the rupee depreciation.
Analysts at Angel Broking calculate that every 1 percentage point depreciation of the rupee against the US dollar aids the EBIDTA margins of IT companies by 30-40 basis points.
IT companies could share these gains with their clients to get more business. However, the analysts have said that they talked to many IT companies and have found out that the companies may not share the rupee depreciation gains with their clients. “Most managements indicated that due to a highly volatile currency environment the companies would rather invest the gains in sales and marketing.”
“We believe that benefits from rupee depreciation will be retained by IT companies and will be re-invested into business,” says the analyst’s report.
Metal companies will similarly be benefited by the rupee fall because they price their products in alignment with the price of imported metals. While the rupee depreciation gives them scope to raise product prices, they may not do so, feel analysts. This is because domestic pricing depends a lot on domestic demand-supply dynamics, especially for steel.
Even so, analysis of the rupee at 52 and 54 to a dollar on select metal companies’ turnover for 2013-14 shows significant gains in earnings.
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