Weak rupee will have little impact on global ratings of Indian cos: Fitch

The depreciation of the rupee, seen so far, would have limited impact on the international ratings of Indian companies, said rating agency, Fitch Ratings.

Of the 19 companies that Fitch took up for international ratings, nine would have a negligible direct impact of forex fluctuations on either their operating margins or leverage ratios.

For the remaining, the impact would be marginally negative. However, these are unlikely to cause a rating impact immediately, said Fitch in a report released on Wednesday.

“However, a further 10-15 per cent depreciation of the rupee against the dollar and being sustained at that level, could potentially have a negative impact on some of the ratings,” the report said.

According to Fitch, companies that would have no impact on operating margins and repayments include Tata Steel Holdings UK, Vedanta Resources, Rural Electrification Corporation, Jaguar Land Rover, Essar Projects and GAIL. The companies that would have marginally to moderately negative impact include Ballarpur Paper, Ballarpur Industries, IOC, Reliance Industries, Tata Chemicals and Tata Steel.

NTPC, NHPC and Bharti Airtel have no impact on operating margin, but negative impact on repayments.

Tata Motors and Aegis would have a neutral to marginally positive impact on operating margin and a marginally negative impact on repayments.

Operating margins

Of the 19 companies, 10 import negligible amounts of raw materials for production. As such their costs are neutral to forex fluctuation.

These companies also have negligible exports and are unlikely to face an operating margin squeeze.

Of the remaining, seven (mostly in oil and energy, paper and commodities) import raw materials to meet 40-100 per cent of their requirements, and thus are expected to experience a 5-10 per cent reduction in their operating profit. There are two companies whose exports outweigh imports and, therefore, are expected to benefit from rupee depreciation.

Most of the companies in this study are heavy importers and also tend to export a significant portion of their output.

Thus, a degree of natural hedge is provided by the export activity of these heavy raw material importers.

Foreign currency debt

Among the 19 companies, 12 have accessed foreign currency debt, which is mostly in dollars. The debt ranges from 10 per cent to 90 per cent of total debt.

Of these 12, three companies have sovereign support. Of the remaining nine, seven companies have foreign currency loans which are over 30 per cent of their total debt.

These seven companies may face a marginal deterioration in the coverage ratio to the extent these foreign currency loans are un-hedged, the report said.

> priyan@thehindu.co.in

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