Nomura expects INR to fall to `82 in the third quarter of this calendar year. In general, net exporters will gain as they will receive more rupees for their dollars while net importers will need to pay more to buy dollars for imports. Those with large foreign loans will also see rupee interest costs rise. ET looks at the sectors impacted the most.
1] Information technology
IT companies are the biggest gainers as they bill most clients in US dollars. Americas, including the US, contribute about 50-60% of revenue. Their rupee earnings rise as the Indian currency falls
IMPACT: A 100-bps fall in rupee against dollar translates into a 30-bps operating margin benefit 115-basis point operating margin expansion on average for IT cos Some of the gains are being offset by other cross-currency headwinds
2] PHARMA
A net gainer sector as it’s a big exporter though raw materials are substantial imports. In FY22, India exported $24.62 b worth of products, of which about 30% is to the US. Raw material imports were about $4-5 billion
IMPACT: Exporters to the US stand to gain the most INR fall vs USD to add 0.1-0.15% to EBITDA margins Domestic-focused formulation, API players to face cost escalation
3] GARMENTS
Sector to benefit given the significant exports and most input costs are locally sourced
IMPACT: For every 1% fall in Rupee, profit increases by 0.25-0.5% Rupee fall may also make exports more competitive
4] TEA
India exports nearly 230 million kg of teas, or around 16% of what it produces, to countries like Russia, Iran, the US, the UK, Germany, Japan, Poland, CIS countries
IMPACT: Profits expected to rise by 5-10% in current fiscal Increases competitiveness of Indian tea in the world, spurring more exports
5] OIL & GAS
The most adversely impacted sector as India imports over 85% of oil and half of the gas it consumes.
IMPACT: Purchase costs to rise for crude importers (
, , , RIL, Nayara), as well as gas importers (, GSPC) Margins to take a hit if pass-through not allowed Local producers such as , Oil India, , as well as fuel exporters like RIL and Nayara would see higher rupee realisation.
6] RENEWABLE ENERGY
Indian solar plants depend heavily on imported solar cells and modules
IMPACT: Project costs would rise, tariffs higher in future bids Margin compression for upcoming projects Every Re 1 fall vs Dollar leads to 2 paisa/unit increase in tariff
7] STEEL
India exports 10-15% of its steel
IMPACT: Makes Indian steel more competitive globally Balances the impact of the recent export duty on steel
8] AUTO
About 10-20% of a car’s total raw materials by value are imported but firms also export vehicles
IMPACT: Makes cars, in general, more expensive Exact impact will depend on inputs purchased and level of exports
9] FMCG
Raw material imports account for nearly half of input cost
IMPACT: Price hikes to offset higher input costs Margins may be impacted as full pass-through hasn’t happened
10] CONSUMER ELECTRONICS
40-60% of total input cost on imports; in smartphones, 70-80% of input costs on imports
IMPACT: Re fall has been largely offset by recent drop in component costs Companies not likely to drop prices since they want to improve their margins after 2 yrs
11] AVIATION
About 60% of costs in dollar terms
IMPACT: Raised cost burden when fuel prices are at record highs Will impact profitability Will make overseas tickets more expensive
12] TELECOM SERVICES
A falling rupee makes gear imports more costly
IMPACT: Weaker rupee could push up capex bill by 5% in FY23 Drag on profits, unless telcos increase tariffs
13] CEMENT
Energy and logistics account for around 50-60% of the total cost. As the rupee weakens, both these bills are going to go up, impacting the margins of cement companies
IMPACT: Higher input costs as energy and logistics bills go up Limited ability to pass on higher costs to consumers during lean season
