Not every company is going to suffer from the fall in the Indian rupee. As the chart shows, companies in the information technology and pharmaceutical sectors stand to gain from the local currency’s depreciation.
These are mainly exporters and the actual earnings per share (EPS) impact varies to the extent of their foreign currency hedges and pricing for new contracts. But EPS sensitivity is only one thing. Balance sheet exposure also affects firms. Dr. Reddy’s Laboratories Ltd and Cipla Ltd are expected to benefit the most, given their high net operational forex exposure and hedged liabilities, says a report from Standard Chartered Securities. According to the brokerage, the biggest beneficiaries from the currency fall, apart from these two firms, are Reliance Industries Ltd, National Aluminium Co. Ltd (Nalco), Oracle Financial Services Software Ltd (OFSS), Satyam Computer Services Ltd and Bajaj Auto Ltd. On the other hand, fast-moving consumer goods (FMCG) firms and some auto companies will suffer the most because of their reliance on imports. The brokerage reckons that Hindustan Unilever Ltd could see almost 10% of its EPS shaved off “assuming it passes only 60% of the increased costs and offsetting for exports”.
Graphic by Yogesh Kumar/Mint
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