Mobile firms receive windfall on rupee appreciation
Indian telecom companies are likely to get a windfall of Rs 100-150 crore during their first quarter of the current fiscal. The unexpected profits are due to the rupee appreciation, which had a negative impact on IT companies.
According to analysts, the two major companies – Bharti Airtel and Reliance Communications -- are expected to rake in Rs 100-150 crore additional profits due to foreign exchange gains. For the Aditya Birla group company, Idea Cellular, the additional profit could be around the Rs 40-50 crore levels.
The telecom companies’ capital expenditure (capex) mainly goes into equipment imports for their expansion plans. The rupee appreciation would result in foreign exchange gains as the companies are paying in dollars. The Indian rupee started appreciating against the dollar from April, rising 7 per cent this year compared with the same period last year.
Says Sumit Modi of Emkay Shares, “The majority of the active components are imported by the operators for which they pay in dollars. Therefore, the operators would benefit from the rising rupee to the extent of capex on active components.”
Idea Cellular has posted a consolidated net profit of Rs 308 crore during the first quarter of this fiscal. The net profit during the previous quarter ended March 31 was Rs 133 crore. In the case of Bharti Airtel, the consolidated total revenues for the quarter ended June 30, 2007 of Rs. 5,905 crore grew by 53% and EBITDA of Rs. 2,447 crore grew by 63% on a year on year basis. Reliance Communications is yet to announce results.
According to analysts, the two major companies – Bharti Airtel and Reliance Communications -- are expected to rake in Rs 100-150 crore additional profits due to foreign exchange gains. For the Aditya Birla group company, Idea Cellular, the additional profit could be around the Rs 40-50 crore levels.
The telecom companies’ capital expenditure (capex) mainly goes into equipment imports for their expansion plans. The rupee appreciation would result in foreign exchange gains as the companies are paying in dollars. The Indian rupee started appreciating against the dollar from April, rising 7 per cent this year compared with the same period last year.
Says Sumit Modi of Emkay Shares, “The majority of the active components are imported by the operators for which they pay in dollars. Therefore, the operators would benefit from the rising rupee to the extent of capex on active components.”
Idea Cellular has posted a consolidated net profit of Rs 308 crore during the first quarter of this fiscal. The net profit during the previous quarter ended March 31 was Rs 133 crore. In the case of Bharti Airtel, the consolidated total revenues for the quarter ended June 30, 2007 of Rs. 5,905 crore grew by 53% and EBITDA of Rs. 2,447 crore grew by 63% on a year on year basis. Reliance Communications is yet to announce results.
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