The other side of the rising Rupee

The rupee appreciation which has effected badly on the margins of export-oriented software companies, it has benefited some of the sectors also. As the Indian currency's value against the dollar moved from Rs. 44 on March 30 this year to Rs. 41 on June 30, there are many companies whose profits swelled from the above appreciation (plese see the chart below).

The companies with major imports have benefited by reducing their import bill in rupee terms. Comapnies with sizeable dollar loans have also benefited as the difference between the estimated outgo and the actual interest paid is shown as net gains from exchange fluctuations. As per the study done by Business Standard, other income, swelled by foreign exchange gains, contributed 21.47 percent of the profit before tax of 331 comapnies (financial services companies are not studied here) in the first quarter of current fiscal - the highest in five quarters. This figure was only 13.11 percent in the quarter ended June last year. If we exclude other income, the growth of PBT of these companies falls below 20 percent, when compared to their reported growth rate of 32.90 percent in PBT.

Larsen & Tubro, for example, has $600 million worth of overseas loans in dollars and yen and reported nearly Rs. 134 crore in foreign exchange gains last quarter. Pharmaceutical company Ranbaxy Laboratories, which has dollar loans of $750 million and reported foreign exchange gains of almost Rs. 200 crores last quarter, has a natural hedge against a raising rupee. Even though it lost Rs. 40 crore in revaluation of receivables, the net gain was still Rs. 160 crores. Ranbaxy earns a large part of its revenues from its US operations. However, the loss on sales front on account of rising rupee is offset by gains on forward exchange contracts. The gain earned by Ranbaxy on forward exchange contracts is almost Rs. 70 crores.