The Rupee Bonanza | Value Research That rupee was in a downcast mood was evident since last year, but there are those that stand to gain from the decline
Special Report

The Rupee Bonanza

That rupee was in a downcast mood was evident since last year, but there are those that stand to gain from the decline

That rupee was in a downcast mood was evident since last year. But the sheer ferocity of the gravitational pull has surprised one and all. It is down as much as 19 per cent since the beginning of 2013. The currency hit a historical low of ₹68.8 on August 28, 2013 and things haven't gotten any better.

The mandarins at the North Block have let loose a flurry of activity to shore up the confidence with the fear lurking around that we ain't seen the bottom. The government has relaxed FDI restrictions in a number of sectors. The RBI too is pitching in. It announced bond sale worth ₹12,000 crore in a bid to suck up liquidity from the market. Operation 'Rupee Salvage' has begun in all its sincerity.

Lose some, win some
Corporates that import raw materials or components have been particularly hit. Cement companies for instance, import a lot of their coal requirements.
Those that have dollar denominated loans too will take a knock. Bharti Airtel for instance has exposure to $8.7 billion loan that it raised to finance its African adventure and will feel the pinch harder now.
But there are those that stand to gain from the rupee's decline. These are companies that are net exporters. Companies like Cairn India that prices its sales in dollars stand to benefit. The most notable groups that stand to gain from the rupee fall include the sectors pharma and technology. On a rough basis for example, a 1 per cent fall in the rupee against the dollar will drive up margins of tech companies by around 30-50 basis points.

No equal joy
In spite of the fall in the rupee, not all pharma or tech companies will gain equally. Companies that hedge a considerable percentage of their expected revenues will lose out even with a lower rupee. Biocon for instance, hedges nearly its entire net foreign receipts for the next one year. That makes it impossible for the company to gain from the rupee's fall in the immediate term.
Then there are other companies that have debt in foreign currency. Jubilant Lifesciences for example has a foreign debt of $600 million payable from 2014 onwards. The company is estimated to be staring at potential loss of ₹60 crore for every rupee decline against the dollar.
When it comes to tech companies, the level of hedging is important. But there are other considerations that come in play for these companies. The primary among them are wage hikes and visa costs. And then there is the matter of discretionary IT spending picking up and how that affects individual companies.
This story lists five companies that are best placed to gain from a falling rupee. All of the companies featured here are investment-worthy even without the rupee slanting in their favour. But because it does, it adds another cherry on their cakes. Enjoy!

Cipla
Divis Laboratories
HCL Technologies
Mindtree
Sun Pharmaceutical Industries



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