Forex woes: Nifty to lose another Rs 4k cr; oil cos hit

The Nifty companies could lose as much as Rs 3,500 crore to Rs 4,000 crore from their profit before tax (PBT) due to the depreciating rupee. A recent report by Crisil Research shows that an 8 percent fall in value of rupee over the October-December period could turn out to be really expensive for these firms.

The rupee has depreciated almost 18 percent from the July to December period. In the previous quarter (July-September), the Nifty companies had lost almost Rs 4,800 crore due to forex loss which comprised of 8 percent of their PBT of Rs 57,200 crore. But the rupee plunge has continued this quarter as well.

Dharmakirti Joshi, Chief Economist, CRISIL, explains in the report that demand for dollars increased due to repayment pressures on private foreign debt and rising import bill. But as foreign inflows dried up thanks to the eurozone crisis, the resultant mismatch led to the sharp fall of the rupee.

The reported forex losses will be high because the companies have to declare their total foreign debt depending on the closing value of the rupee. According to the annual reports, the total foreign debt is Rs 1.5 lakh crore, around a fourth of its total debt. The hedging policies also have a substantial impact on the forex losses the companies need to show.

At a sectoral level, oil refining and marketing, telecom and steel could be worst effected as they have more than 25 percent of their loans in foreign currencies. Things could be worse for oil companies as their key input, that is oil, is also dollar-denominated, which can magnify the impact of foreign exchange losses. By contrast, sectors such as IT and pharma, with high exposure to export revenues at around 75 percent and 40 percent respectively, and low debt levels, are expected to gain from the rupee’s depreciation.