The 11 percent rupee depreciation during the September 2011 quarter took Corporate India by surprise and many companies reported steep losses in their forex transactions. According to a Firstpost analysis, losses totalling little over Rs 5,200 crore were incurred by 82 companies during the quarter so far. We compiled a list of companies that reported forex losses exceeding Rs 100 crore. (see table below). These 11 companies accounted for nearly 70 percent of India Inc's forex losses so far.
PFC, whose results were released a few minutes ago,topped the list with a Rs 529 crore forex loss.JSW Steelcame second as it racked up a total forex loss of Rs 512.98 crore for the September-ended quarter.
A UBS Investment Research report said the hefty losses arose out of LCs (letter of credits)/ acceptances for coking coal payments. It further said the loss was notional and likely to reverse in the coming quarters if the rupee appreciates. That, coupled with higher raw material shortages, led to a steep 71 percent fall in JSW Steel's net profit.
However, UBS maintained its 'buy' rating on the company with a price target of Rs 700 per share vis-a-vis its current price of Rs 696 per share.
• SAIL, India largest steel producer, also reported a steep 55 percent drop in quarterly net profit because of an unexpected massive forex loss and surging raw material costs. According to a company release, a stronger dollar resulted in a notional loss of around Rs 509 crore ($ 118.7 million) for the quarter.
Edelweiss maintains its 'hold' rating on the company with a target price of Rs 107 per share, citing weak margins due to falling international steel prices.
•Sterlite Industries'forex losses totalled Rs 466 crore due to restatement of its foreign currency convertible bonds (FCCBs) and forward cover of $500 million related to cash flows from its international zinc assets. Post the results, ICICI Direct changed its rating on the company to 'hold' from 'buy' and has a price target of Rs 135 per share.
•After moving into the black in the June-ended quarter, Essar Oilagain tumbled into losses in the September-ended quarter due to huge foreign exchange loss of Rs 407 crore. As a result, it reported a loss of Rs 166 crore.
Despite that, some brokerages such as LKP Securities retained its 'buy' rating on the stock with a price target of Rs 99 per share vis-a-vis the current market price of Rs 85.9 per share. The rating is due to the expansion of Essar Oil's Vadinar refinery and commercial production from the Raniganj coal-based methane (CBM) block. Over the past one year, the stock has fallen almost 45 percent.
•Another company worth looking at is Bharti Airtel, India's largest telecom service company. As per their statement, the appreciation of the US dollar vis-a-vis the the Indian rupee and several African currencies led to a Rs 239 crore forex loss for the September quarter. The company had gained Rs 249 crore in the same period a year ago. Emkay retained its 'accumulate' rating on the stock with a price target of Rs 46. The stock's current price is 398.55.
Other companies whose profits were impacted include Sesa Goa, which reported a steep 99 percent fall in its net profit for the quarter, JSL Stainless and Usha Martin, which posted losses.
Of course, IT companies, the usual suspects that come under the investor spotlight when the value of the rupee changes, also posted losses on forex movements. TCS lost Rs 91 crore due to adverse forex movements, while HCL Tech lost Rs 17.9 crore. Infosys also lost Rs 33 crore on adverse exchange movements, but that was lower than what the market expected.
Updated Date: Dec 20, 2014 15:33:54 IST