MUMBAI: The sharp fall in the Indian currency during the quarter to September has come to hurt some of India's top companies that have an overseas business presence, with the loss on account of an unfavourable currency movement amounting to over Rs 1,130 crore or close to 10% of the cumulative net profit for nine companies that are part of Nifty50.
The hit for these companies because of the rupee's slide against the dominant currency such as the US dollar, whether realised or on account of mark-to-market, comes at a time margins are getting squeezed owing to higher borrowing and raw material costs.
In fact, the aggregate net profit of 32 of the Nifty50 companies which reported their latest results fell by 3% - the first such drop in the past five quarters. Net profit fell despite a robust 24% jump in net sales reflecting the inability of India Inc to pass on the rising cost of operating and non-operating business activities.
This resulted in a 260-basis point fall in operating margin at 23.3% for the sample of 32 Nifty50 companies from a year ago. The rupee has been one of the worst performing currencies in Asia, having fallen 9.8% against the US dollar year-todate.
The sharp slide caught many firms, including those that had hedged foreign exchange exposure, by surprise. In the quarter to September, the rupee fell 10% against the dollar. While this raised the cost of production for some companies, others were compelled to take a hit on previously hedged contracts.
Of the 32 Nifty50 companies that have announced results so far, nine were impacted by the rupee's decline, led by firms in the metals, mining and technology sectors. Steel producers such as SAIL, which import most of their coal requirement, took a hit since a weak rupee implies costlier imports.
SAIL's net profit was 77% lower because of a forex loss of Rs 508 crore compared to a gain of Rs 152.52 crore a year ago. Sterlite Industries reported a forex loss of Rs 284.91 crore compared to a gain of Rs 65.30 crore last year. This loss weighed on its results and net profit remained stagnant at Rs 997.78 crore. Iron ore minerSesa Goa reported a profit of just Rs 1.28 crore in the quarter against Rs 384.94 crore last yea
The hit for these companies because of the rupee's slide against the dominant currency such as the US dollar, whether realised or on account of mark-to-market, comes at a time margins are getting squeezed owing to higher borrowing and raw material costs.
In fact, the aggregate net profit of 32 of the Nifty50 companies which reported their latest results fell by 3% - the first such drop in the past five quarters. Net profit fell despite a robust 24% jump in net sales reflecting the inability of India Inc to pass on the rising cost of operating and non-operating business activities.
This resulted in a 260-basis point fall in operating margin at 23.3% for the sample of 32 Nifty50 companies from a year ago. The rupee has been one of the worst performing currencies in Asia, having fallen 9.8% against the US dollar year-todate.
The sharp slide caught many firms, including those that had hedged foreign exchange exposure, by surprise. In the quarter to September, the rupee fell 10% against the dollar. While this raised the cost of production for some companies, others were compelled to take a hit on previously hedged contracts.
Of the 32 Nifty50 companies that have announced results so far, nine were impacted by the rupee's decline, led by firms in the metals, mining and technology sectors. Steel producers such as SAIL, which import most of their coal requirement, took a hit since a weak rupee implies costlier imports.
SAIL's net profit was 77% lower because of a forex loss of Rs 508 crore compared to a gain of Rs 152.52 crore a year ago. Sterlite Industries reported a forex loss of Rs 284.91 crore compared to a gain of Rs 65.30 crore last year. This loss weighed on its results and net profit remained stagnant at Rs 997.78 crore. Iron ore minerSesa Goa reported a profit of just Rs 1.28 crore in the quarter against Rs 384.94 crore last yea
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