The economic downturn has affected the industry in a strange manner — while many are sweating it out, a few others are making fortune.
Country’s top companies, including Cairn India, ITC, Infosys, Reliance Industries, TCS, Sun Pharmaceutical, Wipro, Dr Reddy’s, and Cipla are going to be benefited the most in the current scenario. All these companies have heavy foreign currency earning and more the rupee falls, the more these companies will gain.
TCS’s net foreign earning for FY 12-13 stood at Rs30,320 crore, with maximum revenue in US dollar. As rupee has depreciated over 25 per cent since April, when the company converts its revenue into rupees, the depreciating currency would improve its profit margins.
Similarly, for Cairn India, all billings are in dollar and has a net foreign revenue of Rs9,261 crore, out of which nearly 95 per cent comes from exports; so with currency weakening, Cairn would get more for their Dollar earnings.
Reliance Industries as well will gain from this rupee weakness as large portion of its rupee earning is pegged to the dollar and hence with rupee falling, company’s margins and profits will register a healthy growth.
With rupee touching 68 per dollar, market experts calculate that the IT giants, TCS, Wipro and Infosys will approximately gain an additional Rs 6,041 crore, Rs 2,900 crore and Rs 3,846.7 crore respectively, on net dollar earnings for FY14. Beneficiaries would also include pharmaceuticals, hotels, textiles and export oriented companies as they all are net foreign exchange earners.
Another sector which is enjoying an early festive season is the hotel industry. With such a steep fall in the currency, India may have become one of the least favorite countries to invest in but has for sure become an ideal vacation spot for foreign travelers. And with the festive season approaching fast, industry experts expect the volumes to rise sharply as India has now become a cheap country to travel to.
Ashok Agarwal from Escorts Securities said, "Companies with at least 40% exports, a recognised markets and a healthy order book will benefit from the current currency fall. Gems & jewellery, Textile, Pharmaceutical and IT companies will be on the focus of investors in the coming days."
Globe Capital's Ravi Rastogi added, "Exporters were the biggest gainers as the currency continues to crumble. But not all exports will gain. Those importing raw materials and exporting finished good would not gain much. But service exporters like Infosys and TCS would cash in on the currency fall as they have no imports, just export of services."
"IT companies along with those who have higher revenue share from exports will benefit the most from rupee fall. Investors should keep a close eye on companies like NMDC, Cairn India, HCl Technologies and Wipro as they will be the best performing in this situation," added Rakesh Bansal from RK Global Securities.