Rated Indian companies mostly resilient to Rupee depreciation: S&P

August 16, 2018

SINGAPORE - S&P Global Ratings believes most of its rated Indian corporates can withstand a recent sharp depreciation in the Indian rupee (INR)because the share of U.S.-dollar linked earnings largely balances the share of U.S.-dollar-denominated debt.

“There are some exceptions: a few companies are vulnerable to a weaker rupee, while exporters could benefit,” S&P says.
 
The rupee fell beyond INR70 to the U.S. dollar, an all-time low, before retracing briefly. The currency remains volatile alongside other emerging market assets. “A weaker and more volatile rupee would likely result in increased hedging costs for companies,” S&P says.
 
“A few rated Indian corporates will be negatively affected, but not severe enough to impact the credit rating.
 
“These companies tend to have a greater share of foreign currency debt compared to their share of foreign currency earnings. Export-focussed sectors could see a credit benefit, including IT services and pharmaceuticals.”
 
S&P says a deep and sustained decline in the rupee could have broader economic effects on Indian corporates, including through knock-on effects of inflation and higher imported commodity costs affecting margins.
“However, given relatively sound economic fundamentals, that is not our base case.” www.sstandardandpoors.com (ATI)