NEW DELHI: Usually, a 10% fall in the rupeein three months is a reason to cheer for exporters. After all, their earnings will go up. But HKL Magu, chairman and managing director of Jyoti Apparels isn't celebrating.
The rupee may have hit 60 to a dollar but he will get around Rs 56 to a greenback. "Most large exporters had gone for forwards at 54-55 . May be 55.80-56 to a dollar in June-July but we didn't expect it to reach 60," says Magu, whose company specializes in men's and women's clothing. Magu and several other large exporters may not have gained much given that they cover 60-70 % of the currency risk through forward contracts, but on the remaining they will book a handsome profit. "At the start of the financial year, people expected the rupee to trade in the 54-56 band. They didn't expect the extent of withdrawal from FIIs or the extent of movement of capital to the US (that has been seen)," said Ajay Marwah, head of trading at HDFC Bank.
But importers are in for a tough time. "Exporters have been selling dollars at 55, 56 and 59 but importers have not hedged their risks and so have several large companies with significant foreign debt," says Moses Harding, executive vicepresident and head of global markets group at private sector lender IndusInd Bank.
Companies with large imports such as Gitanjali Group, among the largest gems & jewelry players in the country, however, say that the impact will not be significant. In any case, bankers reckon that around 80-85 % of the bullion import is used for export, after value addition, with the remaining meant for local sales. Similarly, oil companies only hedge a small portion of their currency risk arguing that retail sales are linked to international prices.
But, even the big daddies such as IndianOil were caught off-guard . "No body expected that the rupee which was at 54.29 at the end of March will be at 60 to a dollar in less than three months. You don't expect afall of 10%," said P K Goyal, director ( finance) at the country's largest oil marketing company.
Exporters may be grinning on account of improved realization this quarter but they are already staring at overseas buyers asking for a price cut.
"Everyone thinks that exporters are rich but that's not the reality. We will have to share some of the gains with the buyers," said M Rafeeque Ahmed, chairman of Farida group, one of the largest leather goods suppliers to international retail chains.
The good news is that in sectors such as textiles and leather, neighbours such as Pakistan and Bangladesh, which have done well in the past, currencies have not depreciated significantly . So, Indian exporters seem to be better off.