IT firms rake in dollars as rupee takes a beating

Dollar earnings pegged against the rupee have increased by nearly 20 per cent from April 2011.

Written by Ishfaq Naseem | Pune | Published: January 16, 2012 2:28 am

With major portion of their export revenue coming in from the US market,IT companies in Pune are benefiting from the depreciation of the rupee against the dollar. The dollar earnings pegged against the rupee have increased by nearly 20 per cent from April 2011. With market analysts pointing out that dollar will remain in the range of Rs 51-53 in the next few months,the companies expect further rise in their revenues.

Chairman and managing director of Persistent Systems Ltd,Dr Anand Deshpande,said,“A large chunk of our revenue comes in dollars. Any swing affects the company.” He said the company takes ‘forward cover’ as a standard practice to hedge its business. Not only is Persistent benefiting,but on Thursday,the third quarter results of country’s second largest IT exporter,Infosys,showed that its 33 per cent increase in net profit at Rs 2,372 crore was on account of weak rupee.

Industry experts say that given the profit coming from weak rupee,companies as a standard practice take ‘forward cover’ for only a limited part of business. “The companies normally hedge the dollar in the range of Rs 46-47,so this time the companies are benefiting from the currency swing. Over 40 per cent of the funds of the companies remains unhedged,which is where the benefit comes from,” said Deepak Shikarpur,chairman of the IT committee of Mahratta Chamber of Commerce Industries and Agriculture (MCCIA).

He said currency swings play a major role as huge chunk of the export market of IT companies is in the US. Companies have foreign risk management framework in place and hedging decisions are evaluated from time-to-time considering the revenue and expense trends and perception about the movement of foreign exchange rates.

“From the share of nearly $6 billion software exports from the Pune,the US market contributes around 50 per cent,” said Shikarpur.

Chief currency strategist of Geojit Comtrade Ltd,Himal Doshi,said the dollar will remain in the range of Rs 51-53 over the next two months. “The rupee has taken a severe beating in the dollar swing since April 2011. The opening rate of the dollar against the rupee in April 2011 was 44.32. But the rupee started depreciating and the the dollar high in 2011 was Rs 54.3 last month. Overall,the percentage increase in dollar against rupee between April and December 2011 was 22.56. The rupee has appreciated recently due to improvement in risk sentiment globally,intervention by the RBI,FII inflows into debt markets and squaring of long position in dollars. The Rs 52.2 crucial support was broken and the appreciation trend is expected to continue till Rs 51.80-51.20,” he said.

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