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Bloomberg Quint
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Imported Raw Materials Hurt PVC Pipes, Capital Goods As Rupee Depreciates: Crisil
- Crisil reports that the depreciation of the Indian rupee against the US dollar will impact certain sectors' earnings in the current financial year.
- The rupee depreciation is expected to continue, settling at around Rs 88 by the end of the fiscal year.
- Industries relying on imported or dollar-denominated raw materials, like the PVC pipes and fittings sector, face increased costs and profitability pressure due to the rupee's devaluation.
- Capital goods players are also likely to experience profitability decline due to import challenges, while the export-focused segments may benefit from the weaker rupee.
- Sectors like IT, marine foods, and home textiles benefit from rupee depreciation as their exports form a significant portion of revenue.
- Pharmaceuticals and renewable power sectors face marginal pressure on profitability due to dependence on imported raw materials.
- Sectors with foreign trade exposure like pharmaceuticals and ceramics are likely to have a neutral impact from rupee depreciation due to a natural hedge.
- Businesses are expected to adapt to new currency exchange rate levels, neutralizing the initial impact of rupee volatility on credit profiles.
- A depreciating rupee may lead to higher debt obligations for companies with dollar-denominated liabilities, affecting their credit profiles negatively.
- Overall, the credit impact is projected to be neutral while the earnings impact will need monitoring in the near term.
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