Moody’s Investors Service on Thursday stated most rated firms in India have buffers to face up to an extra 10-15 per cent depreciation of the rupee.
The rupee depreciated by 8 paise to shut at 77.76 in opposition to the US greenback on Thursday, weighed down by elevated crude oil costs and protracted overseas capital outflows.
In a press release, Moody’s stated the rupee has depreciated round 4.5 per cent for the reason that begin of the 12 months.
Higher power costs and rates of interest in developed economies have led to capital outflows and rising commodity costs, pressuring the rupee.
“While these external factors will heighten credit risks associated with currency volatility, most rated companies in India have buffers to withstand a further 10-15 per cent depreciation of the rupee,” Moody’s stated.
The rupee’s depreciation is credit score unfavorable for firms that generate income in rupees however rely closely on US greenback debt to fund operations, in addition to for these with important dollar-based prices, comparable to uncooked supplies and capital spending. However, the unfavorable credit score implications for rated firms will likely be restricted.
“Most rated companies have protections to limit the effect of currency fluctuations. These include natural hedges in the form of revenue and costs denominated in or linked to the US dollar, some US dollar revenue and financial hedges, or a combination of these factors, which help limit the adverse effects on cash flow and leverage, even under a more severe deprecation scenario,” Moody’s stated.
Exporters may benefit as their companies or merchandise grow to be cheaper and due to this fact extra aggressive within the world market.
However, within the present macroeconomic setting, the profit will likely be seemingly restricted amid weak world demand and rising inflation, Moody’s added.
Source: www.financialexpress.com”