CEOs fear Q2 will fare worse than Q1 on fall
After reporting disappointing results in the June quarter the pain has just increased for corporate India and, with the falling rupee, there's little hope it will ease anytime soon.
By Piyush Pandey, TNN | Updated:
MUMBAI: Already burdened with high debt, policy paralysis, project delays and liquidity issues, India Inc is now facing another challenge: The free-fall of the Indian rupee, which is giving sleepless nights to the brass.
After reporting disappointing results in the June quarter — the slowest revenue growth in the last 12 quarters — the pain has just increased for corporate India and, with the falling rupee, there's little hope it will ease anytime soon.
"It's a real problem and a very difficult situation. It's bound to swell inflation, put policy makers in a dilemma and growth will languish. I don't know how I should react as the falling rupee adds to our revenues. But, on the other hand, it leads to huge under-recoveries for oil marketing firms that we have to compensate. Our Q1 results were impacted and I don't know what Q2 holds for us as it depends on the under-recoveries of the OMCs. Each depreciating rupee leads to Rs 9,000 crore of under-recoveries," A Banerjee, director ( finance), ONGC, India's largest oil explorer, told TOI.
It's not just the oil and gas companies that are suffering. Echoing similar fears, the CEO of an infrastructure firm, said, "There is a problem on the governance front to restore the faith of FIIs. There is overall pessimism as they feel that the government will put further restrictions on the outflow of currency. The falling rupee has led to project costs going up and getting delayed."
CFOs are worried about the current macro-economic situation, particularly the rising interest rate scenario due to liquidity tightening by RBI, which has put a huge burden on corporate India's balance sheet. They say Q2 is likely to be more disappointing for India Inc.
RPG chairman Harsh Goenka is also worried with the steep fall in the Indian rupee and feels that India should fast-track infrastructure projects, take concrete measures to tame the trade deficit and improve sentiment through stable and pro-investor policies.
After reporting disappointing results in the June quarter — the slowest revenue growth in the last 12 quarters — the pain has just increased for corporate India and, with the falling rupee, there's little hope it will ease anytime soon.
"It's a real problem and a very difficult situation. It's bound to swell inflation, put policy makers in a dilemma and growth will languish. I don't know how I should react as the falling rupee adds to our revenues. But, on the other hand, it leads to huge under-recoveries for oil marketing firms that we have to compensate. Our Q1 results were impacted and I don't know what Q2 holds for us as it depends on the under-recoveries of the OMCs. Each depreciating rupee leads to Rs 9,000 crore of under-recoveries," A Banerjee, director ( finance), ONGC, India's largest oil explorer, told TOI.
It's not just the oil and gas companies that are suffering. Echoing similar fears, the CEO of an infrastructure firm, said, "There is a problem on the governance front to restore the faith of FIIs. There is overall pessimism as they feel that the government will put further restrictions on the outflow of currency. The falling rupee has led to project costs going up and getting delayed."
CFOs are worried about the current macro-economic situation, particularly the rising interest rate scenario due to liquidity tightening by RBI, which has put a huge burden on corporate India's balance sheet. They say Q2 is likely to be more disappointing for India Inc.
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Videocon Industries chairman V N Dhoot feels that the market needs assurance that India can attract foreign inflows in an extremely difficult global environment and the government should not go back on its promises by putting retrospective legislation to regain foreign investors' confidence in the Indian markets. However, L&T chairman A M Naik feels that the situation of policy paralysis will not change soon as clarity about the government plan on economic growth cannot come till elections are over. RPG chairman Harsh Goenka is also worried with the steep fall in the Indian rupee and feels that India should fast-track infrastructure projects, take concrete measures to tame the trade deficit and improve sentiment through stable and pro-investor policies.
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