Volatile dollar drives exporters back to school

MUMBAI: It’s learning time for exporters. Bruised by a plummeting dollar, small and medium exporters are taking up training courses to ride the roller-coaster currency market. In the last one month several exporters have joined programmes to equip themselves with risk management techniques.

Monil Shah, director of Jayesh Industries, is attending one such course. “This has helped as I got to interact with people from large organisations. Though our company have been hedging risks, I have learnt things like interest rate hedging and interest rate conversion.”

A Mumbai-based diamond exporter with business worth Rs 80 crore has also opted for a similar course. However, none of the other senior members of his organisation is pursuing it. This makes little sense, feels Jamal Mecklai, CEO of Mecklai Financial, a risk management consulting company.

Even today exporters don’t realise that training themselves is not enough, as on several occasions other people in the organisation will have to take decisions in the person’s absence.

Mr Shah is the only one of the 100 employees who attends the training as of now, but in the coming days others would also be encouraged to join. Sheetal Vora (name changed) who attended the six-month foreign exchange and risk management course at World Trade Institute and works for an export house says that the course has helped her in terms of fully hedging the risks and dealing in options and forwards.

The training institutes, on the other hand, are seeing many exporters queuing up for similar courses. According to Kaushal Sampat, COO of Dun and Bradstreet, which conducts such training programmes, the number of exporters taking these courses has almost doubled in the last six months.

“Since the degree of uncertainty has increased, the margins have come under pressure and the exporters are becoming enthusiastic about taking these classes,” he added. The volatility has affected the merchant exporters far more than the manufacturing exporters.

The rupee has gained against the US currency close to 10% since January. Since a predominant number of invoices are in dollar, Indian exporters have been badly hit. Most lack the mindset to cover the losses arising out of foreign currency fluctuations; some of them operating on thin margins often run open positions to save cost.

But with the rupee showing a sustained gain, more and more small exporters are feeling the need to hedge. Others like AV Rajwade have organised training, addressing foreign-exchange risk, in association with organisations like Crisil.

“The changes in the system have been so fast that small exporters haven’t been able to adjust. There have been instances where companies that were looking at expansion plans six months ago, are now wondering how they will survive,” says Mr Rajwade. Mecklai says the company is in talks with SIDBI to start with a risk management programme for export houses that have business worth Rs 5-8 crore in 4-5 months time.