Firms with large capex may benefit from rising rupee
A lot of companies, which are on a major expansion drive and are importing huge machinery to support the expansion, have ended up saving huge sums with this appreciation.
By Mansi Bhatt & Mitul Thakkar, TNN |
AHMEDABAD: Rising rupee might have adversely impacted textile, telecom and IT sector, however, there are many in these sectors who are laughing their way to the bank. A lot of companies, which are on a major expansion drive and are importing huge machinery to support the expansion, have ended up saving huge sums with this appreciation.
According to Enam Securities’ Sachchidanand Shukla, companies with large capex will benefit due to the strengthening of rupee. "Auto companies like Tata Motors planning low-cost cars would benefit the most. Also, major importers in energy and gems and jewellery sectors would benefit with their costs coming down. The costs of capital goods have come down and are likely to go down further with an appreciating rupee," Mr Shukla said. Several textile companies are gaining as well. Mumbai-based Kapila Garments ,which is setting up textile park in Gujarat, has imported huge machineries at high cost for the proposed expansion and is benefiting from the rise. "Importing heavy machinery is now working out much cheaper for us," said Ashish Kapila.
Similarly, many other textile companies, which are importing huge machineries, are all at gain. "Usually, we keep aside around 5% for contingency or depreciation while importing new machineries. But now, we are benefiting as the minimum gain from rupee appreciation is around 5%. At present, we are saving around Rs 5-7 crore," said Jindal textiles CFO Vikram Oza.
Among others, pharma companies like Sterling Biotech are aiming to save on its capital expenditure. The company is investing around Rs 600 crore to install plants consisting of equipments from overseas. Commenting on the trend, VSNL’s head of corporate strategy, Srinivasa Addepalli, said: "The telecom service providers might not have to shell out what they have been actually projecting. The difference of few paise would result in huge savings for players who are highly dependent on foreign equipments investing in India." VSNL, with a capex plan of $500 million for current fiscal, is anticipating large savings.
According to Enam Securities’ Sachchidanand Shukla, companies with large capex will benefit due to the strengthening of rupee. "Auto companies like Tata Motors planning low-cost cars would benefit the most. Also, major importers in energy and gems and jewellery sectors would benefit with their costs coming down. The costs of capital goods have come down and are likely to go down further with an appreciating rupee," Mr Shukla said. Several textile companies are gaining as well. Mumbai-based Kapila Garments ,which is setting up textile park in Gujarat, has imported huge machineries at high cost for the proposed expansion and is benefiting from the rise. "Importing heavy machinery is now working out much cheaper for us," said Ashish Kapila.
Similarly, many other textile companies, which are importing huge machineries, are all at gain. "Usually, we keep aside around 5% for contingency or depreciation while importing new machineries. But now, we are benefiting as the minimum gain from rupee appreciation is around 5%. At present, we are saving around Rs 5-7 crore," said Jindal textiles CFO Vikram Oza.
Among others, pharma companies like Sterling Biotech are aiming to save on its capital expenditure. The company is investing around Rs 600 crore to install plants consisting of equipments from overseas. Commenting on the trend, VSNL’s head of corporate strategy, Srinivasa Addepalli, said: "The telecom service providers might not have to shell out what they have been actually projecting. The difference of few paise would result in huge savings for players who are highly dependent on foreign equipments investing in India." VSNL, with a capex plan of $500 million for current fiscal, is anticipating large savings.
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