Rupee's Sharp Depreciation Dominates Indian Corporate Earnings Calls

The rupee’s sharp depreciation, down about 10% against the dollar in the past year, has become a key concern during corporate earnings calls. Investors are increasingly questioning companies about hedging and forex risk management. While exporters benefit from higher overseas revenue, importers face rising costs. Companies across sectors are strengthening hedging strategies as speculation grows that the rupee could weaken further.

The rupee’s relentless slide is prompting tougher scrutiny of Indian companies as investors and analysts press executives on their foreign-exchange strategy.

The local currency’s tumble to successive all-time lows, including a brush with the 97-per-dollar mark last week, has made it a dominant theme on corporate earnings calls this results season. Mentions of “rupee depreciation” and “hedging” in calls hosted by firms that are part of the BSE AllCap Index rose past 350, the highest level in almost eight years, according to data compiled by Bloomberg.

The rupee has lost about 10% against the dollar over the past 12 months, the worst performance among Asian currencies. With speculation growing that it may slump to 100 per dollar, firms are being questioned over their preparedness for further depreciation.

The impact is reverberating across both exporters and importers. While a weaker rupee has boosted overseas revenue for software firms and other exporters, import-dependent businesses are grappling with higher raw material and freight costs, prompting questions on pricing power, procurement strategies and hedging plans.

Analysts covering Welspun Living, a supplier of towels used at the Wimbledon Championships, asked the textile firm whether overseas customers were seeking a share of the gains from a weaker rupee. Chief Executive Officer Dipali Goenka said while the company benefits from a depreciating rupee, costs for a number of inputs from crude, cotton, yarns and polymers were up in the range of 10% to 40%.

“There is no net delta gain, even with the rupee where it is,” Goenka said on the earnings call.

Manorama Industries, a maker of agriculture products, was quizzed on its hedging policy after adverse currency fluctuations forced a mark-to-market provision of 170.5 million rupees ($1.8 million) during the quarter ended March.

The company, which is expanding its cocoa butter business in West Africa, has hedged about 60% of its net foreign-exchange through forward contracts, Ekta Soni, Associate Vice President— investor relations, said during the call.

Similar discussions played out on earnings calls at software exporters Infosys and Mphasis as well as agrichemical producer Coromandel International.

Meanwhile, currency hedging costs have risen sharply as importers scrambled to shield themselves from further rupee weakness while exporters held back from selling dollars. The dollar-rupee one-year forward premium climbed to its highest level since 2022 in late March as the Reserve Bank of India limited banks’ daily open currency positions to just $100 million in a bid to curb speculation in the foreign-exchange market.