India Inc’s forex deficit up 18% a year since 2007
17 May 2014 4:49 AM IST
Even as more domestic companies are netting a good portion of their revenues from overseas markets, their forex expenditure has been outpacing their earnings since 2007 to the tune of 18 per cent per annum, leading to a wider mismatch in balancesheets, says a report. ‘The corporate level foreign currency deficit since 2007 grew at a compounded annual rate of 17.8 per cent to Rs 6,353 billion in FY’13,’ India Ratings said in a report on Thursday.
During these six years, the share of foreign currency in the total revenues of Bombay Stock Exchange (BSE)-500 companies grew to 20.1 per cent at an aggregate level from 17.1 per cent, while their forex expenditure grew to 41.8 per cent from the 38.6 per cent.
The country’s largest croporate entity Tata Group earns more than 65 per cent of their revenue in forex while software companies earn more than 95 per cent in forex. Similarly, private oil refiners like Reliance and Essar Oil also earn nearly their entire revenues in forex. ‘As may be expected, in a net importer nation such as India, its largest corporates on aggregate had more foreign currency outflows than inflows,’ the report said.
Over half of the companies which account for 70 per cent of the balance sheet debt are net foreign currency spenders who are expected to suffer a pre-tax margin compression of 1.3 per cent in rupee terms for every percentage point of depreciation in the rupee, it said. The challenge for such net spenders is aggravated as 17 per cent of their aggregate debt is foreign currency debt.
During these six years, the share of foreign currency in the total revenues of Bombay Stock Exchange (BSE)-500 companies grew to 20.1 per cent at an aggregate level from 17.1 per cent, while their forex expenditure grew to 41.8 per cent from the 38.6 per cent.
The country’s largest croporate entity Tata Group earns more than 65 per cent of their revenue in forex while software companies earn more than 95 per cent in forex. Similarly, private oil refiners like Reliance and Essar Oil also earn nearly their entire revenues in forex. ‘As may be expected, in a net importer nation such as India, its largest corporates on aggregate had more foreign currency outflows than inflows,’ the report said.
Over half of the companies which account for 70 per cent of the balance sheet debt are net foreign currency spenders who are expected to suffer a pre-tax margin compression of 1.3 per cent in rupee terms for every percentage point of depreciation in the rupee, it said. The challenge for such net spenders is aggravated as 17 per cent of their aggregate debt is foreign currency debt.
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