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Most rated cos have buffers to resist additional 10-15% rupee depreciation: Moody’s

Moody’s Investors Service on Thursday stated most rated corporations in India have buffers to resist an extra 10-15 per cent depreciation of the rupee.
The rupee depreciated by eight paise to shut at 77.76 in opposition to the US greenback on Thursday, weighed down by elevated crude oil costs and protracted overseas capital outflows.

In a press release, Moody’s stated the rupee has depreciated round 4.5 per cent for the reason that begin of the 12 months.
Higher vitality costs and rates of interest in developed economies have led to capital outflows and rising commodity costs, pressuring the rupee.

“While these external factors will heighten credit risks associated with currency volatility, most rated companies in India have buffers to withstand a further 10-15 per cent depreciation of the rupee,” Moody’s stated.

The rupee’s depreciation is credit score damaging for corporations that generate income in rupees however rely closely on US greenback debt to fund operations, in addition to for these with important dollar-based prices, equivalent to uncooked supplies and capital spending. However, the damaging credit score implications for rated corporations shall be restricted.

“Most rated companies have protections to limit the effect of currency fluctuations. These include natural hedges in the form of revenue and costs denominated in or linked to the US dollar, some US dollar revenue and financial hedges, or a combination of these factors, which help limit the adverse effects on cash flow and leverage, even under a more severe deprecation scenario,” Moody’s stated.

Exporters may gain advantage as their providers or merchandise grow to be cheaper and due to this fact extra aggressive within the international market.
However, within the present macroeconomic surroundings, the profit shall be seemingly restricted amid weak international demand and rising inflation, Moody’s added.

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