Most rated Indian firms have protections against weaker rupee: Moody's

Have buffers to withstand further 10-15 per cent depreciation

Rating agency Moody's said on Thursday most of the 23 Indian companies rated by it have protection against weaker Indian Rupee and hold buffers to withstand a further 10%-15% depreciation of the currency.

Nearly half the 23 rated India-based companies have natural hedges that mitigate their exposure to rupee weakness.

For another four companies, their global operations provide the ability to match foreign-currency debt service with foreign-currency cash flows, often at the subsidiary level, the rating agency said in a statement.

The remaining companies either use financial hedges to manage their exposure to US dollar debt costs or have low exposure to rising US dollar debt costs. These aspects help to limit the strain on cash flow and leverage, even under a more severe deprecation scenario.

On June 8, 2022, rupee closed at 77.77 against the US dollar, touching a record low, after depreciating around 4.5% since the start of the year. Higher energy prices and higher interest rates in developed economies have led to capital outflows and rising commodity prices, pressuring the rupee, it added.

The exporters could benefit as their services or products become cheaper and therefore more competitive in the global market. However, in the current macroeconomic environment, the benefit will be likely limited amid weak global demand and rising inflation.

Four rated companies together have around $2.5 billion of rated US dollar bonds maturing over the next 12 months through May 2023. Capital markets remain volatile and investor appetite remains selective, so refinancing risks will remain elevated for particularly for high-yield companies.

In fact, CA Magnum Holdings (B1 stable), an investment holding unit formed by Carlyle Group affiliates to hold their investment in Hexaware Technologies Limited was the last rated high-yield Indian company to tap the US dollar bond market in October 2021.