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After two years of calm, the rupee’s sudden slide is starting to strain Indian corporate earnings, sparking a rush among some companies to hedge their currency exposures.
InterGlobe Aviation Ltd., which runs India’s largest airline, saw its foreign-exchange losses jump threefold to 14.6 billion rupees ($169 million) in the December quarter. Adani group’s flagship Adani Enterprises Ltd. on Thursday reported a sharp fall in profit, citing foreign exchange losses.
Maruti Suzuki India Ltd., the top carmaker, also flagged currency variations as a negative for margins. A few smaller companies have also announced currency-related losses, with more expected as the earnings season progresses.
The rupee has weakened 2.4% versus the dollar over the past two months, the most in emerging Asia, fueling speculation that the Reserve Bank of India may have eased its tight control over the currency. While the central bank’s approach over the past two years curbed volatility, it may have also led companies to overlook foreign-exchange risks.
Now, with economic growth slowing and global volatility rising, companies find themselves strained to hedge their exposures just as rupee declines are expected to deepen.
“There was some complacency that had set in because the rupee was so stable,” said Neeraj Gambhir, group executive for treasury, markets and wholesale banking products at Axis Bank Ltd. As currency volatility surged, there were more hedging inquiries, he said.
Companies bought $48 billion of forward cover in December, the highest for 2024, according to data collated from the Clearing Corp. of India. That pushed up hedging costs by more than a percentage point last month.
Smaller companies are also feeling the heat — NIIT Learning Systems Ltd. reported a forex loss of 14 million rupees in the December quarter, while Tanla Platforms Ltd. faced a currency impact of 44 million rupees.
IndiGo will explore if it can extend its hedging beyond the current 12 months, Chief Financial Officer Gaurav Negi said last week. The company is taking cover for up to 70% of its exposure till one year, he said.