Rupee volatility to have low impact on credit profiles of Indian firms: Report

While some sectors may see temporary pressure on earnings, the impact is not likely to affect the medium-term financial strength of businesses, according to the report by Crisil Ratings.

The report notes that while a weaker rupee can increase input costs for some sectors due to higher import expenses, companies are well-placed to manage the shift through various mechanisms such as subsidies, pricing strategies, and hedging practices.

Additionally, several exporting sectors are likely to benefit from the rupee depreciation, which could support their earnings in the near term.

Sectors like information technology (IT), home textiles, and marine foods stand to gain as they earn a significant portion of their revenues from exports while their import exposure is minimal.

This could improve their profitability, depending on how much of the gain is passed on to customers.

Even in sectors like complex fertilisers, oil and gas, and airlines, where there is significant exposure to imported inputs or foreign currency obligations, Crisil notes that supportive policies and hedging strategies help cushion the impact.

For instance, fertiliser manufacturers receive subsidies from the government, while over half of the lease obligations of airlines are hedged, said the report.

Moreover, current global crude oil prices remain favourable, offering additional support to the oil and gas sector.

Capital goods, pharmaceuticals, and renewable energy companies are also expected to adjust well, with some segments even benefiting due to their export orientation.

Meanwhile, sectors like chemicals, ceramics, gems and jewellery, city gas distribution, edible oils, and steel are expected to see minimal impact as they either maintain a natural hedge through balanced import-export exposure or have strong pricing power.

The report emphasised that while short-term earnings may fluctuate, companies are expected to adapt to the evolving currency scenario.

"The overall credit impact is likely to be neutral as it will get neutralised over the medium term once businesses adapt to the new currency levels," the report said.