Despite the sharpest fall in rupee on Tuesday, major automobile exporters from India, like Hyundai Motor India, Maruti Suzuki India and Tata Motors, are unlikely to witness a significant improvement in their export margins due to the ongoing slump in the US market and hedging of rupee vis-?-vis dollar.
?Indian rupee has been falling for quite some time and Tuesday’s steep fall will certainly add to the export realisation, though to a small extent. This negligible improvement in margins is largely because there are no signs of strengthening in the US economy. Consequently, export volume growth is not happening in that part of the globe,? says Vaishali Jajoo, senior auto analyst, Angel Broking. According to Jajoo, high degree of hedging by OEMs and component manufacturers is another factor that is holding back the gain in export margins in tandem with depreciation of rupee. ?Last year’s fluctuation in rupee vis-?-vis dollar had forced industry players to fix the exchange rates. As a result, whether rupee appreciates or depreciates, there is no impact on margins on the extent of export that has been hedged,? she says. While, ancillary majors like Bharat Forge and Amtek Auto have hedged 60% of their exports, players like Maruti and Hyundai have also secured their exports to a substantial extent.
Indian rupee posted its sharpest fall in a decade on Tuesday, closing another 82 paise lower against the dollar, at 46.88, after touching a low of 46.99. The rupee, however, rose by 62 paise on Wednesday to 46.27/28. According to estimates, while the rupee has depreciated by 16% this year till date, euro has seen a depreciation of over 17% since the beginning of this year.
?Ideally export margins for all component manufacturers should have improved but with similar depreciation in other competing currencies including Yuan has forced them to lower their prices. As a result, the net realisation would be negligible,? says Arvind Jain, vice-president, BanayanTree, adding that the combined impact of all these factors would be seen in next three-four quarters.
Meanwhile, imports have also become expensive with the depreciation of rupee, further nullifying the impact on margins. While Maruti has a local content to the order of 85-90%, the overall localisation content of Hyundai is slightly less than this as company’s top-end models have high degree of import.
According to the Society of Indian Automobile Manufacturers, the overall export from India for April-August went up by 24.48% at 6,35,274 units as against 5,11,148 units during the same period last year. The highest growth was registered in the export of passenger cars at 1,23,142 units compared with 84,127 units in the corresponding period last year, a growth of 46.38%.