Global credit rating agency, Moody’s Investors Services in its latest report has said that the ongoing free fall in the value of the rupee against the US dollar is credit negative for Indian companies especially for those which generate revenue in rupees, but rely on US dollar debt to fund their operations and have significant dollar-based costs, including capital expenses. It noted that so far in 2018, the Indian rupee has depreciated by 13 percent against the dollar.
Moody’s said that nevertheless, most rated India-based corporates have protections in place -- including natural hedges, some US dollar revenues and financial hedges to limit the negative credit implications of a potential further 10 percent weakening of the rupee to the US dollar from September 6 rate of 72.11 a dollar.
According to the report, the 24 Moody's-rated India-based corporates across the high-yield and investment grade categories, 12 generate most of their revenue in US dollars or have contracts priced in US dollars, providing a natural hedge, and thus limiting the effect a weakening in the rupee could have on their cash flows. It noted that these 24 corporates include those in the IT, oil and gas, chemicals, automobiles, commodities, steel, and real estate development sectors.
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