Droopy Rupee Aids India’s Outsourcing Firms

Filed under: International,News,Outsourcing |

With the rupee drooping to record lows versus the U.S. dollar, The Economic Times of India reports that major outsourcing firms Infosys Ltd and HCL Technologies Ltd are “poised to profit” from foreign-exchange hedging.

Infosys headquarters in Bengaluru, India

Infosys headquarters in Bengaluru, India

During 2011 the rupee has fallen about 14% against the dollar, and is the worst performing Asian currency.

A weaker rupee helps Indian information technology outsourcers by increasing the value of overseas earnings since the largest parts of the firms’ revenues since the they get paid in U.S. dollars. Infosys last month raised its rupee-revenue forecast for the fiscal year year ending in March, while warning that its customers’ IT budgets may shrink.

India’s major outsourcing companies design software, provide product- engineering, back-office support, business process outsourcing and manage call centers.

Infosys and HCL have “a large amount of unhedged exposure, meaning they’ll benefit the most,” said Jigar Shah, head of research in Mumbai at Kim Eng Securities India Pvt, told The Economic Times. “We’ve been positive on the IT sector, in spite of the economic slowdown in the US and Europe.

Today, there is a threat to all the companies’ earnings, but these companies could outperform because they’re exporters.”

Across India’s IT industry, the decline in the rupee’s value could increase the outsourcing companies’ earnings an average of 9% from the previous quarter, according to recent Barclay’s Capital report.

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