Bharti faces Rs 4,000 crore hit on rupee slide

Telecom firms which have foreign currency debt exposure are set to be hurt by the ongoing slide in the rupee.

Bharti Airtel, the top telco, which has been hit the most, followed by Reliance Communications and Idea Cellular.

The rupee has fallen over 8% in the last three months to 57.99 on Thursday’s close. The currency’s slide would have an impact on April-June financial results.

Vinay Jaising and Vanessa A D’Souza, analysts with Morgan Stanley, said in a note to investors on Wednesday, “For Bharti, our analysis suggests if the INR/USD remains at current levels for the rest of the year, there would be a net impact of 9%, or Rs 0.9/share, on its earnings per share. However, the entire impact would be felt this quarter.”

Assuming that 80% of the $11.7 billion net debt as of March 31, is in US dollar, the restatement of debt would have a Rs 3,860 crore, or Rs 9.7/share impact on the balance sheet.”

Shoubit Khare of Motilal Oswal said, “This means for Bharti, debt would go up Rs 1,000 crore for every single rupee fall – which means an increase of approximately Rs 4,000 crore in debt since March-end.”

For RCom, which has at least $7 billion debt exposure, every rupee fall would mean a Rs 700 crore rise in debt. However, on a per-share basis, some analysts believe that RCom would be hit harder by the rupee depreciation than Bharti.

“Out of the company’s net debt, approximately 70% is in foreign currency; hence, we estimate the restatement of debt would have a Rs 2,003 crore or Rs 9.8/share impact on the balance sheet.

At current levels, there would be a 1.6%, or Rs 0.08/share, impact on Idea’s EPS for this fiscal. Assuming that 55% of the $2.4 billion net debt as of March 31, is in US dollar, the restatement of debt would have Rs 530 crore, or Rs 1.6/share, impact on the balance sheet. However, impact may be less, considering its hedging position.

An industry expert said, “Profit & loss hit and capex losses are another concern. If the rupee continues to fall or stays at current levels for a prolonged period, telecom firms will have to increase their capex investment, else capex efficiency will go down. However, at the moment, net to Ebitda impact is minimal – so it is not much cause for concern.”
The telecom firms declined to comment.