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‘Unhedged’ Infosys, HCL Profit From Rupee Fall: Chart of the Day

Infosys Ltd. and HCL Technologies Ltd. are poised to profit most among India’s biggest outsourcing companies from a weaker rupee, which dropped to a record low this week.

The CHART OF THE DAY shows foreign-exchange hedging as a percentage of revenue for India’s largest information-technology service providers: Tata Consultancy Services Ltd., Bangalore-based Infosys, Wipro Ltd. and HCL, based on a report by Barclays Capital. HCL and Infosys had the least currency cover as of June 30, while Wipro had the highest level of protection, the data said. The rupee has fallen about 14 percent this year against the dollar, the worst performance among Asian currencies.

A weaker rupee helps Indian software exporters by boosting the value of repatriated earnings, as the largest proportion of revenues comes in dollars from U.S.-based customers. Infosys last month raised its rupee-revenue forecast for the year ending in March, even as it warned that customers’ IT budgets may shrink. The companies design software programs, provide product-engineering, back-office support and business outsourcing. They also manage call centers. International Business Machines Corp. and Accenture Plc are among their global competitors.

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. “We’ve been positive on the IT sector, in spite of the economic slowdown in the U.S. and Europe. Today, there is a threat to all the companies’ earnings, but these companies could outperform because they’re exporters.”

HCL hedged 40 percent of its revenue in the quarter ended June, compared with Infosys’ 45 percent, Tata’s 70 percent and Wipro’s 114 percent, Bhuvnesh Singh, an analyst at Barclays Capital in Mumbai, said in the report last month. Infosys derived 65 percent of its revenue from North American customers in the year ended March 31, compared with Tata’s 54 percent, according to the companies’ annual reports.

Across India’s IT industry, the depreciation of the rupee could boost the companies’ earnings by an average of 9 percent from the previous quarter, Shah said.

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