impact of rupee volatility on the financials of the indian it companies
Mugdha Shailendra Kulkarni, Anuradha PS
Published in International Journal of Advanced Research in Economics and Commerce
ISSN: xxxx-xxxx Impact Factor:xx Volume:1 Issue:1 Year: 08 June,2013 Pages:23-35
Abstract
Rupee has been depreciating for a long period. A country like India is heavily dependent on oil import, we have seen imbalance in our Balance of payment due to the high depreciation of the Indian Rupee (INR). Yet, depreciation of rupee has helped exports like textile, pharma industry, gems and jewellery and particularly IT sector which is contributes nearly 25% of our exports. IT sector companies have been affected by depreciation in rupee .Recently Indian rupee under great stress is a concern for IT sector. International uncertainty and mounting worries over the domestic economy especially IT sector.The exchange rate between the INR and the US Dollar is fluctuating erratically. In 2009 – 2010 the exchange rate was hovering around the 43 – 45 rupees per US Dollar level. Over the past two years, the rupee has consistently depreciated against the dollar with the last quarter of 2011 (calendar) being one of the worst in terms of Rupee Value Depreciation.This study attempts to find the relation between the revenues, expenses and EBIT and rupee volatility. For this study, we look at 6 Indian IT companies. How do the financials which includes Revenue, EBIT and expenses of the companies are affected by change of rupee. Study has also made comparison between 6 companies how the strategy of hedging is proving beneficial to the IT companies and what is effect of aggressive hedging strategy.
Kewords
Volatility Exchange rate IT (Information Technology) Hedging EBIT(Earning Before Interest and Tax)
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