MUMBAI: Championing rupee decline to boost exports is doing more harm than good, said a latest report by State Bank of India (SBI). While companies, which have resorted to external commercial borrowings are taking a hit on their bottom line, it noted that even export oriented companies, especially in the textile sector has slipped into default category during the last few months.
An analysis of the rating migration of 478 export intensive companies falling under textile, agriculture, leather, automobile, gems & jewellery sector during March to August 2018 revealed that the credit ratio (number of upgrades to downgrades) stood at 0.58 times. Interestingly, 15 per cent of the companies out of total 478 companies under the study have slipped into default category and most of them are in textile business. Gems & Jewellery and leather are also doing badly,” the report stated.
However, it added that auto ancillary, pharma (bulk drugs), industrial paper and chemicals (speciality) sector saw maximum upgrades.
In the import intensive industries, the ratio of upgrades to downgrades stood at 0.95 times. Out of 1,092 companies falling under electrical, engineering goods, metal and Oil & Gas industries, 67 companies have been downgraded while 64 companies have been upgraded during last six month.
“The rupee volatility has impacted export intensive industries more severely than import intensive industries as the credit profiles of import intensive industries are cushioned by presence of natural or contracted hedges, ability to pass on increased costs to customers, support from strong parents or government and being able to substitute imports in select circumstances,” it added.
During March to August 2018, the report said companies in sectors such as petroleum, NBFCs, power, telecommunication and automobile have turned to external commercial borrowing (ECB) under the automatic route and accounted for about 71 per cent of the total borrowing. The total borrowing during the period stood at Rs 14,700 crore.
