SOFTWARE INC NOW GETS A ROYAL POUND-INGC

By Chitti Pantulu, HyderabadDNA

While attention has been focused on the impact of a strong rupee vis-à-vis the greenback, going into the third quarter earnings season, the sudden and steep weakening of the British pound is set to emerge as a new concern for the Indian IT industry. Till September-end, the rupee strengthened almost 11% against the dollar but only 6% against the pound. But since early October, it has shored up a further 4% while holding steady against the dollar.

The weakening of the pound comes at a time when Indian IT vendors are grappling with strategies to derisk against the dollar by invoicing in euro and pound. But the sudden spurt in the rupee against the pound complicates this exercise. This could hit the quarterly results differently, CLSA analysts Bhavtosh Vajpayee and Nimish Joshi pointed out in a insightful report on Wednesday.

The hardest hit could be Tech Mahindra, which has 72% of its invoices denominated in the British currency, and Mastek, with 65%. Among the large caps, HCL Tech has 25% exposure to the pound, followed by TCS at about 16%. Satyam has the lowest exposure to the pound, at 9%. “We have a strong hedging position of $2.6 billion against a basket of currencies which is dynamically monitored and adjusted by a 10-man strong treasury department,” said a TCS spokesperson.