Vineet Nayyar of Tech Mahindra does not see rupee hardening beyond a point.
Do not expect rupee to harden beyond a point… see the currency oscillating around 60 per dollar.
Vineet Nayyar
Executive Vice Chairman
Tech Mahindra
An appreciating rupee may help boost confidence in the economy, but it may spell trouble for export-oriented sector like the IT companies.
Vineet Nayyar, Executive Vice-Chairman, Tech Mahindra , feels that IT companies may see some decline in margins due to rupee gains, but he believes, and as pointed by economists, that hardening of the "currency will not take place because the current account deficit (CAD) is bound to increase with greater investment going in".
In the long-term he doesn't see rupee hardening beyond a point. "You may at best see oscillations around 60 per dollar," he said, adding that foreign exchange is not going to be an issue for the IT growth.
Tech Mahindra has posted a 3.6 percent decline in its consolidated net profit for the quarter ended March (Q4). However, the company's dollar revenues grew 4.3 percent.
Below is the transcript of Vineet Nayyar's interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.
Reema: With the appreciation that we have seen in the rupee, the question is will margins of the Indian IT companies be under pressure at least for the next two quarters, your comments?
A: There could be marginal decline but when I look at the fundamentals, is this industry going to grow, is this industry finding bigger market and whether the hardening of rupee is a blip or a secular trend? I do believe that most economists feel that hardening of the currency will not take place because the current account deficit (CAD) is bound to increase with greater investment going in. Yes, it will be offset a bit by inflow of money from outside but by and large, all economies, which are on a growth trajectory and hopefully we will be on a growth trajectory over the next five years, you will see widening of CAD. Therefore, long-term I would venture that rupee is not going to harden beyond a point. You may at best see oscillations around 60 per dollar. It is also not going to go down well as it had happened earlier, you will see stability but with a slight upward momentum. So I would say that exchange is not going to be an issue on the growth of the IT sector.
Tech Mahindra stock price
On June 04, 2014, at 11:05 hrs Tech Mahindra was quoting at Rs 1889.10, down Rs 13.1, or 0.69 percent. The 52-week high of the share was Rs 1936.35 and the 52-week low was Rs 910.00.
The company's trailing 12-month (TTM) EPS was at Rs 114.98 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 16.43. The latest book value of the company is Rs 183.58 per share. At current value, the price-to-book value of the company is 10.29.
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