Rupee's 10% rise to dent profits in big way: Goldiam

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Rupee's 10% rise to dent profits in big way: Goldiam

Rashesh Bhansali, Vice-CMD, Goldiam International, says that a 10% rise in the rupee, translates into almost a million dollars worth less profit for them.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Goldiam International slips on profit bookng Goldiam International takes further dip Rupee close steady, bonds lower In talks with RBI on rupee rise: Kamal Nath IT to give 20-25% returns if rupee stands between 40-41 ALSO READ See latest News about Goldiam Inter See previous management interviews See what other Experts & Brokerages are saying about Goldiam Inter Goldiam Inter BSE | NSE 28/05/12 Are Mutual Funds betting on Goldiam Inter?

Rashesh Bhansali, Vice-CMD, Goldiam International , says that a 10% rise in the rupee, translates into almost a million dollars worth less profit for them. He adds that, keeping in mind the rupee's steady rise, though they are re-negotiating prices with their current clients, they have to closely watch markets like China which are their closest competitors.

Excerpts from CNBC-TV18's exclusive interview with Rashesh Bhansali:

 Q: Put it into perspective, how much of an export obligation do you have from the US and what's the current hedge that you have taken against the dollar?

A: The export that we do in the United States is close to 70% of our annual exports, which is to the tune of USD 70 million.

Q: What hedge have you taken against the dollar at this point in time at what rate?

A: Fifty percent of our exports receivable are against the US dollar. But the inventory that we stand to have, stays completely unhedged.

Q: For this 70% that you have spoken about on the USD 70 million, could you put it down in simple layman's terms as to how much a 1% rise in the rupee hurts you on the operating and on the bottomline?

A: The rupee has risen 10% from its preferred rates, which are Rs 45. Now it's close to Rs 40 to 40.5. So with every 10%, you are looking at close to a million dollars worth less gain or less profits for an exporting company.

Q: When you started the year as on 1st April 2007, what were you expecting in terms of closing out FY08 with an EPS? How has that EPS estimate changed as things stand today with the rupee appreciating 10%?

A: The EPS has fallen down by Rs 1.5 as compared to last year's EPS.

Q: What are you looking to do in terms of 2008 EPS?

A: Currently, all we have to do is import more diamonds at today's rate so that hedging automatically goes down in terms of import rather than buying it in rupee local bills. That way you stand to pay customers later as well with a lower rupee to dollar rate.

Basically, that is all we can do because the export community in the jewellery industry is all market driven towards price. It is not driven towards the appreciating rupee price.

Q: Are you renegotiating prices with your current clients with the appreciation in the rupee?

A: Yes, we are renegotiating, but we also have to watch other markets like China. With the way the yuan is to a dollar, our largest competitors are from China and if they are not able to increase higher shares in terms of their realizing prices, I don't think it will be easy for us to do the same.