Rupee at 60: Are all pharma cos really gaining?

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26 Aug, 2025 12:21

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Indian Pharmaceutical sector has turned out to be a clear beneficiary of the sinking rupee. In FY13, the sector clocked double-digit growth when its peers struggled to stay afloat. Since then this sector, which is driven primarily by exports, gained further strength from the rupee's downfall.

But not all pharma majors will reap big gains from a weak rupee which has fallen more than 10 percent against the dollar since April 2013, says a Citi report titled What If the INR Stays at 60?  Benefit to pharma companies with significant dollar earnings could be theoritical in nature. In practice, only those companies that have a large portion of revenues unhedged will see windfall upfront, while those with considerable hedges would see the benefits with a lag.

The report points out there are only 5 companies that have not hedged or is partially hedged which stand to benefit the most operationally while 3 others would benefit with a lag. It must be noted that not only will hedges push out the gains for a few quarters, mark-to-market losses on hedge positions and dollar debt will affect first quarter earnings as well.

Check out  hedging policies of the following companies and their possible impact on earnings:
(Data courtesy Citi)

Aurobindo Pharma	No hedges	Translation gains on receivables to act as a natural hedge for ST WC loans
Biocon	Hedges 100% of net exports of the first year & 50-75% of net exports of the next year - covered using put and call options between 58-64 INR/ US$	High net exposure but hedges will push out the upside
Cadila Healthcare	No hedges	Should benefit upfront, but cross-currency risk is high given exposure to emerging markets currencies
Cipla	Rs10bn foreign currency loan - primarily WC loans which are completely hedged; Hedges all outstanding debtors – outstanding hedges of cUS$220m	Hedges are marked to market; policy implies that benefits will be captured without too much lag
Dr Reddy’s	Hedges 60% of net exposure for the next 18 months Hedges worth US$480m (Rs56-59/US$ range); B/S hedges at US$350m	No MTM hit, hedges will push out a big part of the upside to later quarters. Crosscurrency fluctuations and translation impact on receivables & inventory (especially related to Russia/CIS) need to be watched fluctuations and translation impact on receivables & inventory (especially related to Russia/CIS) need to be watched
Glenmark Pharma	Limited Hedge	Should be a material beneficiary but cross-currency risk is high (given depreciation in most emerging markets currencies)
Jubilant Lifesciences	Forward cover on net exposure between Rs56-58/US$; Over US$600m of debt is in foreign currency	Operational upside to be pushed out by hedges; MTM on hedges likely to impact numbers in 1Q
Ipca Labs	Hedged c50% of net exposure for the next 9-12 months; Current hedges of US$100m (between 48-56Rs/US$); cUS$100m forex debt	MTM of hedges will hurt reported profit in 1Q
Lupin	Hedges c30-40% of net exposure for the next 1yr; coverage for the immediate next Q	Only hedges covering current quarter revenues booked in P&L (netted off from revenues) – MTM of other hedges reflects in balance sheet
Ranbaxy Labs	cUS$962m of derivatives in the 41-42 INR/US$ range: Contracts worth cUS$108m mature every quarter; c80% of total debt (US$850m) is in foreign currency	MTM of all hedges reflect on the P&L – big hit in June quarter
Sun Pharma	NA	Should benefit from recent INR depreciation, partly in 1Q and fully from 2Q
Wockhardt	No hedges on balance sheet or P&L; Rs19bn debt lying in foreign subsidiaries	Should benefit from recent INR depreciation, partly in 1Q and fully from 2Q; no MTM on P&L or BS
GSK Pharma	No Hedges	Will be hit on imports from parent

"These MTM losses could be significant given the extent of depreciation. These are largely notional and should be offset by the operational upside over a period of time, if the INR does not bounce back. However, some of these losses may be realized if the debt is repayable in the near term," the report said.