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Informist, Monday, Jun. 8, 2026

 

--Moody's: India OMCs, IndiGo lack adequate mitigation for dollar strength 

--Moody's: UltraTech, Bharti Airtel have sufficient buffers for dlr strength 

 

MUMBAI – A strengthening US dollar is expected to weigh on credit quality for companies tracked by Moody's Ratings Ltd. but overall credit strength across South and Southeast Asia will remain stable over the next 12-18 months, the agency said in a report. A larger share of rated companies is affected by local currency weakness, Moody's Ratings said. In India, five of the seven rated companies that are exposed to a strengthening dollar lack adequate mitigation auxiliaries to tackle this. The remaining two have sufficient buffers to combat further weakening of the rupee.

 

The oil marketing companies--Hindustan Petroleum Corp. Ltd., Indian Oil Corp. Ltd., and Bharat Petroleum Corp. Ltd.--are highly exposed to risks related to a strong dollar as their revenues are primarily denominated in rupee but most of their costs are incurred in dollar. Feedstock costs remain dollar-linked given India's reliance on crude oil and gas imports.

 

"This creates a double whammy during periods of elevated oil and gas prices and rupee depreciation, as higher procurement costs compress marketing margins and a weaker rupee raises the landed cost of every barrel," the rating agency said. These companies lack both natural as well finance hedges, putting them at higher risk.

 

However, the status of the oil marketing companies as government-related issuers with established access to international capital markets will mitigate refinancing risks associated with their upcoming debt maturities, the rating agency said.

 

Another company with high exposure to the dollar is InterGlobe Aviation Ltd., whose fuel costs are linked to the greenback alongside expenses pertaining to maintenance, repair, and overhaul charges. About 25% of the airline's revenue is earned from international operations, with only about 15% of total revenue in foreign currency. IndiGo is hedging its foreign currency exposure up to $3 billion, with about $1.4 billion hedged as of March. The company has been gradually increasing its hedge book each month. In addition, around 25% of its cash, or INR 517 billion as of Mar. 31, was maintained in US dollars, the rating agency said.

 

On the other hand, UltraTech Cement, which imports petroleum coke and coal 1and has 40% of its debt denominated in dollars, fully hedges its currency exposure on imported commodities and dollar debt through cross-currency swaps and forward contracts, Moody's Ratings said. The petcoke and coal imports account for around 20% of the cement manufacturer's total costs. Moreover, its strong balance sheet with robust financial metrics also mitigate these risks, it said.

 

Bharti Airtel has 50% of its total borrowings, excluding spectrum liabilities, denominated in dollars, while about 70-75% of its revenue and earnings before interest, tax, depreciation, and amortisation is generated in rupees. The remaining EBITDA, which is attributable to its operations across 14 countries in sub-Saharan Africa, is also subject to significant currency volatility. For the company, the proportion of dollar-denominated debt is lower at around 27%, even after including the company's deferred spectrum liabilities and liabilities related to adjusted gross revenue. These are, however, not subject to refinancing risk and Bharti Airtel actively hedges its exposure, the rating agency said.

 

Eight companies in India tracked by Moody's Ratings benefit from natural hedges as they are commodity companies or information technology services companies whose revenues are dollar-denominated or dollar-linked. JSW Steel Ltd. and Tata Steel Ltd. also use financial hedges to insulate their operations from foreign exchange fluctuations.

 

As for the others, while they have large dollar debt exposures, their international operations limit the effects of a strong dollar. Oravel Stays Ltd., Samvardhana Motherson International Ltd., Tata Motors Passenger Vehicles Ltd., Tata Chemicals Ltd., and UPL Corp. Ltd. generate earnings across multiple currencies, reflecting their global operations and offsetting the strength of the dollar. In addition to this natural hedge, most also hedge their foreign currency debt exposures, according to the report.  End

 

US$1 = INR 95.70

 

Reported by Gopika Balasubramanium

Edited by Rajeev Pai

 

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