Dollar Impact: Wipro, Persistent And Mphasis May Hit Hard In Near-term, Warns Kotak

A anemic dollar is each apt to effect nan profitability of IT firms specified arsenic Wipro, Persistent Systems and Mphasis difficult successful nan near-term, Kotak Institutional Equities said based connected rate movements connected an unhedged basis. 

The informing comes arsenic nan dollar depreciated 4 per cent against nan rupee successful nan past 3 months. The greenback has besides dropped 7.6 per cent against euro and 9.9 per cent against British pound. This crisp INR appreciation tin negatively effect profitability. 

Kotak said a institution pinch little margins whitethorn return bigger deed connected net per stock owed to nan rupee appreciation. The logic is: 1 per cent rupee appreciation impacts margins by 30 bps. A 30 bps effect connected a 21 per cent separator of Infosys is little compared pinch a 30 bps deed connected mid-tier companies pinch margins of 12-14 per cent.

Therefore, Kotak said companies pinch a higher offshore operation whitethorn return higher deed connected profitability. 

It explained that a rupee appreciation does not alteration nan onsite margin, but it impacts offshore margins, adding that emblematic offshore margins are mostly 3 times onsite margins. 

In its sum universe, Kotak sees a up to 8 per cent deed connected FY26 net for companies specified arsenic Persistent Systems (7.9 per cent), Indegene (6.7 per cent) and Mphasis (6.1 per cent) owed to their higher US exposure. 

"In nan adjacent term, nan effect will beryllium mostly akin astatine 1-7 per cent. We person not assumed immoderate pullback successful adaptable compensation payouts aliases costs reductions successful our analysis, though companies whitethorn usage these measures successful nan short word to take sides margins," it said.

Kotak believes a fewer IT companies specified LTIMindtree, Tech Mahindra and L&T Technology Services, person long-duration system hedging policies that will insulate them astatine nan nett profit level, fundamentally offsetting nan effect of nan rate appreciation astatine nan EBIT line, pinch forex gains captured successful different income.
 

Published on: May 9, 2025 12:29 PM IST