How Interest Rates, Rupee Impact Reliance Industries
A 1 percent depreciation in the rupee hits Reliance Industries’ profit by Rs 309 crore.
Currency fluctuations impact Mukesh Ambani-led Reliance Industries Ltd.'s profit as the owner of the world’s largest refinery buys crude and sells oil in dollars. A change in interest rates also affects its profit given that a fourth of its consolidated borrowings are pegged to floating rates, according to its annual report for the year ended March.
Vulnerability To Foreign Currency
At Rs 99,895 crore, nearly half of the group’s debt was dollar-denominated at the end of March. RIL has a natural hedge against the exposure as future earnings are linked to dollars. The company has a very limited exposure to the euro and the Japanese yen.
Rate Impact
More than half of the company’s Rs 1.07-lakh-crore standalone loans attract a floating rate of interest. Nearly a third are pegged to a fixed rate of interest, while a little more than a fifth have a tenure of less than one year. RIL’s hedged loans fell by a third to Rs 36,997 crore. A 1 percent change in interest rate impacts the company’s profit by Rs 116 crore.
Total Borrowings
The company’s consolidated borrowings rose by 9 percent to nearly Rs 2 lakh crore in 2016-17, the year when Ambani made his second telecom foray and disrupted the market by offering free services for the first six months.
