Wednesday, September 26, 2007

Hedging, pricing, and diversification - the strategies adopted by Indian companies

IT’s rupee strategy

With the rupee on an overdrive, Indian BPO (business process outsourcing) companies are rethinking their strategies because, as exporters of services, these companies earn their revenues predominantly in dollars.

“The Indian rupee (INR) is on a rising curve. It has risen to 39.85 against the US dollar in recent times,” observes Mr Pradeep Udhas, Global Partner-in-charge, Sourcing Advisory, KPMG. “It has been estimated that with every 1 per cent appreciation in the INR the effective decline in OPM (operational margin) is almost to the tune of 40-50 basis points.” The rising rupee has become a major cause for concern among Indian ITES (information technology enabled services) and BPO firms, especially the smaller ones, which are not adequately hedged, and are likely to get significantly affected, fears Mr Udhas, in an email interaction with Business Line.

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