The Hindu Business Line : Foreign currency loans: IOC may save Rs 150 cr on interest

Kolkata June 18 But for any major change in foreign exchange rates during the remaining period of this month, IndianOil may save close to Rs 150 crore on interest payment on foreign currency loans during the first quarter of this fiscal due to appreciation of rupee against dollar.

The decider, however, will be played on June 29 — the last working day of this quarter — as the foreign exchange rate of that day will be used as benchmark for interest payments for the period.

The rupee appreciated by 7.4 per cent on an average during the first two-and-a-half months of this fiscal. The average exchange rate in June was Rs 40.51 compared to Rs 43.79 in March.

As on June 15, the exchange rate stands at Rs 40.52 compared to Rs 43.05 a dollar on April 2 (the first working day of this fiscal) this year.

Since the company hedges the exchange rate fluctuation risk through forward cover, the actual gain may be lower than the average.

The country's largest refiner has foreign currency loans worth $2.6 billion, roughly 40 per cent of its total loan portfolio of Rs 26,000 crore. According to sources, fluctuation in rupee-dollar exchange by 100 paise leaves an annual impact of Rs 250 crore on the annual interest payout of IOC.

IOC paid Rs 334 crore on interest (inclusive both domestic and foreign currency borrowings) during the April-June quarter of 2006-07.

Though the total borrowings remain similar to last year, provisions for the quarter ending in June 2007 are expected to move up due to firming up of interest rates especially that for the short-term loans. The share of foreign currency loans has increased.

After some early signs of appreciation between January and February, the rupee started appreciating at a fast pace since March. The trend became stronger in April and May and stabilised in June.

The slide of dollar was more or less consistent and touched its lowest at Rs 40.14 on May 22. The peak was touched on January 11 at Rs 44.49.

The fall of dollar has already helped IOC to save over Rs 450 crore in 2006-07 on foreign currency borrowings.

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