Limited gains for garment exporters.

COIMBATORE: With most exporters opting against taking forward cover to hedge currencyrelated risks as the rupee had remained within a narrow range for the past several months, the steep fall in the currency would improve profits and order flow for garment makers.

"It (rupee depreciation) will benefit exporters. We would become competitive and would be able to get more orders ," says P Nataraj, Managing Director (MD), KPR Mill. "Existing orders will be benefited as they were locked in when the rupee was at 53-54 levels ," says B Jaichand, Managing Director, Jay Jay Mills, a mid-sized garment export house in Tirupur.

"The order flow is quite good. We are getting more enquiries ," says Raja M Shanmugham , MD, Warsaw International , a Tirupur-based garment exporter. The rupee has lost 4.8% in May making it the worst performing Asian currency and is trading close to the record low of 57.32 hit in June last year.

Exporters usually take forward covers as a hedge against foreign exchange losses. A forward cover helps exporters avoid potential losses with the positions they take giving them an opportunity to shield their order bookings from the fall in the rupee against the dollar and other major currencies.

Mid-sized firms usually take forward covers for up to three months for 50%-60 % of their consignments. But exporters have been covering only about 30% of their orders on an average as the rupee had remained in a tight range for the last four seasons.

Though a forward cover helps exporters to substantially reduce foreign currency related losses, they will not be in a position to reap benefits from any sudden fall in the rupee. For instance, a leading export house in Tirupur, which has taken a contrarian position by taking forward cover for 60%- 70% of its orders at lower levels , will not benefit from the fall in the rupee.

Source : timesofindia.indiatimes.com