Aviation stocks have fallen on sharp rupee depreciation. Shares of Jet Airways and SpiceJet were battered in trade Wednesday as rupee hit record low at Rs 68.75 per dollar.
According to a IIFL report, Jet Airways' 35 percent of FY14 revenue is denominated in foreign currency while 63 percent of the cost is also in foreign currency.
If we account for 10 percent rupee depreciation, then the earnings per share estimates for FY14 and FY15 may get impacted by 70-80 percent on downside, respectively, which may hurt its profitability going ahead.
Meanwhile, in case of SpiceJet, analysts expect huge loss in FY14. A 2 percent of FY14 revenue of SpiceJet would come in foreign currency and a huge 74 percent of cost comes from foreign shores, which would aggravate loss for this company with the current rupee depreciation, says IIFL.
Rupee touched another record low of 68.75 to the dollar in early morning trade before recovering. Dealers say dollar demand from foreign funds and concerns related to subsidy burden after the passage of Food Security Bill weighing on the currency. RBI may have sold dollars at higher levels.
The rupee fell more than 8 percent this week and 12.2 percent in August.
(Track rupee movement here )
Jet Airways ended at Rs 290.25, down Rs 19.50, or 6.30 percent on the BSE. SpiceJet closed at Rs 19.90, down Rs 1.00, or 4.78 percent.
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