Yen's Fall To 34-Year Low Spells Good News For Indian Auto Players: Here's How

The Japanese yen tumbled to a 34-year low on Wednesday, trading at 151.97 against the US Dollar, precipitated by the Bank of Japan’s recent move to end its negative interest rate policy. However, an unexpected beneficiary emerged thousands of miles away: the Indian auto sector.

What to know: This significant currency shift, marking its lowest dive since 1990, sparked a financial ripple effect favouring Indian auto giants Maruti Suzuki, Lumax Industries, and JTEKT India, due to their deep financial ties with Japanese partners and reliance on Yen-based transactions.

Maruti Suzuki, a titan in the Indian auto industry, remits a portion of its net income as royalty to its parent company, Suzuki Motor Corporation in Japan. In the fiscal year 2021, this amounted to 3.6% of its net total income. Additionally, a substantial 7-8% of its annual income comes from imports valued in yen. Therefore, the yen’s decline could herald a windfall for Maruti Suzuki, boosting its financial health and stock value. This optimism was reflected in Maruti Suzuki’s shares hitting a 52-week high of ₹12,724.95 and ending the day 2.53% higher at ₹12,560 on the BSE after the closing bell.

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Lumax Industries, known for its collaboration with Stanley Electric Company of Japan in automobile illumination and lighting, also stands to gain. The company, which paid 1.5% of its revenue, or ₹18.6 crore, as royalty to Stanley in the fiscal year 2021, will benefit from the depreciated Yen, making these payments less burdensome.

Similarly, JTEKT India, which pays royalties, technical know-how fees, and for auto component supplies to its Japanese parent, JTEKT Corporation, in Yen, will find relief. In fiscal 2022, JTEKT India’s payments to its parent company amounted to ₹22 crore in royalties and ₹49 crore for product imports, comprising a significant part of its income. The softer Yen means these transactions will now cost the company less, potentially boosting its profitability.

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Posted In: EquitiesMarketsDollar/YenJTEKT IndiaLumax IndustriesMaruti Suzuki