Credit FAQ: How South And Southeast Asian Firms Will Fare As Currencies Depreciate

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16 May, 2024 | 03:31
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Persistently high U.S. rates are rarely good news for currencies in South and Southeast Asia. And this has been the case over the past 18 months, with currencies in the region dropping 5%-10% against the U.S. dollar. Such depreciations can strain issuers with revenue in their local currency when they have debt and costs in U.S. dollars.

This time may be different. S&P Global Ratings does not expect currency depreciations in isolation to lead to a wave of corporate rating or outlook changes in South and Southeast Asia (SSEA) over the next 12 months. That's even if currencies were to weaken a further 5%-10%.

In this cycle, currencies have eroded more slowly than in previous major depreciation cycles. Rated entities often have less of a currency mismatch between operations and debt than in previous rounds of forex volatility, either because of more financial hedging, less reliance on dollar funding, or more dollar-linked revenues.

The most exposed firms also often have:

Either sound liquidity, conservative financial policies, or benefit from parent or government support; or
Ratings from 'B+' and below that already capture foreign-currency mismatch, especially for more exposed issuers in Indonesia.

We address some of the most frequently asked questions from investors about the impact of currency depreciations on rated SSEA companies. In a separate FAQ published alongside this report, we look at the wider context for the recent forex volatility (see, "A Look At Why South And Southeast Asian Firms Are Standing Up To A Strong Dollar," May 16, 2024).

We ranked the 73 publicly rated corporate and infrastructure issuers in South and Southeast Asia in four categories according to their exposure to operating and balance-sheet currency mismatch (see chart 1 and tables 1, 2, and 3).

Chart 1

Frequently Asked Questions

What's the impact of ongoing currency depreciations on the operations and margins of rated firms in SSEA?

Ongoing regional currency weakness is largely neutral for the operations of about three-quarters of the companies we rate in the region (see chart 1).

These companies fall into three key groups:

Group 1: Companies that have revenue in domestic currencies, with little (if any) expenses linked to the U.S. dollar. This group includes:

Telecom companies Advanced Info Service Public Co. Ltd., Telekom Malaysia Bhd., PLDT Inc., Singapore Telecommunications Ltd., or Bharti Airtel Ltd.;
Infrastructure or utilities companies such as Adani Electricity Mumbai Ltd., Delhi International Airport Ltd., Singapore Power Ltd., SMRT Corp. Ltd., or NTPC Ltd.; and
Real estate companies Frasers Commercial Trust, Frasers Logistics & Commercial Trust, CapitaLand Integrated Commercial Trust, Kawasan Industri Jababeka Tbk. PT, and Pakuwon Jati Tbk. PT.

Group 2: Commodity and energy companies that have a significant share of export revenues or product priced in U.S. dollars, matching the currency of their expenses. These companies include:

Rain Carbon Inc.;
PTT Exploration and Production Public Co. Ltd.; Pertamina (Persero) PT; and
PT Kilang Pertamina Internasional.

Group 3: Power utilities with a high share of expenses in (or linked to) the U.S. dollar that generate revenues in domestic currencies but can pass on higher costs to end-customers. These companies include:

Perusahaan Perseroan (Persero) PT Perusahaan Listrik Negara (PLN) and Cikarang Listrindo PT. (in Indonesia);
Tenaga Nasional Bhd. (in Malaysia);
Ratch Group Public Co. Ltd.(in Thailand); and
Tata Power Co. Ltd. (in India).

The operating impact is more negative for issuers with a higher share of U.S. dollar-denominated or linked expenses than U.S. dollar-denominated or linked revenues.

Among rated companies in SSEA, Indonesian animal feed producer Japfa Comfeed Indonesia Tbk. PT and tiremaker Gajah Tunggal Tbk. PT are the most exposed to local-currency depreciation. Almost all of Japfa Comfeed's revenues are in Indonesian rupiah, while about one-quarter of its raw-material costs are linked to the U.S. dollar (soybean meal). Currency depreciation is more negative for Gajah Tunggal, given its largely domestic revenues, modest exports (15%-20% of revenues) and largely U.S.-dollar-linked expenses (especially raw materials).

We expect weaker currencies to be a net positive for the operating performance and margins of about 20% of rated issuers with more U.S.-dollar or U.S.-dollar-linked revenues than expenses.

These entities include energy and commodity companies Petroliam Nasional Bhd., Vedanta Resources Ltd., Aneka Tambang Tbk. PT, Reliance Industries Ltd., PTT Global Chemical Public Co. Ltd., Thai Oil Public Co. Ltd., and UPL Ltd.

They also include companies with a high share of export revenues (Indian IT firms Genpact Ltd., HCL Technologies Ltd., Infosys Ltd., Wipro Ltd., and pharma producer Glenmark Pharmaceuticals Ltd.)

What's the impact of ongoing currency depreciation on the balance sheet and leverage of rated firms in SSEA?

It varies. The rated entities have differing exposure to currency risk on U.S. dollar debt, so the impact is determined by a mix of sector characteristics, financial policies, a willingness to hedge, and the depth of domestic funding sources.

All 73 rated firms in SSEA have at least partial hedging in place against currency depreciation. That's either because of foreign-currency revenues or more active financial hedging (on interest or principal, using cross-currency swaps or options). Notably, financial hedging is now a lot more comprehensive and widespread than during the Asian and global financial crises.

Weaker regional currencies have a limited impact on the balance sheet and leverage of about 85% of the companies we rate.

Those firms either:

Have limited to no debt. This is the case for Indian IT services companies Wipro, HCL, Infosys or Genpact;
Fund predominantly in domestic currencies. This is the case for real estate investment trusts in Singapore, telecom companies Advanced Info Service, PLDT, and Telekom Malaysia.
Have limited or no mismatch between revenue and debt currencies. These include: Energy conglomerates Pertamina (Persero) PT, Kilang Pertamina Internasional, and Oil and Natural Gas Corp. Ltd.; Metal and mining companies Tata Steel Ltd.; Vedanta Resources Ltd., and Vale Indonesia Tbk. PT; U.S.-based gaming companies Resorts World Las Vegas LLC and Empire Resorts Inc.; Diversified group Astra International Tbk. PT; and Aircraft lessor Avation PLC.
Have largely or fully hedged foreign-currency debt. These include: Singapore Power Ltd. and SP PowerAssets Ltd.; Profesional Telekomunikasi Indonesia PT; Power Grid Corp. of India Ltd. and NTPC Ltd.

Currency mismatch in balance sheets is a moderately negative consideration for less than 10% of rated issuers.

These entities are exposed because they only partially hedge U.S.-dollar debt (principal or interest) or do not generate enough foreign-currency revenues to provide a natural hedge.

For example, nearly two-thirds of the debt of Axiata Group Bhd., a Malaysia-based telecom company, is in U.S. dollars. However, the company only hedges one-third of that debt.

Companies that also have exposure to unhedged U.S. dollar-denominated principal or interest are:

Real estate developers Kawasan Industri Jababeka Tbk. PT, Pakuwon Jati Tbk. PT;
Manufacturing companies Japfa Comfeed and Gajah Tunngal;
Malaysian gaming company Genting Malaysia Bhd.; and
Power company PLN.

Currency depreciation is a net positive for issuers with a high share of local-currency financing or cash balances in U.S. dollars that also have more revenues in dollars (or dollar-linked) than expenses.

Among rated companies, the impact of the currency depreciation is most positive for Malaysia national oil company Petronas, given its revenues and cash flows are largely U.S.-dollar-linked. Slightly over 40% of its Malaysian ringgit 208.5-billion cash balance is held in U.S. dollars. We also regard depreciation as a positive for Thailand-based PTT Public Co. Ltd., PTT Global Chemical Public Co. Ltd., and Indonesia-based Medco Energi Internasional Tbk. PT, which have a high share of domestic-currency debt.

What is the rating headroom of issuers exposed to weakening currencies?

Of the eight companies we rate with exposure to currency depreciation, six have a moderate to high headroom under the current rating. For those, we don't anticipate further downside rating actions even if their domestic currencies erode another 5% to 10% (see table 1). That's because of either parent or government support (Axiata, EGAT International, Genting Malaysia Bhd. and PLN) or adequate financial headroom (Gajah Tunggal, and Pakuwon Jati Tbk. PT).

Rating headroom is more limited for Kawasan Industri Jababeka and Japfa Comfeed, because of thin liquidity or margin erosion. For the latter, a further erosion in the rupiah could also lead to a spike in working capital and rising refinancing risk.

Table 1

Rated SSEA issuers that are most sensitive to forex risk
	Rating/Outlook	Rating headroom	Observations
Kawasan Industri Jababeka Tbk. PT	CCC+/Stable/--	Limited	Limited headroom to absorb material Indonesian rupiah (IDR) depreciation given a thin liquidity.
Japfa Comfeed Indonesia Tbk. PT	B+/Negative/--	Limited	Limited rating headroom reflected in the negative rating outlook, which captures an uncertainty in a recovery in margin amid volatile poultry prices and raw material costs.
			The company also has a growing dependence on short-term financing. Reliance on short-term funding will increase if the IDR further weakens materially, putting pressure on working capital and an already tight liquidity. About one-quarter of the company's raw material costs are exposed to the U.S. dollar.
Gajah Tunggal Tbk. PT	B-/Stable/--	Moderate	The 'B-' rating already captures structural exposure to currency risk.
			While a further depreciation in the Indonesian rupiah could lead to rising working capital requirements, and draining liquidity, lower raw material prices have mitigated fall in margins. The company's debt-to-EBITDA was below 3x in 2023 and hence we believe there is moderate rating headroom.
Genting Malaysia Bhd.	BBB-/Stable/--	High	Core subsidiary of parent company Genting Bhd.
			Genting Bhd. maintains solid rating headroom. We project the company’s ratio of funds from operations (FFO) to debt to be 35%-40% through 2026, compared with a downside rating trigger of 20%.
Axiata Group Bhd.	BBB/Stable/--	High on the rating; limited on the 'bbb' stand-alone credit profile (SACP)	Solid rating headroom under the rating. We project the ratio of debt-to-EBITDA to trend below 3x by 2025 given our expectations of improving revenue, margins, capex downsizing and stabilizing debt. That compares with a downgrade trigger of 4x. There is limited headroom under the 'bbb' SACP, which could be lowered by one notch to 'bbb-' if debt-to-EBITDA fails to trend below 3x. A one notch downgrade in the SACP would have no impact on the 'BBB' rating given government support.
Pakuwon Jati Tbk. PT	BB+/Stable/--	High	Significant rating headroom. We anticipate the issuer's ratio of debt-to-EBITDA to average about 2x through 2026, compared with a downgrade trigger of 3x.
			The company also benefits from a high share (over 60%) of recurring lease income from retail and offices, has a sizable cash balance of about IDR7.6 trillion as of Dec. 31, 2023, and has a record of conservative financial policies.
Perusahaan Perseroan (Persero) PT Perusahaan Listrik Negara	BBB/Stable/--	High	We equalize the rating on PLN to the rating on the sovereign of Indonesia given the company's role to the economy and its integral link with the sovereign.
			The company has also built improved financial headroom following two years of reduced capital spending and receipt of compensation income from the government.
EGAT International Co. Ltd.	BBB+/Stable/--	High	We equate the rating on EGAT International to the rating on parent company Electricity Generation Authority of Thailand (EGAT).
			We view EGAT International as an extension of State-owned EGAT, with timely government support likely via the parent in extraordinary circumstances.
Ratings as of May 13, 2024. SSEA--South and Southeast Asia. Source: S&P Global Ratings.

Editor's note: This article is a companion piece to a recently published FAQ, titled, "A Look At Why South And Southeast Asian Firms Are Standing Up To A Strong Dollar." The companion FAQ establishes context for understanding the recent currency fluctuations in South and Southeast Asia. This FAQ provides company-specific comments on the exposure of rated firms in the region to currency depreciation.

Appendix

Table 2

A summary of forex risks on the operations of the 73 firms we rate in SSEA
	Short name	Operational exposure to FX (P&L/operating impact)	Company characteristics
Adani Electricity Mumbai Ltd.	Adani Electricity	Largely neutral	Operations are mainly in Indian rupee with immaterial mismatch between revenue and expense currencies. Fuel sourced in local currency domestically and recoverable through timely midterm tariff reviews.
Adani Ports and Special Economic Zone Ltd.	Adani Ports	Largely neutral	Operations are mainly in Indian rupee with immaterial mismatch between revenue and expense currencies. No mismatch for foreign operations (e.g. Israel) where revenue and expenses are denominated in local currency.
Advanced Info Service Public Co. Ltd.	AIS	Largely neutral	Operations are mainly in Thai baht with immaterial mismatch between revenue and expense currencies. AIS also utilizes forward contracts to hedge exposure in foreign currency denominated financial liabilities arising from expenses and purchasing goods and equipment.
ANI Technologies Pte. Ltd.	ANI	Largely neutral	Operations are mainly in Indian rupee with immaterial mismatch between revenue and expense currencies.
Avation PLC	Avation	Largely neutral	Revenues and capital spending are largely in U.S. dollar (about 20% in euros), with costs largely mix between U.S. dollar and Singapore dollar. We don't believe there are material currency mismatch on operations.
Axiata Group Bhd.	Axiata	Largely neutral	Revenue and expenses in the same domestic currencies in different markets, mainly in Indonesia, Bangladesh, Sri Lanka, Cambodia and Malaysia. Accounting profit impacted by translation to presentation currency (Malaysian ringgit). The strong U.S. dollar has a modest indirect impact on operations in Bangladesh, and Sri Lanka given the economic crisis and inflation.
Bharti Airtel Ltd.	Bharti Airtel	Largely neutral	Limited impact of the depreciation of the Indian rupee against the U.S. dollar, noting that the depreciation of African currencies against Indian rupee had a modest impact on consolidated EBITDA (African operations account for about 25%-30% of EBITDA).
BOC Aviation Ltd.	BOC Aviation	Largely neutral	Revenues and capital spending are largely in U.S. dollar, with costs largely mixed between U.S. dollar and Singapore dollar. We don't believe there is a material currency mismatch on operations.
CapitaLand Integrated Commercial Trust	CICT	Largely neutral	Revenues and expenses are mainly in Singapore dollar.
Continuum Green Energy Ltd.	Continuum	Largely neutral	Operations are mainly in Indian rupee with immaterial mismatch between revenue and expense currencies and no U.S. dollar-linked fuel costs (renewable player).
Delhi International Airport Ltd.	Delhi Airport	Largely neutral	About 90% of revenues are in Indian rupee, with the rest in foreign currency while nearly 100% of expenses are in Indian rupee.
EGAT International Co. Ltd.	EGAT International	Moderately negative	The rating is equalized to the rating on the parent, EGAT. EGAT has some exposure to U.S. dollar-denominated fuel costs, with revenues largely denominated in Thai baht. While EGAT had fully passed through fuel costs to customers in the past, there has been delays in recovery of higher fuel costs in the recent years, driven by COVID. PTT has also been helping partly relieve EGAT's cash flow pressure, including providing extended payment terms
Empire Resorts Inc.	Empire Resorts	Largely neutral	Revenues and expenses are mainly in U.S. dollar.
Frasers Centrepoint Trust	FCT	Largely neutral	Revenues and expenses are mainly in Singapore dollar.
Frasers Logistics & Commercial Trust	FLCT	Largely neutral	Revenues and expenses are generated in domestic currencies in each market (Australia, Europe, the U.K., and Singapore) with no mismatch.
Genpact Ltd.	Genpact	Net positive	Revenues are largely in U.S. dollar while costs are in Indian rupee.
Genting Bhd.	Genting	Largely neutral	Revenues and expenses are generated in domestic currencies in each main market (U.S., Malaysia and Singapore) with no major mismatch.
Genting Malaysia Bhd.	Genting Malaysia	Largely neutral	Revenues and expenses are generated in Malaysian ringgit with no major mismatch.
Genting New York LLC	Genting NY	Largely neutral	Revenues and expenses are generated in U.S. dollar with no major mismatch.
Glenmark Pharmaceuticals Ltd.	Glenmark	Net positive	About two-thirds of revenues from international markets including the U.S. (about 25%) and Europe (about 20%) more than offset the higher cost of imported raw materials.
GMR Hyderabad International Airport Ltd.	GMR Hyderabad IA	Largely neutral	About 70% of revenues are in Indian rupee, with the rest in foreign currency, while nearly 100% of expenses are in Indian rupee.
Grab Holdings Ltd.	Grab	Largely neutral	Revenues and expenses in each market are denominated in respective local currencies.
HCL Technologies Ltd.	HCL	Net positive	Revenues are largely dominated in U.S. dollar while most costs are in Indian rupee.
Infosys Ltd.	Infosys	Net positive	Revenues are largely dominated in U.S. dollar while most costs are in Indian rupee.
Manila Electric Company	Meralco	Largely neutral	Revenues and operations are mainly in Philippine peso. The regulatory framework in Philippines has been generally supportive, allowing Meralco to fully recover all passthrough charges, even during COVID when fuel costs were high.
MISC Bhd.	MISC	Largely neutral	Revenues are largely denominated in U.S. dollar, costs mix between U.S. dollar and Malaysian ringgit, capex in U.S. dollar. We don’t believe there are material currency mismatches on operations.
NagaCorp Ltd.	Nagacorp	Largely neutral	Revenues and a large share of expenses (including winnings) from casino operations are denominated in U.S. dollar.
NHPC Ltd.	NHPC	Largely neutral	Nearly all of the generation capacity is hydro-based, revenues and operating expenses are in the same currency.
NTPC Ltd.	NTPC	Largely neutral	Revenue and operations are in Indian rupee. Well-established & stable regulatory framework with automatic formula-based tariff adjustment. Availability-based tariff insulates NTPC from both price & volume risks and allows for timely passthrough of actual operating costs (fuel, operations and maintenance, and depreciation) and financing costs (currency hedging and interest expense).
Oil and Natural Gas Corp. Ltd.	ONGC	Largely neutral	Largely neutral on a consolidated basis. Revenues in India are linked to the U.S. dollar while costs are mostly denominated in Indian rupee, but any upside on realization on crude oil beyond certain threshold could lead to a windfall tax. The net positive impact of the Indian rupee depreciation on gas production and international operations can be offset by refining operations because retail prices might not fully capture higher feedstock costs.
OUE Real Estate Investment Trust	OUE REIT	Largely neutral	Revenues and expenses are generated in domestic currencies in each market (Singapore, China) with no mismatch.
Perusahaan Perseroan (Persero) PT Perusahaan Listrik Negara	PLN	Largely neutral	Revenues in Indonesian rupiah but some fuel costs paid in U.S. dollar. Tariffs to remain flat, but revenue shortfalls are recoverable through (1) a cost plus 7% public service obligation margin; (2) a long record of government subsidies; (3) and a growing record of compensation income. We also note that coal prices are capped to US$70/ton on domestic coal and US$6/MMBtu gas from PGN.
Petroliam Nasional Bhd.	Petronas	Net positive	Revenues are reported in Malaysian ringgit but largely linked to the U.S. dollar. Over half of the cost base is linked to the U.S. dollar, especially upstream and downstream production costs. The depreciation of the ringgit is a net positive given part of cost base (especially selling, administrative and general expenses, including most labor costs) is in ringgit and most cash flows are in dollars.
PLDT Inc.	PLDT	Largely neutral	Revenue largely denominated in Philippine peso (about 8% revenue and 6% expenses denominated in U.S. dollar in 2023). Capital spending is mostly in U.S. dollar. PLDT utilized forward contracts and other hedging instruments to hedge exposures in foreign currency-denominated financial liabilities.
Power Grid Corp. of India Ltd.	PowerGrid	Largely neutral	Revenues and expenses are denominated in Indian rupee (transmission activities with no fuel procurement costs).
PT Aneka Tambang Tbk.	PT ANTAM	Net positive	Revenues are largely pegged to the U.S. dollar, including minerals, metals and gold (although with some lag between price quotes and actual forex rates). A significant share of operating costs and selling and administrative expenses in Indonesian rupiah.
PT Astra International Tbk.	PT Astra	Largely neutral	Natural hedge with revenues and costs in similar currencies for main divisions (U.S. dollar or U.S.-dollar linked for the mining and mining contacting operations, Indonesian rupiah for the automobile, finance, and infrastructure operations).
PT Cikarang Listrindo	Cikarang Listrindo	Largely neutral	Revenues and fuel costs are denominated in U.S. dollar. Currency fluctuations can be passed through to industrial customers via tariff adjustments.
PT Gajah Tunggal Tbk.	Gajah Tunggal	Negative	Largely domestic revenues in Indonesian rupiah (70%-80%). The cost base is largely linked to the U.S. dollar (raw materials, chemical products, energy).
PT Japfa Comfeed Indonesia Tbk.	PT Japfa	Moderately negative	Nearly all revenues are generated in Indonesian rupiah. 20%-25% of the input costs (especially agricultural commodities such as soybean meal) are denominated in U.S. dollar.
PT Kawasan Industri Jababeka Tbk.	KIJA	Largely neutral	About 75% of revenues in domestic currency (25% of revenue are linked to the U.S. dollar) with a largely domestic currency expense base.
PT Kilang Pertamina Internasional	PT KPI	Largely neutral	Refined fuel sales to sister company Patra Niaga are quoted in Indonesian rupiah but follow a monthly foreign exchange benchmark, with a limited lag. Over 70% of costs (oil and naphtha) are linked to the U.S. dollar. While the sales pricing formula theoretically allows for cost passthrough if the Indonesian rupiah depreciates, it hasn’t been tested over extended periods of oil and currency fluctuations.
PT Medco Energi Internasional Tbk.	Medco	Largely neutral	Most of Medco's revenues and expenses are either in U.S. dollar or linked to the U.S. dollar.
PT Pakuwon Jati Tbk.	PWON	Largely neutral	Revenues and expenses are denominated in Indonesian rupiah.
PT Pertamina (Persero)	Pertamina	Largely neutral	Revenues in Indonesia are denominated in Indonesian rupiah but most of the company's sales and costs (especially in upstream production and refining) are linked to the U.S. dollar. A growing record of timely subsidy on fuel distribution mitigates the risk associated with Indonesian rupiah depreciation and higher operating costs.
Profesional Telekomunikasi Indonesia PT	Protelindo	Largely neutral	Revenues from domestic telecom companies, mostly denominated in Indonesian rupiah.
PT Vale Indonesia Tbk	PT Vale	Largely neutral	Revenues from nickel operations and most of the cost base (mining contracting and energy costs) are linked to the U.S. dollar.
PTT Exploration and Production Public Co. Ltd.	PTTEP	Largely neutral	Revenues from oil and gas sales and most of the cost base (exploration, lifting costs) are linked to the U.S. dollar. A small portion of expenses is in Thai baht.
PTT Global Chemical Public Co. Ltd.	PTTGC	Net positive	Revenues from refining and chemical products are linked to the U.S. dollar. Feedstock prices are either denominated in U.S. dollar or in Thai baht but are adjusted to reflect prevailing currency rates. A relatively large portion of cash expenses (around 30%, largely labor and administrative costs) are in Thai baht.
PTT Public Co. Ltd.	PTT Public	Net positive	Revenues are reported in Thai baht but largely linked to the U.S. dollar. Over half of the cost base is linked to the U.S. dollar, especially upstream and downstream production costs at operating subsidiaries. Marginally positive effect given part of cost base (especially selling, administrative and general expenses, including most labor costs) is in Thai baht and most cash flow in dollars.
Rain Carbon Inc.	Rain Carbon	Largely neutral	About 50% of the revenues are denominated in the U.S. dollar and 35% in euros, with matching currencies in the expense base.
Ratch Group Public Co. Ltd.	Ratch	Largely neutral	The power purchase agreements (PPA) with EGAT in Thailand represents about half of 2023 adjusted EBITDA (declining to below 40% in the next three years) and allows full cost passthrough. Most of PPAs in Australia and Indonesia also allow cost passthrough.
Reliance Industries Ltd.	Reliance Industries	Net positive	Revenues and most upstream and downstream costs from the refining and chemicals segment (about 45% of EBITDA) are linked to the U.S. dollar. Revenues and costs in remaining businesses (telecommunications and retailing) are mostly domestic and denominated in Indian rupee.
Resorts World Las Vegas LLC	RWLV	Largely neutral	Revenues and expenses are mainly in U.S. dollar.
Sarawak Energy Bhd.	Sarawak Energy	Largely neutral	Revenues are in Malaysian ringgit. About 60% of capacity is hydro based. Insulated from volatility of global fuel prices. Natural gas is supplied by Petroliam Nasional Bhd. (Petronas) through a long-term contract at competitive rates. Coal is indigenously sourced by a subsidiary of Sarawak Energy.
Singapore Post Ltd.	Singpost	Largely neutral	Revenues and costs are generated in local currencies, mainly in Singapore dollar and Australian dollar.
Singapore Power Ltd.	Singpower	Largely neutral	Regulated transmission and distributions operations with solid regulatory framework and full and timely passthrough of operating and capital expenses. Contribution from Australian asset is immaterial at less than 5% of adjusted EBITDA.
Singapore Technologies Engineering Ltd.	STE	Largely neutral	Limited exposure to foreign currency depreciation given the bulk of revenues and expenses are denominated in U.S. dollar, Singapore dollar and euro.
Singapore Telecommunications Ltd.	Singtel	Largely neutral	Executing a policy to substantially hedge all know transactional currency exposures through forward contracts and currency purchases.
SMRT Corp. Ltd.	SMRT	Largely neutral	Most revenues and costs are in Singapore dollar.
SP PowerAssets Ltd.	SPPA	Largely neutral	Regulated transmission and distributions operations with solid regulatory framework and full and timely passthrough of operating and capital expenses.
Summit Digitel Infrastructure Ltd.	Summit Digitel	Largely neutral	Revenues and costs are predominantly denominated in Indian rupee.
Tata Motors Ltd.	Tata Motors	Largely neutral	Jaguar Land Rover constitutes 80% of earnings and is unaffected by Indian rupee fluctuations. There are some small currency mismatches in the Indian business given most raw materials are linked to the U.S. dollar even though Indian operations only represent about 20% of total earnings and raw material prices are adjusted with a lag.
Tata Power Co. Ltd.	Tata Power	Largely neutral	About 85% of EBITDA from regulated generation, transmission and distribution activities (with cost passthrough) and long-term fixed-price renewable contracts. Dividend income from minority stakes in Indonesian coalmines will partly hedge against fuel price exposure at the Mundra thermal power plant. The Mundra plant remains exposed to higher coal prices given its lack of a permanent and adequate cost passthrough mechanism.
Tata Steel Ltd.	Tata Steel	Largely neutral	Steel prices in Tata Steel's main markets (India, the UK and the Netherlands) are linked to the U.S. dollar. Over 60% of the cost base, including raw materials and energy, are also linked to the U.S. dollar.
Telekom Malaysia Bhd.	Telekom Malaysia	Largely neutral	Revenue and expenses are mainly in Malaysian ringgit. The company also utilizes hedging instruments to reduce exposure to foreign-exchange risk.
Temasek Holdings (Private) Ltd.	Temasek	Largely neutral	A large share of dividends received from investee companies is in Singapore dollar, matching the currency of the expense base.
Tenaga Nasional Bhd.	TNB	Largely neutral	Revenue mostly in Malaysian ringgit but TNB is exposed to U.S. dollar coal procurement costs given its exposure to coal-fired generation (about half of total capacity). However, TNB is protected from elevated commodity prices as it can pass through actual uncontrollable fuel and generation costs via the Imbalance Cost Pass Through mechanism, albeit with a six-month lag.
Thai Oil Public Co. Ltd.	Thai Oil	Net positive	Revenues from refining and chemical products are linked to the U.S. dollar. Feedstock prices are either denominated in U.S. dollar or in Thai baht but are adjusted to reflect prevailing currency rates. We estimate that 20% to 30% of cash expenses, largely labor and administrative expenses are in Thai baht.
UPL Corp. Ltd.	UPL	Net positive	Revenues are denominated or linked to the U.S. dollar (U.S. dollar-linked crop protection prices). The company has a sizable cost base in Indian rupee given large operations in the country.
Vedanta Resources Ltd.	Vedanta	Net positive	Revenues are denominated or linked to the U.S. dollar across oil and gas, metals and mining operations. The company has a sizable cost base in Indian rupee given large operations and expense base in the country.
Vena Energy Capital Pte. Ltd.	Vena Energy	Largely neutral	Revenue and cost base are in the domestic currency of the respective projects across different geographies.
Wipro Ltd.	Wipro	Net positive	Revenues are largely in U.S. dollar while costs are in Indian rupee.
SSEA--South and Southeast Asia. P&L--Profit and loss statement. FX--Forex. Source: S&P Global Ratings.

Table 3

A summary of forex risks on the financials of the 73 firms we rate in SSEA
	Short name	Balance-sheet exposure to currency depreciation	Company characteristics
Adani Electricity Mumbai Ltd.	Adani Electricity	Largely neutral	100% of debt is in U.S. dollar but hedging (swaps) are in place. Hedging costs can also be passed through under the regulatory framework.
Adani Ports and Special Economic Zone Ltd.	Adani Ports	Largely neutral	Debt in U.S. dollar accounts for about 75% of total debt, mitigated by natural hedge from U.S.-dollar earnings (~35%-40% of total revenues). U.S.-dollar EBITDA can cover interest obligations in dollars by more than 4x over the next few years.
Advanced Info Service Public Co. Ltd.	AIS	Largely neutral	All borrowings in Thai baht.
ANI Technologies Pte. Ltd.	ANI	Largely neutral	About 95% of total debt is a US$69 million unhedged term loan B. It is due in 2026 but the company has sizable cash surplus of Indian rupee 16 billion (About US$190 million).
Avation PLC	Avation	Largely neutral	About 85% of debt is in U.S. dollars, 15% in euros. The company entered into some euro-denominated lease contracts and cross-currency swap contracts to hedge the euro foreign exchange risk.
Axiata Group Bhd.	Axiata	Moderately negative	About 59% of company's borrowings are in U.S. dollar as of end-2023, of which 63% are unhedged.
Bharti Airtel Ltd.	Bharti Airtel	Largely neutral	About 75% of the company's borrowings is in Indian rupee. About 25% of borrowings denominated in foreign currency, with some hedging.
BOC Aviation Ltd.	BOC Aviation	Largely neutral	All loans and borrowings that are denominated in foreign currencies are swapped to U.S. dollar, matching U.S. dollar-denominated revenues.
CapitaLand Integrated Commercial Trust	CICT	Largely neutral	Natural hedge for overseas properties, by borrowing in the foreign denominations.
Continuum Green Energy Ltd.	Continuum	Largely neutral	Debt in U.S. dollar accounts for about 53% of total debt and is hedged using call-spread options.
Delhi International Airport Ltd.	Delhi Airport	Largely neutral	Debt in U.S. dollar accounts for about 80% of total debt. U.S. dollar debt is hedged using call spreads for its interest and principal payments.
EGAT International Co. Ltd.	EGAT International	Largely neutral	About 85% of borrowings are in Thai baht, matching the largely Thai baht-denominated revenue base. About 15% of total debt is in foreign currency.
Empire Resorts Inc.	Empire Resorts	Largely neutral	All debt is in U.S. dollar with a natural hedge from U.S. dollar-denominated revenues.
Frasers Centrepoint Trust	FCT	Largely neutral	Most of the debt is in Singapore dollar. Foreign-currency debt is fully hedged with cross-currency interest rate swaps.
Frasers Logistics & Commercial Trust	FLCT	Largely neutral	Natural hedge between debt and revenues for overseas properties.
Genpact Ltd.	Genpact	Largely neutral	Natural hedge as debt and earnings are largely in U.S. dollar.
Genting Bhd.	Genting	Largely neutral	Most of the U.S. dollar debt exposure on the balance sheet comes from Genting Malaysia and U.S.-based operations. The U.S. dollar debt at Genting Malaysia is largely hedged and that of U.S. operations have a natural hedge with U.S. dollar-denominated revenues.
Genting Malaysia Bhd.	Genting Malaysia	Moderately negative	Debt in U.S. dollar accounts for about two-thirds of total debt. About half of the interest expense is hedged.
Genting New York LLC	Genting NY	Largely neutral	All debt is in U.S. dollar with a natural hedge from U.S. dollar-denominated revenues.
Glenmark Pharmaceuticals Ltd.	Glenmark	Largely neutral	We expected Glenmark to have minimal debt following the disposal of its subsidiary Glenmark Lifesciences Ltd.
GMR Hyderabad International Airport Ltd.	GMR Hyderabad IA	Largely neutral	Debt in U.S. dollar accounts for about two-thirds of total debt. Debt in U.S. dollar is hedged using a mix of cross-currency swaps and call spreads (for its interest and principal payments). The company also has about 30% of revenues linked or denominated in U.S. dollar.
Grab Holdings Ltd.	Grab	Largely neutral	Grab is in a net cash position, with most of its cash balance in U.S. dollars and local currencies of markets it operates in.
HCL Technologies Ltd.	HCL	Largely neutral	Natural hedge as debt and earnings are largely in U.S. dollar.
Infosys Ltd.	Infosys	Largely neutral	Infosys is a net debt-free company.
Manila Electric Company	Meralco	Largely neutral	Most of the borrowings are in Philippine peso. Negligible amount of debt in U.S. dollar.
MISC Bhd.	MISC	Largely neutral	Most of the company's debt is in U.S. dollar, with a natural hedge with largely U.S. dollar-denominated revenues. The company also uses currency forwards.
NagaCorp Ltd.	Nagacorp	Largely neutral	Natural hedge as debt and earnings are largely in U.S. dollar.
NHPC Ltd.	NHPC	Largely neutral	Debt is mostly in Indian rupee, with small amounts of hedged Japanese yen loans
NTPC Ltd.	NTPC	Largely neutral	About three-quarters of total debt is in foreign currency. The regulatory framework allows the company to pass through costs, including currency hedging and interest expense.
Oil and Natural Gas Corp. Ltd.	ONGC	Largely neutral	Foreign-currency debt is about 44% of total borrowings. ONGC's cash flows from international operations under OVL provide a natural hedge for the internet servicing of its U.S. dollar borrowings.
OUE Real Estate Investment Trust	OUE REIT	Largely neutral	Natural hedge as debt and revenues are in Singapore dollar.
Perusahaan Perseroan (Persero) PT Perusahaan Listrik Negara	PLN	Moderately negative	About three-quarters of total debt is foreign-currency debt (most in U.S. dollars). PLN has hedged some of its maturing debt in line with the central bank's guidelines. The tariff mechanism, with cost pass-through and subsidies, offsets adverse currency movements on the import of fuel, U.S. dollar-linked power purchase agreements (nearly half of the total), and interest cost on foreign borrowings.
Petroliam Nasional Bhd.	Petronas	Net positive	Net positive. About 82% of Petronas' reported debt is in U.S. dollar and about 12% in Malaysian ringgit, while most of its cash flow is in U.S. dollar. Vast cash balance of about Malaysian ringgit 208.5 billion, about 43% of which is held in U.S. dollars.
PLDT Inc.	PLDT	Largely neutral	About 84% of total debt is in Philippine peso in 2023, matching Philippine peso-denominated revenues. About 16% of debt is in U.S. dollar of which 51% is hedged. Including the natural hedge with U.S. dollar-denominated cash flows, about 5% of debt is denominated in U.S. dollar and unhedged.
Power Grid Corp. of India Ltd.	PowerGrid	Largely neutral	About 30% of total debt is in foreign currencies, but these are either hedged or recoverable via transmission tariffs.
PT Aneka Tambang Tbk.	PT ANTAM	Largely neutral	Almost all debt is U.S. dollar, but the bulk of earnings are also pegged to the U.S. dollar, and therefore there is a natural hedge. Company has about Indonesian rupiah 10 trillion net cash position as of March 31, 2024, of which about half is in U.S. dollars, which can fully repay U.S. dollar-denominated debt.
PT Astra International Tbk.	PT Astra	Largely neutral	About three-quarters of Astra's debt at its industrial businesses is in U.S. dollar, with the remainder in Indonesian rupiah. The bulk of the company's revenues and EBITDA is also linked to U.S. dollar (mining, mining contracting and palm oil) providing a natural hedge. The company also maintains sizable cash in foreign currencies and it has a policy of hedging foreign-currency exposure through derivatives and swaps.
PT Cikarang Listrindo	Cikarang Listrindo	Largely neutral	Debt and revenues are in U.S. dollar, which provides a natural hedge.
PT Gajah Tunggal Tbk.	Gajah Tunggal	Moderately negative	About half of total debt in U.S. dollar and half in Indonesian rupiah. There is no hedging in place, but the company has partial natural hedging from export revenues.
PT Japfa Comfeed Indonesia Tbk.	PT Japfa	Moderately negative	Debt in U.S. dollar accounts for about 40% of total debt. The principal is hedged, but the coupon is not hedged.
PT Kawasan Industri Jababeka Tbk.	KIJA	Moderately negative	Nearly all the company's debt is in U.S. dollar. The company hedges about 35% of U.S. dollar debt principal, but not the interest payment. About a quarter of revenue are linked to the U.S. dollar, providing some natural hedge.
PT Kilang Pertamina Internasional	PT KPI	Largely neutral	Debt is largely in U.S. dollar and revenues linked to U.S. dollar provide a natural hedge.
PT Medco Energi Internasional Tbk.	Medco	Net positive	The company benefits from a high share of local-currency debt (about 36% of total reported debt is in Indonesian rupiah), while its revenues are linked to the U.S. dollar.
PT Pakuwon Jati Tbk.	PWON	Moderately negative	All of the company's debt is in U.S. dollar. The company hedges ~95% (US$378m out of US$400m) of the debt principal but does not hedge interest payments.
PT Pertamina (Persero)	Pertamina	Largely neutral	Debt is largely in U.S. dollar and revenues linked to U.S. dollar provide a natural hedge.
Profesional Telekomunikasi Indonesia PT	Protelindo	Largely neutral	11% of debt denominated in U.S. dollar. Covered with financial hedges.
PT Vale Indonesia Tbk	PT Vale	Largely neutral	The company has no interest-bearing debt, with over 90% of cash in bank deposits, in U.S. dollars.
PTT Exploration and Production Public Co. Ltd.	PTTEP	Largely neutral	70%-80% of debt is denominated in U.S. dollar, the rest in Thai baht. PTTEP employs cross-currency swaps to address currency mismatches in its debt currencies.
PTT Global Chemical Public Co. Ltd.	PTTGC	Net positive	The company benefits from a relatively high share of local-currency debt (about 58% of total reported debt is in Thai baht), while its revenues are linked to the U.S. dollar.
PTT Public Co. Ltd.	PTT Public	Net positive	The company benefits from a high share of local-currency debt (slightly over half of total reported debt is in Thai baht), while its revenues are linked to the U.S. dollar.
Rain Carbon Inc.	Rain Carbon	Largely neutral	Debt is in U.S. dollars and euros and follows a similar revenue mix.
Ratch Group Public Co. Ltd.	Ratch	Largely neutral	About 58% of total debt is in foreign currency but fully hedged via cross-currency swaps
Reliance Industries Ltd.	Reliance Industries	Largely neutral	We estimate half of total borrowings is denominated in foreign currencies, with some natural hedge from revenues linked to the U.S. dollar.
Resorts World Las Vegas LLC	RWLV	Largely neutral	All debt is in U.S. dollar with a natural hedge from U.S. dollar-denominated revenues.
Sarawak Energy Bhd.	Sarawak Energy	Largely neutral	Debt is largely in Malaysian ringgit, 3% of debt is in euro, but hedged.
Singapore Post Ltd.	Singpost	Largely neutral	Debt is in Singapore dollar and Australian dollar, with a natural hedge from Singapore dollar and Australian dollar revenues.
Singapore Power Ltd.	Singpower	Largely neutral	About 85% of total debt is in foreign currencies (of which 80% in U.S. dollar) but entirely hedged.
Singapore Technologies Engineering Ltd.	STE	Largely neutral	Debt is mostly in the same currencies as revenue.
Singapore Telecommunications Ltd.	Singtel	Largely neutral	Executing a policy to fully hedge its foreign currency denominated debt into the functional currency of the respective borrowing entities in the consolidated group.
SMRT Corp. Ltd.	SMRT	Largely neutral	Debt is in Singapore dollar. The company also has a net cash position.
SP PowerAssets Ltd.	SPPA	Largely neutral	About 80% of total debt is in foreign currency but entirely hedged.
Summit Digitel Infrastructure Ltd.	Summit Digitel	Largely neutral	U.S. dollar-denominated bonds are fully hedged via cross-currency swaps.
Tata Motors Ltd.	Tata Motors	Largely neutral	Excluding debt at Jaguar Land Rover, about half of the company's debt is in U.S. dollar, which is hedged.
Tata Power Co. Ltd.	Tata Power	Largely neutral	Natural hedge between revenues linked to U.S. dollar and debt in U.S. dollar.
Tata Steel Ltd.	Tata Steel	Largely neutral	Natural hedge between revenues linked to foreign currencies (U.S. dollar, British pound and euro) and debt.
Telekom Malaysia Bhd.	Telekom Malaysia	Largely neutral	Unhedged foreign-currency debt was about 26% of total borrowings as of end 2023, but the company has a low leverage (debt/EBITDA below 1x) and strong cash generation.
Temasek Holdings (Private) Ltd.	Temasek	Largely neutral	Temasek is in a net cash position.
Tenaga Nasional Bhd.	TNB	Largely neutral	About three-quarters of TNB's debt is in Malaysian ringgit; about one-quarter of debt is in foreign currency but no large unhedged exposure.
Thai Oil Public Co. Ltd.	Thai Oil	Largely neutral	60%-70% of debt is denominated in U.S. dollar, the rest in Thai baht. Most of Thai Oil's revenues are linked to the U.S. dollar; the company also uses currency forwards and cross-currency swaps to hedge its exposure to FX risk.
UPL Corp. Ltd.	UPL	Largely neutral	Natural hedge between revenues linked to U.S. dollar and debt in U.S. dollar.
Vedanta Resources Ltd.	Vedanta	Largely neutral	Natural hedge between revenues linked to U.S. dollar and debt in U.S. dollar.
Vena Energy Capital Pte. Ltd.	Vena Energy	Largely neutral	The currency risk is mitigated by a full swap of a US$500 million medium-term note to Japanese yen. As the bulk of the group's cash flows are yen-denominated, this provides a natural hedge.
Wipro Ltd.	Wipro	Largely neutral	Natural hedge between revenues linked to U.S. dollar and debt in U.S. dollar.
SSEA--South and Southeast Asia. Source: S&P Global Ratings.

Editor: Jasper Moiseiwitsch

Digital Designer: Tim Hellyer

Related Research

Credit FAQ: A Look At Why South And Southeast Asian Firms Are Standing Up To A Strong Dollar, May 16, 2024
Global Economic Update: Policy And Exchange Rate Forecasts Revised On New Fed Funds Rate Expectations, May 3, 2024
Asia-Pacific Sector Roundup Q2 2024: A Nuanced Recovery, March 28, 2024
Credit FAQ: 15,000 Rupiah To One U.S. Dollar Could Be The Level To Watch For Rated Indonesian Companies, Sept. 10, 2015

This report does not constitute a rating action.

Primary Credit Analyst:	Xavier Jean, Singapore + 65 6239 6346; xavier.jean@spglobal.com
Secondary Contacts:	Fiona Chen, Singapore + 65 6216 1085; fiona.chen@spglobal.com
	Spencer Ng, Singapore +65 6597-6100; spencer.ng@spglobal.com
	Isabel Goh, Singapore + 65 65976110; isabel.goh@spglobal.com
	Mary Anne Low, Singapore + (65) 6239 6378; mary.anne.low@spglobal.com
	Cheng Jia Ong, Singapore + 65 6239 6302; chengjia.ong@spglobal.com
	Minh Hoang, Singapore + 65 6216 1130; minh.hoang@spglobal.com

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