High rates may delay capex: Hero

RAVI Sud, chief financial officer at Hero MotoCorp, India’s largest motorcycle maker, has said that the RBI’s interest rate hike for the seventh time this year may lead to delays or deferment of capital expansion plans.

“Down the line, when inflation is under control, global factors like the European situation improve and when the industry starts to grow, there may be a capacity shortage,“ he said. On the impact of the rate hike on Hero MotoCorp, Sud said: “In our industry, a major portion of the sales come from rural market. The rural economy is thriving with good agriculture, high exports and schemes from the government.“ On the recent depreciation of the rupee, he said: “As a country, we are a net importer. Our biggest import is oil.

So, with a depreciating rupee, the impact on the overall economy is more inflationary. I don’t think the RBI will allow the rupee to depreciate below the Rs 50 mark as then they are fighting a lost battle, and the interest rate increases will be of no use.”