Five Companies Primed to Benefit from a Strengthening Dollar

The US dollar’s rapid appreciation since Donald Trump’s re-election has refocused attention on currency-driven market shifts. On November 7, 2024, the dollar recorded its largest single-day gain in eight years, following the Trump administration's anticipated return to tougher trade policies. This currency surge is being further propelled by fears of import tariffs, including a 10% global tariff and a 60% duty on Chinese imports, driving up the dollar index by 1.5% to reach multi-month highs.

In response, central banks across Asia, such as India’s RBI, have taken measures to stabilize their currencies, with actions like dollar sales through state banks to support the rupee. Meanwhile, the yuan has weakened considerably, and other Asian currencies face similar downward pressures. While a robust dollar typically triggers capital outflows from emerging markets, some sectors can turn this situation into an opportunity—especially companies with strong export exposure. Here are five Indian companies poised to benefit as the dollar strengthens.

1. Dr. Reddy’s Laboratories

Dr. Reddy’s Laboratories, a leading Indian pharmaceutical company, is positioned to gain from a stronger dollar. Known for its comprehensive portfolio that includes oncology, gastroenterology, and cardiovascular medications, Dr. Reddy’s has an extensive reach across more than 25 countries, including the US, Europe, and various emerging markets. The company operates within both the generic and branded drug markets, making it a significant player in the global healthcare sector.

The depreciated rupee could work to Dr. Reddy’s advantage by enhancing its export revenue in dollar terms, particularly as the US remains its largest market. With over a dozen R&D facilities and a focus on innovation, the company has developed unique therapies in areas like immuno-oncology and cell and gene therapies. Dr. Reddy’s recent investment in digital therapeutics reflects its commitment to cutting-edge healthcare solutions. Additionally, the company’s sustainability goals—like achieving carbon neutrality by 2030—align well with global corporate responsibility standards, potentially attracting investment from environmentally conscious funds.

Financial Highlights (FY20–FY24):

• Revenue: Rs. 280,111 million in FY24, reflecting consistent year-on-year growth.

• Net Profit: Rs. 55,779 million, with a CAGR of 23.4%.

• Net Profit Margin: Improved to 19.9% from 10.2% in FY21.

A rising dollar positions Dr. Reddy’s well within the pharmaceutical export market, as both the currency tailwind and a favorable US government policy toward Indian generics could drive substantial gains.

2. Sun Pharma

Sun Pharma, India’s largest pharmaceutical company, is another potential beneficiary of a strengthening dollar. It manufactures a wide range of products, including generics, branded generics, and specialty drugs. With 43 manufacturing facilities worldwide and a distribution network spanning 150 countries, Sun Pharma is well-equipped to respond to global demand surges.

The US, Sun Pharma’s largest revenue generator, accounts for over 60% of its annual income, making dollar appreciation a significant factor in its financial performance. As the company expands its specialty drug portfolio and strengthens its generics offering, a stronger dollar will enhance its profit margins.

Financial Highlights (FY20–FY24):

• Revenue: Rs. 484,967 million in FY24.

• Net Profit: Rs. 96,484 million, growing at a CAGR of 24.6%.

• Net Profit Margin: 19.9% in FY24.

Sun Pharma’s focus on expanding its specialty product range and achieving productivity gains in India positions it favorably within the global pharmaceutical landscape.

3. Arvind Ltd.

Arvind Ltd., a prominent textile and apparel manufacturer, is another firm well-suited to benefit from dollar strength. As one of the world’s largest denim manufacturers, Arvind also holds licenses for international brands like Tommy Hilfiger and Arrow. This broad international presence, particularly through Arvind Exports, makes the company highly sensitive to currency fluctuations, where a stronger dollar boosts rupee earnings from overseas markets.

With facilities in India and a large export base in Europe, Arvind’s growth potential is amplified by a favorable exchange rate, which improves its profit margins on global sales.

Financial Highlights (FY20–FY24):

• Revenue: Rs. 77,378 million in FY24.

• Net Profit: Rs. 3,526 million, reflecting a net profit margin of 4.6%.

• Growth in Net Profit (5-Year CAGR): 37.8%.

Arvind is actively working on expanding its retail presence and refining its product offerings, aiming to leverage the strong dollar to boost its international sales and profitability.

4. Dixon Technologies

Dixon Technologies is a leading player in India’s electronics manufacturing services (EMS) sector, specializing in consumer electronics, lighting, and home appliances. With an established reputation in global supply chains, Dixon is set to benefit from the stronger dollar, which enhances its revenue from exports and improves its cost-competitive positioning in global markets.

Dixon’s export revenue is expected to rise as a favorable dollar makes its products more attractive. Founder and Chairman Sunil Vachani has ambitious growth targets for Dixon, forecasting a significant increase in exports over the coming years.

Financial Highlights (FY20–FY24):

• Revenue: Rs. 176,909 million in FY24, marking a robust 5-year CAGR of 42.8%.

• Net Profit: Rs. 3,749 million, growing in tandem with revenue.

• Partnerships: Includes agreements with global companies like Rexxam (Japan) and Acer (Taiwan), underscoring Dixon’s strength in global manufacturing.

Dixon’s role in India’s PLI scheme further amplifies its growth trajectory, as the company continues to expand its product portfolio and scale its operations in the rapidly evolving electronics sector.

5. Tejas Networks

Tejas Networks, a telecommunications equipment manufacturer, rounds out our list as a prime candidate for gains from dollar appreciation. As an exporter to over 75 countries, Tejas has a strong global presence in optical aggregation and broadband markets. A stronger dollar directly translates to higher rupee earnings, helping Tejas further its competitive edge in developing regions across Southeast Asia and Africa.

Financial Highlights (FY20–FY24):

• Revenue: Rs. 24,709 million in FY24, reflecting a growth rate of 22.4%.

• Net Profit: Rs. 630 million, recovering from a challenging FY22.

• Export Focus: Tejas is a top player in global optical networking, with plans to enhance its 5G product offerings in emerging markets.

Tejas Networks’ strategic alignment with Tata Group’s innovation goals and India’s goal to localize supply chains makes it an attractive play for investors seeking to capitalize on the rising dollar’s impact on global telecom infrastructure demand.

In Conclusion, Investing in companies that benefit from a rising dollar can be a prudent strategy, as currency fluctuations often offer unique advantages to specific sectors. For Indian exporters like Dr. Reddy’s Laboratories, Sun Pharma, Arvind, Dixon Technologies, and Tejas Networks, dollar strength provides an added boost to revenue streams and profit margins.

However, investors should carefully assess each company’s foreign currency exposure, import costs, and foreign debt levels, as these factors may offset some advantages of dollar gains. For export-focused businesses, though, a rising dollar could mean a strong growth phase ahead.