IOF: The 4 points of attention to retail, according to XP Investimentos

The changes in IOF announced by the federal government last week have limited impacts on Retail companiesin the view of XP Investments – At least so far.

However, analysts Daniella Eiger and Laryssa Sumer, who sign the house report, believe measures can bring challenges to the sector in the medium term, with an increase in capital cost, inflationary pressure and/or weaker turnover capital dynamics.

Analysts project three main implications in the medium term:

• A higher cost of capital;
• Higher costs, as suppliers can pass on higher funding costs to retailers;
• Weaker working capital dynamics with lower terms with suppliers.

IOF’s 4 points of attention in retail

Analysts punctuate four main topics that are points of attention in the retail sector.

The first of these refers to the drawee risk operations. XP points out that this is a relatively common operation in the sector, even though most are associated with suppliers financing instead of retailers themselves.

“In this sense, we note that the increase can lead to higher costs, if suppliers pass the highest financing costs to the prices and/or worst dynamic working capital, if suppliers decide to renegotiate the terms,” ​​analysts put.

The second point is the increase in IOF rates on credit operations. The government increased the IOF to 0.95% + 3% per year, from 0.38% + 1.5% per year, although some lines of credit remain exempt.

On average, XP estimates that 60% of retailers’ debt is exempt from IOF taxation and should look for alternative financing lines when credit renewal occurs.

Added to this, there is the taxation of foreign loans short term. XP points out that PS retailers have limited exposure to short -term foreign debt, with the Azzas 2154 (Azza3) having the highest exposure (36% of total debt).

Finally, analysts highlight the increase in IOF rates on anticipation of receivables:

“According to news, taxation on such operations is uncertain, as it can be seen as a commercial operation instead of a credit operation 3 acquirers are not financial institutions and therefore do not offer credit. In addition, these companies usually finance such operations through FIDCs, which are exempt from IOF,” they say.