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Corporate Hedging for Foreign Exchange Risk
Table 1: Evidence of Derivative use for Hedging FX Risk in Indian Firms
1. $-INR Forward contracts denote selling of USD forwards to convert revenues to INR. INR-$
Forward contracts denote buying of USD forwards to meet USD payment obligations.
2. $-INR Option contracts are Put options to sell USD. INR-$ are Call options to buy USD
Instruments Currency(mn) Rs (Cr) Nature of exposure
Currency Swaps 1064.49
Options Contracts 2939.76
Forward Contracts 5764.10
Earnings in all businesses are linked to
USD. The key input, crude oil is
purchased in USD. All export revenues
are in foreign currency and local prices
are based on import parity prices as
Import/Royalty payable in Yen and
Exports Receivables in dollars.
Currency swaps 124.70(USD -INR) Interest rate and forex risk.
Mahindra and Mahindra
Forward Contracts 350 (INR-JPY)
Trade payables in Yen and Euro and
export receivables in dollars.
Currency Swaps 5390 (JPY-INR) Interest rate and foreign exchange risk.
Option Contracts 1 2 2.5 ($-INR) 547.16
Most of the revenue is either in dollars
or linked to dollars due to export.
Forward Contracts 119 ($-INR) 529
Range barrier options
Revenues denominated in these
Tata Consultancy Services
Option Contracts 8 3 0 ($-INR)
Revenues largely denominated in
foreign currency, predominantly US$,
GBP, and Euro. Other currencie include
Australian $, Canadian $, South African
Rand, and Swiss Franc
Forward Contracts 2894.589 Exposed on accounts receivable and
loans payable. Exposure in USD and