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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

Reliance Industries

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


Maruti Udyog

Forward Contracts

6411 (INR-JPY)

70 ($-INR)

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.

Arvind Mills

Forward Contracts

152.98 ($-INR)

2.25 (GBP-INR)

5 (INR-$)



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

Options Contracts

Range barrier options

4 ($-INR)

8 (INR-$)

2 ($-INR)

3 (Eur-INR)




Revenues denominated in these


Tata Consultancy Services

Forward Contracts

15 (Eur-INR)

21 (GBP-INR)


Option Contracts 8 3 0 ($-INR)

47.5 (Eur-INR)

76.5 (GBP-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


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