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Date Submitted: 01/16/2013 03:23 PM
Corporate Hedging for Foreign Exchange Risk
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Table 1: Evidence of Derivative use for Hedging FX Risk in Indian Firms
Note:
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
well.
Maruti Udyog
Forward Contracts
6411 (INR-JPY)
70 ($-INR)
Import/Royalty payable in Yen and
Exports Receivables in dollars.
Currency swaps 124.70(USD -INR) Interest rate and forex risk.
Mahindra and Mahindra
Forward Contracts 350 (INR-JPY)
2(INR-EUR)
27.3($-INR)
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 ($-INR)
2.25 (GBP-INR)
5 (INR-$)
703.67
21.88
Option Contracts 1 2 2.5 ($-INR) 547.16
Most of the revenue is either in dollars
or linked to dollars due to export.
Infosys
Forward Contracts 119 ($-INR) 529
Options Contracts
Range barrier options
4 ($-INR)
8 (INR-$)
2 ($-INR)
3 (Eur-INR)
18
36
971
Revenues denominated in these
currencies.
Tata Consultancy Services
Forward Contracts
15 (Eur-INR)
21 (GBP-INR)
265.75
Option Contracts 8 3 0 ($-INR)
47.5 (Eur-INR)
76.5 (GBP-INR)
4057
Revenues largely denominated in
foreign currency, predominantly US$,
GBP, and Euro. Other currencie include
Australian $, Canadian $, South African
Rand, and Swiss Franc
Ranbaxy
Forward Contracts 2894.589 Exposed on accounts receivable and
loans payable. Exposure in USD and
Jap...