Currency Hedging at HCL Tech
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Case Details: |
Price: |
| Case Code |
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FINC074 |
For delivery
in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges
Themes
Cash Management
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| Case Length |
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9 Pages |
| Period |
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2007-2009 |
| Pub. Date |
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2011 |
| Teaching Note |
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Not Available |
| Organization |
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HCL Technologies Limited |
| Industry |
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Information Technology |
| Countries |
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India |
Abstract:
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The case study 'Currency Hedging at HCL Tech' discusses the currency hedging undertaken by HCL Technologies Limited (HCL Tech). The company suffered huge foreign exchange losses, due to unexpected high volatility of USD/INR exchange rate. The foreign exchange losses not only had huge fluctuations on the reported profits of HCL Tech but also created a mismatch between the reported revenues and the foreign exchange losses/gains. To overcome such problems, HCL Tech came up with certain measures like cancellation of currency hedging contracts and adaption of cash flow hedge accounting in conformity with the US GAAP.
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This case study provides in depth understanding of the situation in which HCL Tech suffered huge foreign exchange losses and the measures taken by the company to overcome from it. In addition to this, the case study provides the views of stock broking houses and analysts on the decisions taken by HCL Tech.
Issues:
» Have an in-depth understanding of hedging currency risk
» Understand the advantages and disadvantages of hedging currency risk
» Have an understanding of HCL Tech’s foreign exchange hedge accounting policy
» Understand the currency hedging strategies adopted by HCL Tech in accordance with Rupee fluctuations
» Understand the forward cover cancellations of HCL Tech
» Understand the implications of forward cover cancellations by HCL Tech.
Contents:
Keywords:
Currency risk, Foreign exchange hedge accounting policy, HCL Tech, Currency hedging, Forex market, Exchange rate, Mark to market, US GAAP, Forex exchange risk.
Introduction
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