Currency Hedging at HCL Tech

            
  
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Case Details:

Case Code : FINC074
Case Length : 9 pages
Period : 2007-2009
Pub. Date : 2011
Teaching Note : Not Available
Organization : HCL Technologies Limited
Industry : Information Technology
Countries : India

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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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Excerpts Contd...

Impact of Forex Fluctuations on HCL Tech

HCL Tech took the forward hedge covers for the next coming 7 to 10 quarters, depending upon the earnings visibility and forex market. As the rupee appreciated from Rs. 44.27 per dollar in January 2007 to Rs. 39.45 per dollar in November 2007, HCL Tech reported a huge forex gain as it had already covered its revenues at around Rs. 44 per dollar...

Steps Taken by HCL Tech

As the company reported on a mark-to-market basis, the gains or losses occurring from the forward hedge covers of future quarter revenues caused huge fluctuations in its reported profits. This also created a mismatch between the reported revenues and the forex losses/gains...

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

Future Outlook

With the cancellation of currency hedges, industry analysts opined that the company's move toward unhedged currency forwards reflected its expectations that the rupee would depreciate against the dollar and sustain at Rs. 47 to Rs. 50 in the short to medium term. But they wondered what the company’s position would be if the rupee appreciated above Rs.47 against the dollar...

Exhibits

Exhibit I (A): Revenue Contribution by Different Services of HCL Tech
Exhibit I (B): Geographies HCL Tech Have Presence in
Exhibit II: Forex Policy of HCL Tech
Exhibit III: Movement of Inflation Rate and Exchange Rate (USD/INR) from January 2007 to December 2009
Exhibit IV: Selected Quarterly Data of HCL Tech (Consolidated)

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