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Hedging a boon for IT firms amidst currency flux
By siliconindia
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Monday, 23 March 2009, 19:18 IST |
1 Comments
Mumbai: Indian IT companies hope their hedging strategies will help them maintain their profits and revenues amidst the currency volatility prevailing in the country. Software giants Tata Consultancy Services (TCS) and Wipro, have chosen to hedge their receivables for more than a year.
Infosys, which has hedged over $530 million in rolling contracts, considers hedging for not more than two quarters as the company expects the rupee would only depreciate over the short term. "Rising fiscal deficit, falling economic growth, widening trade deficit and political uncertainty in view of the elections are likely to keep the rupee weaker," Infosys CFO V Balakrishnan told The Economic Times. The company deals only in range forward options. Under such an arrangement, exposure of an exporter is limited to the range of the option. Meanwhile, Wipro targets longer term bets in the forex market, as it has $1.8 billion in currency hedges spread over four years until FY13. "We normally cover 50-100 percent of net inflows (foreign currency revenue sans foreign currency expenses) for the next four quarters," said Rajendra Kumar Shreemal, Corporate Treasurer Wipro.
The strategy is also seen in the BPO firm WNS, that has changed its hedging policy since the past two quarters from 18 to 24 months due to higher forex fluctuations. "Every month, we reassess our position for next 24 months. We have hedged over 90-95 percent of our future revenue," said Alok Misra, Chief Financial Officer of WNS.
