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

Abstract:

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.

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

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:

  Page No.
Introduction 1
HCL Technologies Limited 2
Forex Strategy Followed by HCL Tech 2
Fluctuations in the Forex Market 3
Impact of Forex Fluctuations on HCL Tech 3
Steps Taken by HCL Tech 4
Future Outlook 6
Exhibits 7

Keywords:

Currency risk, Foreign exchange hedge accounting policy, HCL Tech, Currency hedging, Forex market, Exchange rate, Mark to market, US GAAP, Forex exchange risk.

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