Currency Hedging at HCL Tech
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"In this quarter (Apr-Jun 2009), we have cancelled some hedges that were to mature by December 2009. These were the same hedges that were taken in late 2007 and early 2008 before the global meltdown took place. But the forex losses are already reflected in the P&L account to the extent these are marked-to-market and the rest are reflected in the balance sheet. They will flow through the P&L over the next seven quarters, irrespective of the cancellation of these hedges." 1
-Anil Chanana, EVP, Finance, HCL Technologies Limited, May 2009.
HCL Tech, which was known to hedge heavily, had a forward hedge cover of US$ 1.30 billion at the end of the third quarter of FY09.2 However, this went down to US$ 813 million at the end of the fourth quarter of FY09. Canceling of forward cover3 was not new to the company - in FY08, it unwound a US$ 540 million cover, incurring a cash loss of US$ 9 million4 in the process.
1] Shivani Shinde, "HCL Tech Plans to Cancel Rs.3,000 Crore Worth of Hedges," www.business-standard.com/india/storypage.php?autono=358290, May 16, 2009.
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