Infosys gets over 98% of its total revenue from exports. Infosys use forwards and range barrier options to hedge their foreign currency revenue exposure of Rs 7679 cr. While their current hedge ratio (30.08%) is significantly lower than their historical average and the impact of currency movement can be judged by a statement in their annual report - 'Every 1% movement in the Rupee against dollar has an impact of approximately 40bps in operating margin'.
Farward Contracts
Options Contracts
4($-INR)
8(INR-$)
2($-INR)
3(Eur-INR)
18
36
971
NATCO
TANSLATION METHOD
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried. In terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
RISK MANAGEMENT POLICY
The company continues its policy of not hedging any of its import / export transactions. It has been the company's experience that such a policy will, over a period of time, neutralizes the risks associated with foreign currency transactions. The company is operating in an environment where, as of now, financial costs are rising. The company is attempting to reduce the financial costs by contracting new loans at cheaper rates. Wherever possible, attempts are made to enhance the product pricing to cover rising costs.The company has a system of re-cycling the various solvents that it uses to ensure improved productivity and yields and at the same cutting costs.
TCS :
TCS derives over 40 per cent of its revenues from fixed price billing, the highest among top-tier Indian IT players. Of the two key methods of billing, fixed price contracts are done on the basis of proportion of work completed, while time and material billing is based on resources deployed in the project, often on a per hour basis. The ability to price a contract on fixed billing requires a clear ability to forecast the timelines, resources and expertise required to complete a project. This can help predict cash flows and formulate a suitable hedging strategy. Increasingly, international clients are demanding such a pattern from Indian vendors
TCS gets over 90% of its total revenue from exports. Major exposures exists in the $/INR domains. Its net exposure in (all) foreign currency was Rs. 13953 cr for FY 09. TCS favors the use of options as a hedging instrument and has currently deployed Rs. 7203 cr worth of short and long terms hedges. Thus it has hedged approximately 51.63% of its total exposure.
TCS has hedged about $2.5 billion - nearly 55 per cent of its revenues - at about Rs 41 to the dollar, partially mitigating the effect of the appreciating rupee. Also, compared to the 7 per cent appreciation in the April-June quarter, the rupee has traded in a narrow band of Rs 39.5-40.5 for most part of the second quarter. This may reduce the impact of currency fluctuation on the sequential numbers.
Porsche and Mercedes has entered into farward contracts to mitigate exchange the risk
Porsche expects $12.5M in US sales over the next month that that it would like to repatriate back to Germany. Porsche is worried that the dollar might depreciate over the next month. Mercedes need to acquire $12.5M to meet its payroll for its Tuscaloosa, Alabama plant .Mercedes is worried that the dollar might appreciate over the next month. Both Porsche and Mercedes could avoid their potential currency risk by entering into a forward contract.
Porsche approaches Deutsche Bank with an offer to buy Euro 30 days forward. M Deutsche Bank negotiates a price of $1.25 per Euro approaches Deutsche Bank with an offer to sell Euro 30 days forward On Settlement day, Porsche delivers its $12.5M and acquires 10M Euro. Had it instead bought Euro in the spot market, It would've needed $12.9M to buy 10M Euro - Porsche "gains" $400,000 . that Mercedes has an equal "loss" of $400,000.
Arvind Mills:
Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction. Monetary items denominated in foreign currencies at the yearend are restated at year end rates. Non-monetary foreign currency items are carried at cost
All long term foreign currency monetary items consisting of loans which relate to acquisition of depreciable capital assets at the end of the year have been restated at the rate prevailing at the balance sheet to or deducted from the cost of the assets as per the dated March 31, 2009. Exchange rate difference on other long-term foreign currency loans is carried to Account' to be amortized up to the period of loan or up
to March 31, 2011 whichever is earlier Any income or expense on account of exchange than as mentioned in above is recognized in the profit and loss account. Expenses of overseas office are translated and accounted at monthly average rate.
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AVS TRANWORKS LIMITED
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign Currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Foreign currency monetary items are reported using the closing rate. Non-monetary items, which are carried in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
Exchange differences arising on the settlement of monetary items or on reporting companies Monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they occur
Equity capital and all other balance sheet items at closing rate of exchange, profit and loss items at average rate and resultant translation gain/loss is shown separately in Balance sheet
They do have different interest rate swaps and forward contracts for different subsidiaries they have compass BPO FZE and Minacs phillipes inc,Minac KFT etc.
