Depreciating rupee forces Infosys to slash hedging amount

January 13th, 2009 - 9:10 pm ICT by IANS  

Bangalore, Jan 13 (IANS) A depreciating rupee has forced IT bellwether Infosys Technologies Limited to reduce its exposure to hedging in the currency market to $576 million from $932 million for the next two quarters, a senior executive said Tuesday.”We have brought down our hedging amount in the forex market to $576 million to minimise the risk of currency rate volatility for the next two quarters (January-June) of 2009,” Infosys chief financial officer V. Balakrishnan told IANS here.

Another reason for lowering the hedging amount is that the company does not see much fluctuation in the currency market during the coming months from the present range of Rs.48-50 against a dollar.

“We have taken a view that the rupee will not substantially appreciate from the range it is currently during the next two quarters,” Balakrishnan stated on the sidelines of a media briefing on the company’s financial performance for the third quarter (October-December) of the fiscal 2008-09.

During the quarter, the company suffered a forex loss of Rs.2 billion (Rs.200 crore/$41 million) due to hedging at mark-to-market rate when the rupee depreciated to Rs.48.71 from Rs.46.97, a difference of Rs.1.74.

“Our non-operating income was impacted due to rupee depreciation, cross-currency fluctuation and lower utilisation rate. Though operating margin increased by two percent to 35.1 percent in the third quarter from 33.1 percent in the second quarter, the net impact was 2.3 percent due to hedging at higher rupee and translation loss,” Balakrishnan clarified.

Of the $576 million, the company will earmark 50 percent for options and 50 percent for forward cover.

In the second quarter (July-September) too, the company suffered a forex loss of $28 million (Rs.1.26 billion) as the rupee weakened to Rs.46.97 from the average of Rs.44.50.

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