HCL Technologies, India's fifth largest IT services firm, may incur forex losses between Rs 280 crore (Rs 2.8 billion)and Rs 320 crore ($65-75 million) for the fourth quarter ended June 30, 2008, owing to a weak rupee that fell 7.3 per cent (end-of-period) in the April-June quarter.
As a result, analysts expect a sharper decline in its quarter-on-quarter profits.
The company had hedged $2.5 billion as of March 2008, but unwound its position reducing its exposure to $1.7 billion as on June 30. The unwinding resulted in a loss.
An analyst tracking the firm said: "This was expected as HCL Tech had a major portion of its hedges in forward cover. Since the company has unwound $540 million of forward covers, a major part of which will show up in other income.
"We had assumed a 20 per cent sequential decline in profits for HCL. But after this, we are expecting a 50 per cent decline."
The company will continue to take this impact for the next 10 quarters as it was hedged for that period.
Incidentally, for the financial year ended June 30, 2007 HCL Tech had recorded, a forex gain of $79.2 million (about Rs 340 crore).
TCS and Wipro are the other two firms that have hedged around $2 billion and $3.5 billion respectively. Analysts predict that TCS can manage its hedging loss/gain as 80 per cent of its covers are in options (rather than forward contracts).
Wipro is likely to be hit badly. "With the rupee-dollar volatility the firms will have to be very cautious and may cut down its exposure," said an analyst from a leading brokerage house.
