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Wipro averts rupee fluctuation impact

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CIOL Bureau
New Update

BANGALORE: Unlike its rival IT services firm

Infosys,
whose results were impacted by the swinging movements of the rupee,

Wipro

Technologies seems unscathed by the appreciating rupee.






“We plan forward hedging for four to six quarters and so we were able to
reduce the foreign exchange volatility. So there is some sanity with respect to

impact of the rupee on our margins,” said Suresh Senapathy, CFO, Wipro, while

announcing the company's financial

results
here today.






The rupee swung between Rs 44.60 and Rs 45.40 against the dollar last year.





The company has designated forward contracts and options to hedge highly
probable forecasted transactions. Wipro has provisioned zero cost collars to

hedge the exposure to variability in expected future foreign currency inflows

due to exchange movements beyond a defined range.






Last year, the company had forward/option contracts to sell $438 million of
highly probable forecasted transactions. For the year 2005-06, Wipro had hedged

$226 million as a protection against the volatile rupee-dollar fluctuations. The

company said that due to this hedging it has not witnessed any loss due to the

rupee-dollar fluctuations.






For the year 2006-'07 the company has hedged $600 million, taking dollar rate
between Rs 44.50 and 45.50.






The exchange difference measured by the change in the exchange rate between the
inception of forward contract and the date of the balance sheet is applied on

the foreign currency amount of the forward contract and recognized in the profit

and loss account, the company said.






Infosys was not so lucky. Rupee fluctuations put pressure on Infy's annual as
well as quarterly revenues. The company's operating margins took a 3.25

percent beating due to a mix of factors like appreciating rupee, capex of Rs

1000 crore and salary hikes in Q4.






The rupee shot to Rs 45.30 in Q4 compared to Rs 44.22 in the previous quarter.
For FY 06, the impact to operating margins due to currency movements stood at

1.95 percent.






This translated into a loss of Rs 176 crore or $40 million to the company's
annual revenues.






TCS,
which reported its earnings recently, also said that its hedging funds helped in

stemming the currency impact.



















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