MTM operating loss of $7 m on hedging: Infy

Infy has hedged positions of USD 760 million. Their mark-to-market operating losses are of USD 7 m on hedging. The company is looking at reducing onsite buisness by 1% every year.

Infosys CFO Mr.V.BALAKRISHNAN Given a reply to CNBC …

Q: It’s been a more calm quarter for the rupee - what have you factored in by way of a hedge, this time around?

Balakrishnan: We have around USD 760 million of hedging positions as of March-end. It was USD 1.14 billion in the December quarter. We believe that technically the Rupee should depreciate because the trade deficit is still very high - it could be close to USD 100 billion this year. Oil price is still high at USD 110/bbl - India imports around USD 70 billion to USD 75 billion of oil every year, and also the inflows are coming down. If you look at the last two months, the co-relation between the BSE index and the Rupee-Dollar rate is almost same; that is one on one.

So the inflows are coming down; technically the rupee could depreciate, but the inflation is very high. So probably the RBI could appreciate the currency. To manage it, we believe that in the short term, it’s going to be volatile and going to move both ways. We have to actively manage our exposures and hedge it properly. In fact, the mark-to-market dollar instrument - that is one of the biggest concerns in the whole market today - about the hedging losses, the mark-to-market dollar hedging positions.

Every quarter, we adapt Accounting Standard 30 (AS-30); there is a big debate whether to adapt this Standard or not, I am disappointed with the Institute, because they are making it mandatory from 2011 - that Standard should have made mandatory immediately.

All the companies who have mark-to-market their hedging positions or at least tell the investors what is the impact of mark-to-markets, today the information flow is not there, and it’s not fair to investors.

So we adapt that Accounting Standard; we are marking to market all our instruments like what we were doing in the earlier quarters, and for us, the impact is not material; we had a non-operating loss of around USD 12 million - we had a benefit of USD 5 million for the operating income and our net income is only USD 7 million