Hedgemantra fx Hedging Alternatives Evaluation

Portal

www.hedgemantra.com

Reality Check 2012 - 2013

Indian Export Trade Volume $ 309.1 bn

Indian Import Trade Volume

$ 488.6 bn

SME Segment’s contribution to Exports and Imports

45%

Source: Economic Times

45%55%

Indian Foreign Trade 2012 -2013

Small/ Medium EnterprisesOther large enterprises

Total Exports and Imports $ 897.7 bn

Reality Check

Most small & medium enterprises who have foreign exchange exposure.

• Do not hedge their exposure due to limited knowledge on the mechanics of hedging

OR

• Average loss on foreign exchange fluctuations is considered as input cost in product costing

Hence a potential $ 359 billion is unhedged.

USD – INR Fluctuation

Feb 7, 2013 - Feb 5, 2014 9.308 (17.51 %)

Other currencies Fluctuation

GBP 23.22 (27.69%) JP YEN 0.16 (31.37%)

Argentinian Peso ( 29.05%)

All exchange rate base to the INR

Euro ( 13.88%)

What does all this mean to YOU?

An company in the auto components industry has a monthly forex exposure of $100,000 on account of

imports

Forex Exposure Spot rate Transaction Date

Spot rate Maturity Date

30 May 13 1 Nov 13

$ 100,000 Rs 56.0847 / $ Rs 61.7286 / $

Exchange Loss $ 100,000 * ( 61.7286- 56.0847) Rs. 564,390

Rs 564,390 is 9.15% of import value

Hedging 101

• Forex Hedging means protecting against potential losses on account of exchange rate (Fx) fluctuations.

• Fx rates are highly volatile and change real time.

• Some changes are in favour while others result in losses.

• The objective of hedging is not to make speculative gains but to protect against possible losses due to Fx rate fluctuations.

What Hedging does for YOU?

Payment(Without Hedging ) $100,000 * Rs 61.7286 Rs 61,72,860

Payment (With Hedging ) * $100,000 * Rs 57.34 Rs 57,34,000

Potential Savings Rs 438,860

* Hedging is done using forward contract

An company in the auto components industry has a monthly forex exposure of $100,000 on account of imports

Forex Exposure Spot rate Transaction Date

Spot rate Maturity Date

Forward Rate

30 May 13 1 Nov 13

$ 100,000 Rs 56.0847 / $ Rs 61.7286 / $ Rs 57.34/$

Hedgemantra• Hedgemantra is a platform to evaluate hedging

alternatives and provide all information required to make an informed Hedging decision

• Forward contracts, Futures and Options are used to evaluate the cash flow projections.

Forward Contracts

•Issued by banks •Personalized instruments

Futures•Issued and traded on the NSE/BSE•Available in USD/Euro/GBP and Yen

Options•Issued and traded on the NSE/BSE•Available only in USD

Mechanics

• Currency• Exposure Amount & Due date• Payable or Receivable ?

Input

Input form

Information required: Amount, Currency and due date of exposure

Output form A comprehensive output form showing the cash flow projections using various hedging instruments.

Options The output form showing the cash flow projections using Options based on Hedgemantra’s Future Spot Price prediction.

Futures The output form showing the cash flow projections using Futures based on Hedgemantra’s Future Spot Price prediction.

Forward ContractThe output form showing the cash flow projections using Forward Contracts.

UnhedgedThe output form showing the cash flow projections when the exposure is unhedged where in the future spot price provided by Hedgemantra/user is used .

Comparative AnalysisIn case the user has a different Future Spot Price (FSP) the user is free to use the same to compute the cash flow projections.

Hedgemantra provides a comparitive analysis between the cash flow projections based on both the FSPs.

Value added services1 year worth of historical data referenced by RBIhttps://hedgemantra.com/forex

Crisp, 500 word blogs on various forex events- past and present from across the globe. https://hedgemantra.com/blog/

Easy videos on how to use and navigate through Hedgemantra

https://hedgemantra.com/video_tutorials

Quick, effective, basic 101 lessons on the various hedging instruments

https://hedgemantra.com/learnabout