HCL Technologies set to take $65-75m forex hit

The announcement of a forex loss by HCL Technologies only dampened investor sentiment further on a day that saw IT bellwether Infosys take a huge beating despite announcing a 21% year-on-year profit growth for the April-June quarter.
In a departure from the norm so far, the smaller IT services firm said it expects to post a loss of $65-75 million on account of the rupee-dollar movements last quarter.

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As of March 31, HCL Technologies had hedges worth $2.5 billion.

During the April-June quarter, it unwound $540 million worth of forward covers, incurring a cash loss of $9 million. It also incurred mark-to-market (MTM) losses on the cover outstanding.

A statement from the company said, with these losses, the 'other comprehensive loss' in its balance sheet will swell to $114 million.

For the full year ending June 30, the company expects forex losses of $67-77 million, against a gain of $79.2 million last fiscal.

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The local currency depreciated by as much as 7.3% against the greenback during the quarter, sending over-hedged companies such as HCL and Wipro into a tizzy. These companies are likely to take hits since they had estimated the greenback at around Rs 40 levels, against Rs 43 now.

In June, DNA Money had projected forex losses fuelled by the depreciating rupee to trim IT company's profits substantially. Wipro, for instance, had $3 billion worth of outstanding hedges as on March 31, 2008, on which it faced a mark-to-market cash-flow hedge losses of Rs 109.7 crore. In comparison, TCS had $2.2 billion worth of hedges, while Infosys had a forex cover of $760 million in March.