hedgemantra - solution for forex hedging woes
DESCRIPTION
Hedgemantra is a simple and effective tool that helps in evaluating, analyzing various alternatives to hedge one's forex exposure. https://www.hedgemantra.com/ For further information/quesries, please write to us on [email protected]TRANSCRIPT
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Hedgemantra fx Hedging Alternatives Evaluation
Portal
www.hedgemantra.com
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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
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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.
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USD – INR Fluctuation
Feb 7, 2013 - Feb 5, 2014 9.308 (17.51 %)
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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%)
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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
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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.
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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/$
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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
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Mechanics
• Currency• Exposure Amount & Due date• Payable or Receivable ?
Input
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Input form
Information required: Amount, Currency and due date of exposure
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Output form A comprehensive output form showing the cash flow projections using various hedging instruments.
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Options The output form showing the cash flow projections using Options based on Hedgemantra’s Future Spot Price prediction.
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Futures The output form showing the cash flow projections using Futures based on Hedgemantra’s Future Spot Price prediction.
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Forward ContractThe output form showing the cash flow projections using Forward Contracts.
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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 .
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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.
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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