Good Health Can’t Wait.

Standalone Financial Statements Annual Report 2014 - 15
NOTES TO FINANCIAL STATEMENTS
(All amounts in Indian Rupees millions, except share data and where otherwise stated)
2.35: HEDGES OF FOREIGN CURRENCY RISK AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to exchange rate risk which arises from its foreign exchange revenues and expenses, primarily in U.S. dollars, British pounds
sterling, Russian roubles and Euros, and foreign currency debt in U.S. dollars, Russian roubles and Euros.
The Company uses forward contracts, option contracts and swap contracts (derivatives) to mitigate its risk of changes in foreign currency exchange rates.
Further, the Company also uses non derivative financial instruments as part of its foreign currency exposure risk mitigation strategy.
In respect of the aforesaid foreign exchange derivative contracts, the Company has recorded, as part of foreign exchange gains and losses, a net gain of
` 1,040 and a net loss of ` 297 for the years ended 31 March 2015 and 2014, respectively.
Hedges of highly probable forecasted transactions
The Company classifies its derivative contracts that hedge foreign currency risk associated with highly probable forecasted transactions as cash flow
hedges and measures them at fair value. The effective portion of such cash flow hedges is recorded as part of reserves and surplus within the Company’s
“hedging reserve”, and re-classified in the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted
transactions. The ineffective portion is immediately recorded in the statement of profit and loss.
The Company also designates certain non derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the
hedge of foreign currency risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such
relationships. Re-measurement gain/loss on such non derivative financial liabilities is recorded as part of reserves and surplus within the Company’s
“hedging reserve”, and re-classified in the statement of profit and loss as revenue in the period corresponding to the occurrence of the forecasted
transactions.
In respect of the aforesaid hedges of highly probable forecasted transactions, the Company has recorded, in reserves and surplus, a net gain of ` 51 and
a net loss of ` 407 for the years ended 31 March 2015 and 2014, respectively. The Company also recorded, as part of revenue, a net gain of ` 810 and a
net loss of ` 946 during the years ended 31 March 2015 and 2014, respectively.
The net carrying amount of the Company’s “hedging reserve” was a gain of ` 46 as at 31 March 2015, as compared to a loss of ` 5 as at 31 March 2014.
The table below summarises the periods when the forecasted cash flows associated with hedging instruments that are classified as cash flow hedges, are
expected to occur:
PARTICULARS
AS AT
31 MARCH 2015
AS AT
31 MARCH 2014
Cash flows in U.S. Dollars (figures in equivalent rupee millions)
Not later than one month 1,250 1,797
Later than one month and not later than three months 5,625 3,595
Later than three months and not later than six months 6,875 5,392
Later than six months and not later than one year 3,750 5,992
17,500 16,776
Cash flows in Roubles (figures in equivalent rupee millions)
Not later than one month 27 -
Later than one month and not later than three months 54 -
Later than three months and not later than six months 81 -
Later than six months and not later than one year 161 -
323 -
151