The cost of raw materials has increased significantly and that is impacting the competitiveness of this sector. There is also a slowing of demand in the European market due to repeated waves of pandemic. There is growing competition from other exporting countries. The operating advantages for this industry are cheap and skilled labor, supportive policy, and increasing investments.

This industry is a net exporter. They have revenues primarily in USD and Eur with some sizable portions in GBP and JPY. They do also have some imports for raw materials. Fx volatility has a huge impact on their profitability. So making a proper budget and managing their Fx effectively remains the key concern of companies in this industry. Identifying the cycles, the risks and using this information to build an effective hedging strategy are important for this industry.

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Client Scenario

This client with a strong brand in the Textile and Fashion Industry has exposure in both Imports and Exports. They did not have a system of structured hedging and so neither were they able to extract the value they could. At this stage, we came on board as their advisor. We understood their future exposures, re strategized on the Risk Management Policy, and drew out a plan. We started hedging for our client seizing the opportunities in the market. Over a period they consistently made profits. We managed their exposure in such a way that they have profits booked for the future in their books.

Another area where they were facing a big challenge was to get fair rates while converting their FC at the time of taking PCFC. We worked with their team while they were negotiating with the banks, guided the team and also did capability building for the team so that the future negotiations with the banks would be in their favour. In this area too our client has saved extensively.

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Hedging Regulations - Importers, Exporters and Foreign Currency Borrowers

1st July 2022, 3 pm IST onwards

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