Recently in a conference call, ace investor Rakesh Jhunjhunwala questioned Tata Motors management, asking them for details of their forex hedging. “Why don’t you give us your exact forex hedges? Forex has become such an important part of your profit. It will give us a better assessment of your future profit. Infosys and a lot of companies are giving us the quantity, the rates at which they are hedged,” Jhunjhunwala asked Tata Motors’ management.
Ramakrishnan, the CFO of Tata Motors replied, “This year in the slide presentation, we have added a slide, at least in terms of the impact above and below the EBITDA line…we will try to improve the disclosure details.” However, Jhunjhunwala persisted saying, “I am not just talking about this quarter. What about the coming months? What happens is, you are accounting in pounds, 80% of your sale is in dollars, and you are buying in euro! This is all very complicated. We are at a loss to understand what will happen in future quarters unless the hedges are known.” Ramakrishnan sought to assure Jhunjhunwala, saying, “We have been sharing with you the currency exposure mix in JLR. Around 80% of the operations are exported out of UK. In terms of currencies, about 50% revenue will be dollar dependent or dollar-linked, 25% revenue is euro dependent, 50% of costs are euro-dependent.”
Jhunjhunwala, who is an investor in Tata Motors, then asked Ramakrishnan about the August JLR sales. “Jaguar Land Rover continues to roar,” said Ramakrishnan. Shares in Tata Motors have gained over 4% in trade today, and at the time of writing this story were trading at Rs 525.60 on the National Stock Exchange.