INTERNATIONAL FINANCE

CIA 3: GROUP CASE PRESENTATION: FOREIGN

EXCHANGE RISK MANAGEMENT &
INTERNATIONAL INVESTMENT AND FUND
RAISING
CLASS AND SECTION: 3rd Semester, CF1
NAME REGISTRATION NUMBER ROLE PLAY
ANIKET MISHRA 19MBAR0633 TREASURY OFFICER

ANNAVARAPU ANIL KUMAR REDDY 19MBAR0256 Risk Manager

ANNUSHKA DEEPESH GOVIL 19MBAR0136 Derivatives Expert

ANURAG CHETIA 19MBAR0072 Internal Hedging Expert

Data Scientist / Business Intelligence /
APARNA RAVICHANDRA 19MBAR0198 Analytics
ASHNA PARVEEN 19MBAR0609 Authorised Dealer/Banker

ASHUTOSH NAHAR 19MBAR0243 CFO

 INTRODUCTION
• Reliance Industries Limited (RIL) is an Indian multinational conglomerate company headquartered in Mumbai, Maharashtra, India.
• On 22 June 2020, Reliance Industries became the first Indian company to exceed US$150 billion in market capitalization after its
market capitalization hit ₹11,43,667 crore on the BSE.
• Reliance continues to be India's largest exporter, accounting for 8% of India's total merchandise exports with a value of ₹1,47,755
crore and access to markets in 108 countries. 
• Hindustan Petroleum Corporation Limited (HPCL) is an Indian oil marketing company and a subsidiary of ONGC with its
headquarters in Mumbai, Maharashtra.
• The crude oil import for HPCL’s refineries is approx. 220 thousand barrels per day (11.0 Million tons per annum).
• Bharat Petroleum Corporation Limited (BPCL) is an Indian public sector oil and gas company headquartered in Mumbai,
Maharashtra.
• The total crude oil requirement of BPCL group Refineries (Mumbai, Kochi, Bina, Numaligarh) is approximately 39 MMTPA.
Approximately 20 % of crude oil is available indigenously and balance crude is imported.
TREASURY OFFICER
 RISK MANAGER
• Reliance Industries Ltd(RIL):The company has adopted a three lines of defense model to enable
continuous and real time assurance on key risk exposures and the ongoing effectiveness of controls.
1) First line of defense 2) Second line of defense 3) Third line of defense
Risk evaluation techniques
1) Value at risk 2) Stress or scenario test 3)Price value of a basis point
• Hindustan petroleum corporation ltd(HPCL)
1)The corporation has a Forex Risk Management Cell (FRMC) which actively review the forex and
interest rate exposures.
2) The Corporation does not uses derivative financial instruments for trading or speculative
purposes
• Bharat petroleum corporation Ltd(BPCL):International Trade and Risk Management (ITRM)
1)set-up procures indigenous as well as imported crude
2)Oils through term and spot contracts for BPCL group refineries
 DERIVATIVES EXPERT

• Reliance Industries Limited uses futures, forwards, options and swaps to manage its foreign exchange
exposures. Since the company has foreign currency liabilities, use of swaps is appropriate in such cases.
However, it uses forwards and futures on a larger scale to mitigate foreign exchange risk on the net foreign
currency payables relating to import of crude oil feedstock and foreign debt.
• The company also uses options on a small scale to hedge foreign currency risk.
• Hindustan Petroleum corporation limited Low margin of net exposure and thin exchange loss on net profit
has resulted in choosing only forward contract, kept remaining exposure un hedged to manage foreign
exchange risk. USD, GBP, EURO, JPY, AUD, CNY, SGD and CHF were the currencies used for international
operation.
• It is exposed only one majorly traded currency that is USD. The Corporation enters into derivative contracts for
hedging purpose, to mitigate the commodity price risk.
• Bharat Petroleum Corporation Limited Freight costs on import of crude oil are being hedged in order to
protect BPCL from adverse price movement of international shipping freight rates.
• Refinery margins are hedged by entering into derivatives contracts viz. Swaps, with BPCL’s registered
counterparties through Over-the-Counter transactions, at fixed prices for future months.
 INTERNAL HEDGING EXPERT
Internal Hedging Techniques
Leading (advancing of payment): do when foreign currency is appreciating
Lagging (delay/ postponing payment): use it when foreign currency is depreciating
Exposure netting (creating opposite exposure)
Invoicing in domestic currency
Sourcing: RM and sale of output having common currency denominator
External Hedging Techniques
Forward(long or short), futures(long or short) and options(call or out), money market(borrow in domestic
currency – convert it in foreign currency at spot rate – invest foreign currency in money market – use the
proceeds to pay liabilities in foreign currency)
• RIL can hedge using LAGGING technique
• HPCL can hedge using MONEY MARKET
• BPCL can hedge using FORWARDS
 DATA SCIENTIST ANALYTICS
(1 month)
PARTICULARS USD/INR EUR/INR JPY/INR
MEAN 71.612 88.218 0.704
MEDIAN 74.87 88.376 0.707
STANDRAD DEVIATION 0.59 0.59 0.006
1 MONTH HIGH 75.126 89.03 0.7095
1 MONTH LOW 73.129 87.057 0.692
 AUTHORIZED DEALER
PARTICULARS SPOT RATE 1MONTH 3 MONTH 6MONTH BROKEN DATE 2
FORWARD FORWARD FORWADS MONTHS
USD 73.010/73.03 73.45/73.47 73.93/73.96 74.7825/74.8125 73.675/73.715
Spread= .02 Spread = .02 Spread= 0.03 Spread= 0.03 Spread= 0.04

EUR 86.349/86.402 86.53/86.58 87.20/87.28 87.78/87.85 86.865/86.93

Spread= 0.053 Spread= 0.05 Spread = 0.08 Spread = 0.08 Spread= 0.065

JPY 0.6908/0.6921 0.6914/0.6927 0.6942/0.6957 0.6980/0.6996 0.6928/0.6942

Spread= 0.0013 Spread= 0.0013 Spread= 0.0015 Spread = 0.0016 Spread= 0.0014
 CHIEF FINANCIAL OFFICER
• Reliance industries is using external hedging strategies to mitigate risk but
they should internal hedging strategies as they have more outflow than inflow
which will help them to minimize the risk.
• HPCL is using external hedging strategies to mitigate risk and they should
continue to do the same.
• BPCL is using external hedging strategies like SWAPS to mitigate risk. They can
also enter into futures and forwards contracts so that they can minimize
foreign currency exposure.
 RISK MITIGATING FRAMEWORK
COMPANIES INTERNAL HEDGING EXTERNAL HEDGING RECOMMENDATIONS
STRATEGIES STRATEGIES
RIL N/A Forwards, futures, options They can internal hedging
strategies as they have more
outflow than inflow which
will help them to minimize
the risk.

HPCL N/A Forwards No change

BPCL N/A OTC- swaps They can enter into forwards
and future contacts.
 INTERNATIONAL INVESTMENT AND FUND
RAISING
• International investing refers to holding securities issued by companies or governments in
countries other than your own.
• Owning foreign assets also exposes investors to unique risks such as those that stem from
changes in exchange rates, foreign interest rates, and geopolitical events.
• International fundraising is borrowing money from foreign markets or foreign investors.

• RIL has $2.5 Billion from Abu Dhabi investment authority, Mubadala and silver lake.
• RIL has venture capital from Intel.

• HPCL has investments from FII’s and NRI’s.

• HPCL to invest Rs. 74000cr in 5 years overseas in petrochemicals.

• BPCL has investments from Saudi Aramco.