Tata Consultancy Services (TCS), Indias largest software exporter, is slated to report a marginally higher forex loss for the quarter ending September, with over $112 million of its forex hedges expected to mature during the period. The company expects a forex loss of nearly Rs 90 crore in the second-quarter of the current fiscal, up from Rs 84 crore in the first quarter. The marginal increase comes after a substantial drop in forex losses over the past two quarters.

We incurred higher (forex) losses earlier due to our greater exposure to forex options with limited participation. Now, the losses are declining, as we have squared off most of those positions without taking any new hedges, said S Mahalingam, CFO, TCS.

TCS had written call options with its bankers at Rs 41 per dollar in April 2008, when the rupee was appreciating against the dollar. These options, known as limited participation contracts, obliged TCS to sell its dollar revenue to banks at Rs 41 whenever the rupee depreciated or moved beyond this threshold. Such an arrangement had caused TCS to report substantial forex losses in subsequent quarters since the rupee started depreciating sharply.

For instance, the rupee plunged to 52 against the dollar in FY09, which meant TCS had to sell every hedged dollar of its revenue under these contracts at Rs 41, incurring a loss of more than Rs 10 per dollar.

The company had reported a forex loss of Rs 192 crore in the March 2009 quarter. Its total forex loss for FY09 was Rs 781.5 crore compared to a Rs 500 crore gain in the previous year.

At the end of the June 2009 quarter, TCS cut its hedging positions under limited participation contracts from $349 million in the previous quarter to $226 million. Of this, $112 million would mature in the September quarter.

Assuming the current dollar-rupee rate of 48.74, this would result in a loss of over Rs 90 crore.

On the positive side, TCS has improved collections of its outstanding revenues from its troubled clients. We have been able to recover most of our receivables from US clients, who are facing financial problems, said Mr Mahalingam, though he declined to comment on the exact amount or names of clients.

Its learnt from an official source that TCS has been able to collect receivables from its auto clients such as GM and Chrysler. Also, US revenues from the erstwhile Lehman Brothers have so far been collected, while receivables from its offices in other countries are yet to come in. Revenues from clients, including Washington Mutual and Nortel, are also yet to be realised.