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Past Issue • Jul-Sep 2013

Hedging Currency Risk at TT Textiles

This summary is based on the case study by Professor Rajesh Chakrabarti, where he highlights the impact of currency rate fluctuations on the profitability of an export-oriented textile manufacturing firm, TT Textiles. The company’s swap deal, which was based on the historical stability of the Swiss franc (CHF) against the US dollar (US$) initially seemed safe and lucrative, became a pain point with the global financial meltdown of 2008. A turnaround in 2009 saved TT Textiles from further losses, but left its management in a quandary. Should they quit the deal or hold to maturity?

On a hot March morning in Kolkata in 2009, Sanjay K Jain, Joint Managing Director of TT Textiles, watched the sunlight stream through his office window and pondered over the ramifications of the recent movements of the Swiss franc (CHF). The Swiss franc had touched 1.17 CHF/US dollar (US$) from the previous year’s record of 0.96CHF/US$. Was this currency fluctuation good for his company or did it spell doom?

ABOUT THE AUTHORS

  • Rajesh-Chakrabarti

    Rajesh Chakrabarti

    Clinical Associate Professor of Public Policy and Executive Director of the Bharti Institute of Public Policy at the Indian School of Business (ISB).
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