Indian Pharma Corporations Researching the Right Vaccination against Foreign Exchange Risk

Abstract

This paper examines the exposure of Indian Pharma Multinationals to foreign exchange risk. The study draws relationship between value of the firm and hedged foreign exchange exposure.

The increased volatility in the global market arising to array of events from civil wars to BREXIT has increased the exchange rate risk faced by the companies. Foreign exchange risk management has become a crucial constituent of companies operations.

The objective of this paper is to enquire in to foreign exchange exposure of pharmaceutical Sector in India; its measurement and the steps taken to manage it. In particular the paper would focus on measurement of Foreign Exchange exposure of Indian of pharmaceutical Sector, External Control techniques to manage Foreign Exchange Risk & Impact of the Internal Control techniques to manage Foreign Exchange Risk.

The paper will be based on study of six listed Pharma companies two each from Large Cap, Mid Cap & Small Cap will selected from stock exchange (BSE). Hedged foreign exchange exposure was compared with stock returns for the period of ten years and no major impact of hedging practices was found on stock returns. The beta of these stocks were found positively correlated with BSE ltd.

Keywords: Foreign Exchange Risk Management, Pharmaceutical Sector, BSE.