Kpit Cummins Infosystems Ltd on April 28, 2008 informed the stock exchanges about certain foreign exchange transactions.

About 98% of the income that KPIT Cummins derives is in foreign currencies. The Company follows a policy of covering the risks arising out of foreign exchange fluctuations through forward contracts and options.

During the year ended March 31, 2008, apart from forward contracts, the Company has entered into forex derivative transactions to the tune of US dollar 42.6 million covering a period of next five years. Apart from a committed INR - US dollar conversion rate, the contracts also had a component of contingent premium payment with reference to Euro-US dollar rates beyond bench-mark Euro-US dollar rates. By virtue of the strengthening of the Euro vis-?-vis US dollar as at March 31, 2008, the Mark to Market (MTM) loss of the said contracts currently stands at Rs 892.68 million as on March 31, 2008. Since the Company has not cancelled the contracts as of March 31, 2008, this wilt be non-cash / notional loss.

The Company’s current and future exports in Euros based on the current sales trends indicate that the net inflows to the Company in Euros is higher than the amount on which the premium is payable on the contracts mentioned above. The Company therefore believes that it would not incur a loss by virtue of these contracts, although there could be an opportunity loss, The Company has made its cost structure compatible with the bench-mark Euro-dollar rates.

The Company is in the process of ascertaining the accounting treatment of the said contracts in the light of the Accounting Standard namely AS 30 mandated by the Institute of Chartered Accountants of India on March 27, 2008. Should the contracts be treated as ineffective hedges under the Standard, the Mark to Market (MTM) loss on these contracts would stand debited to the P&L account as an exceptional / one-time item. Should the said contracts be treated as effective hedges, the Mark to Market (MTM) losses would be provided through reserves without affecting the P&L account.

Reassuring all the stakeholders, Mr. S B (Ravi) Pandit, Chairman and Group CEO stated:
?The Company is fully of addressing the challenges that have arisen out of the current situation. Owing to our strong presence and growth in Europe, we have a natural hedge to tide over these contracts. We have a strong pipeline to sustain our growth momentum and attain position of leadership in our focus industries.”