Author : Subhamoy Chatterjee
published in : ResearchGate
The study examines how interest rate derivatives (IRDs) contribute to financial performance and risk management in debt-intensive sectors, using case studies of Jaiprakash Associates Limited and Jhajjar Power Ltd. It finds that IRDs, particularly interest rate swaps, play a critical role in stabilising cash flows, managing borrowing costs, and reducing exposure to interest rate volatility. Companies with high levels of floating-rate debt benefit significantly from hedging, as it enables predictable interest expenses and improved balance sheet stability.
The analysis shows that derivative usage reduces finance costs and mitigates the impact of rising interest rates, as supported by regression results and scenario simulations. However, effectiveness depends on proper structuring and continuous monitoring. The study concludes that IRDs are essential for achieving financial performance excellence in capital-intensive sectors, especially where external financing drives growth, and highlights the need for stronger risk management frameworks and broader adoption in emerging economies.
