These are mostly deal contingent forwards ahead of the transaction with the Adani Group. JP Morgan is the primary bank that likely cut the derivative deal last week in the offshore non-deliverable market for the currency risk cover. The American bank is said to have accounted for an estimated $4 billion in forward contracts, said the people cited above.

These derivative bets, said to be of shorter maturities, will cover the exchange rate risk on more than $5 billion as and when the acquisition is completed after all approvals are obtained.

Holcim and Standard Chartered declined to comment on the matter. JP Morgan didn’t reply to ET’s query.

JP Morgan’s contracts were made through its London office while Standard Chartered did so through one of its global centres, said the people cited above.

Deal-contingent hedging in mergers and acquisitions is used to manage foreign exchange and interest rate risks cost effectively. According to a Nomura note, this combines the best aspects of a standard forex forward and a forex option. “This requires no payment upfront, locks in a forward rate, and disappears if the M&A fails,” it said.

A bank with which a company is contracting charges higher than the usual hedges. “It all depends on bank-client relations and the client’s creditworthiness,” said one of the persons cited above.

The Holcim Group had earlier said that no capital gains tax would be paid in India for its $6.4 billion transaction to sell stakes in Ambuja Cements and ACC to the Adani Group, which is likely to pay in rupees. The Adani Group is acquiring the two companies for $10.5 billion. Holcim’s stake in the deal is worth $6.4 billion in net proceeds, ET reported on May 17, citing chief executive Jan Jenisch in an investor call. “The currency market was apprehensive of the deal-specific exchange rate volatility,” said Anindya Banerjee, currency analyst at Kotak Securities. “If Holcim has already availed currency covers, it will likely mitigate event-specific volatility risk back in the local market.”

Reserve Bank of India (RBI) governor Shaktikanta Das told a TV channel Monday that it would not allow runaway depreciation of rupee. The rupee has lost 3.97% against the dollar since January, making it the seventh-worst performing Asian currency, show Bloomberg data compiled by ETIG. The current account deficit or excess of overseas payables over receivables is seen widening. Analysts said the central bank will protect any rapid erosion of the rupee’s value. If the local unit depreciates against the dollar, an entity seeking dollars in exchange of rupees will have to fork out additional costs.

The rupee closed at 77.59 per dollar, down 0.08%, on Tuesday. The one-month volatility index surged to 6.23% from 4.68% on December 31, reflecting the need to cover currency risk against any payables or receivables.