Derivative financial instruments

12 Months Ended

Dec. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company is exposed to the risk of rate fluctuations on its foreign currency assets and liabilities and on foreign currency denominated forecasted cash flows and interest rates. The Company has established risk management policies, including the use of derivative financial instruments to hedge foreign currency assets and liabilities, foreign currency denominated forecasted cash flows and interest rate risk. These derivative financial instruments consist of deliverable and non-deliverable forward foreign exchange contracts, treasury rate locks and interest rate swaps. The Company enters into these contracts with counterparties that are banks or other financial institutions, and the Company considers the risk of non-performance by such counterparties not to be material. The forward foreign exchange contracts and interest rate swaps mature during a period of up to 48 months and the forecasted transactions are expected to occur during the same period.

5. Derivative financial instruments (Continued)

The following table presents the aggregate notional principal amounts of outstanding derivative financial instruments together with the related balance sheet exposure:


	Notional principal amounts (Note a)				Balance sheet exposure asset (liability) (Note b)
	As of December 31, 2023		As of December 31, 2024		As of December 31, 2023		As of December 31, 2024
Foreign exchange forward contracts denominated in:
United States Dollars (sell) Indian Rupees (buy)	$	1,892,800	$	2,413,000	$	5,278	$	(36,478)
United States Dollars (sell) Mexican Peso (buy)	66,000		71,000		2,129		(8,188)
United States Dollars (sell) Philippines Peso (buy)	118,500		161,400		637		(3,274)
Euro (sell) United States Dollars (buy)	222,363		219,706		(3,499)		10,282
Singapore Dollar (buy) United States Dollars (sell)	—		12,000		—		(407)
Euro (sell) Romanian Leu (buy)	66,384		67,144		90		(156)
Japanese Yen (sell) Chinese Renminbi (buy)	52,562		34,507		803		3,402
United States Dollars (sell) Chinese Renminbi (buy)	40,800		46,800		(638)		(1,883)
Pound Sterling (sell) United States Dollars (buy)	14,915		15,507		(398)		463
United States Dollars (sell) Hungarian Font (buy)	32,000		21,000		809		(1,611)
Australian Dollars (sell) Indian Rupees (buy)	90,077		109,490		(1,914)		3,556
United States Dollars (sell) Polish Zloty (buy)	51,000		39,000		3,046		(1,190)
Japanese Yen (sell) United States Dollars (buy)	7,000		7,000		323		366
Israeli Shekel (buy) United States Dollars (sell)	15,000		20,000		1,175		454
South African Rand (sell) United States Dollars (buy)	27,000		32,000		216		1,725
United States Dollars (sell) Brazilian Real (buy)	4,000		4,000		55		(314)
United States Dollars (sell) Costa Rica Colon (buy)	13,000		13,000		555		231
United States Dollars (sell) Canadian Dollar (buy)	—		9,000		—		(352)
Pound Sterling (buy) United States Dollar (sell)	22,300		—		669		—
United States Dollars (sell) Malaysian Ringgit (buy)	18,000		5,000		161		(169)
Interest rate swaps (floating to fixed)	148,125		234,375		(4,553)		(3,155)
					$	4,944	$	(36,698)

(a)Notional amounts are key elements of derivative financial instrument agreements but do not represent the amount exchanged by counterparties and do not measure the Company’s exposure to credit, foreign exchange, interest rate or market risks. However, the amounts exchanged are based on the notional amounts and other provisions of the underlying derivative financial instrument agreements. Notional amounts are denominated in U.S. dollars.

(b)Balance sheet exposure is denominated in U.S. dollars and denotes the mark-to-market impact of the derivative financial instruments on the reporting date.

FASB guidance on derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. In accordance with FASB guidance on derivatives and hedging, the Company designates foreign exchange forward contracts, interest rate swaps and treasury rate locks as cash flow hedges. Foreign exchange forward contracts are entered into to cover the effects of future exchange rate variability on forecasted revenues and purchases of services, and interest rate swaps and treasury rate locks are entered into to cover interest rate fluctuation risk. In addition to this program, the Company uses derivative instruments that are not accounted for as hedges under FASB guidance in order to hedge foreign exchange risks related to balance sheet items, such as receivables and intercompany borrowings, that are denominated in currencies other than the Company’s underlying functional currency.

5. Derivative financial instruments (Continued)

The fair value of the Company’s derivative instruments and their location in the Company’s financial statements are summarized in the table below:


	Cash flow hedges				Non-designated
	As of December 31, 2023		As of December 31, 2024		As of December 31, 2023		As of December 31, 2024
Assets
Prepaid expenses and other current assets	$	13,273	$	11,855	$	5,783	$	5,419
Other assets	$	3,251	$	4,727	$	—	$	—
Liabilities
Accrued expenses and other current liabilities	$	6,833	$	24,436	$	1,276	$	12,990
Other liabilities	$	9,254	$	21,273	$	—	$	—

Cash flow hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain (loss) on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction is recognized in the consolidated statements of income. Gains (losses) on the derivatives, representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness, are recognized in earnings as incurred.

In March 2021, the Company executed a treasury rate lock agreement for $350,000 in connection with future interest payments to be made on its senior notes issued in March 2021 by Genpact Luxembourg S.à r.l. (“Genpact Luxembourg”) and Genpact USA, Inc. (“Genpact USA”), both wholly-owned subsidiaries of the Company, and the treasury rate lock was designated as a cash flow hedge. The treasury rate lock agreement was terminated on March 23, 2021 and a deferred gain was recorded in accumulated other comprehensive income. This gain is being amortized to interest expense over the life of the 2021 Senior Notes (as defined in Note 13). The remaining gain to be amortized related to the treasury rate lock agreement as of December 31, 2023 and 2024 was $368 and $206, respectively.

In May 2024, the Company executed treasury rate lock agreements for $400,000 in connection with future interest payments to be made on its senior notes issued in June 2024 by Genpact Luxembourg and Genpact USA, and the treasury rate locks were designated as cash flow hedges. These treasury rate lock agreements were terminated on May 30, 2024 and a deferred loss was recorded in accumulated other comprehensive income. This loss is being amortized to interest expense over the life of the 2024 Senior Notes (as defined in Note 13). The remaining loss to be amortized related to the treasury rate lock agreements as of December 31, 2024 was $351.

In connection with cash flow hedges, the gains (losses) recorded as a component of other comprehensive income (loss) ("OCI"), and the related tax effects are summarized below:


	Year ended December 31,
	2022						2023						2024
	Before-Tax amount		Tax (Expense) or Benefit		Net of tax Amount		Before-Tax amount		Tax (Expense) or Benefit		Net of tax Amount		Before-Tax amount		Tax (Expense) or Benefit		Net of tax Amount
Opening balance	$	17,468	$	(3,404)	$	14,064	$	(7,255)	$	1,543	$	(5,712)	$	805	$	146	$	951
Net gains (losses) reclassified into statement of income on completion of hedged transactions	(6,815)		(413)		(7,228)		13,871		(3,644)		10,227		11,260		(3,033)		8,227
Changes in fair value of effective portion of outstanding derivatives, net	(31,538)		4,534		(27,004)		21,931		(5,041)		16,890		(18,816)		3,630		(15,186)
Gain (loss) on cash flow hedging derivatives, net	(24,723)		4,947		(19,776)		8,060		(1,397)		6,663		(30,076)		6,663		(23,413)
Closing balance	$	(7,255)	$	1,543	$	(5,712)	$	805	$	146	$	951	$	(29,271)	$	6,809	$	(22,462)

5. Derivative financial instruments (Continued)

The gains or losses recognized in other comprehensive income (loss) and their effects on financial performance are summarized below:


Derivatives in Cash Flow Hedging Relationships	Amount of Gain (Loss) recognized in OCI on Derivatives (Effective Portion)						Location of Gain (Loss) reclassified from OCI into Statement of Income (Effective Portion)	Amount of Gain (Loss) reclassified from OCI into Statement of Income (Effective Portion)
	Year ended December 31,							Year ended December 31,
	2022		2023		2024			2022		2023		2024
Forward foreign exchange contracts	$	(44,873)	$	24,660	$	(21,056)	Revenue	$	3,586	$	1,256	$	2,200
Interest rate swaps	13,335		(2,729)		2,637		Cost of revenue	(8,668)		3,715		6,757
Treasury rate lock	—		—		(397)		Selling, general and administrative expenses	(1,148)		565		947
							Interest expense	(585)		8,335		1,356
	$	(31,538)	$	21,931	$	(18,816)		$	(6,815)	$	13,871	$	11,260

There were no gains (losses) recognized in the statement of income on the ineffective portion of derivatives and excluded from effectiveness testing for the years ended December 31, 2022, 2023 and 2024, respectively.

Non-designated Hedges


Derivatives not designated as hedging instruments	Location of Gain (Loss) recognized in Statement of Income on Derivatives	Amount of Gain (Loss) recognized in Statement of Income on Derivatives
		Year ended December 31,
		2022		2023		2024
Forward foreign exchange contracts (Note a)	Foreign exchange gains (losses), net	$	(29,499)	$	13,462	$	(10,321)

a)These forward foreign exchange contracts were entered into to hedge fluctuations in foreign exchange rates for recognized balance sheet items, such as receivables and intercompany borrowings, and were not originally designated as hedges under FASB guidance on derivatives and hedging. Realized gains (losses) and changes in the fair value of these derivatives are recorded in foreign exchange gains (losses),net in the consolidated statements of income.