Friday, March 21, 2008

New 'D'evil is coming to haunt.

Last year,Hexaware reported a Rs 81-crore loss for the quarter ended December 2007 after the company took a hit of about Rs 103 crore on account of unauthorised forex derivative deals struck by a company official.

The $50 million hit L&T took due to hedging losses in a subsidiary may just be the tip of the iceberg.

Last month,Sundaram Multipaper,paper and stationary manufacturer,has sued ICICI Bank for its losses on forex derivative products,arguing that the bank sold wrong derivative product to them.

Even Sundaram Brake linings,part of tvs group,has dragged its bankers to courts alleging,their bankers have mis-sold derivative products.

Coimbatore based Rajshree Sugars and Chemicals has filed case against Axis bank in madras high court alleging that the forex derivative product sold to them by the bank did not take care of their needs,the currency involved and amount of losses is not yet known.

Losses by Indian companies as a result of their exposure to the foreign exchange derivatives market may hog the headlines for next few quarters since many of the currency swaps are likely to mature after March,says foreign exchange experts.

Almost all private banks—Yes Bank, ICICI Bank, HDFC Bank, Kotak Mahindra Bank— and even State Bank of India have sold these derivative structures, and can potentially be hit if companies do not pay.

The stock market may not be aware of the impending crisis and yet, banking stocks have come under selling pressure when everyone was hoping they would provide succour in a falling market.

Excerpts from Source:Times of india and Business Standard.
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