Now, HSL sues HDFC Bank over derivatives losses
Bangalore-based silk goods exporter HSL has filed a case against HDFC Bank in the city civil court.
By TNN |
BANGALORE: The ongoing tussle between banks and their clients over foreign exchange derivatives losses just keeps growing. Bangalore-based silk goods exporter Himatsingka Seide (HSL) has filed a case against HDFC Bank in the city civil court.
���Yes we have filed a case against them (HDFC Bank). The matter is sub-judice,��� a senior company official of HSL told ET. The case is slated to come up for hearing later this month.
The buzz is that HSL got an attractive rate for dollar exports on the condition that the euro will not appreciate beyond a certain level. But as the euro surged dramatically, the company lost out as it was exposed to a weaker dollar.
It is believed that the derivative exposure has caused a mark-to-market (MTM) loss of nearly Rs 100 crore for HSL. The market is abuzz with rumours that HDFC Bank will move the Debt Recovery Tribunal (DRT) against the company.
Opinion is divided in the city about why HSL has sought the legal route to settle the issue. There is a view that these losses would not relate to hedging losses.
���HSL depends heavily on imports like raw silk and such imports would have been the natural hedge for exports. The losses for which HSL has sought legal aid could relate to trading losses arising out of dealing with foreign exchange,��� feel some experts.
This contentious issue may have remained in the back-burner but for the fact that faced with an avalanche of such deals, the Institute of Chartered Accountants of India (ICAI) has now suggested that listed corporates disclose these transactions in their financial statements.
More recently, senior management of Kotak Mahindra Bank while announcing results for FY08 had indicated that some of its clients had run up MTM losses of over Rs 600 crore and that few of them could be seeking legal aid.
Recent media reports have indicated that banks are looking at seeking an amicable settlement (out of court) with their clients.
���Yes we have filed a case against them (HDFC Bank). The matter is sub-judice,��� a senior company official of HSL told ET. The case is slated to come up for hearing later this month.
The buzz is that HSL got an attractive rate for dollar exports on the condition that the euro will not appreciate beyond a certain level. But as the euro surged dramatically, the company lost out as it was exposed to a weaker dollar.
It is believed that the derivative exposure has caused a mark-to-market (MTM) loss of nearly Rs 100 crore for HSL. The market is abuzz with rumours that HDFC Bank will move the Debt Recovery Tribunal (DRT) against the company.
Opinion is divided in the city about why HSL has sought the legal route to settle the issue. There is a view that these losses would not relate to hedging losses.
���HSL depends heavily on imports like raw silk and such imports would have been the natural hedge for exports. The losses for which HSL has sought legal aid could relate to trading losses arising out of dealing with foreign exchange,��� feel some experts.
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HSL���s move is the latest after a spate of such cases have been filed by listed Indian corporates dragging banks to the courts alleging mis-selling of foreign exchange derivatives.This contentious issue may have remained in the back-burner but for the fact that faced with an avalanche of such deals, the Institute of Chartered Accountants of India (ICAI) has now suggested that listed corporates disclose these transactions in their financial statements.
More recently, senior management of Kotak Mahindra Bank while announcing results for FY08 had indicated that some of its clients had run up MTM losses of over Rs 600 crore and that few of them could be seeking legal aid.
Recent media reports have indicated that banks are looking at seeking an amicable settlement (out of court) with their clients.
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