| Auto parts-maker Amtek Auto today joined a growing list of Indian companies that are sitting on notional losses on account of their exposure to foreign exchange derivatives. |
| Amtek today informed the stock exchanges that it could potentially make a loss of up to $18 million (Rs 72.18 crore) in the next two years on its exposure to currency hedges and swaps. |
| A Rs 72-crore loss is 30 per cent of Amtek's standalone net profits of Rs 236 crore on sales of Rs 1,196 crore during the year ended at the end of May 2007 (the company follows a June-to-May financial year). |
| "The company has taken measures to restrict the same and any improvement in the currency market from here will mitigate the above," the company said. |
| Interestingly, the company earned Rs 36 crore from forex fluctuations or through forex derivative products during the last financial year, according to its balance-sheet. |
| A derivative is an instrument whose value is a function of an underlying commodity, bond, stock or currency and which is used as a risk-management tool. |
| The promoters of the company have undertaken to bring in the matching amount to meet the obligation, should they arise, in the form of a 10-year, interest-free non-convertible debentures or preference shares, the Amtek statement added. |
| "If there are any losses, the hit will be taken by promoters. What we have disclosed is a worst-case scenario," said Amtek's CFO Santosh Singhi. |
| He, however, refused to divulge the total exposure of the company to forex derivatives, saying he needs to first inform the stock exchange. |
| The Amtek Auto scrip was up 3.56 per cent to Rs 260.40 on the Bombay Stock Exchange, though the disclosure came after the market closed for the day. |
| Earlier, software major 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 company had posted a net profit of Rs 110.07 crore in 2007 (the company follows a January to December financial year). |
| About half a dozen other companies have also taken their banks to court alleging that they were sold exotic derivative contracts for speculative purposes. |
| Stationery maker Sundaram Multi Pap Ltd has sued ICICI Bank for its losses on forex derivatives. |
| Coimbatore-based Rajshree Sugars and Chemicals has filed a case against Axis Bank in the Madras High Court alleging that the forex derivative product sold to them by the bank did not take care of their needs. |
| The next hearing is due on Tuesday. Another company, Sundaram Brake Linings, is also involved in a legal dispute with Kotak Mahindra Bank. |
| Foreign exchange experts said India Inc's losses on account of their exposure to foreign exchange derivatives are estimated at Rs 12,000 crore to Rs 20,000 crore. The losses may hog the headlines for the next few quarters as many of the currency swaps are likely to mature after March, said foreign exchange experts. |
| "This is a big thing brewing. The losses in some cases may be equal to a company's profit for the whole year," a senior executive with a Mumbai-based foreign exchange consultant said. |
| In a separate development, engineering major Larsen & Toubro Ltd had reported on March 10 that one of its subsidiaries in West Asia may incur a loss of Rs 200 crore on commodity-hedging bets. |
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