A trusted lieutenant of Habil Khorakiwala dialled a Singapore number tocontact a gentleman named Ponty Singh. Mr Singh, a former banker with Morgan Stanley and Citi, owns the financial services firm Tricolor Capital. The conversationthat followed was the first of its kind by an official of an Indian company. Wockhardt,the company that Mr Khorakiwala founded in 1967, was sitting on a mountain of losses — nearly 1,500 crore — after a series of cross-currency derivative deals with banks backfired.
These are complex transactions that the pharma firm had done to get a better exchange rate — so that its export earnings generate more when converted into rupees — and possibly convert a slice of its expensive local loans into cheaper foreign currency credit with a lower interest rate. All that was possible with the magic of derivatives — a wonder world that many small Indian companies had stepped into and later burnt their fingers when currency markets moved against them..
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