India’s fifth largest drug maker by revenue, Wockhardt Ltd, said in a statement on Thursday it will “neither incur any losses arising out of the derivatives-hit scenario in the current quarter, nor will there be a situation of such losses to occur subsequently.”
The release notes that in the last one year, there has been considerable currency fluctuation and “in such situations, it is normal practice to protect the company from such currency fluctuations”.
“Wockhardt has a highly professional and expert team that undertakes normal business related to hedging for the past few years. In addition, our record of the last few years clearly demonstrates that there have been no losses whatsoever because of business related hedging activities,” added the release.
The release comes on the heels of a Page 1 story in Mint on 20 March that cited several unnamed bankers and risk management experts as saying the firm has taken a “significant” hit from exposure to complex cross-currency options and structured products.
Mint had sent a questionnaire listing what these unnamed bankers and risk management experts were saying about the company’s potential losses on Monday but the company didn’t respond prior to the story appearing. Several attempts to elicit comments from Wockhardt, over the phone and in person, prior to the Mint article appearing, were also unsuccessful.
The release also included a report prepared by Morgan Stanley on the firm’s derivatives exposure. The report quoted the company’s chief financial officer as saying that Wockhardt hasn’t swapped its dollar/euro liabilities (totalling $700 million, or Rs2,835 crore) into other currencies such as yen and Swiss francs. It also says Wockhardt uses rupee/dollar and rupee/euro forward cover as hedge (and not exotic currency options), and hence “has not incurred any losses on forex transactions.” Indian markets were closed on Thursday so there was no trading in Wockhardt’s shares.