Himatsingka Seide, the Bangalore-based Rs 1,000 crore silk fabrics manufacturer and exporter, which had sued HDFC Bank over foreign exchange derivative losses, has withdrawn the case. The company instead has opted to settle the dispute out-of-court. As per the terms of the settlement, Himatsingka has paid Rs 9.23 crore to the bank, sources in the company said.
With this, all disputes pertaining to the said contract have been closed, sources said. Himatsingka, earlier this year had filed a case against HDFC Bank for alleged losses of Rs 175 crore arising out of volatile currency movements.
In early 2007, Himatsingka Seide had entered into a complex forex derivative contract with the lender to manage its euro and US dollar currencies.
In October 2008, the company said in a statement that in respect of the disputed foreign exchange derivative contract, the counter party has communicated that the 'knock out' event has occurred. A knock out event occurs when a currency breaches the specific band of currency under which the contract is agreed upon. Consequently, the liability of the company under such contract stood significantly reduced.
According to industry analysts, since the US dollar has appreciated considerably against most global currencies, losses to the company over this instrument are likely to come down substantially. That is the reason, the company has decided to withdraw the case against the bank and opted to settle the dispute out-of-court, sources said.