Tirupur's textile exporters still not celebrating Re rise

By Divya Rajagopal, CNBC-TV18:

Despite the depreciation of the rupee, Tirupur's textile exporters are not celebrating. They are still trying to figure out their losses under the derivative products they bought and sold last year.

This humming textile export town of Tirupur is used to complex weaves and changing fashions. It is used to ups and dowsn in the market and more lately the ups and downs of the rupee. But most exporters here have not been able to figue out the intricacies of this new concept called forex derivatives.

A discussion with Officials at the Tirupur Exporters Association, indicates that even today any understanding about derivatives is very limited. These officials say their members signed these contracts because they were convincingly told that the Swiss franc would never go up - but actually it did.

A Shaktivel, President, Tirupur Exporters Association said, “It is entirely in the advice of banks; they were not knowing what they were doing. Just what banks said, you buy this or do this - they were following it up. Sometimes they did the contracts first and got the signatures later on.”

The banks assured the exporters that buying these products might be a good way to set off the losses incured through the rupee appreciation and the exporters initaly did make some good money, but as the US economy came crashing, this deal proved too expensive for them

According to sources, the exporters here face losses to the tune of Rs 400 crores. This is only a rough estimate and no one has any exact estimates.

Exporters who did not wish to be quoted said that the issue is bigger than what the Association claims, and exporters are negotiating with the banks before taking them to court. But some 10 to 15 big exporters have written to their bankers to share the losses

The exporters in Tirupur are in a dilemma whether to drag the banks to courts or not, as for most of them the working capital comes from the same bank from where they bought the derivative products and they fear going against them might end up in freezing of that capital.