Hexaware Tech unearths illegal foreign exchange options trade

“The series of forex transactions in question were initiated over the last few months. These transactions were unauthorised and outside the company’s normal hedging programme,” it said. The information regarding these transactions was intentionally withheld from the senior management and the board of directors and was not included in internal reports. The first transaction came to light on November 22. Preliminary investigations conducted over Friday, Saturday and Sunday led to uncovering of more such transactions.

“The need for provisioning is because of direct actions of one individual which were actively concealed,” said Rusi Brij, vice chairman and CEO. The board decided to appoint a special committee comprising independent directors — Shailesh Haribhakti, chairman of the Audit Committee, Preeti Mehta, Partner, Kanga & Co and LS Sarma, member of Audit Committee — to conduct a thorough investigation into the transactions.

“As immediate steps, an embargo has been placed on all option deals; future forex deals will necessarily have to be transacted jointly by two signatories out of the designated four from among the top management. The company’s authorised dealers are being informed about this procedure and the internal auditors (KPMG) are being asked to conduct a thorough audit of the function. The company will continue to maintain the normal hedging strategy to protect against the rupee appreciation,” said Shailesh Haribhakti, chairman of the Audit Committee.

The company will take all measures and actions as advised by the Special Committee of the board, statutory auditors (Deloitte) and legal advisers, to mitigate the impact of the transactions and prevent recurrence of similar situations in the future. “The company’s business remains robust and its future growth trajectory unaffected. Our order book, as on September 30, 2007, stands at over $ 300 million. We will continue to build on that,” Brij said.

Hexaware made a net profit of $27.44 million on a turnover of $187.22 million for FY06. For the first three quarters of FY07, Hexaware has reported a net profit of $21.09 million on a turnover of $187.25 million. Apart from being a debt-free company, Hexaware has a cash position of $82 million and net worth of $198.67 million.