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INDIA’S largest commercial bank, the State Bank of India, has sanctioned a Rs 100-crore lifeline loan to financially troubled pharma major, Wockhardt Ltd, to meet its immediate requirements for funds.

The loan was sanctioned to Wockhardt last week so that the company can meet its working capital requirements.

When contacted, a Wockhardt spokesperson declined to comment. He did not give any details on the terms and conditions of the SBI loan. Wockhard board has referred the company to the corporate debt restructuring cell through ICICI Bank for financial restructuring of the debts of the company.

A source on company's board said that Wockhardt has made "significant losses" on foreign exchange products sold mainly by the foreign banks. The source said Wockhardt will make provisions for all losses in the books of the current financial year. "This is a passing phase. Some of the forex derivative bets turned out to be wrong. The company will absorb all the losses in the current year's balance sheet," the source on the company's board said.

"The company is making arrangements to sell assets and foreign businesses to raise funds. But the company's core businesses are still making profits," he added. State Bank already has the largest exposure of Rs 750 crore with Wockhardt, followed by ICICI Bank. The Wockhardt board would meet by the end of this month to finalise the accounts.

Meanwhile rating agency Crisil downgraded pass-through certificates (PTCs) backed by loan receivables from Wockhardt Ltd (Wockhardt). The downgrade follows a default by Wockhardt on the interest payment on the loan supporting the PTCs. Axis Bank Ltd, the trustee to the transaction, has confirmed the default. "Crisil believes that Wockhardt has chosen not to pay the debt obligation" the rating agency said. The scheduled board meeting to consider results for financial year ending December 2008 on March 31 was postponed to April last week citing "restructuring of its businesses".

A banking source said the many Indian companies are expected to record liabilities due to derivative products linked to Japanese yen. After the Japanese yen fell below 100 to a dollar in November last year, many companies' forex bets went wrong. The banker said as a standard procedure all the orders placed by its clients on telephone are tape recorded so that the clients should not back out later. Wockhardt's shares closed flat at Rs 76 a share on the Bombay Stock Exchange.

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