L&T loses Rs 200 crore in commodity hedging

Rs 200 crore may be a small number for a company with last year’s sales of over Rs 23,000 crore, net profits of over Rs 1,900 crore and which has a market capitalisation of almost Rs 80,000 crore. But volatile commodity prices, got Larsen & Toubro (L&T), India’s 13th most valued company, to admit to a Rs 200 crore loss.

An admission that cost the company over Rs 7,500 crore in its value. In a regulatory filing to stock exchanges, L&T said that during the year 2007-08, there was extreme volatility in the markets, especially in commodity prices. “The company has exposure in commodities and part of it is being hedged by it. As per the unaudited numbers, there could be a loss in commodity hedging of around Rs 200 crore,” the note said.

The actual number will be clear on finalisation of accounts. The company has reduced the exposures to a considerable extent. “However, the company maintained its guidance on order booking, sales and operating margins for the year with an emphasis on improvement in the operating margins,” the note said.

Earlier in the day, L&T shares lost as much as 12.5 per cent before ending down 8.7 per cent at Rs 2,728.80, its weakest in nearly six months, after brokerages said one of its units may book a loss on commodity hedging. The stock has lost nearly 35 per cent this year. The company had started commodity trading two years ago to hedge against volatility in metal prices.