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Hedging Loss Haunts L&T

March 10, 2008

L&T could incur loss of Rs 150 crore to Rs 200 crore from commodity hedging in the year ending March 2008 (FY 2008). The company expects overall margin expansion to offset the losses from commodity hedging.

Brokerage Motilal Oswal Securities had, in a client note, said Larsen & Toubro (L&T) International FZE, a wholly owned subsidiary of Larsen & Toubro, was expected to incur marked-to-market losses on commodity hedging transactions during FY 2008.

Motilal Oswal, which maintained its neutral rating on L&T stock, said it had downgraded its earnings forecast for L&T FZE and expected it to now report a net loss of Rs 92.4 crore in FY 2008, compared to a profit of Rs 85.10 crore a year earlier. It said it had also revised downward its consolidated net profit estimates for L&T to Rs 2400 crore in FY 2008 from a previous estimate of Rs 2590 crore.

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