Mumbai: Shares in Indian engineering and construction firm Larsen & Toubro Ltd fell as much as 12.5% on 10 March on concerns of losses from commodity hedging for the fiscal year to end-March.
A senior company official, however, told Reuters that losses from hedging would be compensated almost entirely by its overall margin expansion.
Shares in the company posted the steepest fall on the Sensex, helping drag the benchmark index lower by as much as 3.8% in morning trade.
At 1500 IST, the shares were down 10.9% at Rs2,662.
“The loss on account of hedging on commodities could be to the order of Rs150-200 crore ,” chief financial officer Y.M. Deosthalee told Reuters.
“It will be compensated to a large extent by margin expansion in the main unit,” he said.
“Commodity prices have been very volatile. We have now brought down our exposure to hedging and we will play it very safe henceforth.”
Brokerage Motilal Oswal Securities had, in a client note on 10 March, said L&T International FZE, a wholly owned subsidiary, was expected to incur “marked-to-market losses on commodity hedging transactions during FY 08”.
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 Rs92.4 crore in the FY 2007-08, compared to a profit of Rs85.1 crore in the previous financial year.
It said it had also revised downward its consolidated net profit estimates for L&T to Rs2,400 crore in FY 2007-08 from a previous estimate of Rs2,590 crore.