Motilal Oswal Financial Services (MOFSL) saw net losses in its broking business in June quarter, owing to negative price settlement of crude oil derivative positions for customers.

The company’s investor presentation showed loss of Rs 66 crore on account of this price movement. Brent crude entered negative territory (i.e. below $0 per barrel) in April.

After adjusting this as an exceptional item, the broking and distribution business reported a net loss of Rs 5.3 crore. Had it not been for this price anomaly and related settlements, the business would have made a net profit of Rs 61.3 crore in the June quarter.

MOFSL has also made provision for Rs 88.96 crore dues from the commodity broking clients, following the negative price move.

“While entering the contract for taking exposure on the contract value, the customers were required to pay only the margin as required by the exchange including mark to market losses. In relation to such contracts, the company has net receivables from the clients aggregating Rs 88.96 crore,” it said in its results.

Brokers have now increased margins for trading in crude oil futures to make sure the client-level risks can be contained and there is no shortfall from clients’ end in case the prices fall in the negative zone again.

Some broking houses have also taken legal route as there have been cases where clients are not willing to pay the margin shortfall, and the broker has had to pay for the difference.

In May, MOFSL moved Bombay High Court to collect dues of Rs 80.74 crore from Dhanera Diamonds against the settlement obligations for trades in crude oil contracts that expired on April 20.

Experts have attributed the negative price points to the Coronavirus-induced glut in supply, and have cautioned that such price points may not necessarily be one-off events.