Mar 31, 2023
Property, Plant and Equipment & Capital work-in-progress (contd.)
a) Additions during the year and capital work-in-progress of building include X 19.47 crore (previous year X 8.83 Crore) being borrowing cost capitalised in accordance with Accounting Standard (Ind AS) 23 on "Borrowing Costs".
b) The rate used to determine the amount of borrowing costs eligible for capitalisation is 6.68% (previous year: 6.23%).
c) Owned assets given on operating lease have been presented separately under respective class of assets as "Leased out" pursuant to Ind AS 116 "Leases".
d) Out of its leasehold land at Hazira, the Company has given certain portion of land for the use to its joint venture company and the lease deed is under execution.
e) Depreciation is provided based on useful life supported by the technical evaluation considering business specific usage, the consumption pattern of the assets and the past performance of similar assets.
(f) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended March 31, 2023 are 46,67,64,755 (previous period of five years ended March 31, 2022: 46,67,64,755 shares)
(g) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding last five years ended on March 31,2023 - Nil (previous period of five years ended March 31,2022: Nil)
(h) Stock option schemes i. Terms:
A. The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options are vested equally over a period of 4 years for series 2003(B) and 5 years in the case of series 2006(A) subject to the discretion of the management and fulfillment of certain conditions.
B. Options can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of issue of equity shares. Management has discretion to modify the exercise period.
iv. Weighted average share price at the date of exercise for stock options exercised during the year is X 1779.07 (previous year:
X 1635.25) per share.
v. A. In respect of stock options granted pursuant to the Company''s stock options schemes, the fair value of the options is treated
as discount and accounted as employee compensation over the vesting period.
B. Expense on Employee Stock Option Schemes debited to the Statement of Profit and Loss during 2022-23 is X 28.16 crore (previous year: X 49.11 crore) [Note 34]. The entire amount pertains to equity-settled employee share-based payment plans. The expense includes X 0.19 crore (previous year: X 0.34 crore) charged by subsidiary companies towards the stock options granted to Company''s employees.
vi. During the year, the Company has recovered X 1.12 crore (previous year: X 2.15 crore) from its subsidiary companies towards the stock options granted to their employees, pursuant to the employee stock option schemes.
vii. Weighted average fair values of options granted during the year is X 1496.52 (previous year: X 1113.62) per option.
The Company continues its policy of a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also enable the Company to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund-raising options for future, which is especially important in times of global economic volatility. The gross debt equity ratio is 0.25:1 as at March 31,2023 (as at March 31,2022 0.30:1).
During the year ended March 31, 2023, the Company paid the final dividend of X 22 per equity share for the year ended March 31, 2022 amounting to X 3091.42 crore.
The Board of directors, at their meeting held on May 10, 2023 recommended the final dividend of X 24 per equity share for the year ended March 31,2023 subject to approval from shareholders. On approval, the total dividend outgo is expected to be X 3373.16 crore based on number of shares outstanding as at March 31, 2023.
[1] Capital reserve: It represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transactions in earlier years.
[2] Capital reserve on business combination: It arises on transfer of business between entities under common control. It represents the difference, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor [refer Note 1(ii)(ab)].
[3] Capital redemption reserve: Created on redemption of preference shares out of profits in accordance with of Section 55(2)(c) the Companies Act, 2013.
[4] Debenture redemption reserve (DRR): The Ministry of Corporate Affairs vide notification dated August 16, 2019, amended the Companies (Share capital and Debenture) Rules, 2014 by which the Company is no longer required to create DRR towards the debentures issued. Earlier to this amendment, the Company was required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis and the amounts credited to the DRR was not to be utilised by the Company except to redeem debentures. The above amount represents the DRR created out of profits of the Company prior to the said notification.
[5] General reserve: The Company created a General Reserve in earlier years pursuant to the provisions of the Companies Act,1956 where in certain percentage of profits were required to be transferred to General Reserve before declaring dividends. As per Companies Act 2013, the requirements to transfer profits to General Reserve is not mandatory. General Reserve is a free reserve available to the company.
23(b) The Company has fund based and non-fund based facilities (viz. bank guarantees, letter of credits and derivatives) from banks. These facilities are secured by hypothecation of inventories and trade receivables. Amount of inventories and trade receivables that are pledged as collateral to the extent of: X 6932 crore as at March 31, 2023 (March 31,2022: X 6932 crore)
23(c) The Company has been sanctioned working capital limits in excess of X 5 crores, in aggregate, at points of time during the year, from banks or financial institutions on the basis of security of current assets. The quarterly returns filed by the Company with such banks or financial institutions are in agreement with the Books of Account of the Company of the respective quarters.
1. The Company does not expect any reimbursements in respect of the above contingent liabilities except in respect of matters at (j)
2. It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above pending resolution of the arbitration/appellate proceedings. Further, the liability mentioned in (a) to (d) above includes interest except in cases where the Company has determined that the possibility of such levy is remote.
3. In respect of matters at (e), the cash outflows, if any, could generally occur up to four years, being the period over which the validity of the guarantees extends except in a few cases where the cash outflows, if any, could occur any time during the subsistence of the borrowing to which the guarantees relate.
4. In respect of matters at (f), the cash outflows, if any, could generally occur up to seven years, being the period over which the validity of the guarantees extends.
5. In respect of matters at (g) to (i), the cash outflows, if any, could generally occur up to completion of projects undertaken by the respective joint operations.
6. In respect of matters at (j), the cash outflows, if any, is fully reimbursable by the third parties under an agreement entered in to with them.
Disclosure pursuant to Ind AS 103 "Business Combinations":
During the previous year, L&T Hydrocarbon Engineering Limited (LTHE), a wholly owned subsidiary, was merged with the Company under a Scheme of Arrangement approved by National Company Law Tribunal, Mumbai on January 28, 2022. The merger was effective from the appointed date April 1, 2021. LTHE had a registered office in Mumbai, India and was engaged in the business of EPC solutions for the global Oil & Gas industry from front-end design through detailed engineering, modular fabrication, procurement, project management, construction, installation, and commissioning.
No fresh shares were issued to effect the merger as LTHE was a wholly owned subsidiary of the Company. Further the merger was accounted in accordance with the Scheme of Arrangement and accounting standards using pooling of interest method, involving the following:
i. The assets and liabilities of LTHE were reflected at their carrying amounts. No adjustment was made to reflect the fair values, or recognise any new asset or liability.
ii. The balance of the Retained Earnings appearing in the financial statements of the LTHE was aggregated with the corresponding balance appearing in the financial statements of the Company.
iii. Restating the financials of the Company from April 1, 2020.
Disclosure pursuant to Ind AS 108 "Operating Segment" (contd.)
(e) Basis of identifying operating segments, reportable segments, segment profit and definition of each reportable segment:
(i) Basis of identifying Operating segments:
Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Company''s other components); (b) whose operating results are regularly reviewed by the Company''s executive management to make decisions about resource allocation and performance assessment; and (c) for which discrete financial information is available.
The Company has four reportable segments as described under "segment composition" below. The nature of products and services offered by these businesses are different and are managed separately given the different sets of technology and competency requirements.
(ii) Reportable segments
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
(iii) Segment profit
Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the corporate executive management.
(iv) Effective from April 1, 2022, the operating segments have been reorganised by the Company''s Corporate Executive Management to reflect business portfolio as per the Strategic Plan - Lakshya 2026 where the Company will focus on Projects and Hi-Tech Manufacturing businesses.
The changes in segment composition are summarised as follows:
a) Hydrocarbon and Power business primarily involved in EPC/turnkey solutions in Energy sector re-organised as "Energy Projects" segment to reflect the integrated pursuit of opportunities in a rapidly transforming Energy sector including Green Energy space.
b) Heavy Engineering and Defence Engineering business, engaged in manufacturing of complex equipment reorganised as "Hi-Tech Manufacturing" segment to leverage the extensive engineering, manufacturing and fabrication expertise across the various customer segments.
The Revised Segment Composition
⢠Infrastructure Projects segment comprises engineering and construction of (a) building and factories, (b) transportation infrastructure, (c) heavy civil infrastructure, (d) power transmission & distribution, (e) water & effluent treatment and (f) minerals and metals.
⢠Energy Projects segment comprises EPC/ turnkey solutions in (a) Hydrocarbon business covering Oil & Gas industry from front-end design through detailed engineering, modular fabrication, procurement, project management, construction, installation and commissioning and (b) Power business covering Coal-based and Gas-based thermal power plants including power generation equipment with associated systems and/or balance-of-plant packages and (c) EPC solutions in Green Energy space.
⢠Hi-Tech Manufacturing segment comprises (a) design, manufacture and supply of (i) custom designed, engineered critical equipment & systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas and Thermal & Nuclear Power (ii) equipment, systems and platforms for Defence and Aerospace sectors and (b) design, construction and repair/refit of defence vessels.
⢠Others segment includes (a) realty, (b) smart world & communication projects (including military communications), (c) marketing and servicing of construction equipment & mining machinery and parts thereof, (d) manufacture and sale of rubber processing machinery and (e) E-commerce/digital platforms & data centres.
iv) Attrition Rate:
a) For gratuity plan the attrition rate varies from 2% to 12% (previous year: 1% to 10%) for various age groups.
b) For Company pension plan, the attrition rate varies from 0% to 2% (previous year: 0% to 2%) for various age groups.
c) For post-retirement medical benefit plan, the attrition rate varies from 1% to 13% (previous year: 1% to 11%) for various
age groups.
v) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
vi) The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long-term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss.
vii) The obligation of the Company under the post-retirement medical benefit plan is limited to the overall ceiling limits. At present, healthcare cost, as indicated in the principal actuarial assumption given supra, has been assumed to increase at 5.00% p.a.
h) Characteristics of defined benefit plans and associated risks:
1 Gratuity plan:
The Company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service. The Company''s scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972.
The defined benefit plan for gratuity of the Company is administered by separate gratuity funds that are legally separate from the Company. The trustees nominated by the Company are responsible for the administration of the plan. There are no minimum funding requirements of these plans. The funding of these plans are based on gratuity fund''s actuarial measurement framework set out in the funding policies of the plan. These actuarial measurements are similar compared to the assumptions set out in (g) supra. Employees do not contribute to any of these plans.
Unfunded gratuity represents a small part of gratuity plan which is not material. Further, the unfunded portion includes amounts payable in respect of the Company''s foreign operations which result in gratuity payable to employees engaged as per local laws of country of operation.
2 Post-retirement medical care plan:
The Post-retirement medical benefit plan provides for reimbursement of health care costs to certain categories of employees post their retirement. The reimbursement is subject to an overall ceiling sanctioned based on cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
3 Company''s pension plan:
In addition to contribution to state-managed pension plan (EPS scheme), the Company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees. The quantum of pension depends on the cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
4 Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952. The plan mandates contribution by employer at a fixed percentage of employee''s salary. Employees also contribute to the plan at a fixed percentage of their salary as a minimum contribution and additional sums at their discretion. The plan guarantees interest at the rate notified by Employees'' Provident Fund Organisation. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.
The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognized immediately in the Statement of Profit and Loss as actuarial loss. Any loss/gain arising out of the investment risk and actuarial risk associated with the plan is also recognized as expense or income in the period in which such loss/gain occurs.
All the above defined benefit plans expose the Company to general actuarial risks such as interest rate risk and market (investment) risk.
i) The Company will assess the impact of Code on Wages, 2019 and the Code on Social Security, 2020 and give effect in the financial statements when the date of implementation of these codes and the Rules/Schemes thereunder are notified.
Disclosure pursuant to Ind AS 20 "Accounting for Government Grants and Disclosure of Government Assistance"
(i) The Company''s exports qualify for various export benefits offered in the form of duty credit scrips under foreign trade policy framed by Department General of Foreign Trade India (DGFT). Income accounted towards such export incentives and duty drawback amounts to
X 86.06 crore (previous year X 93.53 crore).
(ii) The Company''s defence manufacturing facility is eligible for certain incentives under Gujarat Aerospace and Defence Policy, 2016.
Income accounted towards such incentives amounts to NIL (previous year: X 13.05 crore).
b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31, 2023 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of 1 to 3 years from the date of Balance Sheet.
ii. Expected tax liability in respect of indirect taxes represents mainly the differential sales tax liability on account of non-collection of declaration forms.
iii. Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
iv. Contractual rectification cost represents the estimated cost the Company is likely to incur during defect liability period as per the contract obligations in respect of completed construction contracts accounted under Ind AS 115 "Revenue from Contracts with customers".
v Other provisions mainly includes onerous contracts.
c) Disclosure in respect of contingent liabilities is given as part of Note 29 to the Balance Sheet.
The Company regularly reviews its foreign currency and interest rate related exposures - both hedged and open. The Company primarily follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE), hence, the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time that the HPFE becomes an on-balance sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Company. Further, given the effective horizons of the Company''s risk management activities which coincide with the durations of the projects under execution, which could extend across 3-4 years and given the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Company''s financial condition and operating results. The Company monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc. on a regular basis. For on-balance Sheet exposures, the Company monitors the risks on net unhedged exposures.
(i) Foreign exchange rate risk:
The Company has both receivable and payable exposures in foreign currency. Accordingly, changes in exchange rates may affect the Company''s revenues, cost, and profitability. There is a risk that the Company may also have to adjust the pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates.
The Company may enter foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with existing assets and liabilities, firm commitments, forecasted future cash flows and net investments in foreign subsidiaries. In addition, the Company has entered, and may enter in future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances. The Company''s practice is to hedge a portion of its material net foreign exchange exposures with tenors in line with the project/business life cycle. The Company may also choose not to hedge certain foreign exchange exposures.
To provide a meaningful assessment of the foreign currency risk associated with the Company''s foreign currency derivative positions against off-balance sheet exposures and unhedged portion of on-balance sheet financial assets and liabilities, the Company uses a multi-currency correlated value-at-risk ("VAR") model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against Indian rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposure due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments is generally offset by increases in the fair value of the underlying exposures for on-balance sheet exposures. The overnight VAR for the Company at 95% confidence level is X 31.93 crore as at March 31, 2023 and X69.70 crore as at March 31, 2022.
Actual future gains and losses associated with the Company''s investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at March 31, 2023 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchanges rates and the Company''s actual exposures and position.
The Company''s exposure to changes in interest rates relates primarily to the Company''s outstanding floating rate debt. While most of the Company''s outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk, a major portion of foreign currency debt is linked to international interest rate benchmarks like LIBOR. The Company also hedges a portion of these risks by way of derivatives instruments like interest rate swaps and currency swaps.
The Company is well placed to complete transitioning all of its USD LIBOR linked loans to SOFR linked loans by FY24.
(b) Liquidity Risk Management:
The Company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through adequate committed credit lines. Given the need to fund diverse businesses, the Company maintains flexibility by need based drawing from committed credit lines. Management regularly monitors the position of cash and cash equivalents. The maturity profiles of financial assets and financial liabilities including debt financing plans and liquidity ratios are considered while reviewing the liquidity position.
The Company''s investment policy and strategy are focused on preservation of capital and supporting the Company''s liquidity requirements. The Company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. The Company typically invests in money market funds, large debt funds, Government of India securities, equity funds and other highly-rated securities under a exposure limit framework. The investment policy focuses on minimising the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the Company''s investment portfolio, the Company performed a sensitivity analysis to determine the impact of change in prices of the securities on the value of the investment portfolio assuming a 0.5% movement in the fair market value of debt funds and debt securities and a 5% movement in the NAV of the equity funds as below:
(c) Credit Risk Management:
The Company''s customer profile include public sector enterprises, state owned companies and large private corporates. Accordingly, the Company''s customer credit risk is low. The Company''s average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases, retentions are substituted with bank/corporate guarantees. The Company has a detailed review mechanism of overdue customer receivables at various levels within the organisation to ensure proper attention and focus for realisation.
(d) Commodity price risk management:
The Company bids for and executes EPC projects on a turnkey basis. EPC projects entail procurement of various equipment and materials which may have direct or indirect linkages to commodity prices like steel (both long and flat steel), copper, aluminum, zinc, lead, nickel, cement etc. Accordingly, the Company is exposed to the price risk on these commodities. To mitigate the risk of commodity prices, the company relies on contractual provisions like pass through of prices, price variation provisions etc., and further uses hedging instruments where available (refer Note 53 (h)(ii)). There is a certain residual risk carried by the Company that cannot be hedged against.
The table given in the Risk Management section of Management Discussion and Analysis lists out the commodity exposure for the year (only for projects that been awarded and are under execution).
(i) During the year, the Company renewed the loan of X 324.61 crore to L&T Sapura Shipping Private Limited (LTSSPL), a subsidiary!11 as the vessel owned by it was under major repairs since its accident in March 2020 and LTSSPL was unable to generate sufficient revenue till the vessel got re-commissioned in October 2022. Thus, during the year, there were delays in repayment of interest by LTSSPL. However, there were no overdue interest as at March 31, 2023.
(ii) L&T Special Steels and Heavy Forgings Private Limited (LTSSHF), a subsidiary111, has not repaid the loan and net interest thereon aggregating to X 1980.27 crore to the Company due to insufficient funds. LTSSHF is in discussion with its promoters viz. the Company and Nuclear Power Corporation of India Limited, for exploring options to restructure its balance sheet.
Mar 31, 2022
a) Cost of buildings includes ownership accommodations:
(i) A. in various co-operative societies, shop-owners'' associations and non-trading corporations: R 68.21 crore, including 2610
shares of R 50 each, 75 shares of R 100 each. (previous year: in various co-operative societies, shop-owners'' associations and non-trading corporations: R 68.26 crore, including 2615 shares of R 50 each, 75 shares of R 100 each).
B. in various apartments: R 8.82 crore. (previous year: R 8.82 crore).
C. in various co-operative societies: R 0.36 crore (previous year: R 0.36 crore) for which share certificates are yet to be issued.
D. in proposed co-operative societies R 30.59 crore. (previous year: R 30.59 crore).
(ii) ownership accommodations of R 11.75 crore representing undivided share in properties at various locations. (previous year:
R 11.75 crore).
b) Additions during the year and capital work-in-progress of buildings include R 8.83 crore (previous year: R 27.75 Crore) being borrowing cost capitalised in accordance with Accounting Standard (Ind AS) 23 "Borrowing Costs".
c) The rate used to determine the amount of borrowing costs eligible for capitalisation is 6.23% (previous year: 5.71%).
d) Owned assets given on operating lease have been presented separately under respective class of assets as "Leased out" pursuant to Ind
AS 116 "Leases".
e) Cost as at April 1,2021 of individual assets has been reclassified wherever necessary.
f) Out of its leasehold land at Hazira, the Company has given certain portion of land for the use to its joint venture company and the lease
deed is under execution.
g) Depreciation is provided based on useful life supported by the technical evaluation considering business specific usage, the consumption pattern of the assets and the past performance of similar assets.
(f) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended March 31, 2022 are 46,67,64,755 (period of five years ended March 31,2021: 46,67,64,755 shares).
(g) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding last five years ended on March 31,2022 - Nil (period of five years ended March 31, 2021: Nil).
(h) Stock option schemes i. Terms:
A. The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options are vested equally over a period of 4 years [5 years in the case of series 2006(A)], subject to the discretion of the management and fulfillment of certain conditions.
B. Options can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of issue of equity shares. Management has discretion to modify the exercise period.
iv. Weighted average share price at the date of exercise for stock options exercised during the year is R 1635.25 (previous year:
R 1001.47) per share.
v. A. In respect of stock options granted pursuant to the Company''s stock options schemes, the fair value of the options is treated
as discount and accounted as employee compensation over the vesting period.
B. Expense on Employee Stock Option Schemes debited to the Statement of Profit and Loss during 2021-22 is R 49.11 crore (previous year: R 45.63 crore) net of recoveries of R Nil (previous year: R 0.40 crore) from its group companies towards the stock options granted to deputed employees, pursuant to the employee stock option schemes (Note 34). The entire amount pertains to equity-settled employee share-based payment plans. [expense related to held for sale business R Nil (previous year: R 2.14 crore)]
vi. During the year, the Company has recovered R 2.15 crore (previous year: R 1.25 crore) from its subsidiary companies towards the stock options granted to their employees, pursuant to the employee stock option schemes.
vii. Weighted average fair values of options granted during the year is R 1113.62 (previous year: R 834.24) per option.
The Company continues its policy of a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also enable the Company to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund-raising options for future, which is especially important in times of global economic volatility. The gross debt equity ratio is 0.30:1 as at March 31,2022 (as at March 31,2021 0.40:1).
During the year ended March 31, 2022, the Company paid the final dividend of R 18 per equity share for the year ended March 31, 2021 amounting to R 2528.38 crore.
The Board of directors, at their meeting held on May 12, 2022 recommended the final dividend of R 22 per equity share for the year ended March 31,2022, subject to approval from shareholders. On approval, the total dividend outgo is expected to be R 3091.06 crore based on number of shares outstanding as at March 31, 2022.
[1] Capital reserve: It represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transactions in earlier years.
[2] Capital reserve on business combination: It arises on transfer of business between entities under common control. It represents the difference, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor [refer Note 1(ii)(ab)].
[3] Capital redemption reserve: Created on redemption of preference shares out of profits in accordance with of Section 55(2)(c) the Companies Act,2013.
[4] Debenture redemption reserve (DRR): The Ministry of Corporate Affairs vide notification dated August 16, 2019, amended the Companies (Share capital and Debenture) Rules, 2014 by which the Company is no longer required to create DRR towards the debentures issued. Earlier to this amendment, the Company was required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis and the amounts credited to the DRR was not to be utilised by the Company except to redeem debentures. The above amount represents the DRR created out of profits of the Company prior to the said notification.
[5] General reserve: The Company created a General Reserve in earlier years pursuant to the provisions of the Companies Act,1956 where in certain percentage of profits were required to be transferred to General Reserve before declaring dividends. As per Companies Act 2013, the requirements to transfer profits to General Reserve is not mandatory. General Reserve is a free reserve available to the Company.
13,310 fully paid redeemable non-convertible debentures having face value of 10,00,000/- each issued on private placement basis are secured by :
(i) First pari-passu charge over certain assets of the Company with security asset cover of 1.25 times; and
(ii) Charge on the designated account under the Debenture Trust Deed.
23(b) The Company has fund based and non-fund based facilities (viz. bank guarantees, letter of credits and derivatives) from banks. These facilities are secured by hypothecation of inventories and trade receivables. Amount of inventories and trade receivables that are pledged as collateral: R 6932 crore as at March 31, 2022 (March 31, 2021: R 10182 crore)
23(c) The Company has been sanctioned working capital limits in excess of 5 crores, in aggregate, at points of time during the year, from banks or financial institutions on the basis of security of current assets. The quarterly returns filed by the Company with such banks or financial institutions are in agreement with the Books of Account of the Company of the respective quarters.
1. The Company does not expect any reimbursements in respect of the above contingent liabilities except in respect of matters at (j)
2. It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above pending resolution of the arbitration/appellate proceedings. Further, the liability mentioned in (a) to (d) above includes interest except in cases where the Company has determined that the possibility of such levy is remote.
3. In respect of matters at (e), the cash outflows, if any, could generally occur up to five, being the period over which the validity of the guarantees extends except in a few cases where the cash outflows, if any, could occur any time during the subsistence of the borrowing to which the guarantees relate.
4. In respect of matters at (f), the cash outflows, if any, could generally occur up to nine, being the period over which the validity of the guarantees extends.
5. In respect of matters at (g) to (i), the cash outflows, if any, could generally occur up to completion of projects undertaken by the respective joint operations.
6. In respect of matters at (j), the cash outflows, if any, is fully reimbursable by the third parties under an agreement entered in to with them
Disclosure pursuant to Ind AS 103 "Business Combinations":
L&T Hydrocarbon Engineering Limited (LTHE), a wholly owned subsidiary, is merged with the Company under a Scheme of Arrangement approved by National Company Law Tribunal, Mumbai on January 28, 2022. The merger is effective from the appointed date April 1, 2021. LTHE has a registered office in Mumbai, India and is engaged in the business of EPC solutions for the global Oil & Gas industry from front-end design through detailed engineering, modular fabrication, procurement, project management, construction, installation, and commissioning.
No fresh shares are issued to effect the merger as LTHE is a wholly owned subsidiary of the Company. Further the merger is accounted in accordance with the Scheme of Arrangement and accounting standards using pooling of interest method, involving the following:
i. The assets and liabilities of LTHE are reflected at their carrying amounts. No adjustment is made to reflect the fair values, or recognise any new asset or liability.
ii. The balance of the Retained earnings appearing in the financial statements of the LTHE is aggregated with the corresponding balance appearing in the financial statements of the Company.
iii. Restating the financials of the Company from April 1, 2020.
(c) Revenue contributed by any single customer in any of the operating segments, whether reportable or otherwise, does not exceed ten percent of the Company''s total revenue.
(d) The Company''s reportable segments are organised based on the nature of products and services offered by these segments.
(e) Basis of identifying operating segments, reportable segments, segment profit and definition of each reportable segment:
(i) Basis of identifying Operating segments:
Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Company''s other components; (b) whose operating results are regularly reviewed by the Company''s executive management to make decisions about resource allocation and performance assessment; and (c) for which discrete financial information is available.
The Company has six reportable segments as described under "segment composition" below. The nature of products and services offered by these businesses are different and are managed separately given the different sets of technology and competency requirements.
ii) Reportable segments
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
iii) Segment profit
Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the corporate executive management.
iv) Segment composition
⢠Infrastructure segment comprises engineering and construction of (a) building and factories, (b) transportation infrastructure, (c) heavy civil infrastructure, (d) power transmission & distribution, (e) water & effluent treatment systems and
(f) minerals & metals.
⢠Hydrocarbon segment comprises EPC solutions for the global Oil & Gas industry from front-end design through detailed engineering, modular fabrication, procurement, project management, construction, installation, and commissioning.
⢠Power segment comprises turnkey solutions for Coal-based and Gas-based thermal power plants including power generation equipment with associated systems and/or balance-of-plant packages.
⢠Heavy Engineering segment comprises manufacture and supply of custom designed, engineered critical equipment & systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas and Thermal & Nuclear Power.
⢠Defence Engineering segment comprises (a) design, development, serial production and through life-support of equipment, systems and platforms for Defence and Aerospace sectors and (b) design, construction, and repair/refit of defence vessels.
⢠Electrical & Automation segment (upto the date of transfer and disclosed as discontinued operation) comprises manufacture and sale of low and medium voltage switchgear components, custom-built low and medium voltage switchboards, electronic energy meters/protection (relays) systems and control & automation products.
⢠Others segment includes realty, smart world & communication projects (including military communications), marketing and servicing of construction & mining machinery and parts thereof and manufacture, sale of rubber processing machinery and digital platforms - (i) SuFin for B2B e-commerce & (ii) EduTech, for higher education and professional skilling.
i. During the current year, increase in net contract balances is primarily due to higher revenue recognition as compared to progress bills raised.
During the previous year, decrease in net contract balances is primarily due to higher progress bills raised as compared to revenue recognition.
ii. Revenue recognised from opening balance of contract liabilities amounts to R 5589.58 crore (previous year: R 5896.41 crore)
iii. Revenue recognised from the performance obligation satisfied (or partially satisfied) upto previous year (arising out of contract modifications) amounts to R 10.19 crore (previous year: R 26.40 crore)
(e) Cost to obtain the contract:
i. Amortisation in Statement of Profit and Loss: Nil (previous year: Nil)
ii. Recognised as contract assets at March 31,2022: Nil (previous year: Nil)
The Trust formed by the Company manages the investments of provident funds and gratuity fund. Interest income on plan assets is determined by multiplying the fair value of the plan assets by the discount rate determined at the start of the annual reporting period.
The Company expects to fund R 17.71 crore (previous year: R 0.92 crore) towards its gratuity plan and R 100.49 crore (previous year: R 81.06 crore) towards its trust-managed provident fund plan during the year 2021-22.
iv) Attrition Rate:
a) For gratuity plan the attrition rate varies from 1% to 10% (previous year: 1% to 11%) for various age groups.
b) For Company pension plan, the attrition rate varies from 0% to 2% (previous year: 0% to 2%) for various age groups.
c) For post-retirement medical benefit plan, the attrition rate varies from 1% to 11% (previous year: 1% to 11%) for various age groups.
v) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
vi) The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long-term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss.
vii) The obligation of the Company under the post-retirement medical benefit plan is limited to the overall ceiling limits. At present, healthcare cost, as indicated in the principal actuarial assumption given supra, has been assumed to increase at 5.00% p.a.
Disclosure pursuant to Indian Accounting Standard (Ind AS) 19 "Employee Benefits" (contd.)
h) Characteristics of defined benefit plans and associated risks:
1 Gratuity plan:
The Company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service. The Company''s scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972.
The defined benefit plan for gratuity of the Company is administered by separate gratuity funds that are legally separate from the Company. The trustees nominated by the Company are responsible for the administration of the plan. There are no minimum funding requirements of these plans. The funding of these plans are based on gratuity fund''s actuarial measurement framework set out in the funding policies of the plan. These actuarial measurements are similar compared to the assumptions set out in (g) supra. Employees do not contribute to any of these plans.
Unfunded gratuity represents a small part of gratuity plan which is not material. Further, the unfunded portion includes amounts payable in respect of the Company''s foreign operations which result in gratuity payable to employees engaged as per local laws of country of operation.
2 Post-retirement medical care plan:
The Post-retirement medical benefit plan provides for reimbursement of health care costs to certain categories of employees post their retirement. The reimbursement is subject to an overall ceiling sanctioned based on cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
3 Company''s pension plan:
In addition to contribution to state-managed pension plan (EPS scheme), the Company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees. The quantum of pension depends on the cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
4 Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952. The plan mandates contribution by employer at a fixed percentage of employee''s salary. Employees also contribute to the plan at a fixed percentage of their salary as a minimum contribution and additional sums at their discretion. The plan guarantees interest at the rate notified by Employees'' Provident Fund Organisation. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.
The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognized immediately in the Statement of Profit and Loss as actuarial loss. Any loss/gain arising out of the investment risk and actuarial risk associated with the plan is also recognized as expense or income in the period in which such loss/gain occurs.
All the above defined benefit plans expose the Company to general actuarial risks such as interest rate risk and market (investment) risk.
i) The Company will assess the impact of Code on Wages, 2019 and the Code on Social Security, 2020 and give effect in the financial statements when the date of implementation of these codes and the Rules/Schemes thereunder are notified.
Disclosure pursuant to Ind AS 20 "Accounting for Government Grants and Disclosure of Government Assistance":
(i) The Company''s exports qualify for various export benefits offered in the form of duty credit scrips under foreign trade policy framed by Department General of Foreign Trade India (DGFT). Income accounted towards such export incentives and duty drawback amounts to
R 93.53 crore (previous year: R 242.54 crore).
(ii) The Company''s defence manufacturing facility is eligible for certain incentives under Gujarat Aerospace and Defence Policy, 2016.
Income accounted towards such incentives amounts to R 13.05 crore (previous year: Nil).
[2] The Company has provided a revolving line of credit facility of R 1800 crore to L&T Finance Limited as a stand-by liquidity support arrangement (the "Facility"), renewable on a yearly basis. This Facility is in addition to the working capital lines that L&T Finance Limited has with its consortium of lending banks. The Facility shall be exercised by L&T Finance Limited only after exhausting all external bank funding lines. The utilisation against the Facility is NIL as at 31st March 2022.
1. All the related party contracts / arrangements have been entered on arms'' length basis.
2. The amount of outstanding balances as shown above are unsecured and will be settled/recovered in cash.
3. The interest rate charged on loans given to related parties are as per market rates.
b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31, 2022 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of 1 to 3 years from the date of Balance Sheet.
ii. Expected tax liability in respect of indirect taxes represents mainly the differential sales tax liability on account of non-collection of declaration forms.
iii. Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
iv. Contractual rectification cost represents the estimated cost the Company is likely to incur during defect liability period as per the contract obligations in respect of completed construction contracts accounted under Ind AS 115 "Revenue from Contracts with customers".
v. Other provisions mainly includes onerous contracts.
c) Disclosure in respect of contingent liabilities is given as part of Note 29 to the Balance Sheet.
The Company regularly reviews its foreign currency and interest rate related exposures - both hedged and open exposures. The Company primarily follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE), hence, the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time that the HPFE becomes an on-balance sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Company. Further, given the effective horizons of the Company''s risk management activities which coincide with the durations of the projects under execution, which could extend across 3-4 years and given the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Company''s financial condition and operating results. The Company monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc. on a regular basis. For on-balance Sheet exposures, the Company monitors the risks on net unhedged exposures.
(i) Foreign exchange rate risk:
The Company has both receivable and payable exposures in foreign currency. Accordingly, changes in exchange rates may affect the Company''s revenues, cost and profitability. There is a risk that the Company may also have to adjust the pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. In addition, the Company has entered, and may enter in future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances. The Company''s practice is to hedge a portion of its material net foreign exchange exposures with tenors in line with the project/business life cycle. The Company may also choose not to hedge certain foreign exchange exposures.
To provide a meaningful assessment of the foreign currency risk associated with the Company''s foreign currency derivative positions against off-balance sheet exposures and unhedged portion of on-balance sheet financial assets and liabilities, the Company uses a multi-currency correlated value-at-risk ("VAR") model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against Indian rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposures due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increases in the fair value of the underlying exposures for on-balance sheet exposures. The overnight VAR for the Company at 95% confidence level is R 69.70 crore as at March 31, 2022 and R 61.09 crore as at March 31, 2021.
Actual future gains and losses associated with the Company''s investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at March 31, 2022 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchanges rates and the Company''s actual exposures and position.
(ii) Interest rate risk:
The Company''s exposure to changes in interest rates relates primarily to the Company''s outstanding floating rate debt. While most of the Company''s outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk, a major portion of foreign currency debt is linked to international interest rate benchmarks like LIBOR. The Company also hedges a portion of these risks by way of derivatives instruments like Interest rate swaps and currency swaps.
With the transition of LIBOR into another benchmark (SOFR), there will be a spread adjustment that will have to be applied to these loans. The loans are expected to be either refinanced and linked to a new benchmark or simply transitioned to the new benchmark before LIBOR ceases to be published.
The Company''s Treasury team constantly tracks the developments related to this proposed transition and has also had interactions with the counterparty lenders to prepare for the transition.
In the cases mentioned above, the lenders and the Company are likely to agree on a neutral spread adjustment which does not impact the counterparties financially.
(b) Liquidity Risk Management:
The Company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through adequate committed credit lines. Given the need to fund diverse businesses, the Company maintains flexibility by need based drawing from committed credit lines. Management regularly monitors the position of cash and cash equivalents. The maturity profiles of financial assets and financial liabilities including debt financing plans and liquidity ratios are considered while reviewing the liquidity position.
The Company''s investment policy and strategy are focused on preservation of capital and supporting the Company''s liquidity requirements. The Company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. The Company typically invests in money market funds, large debt funds, Government of India securities, equity funds and other highly-rated securities under a exposure limit framework. The investment policy focuses on minimising the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the Company''s investment portfolio, the Company performed a sensitivity analysis to determine the impact of change in prices of the securities on the value of the investment portfolio assuming a 0.5% movement in the fair market value of debt funds and debt securities and a 5% movement in the NAV of the equity
(c) Credit Risk Management:
The Company''s customer profile include public sector enterprises, state owned companies and large private corporates. Accordingly, the Company''s customer credit risk is low. The Company''s average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases, retentions are substituted with bank/corporate guarantees. The Company has a detailed review mechanism of overdue customer receivables at various levels within the organisation to ensure proper attention and focus for realisation.
(d) Commodity price risk management:
The Company bids for and executes EPC projects on turnkey basis. EPC projects entail procurement of various equipment and materials which may have direct or indirect linkages to commodity prices like steel (both long and flat steel), copper, aluminum, zinc, lead, nickel, cement etc. Accordingly, the Company is exposed to the price risk on these commodities. To mitigate the risk of commodity prices, the company relies on contractual provisions like pass through of prices, price variation provisions etc., and further uses hedging instruments where available (refer Note 53 (h)(ii)). There is certain residual risk carried by the company that cannot be hedged against.
The table given in the Risk Management section of Management Discussion and Analysis lists out the commodity exposure for the year (only for projects that been awarded and are under execution).
(d) Fair value of financial assets and financial liabilities measured at amortised cost:
(i) Financial assets measured at amortised cost:
The carrying amounts of trade receivables, loans, advances, investments in CBLO and Commercial Paper and cash and other bank balances are considered to be the same as their fair values due to their short-term nature. The carrying amounts of long-term loans given with floating rate of interest are considered to be close to the fair value.
Exceptional items (net of tax) for 2021-22 includes the following:
(i) Gain of R 138.69 crore on transfer of NxT digital business to Mindtree Limited, a subsidiary, with effect from July 1,2021.
(ii) Gain of R 128.60 crore on divestment of stake in L&T Uttaranchal Hydro Power Limited, a subsidiary on August 30, 2021.
Exceptional items (net of tax) for 2020-21 included the following:
(i) Impairment towards funded exposure of R 1467.38 crore offset by interest income of R 78.58 crore and provision towards constructive obligation to fund future losses R 14.85 crore in the heavy forgings joint venture.
(ii) Impairment of investments in the power development business R 1415.00 crore.
The impairment was recognised considering the existing business operations and the outlook for the future performance. The present value of estimated future cash flows of the business (value-in-use) was considered as a recoverable amount (discount rates used 11.90% to 12.75%). For power development business, in addition to value-in-use, part of the recoverable value was based on the fair value determined based on benchmark multiple method.
i. Refer Annexure C to the Board Report for the nature of CSR activities of the Company.
ii. Amount spent on CSR during the year 2021-22 includes contribution to PM CARES Fund NIL (previous year: R 3.24 crore).
[1] Total amount spent in excess of mandatory requirement for FY 21-22 and available for set off in succeeding financial years is R 6.14 crore (including the amount for which no asset is created).
[2] Total amount spent in excess of mandatory requirement for FY 20-21 was R 5.07 crore. The amount available for set off in succeeding financial years was R 4.51 crore (including the amount for which no asset was created).
[3] Includes CSR expense of discontinued operations R 0.83 crore.
(b) Notes with respect to remarks in CARO Report:
(i) The Company renewed the loan of R 24.66 crore to Hi-Tech Rock Product & Aggregates Limited, a subsidiary, as its business was affected majorly due to an inverted duty structure. The subsidiary company has initiated measures to become more cost competitive including redressal of the inverted duty structure through various forums.
(ii) The Company renewed the loan of R 168.48 crore to L&T Sapura Shipping Private Limited, a joint venture, as the vessel owned by it was under major repairs since its accident in March 2020 and the joint venture company was unable to generate revenue. The vessel is expected to be re-commissioned in 2022-23. The payment of interest of R 3.50 crore on the Company''s bridge loan, for repairs of the vessel, to the joint venture company, is overdue and would be settled out of insurance claim proceeds.
[1] Profit before interest, tax and exceptional items from continuing operations
[2] Interest expense Principal repayments made during the period for long term borrowings Cash flow on settlement of derivatives contracts related to borrowings
[3] Includes Manufacturing construction and operating expenses
[4] Average Equity and average loan funds ( including interest bearing advances)
[5] Includes profit/loss on sale and fair valuation of current investments, dividend on current investment and interest income
[6] Includes current investment, inter corporate deposits and fixed deposits
[7] Not material considering the size and the nature of operations of the Company
(a) For better understanding of the Company''s performance, line items have been added to show Profit after tax from continuing operations separately from exceptional items. This is in line with guidance available in Schedule III to the Act.
(b) Figures for the previous year have been regrouped/reclassified to conform to the figures of the current year.
Mar 31, 2021
a) Cost of freehold land includes R 1.14 crore (previous year: R 1.14 crore) for which conveyance is yet to be completed.
b) Cost of buildings includes ownership accommodations:
(i) A. in various co-operative societies, shop-owners'' associations and non-trading corporations : R 68.26 crore, including 2615
shares of R 50 each, 75 shares of R 100 each. (previous year: in various co-operative societies, shop-owners'' associations and non-trading corporations: R 68 26 crore, including 2615 shares of R 50 each, 75 shares of R 100 each).
B. in various apartments : R 8.82 crore. (previous year: R 9.42 crore).
C. in various co-operative societies : R 0.36 crore (previous year: R 0.36 crore) for which share certificates are yet to be issued.
D. in proposed co-operative societies R 30.59 crore. (previous year: R 30.59 crore).
(ii) ownership accommodations of R 0.15 crore in respect of which the deed of conveyance is yet to be executed. (previous year: R 0.29 crore).
(iii) ownership accommodations of R 11.75 crore representing undivided share in properties at various locations. (previous year:
R 11.75 crore).
c) Additions during the year and capital work-in-progress include R 27.75 crore (previous year: R 23.10 crore) being borrowing cost capitalised in accordance with Ind AS 23 "Borrowing Costs". Asset class wise break-up of borrowing costs capitalised during the year is as follows:
d) The rate used to determine the amount of borrowing costs eligible for capitalisation is 5.83% (previous year: 6.24%).
e) Depreciation for the year includes R 6.95 crore (previous year: R 430 crore) on account of obsolescence.
f) Owned assets given on operating lease have been presented separately under respective class of assets as "Leased out" pursuant to Ind AS 116 "Leases".
g) Cost as at April 1, 2020 of individual assets has been reclassified wherever necessary.
h) Out of its leasehold land at Hazira, the Company has given certain portion of land for the use to its joint venture company and the lease deed is under execution.
a. Pursuant to amalgamation of L&T Realty Limited with L&T Constructure Equipment Limited, L&T Construction Equipment Limited issued 4,71,60,700 equity shares of R 10 each and 64,83,00,000, 12% non-cumulative redeemable preference shares of R 10 each to Larsen & Toubro Limited as a consideration towards the transfer of all assets and liabilities by L&T Realty Limited. The cost of acquisition of shares issued was deemed to be the cost at which Larsen & Toubro Limited acquired shares of L&T Realty Limited. Accordingly, the value of investment in L&T Construction Equipment Limited was increased by R 47.16 crore towards equity shares and R 648.30 crore towards preference shares w.e.f. April 1, 2018 and correspondingly investment in equity and preference shares of L&T Realty Limited stood cancelled.
b. Pursuant to the approval of the Registrar of Companies, L&T Construction Equipment Limited is renamed as L&T Realty Developers Limited and L&T Construction Machinery Limited is renamed as L&T Construction Equipment Limited.
c. Pursuant to demerger of Manufacturing business of L&T Construction Equipment Limited, L&T Construction Machinery Limited issued 19,91,32,091 equity shares of R 10 each to Larsen & Toubro Limited as a consideration towards transfer of certain assets and liabilities by L&T Construction Equipment Limited. The cost of acquisition of these shares issued was derived based on book value of assets transferred to the total value of assets of L&T Construction Equipment Limited as at appointed date. Accordingly, the value of investment in L&T Construction Machinery Limited was increased by R 22.26 crore and reduced in L&T Construction Equipment Limited w.e.f. April 1, 2018.
(f) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended March 31,2021 are 46,67,64,755 (period of five years ended March 31, 2020: 46,67,64,755 shares).
(g) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding five years ended on March 31, 2021 - Nil (period of five years ended March 31, 2020: Nil).
(h) Stock option schemes i. Terms:
A. The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options are vested equally over a period of 4 years [5 years in the case of series 2006(A)], subject to the discretion of the management and fulfillment of certain conditions.
B. Options can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of issue of equity shares. Management has discretion to modify the exercise period.
B. Expense on Employee Stock Option Schemes debited to the Statement of Profit and Loss during 2020-21 is R 42.05 crore (previous year: R 49.44 crore) net of recoveries of R 0.40 crore (previous year: R 0.46 crore) from its group companies towards the stock options granted to deputed employees, pursuant to the employee stock option schemes (refer Note 40). The entire amount pertains to equity-settled employee share-based payment plans. [expense related to discontinued operations R 2.14 crore (previous year: R 233 crore)]
vi. During the year, the Company has recovered R 4.82 crore (previous year: R 5.54 crore) from its subsidiary companies towards the stock options granted to their employees, pursuant to the employee stock option schemes.
vii. Weighted average fair values of options granted during the year is R 834.24 (previous year: R 804.63) per option
The Company continues its policy of a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also enable the Company to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund raising options for future, which is especially important in times of global economic volatility. The gross debt equity ratio is 0.39:1 as at March 31,2021 (as at March 31, 2020 0.49:1).
During the year ended March 31, 2021, the Company paid the final dividend of R 8 per equity share for the year ended March 31, 2020 amounting to R 1 123.23 crore
During the year ended March 31, 2021, the Company paid special dividend of R 18 per equity share amounting to R 2527.66 crore.
The Board of Directors, at their meeting held on May 14, 2021 recommended a final dividend of R 18 per equity share for the year ended March 31, 2021, subject to approval of shareholders. On approval, the dividend outgo is expected to be R 2528.20 crore based on number of shares outstanding as at March 31, 2021.
[1] Capital reserve: It represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transactions in earlier years.
[2] Capital reserve on business combination: It arises on transfer of business between entities under common control. It represents the difference, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor [refer Note 1(ii)(ab)].
[3] Debenture redemption reserve (DRR): The Ministry of Corporate Affairs vide notification dated August 16, 2019, amended the Companies (Share capital and Debenture) Rules, 2014 by which the Company is no longer required to create DRR towards the debentures issued. Earlier to this amendment, the Company was required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis and the amounts credited to the DRR was not to be utilised by the Company except to redeem debentures. The above amount represents the DRR created out of profits of the Company prior to the said notification.
[4] General reserve: The Company created a General reserve in earlier years pursuant to the provisions of the Companies Act,1956 where in certain percentage of profits were required to be transferred to General reserve before declaring dividends. As per the Companies Act 2013, the requirements to transfer profits to General reserve is not mandatory. General reserve is a free reserve available to the Company.
1. The Company does not expect any reimbursements in respect of the above contingent liabilities except in respect of matters at (j)
2. It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above pending resolution of the arbitration/appellate proceedings. Further, the liability mentioned in (a) to (d) above includes interest except in cases where the Company has determined that the possibility of such levy is remote.
3. In respect of matters at (e), the cash outflows, if any, could generally occur up to ten years, being the period over which the validity of the guarantees extends except in a few cases where the cash outflows, if any, could occur any time during the subsistence of the borrowing to which the guarantees relate.
4. In respect of matters at (f), the cash outflows, if any, could generally occur up to ten years, being the period over which the validity of the guarantees extends.
5. In respect of matters at (g) to (i), the cash outflows, if any, could generally occur up to completion of projects undertaken by the respective joint operations.
6. In respect of matters at (j), the cash outflows, if any, is fully reimbursable by the third parties under an agreement entered in to with them.
Disclosure pursuant to Ind AS 103 "Business Combinations":
During the previous year, L&T Shipbuilding Limited (LTSB), a wholly owned subsidiary, was merged with the Company under a scheme of amalgamation approved by National Company Law Tribunal, Chennai on March 10, 2020 and National Company Law Tribunal, Mumbai on April 24, 2020. The merger was effective from the appointed date April 1, 2019. LTSB had a registered office in Chennai, India and was engaged in the business of Shipbuilding and Ship related activities.
No fresh shares were issued to effect the merger as LTSB was a wholly owned subsidiary of the Company. Further the merger was accounted using pooling of interest method, involving the following:
i. The assets and liabilities of LTSB were reflected at their carrying amounts. No adjustment was made to reflect the fair values, or recognise any new asset or liability.
ii. The balance of the Retained earnings appearing in the financial statements of the LTSB was aggregated with the corresponding balance appearing in the financial statements of the Company.
iii. The excess of amount of investment by the Company in LTSB over the share capital of LTSB was treated as Capital reserve in Company''s financial statements and the same was presented separately from other capital reserves [refer Note 18].
iv. Restating the financials of the Company from April 1, 2018.
(d) The Company''s reportable segments are organised based on the nature of products and services offered by these segments.
(e) Basis of identifying operating segments, reportable segments, segment profit and definition of each reportable segment:
(i) Basis of identifying Operating segments:
Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Company''s other components); (b) whose operating results are regularly reviewed by the Company''s executive management to make decisions about resource allocation and performance assessment; and (c) for which discrete financial information is available.
The Company has five reportable segments as described under "Segment composition" below. The nature of products and services offered by these businesses are different and are managed separately given the different sets of technology and competency requirements.
ii) Reportable segments
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
iii) Segment profit
Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the corporate executive management.
iv) Segment composition
⢠Infrastructure segment comprises engineering and construction of building and factories, transportation infrastructure, heavy civil infrastructure, power transmission & distribution, water & effluent treatment and metallurgical & material handling systems.
⢠Power segment comprises turnkey solutions for Coal-based and Gas-based thermal power plants including power generation equipment with associated systems and/or balance-of-plant packages.
⢠Heavy Engineering segment comprises manufacture and supply of custom designed, engineered critical equipment & systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas and Thermal & Nuclear Power.
⢠Defence engineering segment comprises (a) design, development, serial production and through life-support of equipment, systems and platforms for Defence and Aerospace sectors and (b) design, construction, and repair/refit of defence vessels.
⢠Electrical & Automation segment (disclosed as discontinued operation) comprises manufacture and sale of low and medium voltage switchgear components, custom-built low and medium voltage switchboards, electronic energy meters/ protection (relays) systems and control & automation products [upto the date of transfer].
⢠Others segment includes realty, smart world & communication projects (including military communications), hydrocarbon, marketing and servicing of construction & mining machinery and parts thereof and manufacture and sale of rubber processing machinery.
(e) Cost to obtain the contract:
i. Amortisation in Statement of Profit and Loss: Nil (previous year: Nil)
ii. Recognised as contract assets at March 31, 2021: Nil (previous year: Nil)
a) For gratuity plan the attrition rate varies from 1% to 11% (previous year: 1% to 11%) for various age groups.
b) For company pension plan, the attrition rate varies from 0% to 2% (previous year: 0% to 2%) for various age groups.
c) For post-retirement medical benefit plan, the attrition rate varies from 1% to 11% (previous year: 1% to 11%) for various age groups.
v) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
vi) The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long-term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss.
vii) The obligation of the Company under the post-retirement medical benefit plan is limited to the overall ceiling limits. At present, healthcare cost, as indicated in the principal actuarial assumption given supra, has been assumed to increase at 5.00% p.a.
h) Characteristics of defined benefit plans and associated risks:
1 Gratuity plan:
The Company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable to vested employees at retirement, death while in employment or on termination of employment. The benefit vests after five years of continuous service. The Company''s scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972.
The defined benefit plan for gratuity of the Company is administered by separate gratuity funds that are legally separate from the Company. The trustees nominated by the Company are responsible for the administration of the plan. There are no minimum funding requirements of these plans. The funding of these plans are based on gratuity fund''s actuarial measurement framework set out in the funding policies of the plan. These actuarial measurements are similar compared to the assumptions set out in (g) supra. Employees do not contribute to any of these plans.
Unfunded gratuity represents a small part of gratuity plan which is not material. Further, the unfunded portion includes amounts payable in respect of the Company''s foreign operations which result in gratuity payable to employees engaged as per local laws of the country of operation.
2 Post-retirement medical care plan:
The post-retirement medical benefit plan provides for reimbursement of health care costs to certain categories of employees post their retirement. The reimbursement is subject to an overall ceiling sanctioned based on cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
3 Company''s pension plan:
In addition to contribution to state-managed pension plan (EPS scheme), the Company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees. The quantum of pension depends on the cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
4 Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952. The plan mandates contribution by employer at a fixed percentage of employee''s salary. Employees also contribute to the plan at a fixed percentage of their salary as a minimum contribution and additional sums at their discretion. The plan guarantees interest at the rate notified by
Disclosure pursuant to mu ms 19 employee Deneius \luiilu.j
Employees'' Provident Fund Organisation. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering oi service.
The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long-term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss as actuarial loss. Any loss/gain arising out of the investment risk and actuarial risk associated with the plan is also recognized as expense or income in the period in which such loss/ gain occurs.
All the above defined benefit plans expose the Company to general actuarial risks such as interest rate risk and market (investment) risk.
i) The Codes on Wages, 2019 and the Code on Social Security, 2020 have been enacted, however, the effective date from which changes are applicable are yet to be notified. The impact of the same would be given in the financial statements in the period in which the Codes become effective and the Rules/Schemes thereunder are notified.
Disclosure pursuant to Ind MS 20 "Accounting for Government Grants and Disclosure of Government Assistance"
The Company''s exports qualify for various export benefits offered in the form of duty credit scrips under foreign trade policy framed by Department General of Foreign Trade India (DGFT). Income accounted towards such export incentives and duty drawback amounts to R 212.52 crore (previous year: R 11968 crore).
b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31,2021 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of 1 to 3 years from the date of Balance Sheet.
ii. Expected tax liability in respect of indirect taxes represents mainly the differential sales tax liability on account of non-collection of declaration forms.
iii. Provision for litigation-related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
iv. Contractual rectification cost represents the estimated cost the Company is likely to incur during defect liability period as per the contract obligations in respect of completed construction contracts accounted under Ind AS 115 "Revenue from Contracts with customers".
c) Disclosure in respect of contingent liabilities is given as part of Note 29 to the Balance Sheet.
(a) Foreign exchange rate and interest rate risk:
The Company regularly reviews its foreign currency and interest rate related exposures - both hedged and open exposures. The Company primarily follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE), hence, the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time that the HPFE becomes an on-balance sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Company. Further, given the effective horizons of the Company''s risk management activities which coincide with the durations of the projects under execution, which could extend across 3-4 years and given the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Company''s financial condition and operating results. The Company monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc. on a regular basis. For on-balance sheet exposures, the Company monitors the risks on net unhedged exposures.
(i) Foreign exchange rate risk:
In general, the Company is a net receiver of foreign currency. Accordingly, changes in exchange rates, and in particular a strengthening of the Indian Rupee, may adversely affect the Company''s net sales and gross margins expressed in Indian Rupees. There is a risk that the Company may have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. In addition, the Company has entered, and may enter in future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances. The Company''s practice is to hedge a portion of its material net foreign exchange exposures with tenors in line with the project/business life cycle. The Company may also choose not to hedge certain foreign exchange exposures.
To provide a meaningful assessment of the foreign currency risk associated with the Company''s foreign currency derivative positions against off-balance sheet exposures and unhedged portion of on-balance sheet financial assets and liabilities, the Company uses a multi-currency correlated value-at-risk ("VAR") model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against Indian rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposures due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by
Disclosure pursuant to Ind AS 107 "Financial Instruments: Disclosures": Market risk management (contd.)
increases in the fair value of the underlying exposures for on-balance sheet exposures. The overnight VAR for the Company at 95% confidence level is R 32.90 crore as at March 31, 2021 and R 28.78 crore as at March 31, 2020.
Actual future gains and losses associated with the Company''s investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at March 31, 2021 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchanges rates and the Company''s actual exposures and position.
(ii) Interest rate risk:
The Company''s exposure to changes in interest rates relates primarily to the Company''s outstanding floating rate debt. While most of the Company''s outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk, a major portion of foreign currency debt is linked to international interest rate benchmarks like LIBOR. The Company also hedges a portion of these risks by way of derivatives instruments like Interest rate swaps and currency swaps.
L&T has an ECB loan book of USD 250 mn as on date which has a floating interest rate linked to 1 month USD Libor. With the transition of Libor into another benchmark (SOFR), there will be a spread adjustment that will have to be applied to these loans. Out of the USD 250 mn worth of outstanding ECB, USD 100 mn worth of ECB will mature in October 2021, and hence will be repaid before the transition to SOFR. USD 150 mn ECB will mature beyond 2021 and hence will require a credit adjustment.
The Corporate Treasury team constantly tracks the developments related to this proposed transition and has also had interactions with the counterparty lenders to prepare for the transition.
Based on the most widely expected methodology to transition from LIBOR to SOFR, the median historical spread between the two benchmarks is likely to be used as a spread adjustment. In the case mentioned above, both the bank and the Company are likely to agree on a neutral spread adjustment which does not impact the counterparties financially.
(b) Liquidity Risk Management:
The Company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through adequate committed credit lines. Given the need to fund diverse businesses, the Company maintains flexibility by need based drawing from committed credit lines. Management regularly monitors the position of cash and cash equivalents. The maturity profiles of financial assets and financial liabilities including debt financing plans and liquidity ratios are considered while reviewing the liquidity position.
The Company''s investment policy and strategy are focused on preservation of capital and supporting the Company''s liquidity requirements. The Company uses a combination of internal and external tools to execute its investment strategy and achieve its
Disclosure pursuant to Ind AS 107 "Financial Instruments: Disclosures": Market risk management (contd.)
investment objectives. The Company typically invests in money market funds, large debt funds, Government of India securities, equity funds and other highly-rated securities under a exposure limit framework. The investment policy focuses on minimising the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the Company''s investment portfolio, the Company performed a sensitivity analysis to determine the impact of change in prices of the securities on the value of the investment portfolio assuming a 0.5% movement in the fair market value of debt funds and debt securities and a 5% movement in the NAV of the equity funds as below:
(c) Credit Risk Management:
The Company''s customer profile includes public sector enterprises, state owned companies and large private corporates. Accordingly, the Company''s customer credit risk is low. The Company''s average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases, retentions are substituted with bank/ corporate guarantees. The Company has a detailed review mechanism of overdue customer receivables at various levels within the organisation to ensure proper attention and focus for realisation.
(d) Commodity price risk management :
The Company bids for and executes EPC projects on turnkey basis. EPC projects entail procurement of various equipment and materials which may have direct or indirect linkages to commodity prices like steel (both long and flat steel), copper, aluminium, zinc, lead, nickel etc. Accordingly, the Company is exposed to the price risk on these commodities. To mitigate the risk of commodity prices, the Company relies on contractual provisions like pass through of prices, price variation provisions etc., and further uses financial derivatives where available (refer Note 53 (h)(ii)). There is certain residual risk carried by the Company that cannot be hedged against.
The table given in the Risk Management section of Management Discussion and Analysis lists out the commodity exposure for the year (only for projects that been awarded and are under execution).
The Company is also exposed to contingent risk on account of commodity price movements that may not be fully offset by contractual provisions in the projects that it has bid for but which are not awarded yet. Commodity prices are volatile and have witnessed 60% to 75% movement for the year. This may impact the margin on projects where the Company has submitted bids on a firm price basis. However, for projects where the Company is eligible for an adjustment, based on price variation clause, there may not be a major impact. The actual impact will depend on the exact project wins and the relative contractual provisions therein.
(i) Financial assets measured at amortised cost:
The carrying amounts of trade receivables, loans, advances and cash and other bank balances are considered to be the same as their fair values due to their short-term nature. The carrying amounts of long-term loans given with floating rate of interest are
Exceptional items for the year ended March 31, 2021 includes the following:
(i) Impairment towards funded exposure of R 1467.38 crore offset by interest income of R 78.58 crore and provision towards constructive obligation to fund future losses R 14.85 crore in the heavy forgings joint venture.
(ii) Impairment of investments in the power development business R 1415.00 crore.
The impairment is recognised considering the existing business operations and the outlook for the future performance. The present value of estimated future cash flows of the business (value-in-use) is considered as a recoverable amount (discount rates used 11.90% to 12.75%). For power development business, in addition to value-in-use, part of the recoverable value is based on the fair value determined based on benchmark multiple method.
Exceptional items for the year ended March 31, 2020 represents gain of R 626.99 crore on sale of the Company''s stake in a subsidiary company.
i. The amount required to be spent by the Company on CSR related activities during the year 2020-21 is R 145.56 crore (previous year: R 144.80 crore).
ii. The amount carried forward by the Company to offset against CSR obligation of the succeeding years is R 57.74 crore under Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended vide Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021. This comprises R 4.51 crore of excess spent during the year 2020-21 and R 53.23 crore 1 contributed to PM CARES fund during the year 2019-20.
Contribution to political parties during the year 2020-21 is Nil (previous year: The Company purchased Electoral Bonds for R 35.00 crore and issued the same to political parties as Company''s political contribution).
(a) For better understanding of the Company''s performance, line items have been added to show Profit after tax from continuing operations separately from exceptional items. This is in line with guidance available in Schedule III to Companies Act, 2013.
(b) Figures for the previous year have been regrouped/reclassified to conform to the figures of the current year.
The Company contributed R 53.23 crore to PM CARES fund during the year 2019-20 and accounted the same as donation in the financial statements. The management believes, the excess amount contributed by the Company to PM CARES fund over and above the CSR liability is allowed to be offset against the future CSR obligation of the Company under Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended vide Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021. Accordingly, for the year 2019-20 the Company has regrouped the amount of contribution to PM CARES fund from donation to CSR expense.
Mar 31, 2019
a) cost of freehold land includes RS. 1.27 crore (previous year: RS. 1.27 crore) for which conveyance is yet to be completed.
b) cost of buildings includes ownership accommodations:
(i) A. in various co-operative societies, shop-ownersâ associations and non-trading corporations : RS. 65.75 crore, including 2615 shares of RS. 50 each, 80 shares of RS. 100 each. (previous year: in various co-operative societies, shop-ownersâ associations and non-trading corporations : RS. 67.29 crore, including 2660 shares of RS. 50 each, 232 shares of RS. 100 each and 1 share of RS. 250).
B. in various apartments : RS. 9.42 crore. (previous year: RS. 9.42 crore).
c. in various co-operative societies : RS. 0.36 crore (previous year: RS. 0.36 crore) for which share certificates are yet to be issued.
D. in proposed co-operative societies RS. 30.59 crore. (previous year: RS. 29.90 crore).
(ii) ownership accommodations of RS. 3.53 crore in respect of which the deed of conveyance is yet to be executed. (previous year: of RS. 3.53 crore).
(iii) ownership accommodations of RS. 11.75 crore representing undivided share in properties at various locations. (previous year: of RS. 7 68 crore).
c) Additions during the year and capital work-in-progress include RS. 26.72 crore (previous year: RS. 11.42 crore) being borrowing cost capitalised in accordance with Accounting Standard (ind AS) 23 on âBorrowing costsâ. Asset class wise break-up of borrowing costs capitalised during the year is as follows:
d) The average capitalisation rate for borrowing cost is 7.68 % (previous year: 7.24 %).
e) in addition to depreciation, obsolescence amounting to RS. 6.35 crore (previous year: RS. 4.54 crore) have been recognised in Profit and Loss during the year.
f) owned assets given on operating lease have been presented separately under respective class of assets as âLeased outâ pursuant to ind AS 17 âLeasesâ.
g) cost as at April 1, 2018 of individual assets has been reclassified wherever necessary.
h) out of its leasehold land at Hazira, the company has given certain portion of land for the use to its joint venture company and the lease deed is under execution.
i) Depreciation is provided based on useful life supported by the technical evaluation considering business specific usage, the consumption pattern of the assets and the past performance of similar assets.
a. Estimated useful life of the following assets is in line with useful life prescribed in schedule ii of the companies Act, 2013:
j) Carrying value of Property, plant and equipment pledged as collateral for liabilities and/or commitments as at March 31, 2019 -RS. 0.09 crore (as at March 31, 2018: RS. 0.09 crore)
(ii) Fair value of investment property : RS. 2932.97 crore as at March 31, 2019 (RS. 2487.24 crore as at March 31, 2018)
(iii) The fair values of investment properties have been determined with the help of independent valuers on a case to case basis. Fair value of properties that are evaluated by independent valuers RS. 2932.97 crore (RS. 2487.24 crore as at March 31, 2018). Valuation is based on government rates, market research, market trend and comparable values as considered appropriate.
(f) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended march 31, 2019 are 46,67,64,755 (previous period of five years ended march 31, 2018: 77,50,59,331 shares).
(g) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding last five years ended on march 31, 2019 - Nil (previous period of five years ended march 31, 2018: Nil).
(h) Stock option schemes
i. Terms:
A. The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options are vested equally over a period of 4 years [5 years in the case of series 2006(A)], subject to the discretion of the management and fulfillment of certain conditions.
B. options can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of issue of equity shares. management has discretion to modify the exercise period.
iv. Weighted average share price at the date of exercise for stock options exercised during the year is RS. 1272.80 (previous year: RS. 1106.67) per share.
v. A. in respect of stock options granted pursuant to the Companyâs stock options schemes, the fair value of the options is treated as discount and accounted as employee compensation over the vesting period.
B. Expense on Employee Stock Option Schemes debited to the Statement of Profit and Loss during 2018-19 is RS. 73.07 crore (previous year: RS. 68 98 crore) net of recoveries of RS. 1.63 crore (previous year: RS. 0.79 crore) from its group companies towards the stock options granted to deputed employees, pursuant to the employee stock option schemes (Note 34).
The entire amount pertains to equity-settled employee share-based payment plans.
vi. During the year, the Company has recovered RS. 17.15 crore (previous year: RS. 7.16 crore) from its subsidiary companies towards the stock options granted to their employees, pursuant to the employee stock option schemes.
vii. Weighted average fair values of options granted during the year is RS. 986.95 (previous year: RS. 965.25) per option
viii. The fair value has been calculated using the Black-Scholes Option Pricing Model and the significant assumptions and inputs to estimate the fair value of options granted during the year are as follows:
ix. The balance in share options (net) account as at March 31, 2019 is RS. 106.91 crore (previous year: RS. 108.59 crore), including RS. 52.29 crore (previous year: RS. 76.12 crore) for which the options have been vested to employees as at March 31, 2019.
(i) Capital Management:
The Company continues its policy of a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also equip the Company with the ability to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund raising options for future, which is especially important in times of global economic volatility. The gross debt equity ratio is 0.19:1 as at March 31, 2019 (as at March 31, 2018 0.21:1).
(j) During the year ended March 31, 2019, the Company paid the final dividend of R16 per equity share for the year ended March 31, 2018 amounting to RS. 2243.18 crore and dividend distribution tax of RS. 353.60 crore.
(k) On May 10, 2019, the Board of Directors has recommended the final dividend of R18 per equity share for the year ended March 31, 2019 subject to approval of shareholders. On approval, the total dividend payment based on number of shares outstanding as at March 31, 2019 is expected to be R2524.91 crore and the payment of dividend distribution tax is expected to be RS. 233.66 crore.
* Capital Reserve : it represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transactions in earlier Year
** Capital reserve on business combination: it arises on transfer of business between entities under common control. it represents the difference, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor [refer to note 1(ab)].
A Debenture redemption reserve (DRR) : The Company has issued redeemable non-convertible debentures and created DRR out of the profits of the Company in terms of the Companies (Share capital and Debenture) Rules, 2014 (as amended). The Company is required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis. The amounts credited to the DRR is not to be utilised by the Company except to redeem debentures.
# General Reserve : The Company created a General reserve in earlier years pursuant to the provisions of the Companies Act,1956 where in certain percentage of profits was required to be transferred to General reserve before declaring dividends. As per Companies Act 2013, the requirements to transfer profits to General reserve is not mandatory. General reserve is a free reserve available to the Company .
## Equity component of foreign currency convertible bonds : Pursuant to ind AS 32, Foreign Currency Convertible Bonds (FCCB) issued by the Company are split into equity and liability component and presented under other equity and financial liabilities respectively .
1(a) Foreign currency convertible Bonds:
0.675% US$ denominated 5 years & 1 day Foreign currency convertible Bonds (FccB) carried at RS. 1363.39 crore as at march 31, 2019 (as at march 2018: RS. 1245.64 crore) represent 200000 bonds of $1000 each. The bonds are convertible into the companyâs fully paid equity shares of RS. 2 each at a conversion price of RS. 1277.67 per share at the option of the bond holders at any time on and after December 1, 2014 up to october 15, 2019. The bonds are redeemable, subject to fulfillment of certain conditions, in whole but not in part, at the option of the company, on or at any time after october 22, 2017 but not less than seven business days prior to the maturity date, at the principal amount together with accrued interest (calculated up to but excluding the date of redemption) on the date fixed for redemption, unless the bonds have been previously redeemed, converted or purchased and cancelled.
2(a) Loans guaranteed by directors R Nil (previous year: R Nil)
2(b) Loans repayable on demand from banks include fund based working capital facilities viz. cash credits and demand loans. The secured portion of loans repayable on demand from banks, short term loans and advances from the banks, working capital facilities and other non-fund based facilities viz. bank guarantees and letter of credit, are secured by hypothecation of inventories and trade receivables. Amount of inventories and trade receivables that are pledged as collateral: RS. 5930.00 crore as at March 31, 2019 (March 31, 2018 : RS. 6026.53 crore)
3(a) Loans guaraneed by directors R Nil (previous year: R Nil)
4(a) Due to others include due to directors RS. 57.00 crore (previous year: RS. 49.11 crore)
Notes:
1. The Company does not expect any reimbursements in respect of the above contingent liabilities.
2. it is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above pending resolution of the arbitration/appellate proceedings. Further, the liability mentioned in (a) to (d) above includes interest except in cases where the Company has determined that the possibility of such levy is remote.
3. in respect of matters at (e), the cash outflows, if any, could generally occur up to twelve years, being the period over which the validity of the guarantees extends except in a few cases where the cash outflows, if any, could occur any time during the subsistence of the borrowing to which the guarantees relate.
4. in respect of matters at (f), the cash outflows, if any, could generally occur up to six years, being the period over which the validity of the guarantees extends.
5. in respect of matters at (g) to (i), the cash outflows, if any, could generally occur up to completion of projects undertaken by the respective joint operations.
* The Company has entered into a definitive share purchase agreement to acquire 20.32% stake in Mindtree Limited on March 18, 2019 at a price of RS. 980 per share aggregating to consideration of RS. 3269.00 crore. Further, the company has placed a purchase order with its stock broker for acquiring 15% stake through on-market purchases for an overall consideration amount not exceeding RS. 2434.00 crore from any recognised stock exchange, but only after receipt of relevant approvals from regulatory authorities. The Company will also make an open offer to acquire 31% stake for a consideration of RS. 5029.85 crore in accordance with the requirements of the SEBi (Substantial Acquisition of Shares and Takeover) Regulations, 2011. The completion of these transactions are subject to receipt of necessary regulatory approvals.
Subsequent to March 31, 2019 and up to May 9,2019, the Company acquired 4,25,90,088 equity shares of Mindtree Limited (representing 25.94% of the share capital of that company) at a cost of RS. 4180.91 crore through block deal purchase from a major shareholder (and his associate entities) and on- market purchases.
5(a) Aggregation of expenses disclosed vide Note 33 -manufacturing, construction and operating expenses, Note 34 -Employee benefits expense and Note 35 - Sales, administration and other expenses.
NOTE [6]
Particulars in respect of loans and advances in the nature of loans to related parties as required by the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015:
Particulars in respect of loans and advances in the nature of loans to related parties as required by the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015: (contd.)
Notes:
- Above figures include interest accrued
- Loans to employees (including directors) under various schemes of the company (such as housing loan, furniture loan, education loan, etc.) have been considered to be outside the purview of disclosure requirements.
- Subsidiary classification is in accordance with the Companies Act, 2013
Note [7]
Amount required to be spent by the Company on Corporate Social Responsibility (CSR) related activities during the year is RS. 121.47 crore (previous year: RS. 97.29 crore).
The amount recognised as expense in the Statement of Profit and Loss on CSR related activities is RS. 121.68 crore (previous year: RS. 100.92 crore), which comprises:
Note [8]
The expenditure on research and development activities recognised as expense in the Statement of Profit and Loss is RS. 168.23 crore (previous year: RS. 138.93 crore). Further, the Company has incurred capital expenditure on research and development activities as follows:
(a) on tangible assets RS. 5.46 crore (previous year: RS. 6 22 crore);
(b) on intangible assets being expenditure on new product development RS. 40.53 crore (previous year: RS. 48.08 crore) [Note 1(i)(ii)]; and
(c) on other intangible assets RS. 1.96 crore (previous year: RS. 1.84 crore).
In addition, the Company has incurred expenditure of RS. 0.52 crore (previous year: RS. 2.70 crore) which is customer funded.
NOTE [9]
Disclosure pursuant to ind AS 17 âLeasesâ
(a) Where the company is a lessor
(i) operating leases:
The company has given buildings under non-cancellable operating lease, the future minimum lease payment receivable in respect of which are as follows:
(b) Where the company is a lessee:
(i) Finance leases:
(A) Assets acquired on finance lease comprises plant & equipment and land. The leases have a primary period, which is fixed and non-cancellable. The company has an option to renew the lease for a secondary period.
(B) The minimum lease rental and the present value of minimum lease payments in respect of assets acquired under finance leases are as follows:
(ii) operating leases:
(A) The company has taken various commercial premises and plant & equipment under cancellable operating leases. These lease agreements are renewed on expiry, based on requirement, convenience and other factors. There are no exceptional/restrictive covenants in the lease agreements.
(B) Assets acquired on non-cancellable operating lease comprises commercial premises, cars and technology assets, the future minimum lease payments in respect of which are as follows:
(c) Lease rental expenses in respect of operating leases: RS. 150.49 crore (previous year: RS. 103.49 crore)
NOTE [10]
Disclosure pursuant to ind AS 105 âNon-current assets held for sale and discontinued operationsâ:
(a) investment held for sale as at March 31, 2019 represents equity investment in L&T Technology Services Limited RS. 41.72 crore. Regulation 38 of the SEBi (Listing obligation and Disclosure Requirements) Regulations, 2015 requires a listed entity to comply with the minimum public shareholding requirements as specified in rules 19(2) and 19A of the Securities Contracts (Regulation) Rules, 1957 (âSCRRâ). Rule 19(2)(b) of the SCRR requires the maintenance of a minimum public shareholding of 25% at all times of each class or kind of equity shares or convertible debentures issued by a listed company.
The company is holding 78.88% in its listed subsidiary company L&T Technology Services Limited. in order to comply with the said requirement, the Company plans to divest its investment in the said subsidiary in the open market within twelve months from the reporting date.
The above investment forms part of the unallocable corporate assets. [Note 47(a)].
(b) investment held for sale as at March 31, 2018 represents equity investment in Marine infrastructure Developer Private Limited (MiDPL). Through a scheme of arrangement of demerger, the Port business in L&T Shipbuilding Limited was transferred to MiDPL (effective date March 22, 2017) in financial Year 2016-17. As a shareholder, the Company had received 38,80,00,000 equity shares of R10 each. The Company divested its stake in MiDPL to the strategic partner in June 28, 2018.
The above investment forms part of the unallocable corporate assets as at March 31, 2018. [Note 47(a)].
NOTE [11]
Disclosure pursuant to ind AS 1 âPresentation of financial statementsâ:
(a) Current assets expected to be recovered within twelve months and after twelve months from the reporting date:
NOTE [12]
Disclosure pursuant to ind AS 107 âFinancial instruments: Disclosuresâ: Market risk management
(a) Foreign exchange rate and interest rate risk:
The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a standalone basis and in conjunction with its underlying foreign currency and interest rate related exposures. The Company follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE) hence the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time that the HPFE becomes an on-balance sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Company. Further, given the effective horizons of the Companyâs risk management activities which coincide with the durations of the projects under execution and could extend across 3-4 years and the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Companyâs financial condition and operating results. Hence, the Company monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc., on a regular basis. For on balance sheet exposures, the Company monitors the risks on net unhedged exposures.
(i) Foreign exchange rate risk:
in general, the Company is a net receiver of foreign currency. Accordingly, changes in exchange rates and in particular a strengthening of the indian Rupee may negatively affect the Companyâs net sales and gross margins as expressed in indian Rupees. There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. in addition, the Company has entered, and may enter in future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances. The Companyâs practice is to hedge a portion of its material foreign exchange exposures with tenors in line with the project/business life cycle, however, the Company may choose not to hedge certain foreign exchange exposures for a variety of reasons.
The net exposure to foreign currency risk (based on notional amount) in respect of recognised financial assets, recognised financial liabilities and derivatives is as follows:
To provide a meaningful assessment of the foreign currency risk associated with the Companyâs foreign currency derivative positions against off Balance Sheet exposures and unhedged portion of on-Balance Sheet financial assets and liabilities, the Company uses a multi-currency correlated value-at-risk (âVARâ) model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against indian rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposures due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increases in the fair value of the underlying exposures for on balance sheet exposures. The overnight VAR for the company at 95% confidence level is RS. 29.88 crore as at march 31, 2019 and RS. 25.61 crore as at march 31, 2018.
Actual future gains and losses associated with the companyâs investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at march 31, 2019 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchanges rates and the companyâs actual exposures and position.
(ii) interest rate risk:
The companyâs exposure to changes in interest rates relates primarily to the companyâs outstanding floating rate debt. While most of the companyâs outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk, a major portion of foreign currency debt is linked to international interest rate benchmarks like LiBoR. The company also hedges a portion of these risks by way of derivatives instruments like interest rate swaps and currency swaps.
The exposure of the companyâs borrowing to interest rate changes at the end of the reporting period are as follows:
A hypothetical 50 basis point shift in respective currency LiBoRs and other benchmarks on the unhedged loans would result in a corresponding increase/decrease in interest cost for the company on a yearly basis as follows:
(b) Liquidity Risk management:
The company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through an adequate amount of committed credit lines. Given the need to fund diverse businesses, the company maintains flexibility in funding by maintaining availability under committed credit lines to meet obligations when due. management regularly monitors the position of cash and cash equivalents vis-a-vis projections. Assessment of maturity profiles of financial assets and financial liabilities including debt financing plans and maintenance of Balance Sheet liquidity ratios are considered while reviewing the liquidity position.
The companyâs investment policy and strategy are focused on preservation of capital and supporting the companyâs liquidity requirements. The company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. The company typically invests in money market funds, large debt funds, government of india securities, equity funds and other highly-rated securities under a limits framework which governs the credit exposure to any one issuer as defined in its investment policy. The policy requires investments generally to be investment grade, with the primary objective of minimising the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the companyâs investment portfolio, the company performed a sensitivity analysis to determine the impact of change in prices of the securities that would have on the value of the investment portfolio assuming a 0.5% move in debt funds and debt securities and a 5% movement in the NAV of the equity funds. Based on the investment position a hypothetical 0.5% change in the fair market value of debt securities would result in a value change of /- RS. 11.08 crore as at March 31, 2019 and /- RS. 14.04 crore as at March 31, 2018. 5% change in the equity fundsâ NAV would result in a value change of /- RS. 38.91 crore as at March 31, 2019 and /- RS. 16.24 crore as at March 31, 2018 respectively. The investments in money market funds are for the purpose of liquidity management only and are held only overnight and hence not subject to any material price risk.
(c) Credit Risk Management:
The Companyâs customer profile include public sector enterprises, state owned companies and large private corporates. Accordingly, the Companyâs customer credit risk is low. The Companyâs average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. in some cases retentions are substituted with bank/corporate guarantees. The Company has a detailed review mechanism of overdue customer receivables at various levels within organisation to ensure proper attention and focus for realisation.
(i) The Company is making provisions on trade receivables based on Expected Credit Loss (ECL) model. The reconciliation of ECL is as follows:
(ii) Trade receivable written off during the year but still enforceable for recovery amounts to R Nil [previous year: RS. 409.43 crore, out of this RS. 243.62 crore included above and balance RS. 165.81 crore included in exceptional items. Further, exceptional items for the year ended March 31, 2018 also included write off of retention money not due (classified as non-financial asset) amounting to RS. 128.94 crore. (refer to Note 46)].
NOTE [13]
Other disclosure pursuant to ind AS 107 âFinancial instruments: Disclosuresâ
(a) Category-wise classification for applicable financial assets:
(d) Fair value of financial assets and financial liabilities measured at amortised cost:
(i) Financial assets measured at amortised cost:
The carrying amounts of trade receivables, loans, advances and cash and other bank balances are considered to be the same as their fair values due to their short term nature. The carrying amounts of long term loans given with floating rate of interest are considered to be close to the fair value.
Note: The carrying amounts of trade and other payables are considered to be the same as their fair values due to their short term nature. The carrying amounts of borrowings with floating rate of interest are considered to be close to the fair value.
* Valuation technique L2: Future cash flows discounted using G-sec/LiBOR rates plus corporate spread.
(e) Fair value hierarchy of financial assets and liabilities measured at fair value:
Valuation technique and key inputs used to determine fair value:
1. Level 1 : mutual funds, bonds, debentures and government securities- Quoted price in the active market.
2. Level 2 : (a) Derivative instrument - mark to market on forward covers and embedded derivative instruments is based on forward exchange rates at the end of reporting period and discounted using G-sec rate plus applicable spread.
(b) Preference Shares - Future cash flows are discounted using G- sec rate plus applicable spread as at reporting date.
NOTE [14]
A. Exceptional items for the year ended March 31, 2019 include the following:
(i) Gain of RS. 3276.70 crore on sale of the Companyâs stake in subsidiary companies viz. Larsen & Toubro infotech Limited RS. 2142.90 crore and L&T Technology Services Limited RS. 1133.80 crore;
(ii) Write back of trade receivable and retention money of certain customer dues now considered recoverable RS. 294.75 crore [Note 1(t)(vii)].
(iii) impairment of investment in group companies viz L&T Shipbuilding Limited RS. 1167.42 crore, L&T infrastructure Development project Limited RS. 773.00 crore and L&T Special Steels and Heavy Forging Private Limited RS. 1156.10 crore.
Exceptional items for the year ended March 31, 2018 include the following:
(i) Gain of RS. 198.82 crore on sale of the Companyâs stake in subsidiary companies viz. Larsen & Toubro infotech Limited RS. 145.32 crore and L&T Technology Services Limited RS. 53.50 crore;
(ii) Gain on divestment of stake in L&T EWAC Alloys Limited RS. 351.55 crore and L&T Cutting Tools Limited RS. 174.91 crore;
(iii) Write off of trade receivable and retention money not due from a customer against whom insolvency proceedings are underway RS. 294.75 crore [Note 1(t)(vii)].
B The Competition Commission of india (CCi) accorded on April 18, 2019 its approval for the acquisition of the Companyâs Electrical & Automation (E&A) business by Schneider Electric subject to certain conditions, the details of which are awaited. Pending receipt of CCiâs detailed order, the E&A business is treated as continuing operation and accordingly the relevant assets are not classified as held for sale.
Disclosure pursuant to ind AS 108 âOperating Segmentâ (contd.)
(c) Revenue contributed by any single customer in any of the operating segments, whether reportable or otherwise, does not exceed ten percent of the Companyâs total revenue.
(d) The Companyâs reportable segments are organised based on the nature of products and services offered by these segments.
(e) Basis of identifying operating segments, reportable segments, segment profit and definition of each reportable segment:
(i) Basis of identifying operating segments:
Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Companyâs other components); (b) whose operating results are regularly reviewed by the corporate executive management to make decisions about resource allocation and performance assessment; and (c) for which discrete financial information is available.
The Company has six reportable segments as described under âsegment compositionâ below. The nature of products and services offered by these businesses are different and are managed separately given the different sets of technology and competency requirements.
ii) Reportable segments:
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
iii) Segment profit:
Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the corporate executive management.
iv) Segment composition:
- infrastructure segment comprises engineering and construction of building and factories, transportation infrastructure, heavy civil infrastructure, power transmission & distribution, water & effluent treatment, smart world & communication projects and metallurgical & material handling systems (hitherto reported under Others segment).
- power segment comprises turnkey solutions for Coal-based and Gas-based thermal power plants including power generation equipment with associated systems and/or balance-of-plant packages.
- Heavy Engineering segment comprises manufacture and supply of custom designed, engineered critical equipment & systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas and Thermal & Nuclear Power.
- Defence engineering segment comprises design, development, prototyping, serial production, delivery, commissioning and through life-support of equipment, systems and platforms for Defence and Aerospace sectors. it also includes Defence Shipbuilding comprising design, construction, commissioning, repair/refit and upgrades of Naval and Coast Guard vessels.
- Electrical & Automation segment comprises manufacture and sale of low and medium voltage switchgear components, custom built low and medium voltage switchboards, electronic energy meters/protection (relays) systems and control & automation products.
- Realty segment comprises property development and leasing activities.
- others segment includes Hydrocarbon, marketing and servicing of construction & mining machinery and parts thereof, manufacture and sale of rubber processing machinery.
NOTE [15]
Disclosure pursuant to ind AS 115 âRevenue from contracts with customersâ:
(a) Disaggregation of revenue into operating segments and geographical areas for the year ended march 31, 2019:
(b) out of the total revenue recognised under ind AS 115 during the year, RS. 78194.12 crore is recognised over a period of time and RS. 7940.01 crore is recognised at a point in time.
(c) movement in Expected credit Loss during the year:
(d) contract balances:
(i) movement in contract balances during the year:
Note: increase in net contract balances is primarily due to higher revenue recognition as compared to progress bills raised during the year and ind AS 115 transition adjustment.
(ii) Revenue recognised during the year from opening balance of contract liabilities amounts to RS. 6313.77 crore.
(iii) Revenue recognised during the year from the performance obligation satisfied in previous year (arising out of contract modifications) amounts to RS. 29.11 crore.
(e) cost to obtain the contract :
(i) Amount of amortisation recognised in Profit and Loss during the Year 2018-19: R Nil.
(ii) Amount recognised as assets as at march 31, 2019: R Nil.
(i) Pursuant to adoption of ind AS 115, the company recognised impairment loss on contract assets using expected credit loss model applied to trade receivables.
A. impact on account of transition: opening Retained Earnings as at April 1, 2018 reduced by RS. 464.70 crore (net of tax) due to initial recognition of expected credit loss on contract assets with a corresponding increase in deferred tax asset by RS. 226.10 crore and decrease in contract assets by RS. 690.80 crore.
B. impact for the year: There is a decrease in sales, administration and other expenses due to reversal of provision for expected credit loss on contract assets in terms of the provision matrix resulting in profit after tax being higher by RS. 104.40 crore with a corresponding increase in contract assets by RS. 160.48 crore and decrease in deferred tax asset by RS. 56.08 crore.
(ii) Under ind AS 115, revenue from realty business is recognised upon delivery of units as against percentage of completion method followed under ind AS 11.
A. impact on account of transition: opening Retained Earnings as on April 1, 2018 reduced by RS. 236.88 crore (net of tax) with a corresponding increase in contract liability by RS. 714.96 crore, increase in inventory by RS. 372.58 crore, decrease in contract asset by RS. 3.51 crore and increase in deferred tax asset by RS. 109.01 crore.
B. impact for the year: Profit after tax during the year is higher by RS. 140.14 crore, with a corresponding decrease in contract liability by RS. 418.64 crore, increase in other current liability Rs.6.59 crore, decrease in inventory by Rs.196.63 crore, decrease in deferred tax asset by RS. 94.35 crore and decrease in current tax liability by RS. 19.07 crore.
NOTE [16]
Disclosure pursuant to indian Accounting Standard (ind AS) 19 âEmployee Benefitsâ:
i Defined contribution plans: Note {[1](k)(ii)(A)}: Amount of RS. 88.55 crore (previous year: RS. 124.47 crore) is recognised as an expense.
ii Defined benefit plans: Note {[1](k)(ii)(B)}:
a) The amount recognised in Balance Sheet are as follows:
b) The amounts recognised in Statement of Profit and Loss are as follows:
* Basis used to determine interest income on plan assets:
The Trust formed by the Company manages the investments of provident funds and gratuity fund. interest income on plan assets is determined by multiplying the fair value of the plan assets by the discount rate determined at the start of the annual reporting period.
The Company expects to fund RS. 60.92 crore (previous year: RS. 45.05 crore) towards its gratuity plan and RS. 73.88 crore (previous year: RS. 67.68 crore) towards its trust-managed provident fund plan during the Year 2019-20.
iv) Attrition Rate:
(a) For gratuity plan, the attrition rate varies from 1% to 12% (previous year: 1% to 11%) for various age groups.
(b) For company pension plan, the attrition rate varies from 0% to 2% (previous year: 0% to 2%) for various age groups.
(c) For post-retirement medical benefit plan, the attrition rate varies from 1% to 11% (previous year: 1% to 12%) for various age groups.
v) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
vi) The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the statement of Profit and Loss.
vii) The obligation of the Company under the post-retirement medical benefit plan is limited to the overall ceiling limits. At present, healthcare cost, as indicated in the principal actuarial assumption given above, has been assumed to increase at 5.00% p.a.
viii) (A) one percentage point change in actuarial assumptions would have the following effects on the defined benefit obligation of gratuity plan:
(B) one percentage point change in actuarial assumptions would have the following effects on the defined benefit obligation of company pension plan:
h) characteristics of defined benefit plans and associated risks:
1 Gratuity plan:
The company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service. The companyâs scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972. The defined benefit plan for gratuity of the company is administered by separate gratuity funds that are legally separate from the company. The trustees nominated by the company are responsible for the administration of the plan. There are no minimum funding requirements of these plans. The funding of these plans are based on gratuity fundâs actuarial measurement framework set out in the funding policies of the plan. These actuarial measurements are similar compared to the assumptions set out in (g) supra. Employees do not contribute to any of these plans.
Unfunded gratuity represents a small part of gratuity plan which is not material. Further, the unfunded portion includes amounts payable in respect of the companyâs foreign operations which result in gratuity payable to employees engaged as per the local laws of country of operation.
2 Post-retirement medical care plan:
The Post-retirement medical benefit plan provides for reimbursement of health care costs to certain categories of employees post their retirement. The reimbursement is subject to an overall ceiling sanctioned based on cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
3 companyâs pension plan:
In addition to contribution to state-managed pension plan (EPS scheme), the company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees. The quantum of pension depends on the cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
4 Trust managed provident fund plan:
The company manages provident fund plan through a provident fund trust for its employees which is permitted under The Employeesâ Provident Fund and miscellaneous Provisions Act, 1952. The plan mandates contribution by employer at a fixed percentage of employeeâs salary. Employees also contribute to the plan at a fixed percentage of their salary as a minimum contribution and additional sums at their discretion. The plan guarantees interest at the rate notified by Employeesâ Provident Fund organisation. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.
The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss as actuarial loss. Any loss/gain arising out of the investment risk and actuarial risk associated with the plan is also recognised as expense or income in the period in which such loss/ gain occurs.
All the above defined benefit plans expose the company to general actuarial risks such as interest rate risk and market (investment) risk.
Note [17]
Disclosure pursuant to ind AS 27 âSeparate Financial Statementsâ
Investment in following subsidiary companies, joint venture companies and associates is accounted at cost.
NOTE [18]
Disclosures pursuant to ind AS 37 âProvisions, Contingent Liabilities and Contingent Assetsâ
a) Movement in provisions:
b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31, 2019 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of 1 to 5 years from the date of Balance Sheet.
ii. Expected tax liability in respect of indirect taxes represents mainly the differential sales tax liability on account of noncollection of declaration forms.
iii. Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
iv. Contractual rectification cost represents the estimated cost the Company is likely to incur during defect liability period as per the contract obligations in respect of completed construction contracts accounted under ind AS 115 âRevenue from Contracts with customersâ.
c) Disclosure in respect of contingent liabilities is given as part of Note 29 to the Balance Sheet.
Note [19]
The Company purchased Electoral Bonds for RS. 35.00 crore and issued the same to political parties as Companyâs political contribution. (previous year: R Nil).
Note [20]
The Company has amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at March 31, 2019. The disclosure pursuant to the said Act is as under:
NOTE [21]
There are no amounts due and outstanding to be credited to investor Education & Protection Fund as at March 31, 2019.
NOTE [22]
Disclosure in respect of joint operations:
(a) (i) Name of joint operation (with specific ownership interest in the arrangement):
NOTE [23]
Disclosure pursuant to ind AS 103 âBusiness combinationsâ:
(a) The Board of Directors in its meeting held on may 10, 2019, has approved amalgamation of its wholly-owned subsidiary L&T Shipbuilding Limited (âLTSBâ) with the company subject to receipt of regulatory and other approvals. The company has increased its stake in LTSB to 100% in April 2019 from 97% as at march 31, 2019.
(b) During the previous year Spectrum infotech Private Limited (SIPL), a wholly-owned subsidiary, was merged with the company under a scheme of amalgamation approved by National company Law Tribunal on march 27, 2018. The merger was effective from the appointed date April 1, 2017. SIPL had a registered office in Bengaluru, india and was engaged in the business of manufacture of Electronic Systems and Sub-systems.
No fresh shares were issued to effect the merger as SIPL was wholly owned subsidiary of the company. Further the merger was accounted using pooling of interest method, involving the following:
(i) The assets and liabilities of SIPL were reflected at their carrying amounts. No adjustment was made to reflect the fair values, or recognise any new asset or liability.
(ii) The financial information in the financial statements of the company was restated from the effective date April 1, 2017.
(iii) The balance of the retained earnings appearing in the financial statements of the SiPL was aggregated with the corresponding balance appearing in the financial statements of the company.
(iv) The identity of General reserve and Securities premium was preserved and appearing in the financial statements of the company in the same form in which they appeared in financial statements of SiPL; and
(v) The excess of amount of investment by the company in SiPL over the share capital of SiPL was treated as capital reserve in companyâs financial statements and the same was presented separately from other capital reserves [refer to Note 18].
NOTE [24]
Disclosure pursuant to ind AS 20 âAccounting for Government Grants and Disclosure of Government Assistanceâ
The companyâs exports qualify for various export benefits offered in the form of duty credit scrips under foreign trade policy framed by Department General of Foreign Trade india (DGFT). income accounted towards such export incentives and duty drawback amounts to RS. 99.97 crore (previous year: RS. 111.04 crore).
NOTE [25]
Disclosure pursuant to ind AS 7 âStatement of cash Flowsâ - changes in liabilities arising from financing activities:
Note [26]
Disclosure pursuant to ind AS 8 âAccounting Policies, Changes in Accounting Estimates and Errorsâ on new ind AS that has been issued but is not effective as of the closing day of the reporting period:
On March 30, 2019, the Ministry of Corporate Affairs notified following new ind AS, applicable in respect of accounting periods commencing on or after April 1, 2019.
Ind As 116 âLeasesâ
ind AS 116 âLeasesâ supersedes AS 17 âLeasesâ in respect of accounting periods commencing on or after April 1, 2019. ind AS 116 sets out the principles for the recognition, measurement, presentation and disclosure of leases. Pursuant to transition methods permitted under ind AS 116, the Company is proposing to use âmodified retrospective approachâ for transitioning to ind AS 116 with effect from April 1, 2019. Under modified retrospective approach, cumulative effect of initially applying the accounting standard as at April 1, 2019 will be recognised as an adjustment to the opening balance of Retained earnings of the financial Year 2019-20 and figures for the financial Year 2018-19 will not be restated as per the new accounting standard. With respect to existing leases as at the date of initial application of the accounting standard, the Company is proposing to use the practical expedient available on transition to ind AS 116 and will not reassess whether a contract is or contains a lease and instead apply ind AS 116 only to the contracts that were previously identified as lease applying ind AS 17.
The Company has carried out an initial assessment of the impact of adopting this standard and there would not be any significant impact on the financials of the Company.
Note [27]
Figures for the previous year have been regrouped/reclassified to conform to the figures of the current year.
Mar 31, 2018
* The equity shares will be issued at a premium of R 94.42 crore (previous year: R 146.71 crore)
** The equity shares will be issued at a premium of R 1214.50 crore (previous year: R 1215.13 crore) on the exercise of options by the bond holders
# Note 17 (h) for terms of employee stock option schemes ## Note 19 (b) for terms of foreign currency convertible bonds
@ The number of options have been adjusted consequent to bonus issue wherever applicable
(f) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended March 31, 2018 are 77,50,59,331 (previous period of five years ended March 31, 2017: 30,82,94,576 shares)
(g) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding last five years ended on March 31, 2018 - Nil (previous period of five years ended March 31, 2017: Nil)
(h) Stock option schemes
i. Terms:
A. The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options are vested equally over a period of 4 years [5 years in the case of series 2006(A)], subject to the discretion of the management and fulfillment of certain conditions.
B. Options can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of issue of equity shares. Management has discretion to modify the exercise period.
iv. Weighted average share price at the date of exercise for stock options exercised during the year is R 1106.67 (previous year:
R 1386.19) per share.
v. A. In respect of stock options granted pursuant to the Company''s stock options schemes, the fair value of the options is treated as discount and accounted as employee compensation over the vesting period.
B. Expense on Employee Stock Option Schemes debited to the Statement of Profit and Loss during 2017-18 is R 68.98 crore (previous year: R 60.35 crore) net of recoveries of R 0.79 crore (previous year: R 1.42 crore) from its group companies towards the stock options granted to deputed employees, pursuant to the employee stock option schemes (Note 34).
The entire amount pertains to equity-settled employee share-based payment plans.
vi. During the year, the Company has recovered R 7.16 crore (previous year: R 13.81 crore) from its subsidiary companies towards the stock options granted to their employees, pursuant to the Employee Stock Option Schemes.
vii. Weighted average fair values of options granted during the year is R 965.25 (previous year: R 1056.73) per option
ix. The balance in share options (net) account as at March 31, 2018 is R 108.59 crore (previous year: R 177.25 crore), including R 76.12 crore (previous year: R 117.36 crore) for which the options have been vested to employees as at March 31, 2018.
(i) Capital management:
The Company continues its policy of a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also equip the Company with the ability to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund raising options for future, which is especially important in times of global economic volatility. The gross debt equity ratio is 0.21:1 as at March 31, 2018 (as at March 31, 2017 0.23:1).
(j) During the year ended March 31, 2018, the Company paid the final dividend of R 14 per equity share for the year ended March 31, 2017 amounting to R 1960.76 crore and dividend distribution tax of R 317.93 crore.
(k) On May 28, 2018, the Board of Directors has recommended the final dividend of R 16 per equity share for the year ended March 31, 2018 subject to approval from shareholders. On approval, the total dividend payment based on number of shares outstanding as at March 31, 2018 is expected to be R 2242.19 crore and the payment of dividend distribution tax is expected to be R 357.60 crore.
* Capital reserve: It represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transactions in earlier years.
** Capital reserve on business combination: It arises on transfer of business between entities under common control. It represents the difference, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor [refer to note 1(ab)].
A Debenture redemption reserve (DRR): The Company has issued redeemable non-convertible debentures and created DRR out of the profits of the Company in terms of the Companies (Share capital and Debenture) Rules, 2014 (as amended). The Company is required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis. The amounts credited to the DRR shall not be utilized by the Company except to redeem the debentures.
# General reserve: The Company created a General reserve in earlier years pursuant to the provisions of the Companies Act,
1956 wherein certain percentage of profits were required to be transferred to General Reserve before declaring dividends. As per Companies Act 2013, the requirements to transfer profits to General Reserve is not mandatory. General reserve is a free reserve available to the Company.
## Equity component of foreign currency convertible bonds: Pursuant to Ind AS 32, Foreign Currency Convertible Bonds (FCCB) issued by the Company are split into equity and liability component and presented under other equity and financial liabilities respectively.
@ The principal amount has been calculated as [{Average Ref WPI as at reporting period/Average Ref WPI (as at 23/5/2013)} x Face Value]
19(b) Foreign Currency Convertible Bonds:
0.675% US$ denominated 5 years & 1 day Foreign Currency Convertible Bonds (FCCB) carried at R 1245.64 crore as at March 31, 2018 (as at March 2017: R 1201.78 crore) represent 1,000 bonds of US$200000 each. The bonds are convertible into the Company''s fully paid equity shares of R 2 each at a conversion price of R 1277.67 per share (Pre bonus conversion price was R 1916.50 per share) at the option of the bond holders at any time on and after December 1, 2014 up to October 15, 2019. The bonds are redeemable, subject to fulfillment of certain conditions, in whole but not in part, at the option of the Company, on or at any time after October 22, 2017 but not less than seven business days prior to the maturity date, at the principal amount together with accrued interest (calculated up to but excluding the date of redemption) on the date fixed for redemption, unless the bonds have been previously redeemed, converted or purchased and cancelled.
23(a) Loans guaranteed by directors R Nil (previous year: R Nil)
23(b) Loans repayable on demand from banks include fund based working capital facilities viz. cash credits and demand loans. The secured portion of loans repayable on demand from banks, short term loans and advances from the banks, working capital facilities and other non-fund based facilities viz. bank guarantees and letter of credit, are secured by hypothecation of inventories and trade receivables. Amount of inventories and trade receivables that are pledged as collateral: R 6026.53 crore as at March 31, 2018 (March 31, 2017: R 6149.71 crore)
Notes:
1. The Company does not expect any reimbursements in respect of the above contingent liabilities.
2. It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above pending resolution of the arbitration/appellate proceedings. Further, the liability mentioned in (a) to (d) above includes interest except in cases where the Company has determined that the possibility of such levy is remote.
3. In respect of matters at (e), the cash outflows, if any, could generally occur up to ten years, being the period over which the validity of the guarantees extends except in a few cases where the cash outflows, if any, could occur any time during the subsistence of the borrowing to which the guarantees relate.
4. In respect of matters at (f), the cash outflows, if any, could generally occur up to three years, being the period over which the validity of the guarantees extends.
5. In respect of matters at (g) to (i), the cash outflows, if any, could generally occur up to completion of projects undertaken by the respective joint operations.
(i) Through a scheme of arrangement of demerger, the Port business in L&T Shipbuilding Limited (effective date March 22, 2017) was transferred to Marine Infrastructure Developer Private Limited (MIDPL) in financial year 2016-17. As a shareholder, the Company had received 38,80,00,000 equity shares of R 10 each. The Company plans to divest its stake in MIDPL to an identified strategic partner. In order to complete the divestment, certain approvals, such as transfer of Marine License & transfer of shares are pending to be received from statutory bodies. Accordingly, the proposed sale is expected to be completed within 12 months from the reporting date.
(ii) The above investment forms part of the unallocable corporate assets. [Note 47(a) Disclosure pursuant to Ind AS 108 "Operating Segment"].
NOTE [44]
Disclosure pursuant to Ind AS 107 "Financial Instruments: Disclosures": Market risk management
(a) Foreign exchange rate and interest rate risk:
The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a standalone basis and in conjunction with its underlying foreign currency and interest rate related exposures. The Company follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE) hence the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time that the HPFE becomes an on-Balance Sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Company. Further, given the effective horizons of the Company''s risk management activities which coincide with the durations of the projects under execution and could extend across 3-4 years and the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Company''s financial condition and operating results. Hence, the Company monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc., on a regular basis. For on-Balance Sheet exposures, the Company monitors the risks on net unhedged exposures.
(i) Foreign exchange rate risk:
In general, the Company is a net receiver of foreign currency. Accordingly, changes in exchange rates and in particular a strengthening of the Indian Rupee may negatively affect the Company''s net sales and gross margins as expressed in Indian Rupees. There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. In addition, the Company has entered and may enter in future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances. The Company''s practice is to hedge a portion of its material foreign exchange exposures with tenors in line with the project/business life cycle, however, the Company may choose not to hedge certain foreign exchange exposures for a variety of reasons.
To provide a meaningful assessment of the foreign currency risk associated with the Company''s foreign currency derivative positions against off Balance Sheet exposures and unhedged portion of on-Balance Sheet financial assets and liabilities, the Company uses a multi-currency correlated value-at-risk ("VAR") model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against Indian rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposures due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increases in the fair value of the underlying exposures for on-Balance Sheet exposures. The overnight VAR for the Company at 95% confidence level is R 39.80 crore as at March 31, 2018 and R 59.80 crore as at March 31, 2017.
Actual future gains and losses associated with the Company''s investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at March 31, 2018 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchanges rates and the Company''s actual exposures and position.
(ii) Interest rate risk:
The Company''s exposure to changes in interest rates relates primarily to the Company''s outstanding floating rate debt. While most of the Company''s outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk.
A major portion of foreign currency debt is linked to international interest rate benchmarks like LIBOR. The Company also hedges a portion of these risks by way of derivatives instruments like Interest rate swaps and currency swaps.
* Holding all other variables constant
(b) Liquidity Risk Management:
The Company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through an adequate amount of committed credit lines. Given the need to fund diverse businesses, the Company maintains flexibility in funding by maintaining availability under committed credit lines to meet obligations when due. Management regularly monitors the position of cash and cash equivalents vis-a-vis projections. Assessment of maturity profiles of financial assets and financial liabilities including debt financing plans and maintenance of Balance Sheet liquidity ratios are considered while reviewing the liquidity position.
The Company''s investment policy and strategy are focused on preservation of capital and supporting the Company''s liquidity requirements. The Company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. The Company typically invests in money market funds, large debt funds, government of india securities, equity funds and other highly rated securities under a limits framework which governs the credit exposure to any one issuer as defined in its investment policy. The policy requires investments generally to be investment grade, with the primary objective of minimizing the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the Company''s investment portfolio, the Company performed a sensitivity analysis to determine the impact of change in prices of the securities that would have on the value of the investment portfolio assuming a 0.5% move in debt funds and debt securities and a 5% movement in the NAV of the equity funds. Based on the investment position a hypothetical 0.5% change in the fair market value of debt securities would result in a value change of /- R 14.04 crore as at March 31, 2018 and /- R 15.98 crore as at March 31, 2017. 5% change in the equity funds NAV would result in a value change of /- R 16.24 crore as at March 31, 2018 and /- R 17.83 crore as at March 31, 2017. The investments in money market funds are for the purpose of liquidity management only and are held only overnight and hence not subject to any material price risk.
(c) Credit Risk Management:
The Company''s customer profile include public sector enterprises, state owned companies and large private corporate. Accordingly, the Company''s customer credit risk is low. The Company''s average project execution cycle is around 24 to 36 months. General payment terms include mobilization advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases retentions are substituted with bank/corporate guarantees. The Company has a detailed review mechanism of overdue customer receivables at various levels within organization to ensure proper attention and focus for realization.
(ii) Trade receivable written off during the year but still enforceable for recovery amounts to R 409.43 crore (previous year: R Nil). Out of this R 243.62 crore included above and balance R 165.81 crore included in exceptional items. Further, exceptional items also include write off of retention money not due (non-financial asset) amounts to R 128.94 crore. (Note 46).
Valuation technique and key inputs used to determine fair value:
1. Level 1: Mutual funds, bonds, debentures and government securities- Quoted price in the active market.
2. Level 2: (a) Derivative instrument - Mark to market on forward covers and embedded derivative instruments is based on forward exchange rates at the end of reporting period and discounted using G-sec rate plus applicable spread.
(b) Preference shares - Future cash flows are discounted using G-sec rate plus applicable spread as at reporting date.
NOTE [4]
A. Exceptional items for the year ended March 31, 2018 include the following:
(i) Gain of R 198.82 crore on sale of the Company''s stake in subsidiary companies viz. Larsen & Toubro Infotech Limited R 145.32 crore and L&T Technology Services Limited R 53.50 crore;
(ii) Gain on divestment of stake in L&T EWAC Alloys Limited R 351.55 crore and L&T Cutting Tools Limited R 174.91 crore;
(iii) Write off of trade receivable and retention money not due from a customer against whom insolvency proceedings are underway R 294.75 crore [note1(t)(vii)].
Exceptional items for the year ended March 31, 2017 include the following:
(i) Gain of R 1947.89 crore on sale of the Company''s part stake in subsidiary companies viz. Larsen & Toubro Infotech Limited R 1191.70 crore and L&T Technology Services Limited R 756.19 crore;
(ii) Loss on divestment of stake in L&T General Insurance Company Limited R 92.84 crore;
(iii) Loss on sale of Company''s full stake in subsidiary company L&T Arabia LLC to wholly owned subsidiary company R 11.08 crore.
(iv) Provision for impairment of investment in Infrastructure Development Projects Limited R 950 crore.
B. On May 1, 2018, the Company signed, subject to regulatory approvals, definitive agreements with Schneider Electric for strategic divestment of its Electrical and Automation (E&A) business (which is a reported segment), together with certain associated subsidiary companies outside India, for an all-cash consideration of R 14000 crore which is subject to customary post-closing adjustments.
(c) Revenue contributed by any single customer in any of the operating segments, whether reportable or otherwise, does not exceed ten percent of the Company''s total revenue.
(d) The Company''s reportable segments are organized based on the nature of products and services offered by these segments.
(e) Basis of identifying operating segments, reportable segments, segment profit and definition of each reportable segment:
(i) Basis of identifying operating segments:
Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Company''s other components; (b) whose operating results are reviewed by the Corporate Executive Management to make decisions about resource allocation and performance assessment; and (c) for which discrete financial information is available.
The Company has four reportable segments as described under "segment composition" below. The nature of products and services offered by these businesses are different and are managed separately given the different sets of technology and competency requirements.
(ii) Reportable segments:
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
(iii) Segment profit:
Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the Corporate Executive Management.
NOTE [5]
Disclosure pursuant to Ind AS 108 "Operating Segment" (contd.)
(iv) Segment composition
- Infrastructure segment comprises engineering and construction of building and factories, transportation infrastructure, heavy civil infrastructure, power transmission & distribution, water & effluent treatment and smart world & communication projects.
- Power segment comprises turnkey solutions for Coal-based and Gas-based thermal power plants Including power generation equipment with associated systems and/or balance-of-plant packages.
- Heavy Engineering segment comprises manufacture and supply of custom designed, engineered critical equipment and systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas, Thermal & Nuclear Power, Aerospace and Defence.
- Electrical & Automation segment comprises manufacture and sale of low and medium voltage switchgear components, custom built low and medium voltage switchboards, electronic energy meters/protection (relays) systems, control & automation products. .
- Others segment includes hydrocarbon, metallurgical & material handling systems, realty, shipbuilding, marketing and servicing of construction & mining machinery and parts thereof, manufacture and sale of rubber processing machinery. None of the businesses reported as part of others segment meet any of the quantitative thresholds for determining reportable segments in the year ended March 31, 2018 or the year ended March 31, 2017.
* Basis used to determine interest income on plan assets:
The Trust formed by the Company manages the investments of provident funds and gratuity fund. Interest income on plan assets is determined by multiplying the fair value of the plan assets by the discount rate stated in (g)(i) below both determined at the start of the annual reporting period.
The Company expects to fund R 45.05 crore (previous year: R 6.18 crore) towards its gratuity plan and R 67.68 crore (previous year: R 73.21 crore) towards its trust-managed provident fund plan during the year 2018-19.
iv) Attrition Rate:
(a) For post-retirement medical benefit plan and Company pension plan, the attrition rate varies from 1% to 12% (previous year: 2% to 8%) for various age groups.
(b) For gratuity plan the attrition rate varies from 1% to 11% (previous year: 1% to 6%) for various age groups.
v) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
vi) The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognized immediately in the Statement of Profit and Loss.
vii) The obligation of the Company under the post-retirement medical benefit plan is limited to the overall ceiling limits. At present, healthcare cost, as indicated in the principal actuarial assumption given above, has been assumed to increase at 5.00% p.a.
viii) (A) One percentage point change in actuarial assumptions would have the following effects on the defined benefit obligation of gratuity plan:
NOTE [6]
Disclosure pursuant to Ind AS 19 "Employee Benefits" (contd.)
h) Characteristics of defined benefit plans and associated risks:
1. Gratuity plan:
The Company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service. The Company''s scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972. The defined benefit plan for gratuity of the Company is administered by separate gratuity funds that are legally separate from the Company. The trustees nominated by the Company are responsible for the administration of the plan. There are no minimum funding requirements of these plans. The funding of these plans are based on gratuity fund''s actuarial measurement framework set out in the funding policies of the plan. These actuarial measurements are similar compared to the assumptions set out in (g) supra. Employees do not contribute to any of these plans.
Unfunded gratuity represents a small part of gratuity plan which is not material. Further, it includes amounts payable in respect of the Company''s foreign operations which result in gratuity payable to employees engaged as per the local laws of country of operation.
2. Post-retirement medical care plan:
The Post-retirement medical benefit plan provides for reimbursement of health care costs to certain categories of employees post their retirement. The reimbursement is subject to an overall ceiling sanctioned based on cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
3. Company''s pension plan:
In addition to contribution to state-managed pension plan (EPS scheme), the Company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees. The quantum of pension depends on the cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
4. Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under The Employees'' Provident Fund and Miscellaneous Provisions Act, 1952. The plan mandates contribution by employer at a fixed percentage of employee''s salary. Employees also contribute to the plan at a fixed percentage of their salary as a minimum contribution and additional sums at their discretion. The plan guarantees interest at the rate notified by Employees'' Provident Fund Organisation. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.
The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognized immediately in the Statement of Profit and Loss as actuarial loss. Any loss/gain arising out of the investment risk and actuarial risk associated with the plan is also recognized as expense or income in the period in which such loss/ gain occurs.
All the above defined benefit plans expose the Company to general actuarial risks such as interest rate risk and market (investment) risk.
* The Company has sold its stake on September 27, 2017 ** Merged with the Company w.e.f. April 1, 2017
*** The Company has sold its stake on September 9, 2016
@ The Company has sold its stake on November 16, 2017
@@ Merged with L&T Capital Market Limited w.e.f. April 1, 2017
@@@ In the process of liquidation
â The Company through its subsidiaries acquired stake on June 1,2017
â Incorporated on August 8,2017 A Incorporated on July 14, 2016 AA Applied for strike off
# The Company through its subsidiary sold its stake on September 28, 2017 ## Merged with Larsen & Toubro Infotech Limited w.e.f. April 1, 2017
### Incorporated on March 17, 2017
% The Company through its subsidiary has sold its stake on March 20, 2017
%% Reclassified from joint venture to subsidiary due to additional purchase of stake on August 16, 2017
$ The Company through its subsidiary has acquired stake on December 11, 2017
$$ The Company through its subsidiary has acquired stake on December 15, 2017
Note: The basic and diluted EPS and number of potential equity shares on account of conversion of foreign currency convertible bonds for the year 2016-17 have been restated pursuant to the issue of bonus equity shares in the ratio of 1:2 (one bonus equity share of R 2 each for every two equity share of R 2 each held).
NOTE [7]
Disclosure pursuant to Ind AS 27 "Separate Financial Statements"
Investment in following subsidiary companies, joint venture companies and associates is accounted at cost.
NOTE [8]
Disclosures pursuant to Ind AS 37 "Provisions, Contingent Liabilities and Contingent Assets" (contd.)
b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31, 2018 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of 2 to 4 years from the date of the Balance Sheet.
ii. Expected tax liability in respect of indirect taxes represents mainly the differential sales tax liability on account of noncollection of declaration forms.
iii. Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
iv. Contractual rectification cost represents the estimated cost the Company is likely to incur during defect liability period as per the contract obligations in respect of completed construction contracts accounted under Ind AS 11 "Construction Contracts".
c) Disclosure in respect of contingent liabilities is given as part of Note 29 to the Balance Sheet.
NOTE [60]
Disclosure pursuant to Ind AS 103 "Business Combinations":
During the year Spectrum Infotech Private Limited (SIPL), a wholly owned subsidiary, was merged with the Company under a scheme of amalgamation approved by National Company Law Tribunal on March 27, 2018. The merger is effective from the appointed date April 1, 2017. SIPL has a registered office in Bengaluru, India and is engaged in the business of Manufacture of Electronic Systems and Sub-systems.
No fresh shares are issued to effect the merger as SIPL is wholly owned subsidiary of the Company. Further the merger is accounted using pooling of interest method, involving the following:
a. The assets and liabilities of SIPL are reflected at their carrying amounts. No adjustment is made to reflect the fair values, or recognise any new asset or liability.
b. The financial information in the financial statements of the Company is restated from the effective date April 1, 2017.
c. The balance of the retained earnings appearing in the financial statements of the SIPL is aggregated with the corresponding balance appearing in the financial statements of the Company.
d. The identity of General Reserve and Securities Premium is preserved and is appearing in the financial statements of the Company in the same form in which they appeared in financial statements of SIPL; and
e. The excess of amount of investment by the Company in SIPL over the share capital of SIPL is treated as capital reserve in Company''s financial statements and the same is presented separately from other capital reserves [refer to Note 18].
NOTE [9]
Disclosure pursuant to Ind AS 20 "Accounting for Government Grants and Disclosure of Government Assistance":
The Company''s exports qualify for various export benefits offered in the form of duty credit scrips under foreign trade policy framed by Department General of Foreign Trade India (DGFT). Income accounted towards such export incentives amounts to R 111.04 crore (previous year: R 27.23 crore).
NOTE [10]
Disclosure pursuant to Ind AS 8 "Accounting Policies, Changes in Accounting Estimates and Errors" on new Ind AS that has been issued but is not effective as of the closing day of the reporting period:
A. Ind AS 115 "Revenue from Contracts with Customers"
The Ministry of Corporate Affairs notified Ind AS 115 "Revenue from Contracts with Customers" in respect of accounting periods commencing on or after April 1, 2018, superseding Ind AS 11 "Construction Contracts" and Ind AS 18 "Revenue".
The Company''s current revenue recognition policy is broadly aligned to the principles enunciated in Ind AS 115 and does not require any material change except for realty business. In terms of Ind AS 115, revenue of realty business will be recognized at the time of delivery of units to the customers as compared to revenue recognition based on percentage completion method currently followed as per the Guidance note issued by the Institute of Chartered Accountants of India. The management is in the process of implementing Ind AS 115 and does not expect any material impact on the Company''s financial position as at March 31, 2018 and on the financial results of the Company in the first year of implementation viz. financial year commencing on April 1, 2018 except as above.
B. Ind AS 21 "The Effects of Changes in Foreign Exchange Rates"
On March 28, 2018, the Ministry of Corporate Affairs notified Companies (Indian Accounting Standards) Amendment Rules, 2018 and inserted Appendix B, Foreign Currency Transactions and Advance Consideration in Ind AS 21.
In Appendix B, it is clarified that the date of transaction to determine the exchange rate to use on initial recognition of related asset, expense or income is the date on which the initial recognition of the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
The company''s existing accounting policy conforms to the above clarification.
NOTE [11]
Figures for the previous year have been regrouped/re-classified to conform to the figures of the current year.
Mar 31, 2017
NOTE [1]
Equity share capital
(a) Share capital authorised, issued, subscribed and paid up:
(b) Reconciliation of the number of equity shares and share capital:
(c) Terms/rights attached to equity shares:
The Company has only one class of share capital, i.e., equity shares having face value of Rs. 2 per share. Each holder of equity share is entitled to one vote per share.
(d) Shareholder holding more than 5% of equity shares as at the end of the year:
(e) Shares reserved for issue under options outstanding as at the end of the year on un-issued share capital:
* The equity shares will be issued at a premium of RS.146.71 crore (as at 31-3-2016: f 203.97 crore and as at 1-4-2015: Rs. 278.09 crore)
** The equity shares will be issued at a premium of RS.121 5.13 crore (as at 31-3-2016: Rs. 1215.13 crore and as at 1-4-2015: Rs. 1215.13 crore) on the exercise of options by the bond holders
# Note 17(h) for terms of employee stock option schemes ## Note 19(b) for terms of foreign currency convertible bonds
(f) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended March 31, 2017 are 30,82,94,576 (previous period of five years ended March 31, 2016: 30,82,94,576 shares)
(g) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding last five years ended onMarch31,2017-Nil (previous period of five years ended March 31, 2016: Nil)
(h) Stock option schemes
(i) Terms:
A. The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options are vested equally over a period of 4 years [5 years in the case of series 2006(A)], subject to the discretion of the management and fulfillment of certain conditions.
B. Options can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of issue of equity shares. Management has discretion to modify the exercise period.
(ii) The details of the grants under the aforesaid schemes under various series are summarised below:
(iii) The number and weighted average exercise price of stock options are as follows:
(iv) Weighted average share price at the date of exercise for stock options exercised during the year is Rs. 1386.19 (previous year: Rs.1543.13) per share.
(v) A. In respect of stock options granted pursuant to the Companyâs stock options schemes, the fair value of the options is treated as discount and accounted as employee compensation over the vesting period.
B. Expense on Employee Stock Option Schemes debited to the Statement of Profit and Loss during 2016-17 is Rs. 60.35 crore (previous year: Rs. 59.18 crore) net of recoveries of Rs. 1.42 crore (previous year: Rs. 7.76 crore) from its group companies towards the stock options granted to deputed employees, pursuant to the employee stock option schemes (Note 34).
The entire amount pertains to equity-settled employee share-based payment plans.
(vi) During the year, the Company has recovered Rs. 13.81 crore (previous year: Rs. 14.28 crore) from its subsidiary companies towards the stock options granted to their employees, pursuant to the Employee Stock Option Schemes.
(vii) Weighted average fair values of options granted during the year is Rs. 1056.73 (previous year: Rs. 965.39) per option.
viii. The fair value has been calculated using the Black-Scholes Option Pricing Model and the significant assumptions and inputs to estimate the fair value of options granted during the year are as follows:
ix. The balance in share options (net) account as at March 31, 2017 is Rs.177.25 crore (previous year: Rs. 242.23 crore), including Rs. 117.36 crore (previous year: Rs. 155.87 crore) for which the options have been vested to employees as at March 31, 2017.
(i) Capital management:
The Company continues its policy of a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also equip the Company with the ability to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund raising options for future, which is especially important in times of global economic volatility. The gross debt equity ratio is 0.23:1 (as at 31-3-2016: 0.33:1 and as at 1-4-2015: 0.34:1)
(j) During the year ended March 31, 2017, the Company paid the final dividend of t 18.25 per equity share for the year ended March 31, 2016 amounting to Rs. 1701.51 crore and dividend distribution tax of Rs. 141.20 crore.
(k) The Board of Directors has recommended for approval of shareholders, the issue of bonus equity shares in the ratio of 1:2 (one bonus equity share of t 2 each for every 2 equity shares of t 2 each held). On May 29, 2017, the Board of Directors has recommended the final dividend of t 21 per equity share on the pre-bonus share capital for the year ended March 31, 2017 subject to approval from shareholders. On approval, the total dividend payment based on number of shares outstanding as at March 31, 2017 is expected to be Rs. 1959.23 crore and the payment of dividend distribution tax is expected to be Rs. 316.31 crore.
* Capital Reserve: It represents the gains of capital nature which mainly includes the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transaction in earlier years.
A Debenture redemption reserve (DRR): The Company has issued redeemable non-convertible debentures and created DRR out of the profits of the Company in terms of the Companies (Share capital and Debenture) Rules, 2014 (as amended). The Company is required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis. The amounts credited to the DRR may not be utilised by the company except to redeem debenture.
# General Reserve: The Company created a General Reserve in earlier years pursuant to the provisions of the Companies Act wherein certain percentage of profits were required to be transferred to General Reserve before declaring dividends. As per Companies Act 2013, the requirement to transfer profits to General Reserve is not mandatory. General Reserve is a free reserve available to the Company.
2(a) Foreign currency convertible bonds:
0.675% US$ denominated 5 years & 1 day Foreign Currency Convertible Bonds (FCCB) carried at 1201.78 crore as at March 31, 2017 (previous year: Rs. 1190.86 crore) represent 1,000 bonds of US$ 200000 each. The bonds are convertible into the Companyâs fully paid equity shares of 2 each at a conversion price of t 1916.50 per share at the option of the bond holders at any time on and after December 1, 2014 up to October 15, 2019. The bonds are redeemable, subject to fulfillment of certain conditions, in whole but not in part, at the option of the Company, on or at any time after October 22, 2017 but not less than seven business days prior to the maturity date, at the principal amount together with accrued interest (calculated up to but excluding the date of redemption) on the date fixed for redemption, unless the bonds have been previously redeemed, converted or purchased and cancelled.
2(b)Loans repayable on demand from banks include fund based working capital facilities viz. cash credits and demand loans. The secured portion of loans repayable on demand from banks, short term loans and advances from the banks, working capital facilities and other non-fund based facilities viz. bank guarantees and letter of credit, are secured by hypothecation of inventories and trade receivables. Amount of inventories and trade receivables that are pledged as collateral: Rs. 6149.71 crore as at March 31, 2017; Rs. 6188.72 crore as at March 31, 2016; Rs. 6098.53 crore as at April 1, 201 5.
3(a) Due to others include due to directors Rs. 55.58 crore (as at 31-3-2016: Rs.51.30 crore; as at 1-4-2015: Rs. 53.83 crore)
Notes:
1. The Company does not expect any reimbursements in respect of the above contingent liabilities.
2. It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above pending resolution of the arbitration/appellate proceedings. Further, the liability mentioned in (a) to (d) above excludes interest and penalty in cases where the company has determined that the possibility of such levy is remote.
3. In respect of matters at (e), the cash outflows, if any, could generally occur up to ten years, being the period over which the validity of the guarantees extends except in a few cases where the cash outflows, if any, could occur any time during the subsistence of the borrowings to which the guarantees relate.
4. In respect of matters at (f), the cash outflows, if any, could generally occur up to three years, being the period over which the validity of the guarantees extends.
5. In respect of matters at (g) to (i), the cash outflows, if any, could generally occur upto completion of projects undertaken by the respective joint operations.
NOTE [4]
Particulars in respect of loans and advances in the nature of loans to related parties as required by the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:
Notes:
Above figures include interest accrued
Loans to employees (including directors) under various schemes of the Company (such as housing loan, furniture loan, education loan, etc.) have been considered to be outside the purview of disclosure requirements.
Subsidiary classification is in accordance with the Companies Act, 2013
NOTE [5]
Disclosure pursuant to section 186 of the Companies Act, 2013:
NOTE [6]
Amount required to be spent by the Company on Corporate Social Responsibility (CSR) related activities during the year is Rs. 98.97 crore (previous year: Rs. 101.46 crore).
(a) The amount recognised as expense in the Statement of Profit and Loss on CSR related activities is Rs. 100.77 crore (previous year: Rs. 119.89 crore), which comprises of:
NOTE [7]
The expenditure on research and development activities recognised as expense in the Statement of Profit and Loss is Rs. 145.98 crore (previous year: Rs. 149.62 crore). Further, the company has incurred capital expenditure on research and development activities as follows:
(a) on tangible assets of Rs. 9.43 crore (previous year: Rs. 5.79 crore);
(b) on intangible assets being expenditure on new product development of Rs. 43.01 crore (previous year: Rs. 48.19 crore) [Note 1 (i)(ii)] and
(c) on other intangible assets of Rs. 1.09 crore (previous year: Rs. 0.55 crore).
NOTE [8]
Disclosures pursuant to Ind AS 17 âLeasesâ:
(a) Where the Company is a lessor
(i) Operating leases:
The Company has given a building under non-cancellable operating lease, the future minimum lease payments receivable in respect of which are as follows:
(b) Where the Company is a lessee:
(i) Finance leases:
(A) Assets acquired on finance lease comprises plant and equipment and land. The leases have a primary period, which is fixed and non-cancellable. The company has an option to renew the lease for a secondary period.
(B) The minimum lease rentals and the present value of minimum lease payments in respect of assets acquired under finance leases are as follows:
(C) Contingent rent recognised in the Statement of Profit and Loss: Rs. Nil (previous year: Rs. Nil)
(ii) Operating leases:
(A) The Company has taken various commercial premises and plant and equipment under cancellable operating leases. These lease agreements are normally renewed on expiry.
(B) Assets acquired on non-cancellable operating lease comprises commercial premises, cars and technology assets, the future minimum lease payments in respect of which are as follows:
(C) Lease rental expense in respect of operating leases: Rs. 109.10 crore (previous year: Rs. 76.97 crore)
(D) Contingent rent recognised in the Statement of Profit and Loss: t Nil (previous year: f Nil)
NOTE [9]
Disclosure pursuant to Ind AS 105 âNon-current assets held for sale and discontinued operationsâ:
The Company has identified the above as held for sale to optimise the capital allocation and focus on core business. The sale is envisaged through transfer of title deeds for identified assets held for sale and through divestment of stake/business transfer agreement in case of disposal group held for sale. The proposed sale are expected to be completed within 12 months from the respective reporting dates.
(A) Investments held for sale:
(i) Through a scheme of arrangement of demerger, the Port business in L&T Shipbuilding Limited (effective date March 22, 2017) is transferred to Marine Infrastructure Developer Private Limited (MIDPL). As a shareholder L&T has received 38,80,00,000 equity shares of t 10 each. L&T is planning to divest its stake in MIDPL to an identified strategic partner. Accordingly, the investment in MIDPL is presented as assets held for sale.
(ii) The Investment held for sale forms part of the unallocable corporate assets. [Note 47(a)],
(B) Assets and Liabilities of disposal group classified as held for sale:
(i) Pursuant to Board of Directors decision on November 7, 2014, to sell Companyâs Foundry Business Unit a definitive agreement with M/S Bradken Operations Pty Limited was executed on November 11, 2014. The associated assets and liabilities are consequently presented as held for sale as at April 1, 201 5. The Foundry Business was subsequently sold on March 31, 2016.
(ii) Details of assets and liabilities of disposal group classified as held for sale as at April 1, 201 5:
(iii) The assets and liabilities of the disposal group are presented in assets and liabilities of construction equipment & others segment reported under âOthersâ segment. [Note 47(a)],
NOTE [10]
Disclosure pursuant to Ind AS 1 âPresentation of financial statementsâ:
(a) Current assets expected to be recovered within twelve months and after twelve months from the reporting date:
(b) Current liabilities expected to be settled within twelve months and after twelve months from the reporting date:
NOTE [11]
Disclosure pursuant to Ind AS 107 âFinancial Instruments: Disclosuresâ: Market risk management
(a) Foreign exchange rate and interest rate risk:
The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a standalone basis and in conjunction with its underlying foreign currency and interest rate related exposures. The Company follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE) hence the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time that the HPFE becomes an on Balance Sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Company. Further, given the effective horizons of the Companyâs risk management activities which coincide with the durations of the projects under execution and could extend across 3-4 years and the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Companyâs financial condition and operating results. Hence, the Company monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc. on a regular basis. For on Balance Sheet exposures, the Company monitors the risks on net unhedged exposures.
(i) Foreign exchange rate risk:
In general, the Company is a net receiver of foreign currency. Accordingly, changes in exchange rates, and in particular a strengthening of the Indian Rupee, will negatively affect the Companyâs net sales and gross margins as expressed in Indian Rupees. There is a risk that the Company may have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates.
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. In addition, the Company has entered and may enter in the future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances. The Companyâs practice is to hedge a portion of its material foreign exchange exposures with tenors in line with the project/business life cycle, however, the Company may choose not to hedge certain foreign exchange exposures for a variety of reasons.
The net exposure to foreign currency risk (based on notional amount) in respect of recognised financial assets, recognised financial liabilities and derivatives is as follows:
To provide a meaningful assessment of the foreign currency risk associated with the Companyâs foreign currency derivative positions against off-Balance Sheet exposures and unhedged portion of on-Balance Sheet financial assets and liabilities, the Company uses a multi-currency correlated value-at-risk (âVARâ) model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against Indian Rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposures due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increase in the fair value of the underlying exposures for on Balance Sheet exposures. The overnight VAR for the Company at 95% confidence level is Rs. 59.80 crore as at March 31, 2017 and Rs. 27.60 crore as at March 31, 2016.
Actual future gains and losses associated with the Companyâs investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at March 31, 2017 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchange rates and the Companyâs actual exposures and position.
(ii) Interest rate risk:
The Companyâs exposure to changes in interest rates relates primarily to the Companyâs outstanding floating rate debt. While most of the Companyâs outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk.
A major portion of foreign currency debt is linked to international interest rate benchmarks like LIBOR. The Company also hedges a portion of these risks by way of derivative instruments like interest rate swaps and currency swaps.
A hypothetical 25 basis point shift in respective currency LIBORs on the unhedged loans would result in a corresponding increase/decrease in interest cost for the Company on a yearly basis.
(b) Liquidity risk management:
The Company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through an adequate amount of committed credit lines. Given the need to fund diverse businesses, the Company maintains flexibility in funding by maintaining availability under committed credit lines to meet obligations when due. Management regularly monitors the position of cash and cash equivalents vis-a-vis projections. Assessment of maturity profiles of financial assets and financial liabilities including debt financing plans and maintenance of Balance Sheet liquidity ratios are considered while reviewing the liquidity position.
The Companyâs investment policy and strategy are focused on preservation of capital and supporting the Companyâs liquidity requirements. The Company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. The Company typically invests in money market funds, large debt funds, government of india securities, equity funds and other highly rated securities under a limits framework which governs the credit exposure to any one issuer as defined in its investment policy. The policy requires investments generally to be investment grade, with the primary objective of minimising the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the Companyâs investment portfolio, the Company performed a sensitivity analysis to determine the impact of change in prices of the securities that would have on the value of the investment portfolio assuming a 0.25% movement in debt funds and debt securities and a 5% movement in the NAV of the equity funds. Based on the investment position a hypothetical 0.25% change in the fair market value of debt securities would result in a value change of /- Rs. 4.08 crore as at March 31, 2017 and /- Rs. 14.83 crore as at March 31, 2016. 5% change in the equity funds NAV would result in a value change of /- Rs. 17.14 crore as at March 31, 2017 and /- Rs. 2.87 crore as at March 31, 2016. The investments in money market funds are for the purpose of liquidity management only and are held only overnight and hence not subject to any material price risk.
(c) Credit Risk Management:
The Companyâs customer profile include public sector enterprises, state owned companies and large private corporates. Accordingly, the Companyâs customer credit risk is low. The Companyâs average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases retentions are substituted with bank/corporate guarantees. The Company has a detailed review mechanism of overdue customer receivables at various levels within organisation to ensure proper attention and focus for realisation.
NOTE [12]
Exceptional items for the year ended March 31, 2017 include the following:
(i) Gain of t 1947.89 crore on sale of the Companyâs part stake in subsidiary companies viz. Larsen & Toubro Infotech Limited - Rs. 1191.70 crore and L&T Technology Services Limited - Rs. 756.19 crore;
(ii) Loss on divestment of stake in L&T General Insurance Company Limited - Rs. 92.84 crore;
(iii) Loss on sale of companyâs full stake in subsidiary company L&T Arabia LLC - Rs. 11.08 crore to a wholly owned subsidiary company and
(iv) Provision for impairment of investment in Infrastructure Development Projects Limited - Rs. 950 crore.
Exceptional items for the year ended March 31, 2016 include the following:
(i) Gain on sale of the Companyâs part stake in L&T Finance Holdings Limited - Rs. 488.39 crore,
(ii) Gain on divestment of stake in L&T-Valdel Engineering Limited - Rs. 36.59 crore, L&T-Gulf Private Limited - Rs. 6.74 crore and L&T Sapura Shipping Private Limited - Rs. 9.18 crore to a wholly owned subsidiary company.
(iii) Gain of Rs. 105.86 crore on sale of the Companyâs stake in associate companies viz. Salzer Electronics Limited - Rs. 57.46 crore and L&T-Chiyoda Limited - Rs. 48.40 crore;
(iv) Gain of Rs. 48.52 crore on sale of the Companyâs Foundry Business Unit and
(v) Provision for impairment of investment in L&T General Insurance Company Limited - Rs. 135 crore.
NOTE [13]
Disclosure pursuant to Ind AS 108 âOperating Segmentâ
(a) Information about reportable segment
(b) Geographical information
(c) Revenue contributed by any single customer in any of the operating segments, whether reportable or otherwise, does not exceed ten percent of the Companyâs total revenue.
(d) The Companyâs reportable segments are organised based on the nature of products and services offered by these segments.
(e) Basis of identifying operating segments, reportable segments, segment profit and definition of each reportable segment:
(i) Basis of identifying operating segments:
Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Companyâs other components; (b) whose operating results are regularly reviewed by the Companyâs Executive Management Committee (EMC) to make decisions about resource allocation and performance assessment and (c) for which discrete financial information is available.
The Company has four reportable segments as described under âSegment Compositionâ below. The nature of products and services offered by these businesses are different and are managed separately given the different sets of technology and competency requirements.
(ii) Reportable segments:
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
(iii) Segment profit:
Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the Companyâs EMC.
(iv) Segment composition:
- Infrastructure segment comprises engineering and construction of building and factories, transportation infrastructure, heavy civil infrastructure, power transmission & distribution, water & effluent treatment and smart world & communication projects.
- Power segment comprises turnkey solutions for Coal-based and Gas-based thermal power plants including power generation equipment with associated systems and/or balance-of-plant packages.
- Heavy Engineering segment comprises manufacture and supply of custom designed, engineered critical equipment and systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas, Thermal & Nuclear Power, Aerospace and Defence.
- Electrical & Automation segment comprises manufacture and sale of low and medium voltage switchgear components, custom built low and medium voltage switchboards, electronic energy meters/protection (relays) systems, control & automation products.
- Others segment includes metallurgical & material handling systems, realty, shipbuilding, manufacture, marketing and servicing of construction equipment and parts thereof, marketing and servicing of mining machinery and parts thereof, manufacture and sale of rubber processing machinery & castings (upto the date of sale). None of the businesses reported as part of others segment meet any of the quantitative thresholds for determining reportable segments in the year ended March 31, 2017, the year ended March 31, 2016 or as at April 1, 201 5.
NOTE [14]
Disclosure pursuant to Ind AS 19 âEmployee Benefitsâ:
(I) Defined contribution plans - Note 1(k)(ii)(A): Amount of Rs. 118.34 crore (previous year: Rs. 102.98 crore) is recognised as an expense.
(II) Defined benefit plans - Note 1(k)(ii)(B):
(a) The amounts recognised in Balance Sheet are as follows:
(c) The changes in the present value of defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows:
* Basis used to determine interest income on plan assets:
The Trust formed by the Company manages the investments of provident funds and gratuity fund. Interest income on plan assets is determined by multiplying the fair value of the plan assets by the discount rate stated in (g)(i) below both determined at the start of the annual reporting period.
The Company expects to fund Rs. 6.1 8 crore (previous year: Rs. 29.85 crore) towards its gratuity plan and Rs. 73.21 crore (previous year: Rs. 79.93 crore) towards its trust-managed provident fund plan during the year 2017-18.
# Employerâs and employeesâ contribution due towards Provident Fund.
(e) The fair value of major categories of plan assets are as follows:
iv) Attrition Rate:
(a) For post-retirement medical benefit plan and Company pension plan, the attrition rate varies from 2% to 8% (previous year: 2% to 8%) for various age groups.
(b) For gratuity plan the attrition rate varies from 1 % to 6% (previous year: 1 % to 6%) for various age groups.
v) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
vi) The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the statement of Profit and Loss.
vii) The obligation of the Company under the post-retirement medical benefit plan is limited to the overall ceiling limits. At present, healthcare cost, as indicated in the principal actuarial assumption given above, has been assumed to increase at 5.00% p.a.
viii) (A) One percentage point change in actuarial assumptions would have the following effects on the defined benefit obligation of gratuity plan:
(B) One percentage point change in actuarial assumptions would have the following effects on the defined benefit obligation of company pension plan:
(C) One percentage point change in actuarial assumptions would have the following effects on the defined benefit obligation of post-retirement medical benefit plan:
(h) Characteristics of defined benefit plans and associated risks:
1. Gratuity plan:
The Company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service. The Companyâs scheme is more favourable as compared to the obligation under Payment of Gratuity Act, 1972. The defined benefit plan for gratuity of the Company is administered by separate gratuity funds that are legally separate from the Company. The trustees nominated by the Company are responsible for the administration of the plan. There are no minimum funding requirements of these plans. The funding of these plans are based on gratuity funds actuarial measurement framework set out in the funding policies of the plan. These actuarial measurements are similar compared to the assumptions set out in (g) supra. A small part of the gratuity plan, which is not material, is unfunded and managed by the Company. Employees do not contribute to any of these plans.
2. Post-retirement medical care plan:
The Post-retirement medical care plan provides for reimbursement of health care costs to certain categories of employees post their retirement. The reimbursement is subject to an overall ceiling sanctioned based on cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
3. Companyâs pension plan:
In addition to contribution to state-managed pension plan (EPS scheme), the Company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees. The quantum of pension depends on the cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.
4. Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Provident Fund and Miscellaneous Provisions Act, 1952. The plan mandates contribution by employer at a fixed percentage of employeeâs salary. Employees also contribute to the plan at a fixed percentage of their salary as a minimum contribution and additional sums at their discretion. The plan guarantees interest at the rate notified by Employeesâ Provident Fund Organisation. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.
The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss as actuarial loss. Any loss/gain arising out of the investment risk and actuarial risk associated with the plan is also recognised as expense or income in the period in which such loss/ gain occurs.
All the above defined benefit plans expose the Company to general Actuarial risks such as Interest rate risk and market (investment) risk.
NOTE [15]
Disclosure pursuant to Ind AS 27 âSeparate Financial Statementsâ
Investment in following subsidiary companies, joint venture companies and associates is accounted at cost.
NOTE [16]
Disclosures pursuant to Ind AS 37 âProvisions, Contingent Liabilities and Contingent Assetsâ
(a) Movement in provisions:
(b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31, 2017 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of two to five years from the date of Balance Sheet.
ii. Expected tax liability in respect of indirect taxes represents mainly the differential sales tax liability on account of noncollection of declaration forms.
iii. Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
iv. Contractual rectification cost represents the estimated cost the Company is likely to incur during defect liability period as per the contract obligations in respect of completed construction contracts accounted under Ind AS 11 âConstruction Contractsâ.
(c) Disclosure in respect of contingent liabilities is given as part of Note 29 to the Balance Sheet.
NOTE [17]
Contribution to political parties during the year 2016-17 is t Nil (previous year t Nil).
NOTE [18]
The Company has amounts due to suppliers under The Micro, Small and Medium Enterprises Development Act, 2006, [MSMED Act] as at March 31, 2017. The disclosure pursuant to the said Act is as under:
NOTE [19]
There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at March 31, 2017.
NOTE [20]
Disclosure on Specified Bank Notes (SBN) pursuant to MCA notification 308(E) dated March 30, 2017:
Notes:
A. The Company is executing some of the projects through unincorporated joint ventures (UJV). Such arrangements have been classified as joint operations pursuant to Ind AS 111 and accordingly Companyâs share in assets, liabilities, income and expenses of UJVs has been consolidated in standalone financials on a line by line basis. Under l-GAAP the investment in UJVs was being presented as a single line item in the Balance Sheet and the Companyâs share in the net profit or loss was accounted as a single line item in the Statement of Profit and Loss.
B. Pursuant to Ind AS requirements, investment property is presented separately. Under l-GAAP the same was presented as part of tangible assets. Tangible assets have been now divided into two categories under Ind AS viz. Property, plant and equipment and Investment property.
C. Under Ind AS 23 borrowing cost is calculated following effective rate of interest (EIR) method as described under Ind AS 109. Under l-GAAP borrowing cost was computed by applying the coupon rate to the principle amount for the period with consequential impact in the asset items where borrowing cost is capitalised/inventorised. Borrowings are recognised at fair value at the inception and subsequently at amortised cost with interest recognised based on EIR method.
D. All Investments except investments in group companies have been fair valued in accordance with Ind AS 109. Investments in debt securities are fair valued through OCI and reclassified to profit or loss on their sale. Other investments are fair valued through profit or loss. Under l-GAAP the current investments were carried at cost net of diminution in their value as at the Balance Sheet date.
The long term investments were carried at cost net of permanent diminution, if any.
E. Financial guarantee contracts have been recognised at fair value at the inception in accordance with Ind AS 109 along with accrued guarantee charges. Under l-GAAP financial guarantee given was disclosed as contingent liability and commitments.
F. Under Ind AS financial assets and liabilities are measured at fair value at the inception and subsequently at amortised cost or at fair value based on their classification. Under l-GAAP the financial assets and liabilities were measured at cost.
G. Deferred tax under Ind AS has been recognised for temporary differences between tax base and the book base of the relevant assets and liabilities. Under l-GAAP the deferred tax was accounted based on timing differences impacting the Statement of Profit and Loss for the period.
H. The provision is made against trade receivables based on âexpected credit lossâ model as per Ind AS 109. Under l-GAAP the provision was made when the receivable turned doubtful based on the assessment on case to case basis.
I. ESOP charge is accounted using fair value method. The portion of ESOP charge recoverable from the group companies is accordingly measured and recognised at fair value. Under l-GAAP ESOP charge was calculated based on intrinsic value method.
J. Pursuant to Ind AS 32, Foreign Currency Convertible Bonds (FCCB) issued by the Company is split into equity and liability component and presented accordingly. The measurement of liability component is done at fair value at the inception and subsequently at amortised cost. Under l-GAAP FCCB was accounted at cost and presented as borrowing.
K. Provision is made under Ind AS towards constructive obligations of the Company related to payment of performance linked rewards to the employees and tax on ESOP benefits, wherever applicable. Under l-GAAP the cost was recognised on actual payments.
L. Under Ind AS the final dividend including related tax is recognised in the period in which the obligation to pay is established on its approval, post reporting of financial statements. Under l-GAAP a provision was required to be made in the financial statements for the proposed final dividend in the period to which the liability related.
M. In accordance with Ind AS 105 group of assets held for sale and liabilities associated with such group is presented separately. Under l-GAAP there was no such requirement.
N. Change in fair value of derivative instrument taken to hedge off-Balance Sheet item is accounted in the hedging reserve. Under l-GAAP the premium on these derivative instrument was recognised on accrual basis in the Statement of Profit and Loss.
0. Past service cost arising out of modifications in the post-retirement benefits is recognised in Profit or Loss pursuant to Ind AS 19. Under l-GAAP the past service cost was amortised over a period.
P. Actuarial gains and losses pertaining to defined benefit obligations and re-measurement pertaining to return on plan assets are recognised in Other Comprehensive Income in accordance with Ind AS 19 and are not reclassified to profit or loss. Further, there are certain other items (as presented in OCI) that are accounted in Other Comprehensive Income and subsequently reclassified to Profit or Loss in accordance with Ind AS requirements.
Q. The previous year l-GAAP figures have been reclassified/regrouped to make them comparable with Ind AS presentation.
Mar 31, 2016
Q(1) Contribution to political parties include:
Contribution to political parties aggregating to Rs. Nil (Previous
year: Rs. 11.00 crore made during the year as follows: Indian National
Congress: Rs. 5.00 crore, Bharatiya Janata Party: Rs. 5.00 crore and
Shiv Sena: Rs. 1.00 crore).
Q(2) a) Amount required to be spent by the Company on Corporate Social
Responsibility (CSR) related activities during the year: Rs. 101.46
crore.
b) The amount recognised as expense in the Statement of Profit and Loss
on CSR related activities is Rs. 119.89 crore, which comprises of:
Q(3) During the year, the Company transferred at book value the equity
investments held by it:
a) to facilitate the merger with wholly owned subsidiary company viz.
L&T Capital Company Limited:
Q(4) Figures for the previous year have been regrouped/reclassified
wherever necessary.
Mar 31, 2015
A(III) Terms/rights attached to equity shares:
The Company has only one class of share capital, i.e., equity shares
having face value of Rs. 2 per share. Each holder of equity share is
entitled to one vote per share.
A(VI) The aggregate number of equity shares allotted as fully paid up
by way of bonus shares in immediately preceding five years ended March
31,2015 are 30,82,94,576 (previous period of five years ended March 31,
2014: 30,82,94,576 shares)
A(VII) The aggregate number of equity shares issued pursuant to
contract, without payment being received in cash in immediately
preceding last five years ended on March 31, 2015: Nil (previous period
of five years ended March 31, 2014: Nil)
A(VIII) Stock option schemes
a) Terms:
i. The grant of options to the employees under the stock option schemes
is on the basis of their performance and other eligibility criteria.
The options are vested equally over a period of 4 years [5 years in the
case of series 2006(A)], subject to the discretion of the management
and fulfillment of certain conditions.
ii. Options can be exercised anytime within a period of 7 years from
the date of grant and would be settled by way of issue of equity
shares. Management has discretion to modify the exercise period.
d) Weighted average share price at the date of exercise for stock
options exercised during the period is Rs. 1554.71 (previous year: Rs.
112061) per share.
e) (i) In respect of stock options granted pursuant to the Company's
stock options schemes, the intrinsic value of the options
(excess of market price of the share over the exercise price of the
option) is treated as discount and accounted as employee compensation
over the vesting period.
(ii) Expense on Employee Stock Option Schemes debited to the Statement
of Profit and Loss during 2014-15 is Rs. 49.11 crore (previous year: Rs. 55
88 crore) net of recoveries of Rs. 2.54 crore (previous year: Rs. 3.30
crore) from its group companies towards the stock options granted to
deputed employees, pursuant to the employee stock option schemes (Note
N). The entire amount pertains to equity-settled employee share-based
payment plans.
f) Pursuant to the Securities and Exchange Board of India (Share Based
Employee Benefits) Regulations, 2014, the Company has adopted the
guidance note on Employee Share Based Payments issued by the Institute
of Chartered Accountants of India and revised the method of computation
of stock option compensation based on the number of grants that are
expected to vest. Consequently, the charge on account of employee
stock option compensation for the year ended March 31,2015 is lower and
the profit before tax is higher by Rs. 13.99 crore.
g) During the year, the Company has recovered Rs. 14.60 crore (previous
year: Rs. 16.01 crore) from its subsidiary companies towards the stock
options granted to their employees, pursuant to the employee stock
option schemes.
h) Had fair value method been adopted for expensing the compensation
arising from employee share-based payment plans:
(i) The employee compensation charge debited to the Statement of Profit
and Loss for the year 2014-15 would have been higher by Rs. 9.10 crore
(previous year: Rs. 21.30 crore) [excluding Rs. 2.05 crore (previous year:
Rs. 5.45 crore) on account of grants to employees of subsidiary
companies]
(ii) Basic EPS before extraordinary items would have decreased from Rs.
54.46 per share to Rs. 54.37 per share
(iii) Basic EPS after extraordinary items would have decreased from Rs.
54.46 per share to Rs. 54.37 per share
(iv) Diluted EPS before extraordinary items would have decreased from Rs.
54.10 per share to Rs. 54.00 per share
(v) Diluted EPS after extraordinary items would have decreased from Rs.
54.10 per share to Rs. 54.00 per share
i) Weighted average fair values of options granted during the year is Rs.
1190.22 (previous year: Rs. 556.06) per option
k) The balance in share option outstanding account as on March 31, 2015
is Rs. 252.56 crore (net) (previous year: Rs. 323.70 crore), including Rs.
135.98 crore (previous year: Rs. 148.22 crore) for which the options have
been vested to employees as on March 31, 2015.
A(IX) The Directors recommend payment of final dividend of Rs. 16.25 per
equity share of Rs. 2 each on the number of shares outstanding as on the
record date.
Provision for final dividend has been made in the books of account for
92,95,62,061 equity shares outstanding as at March 31,2015 amounting to
Rs. 1510.54 crore.
C(I)(b) Foreign Currency Convertible Bonds:
0.675% US$ denominated 5 years & 1 day Foreign Currency Convertible
Bonds (FCCB) carried at Rs. 1250 crore as on March 31, 2015 represent
1000 bonds of US$ 2,00,000 each .The bonds are convertible into the
CompanyRs.s fully paid equity shares of Rs. 2 each at a conversion price of
Rs. 1916.50 per share at the option of the bond holders at any time on
and after December 1,2014 up to October 15, 2019. The bonds are
redeemable, subject to fulfillment of certain conditions, in whole but
not in part, at the option of the Company, on or at any time after
October 22, 2017 but not less than seven business days prior to the
maturity date, at the principal amount together with accrued interest
(calculated up to but excluding the date of redemption) on the date
fixed for redemption, unless the bonds have been previously redeemed,
converted or purchased and cancelled.
D(I)(a) Loans repayable on demand from banks include fund based working
capital facilities viz. cash credits and demand loans. The secured
portion of loans repayable on demand from banks of Rs. 57.79 crore
(previousyear: Rs. 104.45 crore), short term loans and advances from the
banks of Rs. 206.25 crore (previous year: Rs. 103.92 crore), working
capital facilities and other non-fund based facilities viz. bank
guarantees and letters of credit, are secured by hypothecation of
inventories, book debts and receivables.
D(IV)(a) Other payable includes due to directors Rs. 50.61 crore
(previous year: Rs. 52.90 crore) on account of commission.
(c) in various co-operative societies Rs. 12.88 crore for which share
certificates are yet to be issued.
(d) in proposed co-operative societies Rs. 0.53 crore.
(ii) of Rs. 4.39 crore in respect of which the deed of conveyance is yet
to be executed.
(iii) of Rs. 8.45 crore representing undivided share in properties at
various locations.
4. Depreciation for the year include obsolescence Rs. 30.68 crore
(previous year Rs. 17.09 crore).
5. Own assets given on operating lease have been presented separately
in the schedule as per Accounting Standard (AS) 19.
6. Cost/valuation as at April 1,2014 of individual assets has been
reclassified wherever necessary.
7. Out of its lease hold land at Hazira, the Company has given certain
portion of land for the use of its subsidiary company. The lease deed
in respect of leasehold land given to the subsidiary company is under
execution.
8. With effect from April 1,2014, depreciation has been computed and
provided on the basis of useful life of fixed assets as specified in
Schedule II to the Companies Act, 2013 except in respect of assets
specified in Note 9 below where the useful life was determined by
technical evaluation, considering business specific usage, the
consumption pattern of the assets and the past performance of similar
assets. Consequently, the depreciation for the year ended March 31,2015
is higher and the profit before tax lower to the extent of Rs. 147.41
crore.
In respect of assets where useful life specified in Schedule II has
expired as on April 1, 2014, the carrying amount of Rs. 86.28 crore
before tax (Rs. 56.95 crore net of tax of Rs. 29.33 crore) was adjusted
against retained earnings as on April 1,2014.
NOTE [I]
Contingent liabilities
As at 31-3-2015 As at 31-3-2014
Particulars Rs. crore Rs. crore
(a) Claims against the Company
not acknowledged as debts 883.06 184.75
(b) Sales-tax liability that
may arise in respect of matters
in appeal 173.96 122.11
(c) Excise duty/Service Tax
liability that may arise in respect
of matters in appeal/challenged
by the Company in WRIT 55.41 41.80
(d) Income-tax liability (including
penalty) that may arise in respect
of which the Company is in appeal 826.44 463.58
(e) Corporate guarantees for debt
given on behalf of Subsidiary
companies 8723.55 3772.85
(f) Corporate and bank guarantees
for performance given on behalf of
Subsidiary companies 9201.96 5627.07
Notes:
1. The Company does not expect any reimbursements in respect of the
above contingent liabilities.
2. It is not practicable to estimate the timing of cash outflows, if
any, in respect of matters at (a) to (d) above pending resolution of
the arbitration/appellate proceedings.
3. In respect of matters at (e), the cash outflows, if any, could
generally occur up to twelve years, being the period over which the
validity of the guarantees extends except in a few cases where the cash
outflows, if any, could occur any time during the subsistence of the
borrowing to which the guarantees relate.
4. In respect of matters at (f), the cash outflows, if any, could
generally occur up to four years, being the period over which the
validity of the guarantees extends.
5. Contingent liability with respect to interest in joint ventures -
Note Q(16)
NOTE [K(I)]
Revenue from sales & service include:
(a) Rs. 1443.57 crore (previousyear: Rs. 1558.70 crore) for price
variations net of liquidated damages in terms of contracts with the
customers.
(b) Shipbuilding subsidy Rs. Nil (previous year: Rs. Nil) and reversal of
shipbuilding subsidy of Rs. Nil (previous year: Rs. 31.54 crore)
NOTE [Q]
Q(1) The balance sheet as on March 31, 2015 and the Statement of Profit
and Loss for the year ended March 31,2015 are drawn and presented as
per the format prescribed under Schedule III to the Companies Act,
2013.
Q(2) Particulars in respect of loans and advances in the nature of
loans as required by the listing agreement:
Q(4) Exceptional Item [Note R4]:
Exceptional item for the year ended March 31, 2015 includes gain of Rs.
357.16 crore (previous year: Rs. 588.50 crore) on sale of the Company's
part stake in L&T Finance Holdings Limited, a subsidiary company.
Q(5) The expenditure on research and development activities recognised
as expense in the Statement of Profit and Loss is Rs. 139.44 crore
(previous year: Rs. 114.15 crore). Further, the company has incurred
capital expenditure on research and development activities as follows:
(a) on tangible assets of Rs. 6.50 crore (previous year: Rs. 5.02 crore);
(b) on intangible assets being expenditure on new product development
of Rs. 56.93 crore (previous year: Rs. 60.73 crore) [Note R5(b)]; and
(c) on other intangible assets of Rs. 0.69 crore (previous year: Rs. 1.20
crore).
Q(6) (a) Provision for current tax includes Rs. Nil crore in respect of
income tax payable outside India (previous year: Rs. 9.74 crore)
(b) Tax effect of Rs. 9.29 crore (previous year: Rs. 2.00 crore) on account
of debenture/share/foreign currency convertible bond issue expenses and
premium on inflation linked debenture has been credited to securities
premium account.
Q(8) Disclosures pursuant to Accounting Standard (AS) 13 "Accounting
for Investments"
1. The Company has given, inter alia, the following undertakings in
respect of its investments:
a. Jointly with L&T Infrastructure Development Projects Limited (a
subsidiary of the Company), to the term lenders of its subsidiary
companies L&T Transportation Infrastructure Limited (LTTIL):
i. not to reduce their joint shareholding in LTTIL below 51% until the
financial assistance received from the term lenders is repaid in full
by LTTIL and
ii. to jointly meet the shortfall in the working capital requirements
of LTTIL until the financial assistance received from the term lenders
is repaid in full by LTTIL.
b. To the lenders of L&T Krishnagiri Thopur Toll Road Limited (KTTL),
not to dilute Company's shareholding in L&T Infrastructure Development
Projects Limited below 51% until the borrowings received from the
lenders is repaid in full by KTTL.
c. To Gujarat State Road Development Corporation Limited:
i. to hold in L&T Ahmedabad-Maliya Tollway Limited, L&T Halol-Shamlaji
Tollway Limited and L&T Rajkot-Vadinar Tollway Limited alongwith L&T
Infrastructure Development Projects Limited:
- 100% stake during the construction period;
- 51% stake for 5 years from the date of commercial operation or end
of construction of the project, whichever is later; and
- 51% stake during operational period.
ii. not to divest the stake in L&T Infrastructure Development Projects
Limited until the aforesaid undertakings are valid.
d. To National Highway Authority of India, to hold along with its
associates minimum 51% stake in L&T Samakhiali Gandhidham Tollway
Limited for a period of 2 years after the construction period.
e. To National Highway Authority of India, to hold minimum 26% stake in
PNG Tollway Limited till the commercial operations date.
f. To National Highway Authority of India, to hold together with its
associates in L&T Devihalli Hassan Tollway Limited, minimum 51% equity
stake for a period of 2 years after construction period.
g. To National Highway Authority of India, to hold together with its
associates in L&T Krishnagiri Walajahpet Tollway Limited:
(i) minimum 51% equity stake during the construction period
(ii) minimum 33% stake for 3 years from project completion date and
(iii) minimum 26% or such lower stake as may be permitted by National
Highway Authority of India during remaining concession period
h. To the Security Trustee of:
(i) the lenders of PNG Tollway Limited, to hold along with L&T
Infrastructure Development Projects Limited and Ashoka Buildcon Limited
minimum 51% equity stake in PNG Tollway Limited, until the financial
assistance received from the term lenders is repaid in full by PNG
Tollway Limited. The aforesaid minimum stake can, however, be disposed
off before final settlement date with prior approval of lenders;
(ii) the lenders of L&T Krishnagiri Walajahpet Tollway Limited, to hold
along with L&T Infrastructure Development Projects Limited minimum 51%
equity stake in L&T Krishnagiri Walajahpet Tollway Limited, until the
financial assistance received from the term lenders is repaid in full.
The aforesaid minimum stake can, however, be disposed off before final
settlement date with prior approval of lenders.
(iii) the lenders of L&T Samakhiali Gandhidham Tollway Limited, to hold
along with L&T Infrastructure Development Projects Limited minimum 51%
equity stake in L&T Samakhiali Gandhidham Tollway Limited, until the
financial assistance received from the term lenders is repaid in full
by L&T Samakhiali Gandhidham Tollway Limited. The aforesaid minimum
stake can, however, be disposed off before final settlement date with
prior approval of lenders;
(iv) the lenders of L&T Metro Rail (Hyderabad) Limited, to hold along
with L&T Infrastructure Development Projects Limited minimum 51% equity
stake and retain management control in L&T Metro Rail (Hyderabad)
Limited until the financial assistance received from the term lenders
is repaid in full. The aforesaid minimum stake can, however, be
disposed off before final settlement date with prior approval of
lenders;
(v) the lenders of L&T Sapura Shipping Private Limited, not to sell or
transfer equity stake without prior approval;
(vi) L&T Aviation Services Private Limited, to hold atleast 51% stake,
directly or indirectly, in L&T Aviation Services Private Limited, until
any amount is outstanding under the Credit Facility Agreement.
i. To the Government of Telangana (erstwhile Government of Andhra
Pradesh) with respect to shareholding in L&T Metro Rail (Hyderabad)
Limited, to hold and maintain along with L&T Infrastructure Development
Projects Limited -
(i) 51% stake till the second anniversary of the commercial operation
date (COD) of the project;
(ii) 33% stake till the third anniversary of the COD of the project;
(iii) 26% stake (or such lower proportion as may be permitted by the
Government of Telangana (erstwhile Government of Andhra Pradesh), till
the remaining concession period.
j. To hold certain minimum stake in its subsidiary companies namely,
L&T-MHPS Boilers Private Limited and L&T-MHPS Turbine Generators
Private Limited. These undertakings have been given to the
customers/potential customers of the Company and customers/potential
customers of L&T-MHPS Boilers Private Limited. The undertakings will
remain valid till the end of defect liability period or till such
period as prescribed in the related bid documents/contracts.
k. To hold 15,899 shares comprising 9.85% of the issued capital of
International Seaport Dredging Limited till January 24, 2016.
l. To City and Industrial Development Corporation of Maharashtra
Limited (CIDCO) that it shall continue to hold not less than 51% stake
in L&T Seawoods Limited (formerly known as L&T Seawoods Private
Limited) until CIDCO executes the lease deed for land in favour of L&T
Seawoods Limited (formerly known as L&T Seawoods Private Limited).
m. To the lenders of L&T Seawoods Limited (formerly known as L&T
Seawoods Private Limited), to maintain a minimum 51% stake in L&T
Seawoods Limited (formerly known as L&T Seawoods Private Limited) until
any amount is outstanding towards banking credit facilities.
n. To the debenture trustee of L&T Shipbuilding Limited, to maintain
atleast 26% stake in L&T Shipbuilding Limited, until any amount is
outstanding towards the debentures.
o. To the lender of L&T Shipbuilding Limited, to maintain minimum 76%
stake in L&T Shipbuilding Limited, until any amount is outstanding
towards the working capital loan.
p. To the joint venture partner in L&T Howden Private Limited, to not
sell, transfer or dispose of any stake in L&T Howden Private Limited
till December 17, 2017 (90 months from the date of incorporation).
Q(9) Disclosure pursuant to Accounting Standard (AS) 15 (Revised)
"Employee Benefits".
i. Defined contribution plans: [Note R(6)(b)(i)] Amount of Rs. 82.64
crore (previous year Rs. 74.85 crore) is recognised as an expense and
included in "employee benefits expense" (Note N) in the Statement of
Profit and Loss Account.
ii. Defined benefit plans: [Note R(6)(b)(ii)]
h) General descriptions of defined benefit plans:
1. Gratuity Plan:
The Company operates gratuity plan through a trust wherein every
employee is entitled to the benefit equivalent to fifteen days salary
last drawn for each completed year of service. The same is payable on
termination of service or retirement whichever is earlier. The benefit
vests after five years of continuous service. The company's scheme is
more favourable as compared to the obligation under Payment of Gratuity
Act, 1972. A small part of the gratuity plan, which is not material, is
unfunded and managed within the Company.
2. Post-retirement medical care plan:
The Post-retirement medical benefit plan provides for reimbursement of
health care costs to certain categories of employees post their
retirement. The reimbursement is subject to an overall ceiling
sanctioned based on cadre of the employee at the time of retirement.
3. Company's pension plan:
In addition to contribution to state-managed pension plan (EPS scheme),
the Company operates a post retirement pension scheme, which is
discretionary in nature for certain cadres of employees. The quantum of
pension depends on the cadre of the employee at the time of retirement.
4. Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust
for its employees which is permitted under the Provident Fund and
Miscellaneous Provisions Act, 1952. The plan envisages contribution by
employer and employees and guarantees interest at the rate notified by
the provident fund authority. The contribution by employer and employee
together with interest are payable at the time of separation from
service or retirement, whichever is earlier. The benefit under this
plan vests immediately on rendering of service.
The interest payment obligation of trust-managed provident fund is
assumed to be adequately covered by the interest income on long term
investments of the fund. Any shortfall in the interest income over the
interest obligation is recognised immediately in the statement of
Profit and Loss as actuarial loss. Any loss/gain arising out of the
investment risk and actuarial risk associated with the plan is also
recognised as expense or income in the period in which such loss/gain
occurs. Further, the provision of Rs. 27.55 crore created in 2013-14
based on actuarial valuation towards the future obligation arising out
of interest rate guarantee associated with the plan, has been reversed
to the extent of Rs. 22.69 crore in the current year, because the balance
in surplus account of the fund is higher than the interest obligation
of Rs. 27.78 crore as on March 31, 2015.
c) Segment reporting: segment identification, reportable segments and
definition of each reportable segment:
i) Primary/secondary segment reporting format:
[a] The risk-return profile of the Company's business is determined
predominantly by the nature of its products and services. Accordingly,
the business segments constitute the primary segments for disclosure of
segment information.
[b] In respect of secondary segment information, the Company has
identified its geographical segments as (i) domestic and (ii) overseas.
The secondary segment information has been disclosed accordingly.
ii) Segment identification:
Business segments have been identified on the basis of the nature of
products/services, the risk-return profile of individual businesses,
the organisational structure and the internal reporting system of the
Company.
iii) Reportable segments:
Reportable segments have been identified as per the criteria specified
in Accounting Standard (AS) 17 "Segment Reporting".
iv) Segment composition:
- Infrastructure segment comprises engineering and construction of
building and factories, transportation infrastructure, heavy civil
infrastructure, power transmission & distribution and water & renewable
energy projects.
- Power segment comprises turnkey solutions for Coal-based and
Gas-based thermal power plants including power generation equipment
with associated systems and/or balance-of-plant packages.
- Metallurgical & Material Handling segment comprises turnkey
solutions for ferrous (iron & steel making) and non-ferrous (aluminium,
copper, lead & zinc) metal industries, bulk material & ash handling
systems in power, port, steel and mining sector including manufacture
and sale of industrial machinery and equipment.
- Heavy Engineering segment comprises manufacture and supply of
custom designed, engineered critical equipment & systems to core sector
industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil &
Gas, Thermal & Nuclear Power, Aerospace and Defence.
- Electrical & Automation segment comprises manufacture and sale of
low and medium voltage switchgear components, custom built low and
medium voltage switchboards, electronic energy meters/protection
(relays) systems and control & automation products.
- Others segment includes realty, shipbuilding, marketing and
servicing of construction & mining machinery and parts thereof,
manufacture and sale of rubber processing machinery & castings. Others
also included integrated engineering services, manufacture and
marketing of industrial valves and cutting equipment (up to the date of
transfer) in the previous year.
v) The businesses of marketing and servicing of construction & mining
machinery and parts thereof, manufacture and sale of rubber processing
machinery & castings which was hitherto reported as the Machinery and
Industrial Products segment have been grouped under "Others" segment
during the year based on internal restructuring. The figures pertaining
to the previous year have been regrouped and restated for proper
comparison.
The businesses of manufacture and marketing of industrial valves and
cutting equipment (up to the date of transfer) which were reported as
part of the Machinery and Industrial Products segment in the previous
year have also been grouped under "Others" segment in the previous
year.
vi) Pursuant to the business transfer agreement dated March 15, 2014,
the Company has transferred at book value to its wholly owned
subsidiary L&T Technology Services Limited, the business of integrated
engineering services as a going concern effective April 1,2014. The
same was hitherto reported as part of the "Others" segment [Note
Q(15)].
Q(12) Disclosure in respect of Leases pursuant to Accounting Standard
(AS 19) "Leases"
(i) Where the Company is a Lessor:
a. The Company had given on finance leases certain items of plant and
equipment. The leases had a primary period that is fixed and
non-cancellable. The leases were cancellable upon payment by the lessee
of an additional amount such that, at inception, continuation of the
lease was reasonably certain. There were no exceptional/restrictive
covenants in the lease agreement.
(ii) Where the Company is a lessee: a) Operating leases:
i. The Company had taken various commercial premises and plant and
equipment under cancellable operating leases. Those lease agreements
were normally renewed on expiry.
[b] The lease agreements provided for an option to the Company to renew
the lease period at the end of the non-cancellable period. There were
no exceptional/restrictive covenants in the lease agreements.
iii. Lease rental expense in respect of operating leases: Rs. 87.14 crore
(previous year: Rs. 102.18 crore).
iv. Contingent rent recognised in the Statement of Profit and Loss: Rs.
Nil (previous year: Nil).
Q(15) Pursuant to the business transfer agreement dated March 15, 2014,
the Integrated Engineering Service business of the Company has been
transferred at book value to a wholly owned subsidiary L&T Technology
Services Limited as a going concern with effect from April 1, 2014 for
a lump sum consideration of Rs. 549.49 crore.
Q(17) Disclosures pursuant to Accounting Standard (AS) 29 "Provisions,
Contingent Liabilities and Contingent Assets":
b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain products
and services, undertaking to repair or replace the items that fail to
perform satisfactorily during the warranty period. Provision made as at
March 31, 2015 represents the amount of the expected cost of meeting
such obligations of rectification/replacement. The timing of the
outflows is expected to be within a period of five years from the date
of Balance Sheet.
ii. Expected tax liability in respect of indirect taxes represents
mainly the differential sales tax liability on account of non-
collection of declaration forms.
iii. Provision for litigation related obligations represents
liabilities that are expected to materialise in respect of matters in
appeal.
iv. Contractual rectification cost represents the estimated cost the
Company is likely to incur during defect liability period as per the
contract obligations in respect of completed construction contracts
accounted under (AS) 7 (Revised) "Construction Contracts".
c) Disclosure in respect of contingent liabilities is given as part of
Note (I) to the Balance Sheet.
Q(18) In line with the Company's risk management policy, the various
financial risks mainly relating to changes in the exchange rates,
interest rates and commodity prices are hedged by using a combination
of forward contracts, swaps and other derivative contracts, besides the
natural hedges.
Q(27) Contribution to political parties include:
Contribution to political parties aggregating to Rs. 11.00 crore
(previous year: Rs. Nil) made during the year as follows: Indian National
Congress: Rs. 5.00 crore, Bharatiya Janata Party: Rs. 5.00 crore and Shiv
Sena Rs. 1.00 crore.
Q(28) a) Amount required to be spent by the Company on Corporate Social
Responsibility (CSR) related activities during the year Rs. 106.21 crore.
Q(29) Figures for the previous year have been regrouped/reclassified
wherever necessary.
Mar 31, 2013
A(1) Revenue from sales & service include:
(a) Rs. 691.63 crore (previous year: Rs. 298.88 crore) for price
variations net of liquidated damages in terms of contracts with the
customers.
(b) Shipbuilding subsidy Rs. 10.02 crore (previous year: Z 2.09 crore)
and reversal of shipbuilding subsidy of Rs. 7.22 crore (previous year :
f 18.24 crore). .
[B(l)] Miscellaneous income includes recoveries from subsidiary, joint
venture and associate companies towards directly attributable expenses
incurred on employees deputed to these companies. Such expenses, the
details of which are given hereunder, have been netted off from
miscellaneous income.
C(1) The Balance Sheet as on March 31, 2013 and the Statement of Profit
and Loss for the year ended March 31, 2013 are drawn and presented as
per the new Schedule VI to the Companies Act, 1956.
C(2) Particulars in respect of loans and advances in the nature of
loans as required by the listing agreement:
C(3) Extraordinary and Exceptional Items [Note R(4)]:
(a) Exceptional items for the year ended March 31, 2013 include the
following:
(i) Expenses incurred amounting to Rs. 38.34 crore on voluntary
retirement scheme;
(ii) Gain of Rs. 214.29 crore on sale of the Companys stake in L&T
Plastics Machinery Private Limited, a subsidiary company. Exceptional
items for the year ended March 31, 2012 included profit of Rs. 55.00
crore on sale of the Companys part stake in Raykal Aluminium Company
Private Limited, a subsidiary company.
(b) Extraordinary items during the year ended March 31, 2013 represent
the following:
(i) Reversal of Rs. 52.89 crore (previous year: Rs. Nil) being
provision made in earlier years in respect of the Companys Investment
in shares of Satyam Computer Services Limited (SCSL);
(ii) Gain of Rs. 25.22 crore (net of tax Rs. 18.72 crore) on sale of
the Companys Medical Equipment Business unit. Tax of Rs. 6.50 crore
included under current tax.
C(4) The expenditure on research and development activities recognised
as expense in the Statement of Profit and Loss is Rs. 98.17 crore
(previous year: Rs. 83.33 crore). Further, the Company has incurred
capital expenditure on research and development activities as follows:
(a) on tangible assets of Rs. 12.45 crore (previous year: Rs.17.17
crore);
(b) on intangible assets being expenditure on new product development
of Rs. 43.76 crore (previous year: Rs. 38.58 crore) [Note 5(b)]; and
(c) on other intangible assets of Rs. 0.96 crore (previous year: Rs.1.11
crore).
In addition, the Company has carried out work of a developmental nature
of Rs. 21.27 crore (previous year: Rs. 13.06 crore) which is
partially/fully paid for by the customers.
C(5) (a) Provision for current tax includes Rs. 20.25 crore in respect
of income tax payable outside India (previous year: Rs. 8.32 crore)
(b) Tax effect of t 0.17 crore (previous year: Rs. 0.03 crore) on
account of debenture issue expenses has been credited to securities
premium account.
C(6) Disclosures pursuant to Accounting Standard (AS) 13 "Accounting
for Investments"
1. The Company has given, inter alia, the following undertakings in
respect of its investments:
a. Jointly with L&T Infrastructure Development Projects Limited (a
subsidiary of the Company), to the term lenders of its subsidiary
company L&T.Transportation Infrastructure Limited (LTTIL):
i. not to reduce their joint shareholding in LTTIL below 51 % until
the financial assistance received from the term lenders is repaid in
full by LTTIL; and
ii. to jointly meet the shortfall in the working capital requirements
of LTTIL until the financial assistance received from the term lenders
is repaid in full by LTTIL .
b. To the lenders of L&T Krishnagiri Thopur Toll Road Limited, not to
dilute Companys shareholding in L&T Infrastructure Development
Projects Limited below 51 %.
c. To Gujarat State Road Development Corporation Limited:
i. to hold in L&T Ahmedabad-Maliya Tollway Limited, L&T Halol-Shamlaji
Tollway Limited and L&T Rajkot-Vadinar Tollway Limited along with L&T
Infrastructure Development Projects Limited:
- 100% stake during the construction period;
- 51 % stake for 5 years from the date of commercial operation or end
of construction of the project, whichever . is later; and
- 51% stake during operational period.
ii. not to divest the stake in L&T Infrastructure Development Projects
Limited until the aforesaid undertakings are valid.
d. To National Highway Authority of India, to hold together with its
associates in L&T Samakhiali Gandhidham Tollway Limited minimum 51 %
stake for a period of 2 years after the construction period.
e. To National Highway Authority of India, to hold minimum 26% stake
in PNG Tollway Limited till the commercial operations date.
f. To National Highway Authority of India, to hold together with its
associates, in L&T Devihalli Hassan Tollway Limited, minimum 51 % stake
for a period of 2 years after construction period.
g. To National Highway Authority of India, to hold together with its
associates in L&T Krishnagiri Walajahpet Tollway Limited:
i. minimum 51 % stake during the construction period
ii. minimum 33% stake for 3 years from project completion date and
iii. Minimum 26% or such lower stake as may be permitted by National
Highway Authority of India during remaining concession period.
h. To the lenders of PNG Tollway Limited, to hold together with L&T
Infrastructure Development Projects Limited and Ashoka Buildcon
Limited, minimum 51% stake in PNG Tollway Limited, until final
settlement date.
i. To the Security Trustee of the lenders of L&T Metro Rail
(Hyderabad) Limited, to hold and maintain along with L&T Infrastructure
Development Projects Limited (a subsidiary of the Company) at least 51
% stake till final settlement date.
j. To the Government of Andhra Pradesh (GoA) with respect to
shareholding in L&T Metro Rail (Hyderabad) Limited, to hold and
maintain along with L&T Infrastructure Development Projects Limited -
i. 51 % stake till the second anniversary of the commercial operation
date (COD) of the project;
ii. 33% stake till the third anniversary of the commercial operation
date of the project;
iii. 26% stake (or such lower proportion as may be permitted by the
GoA), till the remaining concession period.
k. Jointly with L&T-MHI Turbine Generators Private Limited (a
subsidiary of the Company) and Mitsubishi Heavy Industries Limited
(joint venture partners in L&T-MHI Turbine Generators Private Limited),
to Andhra Pradesh Power Development Company Limited (APPDCL) to render
unconditional and irrevocable financial support for the successful
execution of APPDCL 2x800 MW Power Project - Steam Turbine Generator
Package Tender, near Krishnapatnam, Nellore District, Andhra Pradesh.
I. To hold certain minimum stake in its subsidiary companies namely,
L&T-MHI Boilers Private Limited and L&T-MHI Turbine Generators Private
Limited. These undertakings have been given to the customers/potential
customers of the Company, as also those of L&T-MHI Boilers Private
Limited. The undertakings will remain valid till the end of defect
liability period or till such period as prescribed in the related bid
documents/contracts, m. To the Security Trustee of the lenders of L&T
Sapura Shipping Private Limited, not to sell or transfer equity stake
without prior approval.
n. To hold 15,899 shares comprising 9.85% of the issued capital of
International Seaport Dredging Limited till January 24, 2016.
o. To the Security Trustee of L&T Aviation Services Private Limited,
to hold at least 51% stake, directly or indirectly, in L&T Aviation
Services Private Limited, until any amount is outstanding under the
Credit Facility Agreement, p. To City and Industrial Development
Corporation of Maharashtra Limited (CIDCO) that it shall continue to
hold not less than 51 % stake in L&T Seawoods Private Limited (LTSPL)
until CIDCO executes the lease deed for land in favour of LTSPL.
q. To the lenders of L&T Seawoods Private Limited, to maintain a
minimum 51 % stake in L&T Seawoods Private Limited, until any amount is
outstanding under banking credit facilities.
r. To the debenture trustee of L&T Shipbuilding Limited, to maintain at
least 26% stake in L&T Shipbuilding Limited, until any amount is
outstanding under the debentures.
C(7) Disclosure pursuant to Accounting Standard (AS) -15 (Revised)
"Employee Benefits.
i. Defined contribution plans: [Note R(6)(b)(i)) Amount of Rs. 103.80
crore [including Rs.17.17 crore in respect of earlier years] (previous
year: Rs. 74.52 crore) is recognised as an expense and included in
"employee benefits expense" (Note N) in the Statement of Profit and
Loss.
ii. Defined benefit plans: [Note R(6)(b)(ii)]
a) The amounts recognised in Balance Sheet are as follows:
C(8) Disclosures pursuant to Accounting Standard (AS) 17 "Segment
Reporting"
a) Information about business segments (information provided in respect
of revenue items for the year ended March 31, 2013 and in respect of
assets/liabilities as at March 31, 2013 denoted as "CY" below, previous
year denoted as "PY")
C(9) Disclosure in respect of Leases pursuant to Accounting Standard
(AS 19) "Leases"
(i) Where the Company is a Lessor:
a. The Company has given on finance leases certain items of plant and
equipment. The leases have a primary period that is fixed and
non-cancellable. The leases are cancellable upon payment by the lessee
of an additional amount such that, at inception, continuation of the
lease is reasonably certain. There are no exceptional/restrictive
covenants in the lease agreement.
b. The total gross investment in these leases as on March 31, 2013 and
the present value of minimum lease payments receivable as on March 31,
2013 is as under:
(ii) Where the Company is a lessee: a) Finance leases:
i. [a] Assets acquired on finance lease mainly comprise plant and
equipment, vehicles and personal computers. The leases have a primary
period, which is fixed and non-canceliable. In the case of vehicles,
the Company has an option to renew the lease for a secondary period.
The agreements provide for revision of lease rentals in the event of
changes in (a) taxes, if any, leviable on the lease rentals (b) rates
of depreciation under the Income Tax Act, 1961 and (c) change in the
lessors cost of borrowings. There are no exceptional/restrictive
covenants in the lease agreements.
C(10) In line with the Companys risk management policy, the various
financial risks mainly relating to changes in the exchange rates,
interest rates and commodity prices are hedged by using a combination
of forward contracts, swaps and other derivative contracts, besides the
natural hedges.
C(11) (a) The Company has adopted a new accounting policy [Note
R(18)(f)] for separate accounting of embedded derivatives with effect
from April 1, 2012, for more appropriate presentation of the financial
statements. The profit before tax is lower by Rs. 55.36 crore pursuant
to adoption of the new accounting policy for separate accounting of
embedded derivatives.
(b) The Company has changed the accounting policy for recognition of
revenue from real estate development transactions pursuant to the
guidance note on accounting for Real Estate Transactions (Revised 2012)
issued by the Institute of Chartered Accountants of India [Note
R(3)(A)(a)(iii)]. The profit before tax of the Company is higher byRs.
2.39 crore pursuant to change in the accounting policy of revenue
recognition for real estate development transactions.
C(12) There are no amounts due and outstanding to be credited to
Investor Education & Protection Fund as at March 31, 2013.
C(13) Figures for the previous year have been regrouped/reclassified
wherever necessary.
Mar 31, 2012
1 Contingent liabilities
As at 31-3-2012 As at 31-3-2011
Particulars - -
Rs crore Rs crore
(a) Claims against the
Company not acknowledged
as debt 198.15 263.47
(b) Sales-tax liability that
may arise in respect of
matters in appeal 107.04 194.31
(c) Excise duty/service tax
liability that may arise
in respect of matters
in appeal/challenged by the
Company in WRIT 28.59 11.95
(d) Income-tax liability (including
penalty) that may arise in
respect of which the Company
is in appeal 198.38 1.95
(e) Corporate guarantees given on
behalf of Subsidiary Companies 1570.47 775.66
Notes:
1. The Company does not expect any reimbursements in respect of the
above contingent liabilities.
2. It is not practicable to estimate the timing of cash outflows, if
any, in respect of matters at (a) to (d) above pending resolution of
the arbitration/appellate proceedings.
3. In respect of matters at (e), the cash outflows, if any, could
generally occur up to eight years, being the period over which the
validity of the guarantees extends except in a few cases where the cash
outflows, if any, could occur any time during the subsistence of the
borrowing to which the guarantees relate.
2(1) Revenue from sales & service includes:
(a) Rs 320.47 crore (previous year: Rs 352.04 crore) for price variations
net of liquidated damages in terms of contracts with the customers.
(b) Ship building subsidy Rs 2.09 crore (previous year: Rs 32.16 crore)
and reversal of shipbuilding subsidy of Rs18.24 crore (previous year: f
nil).
Q(1) The Balance Sheet as on March 31, 2012 and the Statement of Profit
and Loss for the year ended March 31, 2012 are drawn and presented as
per the new format prescribed under Schedule VI to the Companies Act,
1956 applicable for the financial year commencing from April 1, 2011.
The amounts pertaining to the previous year have been recast to conform
with the new format.
2(2) Exceptional Items [accounting policy no.R(4)]:
Exceptional items for the year ended March 31, 2012 include profit of Rs
55.00 crore on sale of the Companys part stake in Raykal Aluminium
Company Private Limited.
Exceptional items for the year ended March 31, 2011 include the
following:
a) Profit of Rs 25.00 crore on sale of the Companys part stake in Kesun
Iron & Steel Company Private Limited, a subsidiary of the Company to a
strategic partner.
b) Gain of Rs 213.04 crore on sale of the Companys entire stake in
L&T-Case Equipment Private Limited, an associate company.
c) Part reversal of provision of Rs 24.03 crore made in the earlier
years for diminution in the value of investment in the International
Seaport Dredging Limited, pursuant to divestment of the Companys part
stake in the said company.
2(3) The expenditure on research and development activities recognised
as expense in the Statement of Profit and Loss is Rs 78.14 crore
(previous year: 168.26 crore). Further, the Company has incurred
capital expenditure on research and development activities as follows:
(a) on tangible assets of Rs 17.17 crore (previous year: f 16.67 crore)
(b) on intangible assets being expenditure on new product development
of 138.58 crore (previousyear: Rs22.72) [accounting policy no.R(5)(b))
and
(c) on other intangible assets of Rs 1.11 crore (previousyear: f 1.33
crore).
In addition, the Company has carried outwork of a developmental nature
of Rs 13.06 crore (previous year: Rs 16.46) which is partially/ fully
paid for by the customers.
2(4) (a) Provision for current tax includes:
i. Rs 8.32 crore in respect of income tax payable outside India
(previous year: 7 3.58 crore)
ii. Rs nil being provision for income tax in respect of earlier years
(previous year: Rs 87.39 crore).
(b) Tax effect of Rs 0.03 crore (previous year: Rs 0.62 crore) on account
of debenture issue expenses has been credited to securities premium
account.
2(5) Disclosures pursuant to Accounting Standard (AS) 13 "Accounting
for Investments"
The Company has given, inter alia, the following undertakings in
respect of its investments:
a. Jointly with L&T Infrastructure Development Projects Limited (a
subsidiary of the Company), to the term lenders of its subsidiary
companies L&T Transportation Infrastructure Limited (LTTIL):
i. not to reduce their joint shareholding in LTTIL below 51 % until
the financial assistance received from the term lenders is repaid in
full by LTTIL and
ii. to jointly meet the shortfall in the working capital requirements
of LTTIL until the financial assistance received from the term lenders
is repaid in full by LTTIL.
b. To the debenture holders of L&T Infrastructure Development Projects
Limited (a subsidiary of the Company) and to the lenders of its
subsidiaries L&T Panipat Elevated Corridor Limited and L&T Krishnagiri
Thopur Toll Road Limited, not to dilute Companys shareholding below 51
%.
c. To National Highway Authority of India, to hold minimum 26% stake
in L&T Samakhiali Gandhidham Tollway Limited till 180 days from the
date of concession agreement. However, the Company has decided to hold
this stake for a period of 2 years after the construction period.
d. To National Highway Authority of India, to hold minimum 26% stake
in PNG Tollway Limited till the commercial operations date.
e. To Gujarat State Road Development Corporation Limited:
(i) to hold in L&T Ahmedabad-Maliya Tollway Limited and in L&T Halol -
Shamlaji Tollway Limited alongwith L&T Infrastructure Development
Projects Limited:
- 100% stake during the construction period;
- 51 % stake for 5 years from the date of commercial operation or end
of construction of the project, whichever is later; and
- 51 % stake during operational period.
(ii) not to divest the stake in L&T Infrastructure Development Projects
Limited until the aforesaid undertakings are valid.
f. To Gujarat State Road Development Corporation Limited, to hold in
L&T Rajkot - Vadinar Tollway Limited:
- 100% stake during the construction period;
- 51 % stake for 5 years from the date of commercial operation or end
of construction of the project, whichever is later; and
- 51 % stake during operational period.
g. To the lenders of L&T Ahmedabad-Maliya Tollway Limited (a
subsidiary of the Company), not to divest control directly or
indirectly without the prior approval of the lenders or Gujarat State
Road Development Corporation Limited.
h. To the lenders of L&T Rajkot - Vadinar Tollway Limited (a
subsidiary of the Company), not to divest control without the prior
approval of the lenders or Gujarat State Road Development Corporation
Limited.
i. Jointly with L&T-MHI Turbine Generators Private Limited (a
subsidiary of the Company) and Mitsubishi Heavy Industries Limited (JV
partners in L&T-MHI Turbine Generators Private Limited), to Andhra
Pradesh Power Development Company Limited (APPDCL) to render
unconditional and irrevocable financial support for the successful
execution of APPDCL 2x800 MW Power Project-Steam Turbine Generator
Package Tender, near Krishnapatnam, Nellore District, Andhra Pradesh.
j. To City and Industrial Development Corporation of Maharashtra
Limited (CIDCO) that it shall continue to hold not less than 51 % stake
in L&T Seawoods Private Limited (LTSPL) until CIDCO execute the lease
deed for land in favour of LTSPL.
k. To National Highway Authority of India, to hold together with its
associates in L&T Devihalli Hassan Tollway Limited, minimum 51 % equity
stake for a period of 2 years after construction period.
I. To National Highway Authority of India, to hold together with its
associates in L&T Krishnagiri Walajanpet Tollway Limited:
(i) minimum 51 % equity stake during the construction period
(ii) minimum 33% stake for 3 years from project completion date and
(iii) minimum 26% or such lower stake as may be permitted by National
Highway Authority of India during remaining concession period
m. To the lenders of PNG Tollway Limited, to hold minimum 51 % equity
stake PNG Tollway Limited, until final settlement date.
n. To the security trustee of the lenders of L&T Sapura Shipping
Private Limited, not to sell or transfer equity stake without prior
approval.
o. To hold 15,899 shares comprising 9.85% of the issued capital of
International Seaport Dredging Limited till January 24, 2016.
p. To the Security Trustee of the lenders of L&T Metro Rail (Hyderabad)
Limited, to hold and maintain along with L&T Infrastructure Development
Projects Limited (a subsidiary of the Company) at least 51 % stake till
final settlement date.
q. To hold certain minimum stake in its subsidiary companies namely,
L&T - MHI Boilers Private Limited and L&T-MHI Turbine Generators
Private Limited. These undertakings have been given to the
customers/potential customers of the Company, as also those of L&T-MHI
Boilers Private Limited. The undertakings will remain valid till the
end of defect liability period or till such period as prescribed in the
related bid documents/contracts.
r. To the Security Trustee of L&T Aviation Services Private Limited, to
hold at least 51 % stake, directly or indirectly, in L&T Aviation
Services Private Limited, until any amount is outstanding under the
Credit Facility Agreement.
s. To the lenders of L&T Seawoods Private Limited, to maintain a
minimum 51 % stake in L&T Seawoods Private Limited, until any amount is
outstanding under banking credit facilities.
Q(8) Disclosure pursuant to Accounting Standard (AS) 15 (Revised)
"Employee Benefits".
i. Defined contribution plans: [accounting policy no.R(6)(b)(i)]
Amount of Rs 74.52 crore (previous year: Rs 89.62 crore) is recognised as
an expense and included in "employee benefits expense" (note no. N) in
the Statement of Profit and Loss.
ii. Defined benefit plans: {accounting policy no.R(6)(b)(ii)]
* Basis used to determine the overall expected return:
The trust formed by the Company manages the investments of provident
funds and gratuity fund. Expected return on plan assets is determined
based on the assessment made at the beginning of the year on the return
expected on its existing portfolio, along with the estimated increment
to the plan assets and expected yield on the respective assets in the
portfolio during the year. Refer Note no.Q(8)(ii)(f)(7) below.
The Company expects to fund Rs 48.56 crore (previous year: Rs 27.11
crore) towards its gratuity plan and Rs 84.45 crore (previous year: Rs
78.63 crore) towards its trust-managed provident fund plan during the
year 2012-2013.
# Employers and employees contribution (net) for March is paid in
April.
$ Employers contribution to provident fund
~ Amount transferred (to)/from subsidiary & Associate companies and
transferred out on sale of business undertakings (net) Rs (2.03) crore
(previous year: Rs (1.73) crore)
3 Attrition rate:
a) For post-retirement medical benefit plan & Company pension plan, the
attrition rate varies from 2% to 8% (previous year: 2% to 8%) for
various age groups.
b) For gratuity plan the attrition rate varies from 1 % to 6% (previous
year: 1 % to 6%) for various age groups.
4 The estimates of future salary increases, considered in actuarial
valuation, take into account inflation, seniority, promotion and other
relevant factors, such as supply and demand in the employment market.
5 The interest payment obligation of trust-managed provident fund is
assumed to be adequately covered by the interest income on long term
investments of the fund. Any shortfall in the interest income over the
interest obligation is recognised immediately in the Statement of
Profit and Loss as actuarial losses.
6 The obligation of the Company under the post-retirement medical
benefit plan is limited to the overall ceiling limits. At present,
healthcare cost, as indicated in the principal actuarial assumption
given above, has been assumed to increase at 5% p.a.
7 A one percentage point change in assumed healthcare cost trend rates
would have the following effects on the aggregate of the service cost
and interest cost and defined benefit obligation:
General descriptions of defined benefit plans:
1. Gratuity plan:
The Company operates gratuity plan through a trust wherein every
employee is entitled to the benefit equivalent to fifteen days salary
last drawn for each completed year of service. The same is payable on
termination of service or retirement whichever is earlier. The benefit
vests after five years of continuous service. The Companys scheme is
more favourable as compared to the obligation under Payment of Gratuity
Act, 1972. A small part of the gratuity plan, which is not material is
unfunded and managed within the Company.
2. Post-retirement medicai benefit plan:
The Post-retirement medical benefit plan provides for reimbursement of
health care costs to certain categories of employees post their
retirement. The reimbursement is subject to an overall ceiling
sanctioned based on cadre of the employee at the time of retirement.
3. Companys pension plan:
in addition to contribution to state-managed pension plan (EPS scheme),
the Company operates a post retirement pension scheme, which is
discretionary in nature for certain cadres of employees. The quantum of
pension depends on the cadre of the employee at the time of retirement.
4. Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust
for its employees which is permitted under the Provident Fund and
Miscellaneous Provisions Act, 1952. The plan envisages contribution by
employer and employees and guarantees interest at the rate notified by
the provident fund authority. The contribution by employer and employee
together with interest are payable at the time of separation from
service or retirement whichever is earlier. The benefit under this plan
vests immediately on rendering of service.
The interest payment obligation of trust-managed provident fund is
assumed to be adequately covered by the interest income on long term
investments of the fund. Any shortfall in the interest income over the
interest obligation is recognized immediately in the Statement of
Profit and Loss as actuarial loss. Any loss/gain arising out of the
investment risk and actuarial risk associated with the plan is also
recognized as expense or income in the period in wnich such ioss/gain
occurs. Further, an amount of t 18.68 crore has been provided based on
actuarial valuation towards the future obligation arising out of
interest rate guarantee associated with the plan.
8 Disclosures pursuant to Accounting Standard (AS) 17 "Segment
Reporting1
a) Information about business segments (information provided in respect
of revenue items for the year ended March 31,2012 and in respect of
assets/liabilities as at March 31, 2012 denoted as "CY" below, previous
year denoted as "PY").
b) Segment reporting: segment identification, reportable segments and
definition of each reportable segment:
i) Primary/secondary segment reporting format:
[a] The risk-return profile of the Companys business is determined
predominantly by the nature of its products and services. Accordingly,
the business segments constitute the primary segments for disclosure of
segment information.
[b] In respect of secondary segment information, the Company has
identified its geographical segments as (i) domestic and (ii) overseas.
The secondary segment information has been disclosed accordingly.
ii) Segment identification:
Business segments have been identified on the basis of the nature of
products/services, the risk-return profile of individual businesses,
the organisational structure and the internal reporting system of the
Company.
iii) Reportable segments:
Reportable segments have been identified as per the criteria specified
in Accounting Standard (AS) 17 "Segment Reporting" issued by the
Institute of Chartered Accountants of India.
iv) Segment composition:
- Engineering & construction Segment comprises execution of
engineering and construction projects in India/abroad to provide
solutions in civil, mechanical, electrical and instrumentation
engineering (on turnkey basis or otherwise) to core/infrastructure
sectors including railways, shipbuilding and supply of complex plant
and equipment to core sectors. The segment capabilities include
basic/detailed engineering, equipment fabrication/supply, erection &
commissioning, procurement/construction and project management.
- Electrical & electronics Segment comprises manufacture and sale of
low and medium voltage switchgear components, custom-built
switchboards, custom built low and medium voltage switchboards,
electronic energy meters/protection (relays) systems, control &
automation products, medical equipment.
- MachinerySt industrial Products Segment comprises manufacture and
sale of industrial machinery & equipment, manufacture and marketing of
industrial valves, construction equipment and welding/industrial
products.
- Others include property development and integrated engineering
services.
vi. Notes to related party transactions:
a) The Company has a sole selling agreement with L&T-Komatsu Limited
(LTK), an associate company, valid for the period of 5 years from
October 16, 2006 in line with Government of India (Gol) approval letter
dated May 28, 2007. The appointment shall be in effect as long as the
joint venture agreement between the parent Company and M/s Komatsu Asia
Pacific Pte. Limited, Singapore (which is a subsidiary of Komatsu
Limited, Japan) remains in force, subject to approval of Gol, under
section 294 AA of the Companies Act, 1956. As per the terms of the
agreement, the Company is the exclusive agent of L&T-Komatsu Limited to
market LTK machines and provide product support. Pursuant to the
aforesaid agreement, LTK is required to pay commission to the Company
at specified rates on the sales effected by the Company.
b) The Company had the Selling Agency Agreement (SAA) from October 1,
2003 with EWAC Alloys Limited (EWAC). a wholly owned subsidiary company
till June 30, 2011, As per the terms of agreement, the Company through
its Welding Products Business Unit (WPBU), was authorised to purchase
and sell the products in accordance with the prices and otner
conditions stipulated therein. The Company, effective July 1,2011
transferred the WPBU to EWAC along-with ali employees on the asset
transfer basis. WPBU now functions as the marketing arm of EWAC.
Pursuant to transfer of WPBU to EWAC, the SAA stands terminated.
Note: The financial impact of the agreements mentioned at (a) to (b)
above has been included in/disclosed vide Note no.QdOHiin supra.
QC11) Disclosure in respect of Leases pursuant to Accounting Standard
(AS 19) "Leases"
ii Where the Company is a Lessor;
a. The Company has given on finance leases certain items of plant and
equipment. The leases have a primary period that is fixed and
non-cancellable. The leases are cancellable upon payment by the lessee
of an additional amount such that, at inception, continuation of the
iease is reasonably certain. There are no exceptional/restrictive
covenants in the lease agreement.
ii) Where the Company is a lessee:
a) Finance leases.
i. [a] Assets acquired on finance lease mainly comprise plant and
equipment, venicies and personal computers. The leases have a primary
period, which is fixed and non-cancellable. In the case of vehicles,
the Company has an option to renew the lease for a secondary period.
The agreements provide for revision of lease rentals in the event of
changes in (a) taxes, if any, leviable on the iease rentals (b) rates
of depreciation under tne Income Tax Act, 1961 and (c) change in the
lessors cost of borrowings. There are no exceptional/restrictive
covenants in the iease agreements.
ii. Contingent rent recognised/(adjusted) in the Statement of Profit
and Loss in respect of finance leases: Rs nil (previous year: Rs nil).
b) Operating leases:
i. The Company has taken various commercial premises and plant and
equipment under cancellable operating leases. These lease agreements
are normally renewed on expiry.
[b] The lease agreements provide for an option to the Company to renew
the lease period at the end of the non- cancellable period. There are
no exceptional/restrictive covenants in the lease agreements.
iii. Lease rental expense in respect of operating leases: Rs 89.37 crore
(previous year: Rs 76.70 crore).
iv. Contingent rent recognised in the Statement of Profit and Loss: Rs
0.03 crore (previous year: Rs 0.03 crore).
Notes:
i. Figures in brackets relate to previous year
ii. Contingent liabilities, if any, incurred in relation to interests
in joint ventures as at March 31, 2012: Rs nil (previous year: Rs nil):
and share in contingent liabilities incurred jointly with other
ventures as at March 31, 2012: Rs nil (previous year: Rs nil).
iii. Share in contingent liabilities of joint ventures themselves for
which the Company is contingently liable as on March 31, 2012: Rs 134.98
crore (previous year: Rs 95.97 crore).
iv. Contingent liabilities in respect of liabilities of other ventures
of joint ventures as at March 31, 2012: Rs nil (previous year: T nil).
v. Capital commitments, if any, in relation to interests in joint
ventures as at March 31, 2012: Rs 28.56 crore (previous year: Rs nil).
b) Nature of provisions:
i. Product warranties: The Company gives warranties on certain
products and services, undertaking to repair or replace the items that
fail to perform satisfactorily during the warranty period. Provision
made as at March 31, 2012 represents the amount of the expected cost of
meeting such obligations of rectification/replacement. The timing of
the outflows is expected to be within a period of two years from the
date of Balance Sheet.
ii. Provision for sales tax represents mainly the differential sales
tax liability on account of non-collection of declaration forms for the
period prior to 5 years.
iii. Provision for litigation related obligations represents
liabilities that are expected to materialise in respect of matters in
appeal.
iv. Contractual rectification cost represents the estimated cost the
Company is likely to incur during defect liability period as per the
contract obligations in respect of completed construction contracts
accounted under AS 7 (Revised) "Construction Contracts".
v. Others represent residual provision in respect of companys
investment in shares of Satyam Computer Services Limited.
c) Disclosure in respect of contingent liabilities is given as part of
Note no.(l) to the Balance Sheet.
9 In line with the Companys risk management policy, the various
financial risks mainly relating to changes in the exchange rates,
interest rates and commodity prices are hedged by using a combination
of forward contracts, swaps and other derivative contracts, besides the
natural hedges.
Mar 31, 2010
(i)-Tangible assets:
1 Cost/valuation of freehold land includes Rs.0.14 crore for which
conveyance is yet to be completed.
2 Additions to freehold land include Rs.4.63 crore being the book value
of leasehold land reclassified as freehold land pursuant to acquisition
of ownership rights in it.
3 Cost/valuation of buildings includes ownership accommodation:
(i) (a) in various co-operative societies and apartments and
shop-owners associations: Rs.95.84 crore, including 2473 shares of
Rs.50 each and 50 shares of Rs.100 each. (b) in proposed co-operative
societies Rs.21.17 crore. (ii) of Rs.4.39 crore in respect of which
the deed of conveyance is yet to be executed. (iii) of Rs.8.45 crore
representing undivided share in a property at a certain location.
4 Additions during the year and capital work-in-progress include
Rs.27.72 crore (previous year Rs.6.17 crore) being borrowing cost
capitalised in accordance with Accounting Standard (AS)16 on "Borrowing
Costs" as specified in the Companies (Accounting Standards) Rules, 2006
5 Depreciation for the year includes obsolescence Rs.7.41 crore
(previous year Rs. 1.37 crore).
6 Capital work-in-progress includes advances Rs.74.82 crore (previous
year Rs.103.76 crore).
7 The Company had revalued as at October 1, 1984 some of its land,
buildings, plant and machinery and railway sidings at replacement/
market value which resulted in a net increase of Rs. 108.05 crore.
8 Own assets given on operating lease have been presented separately in
the schedule as per Accounting Standard (AS) 19.
Schedule E(ii)-lntangible assets:
1 Cost/valuation of leasehold land includes:
(i) Rs.2.63 crore for land taken at Mysore on lease from KIADB vide
agreement dated May 5, 2006, The lease agreement is for a period of six
years with extension of 3 years, at the end of which sale deed would be
executed, on fulfilment of certain conditions by the Company.
(ii) Rs. 18.57 crore added during the year in respect of which lease
agreements are yet to be executed.
2 Leashold land rights at a certain location have been reclassified as
freehold land under tangible assets, pursuant to acquisition of ,
ownership rights in it during the year. (See note no. 2 on tangible
assets.)
As at 31-3-2010 As at 31-3-2009
Rs.crore Rs.crore
Schedule J
Contingent liabilities:
(a) Claims against the
Company not acknowledged
as debts 158.21 166.21
(b) Sales-tax liability
that may arise in respect
of matters in appeal 158.78 66.96
(c) Excise duty/service
tax liability that may
arise in respect 10.28 10.93
of matters in appeal/
challenged by the Company
in write
(d) Income-tax liability
(including penalty) that
may arise in respect 8.45 162
of which the Company is
in appeal
(e) Corporate guarantees
given on behalf of subsidiary
companies 805.38 361.16
Notes:
1. The Company does not expect any reimbursements in respect of the
above contingent liabilities.
2. It is not practicable to estimate the timing of cash outflows, if
any, in respect of matters at (a) to (d) above pending resolution of
the arbitration/appellate proceedings.
3. In respect of matters at (e), the cash outflows, if any, could
generally occur during the next three years, being the period over
which the validity of the guarantees extends except in a few cases
where the cash outflows, if any, could occur any time during the
subsistence of the borrowing to which the guarantees relate.
a) Segment accounting policies
Segment accounting policies are in line with the accounting policies of
the Company. In addition, the following specific accounting policies
have been followed for segment reporting:
i) Segment revenue includes sales and other income directly
identifiable with/allocable to the segment including intersegment
revenue.
ii) Expenses that are directly identifiable with/allocable to segments
are considered for determining the segment result. Expenses which
relate to the Company as a whole and not allocable to segments are
included under "unallocable corporate expenditure."
iii) Income which relates to the Company as a whole and not allocable
to segments is included in "unallocable corporate income".
iv) Segment result includes margins on inter-segment capital jobs,
which are reduced in arriving at the profit before tax of the Company.
v) Segment assets and liabilities include those directly identifiable
with the respective segments. Unallocable corporate assets and
liabilities represent the assets and liabilities that relate to the
Company as a whole and not allocable to any segment.
b) Inter-segment transfer pricing
Segment revenue resulting from transactions with other business
segments is accounted on the basis of transfer price agreed between the
segments. Such transfer prices are either determined to yield a desired
margin or agreed on a negotiated basis.
10. Taxes on income
Tax on income for the current period is determined on the basis of
taxable income and tax credits computed in accordance with the
provisions of the Income Tax Act 1961, and based on the expected
outcome of assessments/appeals.
Deferred tax is recognised on timing differences between the income
accounted in financial statements and the taxable income for the year,
and quantified using the tax rates and laws enacted or substantively
enacted as on the Balance Sheet date.
Deferred tax assets relating to unabsorbed depreciation/business
losses/losses under the head "capital gains" are recognised and carried
forward to the extent there is virtual certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
Other deferred tax assets are recognised and carried forward to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
11. Fringe benefit tax
Fringe benefit tax (FBT) on the employee stock options (ESOPs) is
recognised in the Profit and Loss Account when the liability
crystalises upon vesting of such stock options. Wherever such FBT
liability is borne by the employee, the same is not so recognised. FBT
on all the other expenses, as specified in the Income Tax Act, 1961, is
recognised in the Profit and Loss Account when the underlying expenses
are incurred.
12. Provisions, contingent liabilities and contingent assets
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if
a) the Company has a present obligation as a result of a past event,
b) a probable outflow of resources is expected to settle the
obligation; and
c) the amount of the obligation can be reliably estimated.
Reimbursement expected in respect of expenditure required to settle a
provision is recognised only when it is virtually certain that the
reimbursement will be received. Contingent liability is disclosed in
case of
a) a present obligation arising from past events, when it is not
probable that an outflow of resources will be required to settle the
obligation;
b) a present obligation arising from past events, when no reliable
estimate is possible; and
c) a possible obligation arising from past events where the probability
of outflow of resources is not remote. Contingent assets are neither
recognised, nor disclosed.
Provisions, contingent liabilities and contingent assets are reviewed
at each Balance Sheet date.
1. a) Of the equity shares of Rs.2 each comprised in the subscribed
and paid-up capital of the Company:
i) 9,19,943 (previous year: 9,19,943) equity shares were allotted as
fully paid up, pursuant to contracts, without payment being received in
cash.
ii) 44,96,76,280 (previous year: 44,96,76,280) equity shares were
issued as bonus shares by way of capitalisation of general reserve:
Rs.2.35 crore (previous year: Rs.2.35 crore), securities premium:
Rs.87.47 crore (previous year: Rs.87.47 crore) and capital redemption
reserve: Rs.0.12 crore (previous year: Rs.0.12 crore).
iii) 2,00,88,346 (previous year: 1,48,67,485) equity shares were
allotted as fully paid up on exercise of grants under Employees
Stock Ownership Schemes.
b) During the year, the Company has issued and allotted 1,12,86,685
equity shares of Rs.2 each by way of Qualified Institutional Placement
(QIP) at issue price of Rs.1659.30 per share. The shares rank pari
passu in all respects with the existing equity shares of the Company.
c) On October 21, 2009, the Company issued 5 years & 1 day, 3.50% US$
denominated Foreign Currency Convertible Bonds (FCCB) at par,
aggregating to US$ 200 million (INR 928.80 crore as on the date of
issue) comprising 2000 bonds of US$ 1,00,000 each. The bonds are
convertible into the Companys fully paid up equity shares of Rs.2 each
at a conversion price of Rs. 1908.20 per share at the option of the
bond holders at any time after December 1, 2009 up to October 15, 2014.
The bonds are redeemable, subject to fulfilment of certain conditions,
in whole but not in part, at the option of the Company, on or at any
time after October 21, 2012 but not less than seven business days prior
to the maturity date, at the principal amount together with accrued
interest till the date fixed for redemption, unless the bonds nave been
previously redeemed, converted or purchased and cancelled.
13. a) Working capital facilities from banks including cash credits,
demand loans, bank guarantees and letters of credit are secured b
hypothecation of inventories, book debts and receivables. The total
charge on these assets is Rs.2037.51 crore as on March 31 2010. b)
Other secured loans from banks represent loans amounting to Rs.5.90
crore (previous year: Rs.nil) availed under bill discountini facility
and are secured against specific receivables.
14 Loans and advances include:
a) Rent deposit with whole-time directors: Rs.0.03 crore (previous
year: Rs.0.03 crore). The maximum amount outstanding at any time during
the year: Rs.0.03 crore (previous year: Rs.0.03 crore).
b) Amount, including interest accrued, due from the managing director
and whole-time directors in respect of housing loan: Rs.0.61 crore
(previous year: Rs.0.63 crore). Maximum amount outstanding at any time
during the year: Rs.0.63 crore (previous year: Rs 0.73 crore).
15 Sales and service include Rs.142.83 crore (previous year: Rs.117.72
crore) for price variations net of liquidated damages in terms of
contracts with the customers and shipbuilding subsidy Rs.56.80 crore
(previous year: Rs.25.49 crore).
16. Extraordinary items during the year comprise the following:
a) Proportionate reversal of Rs.62.55 crore, out of the provision made
in previous year in respect of the Companys investment in shares of
Satyam Computer Services Limited (SCSL), pursuant to sale of a part of
its holding in SCSL during the year.
b) Gain of Rs.73.17 crore (net of tax of Rs.21.61 crore) on sale of the
Companys Petroleum Dispensing Pumps & Systems business.
17. Other income for the year ended March 31, 2010 includes:
a) Profit of Rs.1019.88 crore on sale of the Companys long term
investment in Ultra Tech Cement Limited.
b) Gain of Rs.67.61 crore on sale of the Companys stake in Voith Paper
Technology (India) Limited, an associate company.
c) Profit of Rs.27.22 crore, pursuant to buy back of the Companys part
equity holding by Audco India Limited, an associate company.
18. Sales, administration and other expenses include a provision of
Rs.39.93 crore, for diminution in the companys investment in an
associate company
19. Disclosure pursuant to Accounting Standard (AS) 15 (Revised)
"Employee Benefits".
i. Defined contribution plans: [accounting policy no.4b(i)]
Amount of Rs.70.03 crore (previousyear: Rs.63.43 crore) is recognised
as an expense and included in "Staff Expenses" (Schedule N) in the
Profit and Loss Account.
h) General descriptions of defined benefit plans:
1. Gratuity plan:
The Company operates gratuity plan through a trust wherein every
employee is entitled to the benefit equivalent to fifteen days salary
last drawn for each completed year of service. The same is payable on
termination of service or retirement whichever is earlier. The benefit
vests after five years of continuous service. The companys scheme is
more favourable as compared to the obligation under Payment of Gratuity
Act, 1972. A small part of the gratuity plan, which is not material is
unfunded and managed within the Company.
2. Post-retirement medical care plan:
The Post-retirement medical benefit plan provides for reimbursement of
health care costs to certain categories of employees post their
retirement. The reimbursement is subject to an overall ceiling
sanctioned based on cadre of the employee at the time of retirement.
3. Companys pension plan:
In addition to contribution to state-managed pension plan (EPS scheme),
the Company operates a post retirement pension scheme, which is
discretionary in nature for certain cadres of employees. The quantum of
pension depends on the cadre of the employee at the time of retirement.
4. Trust managed provident fund plan:
The Company manages provident fund plan through a provident fund trust
for its employees which is permitted under the Provident Fund and
Miscellaneous Provisions Act, 1952. The plan envisages contribution by
employer and employees and guarantees interest at the rate notified by
the provident fund authority. The contribution by employer and employee
together with interest are payable at the time of separation from
service or retirement whichever is earlier. The benefit under this plan
vests immediately on rendering of service.
20. Uncalled liability on shares partly paid is Rs.36.62 crore net of
advance paid against equity commitment (previous year: Rs.66.44 crore).
b) Segment reporting: segment identification, reportable segments and
definition of each reportable segment: i) Primary/secondary segment
reporting format:
[a] The risk-return profile of the Companys business is determined
predominantly by the nature of its products and services. Accordingly,
the business segments constitute the primary segments for disclosure of
segment information.
[b] In respect of secondary segment information, the Company has
identified its geographical segments as (i) domestic and (ii) overseas.
The secondary segment information has been disclosed accordingly.
ii) Segment identification:
Business segments have been identified on the basis of the nature of
products/services, the risk-return profile of individual businesses,
the organisational structure and the internal reporting system of the
Company.
iii) Reportable segments:
Reportable segments have been identified as per the criteria specified
in Accounting Standard (AS) 17 "Segment Reporting" issued by the
Institute of Chartered Accountants of India. iv) Segment composition:
- Engineering & Construction Segment comprises execution of engineering
and construction projects in India/abroad to provide solutions in
civil, mechanical, electrical and instrumentation engineering (on
turnkey basis or otherwise) to core/infrastructure sectors including
railways, shipbuilding and supply of complex plant and equipment to
core sectors. The segment capabilities include basic/detailed
engineering, equipment fabrication/supply, erection & commissioning,
procurement/construction and project management.
- Electrical & Electronics Segment comprises manufacture and sale of
low and medium voltage switchgear, custom- built switchboards, control
gear, petroleum dispensing pumps & systems, electronic energy
meters/protection (relays) systems, control & automation products and
medical equipment.
- Machinery & Industrial Products Segment comprises manufacture and
sale of industrial machinery & equipment, marketing of industrial
valves, construction equipment and welding/industrial products.
- Others include (a) property development activity (b) integrated
engineering services and (c) ready mix concrete [up to the date of sale
in previous year]
21. Disclosure of related parties/related party transactions: i. List
of related parties over which control exists
Sr. no. Name of the related party Relationship
1 Tractor Engineers Limited Wholly owned subsidiary
2 L&T Capital Company Limited Wholly owned subsidiary
3 Larsen & Toubro Infotech Limited Wholly owned subsidiary
4 Larsen & Toubro International FZE Wholly owned subsidiary
5 Spectrum Infotech Private Limited Wholly owned subsidiary
6 L&T- Plastics Machinery Limited Wholly owned subsidiary
(formerly known as L&T- Demag Plastics Machinery Limited)
7 L&T Power Development Limited Wholly owned subsidiary
8 L&T Shipbuilding Limited Wholly owned subsidiary
9 L&T Infra & Property Development Private Limited Wholly owned
subsidiary
10 L&T Realty Private Limited Wholly owned subsidiary
11 L&T Concrete Private Limited Wholly owned subsidiary
12 L&T Strategic Management Limited Wholly owned subsidiary
13 L&T Transco Private Limited Wholly owned subsidiary
14 Hi Tech Rock Products & Aggregates Limited Wholly owned subsidiary
15 L&T Seawoods Private Limited Wholly owned subsidiary
16 L&T Power Limited Wholly owned subsidiary
Sr.no. Name of the related party Relationship
17 L&T Natural Resources Limited Whciy ovnca ajcsid ary
18 L&T Ahmedabad-Maliya Tollway Private Limited Wholly owned suasidiary
19 L&T Halol-Shamlaji Tollway Private Limited Wholly owned subsidiary
20 L&T Rajkot-Vadinar Tollway Private Limited Wholly owned subsidiary
21 L&T Engserve Private Limited Wholly owned subsidiary
22 L&T EmSyS Private Limited Wholly owned subsidiary
23 L&T Technologies Limited Wholly owned subsidiary
24 L&T-Valdel Engineering Limited Wholly owned subsidiary
25 L&T General Insurance Company Limited Wholly owned subsidiary
26 PNG Tollways Private Limited Subsidiary *
(formerly known asL&T PNG Tollway Private Limited)
27 Larsen & Toubro LLC Subsidiary *
28 L&T Infrastructure Development Projects Limited Subsidiary *
29 Bhilai Power Supply Company Limited Subsidiary *
30 Raykal Aluminum Company Private Limited Subsidiary *
31 L&T-Sargent & Lundy Limited Subsidiary*
32 L&T-Gulf Private Limited Subsidiary *
33 L&T Capital Holdings Limited Subsidiary *
34 L&T Special Steels & Heavy Forgings Private Limited Subsidiary *
35 L&T Trustee Company Private Limited Wholly owned subsidiary of L&T
Capital Company Limited
36 L&T Real Estate India Fund Wholly owned subsidiary of L&T Capital
Company Limited
37 L&T Asset Management Company Limited Wholly owned subsidiary of L&T
Capital Company Limited
38 L&T Chennai-Tada Tollway Limited Wholly owned subsidiary of L&T
Transco Private Limited
39 L&T Port Sutrapada Limited Wholly owned subsidiary of L&T Transco
Private Limited
40 Sutrapada SEZ Developers Limited Wholly owned subsidiary of L&T
Transco Private Limited
41 Sutrapada Shipyard limited Wholly owned subsidiary of L&T Transco
Private Limited
42 L&T Samakhiali Ganhidham Tollway Private Limited Subsidiary of L&T
Transco Private Limited #
43 Chennai Vision Developers Private Limited Wholly owned subsidiary of
L&T Realty Private Limited
44 L&T Realty FZE Wholly owned subsidiary of L&T Realty Private Limited
45 L&T-MHI Boilers Private Limited Subsidiary of L&T Power Limited #
46 L&T-MHI Turbine Generators Private Limited Subsidiary of L&T Power
Limited #
47 Larsen & Toubro Infotech GmbH Wholly owned subsidiary of Larsen &
Toubro Infotech Limited
48 Larsen & Toubro Information Technology Canada Limited Wholly owned
subsidiary of Larsen & Toubro Infotech Limited
49 Larsen & Toubro Infotech LLC Wholly owned subsidiary of Larsen &
Toubro Infotech Limited
50 GDA Technologies Inc. Wholly owned subsidiary of Larsen & Toubro
Infotech Limited
51 GDA Technologies Limited Wholly owned subsidiary of GDA Technologies
Inc.
52 India Infrastructure Developers Limited Wholly owned subsidiary of
L&T Capital Holdings Limited
53 L&T Infrastructure Finance Company Limited Wholly owned subsidiary
of L&T Capital Holdings Limited
54 L&T Aviation Services Private Limited Wholly owned subsidiary of L&T
Capital Holdings Limited
55 L&T Finance Limited Wholly owned subsidiary of L&T Capital Holdings
Limited
56 L&T Investment Management Limited Wholly owned subsidiary of L&T
Finance Limited
57 L&T Mutual Fund Trustee Limited Wholly owned subsidiary of L&T
Finance Limited
58 L&T Uttaranchal Hydropower Limited Wholly owned subsidiary of L&T
Power Development Limited
59 Nabha Power Limited Wholly owned subsidiary of L&T Power Development
Limited
60 L&T Electrical & Automation FZE Wholly owned subsidiary of Larsen &
Toubro International FZE
61 Tamcc Switchgear (Malaysia) SDN. BHD Wholly owned subsidiary of
Larsen & Toubro International FZE
62 Tamco Shanghai Switchgear Company Limited Wholly owned subsidiary of
Larsen & Toubro International FZE
63 Tamco Electrical Industries Australia Pty Limited Wholly owned
subsidiary of Larsen & Toubro International FZE
64 Larsen & Toubro (Wuxi) Electric Company Limited Wholly owned
subsidiary of Larsen & Toubro International FZE
65 Pathways FZE Wholly owned subsidiary of Larsen & Toubro
International FZE
66 L&T Overseas Projects Nigeria Limited Wholly owned subsidiary of
Larsen & Toubro International FZE
67 Larsen & Toubro (Jiangsu) Valve Company Limited Wholly owned
subsidiary of Larsen & Toubro International FZE
68 Larsen & Toubro (Qingdao) Rubber Machinery Company Limited Wholly
owned subsidiary of Larsen & Toubro International FZE
69 Peacock Investments Limited Wholly owned subsidiary of Larsen &
Toubro International FZE
70 Lotus Infrastructure Investments Limited Wholly owned subsidiary of
Larsen & Toubro International FZE
71 Mango Investments Limited Wholly owned subsidiary of Larsen & Toubro
International FZE
72 Larsen &Toubro Saudi Arabia LLC Subsidiary of Larsen & Toubro
International FZE #
73 PT Tamco Indonesia Subsidiary of Larsen & Toubro International FZE #
74 L&T Electricals Saudi Arabia Company Limited Subsidiary of Larsen &
Toubro International FZE #
75 Larsen & Toubro Electromech LLC Subsidiary of Larsen & Toubro
International FZE #
76 Larsen & Toubro (Oman) LLC Subsidiary of Larsen & Toubro
International FZE #
77 L&T Modular Fabrication Yard LLC Subsidiary of Larsen & Toubro
International FZE #
78 Offshore international FZC Subsidiary of Larsen & Toubro
International FZE #
79 Larsen & Toubro Heavy Engineering LLC Subsidiary of Larsen & Toubro
International FZE #
80 Larsen & Toubro Qatar LLC Subsidiary of Larsen & Toubro
International FZE ##
81 Larsen & Toubro (East Asia) SDN. BHD. Subsidiary of Larsen & Toubro
International FZE ##
82 Larsen & Toubro Readymix Concrete Industries LLC Subsidiary of
Larsen & Toubro International FZE ##
83 Larsen & Toubro Kuwait Construction
General Contracting Company WLL Subsidiary of Larsen & Toubro
International FZE ##
84 Larsen & Toubro ATCO Saudia LLC Subsidiary of Larsen & Toubro
International FZE ##
85 Qingdao Larsen & Toubro Trading Company Limited Wholly owned
subsidiary of Larsen & Toubro (Qingdao) Rubber Machinery
Company Limited
86 International Seaports (India) Private Limited Wholly owned
subsidiary of L&T Infrastructure Development Projects Limited
87 L&T Panipat Elevated Corridor Limited Wholly owned subsidiary of L&T
Infrastructure Development Projects Limited
88 Narmada Infrastructure Construction Enterprise Limited Wholly owned
subsidiary of L&T Infrastructure Development Projects Limited
89 L&T Krishnagiri Thopur Toll Road Limited Wholly owned subsidiary of
L&T Infrastructure Development Projects Limited
90 L&T Western Andhra Tollways Limited Wholly owned subsidiary of L&T
Infrastructure Development Projects Limited
91 L&T Vadodara Bharuch Tollway Limited Wholly owned subsidiary of L&T
Infrastructure Development Projects Limited
92 L&T Interstate Road Corridor Limited Wholly owned subsidiary of L&T
Infrastructure Development Projects Limited
93 L&T Transportation Infrastructure Limited Wholly owned subsidiary of
L&T Infrastructure Development Projects Limited
94 L&T Western India Tollbridge Limited Wholly owned subsidiary of L&T
Infrastructure Development Projects Limited
95 L&T Infrastructure Development Projects Lanka (Private) Limited
Subsidiary of L&T Infrastructure Development Projects Limited #
96 L&T Urban Infrastructure Limited Subsidiary of L&T Infrastructure
Development Projects Limited #
97 Cyber Park Development & Construction Limited Subsidiary of L&T
Urban Infrastructure Limited #
98 L&T Tech Park Limited Subsidiary of L&T Urban Infrastructure Limited
#
99 L&T Bangalore Airport Hotel Limited Subsidiary of L&T Urban
Infrastructure Limited #
100 L&T Vision Ventures Limited Subsidiary of L&T Urban Infrastructure
Limited #
101 CSJ Infrastructure Private Limited Subsidiary of L&T Urban
Infrastructure Limited #
102 L&T Arun Excello IT SEZ Private Limited Subsidiary of L&T Urban
Infrastructure Limited #
103 L&T Arun Excello Commercial Projects Private Limited Subsidiary of
L&T Urban Infrastructure Limited #
104 L&T Infocity Limited Subsidiary of L&T Urban Infrastructure Limited
#
105 L&T South City Projects Limited Subsidiary of L&T Urban
Infrastructure Limited #
106 L&T Siruseri Property Developers Limited Wholly owned subsidiary of
L&T South City Projects Limited
107 Andhra Pradesh Expositions Private Limited Wholly owned subsidiary
of Hyderabad International Trade Expositions Limited
108 Hyderabad International Trade Expositions Limited Subsidiary of L&T
Infocity Limited #
109 L&T Infocity Lanka Private Limited Subsidiary of L&T Infocity
Limited #.
110 L&T Hitech City LimitedSubsidiary of L&T Infocity Limited #
* The Company holds more than one-half in nominal value of the equity
share capital.
# The Company, together with its subsidiaries, holds more than one-half
in nominal value of the equity share capital. ## The Company, together
with its subsidiaries controls the composition of the Board of
Directors.
ii. Names of the related parties with whom transactions were carried
out during the year and description of relationship:
Subsidiary companies:
1 Cyber Park Development & Construction Limited 2 Larsen & Toubro (East
Asia) SDN. BHD.
3 Larsen & Toubro (Wuxi) Electric Company Limited 4 India
Infrastructure Developers Limited
5 L&T Capital Company Limited 6 L&T-Sargent & Lundy Limited
7 L&T Finance Limited 8 L&T Engserve Private Limited
9 L&T Infrastructure Development Projects Limited 10 L&T Infocity
Limited
11 L&T Krishnagiri Thopur Toll Road Limited 12 L&T Interstate Road
Corridor Limited
13 L&T Panipat Elevated Corridor Limited 14 L&T Arun Excello Commercial
Projects Private Limited
15 L&T Tech Park Limited 16 L&T Chennai-Tada Tollway Limited
17 L&T Urban Infrastructure Limited 18 L&T Vadodara Bharuch Tollway
Limited
19 L&T Western Andhra Tollways Limited 20 L&T Western India Tollbridge
Limited
21 Larsen & Toubro (Oman) LLC 22 Larsen & Toubro Infotech GmbH
23 Larsen & Toubro Information Technology Canada Limited 24 Larsen &
Toubro International FZE
25 Larsen & Toubro infotech Limited 26 Raykal Aluminum Company Private
Limited
27 Narmada Infrastructure Construction Enterprise Limited 28 Tractor
Engineers Limited
29 Larsen & Toubro Saudi Arabia LLC 30 L&T Southcity Projects Limited
31 L&T Modular Fabrication Yard LLC, Oman 32 L&T (Qingdao) Rubber
Machinery Company Limited
33 L&T Electrical Saudi Arabia Company Limited, LLC 34 L&T
infrastructure Finance Company Limited
35 L&T Uttaranchal Hydropower Limited 36 L&T Power Limited
37 Nabha Power Limited 38 Bhilai Power Supply Company Limited
39 L&T Bangalore Airport Hotel Limited 40 L&T Phoenix Info Parks
Private Limited
41 Spectrum Infotech Private Limited 42 Larsen & Toubro Electromech LLC
43 Larsen & Toubro Qatar LLC 44 L&T Seawoods Private Limited
45 Larsen & Toubro LLC 46 Hyderabad International Trade Expositions
Limited
47 L&T-Valdel Engineering Limited 48 L&T-MHI Boilers Private Limited
49 Offshore International FZC 50 Larsen & Toubro Readymix Concrete
Industries LLC
51 L&T Infrastructure Development Projects (Lanka) 52 Larsen & Toubro
(Jiangsu) Valve Company Limited Private Limited
53 Qingdao Larsen & Toubro Trading Company Limited
54 CSJ Infrastructure Private Limited
55 L&T Hitech City Limited 56 L&T Trustee Company Private Limited
57 L&T Vision Ventures Limited 58 L&T Gulf Private Limited
59 L&T Rajkot-Vadinar Tollway Private Limited 60 L&T Natural Resources
Limited
61 Tamco Switchgear (Malaysia) SDN. BHD. 62 L&T Power Development
Limited
63 L&T Realty Private Limited 64 L&T Shipbuilding Limited
65 L&T Transco Private Limited 66 L&T Ahmedabad-Maliya Tollway Private
Limited
67 L&T Halol-Shamlaji Tollway Private Limited 68 GDA Technologies
Limited
69 Larsen & Toubro Kuwait Construction General Contracting 70 Larsen &
Toubro ATCO Saudia LLC Company WLL
71 L&T Arun Excello IT SEZ Private Limited 72 L&T Heavy Engineering LLC
73 L&T Electrical & Automation FZE 74 L&T-Plastics Machinery Limited.
75 L&T Transportation Infrastructure Limited 76 PNG Tollway Private
Limited
77 L&T Overseas Projects Nigeria Limited 78 L&T-MHI Turbine Generators
Private Limited
79 L&T Infra & Property Development Private Limited 80 L&T Concrete
Private Limited
81 L&T Strategic Management Limited 82 Hitech Rock Products &
Aggregates Limited
83 L&T Capital Holdings Limited 84 L&T Aviation Services Private
Limited
85 Chennai Vision Developers Limited 86 L&T Special Steels & Heavy
Forgings Private Limited
87 Larsen & Toubro Infotech LLC 88 L&T General Insurance Company
Limited
89 International Seaports Pte. Limited 90 International Seaports
(India) Private Limited
91 L&T Technologies Limited 92 L&T EmSyS Private Limited
Associate companies:
1 Audco India Limited 2 EWAC Alloys Limited
3 L&T-Chiyoda Limited 4 L&T-Komatsu Limited
5 L&T-Ramboll Consulting Engineers Limited 6 L&T-Case Equipment Private
Limited
7 Voith Paper Technology (India) Limited # 8 Salzer Electronics Limited
9 International Seaport (Haldia) Private Limited 10 Feedback Ventures
Limited
11 L&T Arun Excello Realty Private Limited_12 International Seaport
Dredging Limited*_
Joint ventures (other than associates):
1 International Metro Civil Contractors Joint Venture 2 Bauer-L&T
Diaphragm Wall Joint Venture
3 The Dhamra Port Company Limited 4 L&T-Eastem Joint Venture
5 Metro Tunneling Group 6 L&T Hochtief Seabird Joint Venture
7 Desbuild-L&T Joint Venture 8 L&T-Shanghai Urban Corporation Group
Joint Venture
9 L&T-AM Tapovan Joint Venture 10 HCC-L&T Purulia Joint Venture
Key management personnel & their relatives:
1 Mr. A.M. Naik, (Chairman & Managing Director) 2 Mr. J.P. Nayak
(whole-time director)
Mrs. Neeta J. Nayak (wife) Mr. Nitin Nayak (son)
3 Mr. Y. M. Deosthalee (whole-time director) 4 Mr. K. Venkataramanan
(whole-time director)
Mrs. Jyothi Venkataramanan (wife)
5 Mr. R. N. Mukhija (whole-time director) 6 Mr. K. V Rangaswami
(whole-time director) Mrs. Sushma Mukhija (Wife) Ms. DebikaAjmani
(daughter)
7 Mr. V K. Magapu (whole-time director) 8 Mr. M. V Kotwal (whole-time
director)
# Investment sold during the year
* Associate company w.e.f. May 21, 2009
19. Leases:
Where the Company is a lessee: a) Finance leases:
i. [a] Assets acquired on finance lease mainly comprise plant and
machinery, vehicles and personal computers. The leases have a primary
period, which is fixed and noncancellable. In the case of vehicles, the
Company has an option to renew the lease for a secondary period. The
agreements provide for revision of lease rentals in the event of
changes in (a) taxes, if any, leviable on the lease rentals (b) rates
of depreciation under the Income Tax Act, 1961 and (c) change in the
lessors cost of borrowings. There are no exceptional/restrictive
covenants in the lease agreements.
20. Provision for current tax includes:
i. Provision for wealth tax Rs.2.70 crore (previous year: Rs.3.37
crore).
ii. Rs.133.29 crore being provision for income tax in respect of
earlier years (previous year: Rs.53.84 crore). The amount provided in
the current year is mainly arising out of the retrospective amendment
to Section 80IA of the Income Tax Act, 1961 brought about during
2009-2010.
iii. Rs.10.02 crore in respect of income tax payable outside India
(previous year: Rs.2.07 crore).
iv. Reversal of excess provision for tax on fringe benefits Rs.10.01
crore (previous year provision for tax on fringe benefits Rs.0.20
crore) pertaining to earlier years.
22. a) The expenditure on research and development activities, as
certified by the management, is Rs.91.54 crore (including capital
expenditure of Rs.5.56 crore) (previous year. Rs.80.19 crore, including
capital expenditure of Rs.5.01 crore). b) An amount of Rs.74.37 crore
(net loss) [previous year: Rs.197.46 crore (net loss)] has been
accounted under respective revenue heads in the Profit and Loss Account
towards exchange difference arising on foreign currency transactions
and forward contracts covered under Accounting Standard (AS) 11 "The
Effects of Changes in Foreign Exchange Rates".
23. In line with the Companys risk management policy, the various
financial risks mainly relating to changes in the exchange rates,
interest rates and commodity prices are hedged by using a combination
of forward contracts, swaps and other derivative contracts, besides the
natural hedges.
24. Estimated amount of contracts remaining to be executed on capital
account (net of advances) Rs.578.29 crore (previous year: Rs.764.98
crore).
25. The Company has given, inter alia, the following undertakings in
respect of its investments:
a. Jointly with L&T Infrastructure Development Projects Limited (a
subsidiary of the Company), to the term lenders of its subsidiary
companies L&T Transportation Infrastructure Limited (LTTIL):
i. not to reduce their joint shareholding in LTTIL below 51% until the
financial assistance received from the term lenders is repaid in full
by LTTIL and
ii. to jointly meet the shortfall in the working capital requirements
of LTTIL until the financial assistance received from the term lenders
is repaid in full by LTTIL .
b. In terms of Companys concession agreement with Government of India
and Government of Gujarat, not to change the control over L&T Western
India Tollbridge Limited (a subsidiary of L&T Infrastructure
Development Projects Limited) during the period of the agreement.
c. To the debenture holders of L&T Infrastructure Development Projects
Limited (a subsidiary of the Company) and to the lenders of its
subsidiaries L&T Panipat Elevated Corridor Private Limited and L&T
Krishnagiri Thopur Toll Road Limited, not to dilute Companys
shareholding below 51%.
d. To the lender of L&T Offshore International FZC (a subsidiary of
the Company), not to pledge or reduce its shareholding in L&T
International FZE (the holding company of L&T Offshore International
FZC) below 100% of the issued and allotted share capital.
e. To National Highway Authority of India, to hold minimum 26% stake
in L&T Samakhiaii Gandhidham Tollway Private Limited till 180 days from
the date of concession agreement. However, the Company has decided to
hold this stake for a period of 2 years after the construction period.
f. To National Highway Authority of India, to hold minimum 26% stake
in L&T PNG Tollway Private Limited till the commercial operations date.
g. To Gujarat State Road Development Corporation Limited, to hold in
L&TAhmedabad Maliya Tollway Private Limited:
- 100% stake during the construction period;
- 51 % stake for 5 years from the date of commercial operation date or
end of construction of the project, whichever is later; and
- 51% stake during operational period.
h. To Gujarat State Road Development Corporation Limited, to hold in
L&T Rajkot-Vadinar Tollway Private Limited:
- 100% stake during the construction period;
- 51 % stake for 5 years from the date of commercial operation date or
end of construction of the project, whichever is later; and
- 51% stake during operational period.
i. To Gujarat State Road Development Corporation Limited, to hold in
L&T Halol-Shamlaji Tollway Private Limited:
- 100% stake during the construction period;
- 51% stake for 5 years from the date of Commercial Operation Date or
end of construction of the project, whichever is later; and
- 51% stake during operational period.
j. To the lenders of L&T Ahmedabad Maliya Tollway Private Limited (a
subsidiary of the Company), not to divest control without the prior
approval of the lenders or Gujarat State Road Development Corporation
Limited. k. To the lenders of L&T Rajkot-Vadinar Tollway Private
Limited (a subsidiary of the Company), not to divest control without
the prior approval of the lenders or Gujarat State Road Development
Corporation Limited.
I. Jointly with L&T-MHI Turbine Generators Private Limited (a
subsidiary of L&T Power Limited, which is a wholly owned subsidiary of
the Company) and Mitsubishi Heavy Industries Limited (JV partners in
L&T-MHI Turbine Generators Private Limited), to Andhra Pradesh Power
Development Company Limited (APPDCL) to render unconditional and
irrevocable financial support for the successful execution of APPDCL
2x800 MW Power Project - Steam Turbine Generator Package Tender, near
Krishnapatnam, Nellore District, Andhra Pradesh.
m. To City and Industrial Development Corporation of Maharashtra
Limited (CIDCO) that it shall continue to hold not less than fifty one
percent stake in L&T Seawood Private limited (LTSPL) until CIDCO
execute the lease deed for land in favour of LTSPL.
26. There are no amounts due and outstanding to be credited to
Investor Education & Protection Fund as at March 31, 2010.
37. According to the Company, construction is a service activity and
therefore, the same is covered under para 3(ii)(c) of Part II of
Schedule VI to the Companies Act, 1956.
39. Figures for the previous year have been regrouped/reclassified
wherever necessary.