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Larsen & Toubro Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 203279.74 Cr. P/BV 3.26 Book Value (₹) 444.65
52 Week High/Low (₹) 1462/1183 FV/ML 2/1 P/E(X) 22.83
Bookclosure 15/10/2018 EPS (₹) 63.48 Div Yield (%) 0.97
Year End :2018-03 

* 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)


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

— The Company through its subsidiaries acquired stake on June 1,2017

— 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.

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