Mobile Nav

Market

NOTES TO ACCOUNTS

Larsen & Toubro Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 214489.14 Cr. P/BV 3.45 Book Value (₹) 443.41
52 Week High/Low (₹) 1607/1183 FV/ML 2/1 P/E(X) 24.09
Bookclosure 01/08/2019 EPS (₹) 63.46 Div Yield (%) 0.92
Year End :2019-03 

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-owners’ 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-owners’ 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 “Borrowing costs”. 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 “Leased out” pursuant to ind AS 17 “Leases”.

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 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 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 company’s 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 “Leases”

(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 “Non-current assets held for sale and discontinued operations”:

(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 (“SCRR”). 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 “Presentation of financial statements”:

(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 “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.

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 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 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 company’s 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 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.

The exposure of the company’s 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 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 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 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 funds’ 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 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 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 “Financial instruments: Disclosures”

(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 Company’s 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 Company’s 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 Company’s Electrical & Automation (E&A) business by Schneider Electric subject to certain conditions, the details of which are awaited. Pending receipt of CCi’s 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 “Operating Segment” (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 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 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 “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, 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 “Revenue from contracts with customers”:

(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 “Employee Benefits”:

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 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 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 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 “Separate Financial Statements”

Investment in following subsidiary companies, joint venture companies and associates is accounted at cost.

NOTE [18]

Disclosures pursuant to ind AS 37 “Provisions, Contingent Liabilities and Contingent Assets”

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 “Revenue from Contracts with customers”.

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 Company’s 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 “Business combinations”:

(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 (‘LTSB’) 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 company’s financial statements and the same was presented separately from other capital reserves [refer to Note 18].

NOTE [24]

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 and duty drawback amounts to RS. 99.97 crore (previous year: RS. 111.04 crore).

NOTE [25]

Disclosure pursuant to ind AS 7 “Statement of cash Flows” - changes in liabilities arising from financing activities:

Note [26]

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:

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 “Leases”

ind AS 116 “Leases” supersedes AS 17 “Leases” 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 “modified retrospective approach” 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.

Attention Investors :
Prevent Unauthorised transactions in your account --> Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile / email at the end of the day .......... Issued in the interest of investors
Attention Investors :
Prevent Unauthorized Transactions in your demat account --> Update your Mobile Number with your Depository Participant. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat account directly from NSDL on the same day......................issued in the interest of investors.
Attention Investors :
KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
Attention Investors :
No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account.
“Investment in securities market are subject to market risks, read all the related documents carefully before investing”.