Larsen and Toubro

The Directors have pleasure in presenting their Annual Report and
 Accounts for the year ended March 31, 2008.
 
 FINANCIAL RESULTS
 
                                              2007-2008       2006-2007
                                               Rs. crore      Rs. crore
 
 Profit before depreciation and tax             3,367.07      2,174.90
 Less : Depreciation and amortisation             213.63        171.45
                                                3,153.44      2,003.45
 Add : Transfer from Revaluation reserve            2.03          1.44
 Profit before Tax                              3,155.47      2,004.89
 Less : Provision for taxes                       982.05        601.87
 Profit after Tax                               2,173.42      1,403.02
 Add : Balance brought forward from
 previous year                                     78.24         55.70
 Less: Dividend paid for the previous year
 (including dividend distribution tax)              0.77          6.40
 Less: Operating result of acquired entity
 for previous year (net of tax)                        -          2.49
 Balance available for disposal
 which the directors appropriate as follows:    2,250.89      1,449.83
 Interim Dividend                                  56.83        311.60
 Proposed Final Dividend                          438.49         56.65
 Dividend Tax                                      76.26         53.34
 General Reserve                                1,575.00        950.00
                                                2,146.58      1,371.59
 Balance to be carried forward                    104.31         78.24
 Dividend :
 The Directors recommend payment of
 final dividend of Rs. 15/- per equity share
 of Rs. 21- each on  29,23,27,390 shares
 in addition to the interim dividend of
 Rs. 21- per share declared by the
 Board of Directors on July 3, 2007               438.49         56.65
 
 YEAR IN RETROSPECT
 
 The gross sales, other income and interest income for the financial
 year under review were Rs.25,863 crore as against Rs. 18,423 crore for
 the previous financial year registering an increase of 40%. The Profit
 before tax (after interest and depreciation charges) of Rs.3,155 crore
 and the Profit after tax of Rs.2,173 crore for the financial year under
 review as against Rs.2,005 crore and Rs.1,403 crore respectively for
 the previous financial year, improved by 57% and 55% respectively.
 
 DISPOSAL OF READY MIX CONCRETE BUSINESS
 
 Approval of the shareholders as required by Section 293(1 )(a) of the
 Companies Act, 1956 was obtained on February 6, 2008 through Postal
 
 Ballot conducted in accordance with Section 192A of the said Act, read
 with the Companies (Passing of Resolution by Postal Ballot) Rules,
 2001, to dispose of the Ready Mix Concrete (RMC) business unit of the
 Company. The result of the Postal Ballot was widely published in the
 newspapers, besides Stock Exchange websites etc.
 
 On May 14, 2008, the Company entered into a definitive agreement for
 sale of RMC business to Lafarge Aggregates & Concrete India Private
 Limited for an enterprise value of Rs.1,480 crore. The financial effect
 of this sale will be given in the year 2008-2009, on conclusion of the
 transaction.
 
 DIVIDEND
 
 The Directors recommend payment of final dividend of Rs.15/- per equity
 share of Rs.2/- each, which together with the Interim Dividend of
 Rs.2/- per equity share declared on July 3, 2007 works out to Rs.17/-
 per equity share for the year under review.
 
 Shares that may be allotted on exercise of Options granted under the
 Employee Stock Option Schemes before the Book Closure for payment of
 dividend will rank pari passu with the existing shares and be entitled
 to receive the final dividend.
 
 DEPOSITORY SYSTEM
 
 As the members are aware, the Companys shares are compulsorily
 tradable in electronic form. As on March 31, 2008, almost 96% of the
 Companys total paid-up capital representing 28,00,29,889 shares were
 in dematerialised form. In view of the numerous advantages offered by
 the Depository system, members holding shares in physical mode are
 advised to avail of the facility of dematerialisation on either of the
 Depositories.
 
 CAPITAL & FINANCE
 
 During the year under review, the Company allotted 15,00,901 equity
 shares upon exercise of stock options by the eligible employees under
 the Employee Stock Option Schemes.
 
 The Company further allotted 35,55,741 underlying equity shares in
 respect of Global Depository Receipts issued upon conversion of 1,146
 Bonds (value JPY 11.46 bn) out of JPY 11.57 billion Zero Coupon Foreign
 Currency Convertible Bonds (due 2011) issued in January 2006.
 
 The Company issued and allotted 40 lakh Global Depository Shares (GDS)
 at USD 100 each representing an equal number of equity shares of Rs.
 21- each.
 
 During the year under review, the Company tied up foreign currency long
 term loans aggregating to USD 390 million to finance ongoing capital
 expenditure, investment in overseas subsidiaries and overseas
 acquisitions. The loans have tenors of 5, 7 and 10 years.
 
 The Company has repaid rupee loans of Rs. 27 crore during the year.
 
 CAPITAL EXPENDITURE
 
 As at March 31, 2008, the gross fixed and intangible assets, including
 leased assets, stood at Rs. 4,935.02 crore and the net fixed and
 intangible assets, including leased assets, at Rs. 3,645.44 crore.
 Additions during the year amounted to Rs. 1,647.20 crore.
 
 DEPOSITS
 
 123 Deposits totalling Rs. 0.12 crore which were due for repayment on
 or before March 31, 2008 were not claimed by the depositors on that
 date. As on the date of this report, deposits aggregating to Rs. 0.01
 crore thereof have been claimed and paid.
 
 TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND
 
 During the year, the Company has transferred a sum of Rs. 75,09,779/-
 to Investor Education & Protection Fund (IEPF), the amount which was
 due & payable and remained unclaimed and unpaid for a period of seven
 years, as provided in Section 205C(2) of the Companies Act, 1956.
 Despite the reminder letters sent to each shareholder, this amount
 remained unclaimed and hence transferred. Cumulatively, the amount
 transferred to IEPF as on March 31, 2008 was Rs.5,86,37,943/-.
 
 SUBSIDIARY COMPANIES
 
 During the year under review, the Company subscribed to the following
 equity shares in various Subsidiary Companies:
 
 - 6,25,00,000 equity shares of Rs. 10/- each in L&T Finance Limited at
 a premium of Rs. 30/- per share.
 
 - 564 equity shares of Dhs. 550,500 each in Larsen & Toubro
 International FZE for Rs. 336.39 crore at par.
 
 - 1,04,51,000 equity shares of Rs. 10/- each in L&T Power Projects
 Limited at par.
 
 - 21,626 equity shares of Rs. 10,000/- each in International Seaport
 Dredging Limited at par.
 
 - 25,70,00,000 equity shares of Rs. 10/- each in L&T Infrastructure
 Finance Company Limited at par.
 
 - 5,89,500 equity shares of Rs. 10/- each in L&T-Valdel Engineering
 Limited for a consideration of Rs. 16,19,99,725/- (acquired from the
 joint venture partner).
 
 - 2,90,00,000 equity shares of Rs. 10/- each in L&T Power Development
 Limited at par.
 
 - 10,000 equity shares of Rs. 10/- each in L&T Infra & Property
 Development Private Limited at par.
 
 - 4,71,60,700 equity shares of Rs. 10/- each in L&T Realty Private
 Limited at par.
 
 - 10,000 equity shares of Rs. 10/- each in L&T Concrete Private Limited
 at par.
 
 - 50,000 equity shares of Rs. 10/- each in L&T Shipbuilding Limited at
 par.
 
 - 50,000 equity shares of Rs. 10/- each in L&T Strategic Management
 Limited at par.
 
 - 10,000 equity shares of Rs. 10/- each in L&T-Gulf Private Limited at
 par.
 
 - 10,000 equity shares of Rs. 10/- each in L&T Transco Private Limited
 at par.
 
 - 50,000 equity shares of Rs. 10/- each in Hi-Tech Rock Products &
 Aggregates Limited at par.
 
 The Company paid the first call of Rs. 90/- per share (including
 premium of Rs. 89/-) on 22,50,000 equity shares of Larsen & Toubro
 Infotech Limited aggregating to Rs. 20,25,00,000/-. (Total paid up
 value per share is Rs. 3.20 at a premium of Rs. 322.355 per share).
 
 The Company sold its 10% stake in International Seaport Dredging
 Limited to Dredging International India Private Limited. Accordingly,
 1,410 equity shares were sold at a consideration of Rs. 1,51,00,521/-
 and 1,847 preference shares were sold at par for Rs. 1,84,70,000/-.
 
 The Company also divested its 51% stake in HPL Cogeneration Limited.
 Accordingly 3,12,12,000 equity shares and 3,12,12,000 preference shares
 were sold for a consideration of Rs. 1,49,65,57,058/-.
 
 The statement pursuant to Section 212 of the Companies Act, 1956,
 containing details of subsidiaries of the Company, forms part of the
 Annual Report.
 
 AUDITORS REPORT
 
 The Auditors Report to the Shareholders does not contain any
 qualification.
 
 DISCLOSURE OF PARTICULARS
 
 Information as per the Companies (Disclosure of Particulars in the
 Report of Board of Directors) Rules, 1988, relating to Conservation of
 Energy, Technology Absorption, Foreign Exchange Earnings and Outgo is
 provided in Annexure A forming part of this Report.
 
 OTHER DISCLOSURES
 
 The Company has disclosed in the notes forming part of accounts the
 quantitative details in respect of sales, raw materials and components
 consumed and inventories as required vide sub-paras 3(i)(a),
 3(ii)(a)(1) and (2) and 3(ii)(b) of Part II of Schedule VI of the
 Companies Act, 1956.
 
 The Central Government, vide its order No. 46/61/2008-CL-lll dated May
 16, 2008 has granted exemption to the Company for the financial year
 ended on March 31, 2008 in respect of disclosure of the above mentioned
 quantitative details where the values of the individual items in each
 category are less than 10% of the total value of the category.  The
 disclosures required to be made under the Securities and Exchange Board
 of India (Employee Stock Option Scheme and Employee Stock Purchase
 Scheme) Guidelines, 1999, together with a certificate obtained from the
 Statutory Auditors, confirming compliance, is provided in Annexure B
 forming part of this Report.
 
 Pursuant to Clause 49 of the Listing Agreement entered into with the
 Stock Exchanges, a Report on Corporate Governance and a certificate
 obtained from the Statutory Auditors confirming compliance, is provided
 in Annexure C forming part of this Report.
 
 PERSONNEL
 
 The Board of Directors wishes to express their appreciation to all the
 employees for their outstanding contribution to the operations of the
 Company during the year. The information required under Section 217(2A)
 of the Companies Act, 1956 and the Rules made thereunder, is provided
 in the Annexure forming part of the Report. In terms of Section
 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the
 shareholders excluding the aforesaid Annexure. Any Shareholder
 interested in obtaining copy of the same may write to the Company
 Secretary at the Registered Office. None of the employees listed in the
 said Annexure is related to any Director of the Company.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 The Board of Directors of the Company confirms:
 
 i. that in the preparation of the annual accounts, the applicable
 Accounting Standards have been followed and there has been no material
 departure;
 
 ii. that the selected accounting policies were applied consistently and
 the Directors made judgments and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company as at March 31, 2008 and of the profits of the Company for
 the year ended on that date;
 
 iii. that proper and sufficient care has been taken for the maintenance
 of adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities; and
 
 iv. that the annual accounts have been prepared on a going concern
 basis.  DIRECTORS
 
 The Company received a letter dated October 8, 2007 from the
 Administrator of the Specified Undertaking of the Unit Trust of India
 (SUUTI) withdrawing the nomination of Mr. S. Rajgopal from the Board of
 the Company. Mr. S. Rajgopal was however appointed as an Independent
 Director at the meeting of the Board of Directors held on October 26,
 2007. Mr. K. G. Ramachandran who was appointed as the Director in place
 of Mr. S. Rajgopal, ceased to be a Director with effect from December
 22, 2007.
 
 Mr. Subodh Bhargava was appointed as an Additional Director on July 3,
 2007 and the appointed by the shareholders in the Annual General
 Meeting held on August 24, 2007.
 
 Mr. B. P. Deshmukh resigned on May 15, 2007 from the Board consequent
 to the withdrawal of his nomination by the General Insurance
 Corporation of India. Mrs. Bhagyam Ramani was appointed on July 19,
 2007 to represent the equity interest of the General Insurance
 Corporation of India and to fill the casual vacancy caused by the
 resignation of Mr. B. P. Deshmukh.
 
 Lt. Gen. Surinder Nath PVSM, AVSM (Retd.) and Mr. U. Sundararajan
 ceased to be Directors from August 24, 2007.
 
 Mr. N. Mohan Raj who was appointed on May 29, 2007 in the casual
 vacancy caused by the resignation of Mr. Kranti Sinha, holds office
 upto the date of the forthcoming Annual General Meeting and is eligible
 for re-appointment.
 
 Mr. A. K. Jain was appointed as an Additional Director on May 29, 2008
 to represent the equity interest of SUUTI.
 
 Mr. J. P. Nayak, Mr. Y. M. Deosthalee, Mr. M. M. Chitale and Mr. K.
 Venkataramanan retire from the Board by rotation and are eligible for
 re-appointment at the forthcoming Annual General Meeting. The Notice
 convening the Annual General Meeting includes the proposals for
 re-appointment of Directors.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 Your Directors have pleasure in attaching the Consolidated Financial
 Statements pursuant to Clause 32 of the Listing Agreement entered into
 with the Stock Exchanges and prepared in accordance with the Accounting
 Standards prescribed by the Institute of Chartered Accountants of
 India, in this regard.
 
 The Auditors Report to the Shareholders does not contain any
 qualification.
 
 AUDITORS
 
 The Auditors, M/s. Sharp & Tannan, hold office until the conclusion of
 the ensuing Annual General Meeting and are recommended for re-
 appointment. Certificate from the Auditors has been received to the
 effect that their re-appointment, if made, would be within the limits
 prescribed under Section 224(1 B) of the Companies Act, 1956.
 
 ACKNOWLEDGEMENT
 
 Your Directors take this opportunity to thank the Financial
 Institutions, Banks, Central and State Government authorities,
 Regulatory authorities, Stock Exchanges and the stakeholders for their
 continued co-operation and support to the Company. Your Directors also
 wish to record their appreciation for the continued co-operation and
 support received from the Subsidiary Companies/Joint Venture
 partners/Associates.
 
                                        For and on behalf of the Board
 
                                         A.M. Naik
                                      Chairman & Managing Director
 Mumbai, May 29, 2008