Larsen and Toubro

Provisions, contingent liabilities and contingent assets are reviewed
 at each Balance Sheet date.
 
 1.  a) Of the equity shares of Rs.2 each comprised in the subscribed
 and paid-up capital of the Company:
 
 i) 9,19,943 (previous year: 9,19,943) equity shares-were allotted as
 fully paid-up, pursuant to contracts, without payment being received in
 cash.
 
 ii) 44,96,76,280 (previous year: 15,70,84,226) equity shares were
 issued as bonus shares by way of capitalisation of general reserve:
 Rs.2.35 crore (previous year: Rs.2.35 crore), securities premium:
 Rs.87.47 crore (previous year: Rs.28.97 crore) and Capital redemption
 reserve: Rs.0.12 crore (previous year: Rs.0.10 crore).  
 
 iii) 1,48,67,485 (previous year: 1,40,99,067) equity shares were
 allotted as fully paid up on exercise of grants under Employees Stock
 Ownership Schemes.
 
 c) The directors recommend payment of final dividend of Rs.10.50 per
 equity share of Rs.2 each on the number of shares outstanding as on the
 record date. Provision for final dividend has been made in the books of
 account for 58,56,87,862 shares outstanding as at March 31, 2009
 amounting to Rs.614.97 crore.
 
 2.  Stock option schemes
 
 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 four years [5 years in
 the case of Series 2006(A)], subject to the discretion of the
 management and fulfilment of certain conditions.
 
 c) During the year, the Company has recovered Rs.4.80 crore (previous
 year: Rs.2.60 crore) from its subsidiary companies towards the stock
 options granted to their employees, pursuant to the employee stock
 option schemes.
 
 3.  a) Cash credit facilities including working capital demand loans
 from banks are secured by hypothecation of stocks, stores and book
 debts. The total charge on these assets is Rs.1607.84 crore, including
 on account of bank guarantees as on March 31, 2009.
 
 b) Other loans and advances from banks grouped under unsecured loans
 include loans availed from banks outside India amounting to Rs.46.23
 crore secured by corporate guarantee & project-specific receivables.
 
 4.  a) Fixed deposits with scheduled banks as on March 31, 2009 include
 Rs.40.41 crore (previous year: Rs.40.41 crore), in respect of a claim
 against the Company. The dispute is since resolved in favour of the
 Company, and the money has been realised on May 6, 2009.
 
 c) Call deposit with Mashreq Bank, Dubai, UAE, of Rs.0.69 crore is
 subject to an escrow arrangement duly approved by the Reserve Bank of
 India, whereby the proceeds of the deposit, together with interest
 thereon, would be applied towards full and final settlement of loan
 taken from Rafidian Bank, Iraq, which is included under unsecured
 loans. Once the UN embargo against Iraq is lifted, the settlement would
 be effected.
 
 5.  Loans and advances include:
 
 i) amount due from an officer of the Company: Rs.nil (previous year:
 Rs.nil). The maximum amount outstanding at any time during the year was
 Rs.nil (previous year: Rs.nil).
 
 ii) rent deposit with whole-time directors: Rs.0.03 crore (previous
 year: Rs.0.06 crore). The maximum amount outstanding at any time during
 the year: Rs.0.06 crore (previous year: Rs.0.07 crore).
 
 iii) amount, including interest accrued, due from the managing director
 and whole-time directors in respect of housing loan: Rs.0.63 crore
 (previous year: Rs.0.73 crore). Maximum amount outstanding at any time
 during the year: Rs.0.73 crore (previous year: Rs.0.76 crore).
 
 6.  Sundry creditors - others include Rs.1.13 crore (previous year:
 Rs.17.67 crore), being contribution received from the employees of the
 Company and some of its subsidiary & associate companies, on behalf of
 L&T Employees Welfare Foundation Trust and held on account for it.
 
 7.  Sales and service include Rs. 117.72 crore (previous year: Rs.75.10
 crore) for price variations net of liquidated damages in terms of
 contracts with the customers and shipbuilding subsidy Rs.25.49 crore
 (previous year: Rs.29.29 crore).
 
 8.  Extraordinary items during the year comprise the following:
 
 i.  Gain of Rs.958.74 crore (net of tax of Rs.282.08 crore) on sale of
 the Companys Ready Mix Concrete business.
 
 ii. Provision of Rs.186.28 crore in respect of investment in Satyam
 Computer Services Limited (SCSL) held by the Company as well as by its
 wholly owned subsidiary, L&T Capital Company Limited (LTCCL). This
 provision has been made by the Company as a measure of abundant caution
 and in consonance with its commitment to acquire the investment from
 LTCCL at book value, as and when such transfer of shares is
 permitted/takes place. Considering the extraordinary circumstances
 under which the price of SCSL shares fell in the market, the aforesaid
 provision has been created based on the principles of prudence, [see
 note no.23]
 
 9.  Other income for the previous year ended March 31, 2008 included
 profit on disposal of stake in a subsidiary company amounting to
 Rs.87.23 crore.
 
 10.  Disclosure pursuant to Accounting Standard (AS) 15 (Revised)
 Employee Benefits:
 
 i.  Defined contribution plans: [refer accounting policy no.4b(i)]
 
 Amount of Rs.62.50 crore (previous year: Rs.54.15 crore) is recognised
 as an expense and included in staff expenses (Schedule N) in the
 Profit and Loss Account.
 
 f) Principal actuarial assumptions at the Balance Sheet date (expressed
 as weighted averages):
 
 11 Attrition rate:
 
 a) For post-retirement medical benefit plan & company pension plan, the
 attrition rate varies from 2% to 8% (previous year: 2% to 8%) for
 various age groups.
 
 b) For gratuity plan the attrition rate varies from 1% to 7% (previous
 year: 1% to 7%) for various age groups
 
 12 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.
 
 13The 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 Profit and Loss
 Account as actuarial losses.
 
 14 The obligation of the Company under the post-retirement medical
 benefit plan is limited to the overall ceiling limits. At present,
 healthcare cost, as indicated in the principal actuarial assumption
 given above, has been assumed to increase at 5% p.a.
 
 h) General descriptions of defined benefit plans:
 
 1.  Gratuity plan:
 
 The Company operates gratuity plan through a trust wherein every
 employee is entitled to the benefit equivalent to fifteen days salary
 last drawn for each completed year of service. The same is payable on
 termination of service or retirement whichever is earlier. The benefit
 vests after five years of continuous service. The Companys scheme is
 more favourable as compared to the obligation under Payment of Gratuity
 Act, 1972. A small part of the gratuity plan, which is not material, is
 unfunded and managed within the Company.
 
 2.  Post-retirement medical care plan:
 
 The post-retirement medical benefit plan provides for reimbursement of
 health care costs to certain categories of employees post their
 retirement. The reimbursement is subject to an overall ceiling
 sanctioned based on cadre of the employee at the time of retirement.
 
 3.  Companys pension plan:
 
 In addition to contribution to state-managed pension plan (EPS scheme),
 the Company operates a post retirement pension scheme, which is
 discretionary in nature for certain cadres of employees. The quantum of
 pension depends on the cadre of the employee at the time of retirement.
 
 4.  Trust managed provident fund plan:
 
 The Company manages provident fund plan through a provident fund trust
 for its employees which is permitted under the Provident Fund and
 Miscellaneous Provisions Act, 1952. The plan envisages contribution by
 employer and employees and guarantees interest at the rate notified by
 the provident fund authority. The contribution by employer and employee
 together with interest are payable at the time of separation from
 service or retirement whichever is earlier. The benefit under this plan
 vests immediately on rendering of service.
 
 15.  Uncalled liability on shares partly paid is Rs.66.44 crore net of
 advance paid against equity commitment (previous year: Rs.82.63 crore).
 
 16.  Loans and advances include:
 
 a) Rs.161 crore (previous year: Fts.200 crore) under advances
 recoverable in cash or in kind towards interest free loan to L&T
 Employees Welfare Foundation Trust to part-finance its acquisition of
 equity shares in the Company held by Grasim Industries Limited and its
 subsidiary. The loan is repayable in 9 years commencing from May 2005
 with a minimum repayment of Rs.25 crore in a year.
 
 b) Rs.nil (previous year: Rs.43.33 crore) net of provisions, being
 portfolio of financial assets (comprising lease/hire purchase
 receivables and term loans) purchased from L&T Finance Limited, a
 subsidiary of the Company, in earlier years.
 
 b) Segment reporting: Segment identification, reportable segments and
 definition of each reportable segment: i) Primary/secondary segment
 reporting format:
 
 (a) The risk-return profile of the Companys business is determined
 predominantly by the nature of its products and services.  Accordingly,
 the business segments constitute the primary segments for disclosure of
 segment information.
 
 (b) In respect of secondary segment information, the Company has
 identified its geographical segments as (i) Domestic and (ii) Overseas.
 The secondary segment information has been disclosed accordingly.
 
 ii) Segment identification:
 
 Business segments have been identified on the basis of the nature of
 products/services, the risk-return profile of individual businesses,
 the organisational structure and the internal reporting system of the
 Company.  
 
 iii) Reportable segments:
 
 Reportable segments have been identified as per the criteria specified
 in Accounting Standard (AS) 17 Segment Reporting.  iv) Segment
 composition:
 
 - Engineering & Construction Segment comprises execution of engineering
 and construction projects in India/abroad to provide solutions in
 civil, mechanical, electrical and instrumentation engineering (on
 turnkey basis or otherwise) to core/ infrastructure sectors including
 railways, shipbuilding and supply of complex plant and equipment to
 core sectors. The segment capabilities include basic/detailed
 engineering, equipment fabrication/supply, erection & commissioning,
 procurement/construction and project management.
 
 - Electrical & Electronics Segment comprises manufacture and sale of
 low and medium voltage switchgear and control gear, custom-built
 switchboards, petroleum dispensing pumps & systems, electronic energy
 meters/protection (relays) systems, control & automation products and
 medical equipment.
 
 - Machinery & Industrial Products Segment comprises manufacture and
 sale of industrial machinery & equipment, marketing of industrial
 valves, construction equipment and welding/industrial products.
 
 - Others include (a) ready mix concrete (b) property development
 activity and (c) e-engineering services & embedded systems.
 
 v.  Notes to related party transactions:
 
 a) The Company has a sole selling agreement with L&T-Komatsu Limited
 (LTK), an associate company, valid for the period of 5 years from
 October 16, 2006 in line with Government of India (GOI) approval letter
 dated May 28, 2007. The appointment shall be in effect as long as the
 joint venture agreement between the parent Company and M/s Komatsu Asia
 Pacific Pte. Ltd., Singapore (which is a subsidiary of Komatsu Ltd.,
 Japan) remains in force, subject to approval of GOI, under Section 294
 AA of the Companies Act, 1956. As per the terms of the agreement, the
 Company is the exclusive agent of L&T-Komatsu Limited to market LTK
 machines and provide product support. Pursuant to the aforesaid
 agreement, LTK is required to pay commission to the Company at
 specified rates on the sales effected by the Company.
 
 b) The Company has renewed the selling agency agreement from October 1,
 2003 with EWAC Alloys Limited (EWAC), an associate company. The
 agreement shall remain valid until either party gives 12 months prior
 written notice to theother for termination. As per the terms of the
 agreement, the Company is the selling agent authorised to purchase and
 resell EWAC products in accordance with the prices and other conditions
 stipulated in the agreement.
 
 c) The Company has a selling agency agreement with L&T-Demag Plastics
 Machinery Limited (LTDPML), a wholly owned subsidiary.  As per the
 terms of the agreement, the Company is a selling and servicing agent of
 LTDPML. Pursuantto the aforesaid agreement, LTDPML is required to pay
 commission to the Company at specified rates on sales effected by the
 Company.
 
 Afofe.The financial impact of the agreements mentioned at (a) to (c)
 above has been included in/disclosed vide note no.18(iii) supra.
 
 17.  Leases:
 
 Where the Company is a lessee:
 
 a) Finance leases:
 
 i. [a] Assets acquired on finance lease mainly comprise plant &
 machinery, vehicles and personal computers. The leases have a primary
 period, which is fixed and non-cancellable. In the case of vehicles,
 the Company has an option to renew the lease for a secondary period.
 The agreements provide for revision of lease rentals in the event of
 changes in (a) taxes, if any, leviable on the lease rentals (b) rates
 of depreciation under the Income Tax Act, 1961 and (c) change-in the
 lessors cost of borrowings. There are no exceptional/restrictive
 covenants in the lease agreements.
 
 18.  Provision for current tax includes:
 
 i.  Provision for wealth tax Rs.3.37 crore [including Rs.0.98 crore
 being provision for wealth tax in respect of earlier years] (previous
 year: Rs. 1.23 crore)
 
 ii.  Rs.53.84 crore being provision for income tax in respect of
 earlier years (previous year: provision for income tax of earlier years
 written back Rs.25.33 crore)
 
 iii.  Rs.2.07 crore in respect of income tax payable outside India
 (previous year: Rs.nil)
 
 iv.  Provision for tax on fringe benefits includes credit for excess
 provision of Rs.0.20 crore pertaining to earlier years, reversed during
 the year, (previous year: provision includes Rs.0.79 crore pertaining
 to earlier years)
 
 19.  a) The expenditure on research and development activities, as
 certified by the management, is Rs.80.19 crore (including capital
 expenditure of Rs.5.01 crore) [previous year: Rs.67.25 crore, including
 capital expenditure of Rs.6.61 crore].
 
 b) An amount of Rs.197.46 crore (net loss) (previous year: Rs.280.89
 crore [net loss]) has been accounted under respective revenue heads in
 the Profit and Loss Account towards exchange differences arising on
 foreign currency transactions and forward contracts covered under
 Accounting Standard (AS) 11 The Effects of Changes in Foreign Exchange
 Rates.
 
 20.  In line with the Companys risk management policy, the various
 financial risks mainly relating to changes in the exchange rates,
 interest rates and commodity prices are hedged by using a combination
 of forward contracts, swaps and other derivative contracts, besides the
 natural hedges.
 
 21.  Estimated amount ot contracts remaining to be executed on capital
 account (net of advances) Rs.764.98 crore (previous year: Rs.608.16
 crore).
 
 22.  The Company has given, inter alia, the following undertakings in
 respect of its investments:
 
 a) Jointly with L&T Infrastructure Development Projects Limited [a
 subsidiary of the Company], to the term lenders of its subsidiary
 companies L&T Transportation Infrastructure Limited (LTTIL):
 
 i.  not to reduce their joint shareholding in LTTIL below 51% until the
 financial assistance received from the term lenders is repaid in full
 by LTTIL and
 
 ii.  to jointly meet the shortfall in the working capital requirements
 of LTTIL until the financial assistance received from the term lenders
 is repaid in full by LTTIL.
 
 b) In terms of Companys concession agreement with Government of India
 and Government of Gujarat, not to change the control over L&T Western
 India Tollbridge Limited [a subsidiary of L&T Infrastructure
 Development Projects Limited] during the period of the agreement.
 
 c) To the debenture holders of L&T Infrastructure Development Projects
 Limited [a subsidiary of the Company] and to the lenders of its
 subsidiaries L&T Panipat Elevated Corridor Private Limited & L&T
 Krishnagiri Thopur Toll Road Limited, not to dilute Companys
 shareholding below 51%.
 
 d) To the lender of L&T Offshore International FZC (a subsidiary of the
 Company), not to pledge or reduce its shareholding in L&T
 International FZE (the holding company of L&T Offshore International
 FZC) below 100% of the issued & allotted share capital.
 
 e) Jointly with L&T-MHI Turbine Generators Private Limited (a
 subsidiary of L&T Power Limited, which is a wholly owned subsidiary of
 the Company) and Mitsubishi Heavy Industries Limited (JV partners in
 L&T-MHI Turbine Generators Private Limited), to Andhra Pradesh Power
 Development Company Limited (APPDCL) to render unconditional and
 irrevocable financial support for the successful execution of APPDCL
 2x800 MW Power Project - Steam Turbine Generator Package Tender, near
 Krishnapatnam, Nellore district, Andhra Pradesh.
 
 f) Not to sell or otherwise transfer, deal with or agree to acquire,
 sell or otherwise transfer or deal with, in any manner the shares of
 Satyam Computer Services Limited (SCSL), held by the Company or its
 affiliates, till October 21, 2009 or a date approved by the appropriate
 authorities which ever is earlier.
 
 23.  There are no amounts due and outstanding to be credited to
 Investor Education & Protection Fund as at March 31, 2009.
 
 24.  According to the Company, Construction is a service activity and
 therefore, the same is covered under para 3(ii)(c) of Part II of
 Schedule VI to the Companies Act, 1956.
 
 25.  Miscellaneous expenses include donations aggregating to Rs.4.70
 crore made during the year to political parties as follows: Akhil
 Bharatiya Congress Committee: Rs.2.25 crore, Bharatiya Janata Party:
 Rs.2.00 crore and Shiv Sena Madhyavarti Karyalaya: Rs.0.45 crore.
 
 26.  Certain elements of operational income of business segments
 forming a part of segment results used to be hitherto categorised as a
 part of other income in the Profit and Loss Account. During the
 current year the same have been regrouped under other operational
 income in the Profit and Loss Account to reflect the proper
 classification.
 
 27.  Interest income, has been shown separately as a part of other
 income during current year.