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• A. M. Naik Chairman & Managing Director

• J. P. Nayak D& President (Machinery & Industrial Products)
• Y. M. Deosthalee D& Chief Financial Officer
• K. Venkataramanan D& President(Engineering & Construction Projects)
• R. N. Mukhija D& President(Electrical & Electronics)
• K. V. Rangaswami D& President(Construction)
• V. K. Magapu D& Senior Executive Vice President(IT & Technology
• M. V. Kotwal D& Senior Executive Vice President(Heavy
• S. Rajgopal NED
• S. N. Talwar NED
• M. M. Chitale NED
• Thomas Mathew T. Nominee – LIC
• N. Mohan Raj Nominee – LIC
• Subodh Bhargava NED
• Bhagyam Ramani (Mrs.) Nominee – GIC
• A. K. Jain Nominee – UTI

N. Hariharan

L&T House, Ballard Estate, Mumbai – 400 001

M/s. Sharp & Tannan

M/s. Manilal Kher Ambalal & Co.


Sharepro Services (India) Private Limited

D - Whole-time Director
NED- Non Executive Director
Director’s Report

Business Performance:
1) 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%.

2) 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.

3) 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.

4) The company alloted the following during the year.

a) 15,00,901 equity shares under Employee Stock Option Schemes.
b) 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.
c) 40 lakh Global Depository Shares (GDS) at USD 100 each representing an
equal number of equity shares of Rs. 2/- each.

5) 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.

6) The Company has repaid rupee loans of Rs. 27 crore during the year.
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 2007-08.

Responsibility Statement:
L&T brings healthcare within the reach of the underprivileged. A priority is mother-
and-child care. Extending the reach of these services, seven new centres were opened
in Mumbai during 2007-08. Countrywide, around two hundred health camps targeted
specific diseases and specific groups.
Around 50,000 trees were planted during the year under review. In rural areas, L&T
has helped with conservation methods such as tube wells and solar lighting.
1. The fixed assets of the Company are physically verified by the Management
according to a phased programme designed to cover all items over a period of
three financial years, which in our opinion, is reasonable having regard to the size
of the Company and the nature of its assets.
2. The inventory has been physically verified by the Management during the year. In
respect of inventory lying with third parties, these have substantially been
confirmed by them.
3. The Company has not granted or taken any loans, secured or unsecured, to
companies, firms or other parties listed in the Register maintained under Section
301 of The Companies Act, 1956, of India (the Act).
4. The Company has not accepted any deposits from the public within the meaning
of Sections 58A and 58AA of the Act and the rules framed there under.
5. According to the information and explanation given to us and the records of the
Company examined by us, in our opinion, the Company is generally regular in
depositing the undisputed statutory dues including provident fund, investor
education and protection fund, employees’ state insurance, income tax, sales tax,
wealth tax, customs duty, service tax, excise duty, cess and other material
statutory dues as applicable with the appropriate authorities in India.
6. The Company has no accumulated losses as at March 31, 2005 and it has not
incurred any cash losses during the financial year ended on that date or in the
immediately preceding financial year.
7. The company has not made any preferential allotment shares to parties and
companies. Also company has not raised any money by public issue or debenture
during the year.
Management Discussion & Analysis Report

The company has produced consistently impressive financial performance in all its
parameters, namely, revenue growth, operating margins & resource utilization. The
revenues registered a robust growth of 41%. All the business segments have reported
smart increase in both revenues and profitability, despite continued input cost hikes
and a sharp appreciation of rupee vis-a-vis US Dollar.
• Revenue from International business is around 16 % and they wish to take it past
25% in coming years. Major target markets are Middle East and china apart from
Europe and Canada.

• The Engineering, Construction and Contracts Division (ECCD) has secured the
47th rank amongst all the Construction Companies across the globe. [Source:
Engineering News Record (ENR)].
• Under the current Strategic Plan “Project Lakshya 2010”, the Company has
identified and implemented various strategic initiatives encompassing
development of product/technology capabilities, risk management, M&A & HR
functions of the Operating Divisions. Various operational excellence initiatives
undertaken by these businesses have helped not only in improving market reach
and reducing cost of operation but also in streamlining business processes.
• During the year, the Company successfully acquired TAMCO Corporate
Holdings Malaysia, and its 3 international subsidiary companies, whose products
in the medium voltage (MV) switchgear segment are already accepted
worldwide. The acquisition will provide an ideal platform to pursue the
Company’s domestic and international ambitions in the MV switchgear products.
• The financing of mega and complex projects has emerged as one of the major
business opportunities. Realizing this potential, the Company has entered into
infrastructure project financing; the venture is expected to focus on mid to large
infrastructure projects with an annual target of Rs. 2000 crore disbursements.
• A unique and complex project of 17 KM long conveyor system for Lafarge in
Bangladesh was completed during the year 2007-2008.the hydrocarbon Industry
continues present significant business opportunities. The National petroleum
policy emphasizes on boosting investment in the refinery sector. Large spending
is planned in public and private sectors towards capacity enhancement, residue
up-gradation & fuel quality improvement projects. Huge investments are planned
in the upstream sector during the Eleventh Plan period (2007-2008 to 2011-
2012). Focus by the Government on development of marginal fields and
redevelopment of existing fields will also provide business prospects.
• Significant plan outlay during the Eleventh Plan period and thrust on power
sector is expected to generate opportunities in this market. Emphasis on Ultra
Mega power projects, shift towards super critical technology, continuing reforms
and increased role of the private sector will drive this industry.
• Verticalisation will help achieve the business plans, improve competitiveness and
execution strengths by articulating of focused organization structure with
dedicated resources and clear accountability for performance.
• Technology Services Division comprising two business units, e-Engineering
Solutions (e-ES) and Embedded Systems (EmSyS), operates in the rapidly
changing engineering services outsourcing landscape.
• e-ES and EmSys provides a range of IT enabled engineering services required in
the design and execution of turnkey projects. With the market likely to witness
explosive growth, both e-Engineering and EmSyS are working on integrating
their individual skill sets to provide its customers a broader spectrum of
capabilities from a common source.
• EmSyS was among the first business units in the world to achieve CMMI Level 5
certification and has additionally adopted Six Sigma Processes to enhance the
value of its services to its customers.
• e-Engineering business unit has also achieved CMMI Level 5 Certification.

Analysis of Profit and Loss Account

The sales are the revenue generated by discharging of product and services to the end
user or the intermediate. The sales for year end march 31, 2008 is Rs. 24855.00 Cr
excluded excise duty Rs. 362.61 Cr whereas sales for year 2006-07 was Rs. 17567.00
Cr i.e., a 41.49% positive change over last year.

Other Income:
The income generated from the other operations which is not the company’s regular
business. Other income includes interest received on bank deposits, long term
investments and others i.e., Rs.676.00 Cr.

Raw Material Consumed:
The consumption of raw material indicates the total net material consumed for the
production process. Consumption of raw material for the year 2008 is Rs.12314.39
Cr, i.e. an increase of 38.44% over 2007.

Manufacturing Expenses:
It includes aggregate of material costs and other directly attributable to conversion of
material to finished products. Larsen & Toubro has various manufacturing expenses
which include power and fuel, wages and processing charges etc. In year 2008
manufacturing expenses were Rs.21979.35 Cr which is an increase of 45.32% over
last year.

Selling and Distribution Expenses:

The selling expenses are the expenses which the company has incurred to make the
sale of the product. It includes advertising expenses, cost of sample, carriage outward
packaging etc. selling and distribution expenses have increased to Rs.325.63 Cr i.e. an
increase of 46.86% over last year.

Financial Expenses:
It includes expenses like interest on loan, bank charges, interest on capital and loss on
sale of fixed assets and long term investments. Financial charges have reduced in the
past one year it has reduced from Rs.158.44 Cr to Rs.203.11 Cr.

Administrative Expenses:
The administrative expenses are the expenses which company has incurred to run the
business smoothly. Here company has incurred the expenses Rent, Rate, fees and
taxes, Insurance etc. In 2004 administrative charges were Rs.1066.81 Cr which has
increased to Rs.1408.44 Cr in 2008, i.e., by 32%.

Depreciation is the expense which is a non-cash expense. Depreciation is an expense
which is incurred on the regular use of machinery or any other component which is
there for a longer period of time and used in multiple production cycle. This
production is charged on the fixed assets and a particular rate of charging depreciation
is given under Income Tax Act and company has to charge the depreciation as per the
Income Tax Act while filling the return of Income Tax. Depreciation for this financial
year is Rs.404.69 Cr. whereas depreciation of 2007 was Rs.293.44 Cr.


Net Profit:
The net profit is the result of all the business operations. Net profit of Larsen &
Toubro for 2008 is Rs.2173.00 Cr. Interestingly it is significantly greater than that of
2007, profit for 2007 was Rs.1403.00 Cr. This is after deducting tax, depreciation and
deferred tax. After this, profit is ready for appropriation.
Interim dividend paid during the year is Rs. 56.83 Cr., the proposed final dividend is
Rs.438.49 Cr. Last year total dividend was Rs.368.25 Cr.
Dividend Tax:
Larsen & Toubro paid dividend tax of Rs.76.26 Cr whereas last year Rs.53.34 Cr was
paid as dividend tax.

General Reserve:
The general reserve is created to face the future unforeseen contingencies of the
business. This reserve also gets its funds from the net profit as the Debenture
Redemption Reserve gets at the time of appropriation. Amount transferred to general
reserve has increased by 66.29% i.e., last year Rs.5711.00 Cr were transferred to
general reserve but this year the amount has been increased to Rs. 9497.00 Cr.

Shareholders’ Fund:
The share capital is the contribution of the owners of the company towards the
operations of the company. This capital is called as share capital as the members get
the shares as per their contribution. Authorized share capital is of 162,50,00,000
shares whereas only 29,23,27,390 has been subscribed for.

Reserve and Surplus:

Reserve and surplus are the funds which the company owns by the operations in the
shape of profits. In reserve and surplus, off course only profits are not there but also
other items are there but they are only the part of profits which are divided in the
appropriation. Some times addition amount get from owners as share premium can
also be seen there. Larsen & Toubro has capital reserve of Rs.10.52 Cr. and share
premium account has a balance of Rs.4223.69 Cr. General Reserves after adjustment
of intangible asset and transfer to profit and loss account is Rs.5039.41 Cr.

Secured Loans:
Secured loans are the funds arranged by the company from outside by giving some
security as guarantee to those outsiders. Secured loans for 2008 are Rs.308.53 Cr in
form of bank loans. Secured loans were as high as Rs.245.40 Cr in 2007.

Unsecured Loans:
Unsecured loans have increased from Rs.1832.35 Cr to Rs.3275.46 Cr i.e., an increase
of 78.75% from 2007.


Fixed Assets:
Fixed Assets are the assets which are acquired by the company for a longer period of
time not for just one year. These assets are charged depreciation for the amount lost
on their usage. In other words depreciation is the amount charged for the usage of
fixed assets. Fixed assets have increased from Rs.80.65 Cr to Rs.92.01 Cr in 2008.
Investments are the amount invested by the company in various securities for some
future earnings as that of interest, dividend and increase in there value. Investments
have increased by 122.97%. Investments are worth Rs.6922.26 whereas in 2007
investments were only for Rs.3104.44 Cr.

Deferred Tax Assets:

Deferred tax asset for 2008 are worth Rs.182.96 Cr, an increase of Rs.18.27 Cr from
last year’s Rs.164.69 Cr. Deferred tax assets include voluntary retirement scheme and
accrual for expenses allowable only on payment.

Current Assets, Loans and Advances:

Current assets are the assets which are convertible to cash or equal to cash. These
current assets are the Inventories, Sundry Debtors, Cash and Bank Balances, Other
current assets etc. In Inventories, we generally includes the stock and other items
helpful in production but not for long run. Loans and advances are the amount given
to person for their uses. These can be any loan to director or any advance to any
authority etc. Current assets are worth Rs.16313.52 Cr, in 2007 current assets were
worth Rs.11903.83 Cr. Current assets include inventories for Rs.4305.91 Cr, debtors
Rs.7365.01 Cr, cash and bank balance worth Rs.964.46 Cr and accrued interest worth
Rs.14.32 Cr. Loans and advances worth Rs.3663.82 Cr.

Current Liabilities and Provisions:

Current liabilities and provisions are the liabilities which a company has to pay within
one year of time. These current liabilities are in the shape of Sundry Debtors, unpaid
dividend, bank overdraft, advances and security from customers and interest accrued
but not due etc. Current liabilities have increased by Rs.3472.12 Cr. Liabilities for the
year is of Rs.11648.42 Cr and provisions are worth Rs.2035.42 Cr.
Cash Flow from Operating Activities:
The cash flow from operating activities takes into account cash generated by the
company on the basis of its day to day business activities such as buying, selling
receiving payments from clients and clearing dues to suppliers. It is important to note
that in case of Larsen & Toubro the cash generated from operating activities has
decreased from Rs. 2130.45 Cr in 2007 to Rs. 1945.24 Cr. The management needs to
look in this matter as it may lead to lower liquidity.

Cash Flow from Investing Activities:

The funds which the business receives utilizes both by buying goods and assets. Here
we basically consider those activities which include buying assets and other
investment options and profit generated from them if any. In Case of Larsen &
Toubro it is essential to note that both in 2007 and 2008 we see a cash outflow and
moreover it has increased by Rs. 3653.72 Cr this is a huge matter of concern for the

Cash Flow from Financing Activities:

Every company needs funds for its projects, regular working and carrying out its daily
activities. A company may use any method for generating funds, be it issue of shares
and debentures, acquiring loans from banks, etc. The activities mentioned above are
known as financing activities. L & T had an inflow of Rs. 3166.68 Cr in 2008 as
compared to an outflow of Rs. 31.05 Cr in 2007. This is marginally good for the
On the whole we find that there is a net cash outflow of Rs. 129.97 Cr, which raises
concerns regarding the liquidity of the company. The management needs to weed out
this growing weakness.
Ratios are the comparison of the two comparable items of the Financial Statements.
These ratios are basically the values of the comparison which has a meaningful data.
There are many types of the ratios; we will divide the ratio analysis in three parts viz.,
ratios for shareholders, lenders and managers.

1) Important ratios for shareholders

2003-04 2004-05 2005-06 2006-07 2007-08

Earning/share 21.41 38.81 38.03 50.22 75.59
ROIC 13.52 14.17 16.05 20.15 20.58
Return on
20.66 21.05 21.88 26.84 28.21
Invested Capital
2.269 2.452 2.388 2.228 1.883
Turnover Ratio
0.422 0.414 0.345 0.305 0.263
Payout Ratio
It is evident from the graphs drawn above that the company is progressing very nicely
as earning per share and return on net worth are increasing. This is a positive sign for
shareholders. However, the company’s capital turnover ratio is falling which can be a
matter of concern.

2) Important ratios for lenders.

2003-04 2004-05 2005-06 2006-07 2007-08

Gross Debt:
Equity ratio 0.49 0.56 0.32 0.36 0.38

Current ratio
1.47 1.58 1.38 1.27 1.19
Debt to total
0.341 0.367 0.248 0.269 0.276
Capital Ratio

Acid Test
1.26 1.359 1.249 1.089 1.03
From the above trend we analyze that the company is facing a problem for liquidity as
both current ratio and quick ratios are falling, lenders may take it as a negative sign
for lending money. However, the debt equity ratio is significantly low which is a very
positive sign for the company.

3) Important ratios for managers

2003-04 2004-05 2005-06 2006-07 2007-08

1.089 1.12 1.128 1.019 0.925

Collection 126.54 110.86 119.25 114.36 108.16
Gross Profit
Ratio 21.65 19.73 20.78 22.94 23.03

Net Profit
5.57 7.54 6.87 7.99 8.74
• All the business segments have reported smart increase in both revenues and
profitability, despite continued input cost hikes and a sharp appreciation of rupee vis-
a-vis US Dollar by over 10% during the year.
• The Company recognizes the importance of human leadership in realizing its
growth ambitions. Towards achieving this, the Company has initiated a structured
leadership development program to identify leaders and develop them.
• Capitalizing on its core strengths in the construction of large commercial
properties, the Company bagged one of the largest contracts for building an integrated
commercial complex at Sea woods Station, Navi Mumbai.
• Engineering, construction, contracts Division has secured the 47th rank
amongst all the Construction Companies across the globe.
• Industrial Projects & Utilities: The Sector continued its success story in the
year 2007-2008 bagging large value orders in Minerals and Metals and Bulk Material
Handling segments and executing them well ahead of contractual completion
• L&T became the first private sector company to be officially promoted as
power equipment manufacturer for large super critical thermal power plants.

• THE indifferent performance of Larsen & Toubro may lead to weakness in the
stock price. The company has reported a 76 per cent decline in earnings for the April
to June quarter in 2007 with much of the fall attributed to the cement business.
Though the company has continued to show good growth in volumes in the cement
business, but the sluggish price trends appear to be taking a toll on profitability.
Despite the possibility of a de-merger of the cement business taking place over the
next six months, the stock may continue to languish in the near term.

• The cash flow of the company is decreasing which in turn decreases the
liquidity position of the company.
• The company has a falling average collection period, which again is a matter
of concern.

• The Indian construction sector has been growing at more than 12% p.a. in the
last four years, i.e. almost 1.5 times the country’s overall growth.

• Out of the investments of USD 500 billion estimated under the Eleventh Five
Year Plan in the Infrastructure Construction business, the construction component is
expected to be around USD 250 – 275 billion. Presently, most of the core industries
are functioning at their peak capacity. New capacity creation in the major industries
viz; steel, cement, petrochemicals, etc. would benefit the construction industry.

• The efforts of the Government in bridging the gap between demand and
supply for power cannot be fruitful unless the distribution of the same to the end users
is achieved. This provides an excellent opportunity for the Electrical &
Instrumentation and the Transmission Lines businesses for furthering the growth

• The Government’s continued thrust on developing Roads in Public Private

Partnership (PPP) mode, significant private investment in Container Terminals,
development of green field ports expected along the coasts of Gujarat and
Maharashtra and development of Greenfield Shipyards and Metro Rail Projects assure
ample business opportunities for Transportation Infrastructure Sector.

• The Indo-US Nuclear Treaty is expected to give a thrust to growth in the

nuclear business of the Division.

• Huge investments are planned in the upstream sector during the Eleventh Plan
period (2007-2008 to 2011-2012). Focus by the Government on development of
marginal fields and redevelopment of existing fields will also provide business

• In the International business, Middle East is expected to be the focus area for
the Division. New refineries and petrochemical complexes are being planned in this
area. Similarly larger projects are also being implemented for exploration and
production of Oil. The Division expects to benefit from the various initiatives taken in
this region to garner significant business in the hydrocarbon sector.

• Defense Procurement Procedure (DPP) ’06 has made it essential for overseas
suppliers to have value addition from within India for major defense contracts called
offsets. The offset stipulation will drive business opportunities in the defence sector in
the medium term. This would benefit L&T who is licensed to produce defence goods.

• Initiative of the Government on distribution sector reform through APDRP

helps to create demand for electronics meter sales.

• On international front, Gulf countries will continue to witness large-scale

infrastructure development that promises big opportunities for the Electrical Standard
Products, Electrical Systems & Equipment and Control & Automation businesses.

• Demand for Hydraulic Excavators is likely to grow at 48% and Excavator

market (7 T to 60 T) is expected to grow to over 15,000 nos. thereby offering
increasing opportunities for Construction and Mining Business.

• With the market likely to witness explosive growth, both e-Engineering and
EmSyS are working on integrating their individual skill sets to provide its customers a
broader spectrum of capabilities from a common source. This combination of skills is
likely to result in opportunities to help customers transition their product design from
pure mechanical projects to ones with significant embedded electronic content.

• The GABA business added 8.5% to both sales and volume for the European

• The threats to transportation sector involve forecasting of traffic volumes
complex legal and regulatory procedures, requiring intervention / clearance of
multiple authorities. Long gestation periods also continue to weigh down PPP
• With the entry of banks in all forms of retail and wholesale lending operations
there exists very little scope by way of exclusive business segments for L&T’s
financial subsidiary company L&T Finance Ltd. (NBFCs). The competition from
domestic small/medium players has increased considerably in certain businesses.
• Vulnerability to World Macro Economic developments
The Company is exposed both directly & indirectly to uncertainties in the global
markets especially the slowdown in the USA & the EU economies. The slowdown
in these markets may hamper the credit availability, the flow of Foreign Direct
Investment and the capital investment plans of many corporates.

• Risk from Competition

L&T has been exposed to aggressive competition from a host of international (U.S,
European, Korean and other East Asian engineering & construction companies) &
domestic players in Engineering and Construction, Electrical, and Industrial Product
• Risks of Fixed Price Contracts
A significant percentage of the Company’s contracts are fixed-price contracts, won
through competitive bidding. The variations and other risks (in revenue and cost of
contract) inherent in the project business may result in the Company experiencing
reduced profitability or losses on certain projects.
• Technology Services Division comprising two business units, e-Engineering
Solutions (e-ES) and Embedded Systems (EmSyS) operates in the rapidly changing
engineering services outsourcing landscape and is vulnerable to global downturn.

Colgate primarily draws revenue from its first business segment, which
consists of oral care, personal care, household surface care, and fabric care. For
efficiency, that industry will be of primary investigation herein. While oil price
increases, the Iraq war, the SARS outbreak in Asia, increased raw material costs, and
acute pricing pressures have adversely affected consumer products companies, they
have posted notable achievements industry-wide. Most companies in this industry saw
significant earnings per share growth, and average sales growth of 4.7% during 2003,
according to Standard and Poor’s. Industry wide efficiency improvements aiming to
increase margins were overall successful despite increased spending on marketing.
Implementation of various efficiency enhancing initiatives and technologies such as
SAP business software, operating earnings increased by and average of 8.3% in 2003.
Companies in this industry have very little pricing power, due to the value
consciousness of shoppers, buying power large retailers, intense peer competition. As
a result, little price increase has been possible in recent years. Combined with higher
material costs, this has caused many firms to innovate and introduce new products to
attain the higher margins they pursue. Product innovation appears to be the primary
driver of sales growth in this industry. Standard and Poor’s suggests that large
retailers such as Wal-Mart will continue to retain significant leverage over the
producers of such goods, resulting in limited pricing increases. This may allow such
firms to pass along increased costs in the future. Further, the weak dollar bodes well
for the international companies that populate this industry. Many of the goods
consistent with this sector are constant over economic cycles. IT is expected that US
economic recovery and the advance of developing nations to continue to drive
industry wide market growth.