58th ANNUAL REPORT 2002-2003 · started yielding results. This strategy has helped improve the...

BOARD OF DIRECTORS

H. Holck-Larsen Chairman Emeritus

A.M. Naik Managing Director &Chief Executive Officer

A. Ramakrishna Deputy Managing Director &President - Operations

J.P. Nayak Whole-time Director &President - Operations

Y.M. Deosthalee Whole-time Director &Chief Financial Officer

K. Venkataramanan Whole-time Director &President - Operations

R.N. Mukhija Whole-time Director &Senior Vice President - Operations

P.M. Mehta Whole-time Director &Senior Vice President - Operations

S.S. Marathe

D.V. KapurG. Armbruster

S. RajgopalKumar Mangalam BirlaRajashree Birla

B.P. DeshmukhA.K. Doda

K.S.K. KhareKranti Sinha

COMPANY SECRETARYS.V. Subramanian

58th ANNUAL REPORT 2002-2003International Honour for our Chairman Emeritus

L&T's Chairman Emeritus Mr. Henning Holck-Larsen was honoured at the India-European Union summit for his lifetime contribution in promoting business beyondboundaries. On behalf of Mr. Holck-Larsen, Mr. A.M. Naik, L&T's CEO and Managing Director, received a plaque from the Prime Minister of India, Mr. Atal BehariVajpayee in Copenhagen in October 2002.

CONTENTS Page (nos.)Letter to Shareholders 1-2Directors' Report 3-16Network of Offices and Works in India 17L&T Organisation Structure 18Management’s Discussion and Analysis 19-38Graphs 39-4010 Years’ Highlights 41Auditors’ Report 42-43Balance Sheet 44Profit & Loss Account 45Cash Flow Statement 46Schedules forming part of Accounts 47-65Notes forming part of Accounts 66-89Statement pursuant to Section 212 of theCompanies Act, 1956 90-92Auditors' Report on consolidated financial statements 93-94Consolidated Balance Sheet 95Consolidated Profit & Loss Account 96Consolidated Cash Flow Statement 97Schedules forming part of consolidated accounts 98-110Notes forming part of consolidated accounts 111-120Annexure to Directors' Report 2002-2003 :

Reports & Accounts of Subsidiary Companies S 1 to S 94

AUDITORSM/s. Sharp & Tannan

SOLICITORSM/s. Manilal Kher Ambalal & Co.,

REGISTERED OFFICE :L&T House, Ballard Estate, Mumbai 400 001REGISTRAR AND SHARE TRANSFER AGENTSSharepro Services, Satam Industrial Estate,Chakala, Andheri (E), Mumbai – 400 099.

58th ANNUAL GENERAL MEETINGAT BIRLA MATUSHRI SABHAGAR, 19, MARINE LINES,

MUMBAI 400 020 ON FRIDAY, 22ND AUGUST, 2003 AT 3.00 P.M.

LARSEN & TOUBRO LIMITED

11

Dear Shareholders,

Indian economy continued to be in the throes of slow growthduring the year 2002-2003. Overall economic growth slid to4.3% in 2002-2003 from 5.6% in 2001-2002. These comparepoorly with the average growth rate of 6.1% between 1992-1993 and 2000-2001. In the face of the poor monsoon,leading to drought and several downside risks prevailing inthe international and domestic economy, the recorded growthrate can be viewed as significant. The Services and IndustrialSectors helped maintain the growth.

Growth in manufacturing sector - 6% as compared to 2.9%in the previous year - and the core sector - 5.2% up from3.5% - led the higher growth in the industrial sector. However,the machinery sector (excluding transport equipment)continued to languish with a growth rate of just 1.8%, amarginal improvement over the growth rate of 1.3% in 2001-2002. Sluggish demand for capital goods (excluding transportequipment), adverse impact of purchase preferences andfiscal pressures on Government expenditure continue torestrict the overall scope for business for your Company.The Company’s performance this year has to be viewed inthis background.

I am happy to report that your Company has placed itself ona solid foundation to be resilient and to exploit opportunitiesboth in the domestic and international markets. Our effortsduring the last few years to increasingly seek internationalbusiness to compensate the declining domestic potential havestarted yielding results.

This strategy has helped improve the export revenues to17% of sales in 2002-2003, up from 2% four years ago and13% last year. The emphasis on quality, delivery andcompetitiveness has been institutionalised through improvedbusiness processes making the Company more competitive.As a consequence, your Company closed the year with itsorder backlog at Rs. 14,362 crore, a 21% increase over lastyear. The international order booking more than doubled toRs. 2286 Crore. It is significant that the Company has beensuccessful in securing turnkey contracts in recent years and

the trend continues with orders booked during the year. Iwould like to particularly highlight the orders received for aGas Processing and Pipeline Project in Tanzania and aPlatform in Qatar against stiff international competition.

The Company has a very strong engineering base to caterto various industry segments. The Engineering Centres atVadodara and Mumbai, the Engineering Design and ResearchCentre at Chennai, the Front End Engineering and Designgroup at Vadodara and joint ventures for meeting capabilitygaps with Chiyoda of Japan, Sargent & Lundy of the USAand Ramboll of Denmark have significantly improved thecompetitiveness of the Engineering & Construction (E&C)business. The Company’s thrust on product development inits Electrical & Electronics businesses has reduced the timeto market contemporary products.

The Company continues its thrust on cost management.The Company is engaged in several initiatives in optimizingcosts in areas such as Supply Chain Management,Procurement and Finance. At all the cement plant locations,initiatives such as Six-sigma and Total ProductiveMaintenance have helped in maintaining our status as theleast-cost cement producer. The investment in the latestsystems and use of IT as an enabler have contributedsubstantially in reducing our delivery cycle for criticalequipment to 8-11 months from 18-20 months as well asmuch better working capital management across theCompany.

People remain the Company’s key resource. You are awareof my deep commitment to development of your Companyas a knowledge-based organisation. Two years ago, wecommenced several initiatives to map, assess and developcompetencies and to establish an environment where pursuitof knowledge will flourish. The Management LeadershipProgramme and Technology Leadership Programme areimportant steps in this direction, which have matured to thestage where they play a pivotal role in identification of potentialleaders and their career development. During the year wehave commenced similar Supervisory and ExecutiveLeadership Programmes for developing skills andcompetencies which will particularly help the Companymanage projects better. The foresight of your Company insetting up a dedicated Management Development Centre(MDC) at Lonavla is now paying rich dividends with thesuccess of these Programmes at the MDC.

Your Company set itself the goal of becoming an IndianMultinational, with greater emphasis on international business.To achieve this, we recognised the need to develop a newclass of employees capable of doing business in theinternational arena. We are, therefore, in the process ofdeveloping and grooming Global Leaders, who will be capableof operating across geographies, developing local insightsand who will assimilate their learning to create a knowledgeand data bank.

I am reminded of a character in a Russian novel who praysfor the maturity and experience of old age, the

A.M. Naik

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resourcefulness of the middle years, the enthusiasm andoptimism of youth and the sheer inquisitiveness of child-hood in quest of knowledge. I am confident that with the HRinitiatives being implemented, your Company can boast of acombination of all these in its quality manpower to take theCompany forward.

Cement Business

You are aware that the Company’s Board had approveddemerger of its Cement Business in October 2000. Even asthe Company was engaged in the process of securing astrategic or a financial partner for the Cement Business,Grasim Industries Limited (Grasim) had acquired a significantstake in your Company and submitted a proposal to demergethe Company’s Cement Business. After intense debate andconsidering all aspects of the transaction, I am pleased toinform that your Company’s Board has approved a revisedproposal from Grasim. Some of the salient features of thisrevised proposal are as under:

● Demerger of the Company’s cement business into anew Cement Company (CemCo), such that L&T’sshareholders would have an 80% stake and L&T, 20%in CemCo;

● Grasim and its associates to increase their holding toapproximately 51% with a view to take managementcontrol of CemCo through a combination of purchase ofshares from L&T at Rs.171.30 per share and from othershareholders through an open offer at the same price;

● Concurrent with this, Grasim and its associates to selltheir entire stake in L&T (post-demerger) at Rs. 120 pershare to L&T Foundation/Trusts being formed by L&Temployees.

Your Board believes that the implementation of the proposalwould unlock value for the shareholders. Further, theproceeds realised by L&T from the sale of stake in CemCo,coupled with the retention of balance stake in CemCo wouldpartially mitigate the effects of reduction in net worth. Theproposal may also provide stability to the share price of theCompany, post demerger.

The employees of L&T have an abiding commitment andsense of belonging to the Company. The concept ofFoundation/Trusts owning shares in L&T would reinforce thesame and enhance their motivation levels resulting in furthervalue creation.

I am confident that all of you would whole-heartedly welcomethis historic decision of your Board aimed at unlocking value,while at the same time laying foundation for continued growthin the interests of shareholders.

Looking ahead

With the demerger of the Cement business in place, yourCompany can now focus on its core engineering businessesto contribute to the strategic and critical sectors of theeconomy. The Government has embarked on attaining an

economic growth rate of 8% per annum in the future. Industryand, more particularly, manufacturing will be the fulcrum forthis growth. The Budget for 2003-2004 has emphasized theneed for augmenting the quantity and quality of infrastructurein the country and has announced various infrastructureprojects in roads, ports, railways and convention centresestimated at Rs. 60000 crore. We see this offering anopportunity to the E&C business Divisions, simultaneouslyproviding backward linkages to the other business Divisions.

There are other positive signs in the environment in whichwe operate. There is immense scope with the opening up ofdefence sector. Your Company is already engaged in thisendeavour and has obtained several licences for acomprehensive range of equipment and is exploring alliances.The revival in the hydro carbon sector in the oil producingcountries presents yet another opportunity. Considerablegrowth potential also exists for our Information Technologybusiness with our vast domain & functional knowledge andequally strong global delivery model. Your Company is, hence,uniquely positioned in all its major businesses to capitalizeon the imminent growth prospects.

The Company is poised to further expand its internationalbusiness through registrations with all major companies andproject authorities. The Company is also looking atestablishing overseas offices at select locations andpositioning the L&T brand in the target countries.

Your Company has always been conscious of its role towardssociety and the environment. During the year, the Company’sHealth centre at Andheri in Mumbai added Dhrishti, anophthalmic clinic to carry out pre-operative fitness tests onpatients diagnosed for cataract. Your Company is one of thevery few to launch HIV prevention activities for the employees,their families and the community at large. The Companyruns balwadis or nurseries for village children, apart fromconducting adult education programmes

The Company won various prestigious awards during theyear. I would like to make a special mention of the Awardconferred on our Co-founder and Chairman EmeritusMr. Henning Holck-Larsen by the Third India-European UnionBusiness Summit for his lifetime contribution in promotingbusiness beyond boundaries and for promoting internationalunderstanding. I was indeed privileged to receive the Awardfrom the EU President and the Citation from the PrimeMinister of India at a glittering function held in Copenhagen.

I wish to place on record the exemplary dedication and thehard work of our employees, which was responsible for theimproved performance. The Company’s quest towardscreating value would not have been possible but for thesupport that my colleagues and I received from all customers,business associates and shareholders. I am grateful to themfor their continued confidence in the management.

A.M. NaikManaging Director and Chief Executive Officer

Mumbai : 30th June, 2003


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Directors' reportThe Directors have pleasure in presenting their AnnualReport and Accounts for the year ended 31st March, 2003.

FINANCIAL RESULTS

2002-2003 2001-2002Rs. crore Rs. crore

Profit before depreciation and tax 814.77 725.55Less : Depreciation on Fixed Assets 306.24 326.88

508.53 398.67Add : Transfer from Revaluation

Reserve 1.67 1.81Profit Before Tax 510.20 400.48Provision for Tax 77.10 53.68Profit After Tax 433.10 346.80Add : Balance brought forward

from previous year 53.48 48.36Balance available for disposal 486.58 395.16which the directorsappropriate as follows :

Foreign Projects Reserve 3.00 8.36Housing Projects Reserve 2.25 3.98Dividend 186.80 174.34Dividend tax 23.93 -General Reserve 220.00 155.00

435.98 341.68

Balance to be carried forward 50.60 53.48

DividendThe directors recommend payment ofdividend of Rs.7.50 per share ofRs. 10/- each on 24,86,68,756 shares 186.51 174.07The dividend in respect of3,88,956 shares, if and when allotted 0.29 0.27

186.80 174.34

YEAR IN RETROSPECT

The sales and other income for the financial year underreview, were Rs.10124.17 crore as against Rs. 8384.97crore for the previous financial year registering an increaseof 21%. The Profit before tax (after interest and depreciationcharges) of Rs. 510.20 crore and the Profit after tax ofRs.433.10 crore for the financial year under review asagainst Rs.400.48 crore and Rs. 346.80 crore respectivelyfor the previous financial year, improved by 27.4% and24.9% respectively.

FINANCE

During the year, the Company raised funds aggregatingRs. 325 crore from wholesale debt market through privatelyplaced debentures and redeemed debentures includingthose allotted earlier, aggregating Rs.509.54 crore.

CAPITAL EXPENDITURE

As at 31st March, 2003, the gross fixed assets stood atRs. 6231.79 crore and the net fixed assets at Rs. 4048.27crore. Additions during the year amounted to Rs. 128.88crore.

DEPOSITS

1299 Deposits totalling Rs. 1.16 crore due for repaymenton or before 31st March, 2003 were not claimed by thedepositors on that date. As on the date of this report,deposits aggregating Rs.0.47 crore thereof have beenclaimed and paid or renewed.

TRANSFER TO INVESTOR EDUCATION & PROTECTIONFUND

During the year, the Company has transferred a sum ofRs. 95,21,976/- being the amount due & payable andremaining unpaid for a period of 7 years, as provided inSection 205C of the Companies Act, 1956.

SUBSIDIARY COMPANIES

During the year under review, the Company had subscribedto 2,00,00,000 equity shares of SLR 10/- each amountingto INR 101,331,935/- against the rights issue of Larsen &Toubro Ceylinco (Private) Limited – an existing subsidiaryof the Company.The Company purchased 1,14,286 equity shares of OmanRiyals 1/- each in Larsen & Toubro (Oman) LLC increasingits stake to 65% of the paid-up capital, thus making it asubsidiary of the Company.The Company subscribed to the rights offer, totaling to49,900 equity shares of Rs. 10/- each in Bhilai Power SupplyCompany Limited (BPSCL) with a view to maintaining theminimum paid up capital of Rs. 5 lakhs prescribed by theCompanies Act, 1956. BPSCL thus became a subsidiary ofthe Company.The Company subscribed to 59,998 equity shares ofRs. 10/- each and acquired 2 equity shares of Rs. 10/-each in L&T Power Investments Private Limited (LTPIPL),making it a wholly owned subsidiary of the Company.LTPIPL subscribed to 49,998 equity shares of Rs. 10/-each and acquired 2 equity shares of Rs.10/- each (100%of the paid-up capital) in Raykal Aluminium Company PrivateLimited which became a wholly owned subsidiary of LTPIPLand consequently a subsidiary of the Company.L&T Holdings Limited (LTHL) a subsidiary of the Companysubscribed to 50,000 equity shares of Rs. 10/- each (100%of the paid-up capital) in Cyberpark Development &Construction Limited which became a wholly ownedsubsidiary of LTHL and thus a subsidiary of the Company.The name of Hyderabad International Trade ExpositionCentre Limited, a subsidiary of L&T Infocity Limited waschanged to ‘Hyderabad International Trade ExpositionsLimited’ (HITEX) with effect from 13th May 2002.(HITEX) subscribed to 9,998 equity shares of Rs. 10/- eachfully paid up (99.98% of the paid-up capital) in AndhraPradesh Expositions Private Limited (APEX). APEX thusbecame the subsidiary of HITEX and consequently asubsidiary of the Company.The Financial Year of Narmada Cement Company Limited(NCCL) has been extended to end on 30th September,2003 pursuant to approvals received in that regard.


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As required under Section 212 of the Companies Act, 1956,the Audited Statement of Accounts, the Reports of theBoard of Directors and Auditors of the subsidiary companiesexcluding that of Narmada Cement Company Limited areannexed.

AUDITORS’ REPORT

The Auditors’ Report to the Shareholders does not containany qualifications.

DISCLOSURE OF PARTICULARS

Information as per the Companies (Disclosure of Particularsin the Report of Board of Directors) Rules, 1988 relating toConservation of Energy, Technology Absorption, ForeignExchange Earnings and Outgo are given in Annexure ‘A’forming part of this Report.

OTHER DISCLOSURES

The disclosures required to be made under the Guidelineson Employees Stock Options Scheme are given in Annexure‘B’.

Pursuant to clause 49 of the listing agreement, a Reporton Corporate Governance is given in Annexure ‘C’.

PERSONNEL

The Board of Directors wishes to express its appreciationto all the employees for their outstanding contribution tothe operations of the Company during the year. Theinformation required under Section 217(2A) of theCompanies Act, 1956 and the Rules made thereunder, aregiven in the Annexure to this Report and forms part of theReport. In terms of Section 219(1)(b)(iv) of the Act, theReport and Accounts are being sent to the Shareholdersexcluding the aforesaid Annexure. Any Shareholderinterested in obtaining copy of the same may write to theCompany Secretary at the Registered Office. None of theemployees listed in the said Annexure is a relative of anyDirector of the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Board of Directors of the Company confirms:

I. that in the preparation of the annual accounts, theapplicable Accounting Standards have been followedand there has been no material departure;

ii. that the selected Accounting Policies were appliedconsistently and the Directors made judgments andestimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of theCompany as at March 31, 2003 and of the profits ofthe Company for the year ended on that date;

iii. that proper and sufficient care has been taken for themaintenance of adequate accounting records inaccordance with the provisions of the Companies Act,1956 for safeguarding the assets of the Company andfor preventing and detecting fraud and otherirregularities; and

iv. that the Annual Accounts have been prepared on agoing concern basis.

DIRECTORSMr. A. Ramamurthy resigned as Director of the Companywith effect from 15th February 2003. He was a Directorsince April 2001, representing the Life Insurance Corporationof India. He was also member of the Audit Committee. TheBoard of Directors deeply regret the sudden demise ofMr. A. Ramamurthy on 23rd February 2003 and expresstheir heartfelt condolences to his family.

The Directors record their appreciation of the valuableservices rendered by Mr. A. Ramamurthy.

At the meeting of the Board of Directors held on 15thFebruary 2003, Mr. K.S.K. Khare was appointed as Directorliable to retire by rotation, representing the Life InsuranceCorporation of India, in the casual vacancy caused by theresignation of Mr. A. Ramamurthy.

At the same meeting Mr. Kranti Sinha was appointed as anAdditional Director, representing the Life InsuranceCorporation of India, who holds office up to the date of theensuing Annual General Meeting. The Company hasreceived Notices from Members under Section 257 of theCompanies Act, 1956, proposing his appointment asDirector.

Mr. B.P. Deshmukh, Dr. G. Armbruster, Mr. S. Rajgopal,Mr. J.P. Nayak and Mr. Y.M. Deosthalee retire from theBoard of Directors by rotation and are eligible for re-appointment.

CONSOLIDATED FINANCIAL STATEMENTS:Your directors have pleasure in attaching the ConsolidatedFinancial Statements prepared in accordance with theAccounting Standards prescribed by the Institute ofChartered Accountants of India, in this regard.

The auditors have in their Report on Consolidated FinancialStatements qualified, as a prior period adjustment, the reversalof Deferred tax liability of Rs.24.77 crore provided by one ofthe subsidiaries as at 31.3.2002. The said subsidiary (IndiaInfrastructure Developers Limited) has become a Non-BankingFinancial Company (NBFC) during the year. The reversal ofthe deferred tax liability is on account of the Managementdecision to follow a uniform policy of recognizing deferred taxliability for all NBFCs in the Group.

AUDITORSThe Auditors, M/s. Sharp & Tannan, hold office until theconclusion of the ensuing Annual General Meeting and arerecommended for re-appointment. Certificate from theAuditors has been received to the effect that their re-appointment, if made, would be within the limits prescribedunder Section 224(1B) of the Companies Act, 1956.

ACKNOWLEDGEMENTThe Board of Directors thank the Financial Institutions,Banks, Central and State Government authorities and allthe stakeholders for their continued co-operation andsupport to your Company.

For and on behalf of the Board

S.S. Marathe A.M. NaikDirector Managing Director

Mumbai, 29th May, 2003.


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Annexure ‘A’ to the Directors’ Report(Additional information given in terms of notification issued by the Department of Company Affairs)

[A] CONSERVATION OF ENERGY:

(a) Energy conservation measures taken

Modifying equipment to reduce power consumption

Reducing the pressure drop by modifying coal mill bag filter,installation of DD cones in kiln string second stage cyclone,increasing kiln down-comer diameter and increasing calcinervessel height to improve heat recuperation.

Using more cost effective / efficient equipment

✮ Installing belt bucket elevator for kiln feed systeminstead of pneumatic one.

✮ Installing double flap gates in gas conditioning towercircuit to reduce false air entry and thus reducing thegas volume needed.

Switching off when not needed

✮ Auto switching off water coolers and overhead lights inshops, offices and conference rooms.

✮ Providing individual instead of group control, for lights.

✮ Using ductable air conditioners instead of central AC.

✮ Auto switching off of machines like heavy-duty lathes,high frequency motors & rolling machines and auxiliariesof welding rectifiers.

✮ Elimination of idle run of equipments.

Applying right voltage/ Using rating appropriate for theload

✮ Controlling and applying appropriate voltage to lightingcircuit and other load through dedicated transformer /stabilizer/ on line tap changer.

✮ Changing mode of connection from delta to star formotors where appropriate

✮ Using lower rated compressor instead of higher ratedone.

✮ Using appropriate rated motors / transformers.

Using energy efficient devices

✮ Replacing illuminating devices like lamps, ballasts andreflectors with energy efficient ones.

✮ Using energy efficient motors, fans and Lehr fanimpellers.

✮ Using energy efficient medium frequency inductionfurnace and improved burner system.

✮ Installing variable frequency drive in furnace tankcooling blower.

Minimising the need /usage/no. of devices

✮ Reducing dependence on artificial lighting by improvingnatural light with measures like use of translucent roof,opening windows, studying illumination needs andeliminating/ switching off tube lights.

✮ Improving illumination on shop floor by lowering tubelight fixtures.

✮ Using solar lights in place of sodium vapour lamps.

Minimising the loss✮ Converting indirect drive to direct drive to eliminate

losses in speed reduction mechanism and alsoextending the machine life.

✮ Reducing loss of heat in annealing lehr with heatresistant paint.

✮ Avoiding loss of air by installing auto moisture drain incompressors.

✮ Reducing leakages of compressed air.

✮ Monitoring capacitor bank to attain unity power factor.

Modifying process to eliminate / reduce use of electricity✮ Optimising crane movement by effective planning &

shop layouts.

✮ Installing gas vapouriser in place of electric heatedvapouriser.

✮ Replacing cooling fan by heat exchanger using availablewater.

✮ Changing over to less energy intensive, eco-friendlyplating process and replacing chilling plant by a surpluscooling tower.

✮ Using LPG instead of electricity in canteen boiler forcooking.

✮ Disconnecting standby transformer to save on no loadlosses.

✮ Creating redundancies and removing machines

✮ Continuation and increasing scale of measures takenin earlier years

(b) Additional investments and proposals, if any, beingimplemented for reduction of consumption of energy:✮ Installing slip power recovery system, variable speed

drive and variable frequency drives.

✮ Increasing height of calciner vessel for better heatrecuperation.

✮ Optimising operation of process fan and installing highefficiency fans/impellers.

✮ Installing occupancy sensors to switch off tube-lightsand air conditioners when offices, cabins, conferencerooms, and cloak rooms are not occupied.

✮ Using natural light, energy efficient tube-lights, energysavers like electronic ballasts and multi-tap ballast forapplying right voltage to street lights.

✮ Improving system power factor and system voltage forlighting.

✮ Cooling the terrace to reduce inside buildingtemperature.

✮ Conducting energy audit.

✮ Continuation and increasing scale of measures takenin earlier years.

(c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequentimpact on the cost of production of goods:

✮ The measures taken have resulted in savings in the cost of production.


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(d) Total Energy Consumption and Energy Consumption per unit of production as per Form A in respect of industries specified in the Schedule :

FORM A

Disclosure of particulars with respect to conservation of energy

Glass Glass Cement Cement2002-2003 2001-2002 2002-2003 2001-2002

A. POWER AND FUEL CONSUMPTION1. Electricity:

(a) Purchased @Unit ‘000 kWh 23854 23048 325318 224154Total Amount Rs.crore 8.49 8.51 117.85 92.83Rate/Unit Rs. 3.56 3.69 3.62 4.14(b) Own generation @

(i) Through diesel generatorUnit ‘000 kWh 96.92 33.90 207025 290541Units (kWh) per ltr. of fuel oil KWh/ltr. 2.62 2.90 4.15 4.05Cost/Unit Rs. 6.93 6.80 2.71 2.21

(ii) Through Steam Turbine/GeneratorUnit ‘000 kWh 294380 267129Units (kWh) per kg of Coal KWh/kg Nil Nil 1.02 1.07Cost/Unit Rs. 1.18 1.11

(iii) Through SteamTurbine/GeneratorUnit ‘000 kWh 289178 274082Units (kWh) per kg of Naphtha KWh/kg Nil Nil 3.54 3.37Cost/Unit Rs. 3.04 2.65

2. Coal:i) Used in kilns:

Calorific Value Range kcal/kg 3800-6750 3800-6750Quantity Tonnes 1704594 1541172Total cost Rs.crore Nil Nil 269.69 259.35Average rate Rs./Tonne 1582 1683

ii) Used in Captive power plants:Calorific Value Range kcal/kg 3000-3500 3800-4200Quantity Tonnes 288325 250476Total Cost Rs.crore Nil Nil 34.77 29.91Average rate Rs./Tonne 1206 1194

3. Furnace Oil: *Quantity k. ltrs. 10936 9777 149137 169749Total cost Rs.crore 11.17 8.12 164.29 153.39Average Rate Rs./k. ltr. 10214 8308 11016 9036

4. Others : Propane/LPGQuantity Tonnes 2398 2234Total Cost Rs.crore 3.82 3.07 Nil NilRate/Unit Rs./Tonne 15930 13742

B. CONSUMPTION PER UNIT OF PRODUCTION2002-2003 2001-2002 2002-2003 2001-2002

Product : Tonne Glass Glass Cement CementElectricity kWh 306 334 88 91Furnace Oil * ltr. 140 141 0.41 0.31Coal Tonne Nil Nil 0.13 0.13Calorific value range of coal kcal/kg - - 3000-6750 3800-6750Propane kg 31 32 Nil Nil

* includes HFO, HSD, LDO & Naphtha@ Decrease in electricity generation and increase in purchased electricity in cement works is due to Durgapur plant beingoperational throughout the year and Hirmi plant changing over from DG set to Grid supply.

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[B] TECHNOLOGY ABSORPTION:(e) Efforts made in technology absorption as per Form B.

FORM B(Disclosure of particulars with respect to Technology Absorption)

RESEARCH AND DEVELOPMENT (R & D) :1. Specific areas in which R&D carried out by the

Company :n Development of new products/designs/processes/

methods/materials/machines/ tools, improvementof systems in existing products/processes andvalue engineering, analytical engineering, processsimulation in related manufacturing areas of :Industrial machinery, defence equipment, rubberprocessing machinery, glass bottles, cement/mineral/chemical/thermal processes, capabilities for weldingdifficult materials, configurations, weld overlays,conserving weld metal, improving finish and reducingcycle time. Automatic temperature controlling &recording system for pre / post heating applications.Transmission line towers, various types of concrete,high performance special concrete mixes usefulfor special structures, like nuclear power plants,bridge girders/piers, deck slabs, high-rise buildings;aerated/foam/light-weight, self compacting,pumpable, structural, low shrinkage concrete;concrete using fly-ash, blast furnace slag and lessportland clinker, using quarry dust in place of sand,third generation plasticizers, factory made panelsystem and construction methods,Electrical/electronic switchgear products, medicalequipments, energy meters & relays, petroldispensing pumps.

n Development of capabilities for carrying out difficultmachining operations with a high precision, forwelding super duplex materials, for automatedcontrol of welding operations as well as formathematical modeling, simulation studies andnumerical analysis.

n Development of software for auto-generation ofCNC programme from AutoCAD drawings formachining operations, for trouble-shooting ofmachining operations.

n Testing & certification of existing products forconformity to new Indian / international standardsas well as obtaining technical approval fromconsultants and customers. Participation in thestandardization activities, monitoring patents andother IPR-related matters.

2. Benefits derived as a result of above R & D :n Cost reduction / improved utilization / productivity

and competitive pricingn Technology upgradation.n Enhancement in quality and service to the

customers.n Introduction of new/ world class products and

processes.n Awards in recognition of good designs of products

and packaging.n Maintaining market leadership / preparedness to

counter competition.n Bringing out eco-friendly products and reducing

environmental pollution.n Reducing manufacturing / delivery time.n Making products user friendly.

n Catering to changing / unique needs of thecustomers.

n Generating know-why as well as know-how.n Attaining qualification of our processes from

internationally recognised bodiesn Indigenisation / import substitution.

3. Future Plan of Action :n Continuation of the present work in R&D for faster

introduction of new products and processes,improvement in the existing products andprocesses for catering to changing needs ofcustomers and continuously benchmarking againstthe best in the class globally.

n Continuing efforts in value engineering and costreduction.

n Strengthening infrastructure for R&D with testfacilities, software for CAD and analytical andsimulation studies.

n Improving interaction with research / educationalinstitutions.

n Improving properties of materials like polymermodified bituminous mixtures, and durability ofconcrete mixes.

4. Expenditure on R & D :(Rs. crore)

2002-2003 2001-2002

(a) Capital 0.57 1.20(b) Recurring 22.12 19.77(c) Total 22.69 20.97(d) Total R&D expenditure

as a percentage oftotal turnover 0.23% 0.26%

TECHNOLOGY ABSORPTION, ADAPTATION ANDINNOVATION:1. Efforts in brief, made towards technology

absorption, adaptation and innovation :n Training of personnel abroad for exposure to

the latest products / designs, manufacturingtechnologies, processes and constructionpractices.

n Participating in national/international conferences,seminars and exhibitions.

n Imparting training to personnel by foreigntechnicians in various manufacturing / constructiontechniques.

n Valuation/adaptation/modification of importeddesigns/technologies to suit indigenousrequirements, alternative materials/components.

n Arametric studies, evolving theoretical models dulyvalidated by experimental studies at in-houselaboratories and pilot plants as well as feedbackand operating data during commissioning of variousplants and machinery.

n Scanning of information on technology and IPRrelated fields

n Collaborative efforts with educational institutionsfor technology up gradation.


8

n Use of state of the art front line equipment andmethods

n Learning technology by working with world leaders,technology partners

n Analysing feedback from users to improve products& services.

2. Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc. :n Improvement in existing processes and product

quality, performance, productivity, safety, productreliability & serviceability to attain global standards.

n Cost reduction, competitive edge and leadershipin market.

n Reducing capital cost, and maintenance/ operatingcost to end user

n Import substitution and reduced dependence oncollaborators.

n Expansion of product range.n Better accuracy, speed, safety standards,

aesthetics and economy in construction.n Saving in foreign exchange.

3. Information regarding technology imported duringthe last 5 years

Technology Imported Year ofImport Status

1 Cryogenic storage ofliquefied gases 1998 Absorbed

2 High lift wagon tippler, 1998 Absorbedside arm charger andbarrel reclaimer

3 Spreader mobile transfer 1998 Under absorptioncar, ship loaders, levelluffing cranes

4 Dense phase ash handling 1998 Under absorptionsystem

5 Low pressure synthesis 1999 Absorbedprocess for ammonia

6 Modular formwork & H-20 1999 Absorbedsteel beams as replacementof timber beams

7 Helical heat exchanger 2000 Absorbed

8 High speed paper machines 2000 Under absorptionusing recycled waste paper

9 Global positioning system for 2001 Under absorptionconstruction of breakwater

10 Reactor, pressure vessels, 2001 Absorbedcolumns and equipment inChrome-Molly-VanadiumSteel construction

11 Tuyere stocks, overburden 2001 Under absorptionprobe dewatering drum

12 Steel plant equipment – 2002 Under absorptionElectro cleaning line

13 Port equipment – 2002 Under absorptionship unloader

14 Wind mill components 2002 Under absorption

15 Beam former technology 2002 Absorbedfor ultrasound scanners

Technology Imported Year ofImport Status

16 Software for 3D imaging in 2002 Under absorptioncolour doppler

17 Boring of shield tunnels 2002 Under absorptionusing tunnel boring machines

18 Ship unloader and small 2002 Under absorptioncapacity pipe conveyor

[C] FOREIGN EXCHANGE EARNINGS AND OUTGO :(f) Activities relating to exports; initiatives taken to increase

exports; development of new export markets forproducts and services; and export plans :

Overview:The Company has a diversified range of products. Eachbusiness group of the company has dedicated cells, forgiving impetus to exports. The Company regularlyparticipates in prestigious international exhibitions andconducts market surveys and direct mail campaigns. Thecompany has offices abroad and agents in various countriesto help exports. The Company is intensifying efforts inselected countries and exploring new markets. TheCompany is expanding reach of new products throughsynergy with existing products. International EPC projectsand export of heavy engineering equipment has beenidentified as thrust area.Products and services exported:Exports cover fabricated equipment, electrical/ electronicswitchgear products, medical equipments, petrol dispensingpumps, cement, metal bottle closures, glass bottles, weldingelectrodes, etc.The company has been receiving export orders for criticalequipment from major International EPC contractors andcustomers. The company is executing various projectsabroad.The company is continuously exploring avenues to increase exports.A few initiatives detailed:Engineering and Construction division’s efforts forinternational marketing consisted of following activities:1. Brand building/Image creation vis-à-vis L&T’s EPC

capabilities.2. Pre-qualif ications & registrations with several

international clients/authorities3. Market surveys, intelligence gathering, closer rapport

with potential customers.4. Creation of dedicated website, registration with major

search engines like Google.5. Starting the process of e-Commerce vis-à-vis e-

Procurement & reverse auctioning.6. Establishment of “Joint business council” with business

associatesThe Division is overcoming the “Indian”ness by leveragingassociation with Global process/technology licensors, andglobal presence of Larsen & Toubro Infotech & ConstructionDivision of L&T.Active representations were made to major clients &prominent international EPC players in various countries,resulting in getting the Division qualified and registeredwith authorities.


9

Initial efforts on L&T brand building has started yieldingresults with increased acceptance and awareness of L&Tas a major EPC Company especially in GCC countries.The division has already made a foot hold in the Oil andGas EPC business with the award of Sulfur recovery unitsfor refineries in Kuwait, gas recovery and pipe line projectin Tanzania and offshore platform for petroleum in Qatar.The division is bidding for major oil and Gas projects in theMiddle East. The division is also focusing on high potentialcountries like Iran, Nigeria, CIS and Far East.The Division’s strategy for the focus countries is to haveselective and competitive bidding, commitment throughrelationship and local presence and selective partneringwith local contractors.The Division is also looking at close alliances and synergiesin Gulf with fabrication yards and installation contractors.The penetration to other geographical areas will be throughbusiness consultants and local agents or companies.The Division is building competency in vital areas like riskmanagement, innovative finance management, globalsourcing, international safety and quality bench marking tomeet the global challenges.Construction Division, to expand the international business,is bidding for a number of jobs in UAE & other countries inMiddle East, neighbouring countries, CIS countries. JointVenture companies formed in Saudi Arabia, Oman andMalaysia for focused attention are participating in manytenders. A three pronged action plan to bag export ordershas been adopted.n Bidding for International EPC contractors in Asia Pacific

region.n Bidding jointly with collaborators / associates in third

countries.n Working as sub-contractors /suppliers for our

collaborators who have already bagged EPC / supplyorders.

In order to capitalise on the opportunities in heavyengineering equipment, the company has stationedpersonnel in USA. Looking at the business potential fromChina and Brazil, the Company is also in the process ofidentifying local agents / representatives in those markets.Electrical and electronics division has actively participated/led the delegation of Indian Electrical Industry to focusscountries like Saudi Arabia and Bahrain and made thepresence felt in International exhibitions. The Division islocalising its operations in identified markets by basing itspersons, setting up offices, appointing and developingdistributors, customizing products, warehousing, intensifyingpost sales support, obtaining approval and internationalcertification.Systems’ Certification:The quality systems of the Company at its works/officeslocated at Powai, Ahmednagar, Chennai, Faridabad, Hazira,Kansbahal, Mysore, Madh, Nashik, Pondicherry andVadodara have received ISO 9001 standard certification.The certification covers design and manufacture of boilers,pressure vessels, heat exchangers, reactors, power

projects and other equipment fabricated with ferrous and non-ferrous materials, turnkey projects covering marketing,design, engineering, project management, procurement,manufacturing, erection, construction and commissioningat site. Electrical/ electronic switchgear products, medicalequipments, energy meters & relays, petroleum metering& dispensing units, glass bottles, transmission line works,ready mix concrete and machinery, equipment, spares &castings for core industrial sectors like chemical, cement,steel, power & minerals and rubber processing are alsocovered under the ambit of ISO 9001 certification.The following operations have received ISO 9002 standardcertification for quality systems:n Manufacture of cement at Awarpur, Hirmi, Kovaya,

Jharsuguda & Tadipatri.n Manufacture of bottle closures at Powai.n Fabrication of steel structures, vessels, tanks and

manufacture of material handling equipment at Chennai.Operations at Powai for design and manufacture of electricalswitchgear, petroleum metering & dispensing units and atTadipatri for manufacture of cement, Pondicherry andPithampur works for manufacture of transmission line towershave been certified for environmental standards ISO 14001,as well as for Occupational Health & Safety ManagementSystem – OHSAS 18001.Operations at Awarpur, Hirmi, Kovaya, Jharsuguda andArakkonam, for manufacture of cement have also beencertified for environmental standards ISO 14001.Business Sectors/Units and service functions of ECCConstruction Division has been certified under ISO 9001.n Building & Factories Sectorn Civil, Transportation & Infrastructure Sectorn Engineerign Design and Research capabilitiesn Transmission Lines & Railway Electrificationn Plant and Machineryn Power Proejcts constructionn Safety, Personnel & Organisation Development and

Materials DevelopmentProduct certification:Efforts are being made to develop new markets andconsolidate the existing ones by developing products andservices conforming to international standards. Thecompany has obtained EN Certification, CSA Certification,CE marking, FDA certification, UL listing as well as ASTAcertification for key products of electrical and electronicsdivision.(g) Total Foreign Exchange used and earned :

(Rs. crore)

2002-2003 2001-2002

Foreign Exchange earned 1552.42 1151.60Foreign Exchange saved /

deemed exports 255.60 194.19Total 1808.02 1345.79Foreign Exchange used 1348.94 1090.48


10

Annexure ‘B’ to the Directors’ ReportInformation required to be disclosed under SEBI (ESOS & ESPS) Guidelines, 1999:A. (a) Options granted : 10,66,000 Stock Appreciation Rights (SARs)

(b) The pricing formula : Grant Price for the purpose of ascertaining the appreciation

Average of daily High Low Averages of the Company’s Share priceon the Bombay Stock Exchange during the year April 1998 – March1999. This worked out to Rs.199/- per share.

(c) Options vested : 8,27,625 SARs

(d) Options exercised : 2,66,500 SARs

(e) The total number of shares : 1,04,318 Equity shares arising as a result of exercise of option

(f) Options lapsed : 5250 SARs

(g) Variation of terms of options : NIL

(h) Money realised by exercise of options : Rs.10,43,180/-

(i) Total number of options in force : 7,94,250 Stock Appreciation Rights (SARs)

(j) Employee-wise details of options granted to –

i) Senior Managerial Personnel : No. of SARs

Mr. A.M. Naik 1,25,000

Mr. A. Ramakrishna 80,000

Mr. M. Karnani 40,000

Mr. J.P. Nayak 60,000

Mr. Y.M. Deosthalee 60,000

Mr. K. Venkataramanan 60,000

Mr. R.N. Mukhija 30,000

Mr. P.M. Mehta 30,000

4,85,000

ii) Any other employee who receives a grant : NONE

in any one year) of option amounting to

5% or more of option granted during that year.

iii) Identified employees who were granted option : NONE

during any one year, equal to or exceeding 1%

of the issued capital (excluding outstanding

warrants and conversions) of the Company

at the time of grant.

(k) Diluted Earning per Share (EPS) pursuant to issue of : RS. 13.98

shares on exercise of option calculated in accordance

with Accounting Standards (AS) 20.

B. (a) Options granted : 39,48,800 Equity shares

(b) The pricing formula : The average market price on the Bombay Stock Exchange on thedate of grant i.e., 1st June 2000 – Rs.184/- per share.

(c) Options vested : 20,66,675 Equity shares

(d) Options exercised : 5715

(e) The total number of shares : 5715

arising as a result of exercise of option

(f) Options lapsed : 86,750 Equity shares


(h) Money realised by exercise of options : Rs.10,51,560/-

(i) Total number of options in force : 38,56,335 Equity shares


11

Annexure ‘B’ to the Directors’ Report (contd...)(j) Employee-wise details of options granted to –

i) Senior Managerial Personnel : No. of Options / Shares

Mr. A.M. Naik 2,00,000

Mr. A. Ramakrishna 1,25,000

Mr. M. Karnani 42,000

Mr. J.P. Nayak 1,00,000

Mr. Y.M. Deosthalee 1,00,000

Mr. K. Venkataramanan 1,00,000



7,87,000


in any one year) of option amounting to 5%

or more of option granted during that year.






(k) Diluted Earning per Share (EPS) pursuant to : RS. 13.98

issue of shares on exercise of option

calculated in accordance with

Accounting Standards (AS) 20.

C. (a) Options granted : 37,81,100 Equity shares

(b) The pricing formula : The average market price on the Bombay Stock Exchange on thedate of grant i.e., 19th April 2002 (A Series) – Rs.172/- per share.

(c) Options vested : NIL

(d) Options exercised : NIL

(e) The total number of shares : Not applicable


(f) Options lapsed : 32200


(h) Money realised by exercise of options : NIL


(l) Employee-wise details of options granted to –


Mr. A.M. Naik 2,00,000

Mr. A. Ramakrishna 1,25,000

Mr. J.P. Nayak 1,00,000





7,95,000










12

Annexure ‘B’ to the Directors’ Report (contd...)(k) Diluted Earning per Share (EPS) pursuant to : Rs.13.98




NOTE : The Board of Directors, at their meeting held on 14th June 2002, decided to cancel 37,58,700 options granted on 20th April 2001 atRs.212/- per share and reissue the same as above.

D. (a) Options granted : 37,81,660 Equity shares

(b) The pricing formula : The average market price on the Bombay Stock Exchange on thedate of grant i.e., 19th April 2002 (B Series) – Rs.172/- per share.

(c) Options vested : NIL

(d) Options exercised : NIL

(e) The total number of shares : Not applicable


(f) Options lapsed : 6500


(h) Money realised by exercise of options : NIL


(j) Employee-wise details of options granted to –


Mr. A.M. Naik 2,00,000

Mr. A.Ramakrishna 90,000

Mr. J.P. Nayak 1,20,000





7,70,000






of the issued capital (excluding outstanding warrants

and conversions) of the Company at the time of grant.

(k) Diluted Earning per Share (EPS) pursuant to : RS. 13.98




AUDITORS’ REPORT ON EMPLOYEE STOCK OPTIONS SCHEMES

We have examined the books of account and other relevant records and based on the information and explanationsgiven to us, certify that in our opinion, the Company has implemented the Employee Stock Options Schemes inaccordance with SEBI (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999and the Resolutions of the Company passed at the General Meeting held on 26th August, 1999.

SHARP & TANNANChartered Accountants

by the hand of

F.M. KOBLAMumbai, 29th May, 2003. Partner


13

Annexure ‘C’ to the Directors’ ReportCorporate Governance(a) Company’s philosophy

The Company believes in and practices good CorporateGovernance. The Company’s essential character is shapedby the very values of transparency, professionalism andaccountability. The Company continuously endeavours toimprove on these aspects on an ongoing basis.

(b) Board of DirectorsThe Board of Directors comprises a Managing Director, 6Executive Directors and 11 Non-executive Directors,including a nominee of a lending institution.During the year, 7 Meetings of the Board of Directors wereheld, (on 19.4.2002, 14.6.2002, 31.7.2002, 29.10.2002,7.12.2002, 29.1.2003 and 15.2.2003).The composition of the Board of Directors and theirattendance at the Meetings during the year and at the lastAnnual General Meeting as also number of otherdirectorships & memberships of committees are as follows:

Name of Nature of No. of Atten- No. of CommitteeDirector Director- Board dance other Membership

ship meetings at last Director-attended AGM ships(**) Member Chairman

Mr. A.M. Naik MD & CEO 7 YES 6 2 1Mr. A. Ramakrishna DMD 7 YES 14 - -Mr. J.P. Nayak ED 7 YES 13 3 4Mr. Y.M. Deosthalee ED 7 YES 12 2 3Mr. K. Venkataramanan ED 7 YES 10 1 2Mr. R. N. Mukhija ED 7 YES 2 - 1Mr. P.M. Mehta* ED 6 YES 3 1 1Mr. H. Holck-Larsen NED 5 YES - - -Mr. S.S. Marathe NED 6 YES 15 6 2Mr. M.L. Bhakta* NED 3 YES 6 5 5Dr. D.V. Kapur NED 7 YES 11 1 3Dr. G. Armbruster NED 0 YES 7 - -Mr. A. Ramamurthy* ●●●●● NED 5 YES 10 3 -Mr. S. Rajgopal # NED 6 YES 1 - -Mr. Kumar Mangalam NED 5 YES 36 - -

BirlaMrs. Rajashree Birla NED 5 YES 28 - -Mr. A. K. Doda $ NED 7 NO 5 3 2Mr. B.P. Deshmukh @ NED 6 YES 3 - -Mr. Kranti Sinha* ●●●●● NED 1 NA 1 2 1Mr. K.S.K.Khare* ●●●●● NED 1 NA 1 2 -

* part of the year.** includes Private Limited Companies & Foreign Companies.

MD & CEO — Managing Director &Chief Executive Officer

DMD — Deputy Managing DirectorED — Executive DirectorNED — Non-Executive Director

●●●●● Representing equity interest of LIC.# Representing equity interest of UTI.

@Representing equity interest of GIC & its Subsidiaries.$ Nominee of IDBI.(c) Audit Committee:1. Terms of reference :

The Audit Committee is to oversee the Company’s financialreporting process and disclosure of its financial information,to recommend the appointment of Statutory Auditors and

fixation of their fees, to review and discuss with theAuditors about internal control systems, the scope ofAudit including the observations of the Auditors, adequacyof the internal audit system, major accounting policies,practices and entries, compliances with accountingstandards and Listing Agreement entered into with theStock Exchanges and other legal requirements concerningfinancial statements and related party transactions, if any,to review the Company’s financial and risk managementpolicies and discuss with the Internal Auditors any significantfindings for follow-up thereon, to review the Quarterly,Half-Yearly and Annual financial statements before theyare submitted to the Board of Directors.The Committee also meets the operating managementpersonnel and reviews the operations, new initiatives andperformance of the business units. Minutes of the AuditCommittee Meetings are circulated to the Members of theBoard, discussed and taken note of.

2. Composition :The Audit Committee of the Board of Directors wasformed in 1986 and it comprises of Non-ExecutiveDirectors. The Committee met 7 times during the year (on24.5.2002, 13.6.2002, 31.7.2002, 18.9.2002, 29.10.2002,21.12.2002 and 29.1.2003), and the attendance ofMembers at the Meetings was as follows :

Name of Member Status No. of RemarksMeetingsAttended

Mr. M.L. Bhakta Chairman 3 Resigned in August 2002Mr. A. Ramamurthy Member 5 Resigned in February 2003Mr. B.P.Deshmukh Member 7Mr. A.K.Doda Member 7

The Chief Financial Officer and the Chief Internal Auditor arepermanent invitees. The Company Secretary is the Secretaryof the Committee.

(d) Nomination & Compensation Committee :

1. Terms of reference :

To review, assess and recommend the appointment ofExecutive and Non-Executive Directors and, to reviewtheir remuneration package, to recommend compensationto the Non-Executive Directors in accordance with theprovisions of the Companies Act, 1956, to consider andrecommend Employee Stock Option Schemes and toadminister and superintend the same.

2. Composition:The committee comprises 3 Non-Executive Directors andthe Managing Director. The Committee met 5 times duringthe year (on 19.4.2002, 3.5.2002, 14.6.2002, 28.11.2002and 15.2.2003) and the attendance of Members at theMeetings was as follows:

Name of Member Status No. of RemarksMeetingsAttended

Mr. M.L. Bhakta Chairman 3 Resigned in August 2002Mr. S.S. Marathe Member 5Mr. S. Rajgopal Member 4Mr. A.M. Naik (MD&CEO) Member 5


14

3. Remuneration Policy

Remuneration of employees largely consists of baseremuneration, perquisites and performance incentives.The components of the total remuneration vary for differentcadres and are governed by industry pattern, qualificationsand experience of the employee, responsibilities handled,individual performance etc.The objectives of the remuneration policy are to motivateemployees to excel in their performance, recognize theircontribution, retain talent in the organisation and rewardmerit.

4. Details of remuneration paid to Directors for the yearended 31.03.03:

(In lakhs)

(1) Executive Directors:Names Salary Commi- Perqui- Retire- Options

ssion sites mentbenefits

(Rs.) (Rs.) (Rs.) (Rs.) (Nos.)

Mr.A.M. Naik 24.75 78.60 11.25 27.90 2.00Mr.A. Ramakrishna 17.10 48.35 11.25 17.67 0.90Mr.J.P. Nayak 15.15 45.02 11.25 16.24 1.20Mr.Y.M. Deosthalee 15.15 45.02 11.25 16.24 1.20Mr.K. Venkataramanan 15.15 45.02 11.25 16.24 1.20Mr.R. N. Mukhija 9.90 28.84 11.25 10.46 0.80Mr.P.M.Mehta * 8.61 21.19 9.57 8.05 0.40

Total 105.81 312.04 77.07 112.80 7.70

* for part of the year

i. Notice period for termination of appointment of Managing/Whole-time Directors is six months, on either side.

ii. No severance pay is payable on termination of appointment.iii. Details of Options granted under the Employees Stock

Options Scheme are given in Annexure B to the Directors'Report

(2) Non-Executive Directors:(in Rs. lakh)

Names Sitting Commi-Fees ssion

Mr. H. Holck-Larsen 0.25 3.00Mr. S.S. Marathe 1.00 4.50Mr. M.L. Bhakta 0.45 1.50Dr. D.V. Kapur 0.55 3.00Mr. G. Armbruster — —Mr. A. Ramamurthy 0.75** 3.00*Mr. S. Rajgopal 0.75 3.00*Mr. Kumar Mangalam Birla 0.25 3.00Mrs. Rajashree Birla 0.25 3.00Mr. A.K.Doda 0.95* 3.00*Mr. B.P.Deshmukh 0.90* 3.00*Mr. Kranti Sinha 0.05 —Mr. K.S.K.Khare 0.05* —

*Paid/payable to respective Financial Institutions they represent.

**Rs.20,000/- paid to L.I.C.

e) Shareholders’ Grievance Committee

1. Terms of reference:

To look into the investors’ complaints, if any, and toredress the same expeditiously. The committee approvesrequests for issue of Duplicate Certificates, and requestsfor issue of new certificates on split/consolidation/renewaletc. as also requests for transfer & transmission of Sharesand Bonds, as may be referred to it by the Share TransferCommittee.

2. Composition:The Shareholders’ Grievance Committee comprises 2Non-Executive Directors, the Managing Director and anExecutive Director.During the year, the Committee held 4 meetings (on19.4.2002, 8.8.2002, 29.10.2002 and 29.01.2003) andthe attendance of Members at the Meetings was asfollows:

Name of Member Status No. ofMeetingsattended

Mr. S.S. Marathe Chairman 4Dr. D.V. Kapur Member 4Mr. A.M. Naik Member 4Mr. J.P. Nayak Member 4

The Company Secretary is the Compliance Officer.During the year, 5369 letters/complaints were received,out of which 5257 were responded to / resolved. Theremaining 112 letters/complaints which were receivedduring the last week of March, 2003, have since beenresponded to / resolved.As on 31.3.2003, 183 requests involving transfer of 18244shares / bonds were under processing. These requestswere less than ten days old and since been dealt with.

(f) The Board has delegated the powers to approve transferof the Shares and Debentures to a Committee of SeniorExecutives. The Committee held 50 Meetings during theyear and approved the transfer of the Shares / Debentureslodged with the Company.

(g) General Body Meetings:The last three Annual General Meetings of the Companywere held as under :

Financial Year Date Time Location

2001-02 08.8.2002 3.00p.m. Birla Matushri Sabhagar,

Mumbai

2000-01 20.7.2001 3.00 p.m Birla Matushri Sabhagar,

Mumbai

1999-00 31.8.2000 3.00 p.m Birla Matushri Sabhagar,

Mumbai

No Special Resolutions were required to be put throughpostal ballot last year.

No Special Resolutions on matters requiring postal ballotare placed for shareholders’ approval at this Meeting.


15

(h) Disclosures :1. During the year, there were no transactions of material

nature with the Directors or the Management or theirsubsidiaries or relatives that had potential conflict with theinterest of the Company.

2. There were no instances of non-compliance on anymatter related to the capital markets, during the last threeyears.

(i) Means of communication :1. Quarterly & Annual Results are published in prominent

daily Newspapers viz. The Financial Express, The HinduBusiness Line & Loksatta. The said Results are madeavailable on the Company’s website:www.larsentoubro.com.

2. Official news releases, presentations etc. made toInstitutional Investors and the shareholding pattern on aquarterly basis are displayed on the Company’s website.

3. Management Discussion & Analysis forms part of theAnnual Report, which is mailed to the Shareholders of theCompany.

(j) General shareholders’ Information :

1. Annual General Meeting is convened on Friday, the 22ndAugust, 2003 at Birla Matushri Sabhagar, Marine Lines,Mumbai – 400 020 at 3.00 p.m.

2. Financial calendar:

Annual results of previous year End MayMailing of Annual Reports 2nd week of JulyFirst Quarter results End JulyAnnual General Meeting Friday, 22nd August, 2003Payment of Dividend 26th August 2003.Second Quarter results End OctoberThird Quarter results End January

3. Book closure : 13th August, 2003 to22nd August, 2003.

4. Listing of equity shares on Stock Exchanges at :Mumbai (BSE), National Stock Exchange of India Limited(NSE), Ahmedabad, Bangalore, Calcutta, Chennai, NewDelhi, Mangalore and Pune. Listing Fees for the year2003-04 have been paid to all the Stock Exchanges wherethe Company’s Equity Shares are listed.

Stock Code at Mumbai Stock Exchange

Rolling Settlement : 500510

Normal Segment : 510

Shares underlying GDRs are listed with LuxembourgStock Exchange.

The Company propose to delist its securities from theStock Exchanges other than BSE and NSE and for thispurpose necessary Resolutions will be placed before theShareholders for their approval at the forthcoming AnnualGeneral Meeting.

6. Stock market price data for the year 2002-2003:

BSE PRICES BSE SENSEX

HIGH LOW HIGH LOWRs. Rs. Rs. Rs.

Apr-02 186.25 166.00 3538.49 3296.88May 190.70 159.45 3478.02 3097.73Jun 186.45 172.40 3377.88 3148.57Jul 185.10 156.50 3366.74 2932.35Aug 189.00 145.60 3185.08 2931.78Sep 189.00 167.00 3227.62 2973.97Oct 191.00 166.10 3038.92 2828.48Nov 220.00 186.00 3245.98 2928.63Dec 214.05 190.20 3413.83 3186.62Jan-03 214.50 183.60 3416.92 3199.18Feb 206.70 186.00 3341.61 3218.37Mar 204.45 176.00 3311.57 3039.83

7. Registrar and Share Transfer Agents: The Companywas handling share transfer and other allied work in-house and Sharepro Services were the Registrars forDemat of Company’s shares. Securities and ExchangeBoard of India (SEBI), by its circular dated 27-12-2002,directed that all share registry work in terms of bothphysical and electronics segments should be maintainedat a single point either in-house or with a SEBI registeredR & T Agent. In compliance with this directive, theCompany has appointed Sharepro Services as Registrarand Transfer Agents.

8. Share Transfer System : The Company’s Shares aretraded in the Stock Exchanges compulsorily in Dematmode. Shares in physical mode which are lodged fortransfer are processed and returned to the Shareholderswithin the stipulated time. The Company adopts thetransfer -cum-demat system to facilitate Demat of shares.The share related information is available online.

9. Distribution of shareholding as on 31st March, 2003

No. of shares SHAREHOLDERS SHAREHOLDING

NOS. % NOS. %

Up to 500 467472 95.28 49646118 19.96

501-1000 13897 2.83 10125271 4.07

1001-2000 5619 1.15 8004382 3.22

2001-3000 1577 0.32 3906193 1.57

3001-4000 682 0.14 2384169 0.96

4001-5000 381 0.08 1745662 0.70

5001-10000 532 0.11 3719227 1.50

Above 10001 468 0.09 169137734 68.02

Total 490628 100.00 248668756 100.00


16

10. Categories of Shareholders as on 31st March, 2003:

Category Sharehold ing

No. of % of Paid upShares capi ta l

Financial Inst i tut ions 73644840 29.62National ised Insurance Cos. 22464054 9.03Foreign Inst i tut ional Investors 8419633 3.39Shares underlying GDRs 8755982 3.52Mutual Funds 4093470 1.65Bodies Corporate 49830633 20.04Directors & Relat ives 83649 0.03Others 81376495 32.72

Total 248668756 100.00

11. Dematerialisation of shares :

As on 31st March, 2003, 87.11% of the Company’s totalpaid-up capital representing 216624644 shares were heldin dematerialised form and the balance 12.89%representing 32044112 shares were held in paper form.

12. Outstanding GDRs/ADRs/Warrants or any ConvertibleInstruments, conversion date and likely impact onequity:The outstanding GDRs are backed up by underlyingequity shares which are part of the existing paid up capital.However, Debentures convertible into 388956 equityshares have not been converted as all amounts duethereon have not been received.

13. Plant Locations :The Company’s plants are located at Ahmednagar,Arakkonam, Awarpur, Chennai, Durgapur, Faridabad,Hazira, Hirmi, Jharsuguda, Kancheepuram, Kansbahal,Kovaya, Mumbai, Mysore, Nashik, Pithampur, Pondicherryand Tadipatri.

14. Address for correspondence :

The Company’s Registered Office is situated at L&THouse, Ballard Estate, Mumbai 400 001.

Shareholder correspondence may be directed to:

M/s Sharepro Services OR M/s Sharepro ServicesUnit : L& T Unit : L& TSatam Industrial Estate, 912, Raheja Centre, 9th Floor,Cardinal Gracias Road, Free Press Journal Road,Chakala, Andheri (East) Nariman PointMumbai – 400 099. Mumbai – 400 021.Tel : (022) 28215168/69 Tel : (022) 22881568/69, 28329828 22825163Fax : (022) 28375646 Fax : (022) 22825484E-Mail : E-Mail :sharepro@ vsnl.com [email protected]

Shareholders holding shares in electronic mode shouldaddress their correspondence to their respectiveDepository Participants.

15. The Company has adopted the following non-mandatoryrequirements on Corporate Governance recommendedunder Clause 49 of the Listing Agreement:

i) A Chairman’s Office with required facilities is beingmaintained by the Company for use by its non-executive Chairman.

ii) A Compensation Committee comprising 3 Non-Executive Directors and the Managing Director of theCompany is functioning since July 1999.

iii) As the financial performance of the Company is wellpublicised and also displayed on the Company’swebsite, individual communication of quarterly/halfyearly results is not sent to the shareholders.

iv) The Company has not passed any Resolution requiringapproval of the shareholders by postal ballot.

16. Pursuant to the SEBI (Prohibition of Insider Trading)Regulations 1992, the Company has prescribed a code ofConduct for Prevention of Insider Trading.

AUDITORS’ REPORT ON COMPLIANCE OF CONDITIONSOF CORPORATE GOVERNANCE

To the shareholders of Larsen & Toubro Limited,

We have examined the compliance of conditions of corporategovernance by Larsen & Toubro Limited, for the year ended on31st March, 2003 as stipulated in Clause 49 of the ListingAgreement entered into with the Stock Exchanges.

The compliance of conditions of Corporate Governance is theresponsibility of the Management. Our examination was limitedto procedures and implementation thereof, adopted by theCompany for ensuring the compliance of the conditions ofCorporate Governance. It is neither an Audit nor an expressionof opinion on the financial statements of the Company.

In our opinion and to the best of our information and accordingto the explanations given to us, we certify that the Companyhas complied in all material respects with the conditions ofcorporate governance as stipulated in the above-mentionedListing Agreement.

We state that no investor grievances are pending for a periodexceeding one month against the Company as per the recordsmaintained by the Shareholders Grievance Committee.

We further state that such compliance is neither an assuranceas to the future viability of the Company nor the efficiency oreffectiveness with which the management has conducted theaffairs of the Company.


by the hand of

F.M. KOBLAPartner

Mumbai, 29th May, 2003.


17

LAR

SE

N &

TO

UB

RO

LIMIT

ED

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L&T ORGANISATION STRUCTURE

ENGINEERING & CONSTRUCTION ELECTRICAL &ELECTRONICS

CEMENT &OTHERS

FINANCE & HR

▼ ▼ ▼ ▼

A.M. NAIK - MANAGING DIRECTOR & CEO

▼

▼

R. N. MUKHIJA

SBUs:l Earthmoving

Equipmentl Construction

Equipmentl Hydraulic

Equipmentl Earthmoving

Spares & Service

l Packagingl Glassl Welding Electrodes

& Accessoriesl Industrial

Products

SBUs:l Oil & Gas and Special Projectsl Hazira – Modular Fabrication

Facilityl Chemical Plantsl Unit Systemsl Cement Machinery & Mineral

Plantsl Hydrocarbon & Related Projectsl Petrochemical Projectsl Fertiliser Projectsl International Business

Developmentl Food Processing Machineryl EPC Powerl Co-generation & Captive Power

Plantsl Nuclear Power Business Unitl Renovation & Modernisationl Operation & Maintenancel Design Engineering Centrel Front End Engineering &

Designl Technology Innovation

Centerl e-Engineering Solutionsl Project Development

SBUs:l Heat Transfer Equipmentl Pressure Vessell Defence Equipmentl Nuclear Equipmentl Aerospace Equipmentl Refinery & Cracker Plant

Equipmentl Power Plant Equipment &

Systemsl Industrial Machinery for

Paper, Steel, Bulk MaterialHandling, etc.

l Valvesl Rubber Processing

Machineryl Plastic Processing

Machineryl Industrial Equipment

Division

SBUs:l Electrical Standard

Productsl Electrical Systems &

Equipmentsl Petrol Dispensing Pumpsl Control & Automationl Telecom Projectsl Medical Equipmentsl Metering & Protection

Systemsl Embedded Systems

Building & Factories BusinessSectorl Institutional & Commercial

Buildingsl System Housing & Industrial

Structurel Building Productsl Engineering Design &

Research CentreCivil & Transportation Infra-structure Business Sectorl Nuclear, Hydro Power &

Foundation Engineeringl Harboursl Bridgesl Roads, Highways &

RunwaysIndustrial Projects & UtilitiesBusiness Sectorl Power Plant Constructionl Hydrocarbon Construction &

Pipelinesl Minerals, Metal & Bulk

Material handlingl Water Supply & Effluent

Treatmentl L&T-ECC WorkshopsElectrical & InstrumentationBusiness Sectorl Electrical, Instrumentation

& Communicationl Transmission Lines &

Railway ElectrificationOther Operationsl Developmental Projectsl Plant & Machinery

▼ ▼

K. VENKATARAMANANA. RAMAKRISHNA P. M. MEHTA

E&C DIVISIONCONSTRUCTION

▼

J. P. NAYAK▼

Y. M. DEOSTHALEE

HEAVYENGINEERING

▼

CEMENT DIVERSIFIEDBUSINESS

▼ ▼ ▼

▼

▼

▼ ▼ ▼ ▼ ▼


19

Management's Discussion & Analysis

The management of Larsen & Toubro Limited presents theanalysis of division-wise performance of the Company forthe year 2002-2003 and its outlook for the future. This outlookis based on assessment of the current business environment.It may vary due to future economic and other developments,both in India and abroad.

The Company’s performance was satisfactory during 2002-2003, yet another year of challenging business environment.During the year under review, the Indian economy facedsluggish GDP growth which slid down to 4.3% from 5.6% in2001-2002. This was primarily on account of a drought arisingfrom a poor monsoon which affected the agriculture sectorand also the rest of the economy. Global economic recoveryremained subdued affecting capital inflows. Unsettlingconditions in the Middle East added to the volatility of thesituation. Fortunately, the domestic situation was alleviatedto a certain extent by a sharp recovery in the manufacturingsector and a better performance from the services sector.

The growth in domestic manufacturing sector increased from2.9% in 2001-2002 to 6.0% in 2002-2003. Within the industry,however, the machinery and equipment segment grew byjust 1.8% during the year. The core sector industries posteda growth of 5.2% with cement production rising by 8.8%. Asignificant achievement for the Indian economy was theperformance on the external front with exports growing by17.8% in 2002-2003 from -0.4% in 2001-2002. With globalsurplus capacities populating the various regions however,businesses are facing intense competition and hencedeclining operating margins.

Notwithstanding the intense competitive pressures, theCompany maintained its leadership position in most of itsbusinesses during 2002-2003. While coping with thechallenges of sluggish investment climate, global competition,declining operating margins and increasing customerexpectations, the Company focused on strengthening itscapabilities. The Company launched a series of initiativesaimed at enhancing its value proposition to the customer.Since the Company is pursuing a strategy to expand its

presence in the international markets, efforts are under wayto increase the competitiveness benchmarked to globalstandards. During 2002-2003, the Company took specificinitiatives to improve its positioning, significant among thesebeing -

Businesses reorganization to facilitate sharper focus on thrustareas/select markets and faster response to marketdevelopments, global alliances with leading organizations inthe areas of technology, project execution, product marketingetc., productivity enhancement due to asset sweating,process improvements aided by Six Sigma, JIT initiativesetc., Improved customer orientation, Cost reduction initiatives,Adoption of dynamic HR practices etc.

The Company’s impressive order book and its growinginternational business evidence the success of theseinitiatives. While export revenues are increasing smartly,the Company is today exposed to global business conditionslike never before. The initiatives being taken by the Companyare therefore to enable the Company to compete successfullyin the international markets, while consolidating its dominancein the domestic markets.

The Company’s business consists of the following majorsegments:

Name of the Segment % of SegmentRevenue

Engineering & Construction (E&C) 62%[Construction, E&C Projects andHeavy Engineering]

Cement 26%Electrical & Electronics 8%Others 4%

Given below are the performance highlights of the majoroperating divisions of the Company during 2002-2003 inaddition to financial review of the Company’s performance,information on the Company’s HR initiatives, IndustrialRelations and the Awards conferred on the Company during2002-2003. The brief details of the activities of majorSubsidiary and Associate companies are also enclosed.

CONSTRUCTION1. AN OVERVIEW

L&T undertakes engineering design andconstruction of infrastructure andindustrial projects covering civil,mechanical, electrical and instrumentationengineering sectors through its ECC(Engineering, Construction andContracts) Division. ECC is India’s largestconstruction organization, having manyof the country’s landmark constructions

to its credit.

ECC Division offers complete turnkey solutions includingengineering and uses mechanized methods of

construction and modern management principles on thelines of construction majors of the developed world. Thishas helped the Division to establish itself as an undisputedleader in the domestic construction industry. In-houseengineering design and research skills have enabled theDivision to undertake complete turnkey projects acrosssectors. L&T’s customers have the advantage of gettingprojects completed on time – many a time setting worldbenchmarks.

2. BUSINESS ENVIRONMENT

The year 2002-2003 witnessed continued sluggishnessin demand and hence low growth in investments inindustrial and infrastructure projects. Despite someimprovement in the fortunes of core sector industries likesteel, excess capacities continue to hamper investment


20

initiatives. Contract award decisions, land acquisitionissues, environmental clearances and financial closuresneed to be expedited to facilitate early commencement/progress of most projects. The success of public-privatepartnership initiatives hold the key for the much neededdevelopment of infrastructural facilities in the country.Efforts are required to improve the viability and bankabilityof these projects. Increased acceptability of “Pay for Use”and the commitment of States for adherence of thecontract terms are imperative to gain funding support atcompetitive costs for infrastructure projects.

Continued focus on Road sector, proposals for world-class sports infrastructure, Convention Centers and grantof infrastructure status to hospital projects are welcomefeatures in the recent Union Budget. The “Viability GapFunding” proposed in the Finance Act is also expected tohelp private sector participation in promotion of moreroads, ports, airports etc. Apart from infrastructure sectoropportunities, growth in housing demand, developmentof IT parks and improved focus on water managementhold promise for construction companies.

During the year, ECC division stepped up its efforts tosecure increased share of international businessparticularly in the Middle East and other neighbouringcountries where the prospects appear good.

3. SIGNIFICANT INITIATIVES

Keeping in view the stiff competition on international frontand the pressure on pricing, the Division has evolvedstrategies including organization redesign, that exploit theexisting strengths and enhance business prospects andprofitability. Some of the significant initiatives towardsthis end are:

a) Operational Improvements – OrganizationRedesign

Construction Division, from the erstwhile complexmodel of 18 SBU’s, with 7 Regional Offices in Indiaand 4 Area Offices abroad, has been redesigned to anew functional 4x4 matrix structure. The SBUs areregrouped into four Business Sectors based on core-technologies - Buildings and Factories, Civil andTransport Infrastructure, Industrial Projects & Utilitiesand Electrical & Instrumentation.

Geographically, the entire operations, both domesticand international are now divided into 4 zones. TheWest Zone will operate from Mumbai and will look atopportunities in the Middle East and Africa apart fromMumbai Region. The East Zone based in Kolkata willcover, apart from Kolkata Region the markets of Nepal,Bhutan, Bangladesh and Myanmar and will furtherexplore emerging opportunities in Vietnam, Cambodiaand China. The North Zone presence will be fromDelhi to oversee projects in the Delhi and AhmedabadRegions and beyond India in Afghanistan, Iran,Kazakhstan, Uzbekistan, etc. in Central Asia and theRussian Federation. The South Zone will cover ChennaiRegion, Hyderabad Region and Bangalore Region while

spreading operations in Sri Lanka, Male, Malaysia andIndonesia. The new structure thus brings multi-prongedand yet focused attention to our objective of increasinginternational business, especially in the neighbouringcountries.

A Global Resources and Supply Chain ManagementCell has been created to address Asset and ResourcesManagement, Vendor / Sub-Contract Development interms of standardization, sustaining systems,classification, ratings, materials planning andprocurement etc. The objective is to leverage theDivision’s large operations towards achieving costcompetitiveness in procurement, in addition to optimalutilization of all resources for project timeliness, qualityand cost.

The new structure is operational from April 1, 2003.

b) Customer and Quality Focus

Customer needs form a crucial cornerstone of ourgrowth initiatives. The Division endeavors to cater tocustomer needs, at the time and at a price that reflectsthe product’s value to the customer. Long-termrelationships with customers and vendors also helpthe Division to enhance performance, aim at betterquality and have efficient delivery systems. Forinstance, TISCO has recognized the Division’s 25 yearsof continued association in project execution, with anaward in a recent ceremony at Jamshedpur.

Quality in construction is not limited to zero defectsexecution but getting it ‘right the first time’, delivery ontime and to budget, innovating for the benefit of theclient and eliminating waste, be it in design, materialsor construction on site. Cyber Gateway – Phase 2 ofHitec City at Hyderabad that the Division has executedon Design & Build basis with total turnkey responsibilityhas saved considerable costs for the client.

The Division strives to achieve this through continuousprocess improvements and quality accreditations. Mostof the Division’s operations are ISO certified.

c) Engineering Design & Construction Methods

The Division has been initiating steps constantly toimprove its engineering design & construction methodsbenchmarked to global best practices.

Standardization of designs with application of modularconcepts, application of mechanized forms ofconstruction and development of innovativeconstruction materials, will go a long way inindustrializing construction. This would in turn help inachieving savings in both cost and time. Constructionmethod is another area wherein the Division’s expertiseof completing complex projects with maximum speedand at minimum costs matches global standards.

d) Focus on International Markets

The Division’s efforts to broad base internationaloperations with diverse projects have yielded positive


21

results. Large orders have been received during theyear from Tanzania, Mauritius, Jordan, UAE and Kuwaitin different business segments. The Division proposesto further strengthen global marketing through strategictie-ups which will aid its efforts to increase internationalsales to around 20% from its present 11%.

The Division proposes to position itself as a costeffective Business Process Outsourcing partner inengineering and design services. This could also helpthe Division to be truly contemporary by imbibing thelatest and the best from the international arena.

e) Ready Mix Concrete & Building Products

The Division has more than 50 state-of-the-art concretebatching plants and 250 transit mixers and producesmore than one million cubic meter of concrete, everyyear. Sophisticated equipment makes “L&T Concrete”the leader in India and at par with the best in theworld.

In view of emerging business opportunities in the nearand long term, the Division would extend the BuildingProduct portfolio to include Pre-fabricated buildingelements. Development, production and marketing ofPre-fabricated building elements in collaboration withbusiness affiliates for access to technology andexperience would be pursued concurrently.

4. MAJOR ORDERS BOOKED / EXECUTED

Some of the major orders booked/executed during theyear 2002-2003 include:

Rs. crore

l Water Distribution System at Vizag forVizag Industrial Water Supply Co. Ltd. 353

l Jaipur-Kishengarh Road 296l Upgradation of road from Hiriyur to

Bellary for Karnataka State Highways 269l Upgradation of roads from Bahraich to

Faizabad (Katra) and Jaunpur toMohammadpur for PWD, Uttar Pradesh 198

l Sawalkot access road, J&K 137l Construction of LPG Cavern for

South Asia LPG Co. Ltd. 120l Laboratory & Animal house for NIB at Noida, UP 114l Gujarat Petronet - Paghuthan-Baroda Gas pipeline 112l Cross-country conveyor for Lafarge Cement 109

The Division has completed the following major projectsduring the year 2002-2003:

n Rebuilding of Tisco Blast Furnace in a record periodof 105 Days

n Construction of Parliament Library, another landmarkstructure in the country’s capital

n Construction of Bapughat, a memorial at Hyderabadin 90 Days

n Completion of Ahmedabad-Mehsana Road ahead ofschedule

n Construction of Hitex – an international class ExhibitionCentre at Hyderabad

n National Judicial Academy, Bhopal

n De-inking plant for Hindustan Newsprint Limited,Kottayam

5. FUTURE OUTLOOK

Project processes in the construction industry typicallyare a sequence of largely separated operationsundertaken by diverse entities. This necessitates superiorintegration with all the players in the industry workingback from value creation and customer’s needs. Projectslike the Haldia Berth-4A taken-up by the Division on similarlines will be replicated wherever possible. There are nostandardised evaluation criteria for pre-qualification andaward of contracts. In order to overcome the associatedtime delays and pressures on margins, due to groupingof un-equals, the Division has to emerge as a “Preferredcontractor” in its area of operations.

Brand building in the construction industry has beenhampered by the conventional processes of choosing anew team of designers, constructors and supplierscompetitively for every project, thereby inhibiting learning,innovation and the development of experienced teams.This could be overcome through long-term relationshipsbased on clear measurement of sustained performancereplacing competitive tendering with a target priceapproach. The Division enjoys long relationships withsome customers, reputed architectural consultants andprocess consultants and international construction majors.These could help the Division win large orders fromneighbouring overseas markets.

Projects under public-private partnership are on increasedue to facilitating legal framework. Hydel power andirrigation project construction is expected to provide largebusiness opportunities in the near and long term. TheDivision would augment necessary capabilities in theseareas, explore technology tie-ups and grow the BuildingProducts business line by developing Pre-cast buildingelements. More orders in the areas of Airport, Bridgesand Ports are expected to be contracted through theDevelopmental Projects route. The Division is also pre-qualified for projects of diverse nature such as SpecialEconomic Zones, Container Terminals, Ropeways,Railway lines, Food grain storage projects and Watersupply projects, etc. The Division is also focusing onproactive development of projects in coordination withsome State Governments. This could help the Divisionwin many large projects, both industrial and infrastructure,either singly or in consortium.


22

E&C PROJECTS1. AN OVERVIEW

After gaining greater acceptability in thedomestic market, E&C Projects Divisionhas set its sights on establishing theregional brand as the only EPC group pre-qualified for executing large turnkeyprojects in the areas of hydrocarbon,power, cement and chemicals. Winningsome of the prestigious projects in theMiddle East against stiff international

competition reflects the growing acceptability of theCompany’s capabilities in these areas.

In order to increase the horizon and expand the lines ofbusiness, the E&C Projects Division is also seeking togain foothold in Nuclear, Space, Deep-water technologyand clean fuel projects where it sees enormous businesspotential.

The Division’s performance can be attributed to its soundtechnical base, excellent engineering, procurement, projectmanagement, construction and commissioning skills anda dedicated human force.


After passing through a challenging year in 2001-2002,the later part of the year 2002-2003 ushered in a modestindustrial recovery backed by a positive sentiment in someof the core and infrastructure sectors of the economy.

Margins, however, continued to be under pressure dueto intense competition resulting in aggressive pricing. Onthe positive side, Government of India’s proposal to amendAtomic Energy Act would facilitate private sectorparticipation in nuclear power generation. Howeverimposition and increase in Service tax coupled withuncertainty on VAT implementation may have direct costimpact on the operations of E&C Division. The continuedpurchase preference for PSUs is also acting as a majordisincentive for the private players in the market.Slowdown in the investments in process sector industriessuch as cement, petrochemicals and fertilizers continuesdue to demand-supply mismatch affecting the orderbooking in this sector.


The Division has been able to maintain its operationalefficiency through improved project monitoring and costcontrol initiatives. It has also evolved strategies for buildingbrand for L&T as a major EPC company and forcountering the competition. Some of these are:

a) Cost Control & monitoring

Among the principal initiatives to control cost andincrease overall efficiency, the Division has initiatedseveral steps during the year:

n Development of alternative vendors to secure priceadvantage

n Engineering / Design optimisation to save on costof materials albeit without compromising on thequality / efficiency.

n Process improvements generating savings onexecution costs.

n Extensive use of latest IT support services.

n Design & Engineering capability build-up.

b) Focus on International Markets

International Business Development Cell formed in E&CDivision has made initial efforts on L&T brand buildingwhich has started yielding results with increasedacceptance and awareness of L&T as a major EPCcompany especially in GCC countries.

E&C’s major business development strategies for focusinclude competitive bidding, commitment throughrelationship and local presence and need-basedpartnering with local contractors. The Division isevaluating close alliances and synergies in Gulf withfabrication yards and installation contractors. E&C’sefforts in penetration of other geographical areas arealso being channelled through business consultantsand local agents.

The Division is making in-roads with global EPC playersfor joint bidding, alliances and sub-contracting ofpackages for major projects. Early identification ofpartners and firming up alliance for joint bidding willhold the key for success in this regard.

E&C is also building competency in vital areas suchas risk management, global sourcing, internationalsafety and quality benchmarks to meet the globalchallenges.

c) Risk Management

E&C business has a specific set of risk characteristics,which needs to be carefully evaluated, managed andmitigated. In order to effectively manage the potentialrisks of such large value project orders, the Divisionhas taken a number of pro-active steps by preparingand adhering to an internal Risk Management Protocol.

The Risk Management process starts at the proposalstage and continues over the entire execution of theproject. The learnings from the earlier projects throughKnowledge Management and close-out Reports areconsolidated and filtered. During the course ofexecution, the new learnings and mitigation plans arecaptured for future projects. The process of RiskAssessment is aided by using some of the latest state-of-the-art tools and technologies.

d) Focus on Competitiveness

To counter domestic and international competition aswell as to minimize the risks present in large scaleprojects, all against a backdrop of increasingly complexand advance project requirements, the Division hasundertaken a number of initiatives which include:


23

n operational tie-ups and technical alliances with majorglobal engineering companies with cutting-edgetechnologies.

n reaping the benefits of pre-qualification with variousinternational customers through immaculateestimation and aggressive pricing.

n offering innovative technical solutions.

n formation of consortium with installation andengineering contractors in select lines of business

n partnering with PSUs to avail Purchase Preferencebenefits

n developing long term relationship with ProcessLicensors.

n developing yard / building association with foreignyards to handle additional capacity.

n developing capabilities in new technological arenalike clean fuel air technology, Gas-to-liquid projects,Isomerization, Deepwater and Marginal fieldexploration.

e) Capability Building

Through sustained training and development, theDivision is constantly developing the quality andcompetency of its human resource and imparting themwith the requisite skills required of a global manager.

The Division has developed and conducted programssuch as Capabilities and Leadership Development(CALD) and Global Expatriates (GLOPAT).

The basic objective of the CALD initiative is to identifyand build competencies generic to the level or commonto more than one function as well as specific to thefunctions within the levels. The main objective ofGLOPAT program has been to develop global businessacumen and leaders who would drive and manageE&C’s international business initiatives with focus onglobal business strategy, statutory requirements, crosscultural management, customer relationshipmanagement, international finance & taxation, risk &insurance, international law & contract management,marketing & strategic selling, etc.

4. MAJOR ORDERS BOOKED/EXECUTED

During the year, the Petrochemicals business unit of theDivision achieved a major break-through by bagging thesingle largest value order of Rs.1242 crore for the PTA(Purified Terephthalic Acid) plant for IOCL at Panipat.Other major domestic orders included Sulphur RecoveryUnit for BPCL and DHDT and balance of Hydrogen plantfor IOCL.

At international level, the Division booked five prestigiousorders against stiff international competition, such as USD67 million Gas Processing facilities and Offshore pipelinesfor Songas Limited at Songo Songo Island, Tanzania,Capacity augmentation of Sulphur Recovery Unit based

on Oxygen enriched technology for KNPC-Kuwait at theirShuaiba and Mina Abdullah Refineries aggregating toUSD 24 million, Reformer Primary Packages for OmanIndia Fertiliser Company valued USD 9 million and Livingquarters and power upgrade project for Qatar Petroleumfor USD 98 million. The Division has also recentlycompleted a process heater for Sasol, South Africathrough Foster Wheeler. Two Power projects, one inOman and another in Sri Lanka are already in the finalstages of completion.

In addition to the above, some of the major ordersexecuted / under execution during the year 2002-2003were:

Domestic:

n Balance of Plant and mandatory spares for 330 MWCombined Cycle Power Plant for BHEL A/C DelhiVidyut Board

n Mumbai High North Water (MNW) injection-cum-gascompression platform of EIL-ONGC

n Naphtha Hydrotreater, Catalytic reformer unit andHydrogen generation unit for CPCL

n Hydrogen Generation Unit for BPCL

n Sulphur block and associated facilities for BPCL

n Pyro processing upgradation / Clinker Grinding Unitfor Jaypee Cement Ltd.

n Piles for MNW platform for EIL-ONGC

n Clamp on structure at various platforms for ONGC

International:

n 200 MW Gas Turbine Power Plant, Transmission andInterconnection for Dhofar Power Co. S.A.O.C. A/CSalalah Power System Privatisation Project, Sultanateof Oman.

n Supply of Gas Turbine & Generator, Steam Turbine &Generator, HRSG and all plant & equipment for 168.1MW Combined Cycle Power Project for AES KelanitissaPvt. Ltd. Sri Lanka

5. FUTURE OUTLOOK

Apart from domestic market opportunities, the Division isgeared up to exploit global opportunities mainly inhydrocarbon sector and power sector.

In view of the huge investments expected on the domesticfront by PSUs and private operators in hydrocarbon sectorconsisting of refineries and oil & gas, significant businessprospects exist for the Division. In addition, encouraginginternational business prospects are also present for thissector in the Middle East and select African countries.Technological strides in Deep water and Marginal Fieldexploration are expected to generate new opportunities.Major investments are expected in domestic andinternational markets to meet quality norms, clean fuelprograms and quality up-gradation which should generatesizable opportunities for the Division.


24

Coming to the Power sector, the new Electricity bill passedby the Lok Sabha has been a major step in the powersector reform process. The positive impact of thislegislation in terms of accelerated investments in powersector remains to be seen. The problem of off-take risksperceived by lenders for big independent power projectscontinues to hamper bankability of these projects. Nuclearpower would become a more viable source of energy inthe future. The Division is expecting potentially largebusiness in support facilities for nuclear power plantsarising out of capacity additions. Expansion of the powerintensive non-ferrous industries is likely to createopportunities for co-generation & captive power plants.

HEAVY ENGINEERING DIVISION1. AN OVERVIEW

Heavy Engineering Division with its stateof the art manufacturing facilities andstrong engineering capabilities hasestablished a reputation for qualityproducts benchmarked to globalstandards. The Division manufactures andsupplies highly critical precision ProcessPlant Equipment and Industrial Machinery

to varied industries like Fertilizer, Refinery, Petrochemical,Chemical, Oil & Gas, Power, Aerospace, Paper & Pulp,Steel and Ports. The Division also supplies RubberProcessing machinery for the Tyre Industry andundertakes marketing of Industrial Valves and Plasticprocessing machinery manufactured by L&T’s JointVenture companies.

The Division is working towards becoming the preferredsupplier of fabricated equipment in the global marketthrough continuous improvements in quality, deliveryperformance and manufacturing technology.

The Division’s manufacturing facilities are located at Powaiin Mumbai, Hazira and Vadodara in Gujarat, Kansbahalin Orissa and Chennai in Tamil Nadu.


The domestic process plant segment had remainedsluggish for the last three years due to uncertaintiesassociated with the dismantling of Administrative PricingMechanism and the divestment process for PSUs. Partialrevival is now seen in the Refinery sector with somemajor projects getting the necessary clearances. However,there is no major investment yet in the domestic fertilizersector.

In the case of Rubber Processing Machinery, the domesticmarket is showing improved prospects. However, theimport of second hand tyre machinery is hampering theprospects in this business. Further, there is a gradualshift of demand from mechanical tyre curing presses tohydraulic presses which are better suited to manufacturehigh accuracy radial tyres. To cater to this shift in demand,the Division has entered into a technical collaborationagreement with Kobe Steel of Japan.

Adoption of Wind energy is gaining momentum and manystates have identified wind energy as a thrust area. NewPower Plants using Wind Mill Generators are being setup and the Division’s Kansbahal business unit haspositioned itself to supply the specialized nacelle parts –both cast as well as fabricated. The business environmentfor Crushing as well as Paper equipment is showing signsof revival. This is expected to further improve theprospects of Kansbahal unit.

The Division concentrated on exports of process plantequipment to compensate for the demand limitations inthe domestic markets.


The Division had designed a two-pronged strategy tomitigate the risk of shrinking business potential in thedomestic process plant market. These have startedyielding results. The initiatives include :

a) Thrust on Exports

Export sales increased by almost 119% during 2002-2003 as compared to the previous year as a result ofimproved track record of the Division in meetingcustomer expectations of ever decreasing cycle timeand cost.

The Division’s exports presently reach diverseinternational markets in the Middle East, Far East,USA, Canada, Norway, UK, South Africa, Brazil andAustralia. The marketing efforts of the Division haveopened up new opportunities in France, Morocco andChina during the year.

The Division has established a “preferred supplier”relationship with major EPC contractors. Some of thekey success factors have been strategic positioningthrough market intelligence, close customer contacts,goodwill generation, packaging the equipment to reducefreight and positioning L&T as a reliable long termpartner. Repeat orders from some of the foreigncustomers signify growing customer satisfaction.

b) Hi-Tech Products

The Division has identified high end products as theengine of future growth. The Division has strengthenedits design and engineering capabilities and isconcentrating on development of new products andmanufacturing technology. The Division has also madeprogress in finalising technology collaborationagreements with global key technology players in therespective fields.

Government of India (GOI) has initiated concreteactions towards liberalization of the Defence sectorthat hitherto was reserved for the State sector. TheDivision has received Letters of Intent from GOI formanufacture of defence goods under four broadcategories.

The Division is in the process of augmenting facilitiesto cater to the new opportunities arising out of the


25

liberalization of the Defence sector. Steps are alsobeing initiated to explore export opportunities for Hi-Tech products.

4. MAJOR ORDERS BOOKED / EXECUTED

Some of the major orders booked during 2002-2003include S/200 Rocket motor cases & S/139 Segments forVikram Sarabhai Space Centre (Rs. 68 crore), IntegratedCannister Assembly made of composite materials fromBramhos Missile Programme, Re-furbishing of 220 MWSteam Generator at Kota for Nuclear Power Corporationof India Ltd., (Rs. 60 crore) etc. Large orders were alsoprocured from customers like IOCL, ITC, ResearchDevelopment & Establishment Engineers, etc. These werein addition to significant international orders like WasteHeat Boiler, Steam Super Heater, Steam Drum, etc. forOman India Fertilizer Co. (Rs. 115 crore), orders fromJinshan Asso. Trading Co. China, Conoco Philip Refinery– Bechtel, USA, Michelin Siam Co. etc.

During the year, the Division executed orders for criticalequipment like Ammonia Converters and Heat Exchangersfor UHDE/QAFCO, large thick-walled vessels for LNGProject in Australia and for a Clean Fuel project in USA.The Division also completed an order where reactorswith CE marking (European Conformity marking, whichmake sales with EU countries easier), were supplied forthe first time.

The Division supplied the largest column in a single piece,103m long, to Saudi Petrochemicals, Al Jubail, throughSamsung Engineering. Further the Division supplied fiveDHDS reactors for Canada and four reactors for Brazil.The Division exported over 11,000 MT of process plantequipment for the first time.

5. FUTURE OUTLOOK

The Division is focusing on export of high end ProcessPlant equipment which has a good business potential.The Division expects business opportunities from the cleanfuel programmes in USA & Canada as well as the newfertilizer plants being set up overseas.

The Division has positioned its personnel in key overseaslocations keeping in view the major business potential inUSA, Canada & Brazil and the potential of sourcing criticalmaterials from Europe. The Division has also appointedagents in countries like China and Brazil to tap possiblebusiness opportunities.

The policy guidelines towards liberalisation of the Defencesector are expected to be operational shortly. This willresult in the participation of private sector industries inlarge scale indigenous manufacture of Defence goods.The Division is optimistic about its prospects in this sectorin the medium to long term.

CEMENT1. AN OVERVIEW

The Company’s cement capacity including that ofNarmada Cement Company Limited was enhanced during

the year to 16.5 million tones. The increase which wasessentially achieved through “Sweating of Assets”,consolidated the Company’s position as the largest cementmanufacturer in the country. The Cement Divisioncontinues to enjoy leadership position backed by a robustdistribution network, strong brand equity and a consistentlyhigh quality product.


For the second year in a row, growth incement consumption was satisfactory.Financial year 2002-2003 recorded a 9%growth as against 10% in the previousyear. This is impressive consideringsubdued industrial growth and poormonsoons. Cement demand in Northernregion grew by around 9%, Central regionby around 11%, Southern region by 14%

and by 4% each in Eastern and Western regions. Cementdemand growth continues to be driven by the housingsector which is growing due to low interest rates andcontinuing tax incentives.

India is the second largest producer of cement in theworld, with an installed capacity of about 144 milliontonnes (including mini plants). Despite a compoundedgrowth rate of 8% during the last decade, cement capacityadditions continue to outpace demand, leading to a supplyoverhang in the market and hence low capacity utilisation.However, during 2002-2003, the capacity additions weremarginal as compared to the 16 million tonnes addedduring 2001-2002. The thrust towards blended cementcontinues and its production increased from 43% lastfiscal to 49% this fiscal.

Given the supply overhang, the prices of cement werevolatile and depressed during 2002-2003. Domestic salesrealisation was lower by 10% as compared to financialyear 2001-2002.


Given the reality of low cement prices, the Cement Divisionundertook various well-structured initiatives to drive downcosts and improve the profitability. The significant initiativesamong these being :

a) Cost Reduction Initiatives

During the year 2002-2003, the Division contained itsoperating cost through various measures and processoptimization. The efforts were directed to achievereduction in fixed costs by control over less-productiveexpenses. The process of cost reduction was given afurther fillip by the production of higher quantity ofblended cement at 44% as against 34% in the previousyear. Several measures that were taken to optimizecost include reduction in energy consumption, use ofalternate packing materials, changes in raw materialsmix, etc. These initiatives have led to the Companybeing one of the lowest cost producers of cement inthe country.


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b) Supply Chain Management

A structured approach of reducing distribution costswithout compromising on service to customers wasachieved by a movement called ‘ICBM’ (ImprovingCement Business Margins). The entire project focuseson four key areas of value creation: Total DistributionCost, Network Optimization, Sales & Distribution andConsumer Research directed at understanding thecement buyer in terms of developing a better marketingmix to suit construction needs.

c) Project “Parivartan”

Through Project “Parivartan” the Division introducedduring the year Total Productivity Management andSix Sigma concepts in its cement plants. The objectiveof this initiative is to redefine new standards inmanufacturing and therefore bring about“Comprehensive Asset Care Regime”. These initiativeshave shown positive results in employee ownership,process improvement and cost reduction.

d) Exports

The Company continues to be the largest exporter ofcement and clinker from India and exported about 2.8million tonnes of cement and clinker during 2002-2003(previous year 2.41 million tonnes). The focus duringthe year was on enhancing clinker exports for whichdemand and prices are encouraging. The Company’scement and clinker have been well received andcommand a good market in Western Europe, MiddleEast, Africa and neighbouring countries. The Companyhas consistently bagged the CAPEXIL award for thelast six years as highest exporter of cement and clinkerfrom India.

4. FUTURE OUTLOOK

The outlook for the cement industry in 2003-2004continues to be encouraging. Cement demand is expectedto grow at over 8% in the next year. The Government ofIndia in the latest budget announced various initiatives,which would boost investments in housing andinfrastructure sectors like construction of roads, ports andairports. Prices, however, will continue to be underpressure due to supply overhang and pose a majorchallenge to cement companies.

The Cement Division has undertaken specific initiativesin supply chain management, procurement and cementdistribution optimisation and brand building. Further thrustwould be on increasing sale of blended cement, especiallyin Western India, and continued efforts to reduce operatingcosts. Initiatives would be taken in the area of materialsto complete the focus on supply chain management. Theinitiatives have been institutionalised and are expected toimprove the cost competitiveness and the profitability ofthe Division.

In relation to global levels, India’s per capita consumptionof cement is low and therefore the prospects for long-

term growth are good, considering the objectives of thecountry in terms of economic growth. The Companybelieves that further capacity build-up will be rational anddriven by demand growth alone. The consolidation in thecement industry is also expected to contribute to morestable market conditions.

ELECTRICAL AND ELECTRONICSDIVISION

1. AN OVERVIEW

The Electrical Business comprisesElectrical Standard Products, ElectricalSystems & Equipment andPetroleumDispensing Pumps & Systems. TheElectronic business covers Metering &Protection Systems, Control &Automation, Medical Equipment &Systems, Embedded Systems & Softwareand Enterprise Networking.


As against a growth of about 5% in the electrical industryduring 2003-2003, the Division increased its sales by10.6%, which is a significant accomplishment.

Multinational companies’ attempts to increase theirpresence has not affected the leadership position of theCompany and the Division retained its market leadershipposition in Electrical Standard Products, Electrical Systems& Equipment and Medical Equipment segments. Further,the Division consolidated its leadership position inPetroleum Dispensing Pumps & Systems. Metering &Protection Systems business is on the verge of emergingas the largest in the country in one of its products viz.Trivector meter. Embedded Systems & Software (EmSyS)has made a good beginning in North American andEuropean markets.

All these have been achieved due to focused introductionof new products, increasing un-solicited service tocustomers and enhancing the customer base by offeringproduct variants on a regular basis to satisfy their needs.


Some of the key initiatives undertaken by the Divisioninclude:

a) Development of New Products / Technology

In order to mitigate the risk of changes in technologyand product obsolescence, the Division has beenconstantly focusing on introduction of new products,product variants and addressing new markets. HighNew Product Intensity (NPI) of 34% for Low VoltageSwitchgear products and 87% for Medical Equipmentin the year is a benchmark in itself. Increasingly moreand more products are becoming “communicationenabled” and the Division is evaluating on a regularbasis its required response to these developments.


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b) Cost Leadership

Cost competitiveness is continuously enhanced throughimprovements in processes using tools like ValueEngineering, Six Sigma, JIT, e-Procurement, ReverseAuctioning, Lean Manufacturing and e-enablement ofsales processes.

c) Human Resources Development

The Division has placed a lot of emphasis ondeveloping the skill sets of its people. Considerableimportance is given to skill development and acquisitionof talent in the new growth areas like EnterpriseNetworking and Embedded Systems & Software. On-the-job-training, specific need-based programs and jobrotation continue to nurture intellectual capital.

d) Thrust on Exports

On the export front, the Division has embarked upona focused market strategy. The Division presentlyexports its electrical products to the Middle East, SouthEast Asia and neighbouring countries. In addition tothe above, medical equipment are also exported toEurope and China. Efforts were directed towardsconsolidating sales in focused markets, while vacatingmarkets where the potential is uncertain in the longrun. The various business development initiativestaken, including certification of Low VoltageSwitchboards range by Association of Short CircuitTesting Authority, UK (ASTA), have paved way forsignificant business opportunities in the focusedcountries. This strategy is expected to yield resultsover the next few years.

e) Customer Focus

A Customer Satisfaction Survey was carried out forElectrical Standard Products during the year. TheCustomer Satisfaction Index (CSI) showed a markedimprovement of 10% over the previous survey carriedout in 1998-1999, signifying the Division’s orientationtowards customer satisfaction.

f) Intellectual Property Rights

In today’s changing world economic scenario, theIntellectual Property Rights (IPR) and their globalprotection has assumed paramount importance.Enhanced attention to this activity has been given.During the year under review, 43 IPR applicationswere made which is more than double the number ofapplications filed during the previous financial year.

4. FUTURE OUTLOOK

Improvement in overall economic scenario is expected tosustain the Division’s growth plan. Government policiesare generally favourable with particular emphasis onHousing Sector, Infrastructure Development, Health-careand Petroleum. Power Sector reforms are expected toresult in a growth of 10% in the switchgear sector of theelectrical industry.

The new Finance Act has provided incentives such as

increased depreciation benefit and granting infrastructurestatus to hospitals for the growth of healthcare industry.Consequently, increased investments are expected in thissector, which augurs well for the prospects of the Medicalequipment & Systems business. The US market offersopportunity for the Medical equipment business and theDivision is gearing up by getting additional approvals anddeveloping new products to address this market.

DIVERSIFIED BUSINESS DIVISION1. BUSINESS ENVIRONMENT

a) Packaging Business Unit

This unit consists of manufacturing and marketing ofMetal Packaging & Glass Containers for Soft Drinks,Breweries, Liquor, Pharmaceuticals, Processed Food,etc. The industry capacity in Metal Packaging as wellas Glass Container Business continues to be highercompared to the demand. The demand-supply gapand entry of MNCs in domestic market have resultedin fierce competition and pressure on prices.

Reduction in excise duty on soft drinks and introductionof 200 ml bottles has yielded good growth for glassbottles and crowns. The liquor segment continues tosuffer from high excise duty and low margins. Thequality awareness in industry is increasing and bottlesmanufactured by the Company are getting preference.With concerted efforts the exports of glass bottleshave doubled to Rs 17.6 crore.

b) Welding & Industrial Products

This business involves providing Welding solutions forrepairs & maintenance, automatic welding systemthrough Robotics and marketing of world-renownedISCAR carbide cutting tools. The Welding businesshas strategic alliance with MESSER E+C. It involvesapplication development and supply of consumablesand special equipments. The Automation businessinvolves design, engineering and supply of automationsystems with robots for automobile, defence andprocess industries. L&T is the sole distributor forISCAR, Israel in carbide cutting tools business in thehigh-end cutting tool market segment in automobiles,engineering and defence.

L&T is well placed in this business segment with itswell spread out network of stockists and technicalpersonnel. The focus is on development of newproducts and high-end technology solutions to counterthe threat from cheaper alternatives and emerginginternational competition.

c) Earthmoving & Construction Equipment

This business segment comprises of marketing andafter-sales service of Backhoe Loaders and VibratoryCompactors manufactured by L&T-Case EquipmentPvt. Ltd.(50:50 JV with CNH Global N.V., USA) andHydraulic Excavators manufactured at L&T-KomatsuLimited (50:50 JV with Komatsu Ltd., Japan). Both


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these sectors have a number of established players inthe market, viz. JCB, TELCO, CAT, BEML, VOLVO,Escorts, Ingersoll Rand, etc. Most players in theindustry have tie-up with major MNCs, which increasescompetition with pressure on prices. Control on costswill therefore be the key for success.

Major government programmes viz. National HighwayDevelopment, East-West-North-South Corridor, RuralRoads under PMGSY, etc. have seen a market growthof 31% in Backhoe loader, 39% in Compactors and7% in Hydraulic Excavators.

2. FUTURE OUTLOOK

The thrust in Glass business will be on improving productmix, better price realisation and focus on exports andWestern Region market.

The Welding & Industrial Products business will focus onindustries like Defence, Railways, Automobiles, Oil &Drilling, for growth and enhanced export initiatives in SriLanka & Bangladesh.

The outlook in Construction & Earthmoving equipment isencouraging. The continuing Government emphasis oninfrastructure building along with financial reforms wouldlead to massive construction activity in Power sector,linking of National rivers, Ports & Airports, Roadconstruction, etc. With these developments, the demandfor Excavators is expected to increase by 10-12% andthat for Backhoe Loaders and Compactors by 12-15%.

FINANCIAL REVIEWThe year 2002-2003 witnessed somerevival in the Indian industrial activity.During the year, industry grew by about5.8% as compared to 3% in the previousyear. Although broad-based investmentswere still lacking, capital goods sectorreported a 10% growth. Investmentactivity picked up in select areas such asInfrastructure, Oil & Gas and Petrochemi-

cals. Meanwhile, in the global markets, economic conditionscontinued to be subdued. Competition however was intense,with many multinational companies evincing keen interest inmost of the available opportunities. Prices were undercompetitive pressures resulting in squeezed operatingmargins. The Company continued its thrust on internationalbusiness during 2002-2003. The financial performance ofthe Company for the year ended 31st March, 2003 requiresto be viewed in this backdrop.

Revenues

Sales & service income at Rs.9870 crore recorded animpressive increase of 20.8% over the previous year. Theincrease was largely due to the rise in the revenues of E&Csegment, which grew by 33.7%, during the year. WhileCement sales grew by a mere 4% during 2002-2003, salesfrom Electrical and Electronics business grew by 10.6%.Other income of Rs.254 crore, which increased by 17%,comprises mainly dividends from Subsidiaries & Associate

Companies (Rs.49 crore), income from investments (Rs.26crore) and other business related income (Rs.150 crore).

Exports

Export Order Booking clocked a major growth of 93.2% toRs. 2285 crore. This is mainly attributable to the 118.6%growth in E&C export order booking. Export earnings grewby 46.8% during the year to Rs. 1622 crore, representingnearly 16% of the Company’s total turnover. Export revenuesfrom the E&C segment alone saw a significant increase of55.7%. Although some of the initial contracts wereundertaken with thin margins, the Company gained invaluableexperience for building its track-record in the internationalmarket place.

Manufacturing & Other Costs

Manufacturing, construction and operating expenses atRs.6567 crore, were higher by 31% as compared to theprevious year. Given the large number of orders underexecution by the E&C segment, expenditure on raw materials,construction materials, sub-contracts and stores & sparesincreased during the year. The expenditure on theseaccounts largely depends upon the nature of the contractsunder execution and therefore needs to be viewed in totalityfor comparison. Higher level of activity at Powai, Hazira,Nashik and at the various cement plants, expansion ofmodular fabrication yard at Hazira, rise in fuel prices,increased cost of packing materials and the impact of fullyear’s operation at Durgapur Cement Grinding Unit have allcontributed to the increase in manufacturing cost. Higherproduction of cement leading to increased limestone royaltypayments and technical knowhow fees paid for power plantcontracts have resulted in larger outgo on these accountsas compared to the previous year. As a part of financialrestructuring efforts, the Company sold and leased backcertain equipment which have contributed to increased hirecharges during the year. Repairs to equipment at the jettycatering to the Gujarat cement plant contributed to somecost increase as well.

The Company has undertaken several initiatives at its variousestablishments to bring down the overall manufacturing andconstruction cost. Improved procurement processes, globalsourcing, logistics review and redesign, value engineeringinitiatives, etc. are some of the steps in this direction. TheCompany has launched several initiatives such as Six Sigma,Total Productivity Management, etc. to eliminate waste,optimize cost and maximize productivity, all of whichaggregated to cost savings in excess of Rs. 60 crore.

Staff expenses at Rs.668 crore during the year reflect anincrease of 10.8% over the previous year. The increase ison account of annual increments in salary & wages andadditional staff welfare expenses such as medical, leavetravel, contribution towards canteen expenses, etc. Theincrease also reflects the impact of separation of 722 personsunder the Company’s Voluntary Retirement Schemes duringthe year. Decline in the interest rates and reduction in thecorpus of the retirement benefit funds due to VRS separations


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have resulted in higher contribution to Gratuity and PensionFunds.

Sales, administration and other expenses at Rs.1413 crorefor the year have increased by 8.2% over the previous year.The expenses on travel and packing & forwarding expenseshave gone up mainly due to increased international business.Increased sum assured due to growth in project businessand 10% additional surcharge on fire and engineering policieshave contributed to incremental insurance cost. Issuance ofadditional bank guarantees due to larger order book andincreased movement of funds, both within the country andoutside, have resulted in higher bank charges. The decisionto lease technology-based equipment during the year inpreference to owning has led to increase in the rental outgo.Also, the increase in expenses towards professional feesfor technical and other consultations is in line with increasedvolume of business during the year. Delay in broad-basedrevival of core sector industries, to which the Company hasexposure in the form of receivables, has necessitatedincrease in precautionary provisions / write-off of some ofthese receivables.

There was a significant reduction in interest cost for theyear 2002-2003. Gross interest at Rs.225 crore was lowerby 40% as compared to the previous year. The savings ofover Rs.150 crore during 2002-2003 were achieved byefficient treasury operations, repayment of debt and closemonitoring of funds employed by the various business units.Improved working capital management, strict control overcapital expenditure and larger quantum of customer advanceshelped in optimizing funds employed. While the soft interestrate environment aided the effort, the Company madefocused efforts on retiring high cost debt and refinancingsome of them at much lower cost. The Company effected anet debt repayment of Rs.287 crore during the year. Judicioususe of hedging tools such as interest rate swaps, efficientmix of foreign currency loans and varying debt tenors haveassisted the Company in reducing its average cost ofborrowing.

Depreciation and obsolescence charges at Rs.306 crorewas lower by Rs.20 crore on account of sale of certain plantand machinery and technology-based equipment towardsthe end of the previous year.

Profitability

The operating profit for 2002-2003 was lower at Rs.969crore, a decrease of Rs.73 crore over the previous year.The operating margin percentage in E&C business, thelargest business segment for the Company, is lower ascompared to the previous year mainly due to thin margins insome jobs from the international market undertaken in theearlier years, which are nearing completion. Tight deliveryschedules, enhanced quality specifications benchmarked toglobal standards, etc. involve cost and have led to reductionin operating margins.

Cement prices throughout the year were under pressure.The imbalance in demand and supply and capacity increasedue to commissioning of new plants of some of thecompetitors, had an adverse impact on the cement pricesand realisation.

Significant reduction in interest cost and lower depreciationenabled the Company to report a higher profit before tax at

Rs.510 crore for 2002-2003. After considering the tax creditsavailable under Sec.115JAA of Income-tax Act, 1961, theCompany made a provision of Rs.89 crore towards currenttax and has written back Rs.11 crore on account of deferredtax. The Company’s profit after tax for 2002-2003 at Rs.433crore was 24.8% higher as compared to the previous year.

SEGMENT-WISE PERFORMANCE

Engineering & Construction (E&C)

During the year 2002-2003, the segment booked ordersaggregating to Rs.9502 crore, an increase of 29% over theprevious year. The order booking for project exports andsupplies at Rs.1937 crore showed an impressive growth of118.6% over the previous year. The segment reported exportrevenues of Rs.1280 crore during 2002-2003, an increaseof 55.7% over the previous year. The total revenues of thesegment increased by 30.6% to Rs.6155 crore during theyear.

The operating margins for 2002-2003 were lower at 8.1%due to competitive pressures. The brief financials for thesegment are :

Figures in Rs. crore

2002-2003 2001-2002

Order Booking 9502 7354Order Backlog 13687 11063Gross Revenues * 6155 4714EBITDA / Revenue * (%) 8.1 10.1Export Earnings 1280 822

* Includes inter-segment revenue

CementTotal sales of cement and clinker at 13.3 million tonnesincreased by 11.8% over the previous year. Average salesrealization during 2002-2003 declined by about 6% toRs.1222 per MT. Consequently, despite the volume growth,the sales turnover for 2002-2003 posted a marginal increaseover the previous year. The operating margin for the segmentdeclined during the year, due to lower sales realisation.While fuel, power and packing & forwarding costs increasedduring the year both due to increased volumes and rise intheir prices, the Segment launched several cost reductioninitiatives such as reduction in energy consumption, use ofalternative packing material, change in raw materials mix,reduction in distribution and logistics cost, etc. to arrest thedecline in operating margins.The Company was the single largest exporter of bulk cementand clinker from India with shipments aggregating to 2.8million tonnes valued at around USD 60 million.The brief financials for the Segment are :


2002-2003 2001-2002

Gross Revenues * 2715 2611EBITDA / Revenue * (%) 14.4 18.4Export Earnings 284 234



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Electrical & Electronics

The Segment booked orders valued at Rs.871 crore during2002-2003, recording an increase of 22.5% over the previousyear. The revenues of the Segment at Rs.865 crore grewby over 17% during the year, well ahead of the growth ratereported by the electrical industry. Sustained efforts to reducecost through initiatives covering material cost, valueengineering, manufacturing processes and work-forceoptimization contributed to the Segment’s improved operatingmargins.

The brief financials for the segment are :


2002-2003 2001-2002

Order Booking 871 711

Gross Revenues * 865 736

EBITDA / Revenue * (%) 13.2 12.6

Export Earnings 35 34


Diversified Businesses

For Metal & Glass Packaging business, the surplus capacityin the industry and the entry of multinationals have resultedin inadequate capacity utilization and unremunerative prices.The Company made concerted efforts to increase the plantefficiency, step up the export of glass bottles and improvethe profitability of the business.

The industrial slow-down during the past few years hasimpacted the growth of the welding business. Efforts areunder way to migrate to high-end solutions to stay ahead ofcompetition.

In Earthmoving & Construction Equipment business, theCompany faces intense competition from well-establishedplayers. Ability to deliver superior products at competitiveprices would enable the Company to take advantage of themajor developmental programmes announced by theGovernment such as upgradation of transportationinfrastructure, etc.

The brief financials for the Segment are :


2002-2003 2001-2002

Gross Revenues * 425 425EBITDA / Revenue * (%) 6.3 2.9Export Earnings 23 15


Fixed Assets

The gross fixed assets as at March 31, 2003 were at Rs.6232crore as compared to Rs.6135 crore in the previous year.As the capital expenditure during the year was strictlycontrolled, additions to fixed assets were kept at necessaryminimum. During the year, net additions to fixed assetsamounted to Rs.97 crore inclusive of both owned and leasedassets. The additions were essentially towards normal

upgradation of plant & machinery and improved facilities inthe form of office space.

Working Capital

The net working capital at Rs.2300 crore as of March 31,2003 reflects a reduction of Rs.113 crore as compared tothe previous year. The Company continued to place strongemphasis on optimizing the funds locked up in working capitalrequirements during the year. Improved cash managementsystems, optimizing vendor credit arrangements, strictmonitoring of cash budgets contributed to lower level ofworking capital despite increase in sales.

Financial condition and Liquidity

The Fixed Deposit Schemes and the Commercial Papersissued by the Company continue to be rated at the top ofthe league with credit ratings of AAA and P1+, respectively.Although the long term debt rating is AA+, the Companyenjoys the price preference of a AAA Corporate, given itsimpeccable debt servicing track record. The Company’s planto improve its debt equity structure is well on course withthe Net Debt (net of cash and cash equivalents) to Equityratio declining to 0.58 : 1 as on 31st March, 2003. TheCompany continues to access markets at opportune timesfor raising both short and long term resources, often atbenchmark rates. The Company manages its liquidityefficiently through a system of rolling cash forecasts andshort term investment of treasury surpluses in the financialmarkets.

The Company’s principal sources of liquidity are :

1. Existing cash and cash equivalents

2. Cash generated from operations

3. Unutilised funded limits with banks

4. Incremental borrowings

Figures in Rs. Crore

Liquidity & Capital Resources 2002-2003 2001-2002

Cash & cash equivalents atbeginning of the period 204.48 138.90

Add : Net cash provided/(used) by:

Operating activities 1167.38 1327.07Investing activities (363.75) 124.53Financing activities (687.58) (1386.02)

Cash & cash equivalentsat end of the period 320.53 204.48

The cash generated by the operations during 2002-2003was marginally lower as compared to the previous year.The increase in trade and other receivables during the yearwere funded by higher quantum of vendor and other tradepayables. Net cash generated by operating activities wasessentially utilized for reduction of debt, servicing of interestand dividend commitments and investment in capital asset.Net of loans / deposits made with Subsidiary & AssociateCompanies for meeting their cash flow requirements, thesurplus cash available was utilized for making short terminvestments.


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The Company has an integrated financial risk managementpolicy to monitor and manage liquidity, interest rate andforeign currency exposures. The procedures, practices andlimits with respect to this function were subject to periodicreview by senior management during the year.

Consolidated Financial Statements

The Company has presented elsewhere in this annual reporta Consolidated Financial Statement prepared in compliancewith the applicable Accounting Standards. The consolidatednet debt to equity was lower at 0.9:1.

The consolidated sales and service income for 2002-2003was 18% higher at Rs.10857 crore as compared to theprevious year. The profit before tax and profit after tax atconsolidated level for 2002-2003 were higher by 16% and22% respectively at Rs.480 crore and Rs.385 crore Theconsolidated net worth (excluding deferred tax liability) ofthe Group as on 31st March 2003 was higher at Rs.4130crore as compared to Rs.4065 crore during the previousyear.

INTERNAL CONTROL SYSTEM

The Company has an internal control system commensuratewith its size and nature of business which provides for :

n Efficient use and safeguarding of resources

n Accurate recording and custody of assets

n Compliance with prevalent statutes, policies, procedures,listing requirements, management guidelines andcirculars

n Transactions being accurately recorded, cross-verifiedand promptly reported

n Adherence to applicable accounting standards andpolicies

n IT Systems, which include controls for facilitating theabove.

The internal control system provides for well-documentedpolicies, guidelines, authorizations and approval procedures.The Corporate Audit Services Department conducts periodicaudits across all locations and of all functions throughoutthe year and brings out the compliances or deviations ofinternal control procedures through its audit reports. Theobservations arising out of audit are subject to periodic reviewand compliance monitoring. The significant observationsmade in internal audit reports, along with the status of actionthereon, are reviewed by the Audit Committee of the Boardof Directors on a regular basis for further appropriate action,if and as deemed necessary.

LEVERAGING INFORMATION TECHNOLOGY ANDe-ENABLING OF OPERATIONS

The Company has been constantly striving to be at theforefront of information technology and has embraced thelatest technology and equipment to gain competitivestrengths. Considerable progress has been made in e-enabling operations for improvements in quality, deliveryschedule & cost control.

The framework of IT assets (e.g. LAN/ WAN, 3-D PDS,SAP R/3 etc.), built over the last few years, has now maturedinto a vibrant system which provides on-line information for

better value-based decision-making and customer service.Hence the thrust during the year in the E&C business wason leveraging IT for efficient Collaboration & KnowledgeManagement. The Division launched innovative softwarecalled “The KnowNet” to enable E&C-ites to pool and sharetheir collective knowledge gained through individualexperience in various facets of project business.

The Heavy Engineering Division implemented various ITinitiatives like Web based Vendor Managed Inventory,e-Procurement / Reverse auctions, Customer RelationshipManagement, internet-based design / data transfer withoverseas clients, Work-flow based system for employeebenefits with back-end ERP integration, Query facility inERP system using SMS for select applications etc.

IT initiatives during the year in the Electrical & ElectronicsDivision include introduction of Business Warehouse,Strategic Enterprise Management (SEM) and Product LifeCycle Management (PLM). A major initiative of integratingproduct design & CAD (Pro-E) with ERP, launched last yearto enhance concurrent engineering in product design, isresulting in faster introduction of new products. The Divisionimplemented Sales Force Automation (SFA) and is extendingthe same as a step towards implementation of CustomerRelationship Management (CRM). The Division is nowconsidering exploiting new technologies like wireless LANsand VoIP to increase productivity.

The Company expects the above initiatives to improve itscompetitiveness and help augment its business.

PEOPLE INITIATIVES

The Company has prepared a road map for talent acquisitionand retention, to augment its plan of making its presencemore prominent in global markets. A slew of leadershipprogrammes have been launched to segregate talent thatcan build business, by identifying and developing individualpotential, in areas of strategic importance to the Company’sgrowth. The Management Leadership Programme (MLP),launched in 2001, has calibrated the potential of over athousand high performing employees, with the objective ofplacing the cream of this talent in critical business roles anddeveloping them through systematic training and coachingplans. A succession planning process for fast track careerdevelopment of these potential business leaders is evolvingsimultaneously.

A Technology Leadership Programme (TLP), launched in2002, has delineated top talent in the area of technology.Nominees from strategically important core areas of business,such as defence, electronics etc. participated in this uniqueHR initiative, which addresses the need to provide a separatecareer track for encouraging the development of domainknowledge in growth business areas. Another importantprogramme on the anvil is for Top Operational Talent (TOT),which is meant for high quality execution. A set ofcompetencies especially important for executing some ofthe prestigious orders booked by the Company, in the E&Cbusiness segment, is being assessed separately throughthis initiative.

Brand building ambassadors at college campuses are makingefforts to attract young top talent to join the Company as


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trainees under various schemes. The training anddevelopment philosophy of the Company ensures that thedevelopmental inputs are identified through a scientificassessment of competency gaps. Feedback and coachingsessions are becoming a part of the responsibilities of everymanager. A new framework for linking assessment ofindividual performance with incentives and rewards has beendeveloped. The system called FAIR has been launched forobjectively measuring and rewarding contribution to valuedrivers for enhancing business performance. A GlobalManagement Leadership programme is being prepared fordeveloping global business managers. This initiative is tostrengthen the Company’s efforts of expanding its operationsto new international frontiers.

EMPLOYEE RELATIONS

The employee relations at various Works and Establishmentsof the Company continue to be cordial. The active co-operation of unionised employees at various locations is animportant contributory factor for the cordial relations.

CORPORATE AWARDS / ACCREDITATIONS

The following awards/accreditations were conferred onvarious business divisions of the Company during 2002-2003.

Construction

n Engineering Design and Research Centre building ofthe Division has won the prestigious international awardinstituted by fib (Federation Internationale du Beton),the International Federation for Structural Concrete asOutstanding concrete structure – 2002 Special Mention

n ACCE Billimoria Award for high-rise building for SouthCity Project at Bangalore

n The American Society of Concrete Contractors (ASCC)- Certificate of Recognition for achieving Zero Fatalitiesin Ahmedabad Region

n Coal Handling Project at Paradip, Orissa has won theprestigious RoSPA Gold Award for Occupational Healthand Safety from The Royal Society for the Preventionof Accidents (RoSPA), UK

E&C Projects

M/s. LRQA, UK, has recently certified the Division’s e-Engineering solutions business unit and informationtechnology service unit at Baroda to ISO 9001 QualityManagement System. Further the Quality ManagementSystem of all Strategic Business Units and Service Units ofE&C Division were upgraded and duly certified to the newISO 9001 – 2000 version. The Division’s R&D Center atPowai and EPC Centre at Baroda have successfullycompleted their certification & surveillance audits by Ministryof Communications and Information Technology, Governmentof India and became the first in India to be certified forInformation Security Management System to the BritishStandard BS 7799. In addition Front End Engineering andDesign (FEED) Group has been certified to ISO 9001 andISO 14001 by LRQA-UK.

Heavy Engineering Divisionn The Division’s Hazira Unit has been re-certified under

ISO 9001 : 2000 Quality Assurance System

n British Safety Council Award 2002 for Hazira Unitn The Division’s Chennai Unit has received Tamil Nadu

State Safety Award Scheme I & IIn SQLO certification from China for Powai & Hazira Unitsn European CE marking for static equipment for Powai

Unit

Cement

The Company was awarded the “Top Exporter of the Yearfor 2001-2002” by CAPEXIL for export of cement and clinker.Further, some of the Company’s cement-manufacturing unitshave also received various awards for environmentprotection, social awareness, safety and management ofbetter industrial relations.

Electrical & Electronics Division

n At 13th World Congress on Total Quality held in February2003, the Medical Equipment business got the GoldenPeacock Award for innovative product/service in themedical equipment sector. The Division has receivedthis prestigious award for the second consecutive year.

n One of the Division’s new initiatives, EmSyS, becamethe first exclusive embedded systems organisation inthe World to achieve SEI CMMI Level 5 (CMMI isregistered in the U.S. Patent and Trademark office byCarnegie Mellon University) maturity rating by using theentire set of CMMI model components (SystemsEngineering, Software Engineering, Integrated Productand Process Development and Supplier Sourcing). It isthe seventh organisation worldwide to achieve thehighest CMMI Level.

n Worldstar 2002 Award for Packaging Excellence givenby World Packaging Organisation, Sweden fordeveloping an eco-friendly packaging for FN63 SwitchDisconnector Fuse.

n First in India to obtain TTA (Type Tested Assembly)certification from ASTA for MCCs and PCCs

Other Awards

The Company’s leadership position in the domesticinfrastructure sector received further reaffirmation. A peer-to-peer survey by Businessworld, a leading businesspublication, established that L&T was ‘India’s Most RespectedCompany’ in the Infrastructure Sector.

The Jamnalal Bajaj Uchit Vyavahar Puraskar – 2002 for fairbusiness practices added an ethical dimension to theCompany’s achievements. The Council for Fair BusinessPractices, Mumbai, cited L&T’s excellent record in maintaininghigh ethical standards in its business dealings, the highquality of its products and services, its emphasis on customersatisfaction and strong commitment to social obligations.

PERFORMANCE OF SUBSIDIARY ANDASSOCIATE COMPANIESSUBSIDIARY COMPANIES

Larsen & Toubro Infotech Limited

The Company is a wholly-owned subsidiary engaged in thebusiness of providing software solutions tailored for variedapplications and industries, focusing its offerings around fourbroad verticals namely, Manufacturing, Utilities, FinancialServices and Telecom services.


33

The Company’s alliances / partnerships with various softwarevendors like SAP, Sun Microsystems, Microsoft, Oracle, IBM,TIBCO, I2, etc. demonstrate its commitment to keep pacewith the latest technologies and ability to imbibe in theirsolutions offerings. During the year, the Company obtainedSEI-CMMI Level 5 certification across all verticals anddevelopment centres.

During the year under revirew, the Company reported lowertotal income of Rs.269.5 crore including that of its whollyowned subsidiary, Larsen & Toubro Infotech GmbH (previousyear : Rs.281.2 crore) and a lower profit after tax of Rs.12.7 crore (previous year : Rs.35.7 crore). The reduction intotal income and margin is mainly due to fallout of slow-down in USA which has driven rate realizations down bymore than 10% as compared to the previous year.

USA continues to be the leading destination contributing51% of the Company’s software exports, while Europe andJapan contribute 22% and 7% respectively. 61% of theCompany’s exports come out of on-site services and balancethrough offshore development centers.

While the verticals cover a substantial part of the total ITservices landscape and underline the Company’s futuregrowth strategy, the Company also sees horizontaltechnology areas like enterprise solutions (SAP, Oracle,People Soft, JD Edwards, etc.), communication andembedded software and Geographical Information Systems(GIS) as also Enterprise Application Integration (EAI) ascentral to its future growth plans.

The Company has taken appropriate steps to nurture long-term relationships with several large customers. TheCompany’s client base comprises large internationalcorporates including some of the Fortune 500 companies.During the coming year, the initiatives launched onstrengthening the sales and marketing teams coupled withthe renewed vertical focus and the thrust on quality with SEICMM Level 5 are expected to position the Company as apremier IT solutions provider.

The Company has been successful in positioning itself forcertain large outsourcing deals by leveraging on L&T’sparentage. The thrust on ERP segment has also been vastlyincreased to gear up for the anticipated availability ofbusiness during the next year.

L&T Finance Limited

The Company, a wholly-owned subsidiary of L&T, is a Non-Banking Finance Company engaged in the business ofproviding lease, hire purchase and other financing facilities.The Company has consolidated its position in constructionequipment finance and businesses around the L&T Group.The Company is highly respected in the constructionequipment finance market and enjoys a client base of over700.

The Company has been playing a key role in supporting thebusiness growth of L&T Group’s Construction andEarthmoving Equipment as well as Tractors by activelyparticipating in customer financing. Recently, the Companyhas also embarked on vendor financing in a significant way.

The Company prepaid public fixed deposits during the year,with the approval of RBI.

During the year under review, the Company earned a totalincome of Rs.64.3 crore (previous year : Rs.59.0 crore).The company’s profit after tax is lower at Rs.6.1 crore(previous year : Rs.11.2 crore) due to additional provisioningfor risk assets pertaining to small and medium sizedenterprises.

The Company will continue its focus on consolidating itsposition in construction equipment finance and businesesaround the the L&T Group while at the same time exploringgrowth opportunities.

HPL Cogeneration Limited

The Company, a 51% subsidiary, is a special purposecompany set up as a joint venture between L&T and HaldiaPetrochemicals Limited, Kolkata (HPL) for the purpose ofowning and operating a 116MW combined cycle cogenerationpower plant for supply of power and steam exclusively toHPL’s Petrochemical Complex at Haldia, West Bengal.

During the year under review, the Company reported a lowertotal income of Rs.143.9 crore (previous year : Rs. 151.5crore) The reduction in total income is mainly due to impactof weakening USD and lower LIBOR on USD component oflease rentals. The Company earned a higher profit after taxof Rs.40.4 crore (previous year : Rs.36.7 crore) mainly dueto lower operating expenses.

The Company is expected to maintain its profitability in theimmediate future.

L&T Infocity Limited

The Company, an 89% subsidiary of L&T, is a joint venturewith the Andhra Pradesh Industrial Infrastructure CorporationLimited (APIIC). The Company is engaged in the businessof development and maintenance of Information TechnologyParks in Andhra Pradesh. The revenues of the Companyconsist of sales proceeds and lease rentals of floor spaceas well as income from maintenance of the IT Park.

The Company is currently developing Phase III of the 151-acre HITEC City (Hyderabad Information TechnologyEngineering Consultancy City) in Hyderabad, in joint venturewith another company.

Phase I of development of HITEC City was the “CyberTowers” building with 5.25 lakh sq. ft. of office space,constructed and marketed successfully to various ITcompanies. Phase II was the “Cyber Gateway” building,providing 7.8 lakh sq. ft. of office space, which was completedin 2002 and booking for over 90% of the space has beencompleted.

The Company has also completed the first phase ofinfrastructure development work on 145 acres of land inHITEC City, which includes laying of roads, storm waterdrain, trenches for underground power distribution &communication network, sewerage network, water supply,street lighting, etc. This infrastructure facility is attractingmulti-national companies like Oracle, Microsoft, Convergysetc. to set up Built to Suit facilities.

During the year under review, the Company reported lowertotal income of Rs.58.9 crore (previous year : Rs.70.8 crore),as a result of lower floor space sold/leased. The Companyhas earned a profit after tax of Rs.8.7 crore (previous year :Rs.12.5 crore)


34

The Company plans to undertake Consultancy Services forsetting up IT Parks, with the participation of other developersin various places across the country. The Company is alsodeveloping a Trade Fair Centre in two phases through itssubsidiary viz. Hyderabad International Trade ExpositionsLimited.

L&T Equipment Leasing Company Limited

The Company, a wholly-owned subsidiary, was formed toprovide construction related equipment on operating leaseto construction contractors. The Company currentlypredominantly caters to the equipment requirements of L&T.During the year, the Company has added road makingequipment including crushers and impactors, concretingequipment like batching plants and large capacity generalutility equipment to its portfolio of assets.

During the year under review, the Company reported a highertotal income of Rs.6.8 crore (previous year : Rs. 3.9 crore).The profit after tax was higher at Rs.1.3 crore (previousyear : Rs.0.5 crore).

The Company expects reasonable growth in its businesswith the impetus for development of infrastructure projectsbeing given by Government of India. In the long term,however, the Company would continue to focus on L&T’srequirements and assist it in achieving better utilization ofits assets.

India Infrastructure Developers Limited

The Company, a wholly owned subsidiary, was formed as aspecial purpose company to provide a 2x45 MW captivecogeneration plant on lease to Indian PetrochemicalsCorporation Limited at their Gandhar petrochemical facilityin Gujarat. The Company has been registered as a NonBanking Finance Company (“NBFC”) with RBI.

During the year under review, the Company earned a totalincome of Rs.68.0 crore (previous year : Rs.73.6 crore).The reduction in total income is mainly due to impact ofweakening USD and lower LIBOR on USD component oflease rentals.

The Company incurred a lower loss of Rs.0.19 crore(previous year loss: Rs.9.6 crore). During the year, theCompany changed its accounting policy with respect to taxeson income and accordingly reversed the provision for deferredtax liability of Rs.24.8 crore considering the interim injunctionissued by the Hon'ble High Court of Judicature at Chennai,restraining the Institute of Chartered Accountants of Indiafrom implementing the Accounting Standard (AS) 22 -“Accounting for Taxes on Income”, with reference to NBFCs.

The Company’s earnings are expected to follow a consistentpattern during the period of the lease agreement, subject toexchange rate and interest rate fluctuations.

Tractor Engineers Limited

The Company, a wholly owned subsidiary, manufacturesand sells under-carriage systems for excavators, crawlertractors, and bull-dozers, material handling equipment likeapron conveyors, spares for oil-field equipment, etc. and iscurrently the only domestic manufacturer of under-carriagesystems for excavators.

During the year under review, the Company reported a highertotal income of Rs.34.0 crore (previous year : Rs.28.4 crore).The increase is mainly due to increase in sales in Under-carriage segment to OEMs and in Oil-Field Equipmentsegment. The profit after tax was Rs.1.5 crore (previousyear loss : Rs.1.5 crore).

Competition from imported under-carriage systems at lowerprices has affected the Company’s market share and marginsover the years. The Company has introduced three newUnder-carriage models (7T, 35T and 60T) and two newapplications for Under-carriage (Road Pavers and SurfaceMiners). Certain orders in the Defence area have also beensecured.

The Company plans to introduce new models to fight thecompetition and explore possibilities of enhancing businessin Defence sector and apron conveyors.

Narmada Cement Company Limited

The Company, a subsidiary of L&T, manufactures and sellsgrey Portland cement. The Company’s plants, having acombined annual capacity of 1.50 million tonnes, are locatedat Jafrabad and Magdalla in Gujarat and Ratnagiri inMaharashtra.

During the 12-month period ended 31st March 2003, theCompany achieved a turnover of Rs.149.5 Cr. as againstRs.258.5 crore in the previous 12-month period. The lossduring the period was Rs. 43.5 crore (previous period : Rs.15.8 crore) Cement sales in Gujarat and Maharashtra, wherethe Company markets its products, were affected due topoor realization and excess supply. During certain months,realization even fell below the variable cost. Certain inputcosts also increased mainly due to rise in petroleum prices.In view of the poor demand conditions, the Companytemporarily discontinued cement grinding operations at itsplants at Jafrabad and Magdalla.

The Company took certain initiatives to tone up its operations,including major repairs to plant and machinery. A debtrestructuring exercise was carried out and a VRS schemewas announced which received a favourable response.

The Company continues to be a ‘potentially sick company’within the meaning of the Sick Industrial Companies (SpecialProvisions) Act, 1985. Efforts are being made to improve heviability of the Company through a scheme of restructuring.

The Company has extended its financial year by six monthsand accordingly the current financial year will end on 30thSeptember 2003.

Larsen and Toubro Ceylinco (Private) Limited

The Company, an 80% subsidiary, is a joint venture with theCeylinco Group of Sri Lanka. The Company has a cementterminal in Sri Lanka through which it imports bulk cementfrom L&T and markets it in Sri Lanka through a distributor/dealer network. The Company is a major cement player inthe country and the “Ceylinco L&T Cement” brand is wellrecognized in Sri Lanka.

The year 2002 saw an improvement in the political scenarioand general economic conditions in Sri Lanka, which led tolowering of interest rates and stable exchange rates.


35

During the year under review the Company sold 2.9 lakhtonnes of cement compared to 3.3 lakh tonnes in the previousyear. The cement prices continued to remain depressed.Consequently, the Company reported lower income of SriLankan Rupees (SLR) 1594.4 million (previous year : SLR1728.2 million). The loss was lower at SLR 38.5 million(previous year : SLR 48.2 million). The Company undertookvarious cost reduction measures to keep operating costsunder control.

With the economic situation improving and political scenariobecoming stable in Sri Lanka, the outlook for the next yearappears positive. The demand for cement is expected toimprove due to the expected rehabilitation activities andincreased investments in the construction and related areas.

Narmada Infrastructure Construction Enterprise Limited

The Company, a 80% subsidiary, is a special purposecompany with a 15-year ownership/tolling rights in respectof 2 bridges at Zadeshwar across the river Narmada inGujarat on National Highway 8.

During the year under review, the Company reported a totalincome of Rs.23.2 crore (previous year : Rs.19.8 crore) anda loss of Rs. 5.7 crore (previous year : Rs. 7.4 crore) Lowerthan expected traffic during the first half of the year due todisturbances in Gujarat has affected the Company’sprofitability.

Toll collections however picked up in the later half of theyear. The restructuring of term loans during the year hasresulted in bringing down the weighted average cost ofborrowings, which would get reflected in improved marginsin the ensuing years.

L&T Western India Tollbridge Limited

The Company, a wholly owned subsidiary, is a specialpurpose company formed for the purpose of constructingand operating a two-lane bridge across the river Watrak onthe Ahmedabad-Baroda section of National Highway 8 onBOT basis. The Company has a 10 year ownership andtolling rights in respect of the bridge and its approach roads.

During the year under review, the Company reported a totalincome of Rs.12.2 crore (previous year : Rs.12.4 crore).The profit after tax was Rs.1.7 crore (previous year : Rs.1.2crore).

During the year, toll collection was affected due to thedisturbances in Gujarat and also due to the general economicslow-down. The order of the District Magistrate not to collecttoll from non-users of the bridge and issue of passes tolocal vehicles also resulted in lower income.

The Company has pre-paid loans to the tune of Rs.3.95crore during the year.

The Company expects stable operations during the ensuingyear.

L&T Transportation Infrastructure Limited

The Company, a wholly owned subsidiary, is a specialpurpose company owning the property and tolling rights ofthe 28 kilometer Coimbatore Bypass Road and a 2 laneBridge across river Noyyal (Athupalam) on National Highway47. The tolling rights cover the concession period (includingconstruction period) of 31 years for the bypass and 21 yearsfor the bridge.

During the year under review, the Company earned a totalincome of Rs.10.9 Cr.(previous year : Rs.8.9 Cr.) andincurred a loss of Rs.4.3 Cr. (previous year Rs.5.9 Cr.).Profitability of the Company was affected due to loss of tollrevenue on account of non-payment of toll by a section ofthe users of the bridge, which was compensated to someextent in later half of the year by revision in tariff rates. TheCompany has taken up the issue of non-compliance on tollpayments by a section of users with appropriate authoritiesand expects to resolve the problem.

The Company has also restructured its loan portfolio, therebybringing down the weighted average cost of borrowings,and this would reflect in improved margins in the futureyears.

L&T Capital Company Limited

The Company, a wholly-owned subsidiary of L&T FinanceLimited, is a SEBI-registered merchant banker engaged inmerchant banking, money market operations, debtsyndication, corporate and project advisory services andinfrastructure financial modeling.

During the year under review, the Company earned a higherincome of Rs.2.5 crore (previous year: Rs.2 crore) and ahigher profit after tax of Rs.0.48 crore (previous year :Rs.0.23 crore).

L&T Netcom Limited

The Company, a wholly owned subsidiary of L&T, is engagedin the business of providing internet services. The Companyhas an ‘A’ Category (all India level) ISP licence and presentlycaters exclusively to the in-house connectivity requirementsof the L&T Group. Mission critical applications such as SAP,instant messaging and e-business are deployed using theinfrastructure provided by the Company. The network ismonitored by a state-of-the-art Network Operations Centerthat helps in maximizing of uptime.

During the year under review, the Company earned a totalincome of Rs.4.2 crore (previous year : Rs. 3.0 crore) andcould nearly break-even (previous year loss : Rs.1.1 crore).

The Company has obtained a licence to provide “VoiceServices”, which on implementation, is expected to result insignificant savings to the L&T Group.

Larsen & Toubro LLC, USA

The Company, a wholly-owned subsidiary, is based in USAand markets industrial valves manufactured by Audco IndiaLimited, an associate company of L&T, in the Americanmarket. Due to sluggish market conditions in USA and intensecompetition, margins have been under pressure. Howeverthe Company foresees improvement in demand arising outof Clean Fuel Projects being undertaken by US refineries.

In its second year of operations, ending December 2002,the Company reported a higher total income of USD 0.81million (previous year : USD 0.24 million) and a loss of USD0.03 million (previous year loss : USD 0.02 million).

The Company is exploring export opportunities inneighbouring markets like Canada and Latin America.

L&T Holdings Limited

The Company, a wholly-owned subsidiary, was formed asan investment vehicle to invest in non-power related


36

infrastructure projects. The Company has invested Rs.92crore in projects pertaining to roads, bridges, airport, portand IT service sector, which are at different stages ofimplementation.

During the year under review, the Company reported a totalincome of Rs.0.03 crore (previous year : Rs.1.35 crore) anda loss of Rs.2.1 crore (previous year : loss Rs.0.18 crore).Since the Company’s investments are in their early stages,its revenues are essentially from short-term investmentactivities. The higher loss is mainly due to interest outgo onnon-convertible debentures issued during the year toaugment resources for investment in infrastructure projects.

The Government's continued focus on development of roads/ bridges on a risk-sharing basis and impetus to other areaslike ports, airports and cyber-parks would provide furtheropportunities for the Company to build up a strong anddiversified portfolio of infrastructure investments.

Larsen & Toubro International FZE, Sharjah

The Company, a wholly-owned subsidiary with limited liabilitywas incorporated in the Hamriya Free Zone, Sharjah, tocarry on business of import and hire of plant, machineryand other equipment. The Company is yet to start itsoperations.

L&T ECC Construction (M) SDN.BHD, Malaysia

The Company, which is a joint venture between L&T andlocal partners in Malaysia, undertakes civil, mechanical andelectrical contracts and turnkey projects and is a subsidiaryof L&T by virtue of management control. L&T’s shareholdingin the Company is 30%.

During the year under review, the Company reported a totalincome of Malaysian Ringitt (‘RM’) 3.0 million (previous year :RM 1.3 million) and a loss of RM 0.1 million (previous year :0.3 million).

The Company enjoys the status of a local Malaysiancompany.

Larsen & Toubro (Oman) LLC

The Company, which is a joint venture with Zubair EnterprisesLLC, became a subsidiary during the year when L&T acquireda further 16% of the Company’s equity capital, therebyincreasing its shareholding to 65%. The Company wasestablished to provide the entire spectrum of constructionservices in the field of civil, mechanical and electricalengineering.

The major orders currently under execution include RoyalFlight Hangar Project for a value of Omani Riyal 16.3 million.During the year under review, the Company reported a highertotal income of Omani Riyal (‘OR’) 11.1 million (previousyear loss : OR 5.0 million) and a profit after tax of OR 0.23million (previous year : OR 0.08 million). The Company playsa significant role in furthering the L&T Group’s businessinterests in Oman and the neighbouring countries.

ASSOCIATE COMPANIESAudco India Limited

The Company, a joint venture with the Flowserve Group(US), is engaged in the manufacture and sale of industrialvalves, safety systems & equipment, pneumatic actuatorsand accessories.

The quality of the Company’s products has been certified byinternationally accredited agencies. Currently, around 54%of the Company’s revenues accrue out of exports. Superiorproduct quality, good R&D capabilities leading to fasterproduct development, strong distribution network andcompetitive pricing are the key strengths of the Company.

During the year under review, the Company reported a 25%increase in total income to Rs.267.8 crore (previous year :Rs.214.1 crore) and a higher profit after tax of Rs.25.5crore (previous year : Rs.21.6 crore).

The scenario for the ensuing year looks encouraging, with ahealthy order backlog position. Export opportunities in therefinery sector and increased off-take by Flowserve areexpected to provide growth impetus to the Company.

Ewac Alloys Limited

The Company is a joint venture with the Eutectic + CastolinGroup, Switzerland, who are now part of Messer Groupworldwide. The Company is a market leader in the businessof maintenance & repair welding and welding solutions forconservation of global metal resources. The principal productsand services comprise maintenance & repair electrodeconsumables, specification grade electrodes, flux-coredwelding wires, wear plates/parts, welding equipment, terocoat lab services, etc. L&T markets the Company’s productsin India. The Company enjoys 46% market share inmaintenance & repair segment.

Rise in application of continuous welding wire poses a threatto the Company’s business of traditional electrodes. Cheapimports and low priced products from small-scale industriescontinued to cause pressure on sales and operating margins.Downturn in core sector industries also impacted sales.During the year under review, the Company reported a totalincome of Rs.54.9 crore (previous year: Rs.51.7 crore) andprofit after tax of Rs.9.5 crore (previous year : Rs.9.3 crore).

The Company has commissioned Roll Reduction Mill to gearup its production capacity of continuous wires and willcontinue its thrust on production of flux cored wires & lowcost wear plates to counter competition. Export opportunitiesare also being explored with the joint venture partner.

L&T-Sargent & Lundy Limited

The Company, which is a joint venture with Sargent & LundyLLC, USA (S&L) was established for providing the entirespectrum of engineering services and solutions to projectsin the power sector.

The Company caters to the captive requirements of its parententities and a few niche clients in India and abroad. TheCompany, apart from being a high quality engineeringresource to S&L, has also completed design and detailedengineering of L&T’s power projects for Delhi Vidyut Boardin India and also its export projects at Oman and Sri Lanka.

Adverse conditions prevailing in the global markets in generaland US markets in particular have impacted working resultsof the Company. During the year under review, the Companyreported a lower income of Rs.20.8 crore (previous year :Rs.25.7 crore) and lower profit after tax of Rs.6.1 crore(previous year : Rs.9.3 crore). Exports accounted for over80% of the Company’s turnover.


37

L&T-Chiyoda Limited

The Company, which is a joint venture with ChiyodaCorporation, Japan, is a consultancy service firm that offerscomplete range of IT-enabled design and engineeringservices to the hydrocarbon sector. The services offeredinclude technology / licensor selection, preparation of techno-economic feasibility reports, development of process designpackage, front-end engineering and design, projectmanagement consulting, etc.

The hydrocarbon industry in India has shown growth withexpansion projects being implemented and is expected tocontinue to offer business opportunities with fuel upgradationprojects being planned for most of the refineries.

The Company is looking at widening its customer basethrough Oil and Gas sector projects of on-shore & off-shorefacilities. The Company also supports L&T and ChiyodaCorporation for their international projects in the Middle Eastand South East Asia.

During the year under review, the Company reported a 57%higher total income of Rs.22.4 crore (previous year : Rs.14.3crore). The profit after tax was higher at Rs.2.0 crore(previous year Rs.1.2 crore). The Company received a GoldMedal award for excellent and innovative management fromthe National Institute of Economic Development.

With the entry of world leaders in refining segment, theCompany expects an increase in the number of projects inthe domestic market. The Company also foresees goodpotential for integrated engineering jobs during the ensuingyear, both on the domestic and overseas fronts.

L&T-Ramboll Consulting Engineers Limited

The Company, which is a joint venture with Ramboll A/S,and IFU (the Danish Industrialization Fund for DevelopingCountries) of Denmark, offers international quality engineeringand project consulting services in the infrastructure andtransportation sector, especially for projects relating to portsand harbours, roads and bridges, railways, tunnels, airportsand environmental engineering. Additionally, the Companyalso pursues emerging opportunities in privatisation studiesin infrastructure, urban planning, tourism development anddevelopment & implementation of technical software systems.

During the year under review, the Company reported a highertotal income of Rs.9.1 crore (previous year : Rs.7.8 crore)and a profit after tax of Rs.0.2 crore (previous year : Rs.0.02 crore) With increased Government spending and taxconcessions in the infrastructure sector and a healthy orderbacklog position, the Company is optimistic about its future.The Company is looking to work closely with L&T on anumber of infrastructure related projects with private sectorparticipation. The Company is also exploring exportopportunities in identified regions.

During the year, the Company received the “MostOutstanding Bridge Award” from the Indian Institute of BridgeEngineers for ‘Watrak Bridge’ and ‘Cochin Pipe Bridge’.

L&T-Demag Plastics Machinery Private Limited

The Company, which is a joint venture between LTM Limitedand Demag Ergotech GmbH, Germany, manufactures andsells Injection Moulding Machines for the plastics industry.

The Company has established a leadership position in theorganized sector, but however, faces strong competition fromimports of reputed international brands.

The Company’s exports are channelled through Ergotech’sglobal marketing network. During the year, the Company’sproducts were exported to Israel, Australia, Iran andMalaysia. The Company plans to introduce new models ofInjection Moulding Machines with latest technology ofErgotech to cater to domestic as well as overseas demand.

The Company secured orders from major players in varioussegments of the plastics industry in India. Important ordersexecuted include orders for packaging industry, writinginstruments and automobile industry.

During the year under review, the Company reported a 48%increase in its total income at Rs.48.0 crore (previous yearRs.32.5 crore) and a higher profit after tax of Rs.1.5 crore(previous year Rs.0.8 crore). The Company expects improvedorder booking during the ensuing year.

L&T-Niro Limited

The Company is a joint venture with Niro A/S, Denmark,and is engaged in EPC business specific to the dairy,chemical, fertilizer and pharmaceutical industries. The majoractivities involve setting up of powder producing andprocessing plants based on the world renowned technologiesfrom Niro A/S and its group companies.

The continued slow-down in the domestic economy affectedthe order booking and the turnover of the Company. TheCompany, however, executed contracts through Barr-Rosinin international markets. During the year under review, theCompany reported a total income of Rs.21.1 crore (previousyear : Rs.21.8 crore) and a profit after tax of Rs.1.5 crore(previous year loss : Rs.3.1 crore).

In addition to its conventional line of business, the Companyis also exploring new lines based on technologies from GEAKestner, Barr-Rosin, UK and from GEA-Wiegand for Ethanol.In view of dyestuff production and handling norms becomingstringent in many developed countries the prospects forgranulated non-dusty product, for which Niro technology hasan edge, are becoming brighter. The Company expectsgrowth of business opportunities in polymer sector,automated powder plants in the dairy industry and formulationplants in the pharmaceutical industry.

L&T-John Deere Private Limited

The Company, which is a joint venture with Deere &Company, USA, is engaged in the manufacture and sale ofagricultural tractors. The manufacturing facility located atSanaswadi, Pune has an installed capacity of 30,000 tractorsper annum.

The Company enjoys market leadership in 55 HP tractorsegment. The product range has been expanded to include42 HP and 47 HP models, and these have been well receivedin the market.

The Company continued to expand its distribution networkand has appointed 139 dealers covering 19 States in Indiaand in Nepal.

The thrust on overseas markets enabled exports contributing40% of the gross turnover. Despite drought conditions


38

prevailing in large parts of the country and 22% decline indemand for tractors during the year under review, theCompany increased its domestic turnover as well, resultingin the aggregate turnover more than doubling to Rs.185.8crore (previous year : Rs.77.5 crore).

Cost reduction efforts like indigenisation and local purchaseof key component parts continue to be pursued and thefavourable impact is likely to be felt in the coming years.The Company has recast its business strategy to improveits market share in domestic and overseas markets. Therevised strategy is expected to enhance utilization of plantcapacity and improve the financial performance in the comingyears.

L&T-Komatsu Limited

The Company, which is a joint venture with Komatsu Limited,Japan, manufactures hydraulic excavators and high pressurehydraulic systems & components.

During the year under review, activities in manufacturing,mining and construction sectors showed an increase whichresulted in an improved market for Hydraulic Excavatorsand Construction Equipment. The Company expects thistrend to continue in the ensuing year as well. The Companyreported an increase of 38% in its income at Rs.237.3 crore(previous year : Rs.171.6 crore) and a lower loss of Rs.1.7crore (previous year loss : Rs.5.4 crore).

The Company entered into a long-term settlement with theunionised employees at its Bangalore Works which resultedin increase in wages to the emloyees apart from reductionin manpower and substantial increase in productivity.

The Company made considerable improvements in theindigenously designed 35-Ton class (180 CK) and 7-TonPC-71 machine to enhance product reliability. A new productfrom Komatsu range is planned for launch during 2003-2004.

The continuing emphasis on infrastructure development isexpected to contribute to the demand for the Company’sproducts. The Company also plans to increase exportbusiness.

L&T-Case Equipment Private Limited

The Company, which is a joint venture with Case Corporation,USA, is engaged in the manufacture and sale of earthmoving

machinery. The main product lines comprise LoaderBackhoes and Vibratory Compactors. The Company’sproducts are marketed by L&T.

During the year under review, the Company reported a totalincome of Rs.111.1 crore (previous year : Rs.104.6 crore)and a profit after tax of Rs.1.1 crore (previous year : Rs.4.1crore). The Government’s initiative to encourage investmentin the infrastructure sector, particularly in roads, is expectedto result in increased demand for the Company’s products.The introduction of the new model of loader backhoe withthe CNH technology will also enable the Company to facecompetition effectively.

Larsen & Toubro (Saudi Arabia) LLC

The Company, which is a joint venture with a local partnerin Saudi Arabia, was formed to take advantage of theconstruction project opportunities in Saudi Arabia. TheCompany offers turnkey solutions in civil, mechanical andelectrical engineering relating to the specialized fields of oil& gas, petrochemicals, fertilizers & chemicals, infrastructure,buildings, factories, power transmission, distribution andtelecommunication projects. During the year under review,the Company earned a total income of Saudi Riyal (‘SR’)47.0 million (previous year : SR 34.1 million) and a profit ofSR 0.9 million (previous year : SR 1.7 million).

International Seaports Pte. Limited

The Company, which is a joint venture with Precious ShippingPublic Company Limited, Bangkok and SSA Inc., USA, wasformed to provide integrated services with respect to design,development, building and operating seaport terminals inthe Middle East and South East Asia.

The Company, through its project management subsidiaryin India, International Seaports (India) Pvt. Ltd., hassuccessfully bid for port projects in Orissa, Andhra Pradeshand West Bengal, which are being developed throughseparate project companies.

The projects in Orissa and Andhra Pradesh are beingdeveloped through the Dhamra Port Company Limited &Kakinada Seaports Limited respectively. These ventures arestill at developmental stage and financial closures are yet tobe completed. The project in West Bengal is being developedthrough International Seaports (Haldia) Private Limited andthe project has achieved financial closure during the year.


39

72908414

1042710820

13211

8167

9870

782574247292

0

2000

4000

6000

8000

10000

12000

14000

1998-99 1999-00 2000-01 2001-02 2002-03

OR D E R B OOK IN G S A L E S

Rs. crore

4%

8%

26%

62%

Engineerin g & Construction

Cement

Electrical & Electronics

Others

3%

7%

18%

72%

Engineering & Construction

Cement

Electrical &Electronics

Others

10%

21%

17%

35%

17%

Hydrocarbon

Power

Process

Infrastructure

Others

1042 992870

1013995

12% 13% 13%12%

10%

0

400

800

1200

1998-99 1999-00 2000-01 2001-02 2002-03

PBDIT % of Total Income

Rs.crore

4589 4671

42644048

4555

2.4

1.91.71.61.7

2000

3000

4000

5000

1998-99 1999-00 2000-01 2001-02 2002-03

0

1

2

3

4

Net Fixed Assets Turnover Ratio

(Times)Rs.crore

ORDER BOOKING & SALES SEGMENTWISE ORDER BOOKING 2002-2003

SEGMENTWISE CUSTOMER SALES 2002-2003SECTORWISE ORDER BACKLOG AS AT

MARCH 31, 2003

PBDIT AS % OF TOTAL INCOME NET FIXED ASSETS / TURNOVER RATIO

Excluding extra-ordinary income

Rs. crore

ORDER BOOKING SALES

5 year compound growth rate : Order Booking 16%Sales 8%

1998-1999 1999-2000 2000-2001 2001-2002 2002-2003

1998-1999 1999-2000 2000-2001 2001-2002 2002-2003

1998-1999 1999-2000 2000-2001 2001-2002 2002-2003


40

44% 49% 50% 43% 37%

56% 51% 50%57% 63%

0%

25%

50%

75%

100%

1998-99 1999-00 2000-01 2001-02 2002-03

Equity Debt

DISTRIBUTION OF REVENUE FOR 2002-03 NET GEARING

PATTERN OF SHAREHOLDING AS AT JUNE 20, 2003SHARES IN DEMAT/PHYSICAL FORM

AS AT JUNE 20, 2003

1998-1999 1999-2000 2000-2001 2001-2002 2002-2003


41

Rs. c ro re

Description 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97 1995-96 1994-95 1993-94

SALES & EARNINGS

Sales and other income 10124 8385 8032 7599 7402 5768 5392 4325 3318 2768

Profit before taxes 510 401 339 382# 522# 590# 473 430 327 232

Profit after taxes 433 347 315 342# 471# 531# 411 389 277 196

Retained earnings 222 172 137 162 291 353 247 251 168 111

ASSETS & LIABILITIES

Fixed Assets : Gross 6304 6240 6441 6066 5875 5491 4514 3382 2453 1934

: Net 4048 4264 4671 4589 4555 4297 3498 2553 1770 1358

Total Assets : Net 7580 7659 8263 7838 7065 6241 5090 4013 2777 2029

REPRESENTED BY

Net Worth 3563 3344 4000 3864 3706 3422 3104 2875 2118 1536

Share Capital 249 249 249 248 248 248 248 248 229 211

Reserves 3314 3095 3751 3616 3458 3174 2856 2627 1889 1325

Deferred Tax Liability (net) 841 852 - - - - - - - -

Borrowings 3176 3463 4263 3974 3359 2819 1986 1138 659 493

Total funds 7580 7659 8263 7838 7065 6241 5090 4013 2777 2029

RATIOS

Earnings per Equity Share (Rupees) $ 17.42 13.95 12.67 13.74# 18.94# 21.39# 16.55 16.88 12.72 9.25

Dividend per Equity Share (Rupees) 7.50 7.00 6.50 6.50 6.50 6.50 6.00 6.00 5.00 4.00

Net Worth per Equity Share (Rupees) @ 172.62 164.48 157.31 152.13 146.48 134.99 122.04 112.67 89.13 68.51

Debt : Equity Ratio @ 0.74:1 0.85:1 1.09:1 1.05:1 0.92:1 0.84:1 0.65:1 0.41:1 0.32:1 0.34:1

NUMBER OF SHAREHOLDERS AND EMPLOYEES

Number of Shareholders 490628 509922 513562 605031 756852 798947 838324 873026 913189 996829

Number of Employees 21873 22922 23988 24448 25596 25362 26312 24357 22892 21924

# Including extra-ordinary items of income

$ Basic EPS

@ Without Revaluation Reserve and ignoring adjustment to General Reserve in respect of net deferred tax liability.

10 years� highlights


42

Auditors' Report to the ShareholdersWe have audited the attached balance sheet of Larsen & Toubro

Limited, as at 31st March, 2003 and also the profit and loss account

and the cash flow statement for the year ended on that date annexed

thereto. These financial statements are the responsibility of the

Company’s management. Our responsibility is to express an opinion

on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally

accepted in India. Those Standards require that we plan and perform

the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and

disclosures in financial statements. An audit also includes assessing

the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statements

presentation. We believe that our audit provides a reasonable basis

for our opinion.

In accordance with the provisions of section 227 of the Companies

Act, 1956, we report that:

(1) As required by the Manufacturing and Other Companies (Auditor’s

Report) Order, 1988, issued by the Central Government of India

under sub-section (4A) of section 227 of the Companies Act,

1956, we enclose in the Annexure a statement on the matters

specified in paragraphs 4 and 5 of the said Order.

(2) Further to our comments in the Annexure referred to above, we

report that:

(a) we have obtained all the information and explanations which

to the best of our knowledge and belief were necessary for

the purposes of our audit;

(b) in our opinion, proper books of account as required by law

have been kept by the Company so far as appears from our

examination of those books;

(c) the balance sheet, the profit and loss account and cash

flow statement dealt with by this report are in agreement

with the books of account;

(d) in our opinion, the balance sheet, profit and loss account

and cash flow statement dealt by this report comply with the

accounting standards referred to in sub-section (3C) of

section 211 of the Companies Act, 1956;

(e) on the basis of the written representations received from

directors as on 31st March, 2003, and taken on record by

the Board of Directors, we report that none of the directors

is disqualified as on 31st March, 2003, from being appointed

as a director in terms of clause (g) of sub–section (1) of

section 274 of the Companies Act, 1956; and

(f) in our opinion and to the best of our information and according

to the explanations given to us, the said accounts, read

together with the significant accounting policies in schedule

Q, note 11 regarding change in percentage of completion

for long cycle contracts for revenue recognition and other

notes appearing thereon, give the information required by

the Companies Act, 1956 in the manner so required and

give a true and fair view in conformity with the accounting

principles generally accepted in India:

1) in the case of the balance sheet, of the state of affairs

of the Company as at 31st March, 2003;

2) in the case of the profit and loss account, of the profit

for the year ended on that date; and

3) in the case of the cash flow statement, of the cash

flows for the year ended on that date.


by the hand of

F.M. KOBLAMumbai, 29th May, 2003 Partner

Annexure to the Auditors' Report(Referred to in paragraph (1) of our report of even date)

(1) The Company is maintaining proper records to show full particulars

including quantitative details and situation of fixed assets. We

are informed that the Company has formulated a programme of

physical verification of all the fixed assets, over a period of three

years, which in our opinion, is reasonable. Accordingly, the

physical verification of the fixed assets has been carried out by

management during the year and no material discrepancies were

noticed on such verification.

(2) The fixed assets have not been revalued during the year.

(3) As explained to us, stocks of finished goods, trading goods,

stores, spare parts, raw material, and construction materials at

Company’s service depots and those at sites, which are included

under work-in-progress, have been physically verified by

management at reasonable intervals during the year.

(4) As per information given to us, the procedures of physical

verification of stocks followed by management are, in our opinion,

reasonable and adequate in relation to the size of the Company

and the nature of its business.

(5) The discrepancies noticed on physical verification of stocks as

compared to book records were not material.

(6) On the basis of our examination of stock records, we are of the

opinion that the valuation of stocks is fair and proper in accordance

with the normally accepted accounting principles and is on the

same basis as in the preceding year.

(7) The Company has not taken any loans, secured or unsecured,

from companies, firms or other parties listed in the register


43

maintained under section 301 of the Companies Act, 1956. As

explained to us, there are no companies under the same

management, as defined under sub-section (1-B) of section 370

of the Companies Act, 1956.

(8) The Company has not granted any loans, secured or unsecured,

to companies, firms or other parties listed in the register maintained

under section 301 of the Companies Act, 1956. As explained to

us, there are no companies under the same management, as

defined under sub-section (1-B) of section 370 of the Companies

Act, 1956.

(9) The parties to whom loans or advances in the nature of loans

have been given are repaying the principal amounts as stipulated

and are also regular in payment of interest, where applicable.

(10) In our opinion and according to the information and explanations

given to us, there is an adequate internal control procedure

commensurate with the size of the Company and the nature of

its business for the purchase of stores, raw materials including

components, trading goods, construction materials, plant and

machinery, equipment and other assets and for the sale of goods.

(11) According to the information and explanations given to us,

purchase of goods and materials and sale of goods, materials

and services made in pursuance of contracts or arrangements

entered in the register maintained under section 301 of the

Companies Act, 1956 and aggregating during the year to

Rs.50,000 or more in value in respect of each party have been

made at prices which are reasonable having regard to the

prevailing market prices for such goods, materials or services or

the prices at which transactions for similar goods or services

have been made with other parties.

(12) As explained to us, the Company has a regular procedure for the

determination of unserviceable or damaged trading goods, finished

goods, stores, raw materials and construction materials. Adequate

provision has been made in the accounts for the loss arising on

the items so determined.

(13) The Company has accepted deposits from the public and in our

opinion and according to the information and explanations given

to us, the directives issued by the Reserve Bank of India and the

provisions of section 58A of the Companies Act, 1956 and the

rules framed thereunder, where applicable, have been complied

with.

(14) In our opinion, the Company is maintaining reasonable records

for sale and disposal of realisable scrap. We are informed that

the Company has no realisable by-products.

(15) We are of the opinion that the Company has an internal audit

system commensurate with its size and the nature of its business.

(16) The Company, in our opinion and according to the information

and explanations given to us, has made and maintained accounts

and records as prescribed by the Central Government under

section 209(1)(d) of the Companies Act, 1956, in respect of

cement and electronic products, namely, electricity meters and

industrial electronic control panels. The contents of these accounts

and records have not been examined by us.

(17) The Company has generally regularly deposited during the year

the provident fund and employees’ state insurance dues with the

appropriate authorities.

(18) According to the information and explanations given to us, there

were no undisputed amounts payable in respect of income tax,

wealth tax, sales tax, customs duty and excise duty which were

outstanding as at 31st March, 2003 for a period of more than six

months from the date they became payable.

(19) According to the information and explanations given to us, and

the records of the Company examined by us, no personal

expenses have been charged to revenue account other than

those payable under contractual obligations or in accordance

with the generally accepted business practices.

(20) The Company is not a sick industrial company within the meaning

of clause (o) of sub-section (1) of section 3 of the Sick Industrial

Companies (Special Provisions) Act, 1985.

(21) In respect of its service activities, the Company has a reasonable

system of recording receipts, issues and consumption of raw

materials, construction materials and stores commensurate with

its size and the nature of its business. The system provides for a

reasonable allocation of raw materials and construction materials

and man-hours consumed to the relative jobs commensurate

with its size and the nature of its business. In our opinion, there

is a reasonable system of authorisation at proper levels and

adequate system of internal control commensurate with the size

of the Company and the nature of its business on the issue of

stores and allocation of stores and labour to jobs.


by the hand of

F.M. KOBLAMumbai, 29th May, 2003 Partner


44

As at 31-3-2003 As at 31-3-2002 Schedules Rs. crore Rs. crore Rs. crore Rs. crore

SOURCES OF FUNDS:

SHAREHOLDERS’ FUNDS:Share capital A 248.67 248.66Share application money 0.04 0.11Reserves and surplus B 3313.87 3094.80

3562.58 3343.57

LOAN FUNDS:Secured loans C 2703.11 2709.85Unsecured loans D 472.89 752.72

3176.00 3462.57TOTAL 6738.58 6806.14

APPLICATION OF FUNDS:Fixed assets: E

Gross block 6231.79 6134.77Less: Depreciation 2253.05 1973.09Net block 3978.74 4161.68Less : Lease adjustment 3.07 3.07

3975.67 4158.61Capital work-in-progress 72.60 105.11

4048.27 4263.72Fixed assets held for sale 0.60 0.60

(at lower of cost or estimated realisable value)Investments F 1160.37 917.66Current assets, loans and advances: G

Inventories 2590.01 2522.03Sundry debtors 1850.37 1442.31Cash and bank balances 320.53 204.48Other current assets 1.06 0.41Loans and advances 1397.98 1217.81

6159.95 5387.04Less: Current liabilities and provisions: H

Liabilities 3434.79 2686.69Provisions 424.75 287.32

3859.54 2974.01Net current assets 2300.41 2413.03Deferred tax ( see Note no. 26)

Deferred tax assets 84.89 69.37Deferred tax liabilities (925.94) (921.82)

(841.05) (852.45)Deferred revenue items I

Miscellaneous expenditure I ( i ) 74.15 71.91(to the extent not written-off or adjusted)

Deferred income I ( ii ) (4.17) (8.33)69.98 63.58

TOTAL 6738.58 6806.14

CONTINGENT LIABILITIES J

SIGNIFICANT ACCOUNTING POLICIES Q

(For Notes forming part of Accounts see page Nos. 66 to 89)

Balance sheet as at 31st March, 2003

As per our report attached

SHARP & TANNANChartered Accountantsby the hand ofF. M. KOBLAPartnerMumbai, 29th May, 2003

S. V. SUBRAMANIANCompany Secretary

A.RAMAKRISHNAJ. P. NAYAKY. M.DEOSTHALEEK. VENKATARAMANANR. N. MUKHIJAP. M. MEHTA

A. M. NAIKManaging Director

S.S. MARATHEG. ARMBRUSTERS.RAJGOPALB. P. DESHMUKHA. K. DODAK. S. K. KHAREKRANTI SINHADirectors

Mumbai, 29th May, 2003


45

Profit and loss account for the year ended 31st March, 2003

2002-2003 2001-2002 Schedules Rs. crore Rs. crore Rs. crore Rs. crore

INCOME:Sales and Service K 9869.83 8166.61Less: Excise duty 509.71 440.95

9360.12 7725.66Other income L 254.34 218.36

9614.46 7944.02

EXPENDITURE:Manufacturing, construction and operating expenses M 6566.69 5004.87Staff expenses N 668.40 603.00Sales, administration and other expenses O 1412.66 1306.05Interest and brokerage P 176.99 316.08Depreciation and obsolescence 306.24 326.88

9130.98 7556.88Less: Overheads charged to fixed assets 1.98 12.30

9129.00 7544.58Profit before transfer from Revaluation reserve 485.46 399.44Add: Transfer from Revaluation reserve 1.67 1.81

487.13 401.25Add: Company’s share in profit/(loss) [net of tax]

of Integrated Joint Ventures 23.07 (0.77)

Profit bef ore Tax 510.20 400.48Provision for current taxes (including provision for

wealth tax Rs.0.50 crore) 88.50 24.32Provision for deferred tax (see Note no. 26) (11.40) 29.36

77.10 53.68Profit after tax 433.10 346.80Add: Balance brought forward from previous year 53.48 48.36

Profit available for appropriation 486.58 395.16Less :Transferred to:

Foreign Projects Reserve 3.00 8.36Housing Projects Reserve 2.25 3.98General Reserve 220.00 155.00

225.25 167.34

Profit available for distribution 261.33 227.82Proposed dividend 186.80 174.34Additional tax on dividend 23.93 -Balance carried to Balance Sheet 50.60 53.48

Basic earnings per equity share (Rupees) 17.42 13.95Diluted earnings per equity share (Rupees) 13.98 10.22Face value per equity share (Rupees) 10.00 10.00

SIGNIFICANT ACCOUNTING POLICIES Q

(For Notes forming part of Accounts see page Nos. 66 to 89)

(see Note No.19 )}









46








CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2003

2002-2003 2001-2002Rs. crore Rs. crore

A. Cash Flo w fr om operating activities:

Net Profit before tax ... ... 510.20 400.48Adjustments for :Depreciation ... ... 304.57 325.08Unrealised Foreign Exchange difference ... ... (3.79) (0.27)Interest (Net) ... ... 176.99 316.08Dividend Received ... ... (66.94) (71.57)(Profit)/Loss on sale of Fixed Assets (Net) ... ... (11.65) (5.32)(Profit)/Loss on sale of Investments (Net) ... ... (8.29) (2.43)Provision for diminution in value of assets held for sale ... ... - 0.01Provision for diminution in value of investments 0.69 2.99

Operating Profit before working capital changes ... ... 901.78 965.05Adjustments for :(Increase)/Decrease in Trade and Other receivables ... ... (403.32) (129.49)(Increase)/Decrease in Inventories ... ... (67.98) (94.68)(Increase)/Decrease in Miscellaneous Expenditure not written off ... (10.96) (28.26)Increase/(Decrease) in Trade Payables ... ... 788.51 536.56

Cash generated from Operations ... ... 1208.03 1249.18Direct Taxes Paid ... ... (40.65) 77.89

Net Cash from Operating Activities ... ... 1167.38 1327.07

B. Cash flo w fr om in vesting activities:Purchase of Fixed Assets ... ... (96.37) (271.87)(Including Interest capitalised Rs.3.34 crore, previous year Rs.1.70 crore)Sale of Fixed Assets ... ... 16.57 319.11Purchase of Investments ... ... (5160.87) (1714.85)Sale of Investments ... ... 4925.81 1674.40Loans/Deposits made with Subsidiaries / Associates(Net) ... ... (159.28) (15.73)Advance to Subsidiaries/Associates towards equity commitment (Net) ... (3.70) 5.00Interest Received ... ... 47.15 56.90Dividend received from Subsidiaries / Associates ... ... 38.60 51.87Dividend received from Other Investments ... ... 28.34 19.70

Net Cash (used in)/ from Investing Activities ... ... (363.75) 124.53

C. Cash flo w fr om financing activities:Proceeds from issue of Share Capital ... ... 0.03 0.11Proceeds from long term borrowings ... ... 415.61 774.04Repayment of long term borrowings ... ... (816.93) (1126.95)(Repayments) / Proceeds from other borrowings (Net) ... ... 97.47 (398.37)Loans from Subsidiaries / Associates (Net) 31.74 (30.52)Dividends Paid ... ... (174.34) (161.85)Additional Tax on Dividend ... ... - (16.51)Interest Paid ... ... (241.16) (425.97)Net Cash (used in)/ from Financing Activities ... ... (687.58) (1386.02)

Net (decrease) / increase in cash and cash equivalents (A + B + C) 116.05 65.58Cash and cash equivalents at beginning of the year ... ... 204.48 138.90

Cash and cash equivalents at end of the year ... ... 320.53 204.48

Notes:1. Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard - 3 issued by the Institute of Chartered

Accountants of India.2. Purchase of fixed assets includes movements of Capital Work-in-Progress between the beginning and end of the year.3. Cash and cash equivalents represent cash and bank balances and include unrealised loss of Rs 0.02 crore on account of translation of foreign

currency bank balances.4. Previous year’s figures have been regrouped/reclassified wherever applicable.


47

Schedules forming part of accountsAs at 31-3-2003 As at 31-3-2002

Rs. crore Rs. crore Rs. crore Rs. croreSchedule A

Share Capital:

Authorised:32,50,00,000 Equity shares of Rs.10 each 325.00 325.00

Issued:24,90,57,712 Equity shares of Rs.10 each 249.06 249.05

Subscribed:24,86,68,756 Equity shares of Rs.10 each 248.67 248.66

248.67 248.66

As at 31-3-2003 As at 31-3-2002Rs. crore Rs. crore Rs. crore Rs. crore

Schedule B

Reserves and Surplus:

Revaluation Reserve:As per last Balance Sheet 36.01 38.04Less : On assets sold or obsoleted during the year - 0.22

Transferred to Profit and Loss Account 1.67 1.81

34.34 36.01

Cash Subsidy Reserve:As per last Balance Sheet 0.25 0.25Add : Received during the year 0.10 -

0.35 0.25

Capital Redemption Reserve:As per last Balance Sheet 0.02 0.02

Debenture Redemption Reserve:As per last Balance Sheet 425.63 425.63Less: Transferred to General Reserve 125.63 -

300.00 425.63

Securities Premium Account:As per last Balance Sheet 1661.17 1664.47Addition during the year 0.12 0.06

1661.29 1664.53Less: Debenture issue expenses 0.86 0.55

Premium on Redemption of Debentures 0.99 2.81

1659.44 1661.17

General Reserve:As per last Balance Sheet 818.84 1456.18Add : Deferred Tax Assets as on 1.4.2001 - 55.66

818.84 1511.84Less : Deferred Tax Liabilities as on 1.4.2001 - 878.75

818.84 633.09Add : Transferred from:

Foreign Projects Reserve 11.31 5.75Investment Allowance (Utilised) Reserve - 25.00Debenture Redemption Reserve 125.63 -Profit and Loss account 220.00 155.00

1175.78 818.84

Carried forward 3169.93 2941.92


48


Rs. crore Rs. crore Rs. crore Rs. croreSchedule B (Contd.)

Brought forward 3169.93 2941.92Investment Allowance (Utilised) Reserve:

As per last Balance Sheet 7.06 32.06Less : Transferred to General Reserve - 25.00

7.06 7.06

Foreign Projects Reserve:As per last Balance Sheet 66.51 63.90Add : Transferred from Profit and Loss account 3.00 8.36

69.51 72.26Less : Transferred to General Reserve 11.31 5.75

58.20 66.51Housing Projects Reserve:

As per last Balance Sheet 25.83 21.85Addition during the year 2.25 3.98

28.08 25.83Profit and Loss Account 50.60 53.48

3313.87 3094.80


Schedule C

Secured Loans:Secured Redeemable Non-convertible Bonds:

i) FD Plus Bonds 0.43 1.29ii) Early Gain Bonds - 23.18

0.43 24.47Secured Redeemable Non-convertible Debentures:

Fixed Rate Debentures 1001.00 976.00Floating Rate Debentures 214.50 400.00

1215.50 1376.00Loans from banks:

Cash credits / Working Capital Demand Loans 648.84 336.07Other loans 695.13 805.05Interest accrued and due 0.17 0.11

1344.14 1141.23Loans from financial institutions 52.41 75.70Loans from others 90.63 92.45

2703.11 2709.85


Schedule D

Unsecured Loans:Debentures:12.5% Convertible Debentures IV Series 2.38 2.45

Less: Conversion during the year 0.02 0.07Allotment money in arrears 0.21 0.21Calls in arrears 1.41 1.42

0.74 0.75Fixed deposits

(including loans from shareholders Rs. 5.11 crore; 62.99 73.64previous year Rs. 6.19 crore)



49


Rs. crore Rs. crore Rs. crore Rs. croreSchedule D (Contd..)

Brought forward 63.73 74.39Loans from Subsidiary companies 39.55 26.75

Short term loans and advances:From banks 67.91 59.57Lease finance 3.12 2.52From others 3.80 0.10

Commercial Paper - Face value (previous year: Rs.318 crore) 100.00Less : Future interest obligation (previous year: Rs.3.60 crore) 0.28(Maximum amount outstanding at any time during theyear Rs.473 crore; previous year: Rs.650 crore) 99.72 314.40

174.55 376.59Other loans and advances:

From banks 47.49 125.89Sales Tax Deferment Loan 134.79 106.27Lease finance 12.54 12.06From others 0.24 30.77

195.06 274.99472.89 752.72

Cost/Valuation Depreciation Book Value

Fixed Assets ** * ** * * **As at As at Up to For the Up to As at As at

1-4-2002 Additions Deductions 31-3-2003 31-3-2002 Year Deductions 31-3-2003 31-3-2003 31-3-2002Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore

OWNED ASSETS :Goodwill 0.07 - - 0.07 0.07 - - 0.07 - -Land - Freehold 138.27 7.80 0.06 146.01 - - - - 146.01 138.27

- Leasehold 61.25 - - 61.25 6.56 1.21 - 7.77 53.48 54.69Mining lease 3.10 - - 3.10 1.44 0.12 - 1.56 1.54 1.66Buildings 930.04 46.65 2.04 974.65 191.01 23.54 0.66 213.89 760.76 739.03Railway sidings 157.29 0.86 - 158.15 30.99 7.47 - 38.46 119.69 126.30Plant and machinery 4429.19 58.16 20.80 4466.55 1546.60 234.57 16.69 1764.48 2702.07 2882.59Furniture and fixtures 222.55 8.86 3.30 228.11 102.46 13.99 1.94 114.51 113.60 120.09Vehicles 71.19 2.34 5.10 68.43 42.34 6.37 3.65 45.06 23.37 28.85Aircraft 9.26 - - 9.26 4.43 0.51 - 4.94 4.32 4.83Jetties 78.05 - - 78.05 37.01 12.43 - 49.44 28.61 41.04Owned Assets Leased Out:Plant and machinery 19.22 - - 19.22 9.22 - - 9.22 10.00 10.00Less: Lease Adjustment - - - - - - - - 3.07 3.07

Owned Assets (sub total - A) 6119.48 124.67 31.30 6212.85 1972.13 300.21 22.94 2249.40 3960.38 4144.28

LEASED ASSETS:

Plant and machinery 5.40 0.66 0.03 6.03 0.28 0.67 0.01 0.94 5.09 5.12

Vehicles 9.89 3.55 0.53 12.91 0.68 2.11 0.08 2.71 10.20 9.21

Leased Assets (sub total - B) 15.29 4.21 0.56 18.94 0.96 2.78 0.09 3.65 15.29 14.33

Total (A+B) 6134.77 128.88 31.86 6231.79 1973.09 302.99 23.03 2253.05 3975.67 4158.61

Previous year** 6268.97 298.94 433.14 6134.77 1766.00 324.32 117.23 1973.09Add : Capital work-in-progress 72.60 105.11

4048.27 4263.72

Schedule E

* Exclude proportionate share of assets of integrated joint ventures as per requirement of Accounting Standard (AS) 27 ‘Financial Reportingof Interests in Joint Ventures’.

** Previous year’s figures are recast to exclude the proportionate share of integrated joint ventures to make them comparable with currentyear’s figures.


50

Schedules forming part of accountsSchedule E (Contd..)

Notes :-1. Cost / Valuation of :-

(i) Freehold land includes Rs.6.45 crore for which conveyance is yet to be completed.(ii) Leasehold land includes

(a) Rs.6.09 crore for which the lease agreements have not been executed.(b) Rs.0.22 crore for land at Mysore taken on lease-cum-sale basis from Karnataka Industrial Area Development Board (KIADB) vide

agreement dated 14th July, 1987. The lease agreement for the land expired on 13th July, 1998. KIADB vide their letterNo.KIADB\4377\13888\99-2000 dated 1st February, 2000 has granted extension of lease period up to 13th July, 2003 or till the executionof the sale deed whichever is earlier. Pending transfer, this land has been shown as leasehold land.

(c) Rs.5.45 crore for land taken at Bangalore on lease from KIADB vide agreement dated 21st January, 2002. The lease agreement is fora period of six years, at the end of which sale deed would be executed, on fulfilment of certain conditions by the Company.

2. Cost / Valuation of Buildings includes ownership accommodation :-(i) (a) In various co-operative societies and apartments and shop-owners’ associations : Rs.69.01 crore including 930 shares of Rs.50 each,

177 shares of Rs.100 each, 100 shares of Rs.10 each and 1 share of Rs.250.(b) In proposed co-operative societies : Rs.36.11 crore.

(ii) In respect of which the deed of conveyance is yet to be executed : Rs.4.53 crore.3. Additions during the year and capital work-in-progress :

(a) are net of Rs.11.97 crore (gain) being the exchange difference and(b) include Rs. 3.24 crore being borrowing cost capitalised in accordance with Accounting Standard (AS) 16 “Borrowing Costs” issued by the

Institute of Chartered Accountants of India.4. Capital work-in-progress includes advances Rs.28.57 crore (previous year Rs.35.48 crore).5. By virtue of explicit agreements, the title in the jetties devolves on Gujarat Maritime Board.The Company is, however, entitled to use the jetties

on payment of port charges at concessional rates.6. Cost/Valuation of Plant and machinery include Rs.29.89 crore relating to railway wagons given on operating lease to the Railways under “Own

Your Wagons Scheme”.7. The Company had revalued as at October 1,1984 some of its land, buildings, plant and machinery and railway sidings at replacement/market

value which resulted in a net increase of Rs.108.05 crore.8. Cost/Valuation of Railway Sidings includes Rs. 26.72 crore representing the Company’s share in the property at a certain location, jointly owned

with another company.


Schedule F

Investments (At cost, unless otherwise specified):Long T erm Investments:Government and trust securities - 0.27Fully paid equity shares of subsidiary companies 564.76 552.09Fully paid preference shares of subsidiary companies 20.51 20.51Partly paid equity shares of subsidiary companies 2.99 2.99Other fully paid equity shares 237.63 238.73Other fully paid preference shares 2.00 2.00Bonds 6.05 6.05Mutual funds 0.81 2.51

834.75 825.15Current Investments:Government and trust securities 150.88 -Debentures - 58.34Bonds 0.21 -Mutual funds 125.35 1.63

276.44 59.97

Investments in Integrated Joint Ventures 49.18 32.54

1160.37 917.66NOTE : As at As at

31-3-2003 31-3-2002Rs.crore Rs.crore

Quoted InvestmentsBook value 513.94 238.81Market value 448.65 89.54

Unquoted InvestmentsBook value 646.43 678.85


51

Schedule forming part of accountsAs at 31-3-2003 As at 31-3-2002

Rs.crore Rs.crore Rs.crore Rs.crore

Schedule F (Contd.)

Particulars of Investments:A) Long T erm Investments:

Government and trust securities:Pledged as security deposit - 0.20(Rs. 52,500 outstanding as of 31-3-2003,Rs.5,000 maturedduring the year and Rs. 19,38,750 regrouped underLoans and Advances during the year )1 11.4% Government of India Compensation(Project Exports to Iraq) Bonds, 2003 - 0.07

- 0.27Subsidiary companies:

Fully paid equity shares:LTM Limited

6,69,150 shares of Rs.100 each 10.98 10.98L&T Finance Limited

6,00,00,000 shares of Rs.10 each 60.00 60.00Larsen & Toubro Infotech Limited

3,00,00,000 shares of Rs.5 each 15.00 15.00L&T Infocity Limited

1,60,20,000 shares of Rs.10 each 16.02 16.02L&T-ECC Construction (M) SDN. BHD.

2,24,998 shares of Malaysian Ringitt 1 each 0.26 0.26Larsen and Toubro Ceylinco (Private) Limited

4,00,00,000 shares of Sri Lankan Rs.10 each 23.03 12.90(2,00,00,000 shares subscribed during the year)

L&T Transportation Infrastructure Limited1,08,63,994 shares of Rs.10 each 10.86 10.86

Narmada Infrastructure Construction Enterprise Limited1,26,48,501 shares of Rs.10 each 12.65 12.65

Narmada Cement Company Limited6,91,71,183 shares of Rs.10 each 235.24 235.24

India Infrastructure Developers Limited3,50,00,000 shares of Rs.10 each 35.00 35.00

HPL Cogeneration Limited3,12,12,000 shares of Rs.10 each 31.21 31.21(pledged as security in favour of consortium of lendersin respect of term loans provided to HPL Cogeneration Limited)

L&T Western India Tollbridge Limited1,50,00,001 shares of Rs.10 each 15.00 15.00

L&T Equipment Leasing Company Limited50,00,000 shares of Rs 10 each 5.00 5.00

L&T Holdings Limited8,40,50,000 shares of Rs. 10 each 84.05 84.05

Tractor Engineers Limited68,000 shares of Rs.1,000 each 0.30 0.30

Larsen & Toubro LLC50,000 shares of USD 1 each 0.23 0.23

Larsen & Toubro International FZE2 shares of Dhs 5,50,500 each 1.42 1.42

L&T Netcom Limited59,71,610 shares of Rs 10 each 5.97 5.97

Larsen & Toubro (Oman) LLC2,36,786 shares of Omani Riyal 1 each 2.43 -(1,14,286 shares of Omani Riyal 1 each,purchased during the year)(1,225 shares of Omani Riyals 100 each split to 1,22,500shares of Omani Riyal 1 each)

Carried forward 564.65 - 552.09 0.27


52


Rs.crore Rs.crore Rs.crore Rs.croreSchedule F (Contd.)

Brought forward 564.65 - 552.09 0.27Bhilai Power Supply Company Limited

49,950 shares of Rs.10 each 0.05 -(49,900 shares of Rs.10 each subscribed during the year)

L&T Power Investments Private Limited60,000 shares of Rs 10 each(59,998 shares of Rs 10 each subscribed during the year and 0.06 -2 shares of Rs.10 each purchased during the year)

564.76 552.09

Fully paid preference shares:HPL Cogeneration Limited

2,05,12,000 15% Cumulative Redeemable Preferenceshares of Rs. 10 each 20.51 20.51

Partly paid equity shares:L&T Cement Limited

2,99,99,993 shares of Rs. 10 each, Re. 1 paid up 2.99 2.99

Trade investments:

Fully paid equity shares:Ewac Alloys Limited

414,720 shares of Rs.100 each 0.04 0.04Audco India Limited

9,00,000 shares of Rs.100 each 0.06 0.06Larsen & Toubro (Oman) LLC

1,225 shares of Omani Riyals 100 each - 1.01Gujarat Leather Industries Limited

7,35,000 shares of Rs.10 each 0.56 0.56L&T-Niro Limited

40,00,000 shares of Rs.10 each 4.00 4.00L&T-Chiyoda Limited

45,00,000 shares of Rs.10 each 4.50 4.50L&T-Sargent & Lundy Limited

37,96,875 shares of Rs.10 each 2.11 2.11L&T- Komatsu Limited

6,00,00,000 shares of Rs.10 each 60.00 60.00International Seaports Pte. Limited

6,22,500 shares of USD 1 each 2.36 2.10(52,500 shares of USD 1 each subscribed during the year)

L&T-John Deere Private Limited8,75,00,000 shares of Rs.10 each 87.50 87.50

L&T-Ramboll Consulting Engineers Limited17,99,998 shares of Rs.10 each 1.80 1.80(4 shares of Rs.10 each purchased during the year)

Andhra Pradesh Gas Power Corporation Limited26,80,000 shares of Rs.10 each 29.90 29.90

Larsen & Toubro (Saudi Arabia) LLC1,960 shares of Saudi Riyals 1,000 each 2.26 2.26

Bhilai Power Supply Company Limited50 shares of Rs.10 each : Rs 500(as at 31-3-2002 Rs. 500) - -

L&T-Case Equipment Private Limited90,05,000 shares of Rs. 10 each 9.00 9.00

The Dhamra Port Company Limited1,11,03,022 shares of Rs. 10 each 11.10 11.10

Kakinada Seaports Limited25,01,384 shares of Rs. 10 each 2.50 2.50

L&T Crossroads Private Limited90,00,000 shares of Rs. 10 each 9.00 9.00

Carried forward 226.69 588.26 227.44 575.86


53


Rs.crore Rs.crore Rs.crore Rs.croreSchedule F (Contd.)

Brought forward 226.69 588.26 227.44 575.86Sharp Business Systems (India) Limited

23,40,000 shares of Rs. 10 each 2.34 2.34Tullow India Operations Limited

1,000 shares of GBP 1 each 0.19 0.19Feedback First Urban Infrastructure Development

Company Limited15,00,000 shares of Rs. 10 each 1.50 0.75(7,50,000 shares of Rs. 10 each subscribed during the year)

Voith Paper Technology (India) Limited10,00,000 shares of Rs, 10 each 1.00 1.00

Tidel Park Limited40,00,000 shares of Rs. 10 each 4.00 4.00

235.72 235.72Less: Provision for diminution in value 0.56 0.56

235.16 235.16Other investments:

Fully paid equity shares:

Housing Development Finance Corporation Limited3,95,356 shares of Rs.10 each 0.52 0.79( 2,00,178 shares allotted as Bonus shares, 1,04,822shares sold during the year)

ICICI Bank Limited(1,34,976 shares of Rs. 10 each received pursuantto the merger of ICICI Limited with ICICI Bank Limited)(1,34,976 shares of Rs.10 each sold during the year) - 0.59

HDFC Bank Limited(37,200 shares of Rs.10 each sold during the year) - 0.04

Bank of India54,000 shares of Rs.10 each 0.24 0.35(25,000 shares sold during the year)

SREI International Finance Limited45,454 shares of Rs.10 each 0.10 0.10

Corporation Bank6,100 shares of Rs.10 each 0.05 0.05

Bank of Baroda33,000 shares of Rs.10 each 0.27 0.48(25,000 shares sold during the year)

Ambuja Cement Rajasthan Limited33,35,400 shares of Rs.10 each 3.33 3.33

IDBI Bank Limited2,58,100 shares of Rs.10 each 0.46 0.46

Utmal Multi purpose Service Co-operative Society Ltd.300 “B” class shares of Rs.100 each : Rs.30,000 - -(as at 31.03.2002 : Rs.30,000)

4.97 6.19Less: Provision for diminution in value 2.50 2.62

2.47 3.57

Fully paid preference shares:

Titan Industries Limited2,00,000 10.5% redeemable cumulativepreference shares of Rs.100 each 2.00 2.00



54


Rs.crore Rs.crore Rs.crore Rs.croreSchedule F (Contd.)Brought forward 827.89 816.59

Bonds:Konkan Railway Corporation Limited

11,000 10.5% tax-free secured redeemable non-convertiblebonds of Rs.1,000 each 1.05 1.05(8,980 bonds pledged as security deposit with KonkanRailway Corporation Limited)

Maharashtra State Road Development Corporation Limited500 11.5% bonds of Rs.1,00,000 each 5.00 5.00

6.05 6.05Mutual funds:Unit Trust of India

19,62,000 US 64 units of Rs.10 each - 2.60India Project Development Fund

8.131868 units of Rs. 10,00,000 each 0.81 0.55(2.631868 units purchased during the year)

0.81 3.15Less: Provision for diminution in value - 0.64

0.81 2.51B) Current Investments:

Government and trust securities:1 11.4% Government of India Compensation

(Project Exports to Iraq) Bond, 2003 0.0722 7.40 % Government of India Bonds 2012

(Face Value Rs. 110 crore, purchased during the year) 118.262 9.81 % Government of India Bonds 2013 (Face Value

Rs. 10 crore, purchased during the year) 12.583 11.50 % Government of India Bonds 2011

(Face Value Rs.15 crore, purchased during the year) 20.09

151.00Less: Provision for diminution in value 0.12

150.88 -

Debentures:Citicorp Finance (India) Ltd

1 10% secured non-convertible redeemable debentureof Rs.23,824 (previous year Rs.23,824) - -

4,334 9.35% secured non-convertible redeemabledebentures of Rs.1,00,000 each - 43.34(sold during the year)

1,500 10% secured non-convertible redeemabledebentures of Rs.1,00,000 each - 15.00(sold during the year) - 58.34

Bonds:Gujarat Electricity Bonds

1 12% 2006 bond of Rs.10,00,000 each 0.10(4 12% 2006 bonds of Rs.10,00,000 eachpurchased during the year)(3 12% 2006 bonds of Rs.10,00,000 eachsold during the year)

11 11.25% 2009 bonds of Rs.1,00,000 each 0.11(purchased during the year) 0.21 -

Mutual Funds:Unit Trust of India

19,62,000 US 64 units of Rs.10 each 2.60 -J M Income Growth Option

(15,04,630 units of Rs 10 each held as of last year, - 1.6322,569 units received as Bonus and 15,27,199 unitssold during the year)

Carried forward 2.60 985.84 1.63 883.49


55


Rs.crore Rs.crore Rs.crore Rs.croreSchedule F (Contd.)Brought forward 2.60 985.84 1.63 883.49

DSP Merrill Lynch Opportunities Fund - Growth11,86,240 units of Rs.10 each (purchased during the year) 1.00 -

HDFC Liquid Fund - Premium Plan1,24,73,286 units of Rs.10 each(purchased during the year) 15.00 -

HSBC Equity Fund - Growth50,00,000 units of Rs.10 each(purchased during the year) 5.00 -

JM High Liquidity Fund - Growth Plan2,98,61,977 units of Rs.10 each(purchased during the year) 50.02 -

JM Income - Growth Plan1,03,32,841 units of Rs.10 each(purchased during the year) 25.00 -

K-30 Equity scheme - Growth16,51,937 units of Rs.10 each (purchased during the year) 2.00 -

Franklin India Prima Plus - Growth6,37,755 units of Rs.10 each (purchased during the year) 1.50 -

Prudential ICICI Power - Growth52,32,845 units of Rs.10 each (purchased during the year) 7.00 -

StanChart Grindlays Cash Fund - Growth Plan62,20,619 units of Rs.10 each (purchased during the year) 7.00 -

Reliance Vision Fund - Growth Fund39,05,880 units of Rs. 10 each (purchased during the year) 10.56 -

126.68 1.63Less: Provision for diminution in value 1.33 -

125.35 1.63C) Investments in Integrated Joint Ventures:

L&T-Hochtief Seabird Joint Venture 28.57 24.60Desbuild-L&T Joint Venture 1.24 1.02International Metro Civil Contractors 15.47 5.66Bauer-L&T Diaphragm Wall Joint Venture 1.02 1.26HCC-L&T Purulia Joint Venture 0.31 -Larsen & Toubro Limited-Shapoorji Pallonji & Co.Ltd.Joint Venture 2.57 -

49.18 32.541160.37 917.66

Note:Details of Investments purchased and sold during the year

Face Value CostRs. crore Rs. crore

Debentures of Subsidiary Companies11.6% Debentures 2007 Narmada Cement Company Limited 9.00 9.47

Government Securities 1180.00 1442.79

Face Value Nos. CostRs. Per Unit Rs. crore

Mutual FundsAlliance Cash Manager - Growth Option 1,000 2,49,905 35.00Alliance Cash Manager - Growth Option 10 1,24,52,598 18.01Alliance Equity Fund - Growth Option 10 37,85,011 10.00Alliance Frontline Equity Fund - Growth Option 10 1,00,00,000 10.00Birla Cash Plus - Growth 10 2,57,43,835 40.00Deutsche Alpha Equity Fund - Growth 10 75,00,000 7.50Deutsche Premier Bond Fund - Growth Option 10 2,50,00,000 25.00GSSIF - Short Term Plan - Growth 10 3,49,67,641 40.00GGIG GGSF - Investment Plan - Growth 10 3,46,49,173 35.00HDFC Liquid Fund - Growth Option 10 4,36,96,860 50.00


56

Schedules forming part of accountsFace Value Nos. Cost

Rs. Per Unit Rs. croreMutual Funds

HDFC Equity Fund - Growth 10 57,66,348 5.00HDFC Short Term Plan - Growth 10 1,45,16,597 15.00HDFC Equity Fund 10 1,66,58,060 20.00HSBC Institutional Income Fund - IP 10 2,00,00,000 20.00IDBI Cash Management Fund - Liquid Fund - Growth 10 2,30,50,942 26.59IDBI Principal Income Fund - Short Term Plan - Growth 10 1,94,11,068 20.00IL&FS Liquid Account - Growth Plan 10 5,05,44,532 55.00IL&FS Bond Fund - Growth 10 6,55,41,520 100.00JM High Liquidity Fund - Growth Plan 10 32,23,32,877 525.47JM Income - Growth Plan - Bonus Issue 10 15,27,199 1.63JM Income - Growth Plan 10 15,12,06,343 353.85JM Short Term Fund - Growth Plan 10 3,93,11,377 40.00JM-Sec Fund - Regular Plan - Growth 10 55,30,729 10.00JM Basic Fund - Dividend option 10 1,55,47,264 25.00K-Liquid Scheme - Growth Option 10 13,88,59,486 163.82K-Bond-Wholesale Plan - Growth 10 11,11,66,252 170.00K-Bond Short Term Plan - Growth 10 6,23,16,401 65.00K-Gilt Unit Scheme 98 (IP) - Growth 10 1,81,49,028 35.00Prudential ICICI Short Term Plan - Cumulative Option 10 1,40,83,581 15.00Prudential ICICI Liquid Plan - Growth Option 10 16,17,39,020 232.87Prudential ICICI Power - Dividend 10 1,81,29,079 25.00Prudential ICICI Growth - Growth 10 12,55,650 2.50Franklin India Prima Plus - Growth 10 21,39,495 5.00Reliance Growth Fund - Growth Plan 10 9,63,701 3.00Reliance Growth Fund - Dividend 10 1,08,41,284 25.00Reliance Vision Fund - Growth Fund 10 18,62,891 4.94Reliance Vision Fund - Dividend 10 88,65,248 25.00StanChart Grindlays Cash Fund - Growth 10 82,79,11,885 904.23Treasury Management Account - Growth 1,000 1,77,444 25.00Tata Liquid Fund - Appreciation 10 1,59,14,906 21.50Tata Short Term Bond Fund - Growth 10 1,45,59,149 15.00Tata Gilt securities Fund - Appreciation 10 1,09,23,530 20.00Tata Income Plus Fund (Option-B) Growth 10 2,47,78,480 25.00UTI - Money Market Fund - Growth Option 10 1,23,59,901 20.00UTI - Regular Income Scheme - Growth 10 20,00,000 2.00Zurich India Equity Fund - Growth 10 22,32,143 5.00Zurich India High Interest Fund STP - Growth 10 2,38,86,474 25.00Zurich India Liquidity Fund - Savings Plan - Growth Option 10 6,33,17,373 75.15Zurich India High Interest Fund - Regular Growth 10 75,44,475 15.00

As at 31-3-2003 As at 31-3-2002Rs.crore Rs.crore Rs.crore Rs.crore

Schedule GCurrent Assets, Loans and Advances:Current Assets:

Inventories:Stock-in-trade, at cost or net realisable value whichever is lower:

Raw materials 44.26 52.40Components 45.86 39.32Construction materials 11.60 9.95Stores, spare parts and loose tools 188.39 171.88Finished goods 258.00 246.37Property development land 0.95 1.40

549.06 521.32Work-in-progress, including materials at site:

At cost 957.01 1162.87At estimated realisable value on sale 6755.60 5455.74

7712.61 6618.61Less: Progress payments 5671.66 4617.90

2040.95 2000.71Carried forward 2590.01 2522.03


57


Rs.crore Rs.crore Rs.crore Rs.croreSchedule G (Contd.)Brought forward 2590.01 2522.03Sundry Debtors:

Unsecured:Debts outstanding for more than 6 months

Considered good [see Note no. 13 (a)] 566.32 501.56Considered doubtful 133.66 95.09

699.98 596.65Other Debts:

Considered good [see Note no. 13 (a)] 1284.05 940.751984.03 1537.40

Less : Provision for doubtful debts 133.66 95.091850.37 1442.31

Cash and bank balances:Cash on hand 2.22 2.18Balances with scheduled banks:

on current accounts 119.72 152.89on call deposit accounts including interest accrued thereon 1.87 0.20on fixed deposits including interest accrued thereon 41.40 10.03on margin money deposit accounts 0.02 0.99

Balances with non-scheduled banks [See Note No 7(a)] 155.30 38.19320.53 204.48

Other current assets:Interest accrued on investments 1.06 0.41

Loans and advances:Secured:

Considered good:Loans against mortgage of house property 38.06 36.44Loans against pledge of shares 0.02 0.05

Unsecured:Considered good:

Subsidiary companies:Loans including interest accrued thereon 110.85 38.79Others 82.64 70.41

Associate companies:Advances recoverable [see Note no. 13 (b)] 17.61 36.54

Advances towards equity commitment:Associate companies 0.02 0.15Others 3.83 -

Inter-Corporate deposits:Subsidiaries 191.69 59.73Associate companies [see Note no.13 (b)] 20.50 2.00Others 6.00 -

Advances recoverable in cash or in kind 888.38 854.05Loan to a corporate including interest accrued thereon - 67.86Deferred credit against sale of ships 5.00 20.30Balance with customs, port trust, etc. 23.72 31.49Lease receivables 9.66 -

Considered doubtful:Deferred credit against sale of ships 15.30 -Advances recoverable in cash or in kind 53.02 40.09

1466.30 1257.90Less: Provision for doubtful loans and advances 68.32 40.09

1397.98 1217.816159.95 5387.04


58


Rs.crore Rs.crore Rs.crore Rs.crore

Schedule H

Current Liabilities and Provisions:Liabilities:

Acceptances 76.57 4.63Sundry creditors :Due to : Subsidiary Company 20.29

(Previous year Rs.1.35 crore)Small Scale Industrial Undertakings 19.35

(Previous year Rs.18.75 crore)Others (Previous year Rs. 1482.73 crore) 1974.14

2013.78 1502.83Advances from customers 1246.99 1072.01Items covered by Investor Education and Protection Fund:(see note below)

Unpaid dividend 11.36 10.58Unpaid application money received for allotment of securities 0.03 **Unpaid matured deposits 1.16 **Unpaid matured debentures 8.03 **Interest accrued on above 0.32 **

Due to Directors (net) 2.82 1.65Interest accrued but not due on loans 66.14 83.69Pension payable under Voluntary Retirement-cum-Pension

Scheme (payable within one year:Rs 1.94 crore) 7.59 11.303434.79 2686.69

Provisions for:Taxes 88.50 25.56Proposed dividend 186.80 174.34Additional tax on dividend 23.93 -Gratuity 0.20 0.17Leave encashment 81.17 66.73Pension scheme 44.15 20.52

424.75 287.323859.54 2974.01

Note: There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at 31.3.2003.** Previous year figures have not been given as the disclosure requirement came into force with effect from 13th November 2002.


Schedule I

Deferred revenue items

(i) Miscellaneous expenditure:(to the extent not written off or adjusted)Lump sum fees for technical knowhow 0.71 0.97Mining development expenses 10.40 8.70Specialised softwares 6.61 7.51Voluntary Retirement-cum-Pension Schemes/

Voluntary Retirement Scheme 51.65 44.94Loss on sale and lease-back of fixed assets 3.54 7.08Premium on pre-payment and refinancing of term loans 1.24 2.71

74.15 71.91(ii) Deferred income:

Profit on sale and lease-back of fixed assets (4.17) (8.33)69.98 63.58


59


Rs.crore Rs.croreSchedule J

Contingent Liabilities :

(a) Claims against the Company not acknowledged as debts 70.86 17.24(b) Sales-tax liability that may arise in respect of matters in appeals 215.55 222.93(c) Excise duty / Service Tax on fabrication of iron & steel at

various project sites net of recovery from customers andother issues for which the Company has filed writ petitionsin High Courts/Appeals which are pending disposal 19.47 11.00

(d) Customs duty demands against which the Company hasfiled appeals before Appellate Authorities which are pendingdisposal 14.21 15.48

(e) Taxes (including interest) that may arise in respect of whichthe Company is in appeal 6.75 6.67

(f) Extinguishment of debt (being sales tax deferment loansextinguished in previous years by transfer to a wholly ownedsubsidiary company and later assigned to an associatecompany) 216.00 216.00

(g) Customers’ bills discounted 0.82 7.15(h) Guarantees given on behalf of Subsidiary Companies 85.47 32.39(i) Guarantees given on behalf of Associate Companies 114.95 6.27(j) Guarantees given on behalf of others 18.22 -(k) Other claims in respect of which the Company is

contingently liable - 1.61

2002-2003 2001-2002Rs.crore Rs.crore

Schedule KSales and Service:Manufacturing and trading activity 5186.32 4548.02Construction, project related and property development activity 4506.51 3515.02Servicing 63.23 40.71Commission 43.93 25.66Compensation,engineering and service fees 69.84 37.20

9869.83 8166.61

2002-2003 2001-2002Rs.crore Rs.crore Rs.crore Rs.crore

Schedule L

Other Income:Income from long term investments:

Dividend from subsidiary companies 38.60 51.87(Tax deducted at source Rs.4.05 crore, previous year Rs. Nil)

Income from trade investments 10.57 15.18(Tax deducted at source Rs.1.11 crore, previous year Rs. Nil)

Income from units of Unit Trust of India - 0.20Income from other investments 17.77 4.32

(Tax deducted at source Rs.1.87 crore, previous year Rs. Nil)66.94 71.57

Lease rental 6.25 5.95Profit on sale of current investments (net) - 0.59Profit on sale of long term investments 8.63 1.85Profit on sale of fixed assets(net) [including on sale and

lease-back transaction] 11.65 5.32Gain on extinguishment of debt (see Note no. 15 ) 7.66 40.07Miscellaneous income 148.86 91.03Unclaimed credit balances 4.35 1.98

254.34 218.36


60

Schedules forming part of accounts2002-2003 2001-2002

Rs.crore Rs.crore Rs.crore Rs.croreSchedule MManufacturing, construction and operating expenses:Raw materials and components consumed 1895.02 1243.20Add: Purchase of trading goods 611.59 376.98

2506.61 1620.18Less: Scrap sales 13.24 13.69

2493.37 1606.49Construction materials 875.06 672.60Sub contracts 1644.30 1414.52Stores, spares and tools 341.65 245.22Direct expenses on jobs 120.79 94.50Operating expenses - Crude oil production 3.30 3.02

5478.47 4036.35Decrease in manufacturing and trading stocks:Closing stock:

Finished goods 258.00 246.37Work-in-progress 268.22 281.00

526.22 527.37Less : Opening stock:

Finished goods 246.37 294.08Work-in-progress 281.00 234.58

527.37 528.661.15 1.29

Excise duty 9.28 26.65Power and fuel 656.94 610.44Royalty and technical knowhow fees 63.55 58.40Packing and forwarding 152.66 142.27Hire charges - Plant and machinery and others 102.21 34.14Repairs to:

Plant and machinery 94.77 89.42Buildings 7.66 5.91

102.43 95.336566.69 5004.87


Schedule N

Staff expenses:Salaries, wages and bonus 463.75 439.98Contribution to and provision for:

Provident funds and pension fund 38.85 36.62Superannuation/Pension schemes (including provision of 36.79 18.73

Rs. 23.63 crore, previous year Rs.7.71 crore)

Gratuity funds 23.42 12.33(including provision of Rs. 0.03 crore;previous year Rs. 0.03 crore)

Leave encashment 14.44 10.05

113.50 77.73

Welfare and other expenses 91.15 85.29

668.40 603.00


61

Schedules forming part of accounts2002-2003 2001-2002

Rs.crore Rs.crore Rs.crore Rs.croreSchedule O

Sales, administration and other expenses:Rent (includes lease rental Rs.27.88 crore; 60.66 52.06

previous year Rs.18.24 crore)Rates and taxes 43.59 39.15Packing and forwarding 476.29 458.89Travelling and conveyance 154.32 148.12Directors’ fees 0.06 0.04Telephone, postage and telegrams 38.92 45.97Advertising and publicity 42.72 53.14Stationery and printing 16.01 15.04Insurance 70.38 37.39Power and fuel 10.71 11.09Repairs to buildings 2.33 2.87Commission:

Distributors and agents 16.27 13.79Employees and others 2.00 7.16

18.27 20.95Bank charges 32.89 26.94General repairs and maintenance 74.80 68.92Miscellaneous expenses 165.77 170.09Provision for doubtful debts and advances(net) 66.80 45.87Bad debts and advances written off 65.00 19.24Loss on sale of current investments 0.34 -Provision for diminution in value of investments 0.69 2.99Provision for diminution in value of assets held for sale - 0.01Discount on sales 72.11 87.28

1412.66 1306.05


Schedule P

Interest and brokerage:

Debentures and fixed loans 190.05 286.06

Others 35.10 89.18225.15 375.24

Less: (i) Received on inter-corporate deposits, from 45.37 57.48subsidiary and associate companies, customersand others (tax deducted at source Rs.6.08 crore;previous year Rs.1.54 crore)

(ii) Income from long term investments:Interest on debentures, bonds and Government 0.72 1.23Securities (tax deducted at source Rs. 0.13 crore ;previous year Rs. 0.15 crore)

(iii) Income from current investments:Interest on debentures, bonds, Government 2.07 0.45securities and Commercial paper (tax deductedat source Rs.Nil ; previous year Rs. Nil )

48.16 59.16176.99 316.08


62

Schedule forming part of accountsSchedule Q

SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Accounting

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally acceptedaccounting principles [“GAAP”] except for the revaluation of certain fixed assets, and in compliance with the Accounting Standardsreferred to in Section 211(3C) and other requirements of the Companies Act, 1956. However, certain escalation and other claims, whichare not ascertainable / acknowledged by customers, are not taken into account.

The preparation of financial statements in conformity with GAAP requires that the management of the company makes estimates andassumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities andthe disclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates include the usefullives of fixed assets, provision for doubtful debts / advances, future obligations in respect of retirement benefit plans, etc. Actual resultscould differ from these estimates.

2. Sales and Service Income

Sales and service include excise duty, cash subsidy and adjustment for liquidated damages and price variation.

Revenue from construction and project-related activity and contracts executed in Joint Ventures under work-sharing arrangement (JointlyControlled Operations, in terms of Accounting Standard 27 “Financial Reporting of Interests in Joint Ventures”) is recognised based onpercentage of completion method.

In respect of contracts executed in Integrated Joint Ventures under profit-sharing arrangement (Jointly Controlled Entities, in terms ofAccounting Standard 27 “Financial Reporting of Interests in Joint Ventures”), profit / loss is accounted when the same is determined bythe Joint Venture. Services rendered to Integrated Joint Ventures under profit-sharing arrangement are accounted as income on accrualbasis.

Revenue from property development activity is recognised when the equitable share of property in the land and/or building is transferredto the customer.

3. Research and Development

Revenue expenditure on research and development is charged under respective heads of account. Capital expenditure on research anddevelopment is included as part of fixed assets and depreciated on the same basis as other fixed assets.

4. Retirement Benefits

Provisions for / contributions to retirement benefits schemes are made as follows:

a) Provident fund on actual liability basis

b) Superannuation / Pension schemes on the basis of actual liability/actuarial valuation.

c) Gratuity based on actuarial valuation

d) Leave Encashment Benefit on retirement on actuarial valuation basis.

5. Fixed Assets

Fixed assets are stated at original cost net of tax / duty credits availed, if any, and those which were revalued as on October 1, 1984are stated at the value determined by the valuers. Assets acquired on hire purchase basis are stated at their cash values. Specific know-how fees paid, if any, relating to plant and machinery is treated as part of cost thereof.

Revenue expenses incurred in connection with project implementation insofar as such expenses relate to the period prior to thecommencement of commercial production are treated as part of project cost and capitalised.

Own manufactured assets are capitalised at cost including an appropriate share of overheads.

(Also refer to policy on Leases and Borrowing Costs, infra.)

6. Leasesa) Lease transactions entered into prior to April 1, 2001

Assets leased out are stated at original cost. Lease equalisation adjustment is the difference between capital recovery included inthe lease rentals and depreciation provided in the books.

Lease rentals in respect of assets acquired under leases are charged to Profit and Loss Account.

b) Lease transactions entered into on or after April 1, 2001

i. Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified asfinance leases. Such assets are capitalised at the inception of the lease at the lower of the fair value or the present value o fminimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between theliability and the interest cost, so as to obtain a constant periodic rate of interest on the outstanding liability for each per iod.

ii. Assets acquired as leases where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Lease rentals are charged to the Profit and Loss Account on accrual basis.

iii. Assets given under a finance lease are recognised as a receivable at an amount equal to the net investment in the lease. Leaseincome is recognised over the period of the lease so as to yield a constant rate of return on the net investment in the lease.


63

Schedule forming part of accountsSchedule Q (contd...)

iv. Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over the lease term.

v. Initial direct costs relating to assets given on finance lease are charged to Profit and Loss Account.

(Also refer to policy on Depreciation, infra)

7. Depreciation

a) Owned assets

Depreciation on revalued assets is calculated on straight line basis on the values and at the rates given by the valuers. Thedifference between depreciation on assets based on revaluation and that on original cost is transferred from Revaluation Reserveto Profit and Loss account.

Depreciation on original cost is provided on the written down value basis on assets acquired up to March 31, 1968 (at the ratesprescribed under Schedule XIV to the Companies Act, 1956) and on straight line basis on assets acquired subsequently (at therates prevailing at the time of their acquisition on assets acquired up to September 30, 1987 and at the rates prescribed underSchedule XIV on assets acquired after that date). However, motor cars have been depreciated at 14.14% p.a. Depreciation onadditions/deductions is calculated pro rata from / to the month of additions / deductions. Extra shift depreciation is provided on alocation basis. The value of leasehold land is amortised over the residual period of the lease. Capital expenditure incurred by theCompany, not represented by assets, is amortised over a period of five years, and similar expenditure incurred on Jetty is amortisedover the period of the relevant agreement such that the cumulative amortisation is not less than the cumulative rebate availed bythe Company.

b) Leased assets

i. Lease transactions entered into prior to April 1, 2001

Assets given on lease are depreciated over the primary period of the lease. Accordingly, while the statutory depreciation onsuch assets is provided for on straight line method as per Schedule XIV to the Companies Act, 1956, the difference is adjustedthrough lease equalisation and lease adjustment account.

ii. Lease transactions entered into on or after April 1, 2001

Assets acquired under finance leases are depreciated on a straight line basis over the lease term. Where there is reasonablecertainty that the Company shall obtain ownership of the assets at the end of the lease term, such assets are depreciatedat the rates prescribed in Schedule XIV to the Companies Act, 1956.

8. Investments

Current investments are carried at lower of cost or market value. The determination of the carrying costs of such investments is doneon the basis of specific identification. Long term investments (including interests in Joint Ventures which are in the nature of JointlyControlled Entities) are carried at cost, after providing for any diminution in value, if such diminution is of a permanent nature.(Also refer to policy on Accounting for Joint Ventures, infra)

9. Inventories

Inventories are valued after providing for obsolescence, as under:

a) Raw materials, components, construction materials, stores, spares and loose tools at weighted average cost.

b) Work-in-Progress

i. Work-in-progress (other than project and construction-related) at cost including related overheads.

ii. Project and Construction-related Work-in-progress at cost till a major portion of the job is completed and thereafter at realisablevalue.

In the case of qualifying assets, cost includes applicable Borrowing costs vide policy relating to Borrowing Costs.

c) Finished goods at lower of cost or net realisable value. Cost includes related overheads and excise duty paid / payable on suchgoods.

d) Property Development Land at lower of cost or net realisable value.

10. Securities Premium Account

a) Securities premium includes:

i. The difference between the market value and the consideration received in respect of shares issued pursuant to StockAppreciation Rights Scheme.

ii. The discount allowed, if any, in respect of shares allotted pursuant to Stock Options Scheme.

b) The following expenses are written off against Securities Premium Account:

i. Issue expenses pertaining to Shares/Debentures/Bonds.

ii. Premium paid on redemption of Debentures/Bonds.

11. Borrowing Costs

Borrowing costs that are attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of costof such asset till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily requires


64

a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised as an expense in the periodin which they are incurred.

12. Interest

The difference between the Face Value and the Issue Price of the Deep Discount Bonds, being in the nature of interest, is charged tothe Profit and Loss Account, on a compound interest basis determined with reference to the yield inherent in the discount.

13. Employee Stock Ownership Schemes

a) Discount in respect of Stock Appreciation Rights [“SARs”] issued pursuant to Stock Appreciation Rights Scheme is charged to theProfit and Loss Account as employee compensation in the year in which the shares are allotted. SEBI (Employee Stock OptionsScheme & Employee Stock Purchase Scheme) Guidelines, 1999 require the accounting for discount on the grant of options overthe period of vesting. However, in the case of SARs, the number of shares comprised in the grant is not quantifiable until the optionsvest. Hence, the charge to revenue is confined to options that are allotted.

b) In respect of stock options issued pursuant to the Stock Options Scheme, the difference between market price and the grant price,if any, on the date of grant of option, i.e., the discount is treated as employee compensation and deferred over the period of vesting.

14. Deferred Revenue Expenditure

The expenses disclosed under Miscellaneous Expenditure are amortised as follows:

a) Lump sum fees for technical know-how, other than those relating to plant and machinery, over a period of six years in case of foreigntechnology and three years in case of indigenous technology

b) Mining development expenses over a period of five years

c) Specialised softwares over a period of three years

d) Lump sum compensation paid under Voluntary Retirement Schemes launched from the year 2001-2002 and onwards are amortisedover a period of five years. Payments made under the earlier schemes are amortised over a period of three years. The futurepensions under Voluntary Retirement-cum-Pension Scheme are amortised over the period for which pensions are payable.

e) Premium paid on prepayment and refinancing of term loans is charged off over the tenor of the new loans in proportion to theprincipal amount outstanding.

15. Foreign Currency Transactions

Translation of overseas jobs / branches are as under:

a) Closing inventories at rates prevailing at the end of the year.

b) Fixed assets as at April 1, 1991 at rates prevailing at the end of the year in which additions were made. Subsequent additions atrates prevailing on the dates of additions. Depreciation is accounted for at the same rate at which assets are converted.

c) Other assets and liabilities at rates prevailing at the end of the year.

d) Net revenues at the average rate for the year.

All other foreign currency transactions are accounted for at the rates prevailing on the dates of the transactions.

Foreign currency assets and liabilities (other than those relating to overseas jobs / branches) are converted at contracted / year-end ratesas applicable.

The exchange differences on settlement/conversion are adjusted to:

a) Cost of fixed assets, if the foreign currency liability relates to fixed assets.

b) Profit and Loss account in other cases.

Wherever forward contracts are entered into, the exchange differences are dealt with in the Profit and Loss Account over the period ofthe contracts.

16. Segment Accounting

i. Segment accounting policies

Segment accounting policies are in line with the accounting policies of the Company. However, the following specific accountingpolicies have been followed for segment reporting:

a) Segment Revenue includes Sales and other income directly identifiable with / allocable to the segment including inter-segmentrevenue.

b) Expenses that are directly identifiable with / allocable to segments are considered for determining the Segment Result. Theexpenses, which relate to the Company as a whole and not allocable to segments, are included under “Other UnallocableExpenditure.”

c) Income which relates to the Company as a whole and not allocable to segments is included in “Unallocable Corporate Income”.

d) Segment Result includes margins on inter-segment capital jobs, which are reduced in arriving at the profit before tax of theCompany.



65

e) Segment assets and liabilities include those directly identifiable with the respective segments. Unallocable corporate assetsand liabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment.Unallocable assets mainly comprise trade investments in Subsidiaries and Associate companies that constitute or relate to theportfolio of the Company’s core / thrust areas of business such as Infrastructure Development, Cement and Software solutions.Unallocable liabilities include mainly loan funds, provisions for employee retirement benefits and proposed dividend.

ii. Inter-segment transfer pricing

Segment Revenue resulting from transactions with other business segments is accounted on the basis of transfer price agreedbetween the segments. Such transfer prices are either determined to yield a desired margin or agreed on a negotiated basis.

17. Taxes on Income

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with theprovisions of the Income Tax Act 1961, and based on expected outcome of assessments / appeals.

Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year, and quantified usingthe tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxableincome will be available against which such deferred tax assets can be realised.

18. Accounting for Joint Ventures

Accounting for Joint Ventures has been done as follows:

Type of Joint Venture Accounting treatment

Jointly Controlled Operations Company’s share of revenues, common expenses, assets and liabilities are included in Revenues,Expenses, Assets and Liabilities respectively.

Jointly Controlled Assets Share of the Assets according to nature of the assets and share of the Liabilities shown as part ofGross Block and Liabilities. Share of expenses incurred on maintenance of the assets accounted asexpense. Monetary benefits if any from use of the assets reflected as income.

Jointly Controlled Entities Company’s share of profit or loss accounted on determination of profit or loss by the Joint Ventureand the net investment in the Joint Venture reflected as investment.

Joint Venture interests accounted as above, have been included in segments to which they relate.



66

Notes forming part of accounts1. Of the Equity shares:

i) 18,39,882 Equity shares were allotted as fully paid up, pursuant to contracts, without payment being received in cash.

ii) 341,29,743 Equity shares were issued as bonus shares by way of capitalisation of General Reserve: Rs.23.49 crore, Share

Premium: Rs. 9.68 crore and Capital Redemption Reserve: Rs. 0.96 crore.

iii) 1,10,033 Equity shares were allotted as fully paid up on exercise of options under the Employee Stock Ownership Schemes.

2. Stock Ownership Schemes:

In terms of the approval of the shareholders at the Annual General Meeting held on the 26th August 1999, the Company has establishedtwo schemes of employees stock ownership, namely, Stock Appreciation Rights Scheme and Stock Options Scheme. The grant of optionsto the employees under these Schemes is on the basis of their performance and other eligibility criteria. The options are vested overa period of four years, subject to fulfilment of certain conditions. Upon vesting, the grantees are eligible to apply for and secure theallotment of equity shares of the Company on payment of (a) Rs. 10 each in the case of shares allotted, as per a predetermined formula,pursuant to Stock Appreciation Rights Scheme and (b) the grant price in the case of shares allotted pursuant to Stock Options Scheme.

The details of the grants under the aforesaid Schemes are summarized below:

(a) Stock Appreciation Rights [SARs]-1999

1 Grant price per share (Rs.) 199

2 Grant date 1.9.1999

3 Vesting commences on 1.9.2000

4 Vesting schedule 25% of grant each year commencing one year from the date of grant.

Particulars (Number of SARs) 2002-2003 2001-2002

5 SARs outstanding at the beginning of the year 7,94,250 7,99,500

6 SARs exercised in respect of which shares were allotted during the year Nil Nil

7 SARs lapsed during the year on separation Nil 5,250

8 SARs outstanding at the end of the year (5-6-7) 7,94,250 7,94,250

Of which - SARs vested 5,61,125 3,03,250

- SARs yet to vest (due to vest on 1.9.2003) 2,33,125 4,91,000

The number of equity shares in respect of 7,94,250 SARs outstanding as on March 31, 2003 is not quantifiable presently.

(b) Stock Options [“ESOP”]: E S O P

2000 2002 (A series) 2002 (B series)

1 Grant price per share (Rs.) 184 172 172

2 Grant date 1.6.2000 19.4.2002 19.4.2002

3 Vesting commences on 1.6.2001 19.4.2003 19.4.2003

4 Vesting schedule 25% of grant each year commencing one year from the date of grant.

Particulars (Number of Options) 2002-2003 2001-2002 2002-2003 2001-2002 2002-2003 2001-2002

5 Options outstanding at the beginningof the year 39,08,450 39,48,800 Nil N.A. Nil N.A.

6 Options granted during the year Nil Nil 37,81,100 N.A. 37,81,660 N.A.

7 Options exercised in respect of whichshares were allotted 5,715 Nil Nil N.A. Nil N.A.

8 Options lapsed during the year onseparation 46,400 40,350 32,200 N.A. 6,500 N.A.

9 Options outstanding at the end ofthe year (5+6-7-8) 38,56,335 39,08,450 37,48,900 N.A. 37,75,160 N.A.

Of which - Options vested 20,38,985 10,44,425 Nil N.A. Nil N.A.

- Options yet to vest 18,17,350 28,64,025 37,48,900 N.A. 37,75,160 N.A.

During the year, 37,58,700 options granted on 20th April 2001 at a grant price of Rs.212 per share were cancelled.


67

3. Secured Redeemable Non-Convertible Bonds (NCBs) / Debentures :

A F D Plus Bonds

Face Value Date ofAllotment

Amount(Rs. crore)

Interest Redemption

Rs.2,500each

November 1,1996

0.43 Each bond shall be redeemed by an annualpayment of Rs.650 for the first 6 years comprisinginterest at the rate applicable for that year andthe balance towards principal. The principaloutstanding, if any, at the beginning of the 7th

year along with interest thereon will be paid atthe end of the 7th year.

450 basis points over StateBank of India rateapplicable to term depositsof a tenure of more than 3years, as prevailing on 1st

November each year,subject to a floor of 14%p.a. and a cap of 20% p.a.

Note : The Company retains the option to purchase the Bonds at discount, at par or at premium in the open market or otherwise,and cancel, hold or reissue the same at such price and on such terms as the Company may deem fit.

Security : The bonds are secured by way of a first charge on all immovable and movable properties of the Company at certainlocations and/or such other assets (save and except book debts) and subject to the charges in favour of the Company’sBankers in respect of working capital facilities, with such ranking, assets coverage and other terms as may be mutuallydecided between the Company and the Trustees without requiring the consent of the Bondholders.

B Debenturesa) Fixed Rate Debentures

Rs.5,00,000each

August 1,1998

93.00 13.50 % p.a. payablehalf-yearly

Each debenture shall be redeemed at face value at theend of the 5th year from the date of allotment.

(1)

Rs.1,00,00,000each

November24, 1998

20.00 12.75 % p.a. payablequarterly

(2) Each debenture will be redeemed at face value onSeptember 20, 2003.

Rs.1,00,00,000each

January 5,1999

20.00 13.00 % p.a. payableannually

(3) Each debenture shall be redeemed at face value at theend of the 5th year from the date of allotment or onexercise of put option by the debentureholders at theend of 56 months from the date of allotment, whicheveris earlier.

Rs.1,00,00,000each

April 26,1999


(4) Each debenture shall be redeemed at face value at theend of the 5th year from the date of allotment or onexercise of put option by the debentureholders at theend of 52 months from the date of allotment, whicheveris earlier.

Rs.1,00,00,000each

June 25,1999


(5) Each debenture shall be redeemed at face value at theend of the 10th year from the date of allotment or onexercise of call option by the Company at the end of the5th year from the date of allotment, whichever is earlier.

Sl. No.

1.

Rs.1,00,00,000each

September17,1999


(6) Each debenture shall be redeemed at face value at theend of the 7th year from the date of allotment.

Rs.1,00,00,000each

October 29,1999


(7) Each debenture shall be redeemed at face value at theend of the 10th year from the date of allotment or onexercise of call option by the Company at the end of the5th year from the date of allotment, whichever is earlier.

Rs.1,00,00,000each

December22, 1999



Rs.1,00,00,000each

December 31,1999



Notes forming part of accounts (contd...)


Amount(Rs. crore)

Interest RedemptionSl. No.


68

Rs.1,00,00,000each

June 6, 2000 72.00 10.80 % p.a. payableannually


Rs.1,00,00,000each

July 21, 2000 75.00 11.25 % p.a. payableannually


Rs.1,00,00,000each

January 11,2001



Rs.1,00,00,000each

July 22, 2002 50.00 8.40 % p.a. payableannually


Rs.1,00,00,000each

July 25, 2002 45.00 8.09 % p.a. payableas under :1st Coupon - 25/1/032nd Coupon - 25/1/043rd Coupon - 25/1/054th Coupon - 25/1/065th Coupon - 25/1/076th Coupon - 25/7/07


Rs.1,00,00,000each

September 2,2002



Rs.1,00,00,000each

September 2,2002



Rs.1,00,00,000each

September 16,2002

25.00 Interest will be payable ata fixed rate as follows:For 5 years from thedeemed date of allotment:8.00% p.a. payableannuallyFor the next 5 years,interest rate would be fixedat the Applicable Rate.The Applicable Rate willbe contingent on the thenprevailing debt rating ofL&T (as on the beginningof the 6th year from thedeemed date of allotment)and will be the following ifL&T is rated:AAA : 8.90% p.a.AA+ : 9.35% p.a.AA- : 10.15% p.a.Below AA- : 10.90% p.a.


TOTAL 1001.00

6.60 % p.a. payableon calender quarterend as under :1st Coupon - 31/3/032nd Coupon - 30/6/033rd Coupon - 30/9/034th Coupon - 31/12/035th Coupon - 31/3/046th Coupon - 26/5/04

Rs.1,00,00,000each

May 12, 2000 50.00 10.80 % p.a. payableannually

(10) Each debenture shall be redeemed at face value onMay 10, 2005.


Rs.1,00,00,000each

February 26,2003

50.00(19) Each debenture shall be redeemed at face value at theend of the 15th month from the deemed date of allotmentor on exercise of call option on March 31, 2004 whicheveris earlier.


Amount(Rs. crore)

Interest RedemptionSl.No.


69

Rs.5,00,000each

November 101997/November 241997

79.50 / 50.00 Payable half-yearly at aper annum rate set at 325basis points over theBank Rate announced bythe Reserve Bank ofIndia, prevailing on April30 and October 31 for thesubsequent six monthsperiod, respectively.

(1) Each debenture will be redeemed at face value at theend of the 7th year from the date of allotment or onexercise of put option by the debentureholders at theend of the 5th year from the date of allotment, whicheveris earlier.

b) Floating Rate Debentures

Rs.1,00,00,000each

May 15, 2001 25.00 Payable quarterly at a perannum rate set at 150basis points over theMumbai Inter-BankOffered Rate (MIBOR),subject to a floor of 5%p.a. plus 150 basis points,compounded on a dailybasis.

(2) Each debenture shall be redeemed at face value at theend of 2 years from the date of allotment or on exerciseof the put or the call option by the debenture holders orthe Company respectively, at the end of every 3 monthsfrom the date of allotment.

Rs.1,00,00,000each

June 25, 2002 25.00 Payable quarterly at a perannum rate set at 60basis points over theMumbai Inter-BankOffered Rate (MIBOR),compounded on a dailybasis.

(3) Each debenture shall be redeemed at face value at theend of 364 days from the date of allotment.

Rs.1,00,00,000each

March 31, 2003 35.00 Payable, on redemption oron exercise of call optionwhichever is earlier, at aper annum rate set at 110basis points over theMumbai Inter-BankOffered Rate (MIBOR),compounded on a dailybasis.

(4) Each debenture shall be redeemed at face value onexercise of call option on 31st March, 2004 or on finalmaturity i.e. on April 14, 2004 whichever is earlier.

TOTAL 214.50

Note : The Company retains the option to purchase the Debentures in the secondary markets, and cancel, hold or reissue thesame at such price and on such terms as the Company may deem fit or as permitted under the Company Law.

Security : The debentures are secured by way of first / second charge, having pari passu rights, as the case may be, on theCompany’s immovable / movable properties at certain locations, both present and future.

4. The following loans are secured by a first mortgage on the Company’s immovable properties at certain locations and / or by hypothecationof movables at those locations (save and except book debts) both present and future, having pari passu rights, subject to prior charges,on specific assets in favour of the Company’s bankers:

a) i) Loans of Rs. 213.71 crore (forming part of Other Loans from Banks, Institutions and Others)

ii) Loans of Rs. 52.41 crore from financial institutions.

b) Loans in foreign currencies equivalent to Rs. 572.05 crore (forming part of Other Loans from Banks) are secured by hypothecationand / or mortgage of the assets at certain locations.

c) Cash Credit facilities including Working Capital Demand Loans from banks are secured by hypothecation of stocks, stores and bookdebts. The charge on these assets to the extent of Rs. 387.15 crore also extends to bank guarantees as on 31st March, 2003.

5. Conversion of 12.5% Fully Convertible Debentures (IV Series) into 3,88,956 equity shares have not been effected, as all amounts dueon them have not been received from the debentureholders. Additions to the Subscribed / Paid up Capital will be accounted as and whenfurther allotments are made. However, provision for dividend has been made on all the shares including those due on conversion.

6. Closing work-in-progress includes a sum of Rs. 185.19 crore towards retention money withheld by customers.



Amount(Rs. crore)

Interest RedemptionSl.No.


70

7. a) Balances with Non-scheduled banks held in:

As at As at Maximum amount31.3.2003 31.3.2002 outstanding at any time

during

2002-2003 2001-2002Rs. crore Rs. crore Rs. crore Rs. crore

i) Current Accounts(a) Bank of Foreign Economic Affairs, CIS, Moscow

(as at 31.3.2003: Rs.4343 and as at 31.3.2002 – Rs.3339) - - 0.01 -(b) Nepal Indo Suez Bank, Kathmandu, Nepal 0.44 0.14 0.46 1.40(c) Nepal Bank Ltd., Kathmandu, Nepal 0.01 0.01 0.01 0.28(d) Rafidian Bank, Abu Dhabi, UAE 9.76 10.03 10.03 10.03(e) Union National Bank, Abu Dhabi, UAE 4.00 0.11 4.00 1.99(f) Union Bank of Bhutan, Jongkhar, Bhutan 6.97 1.07 9.15 10.70(g) Abu Dhabi Commercial Bank, Abu Dhabi, UAE 22.56 7.26 22.56 11.54(h) Mashreq Bank, Dubai (as at 31.03.2003 –

Rs.Nil and as at 31.03.2002 – Rs.5000) - - - -(i) Bank of Ceylon, Colombo, Sri Lanka 0.01 0.06 0.06 0.44(j) Standard Chartered Bank, Dubai, UAE 5.71 0.02 5.73 0.75(k) HSBC, UAE 0.01 - 0.01 -(l) BNP, Dubai, UAE 0.43 - 0.43 -(m) National Bank of Kuwait, Kuwait 0.49 - 5.13 -(n) Arab Bank, Jordan 0.46 - 0.46 -(o) Standard Chartered Bank, Dhaka, Bangladesh - 0.01 - 0.02(p) Standard Chartered Bank, Doha, Qatar - 0.01 - 0.47(q) Deutsche Bank, Singapore 0.01 2.42 79.29 52.32(r) ABN AMRO Bank, Munich - 1.32 - 17.08(s) Citibank, Tanzania 0.08 - 0.27 -(t) HSBC, Singapore 0.02 - 22.86 -

Total (i) 50.96 22.46

ii) Call Deposits(a) Mashreq Bank, Dubai, UAE 0.82 0.85 0.82 0.85(b) Standard Chartered Bank, Dubai, UAE 14.40 - 14.45 -(c) Arab Bank, Jordan 3.28 - 5.24 -

Total (ii) 18.50 0.85iii) Fixed Deposits(a) HSBC, Singapore 21.31 - 21.31 -(b) Deutsche Bank, Singapore 64.53 14.88 141.08 32.35

Total (iii) 85.84 14.88

Total (i) + (ii) + (iii) 155.30 38.19

b) Call deposit with Mashreq Bank, Dubai, UAE: Rs. 0.82 crore is subject to an escrow arrangement duly approved by the ReserveBank of India, whereby the proceeds of the deposit, together with interest thereon, would be applied towards full and final settlementof loan taken from Rafidian Bank, Iraq, which is included under Unsecured Loans. Once the UN embargo against Iraq is lifted, thesettlement would be effected.

8. Loans and advances include:

i) amount due from an officer of the Company: Rs. 0.06 crore (previous year Rs. 0.06 crore ). The maximum amount outstanding atany time during the year: Rs. 0.06 crore (previous year Rs. 0.07 crore).

ii) rent deposit with three whole-time directors: Rs. 3,39,000 (previous year Rs.3,26,400). The maximum amount outstanding at anytime during the year: Rs. 3,80,400 (previous year Rs.3,26,400).

iii) amount, including interest, due from the Managing Director, the Deputy Managing Director and five whole-time directors in respectof Housing Loan: Rs. 2.99 crore (including interest accrued) (previous year Rs.2.39 crore). Maximum amount outstanding at anytime during the year: Rs. 2.99 crore (previous year Rs.2.39 crore).

9. Sundry creditors include overdue amounts (mainly unclaimed) of Rs.2.12 crore (including interest of Rs 0.30 crore) payable to small scaleand ancillary industries.



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10. [a] Sales and service include:

i) Rs. 54.84 crore for price variation net of liquidated damages in terms of contracts with the customers.

ii) Increase in work-in-progress relating to construction and project-related activity as under:

Rs. crore

Work-in-progress including materials at site

- At close (previous year Rs.6337.61 crore) 7444.39

Less :- At commencement (previous year Rs.6277.24 crore) 6337.61

1106.78

iii) Rs. 4.02 crore relating to earlier years

[b] Manufacturing, construction and operating expenses and Selling, administration and other expenses include Rs. 4.54 crore andRs. 2.60 crore respectively relating to earlier years.

11. During the year, the Company changed the revenue recognition policy with respect to long-cycle turnkey project / construction contracts,so as to recognize margin when 25% of the job is complete. In earlier years, margins on such jobs were recognised when a completionstage of 50% was achieved. Consequent upon the change, sales for the year is higher by Rs.14.94 crore and the profit before tax ishigher by a like amount.

12. Disclosures in respect of Joint Ventures

[a] List of Joint Ventures

Sl. No. Name of Joint Venture Description of interest Pr oportionof Ownership Country of

Interest Incorporation Residence

1 L&T-Hochtief Seabird Joint Venture Jointly Controlled Entity 90% ** India(Construction of breakwater)

2 Desbuild-L&T Joint Venture Jointly Controlled Entity 49% ** India(Renovation of US Consulate, Chennai)

3 International Metro Civil Contractors Jointly Controlled Entity 26% ** India(Construction of Delhi Metro Corridor- Phase I Tunnel Projects)

4 Bauer-L&T Diaphragm Wall JV Jointly Controlled Entity (Construction 50% ** Indiaof Diaphragm Wall for International MetroCivil Contractors)

5 HCC-L&T Purulia JV Jointly Controlled Entity (Construction of 43% ** IndiaPumped Storage Project)

6 Larsen & Toubro Limited- Jointly Controlled Entity (Execution of civil and 50% ** MauritiusShapoorji Pallonji & Co. Limited associated works for Ebene CybercityJoint Venture Project, Mauritius)

7 L&T-Joshi Technologies Inc. Jointly Controlled Operations (Exploration & - ** IndiaJoint Venture development of Dholka & Wavel Oilwells)

8 L&T-HCC Joint Venture Jointly Controlled Operations (Four laning and - ** Indiastrengthening of existing two lane sections from240 km to 320 km on NH-2)

** Country of incorporation not applicable as these are Unincorporated Joint Ventures.

[b] Financial interest in Jointly Controlled EntitiesRs. crore

Company’s share of

Sl. No. Name of the Joint Venture Assets Liabilities Income Expenses TaxAs at 31 st March 2003 For the year

1 L&T-Hochtief Seabird Joint Venture 129.48 100.91 175.54 139.87 12.13(140.09) (115.49) (102.56) (104.07) (-)

2 Desbuild-L&T Joint Venture 2.09 0.85 7.68 7.34 0.13(3.71) (2.69) (7.30) (7.29) (-)

3 International Metro Civil Contractors 61.91 46.44 118.69 119.42 -(49.90) (44.24) (46.10) (45.14) (0.23)

4 Bauer-L&T Diaphragm Wall JV 1.53 0.51 4.46 4.37 0.04(1.87) (0.61) (2.83) (2.83) (-)



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Rs. crore

Company’s share ofSl. No. Name of the Joint Venture Assets Liabilities Income Expenses Tax

As at 31 st March 2003 For the year5 HCC- L&T Purulia JV 12.91 12.60 12.26 12.26 -

(N.A.) (N.A.) (N.A.) (N.A.) (-)

6 Larsen & Toubro Limited-

Shapoorji Pallonji & Co. Limited 12.63 10.06 19.16 19.16 -

Joint Venture (N.A.) (N.A.) (N.A.) (N.A.) (-)

Total 220.55 171.37 337.79 302.42 12.30

(195.57) (163.03) (158.79) (159.33) (0.23)

Share of Net Assets / Profit after tax 49.18 23.07

(32.54) (0.77)Note: Figures in brackets relate to previous year

[c] Contingent liabilities, if any, incurred in relation to interests in Joint Ventures as on 31.3.2003 - Rs. Nil (previous year - Rs. Nil)[d] Capital commitments, if any, incurred in relation to interests in Joint Ventures as on 31.3.2003 - Rs. Nil (previous year - Rs. Nil)[e] The Company has made an application to the Directorate General of Hydrocarbons (DGH) for assignment of its participating interest

in the Oil Production Sharing Contract, in favour of Joshi Technologies International Inc., the JV partner. The Company has notshared development expenses incurred after the submission of the said application.

13. a) Sundry debtors (Unsecured, considered good) include the following amounts due from Larsen and Toubro Ceylinco (Private) Limited,a Company in which the Directors of the Company are Directors:

Rs. crore

As on 31.03.2003 As on 31.03.2002Outstanding for more than 6 months Nil NilOutstanding for less than 6 months 13.40 26.03

b) Loans and advances – Unsecured and considered good-Associate companies and Inter-Corporate deposits – Associate companiesinclude the following amounts that are due from private limited companies in which the directors of the Company are directors:

Rs. crore

Name of the Company Unsecured, considered goodAdvances Recoverable Inter-Corporate Deposits

1 L&T-John Deere Private Limited 0.40 15.50(0.42) (2.00)

2 L&T-Case Equipment Private Limited - 5.00(-) (Nil)

3 L&T-Demag Plastics Machinery Private Limited 2.47 Nil(1.98) (Nil)

Note: Figures in brackets relate to previous year14. Particulars in respect of Loans and Advances in the nature of loans as required by the Listing Agreement:

Rs. crore

Name of the Company / Firm / Director Balance as on Maximum outstanding31.3.2003 during the year

A Loans and advances in the nature of loans given to subsidiaries:1 Narmada Cement Company Limited 105.55 107.962 L&T Holdings Limited 37.54 37.573 L&T Finance Limited 30.00 30.054 Larsen & Toubro Infotech Limited 17.00 17.095 India Infrastructure Developers Limited 36.32 36.326 Bhilai Power Supply Company Limited 74.53 74.537 Tractor Engineers Limited 1.60 1.60

Total 302.54

B Loans and advances in the nature of loans given to associates:1 L&T-John Deere Private Limited 15.50 15.922 L&T-Case Equipment Private Limited 5.00 5.00

Total 20.50



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Rs. crore

Name of the Company / Firm / Director Balance as on Maximum outstanding31.3.2003 during the year

C Loans / advances in the nature of loans where repayment scheduleis not specified / is beyond 7 years1 India Infrastructure Developers Limited [See Note (b) below ] 36.32 36.32

2 Bhilai Power Supply Company Limited [see Note (c) below ] 74.53 74.53

Total 110.85

D Loans and advances in the nature of loans where interest is not chargedor charged below bank rate1 India Infrastructure Developers Limited [See Note (b) below] 36.32 36.32

2 Bhilai Power Supply Company Limited [See Note (c) below] 74.53 74.53

Total 110.85Notes:

a) Loans to employees (including Directors) under various schemes of the Company (such as housing loan, furniture loan, educationloan, etc.) have been considered to be outside the purview of disclosure requirements.

b) The Company constructed a Captive Power Plant for being given on lease to Indian Petrochemicals Corporation Limited. IndiaInfrastructure Developers Limited (IIDL), a wholly-owned subsidiary of the Company, was used as a Special Purpose Vehicle (SPV)to finance the lease of the said power plant. The amount advanced to IIDL as above, to optimise its capital structure and to fundits cash flow gaps, would be repaid out of surpluses generated over the tenor of the lease. Accordingly, no repayment period hasbeen prescribed in respect of the impugned loan. Further, the amount has been granted as an interest-free loan, as IIDL is awholly-owned subsidiary and is mandated to remain so over the lease tenor.

c) Bhilai Power Supply Company Limited is a special purpose vehicle (SPV) formed to build and operate a power plant at Bhilai. TheE&C segment of the Company would set up the power plant on turnkey basis. Pursuant to the agreement with the co-promotersof the project, the Company advanced certain monies to the SPV in order to place a security deposit with the Madhya PradeshElectricity Board (MPEB), as part of the project terms. MPEB is obliged to refund the deposit together with interest at the StateBank of India’s rate for term deposits using 6-monthly rests. The SPV would make over the monies to the Company, when MPEBrefunds the security deposit.

15. During the year, the Company prepaid certain Deferred Sales Tax loans in accordance with the scheme providing for such prepayment.Resultantly an amount of Rs 7.66 crore, being the excess of the loan amount extinguished thereby over the amount paid has beenaccounted as gain on extinguishment of debt.

16. Segment Reporting(a) Information about Business Segments (Information provided in respect of revenue items for the year ended 31.3.2003 and in respect

of assets / liabilities as at 31.3.2003 – denoted as “CY” below, previous year denoted as “PY”)i) Primary Segments (Business Segments):

Rs. croreParticulars Engineering & Cement Electrical & Others Eliminations T otal

Construction ElectronicsCY PY CY PY CY PY CY PY CY PY CY PY

Revenue – including excise dutyExternal 6147.77 4597.70 2582.96 2486.09 781.15 705.51 425.29 424.74 - - 9937.17 8214.04Inter-Segment 7.27 116.74 132.39 124.53 83.99 30.56 - - (223.65) (271.83) - -

Total Revenue 6155.04 4714.44 2715.35 2610.62 865.14 736.07 425.29 424.74 (223.65) (271.83) 9937.17 8214.04ResultSegment Result 445.49 402.55 177.82 271.16 103.83 81.36 9.95 (7.01) - - 737.09 748.06Inter-Segment margin on capital jobs (0.32) (18.71)Unallocable Corporate income / (49.58) (12.79)(expenditure) (net)Operating Profit (PBIT) 687.19 716.56Interest expense (225.15) (375.24)Interest income 48.16 59.16

Profit before tax (PBT) 510.20 400.48Provision for current tax 88.50 24.32Provision for deferred tax (11.40) 29.36

Profit after tax 433.10 346.80Other InformationSegment assets 4812.03 4111.96 3639.22 3815.74 603.31 583.97 373.18 431.50 - (20.25) 9427.74 8922.92Unallocable corporate assets 2011.43 1709.68Total assets 11439.17 10632.60



74

Rs. crore

Particulars Engineering & Cement Electrical & Others Eliminations T otalConstruction ElectronicsCY PY CY PY CY PY CY PY CY PY CY PY

Segment liabilities 2710.34 2048.11 322.89 278.70 158.54 148.16 87.07 88.18 - (20.25) 3278.84 2542.90Unallocable corporate liabilities 4597.75 4746.13

Total liabilities 7876.59 7289.03Capital expenditure 51.57 73.61 26.68 161.56 6.09 8.80 2.26 7.85Depreciation 54.29 75.21 214.26 208.30 9.95 11.45 16.63 19.48Non-cash expenses other 7.30 6.38 8.03 7.03 7.56 6.48 1.30 1.47than Depreciation

ii) Secondary Segments (Geographical segments):Rs. crore

Particulars Domestic Overseas TotalCY PY CY PY CY PY

External Revenue by location of customers 8315.04 7108.83 1622.13 1105.21 9937.17 8214.04Carrying amount of Segment Assets by location of assets 8905.13 8591.75 522.61 331.17 9427.74 8922.92Cost incurred on acquisition of tangible and intangible fixed assets 85.12 250.46 1.48 1.36 86.60 251.82(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 Company’s 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 individualbusinesses, the organisational structure and the internal reporting system of the Company.

iii) Reportable SegmentsReportable segments have been identified as per the quantitative criteria specified in Accounting Standard (AS) 17 “SegmentReporting” issued by the Institute of Chartered Accountants of India.

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 coresectors / infrastructure industries. The segment capabilities include process technology, basic / detailed engineering,equipment fabrication / supply, erection & commissioning, procurement/ construction and project management.

· Cement Segment is engaged in the manufacture and sale of various types of cement, clinker and ready mix concretein India and abroad. The cement is sold in bagged as well as bulk form.

· Electrical & Electronics Segment comprises manufacture and sale of low voltage switchgear and control gear, custom-built switchboards, petroleum dispensing pumps & systems, electronic energy meters/ protection (relays) systems, control& automation products and medical equipment.

· “Others” includes metal and glass packaging business and marketing of [a] welding / industrial products, [b] constructionequipment and [c] earthmoving equipment

17. Disclosure of related parties / related party transactions:I. List of related parties over which control exists

Sr.No. Name of the Related Party Relationship1 Tractor Engineers Limited Wholly Owned Subsidiary2 L&T Finance Limited Wholly Owned Subsidiary3 L&T Capital Company Limited Wholly Owned Subsidiary of L&T Finance Limited4 L&T Trade.com Limited Wholly Owned Subsidiary of L&T Finance Limited5 Larsen & Toubro Infotech Limited Wholly Owned Subsidiary6 Larsen & Toubro Infotech GmbH, Germany Wholly Owned Subsidiary of Larsen & Toubro Infotech Limited7 LTM Limited Wholly Owned Subsidiary8 L&T Transportation Infrastructure Limited Subsidiary*9 HPL Cogeneration Limited Subsidiary*10 Narmada Cement Company Limited Subsidiary*11 Narmada Infrastructure Construction Enterprise Ltd. Subsidiary*



75

12 L&T Western India Tollbridge Limited Wholly Owned Subsidiary13 L&T Equipment Leasing Company Limited Wholly Owned Subsidiary14 India Infrastructure Developers Limited Wholly Owned Subsidiary15 L&T Netcom Limited Wholly Owned Subsidiary16 Larsen and Toubro Ceylinco (Private) Limited Subsidiary*17 L&T Cement Limited Wholly Owned Subsidiary18 Dakshin Cements Limited Wholly Owned Subsidiary of L&T Cement Limited19 Larsen & Toubro LLC, USA Subsidiary *20 Larsen & Toubro International FZE, Sharjah Wholly Owned Subsidiary21 L&T Holdings Limited Wholly Owned Subsidiary22 L&T Infocity Limited Subsidiary *23 Hyderabad International Trade Expositions Limited Subsidiary of L&T Infocity Limited24 Andhra Pradesh Expositions Private Limited Wholly Owned Subsidiary of Hyderabad International

Trade Expositions Limited

25 L&T -ECC Construction (M) SDN. BHD. Malaysia Subsidiary **

26 Bhilai Power Supply Company Limited Subsidiary *

27 Larsen & Toubro (Oman) LLC [ from 25.1.2003 ] Subsidiary*

28 L&T Power Investments Private Limited [“LTPIPL”] Wholly Owned Subsidiary

29 Raykal Aluminum Company Private Limited Wholly Owned Subsidiary of LTPIPL

30 Cyberpark Development & Construction Limited Subsidiary *

* The Company holds more than one-half in nominal value of the equity share capital

** The Company controls the composition of the board of directors

II. Names of the Related Parties with whom transactions were carried out during the year and description of relationship:

Subsidiaries1 Tractor Engineers Limited 2 Larsen and Toubro Ceylinco (Private) Limited3 L&T Finance Limited 4 L&T Cement Limited5 Larsen & Toubro Infotech Limited 6 Dakshin Cements Limited7 Larsen & Toubro Infotech GmbH 8 Larsen & Toubro LLC, USA9 LTM Limited 10 L&T Holdings Limited11 L&T Transportation Infrastructure Limited 12 L&T Infocity Limited13 HPL Cogeneration Limited 14 Hyderabad International Trade Expositions Ltd.15 Narmada Cement Company Limited 16 L&T Capital Company Limited17 Narmada Infrastructure Construction Enterprise Limited 18 Larsen & Toubro (Oman) LLC (from 25.1.2003)19 L&T Western India Tollbridge Limited 20 Bhilai Power Supply Company Limited21 L&T Equipment Leasing Company Limited 22 L&T Power Investments Private Limited23 India Infrastructure Developers Limited 24 Cyberpark Development & Construction Limited25 L&T Netcom Limited

Associate Companies:1 Ewac Alloys Limited 2 Larsen & Toubro (Saudi Arabia) LLC3 Audco India Limited 4 L&T Crossroads Private Limited5 L&T-Niro Limited 6 L&T-Case Equipment Private Limited7 L&T-Chiyoda Limited 8 Sharp Business Systems (India) Limited9 L&T-Sargent & Lundy Limited 10 L&T Infocity-Ascendas Pvt. Ltd.11 L&T-Komatsu Limited 12 The Dhamra Port Company Limited13 International Seaports Pte. Limited 14 Voith Paper Technology India Limited15 L&T-John Deere Private Limited 16 Larsen &Toubro (Oman) LLC (up to 25.1.2003)17 L&T-Ramboll Consulting Engineers Limited

Joint V entures (Other than Associates)1 Desbuild–L&T Joint Venture 2 L&T-HCC Joint Venture3 Larsen & Toubro Limited-Shapoorji Pallonji & 4 Bauer-L&T Diaphragm Wall JV

Co. Ltd. Joint Venture5 L&T-Hochtief Seabird Joint Venture 6 International Metro Civil Contractors7 HCC-L&T Purulia JV 8 L&T-Joshi Technologies Inc. Joint Venture9 L&T-Demag Plastics Machinery Pvt Ltd

(Joint venture through LTM Limited, a subsidiary of the Company)



76

Key Management Personnel & their relatives1 Mr. A M Naik, Managing Director and 2 Mr. K Venkataramanan, Whole-time Director

Chief Executive Officer3 Mr. A Ramakrishna, Deputy Managing Director 4 Mr. R N Mukhija, Whole-time Director

Mrs. A Suryakumari (Wife) Mrs. Sushma Mukhija (Wife)Mr. A Narsimha Rao (Brother)

5 Mr. Y M. Deosthalee, Whole-time Director 6 Mr. P.M.Mehta, Whole-time Director (w.e.f. 14.6.2002 )7 Mr. J P Nayak, Whole-time Director

Mrs. Neeta J. Nayak (Wife)Mr. Nitin J. Nayak (Son)Mrs. Rohini P Nayak (Mother)Mrs. Nina D Nayak (Daughter)

III. Disclosure of related party transactions:Rs. crore

Sr. Nature of relationship / Subsidiaries Associates & Key Management Relatives of T otalNo transaction Joint Ventures Personnel KMP

[“KMP”]1 Purchase of goods & services (including Commission paid) 101.32 277.99 NIL NIL 379.31

(10.21) (235.65) (NIL) (NIL) (245.86)2 Sale of goods/ power/ contract revenue & services 156.72 72.36 NIL NIL 229.08

(158.48) (16.14) (NIL) (NIL) (174.62)3 Purchase/Lease of fixed assets 3.63 1.06 NIL NIL 4.69

(7.88) (4.69) (NIL) (NIL) (12.57)4 Sale of fixed assets 0.01 0.18 NIL NIL 0.19

(2.61) (0.01) (NIL) (NIL) (2.62)5 Subscription to equity and preference shares 11.67 0.26 NIL NIL 11.93

(91.62) (18.11) (NIL) (NIL) (109.73)6 Sale of Investments 9.47 NIL NIL NIL 9.47

(NIL) (0.70) (NIL) (NIL) (0.70)7 Receiving of services / overheads charged 4.13 8.38 NIL NIL 12.51

(28.62) (5.41) (NIL) (0.01) (34.04)8 Rent paid, including lease rentals under leasing / 7.62 0.02 0.05 0.15 7.84

hire purchase arrangements including loss-sharing (10.12) (0.02) (0.01) (0.06) (10.21)on equipment finance

9 Guarantees and collaterals 35.47 163.23 NIL NIL 198.70(34.99) (3.67) (NIL) (NIL) (38.66)

10 Charges for deputation of employees to 0.28 1.10 NIL NIL 1.38related parties (3.05) (1.65) (NIL) (NIL) (4.70)

11 Dividend received 38.59 10.57 NIL NIL 49.16(51.87) (15.18) (NIL) (NIL) (67.05)

12 Commission received including those under 0.10 41.63 NIL NIL 41.73agency agreements (1.60) (22.32) (NIL) (NIL) (23.92)

13 Rent received, overheads recovered and 15.11 44.21 NIL NIL 59.32miscellaneous income (49.52) (15.37) (NIL) (NIL) (64.89)

14 Interest received 18.72 1.35 0.01 NIL 20.08(11.96) (4.69) (0.01) (NIL) (16.66)

15 Interest paid 5.92 3.29 NIL NIL 9.21(9.62) (3.59) (0.14) (0.07) (13.42)

16 Assets taken over NIL NIL NIL NIL NIL(NIL) (1.64) (NIL) (NIL) (1.64)

17 Current liabilities taken over NIL NIL NIL NIL NIL(NIL) (1.16) (NIL) (NIL) (1.16)

18 Transfer of loan liabilities /extinguishment of debt NIL NIL NIL NIL NIL(56.53) (NIL) (NIL) (NIL) (56.53)

19 Amounts written off 1.69 NIL NIL NIL 1.69(NIL) (NIL) (NIL) (NIL) (NIL)

20 Amounts written back NIL NIL NIL NIL NIL(NIL) (NIL) (NIL) (NIL) (NIL)

21 Amounts provided for doubtful debts / advances NIL NIL NIL NIL NIL(NIL) (8.00) (NIL) (NIL) (8.00)

22 Transfer of Research & Development know-how NIL NIL NIL NIL NIL(NIL) (NIL) (NIL) (NIL) (NIL)

23 Licence Agreements NIL NIL NIL NIL NIL(NIL) (NIL) (NIL) (NIL) (NIL)

24 Buyback of debentures NIL NIL NIL NIL NIL(10.42) (NIL) (NIL) (NIL) (10.42)

25 Payment of salaries / perquisites NIL NIL 6.08 0.05 6.13(NIL) (NIL) (3.37) (0.05) (3.42)

Note: Figures in brackets relate to previous year



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IV. Amount due to / from related partiesRs. crore

Sr. Nature of relationship / Subsidiaries Associates & Key Management Relatives of T otalNo transaction Joint Ventures Personnel KMP

[“KMP”]

1 Accounts Receivable 55.57 39.81 NIL NIL 95.38(97.29) (39.90) (NIL) (NIL) (137.19)

2 Accounts Payable 20.29 78.41 NIL NIL 98.70(1.59) (78.71) (NIL) (NIL) (80.30)

3 Loans and advances recoverable 385.18 24.27 3.03 0.04 412.52(157.39) (98.80) (2.43) (0.04) (258.66)

4 Provision for doubtful debts and advances NIL NIL NIL NIL NIL(NIL) (8.00) (NIL) (NIL) (8.00)

5 Advances against equity contribution NIL 0.02 NIL NIL 0.02(NIL) (0.15) (NIL) (NIL) (0.15)

6 Application money pending allotment NIL NIL NIL NIL NIL(NIL) (NIL) (NIL) (NIL) (NIL)

7 Unsecured loans 45.79 NIL NIL NIL 45.79(38.67) (NIL) (NIL) (NIL) (38.67)

8 Bonds and Debentures NIL NIL NIL NIL NIL(NIL) (NIL) (0.13) (0.06) (0.19)

9 Advances from customers 0.13 0.88 NIL NIL 1.01(NIL) (NIL) (NIL) (NIL) (NIL)

10 Due to whole-time directors NIL NIL 2.52 NIL 2.52(NIL) (NIL) (1.35) (NIL) (1.35)

Note: Figures in brackets relate to previous year

V. Notes to related party transactions :a) The Company has a sole-selling agency agreement with L&T-Komatsu Ltd (LTK), an associate company since 1.2.1998. The

agreement shall be in effect as long as the Joint Venture Agreement between the Company and M/s Komatsu Asia Pacific Pte.Ltd., Singapore (which is a subsidiary of Komatsu Ltd., Japan) remains in force. As per the terms of the agreement, theCompany is the exclusive agent of L&T-Komatsu Ltd. to market LTK machines and provide product support. Pursuant to theaforesaid agreement LTK is required to pay commission to the Company at specified rates on the sales effected by theCompany. The Company is also the exclusive distributor of LTK spare parts authorised to purchase and resell the spare partsin accordance with the terms stipulated in the agreement.

b) The Company has a sole-selling agency agreement with L&T-Case Equipment Private Ltd (LTCEL), an associate companysince 16.3.2000. The agreement shall be in effect for a period of 5 years and is renewable thereafter for successive five-yearperiods. As per the terms of the agreement, the Company is the exclusive agent to market LTCEL machines and to provideproduct support. Pursuant to the aforesaid agreement LTCEL is required to pay commission to the Company at specified rateson the sales effected by the Company. The Company is also the exclusive distributor of LTCEL spare parts authorised topurchase and resell the spare parts in accordance with the terms stipulated in the agreement.

c) The Company has entered into a five-year distributorship agreement from 26.4.2002 with Audco India Limited (AIL), anassociate company. Pursuant to the aforesaid agreement, AIL is required to pay commission to the Company at specified rateson the sales effected by the Company. Further, as per the terms of the agreement, the Company is the non-exclusive distributorof AIL products and is authorised to purchase and resell the same in accordance with the terms stipulated in the agreement.

d) The Company has entered into a five-year selling agency agreement from 1.10.1998 with Ewac Alloys Limited (EWAC), anassociate company. As per the terms of the agreement, the Company is the selling agent authorised to purchase and resellthe EWAC products in accordance with the prices and other conditions stipulated in the agreement.

e) The Company has entered into an agreement with L&T-Demag Plastics Machinery Private Limited [“LTDPML”], a joint venturecompany, effective 1.1.2001. As per the terms of the agreement, the Company markets and services plastic processingmachinery manufactured by LTDPML, in consideration of commission payable at specified rates on sales effected by theCompany.

Note: The financial impact of these agreements mentioned in (a) to (e) above have been disclosed vide Note 17 (III) supra.18. Leases

a. Finance Leases:i. Assets acquired prior to April 1, 2001 under finance leases have been accounted in accordance with the “Guidance Note on

Leases” issued by the Institute of Chartered Accountants of India. The cost of the assets taken on lease is Rs. 24.19 crore,the future lease obligation against which is Rs. 8.35 crore as at March 31, 2003

ii. (a) Assets acquired on finance lease mainly comprise cars and personal computers. The leases have a primary period, whichis fixed and non-cancellable. In the case of cars, 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 leaserentals, [b] rates of depreciation under the Income-tax Act, 1961 and [c] change in the lessor’s cost of borrowings. Thereare no exceptional / restrictive covenants in the lease agreements.



78

(b) The minimum lease rentals as at March 31, 2003 and the present value as at March 31, 2003 of minimum lease paymentsin respect of assets acquired under finance leases are as follows:

Rs. croreMinimum Lease Present Value

Payments of Minimum LeasePayments

As at As at As at As at31.3.2003 31.3.2002 31.3.2003 31.3.2002

i. Payable not later than 1 year 4.93 2.87 3.12 2.52ii. Payable later than 1 year and not later than 5 years 15.21 16.59 12.31 11.68iii. Payable later than 5 years 0.36 0.53 0.23 0.38

Total 20.50 19.99 15.66 14.58Less: Future finance charges 4.84 5.41Present Value of Minimum Lease Payments 15.66 14.58

iii. (a) The Company has given on finance leases certain items of plant and machinery. The leases have a primary period whichis fixed and non-cancellable and a secondary period. There are no exceptional / restrictive covenants in the leaseagreements.

(b) The total gross investment in these leases as on March 31, 2003 and the present value of minimum lease paymentsreceivable as on March 31, 2003 are as under:

Particulars Rs. crore1. Receivable not later than 1 year 48.502. Receivable later than 1 year and not later than 5 years 288.253. Receivable later than 5 years -Gross investment in lease (1+2+3) 336.75Less: Unearned finance income 88.92Present Value of Receivables 247.83

iv. Contingent rent recognised /(adjusted) in the Profit and Loss Account in respect of finance leases: Rs. (0.04) croreb. Operating leases:

i. The Company has taken various residential / commercial premises and plant and machinery under cancellable operatingleases. These lease agreements are normally renewed on expiry.

ii. [a] The Company has taken on non-cancellable operating leases certain assets [including assets referred to in (a) (iii) above],the future minimum lease payments in respect of which, as at March 31, 2003 are as follows:

Rs. croreMinimum Lease Paymentsi. Payable not later than 1 year 74.22ii. Payable later than 1 year and not later than 5 years 30.78iii. Payable later than 5 years 0.98Total Minimum Lease Payments 105.98

[b] The lease agreements provide for an option to the Company to renew the lease period at the end of the non-cancellableperiod. There are no exceptional / restrictive covenants in the lease agreements.

iii. The rental expense in respect of operating leases was Rs.73.49 crore (previous year Rs. 42.39 crore)iv. Contingent rent recognised in the Profit and Loss Account: Rs. nil

c. In respect of one of the leases referred to in a. (iii)(a) above, at the inception, the lease receivables were recorded at the presentvalue of minimum lease payments. Subsequently, the Company securitised the lease receivables.

19. Basic and Diluted Earnings per share [“EPS”] computed in accordance with Accounting Standard (AS) 20 “Earnings per Share”:Basic

Particulars 2002-2003 2001-2002Profit after tax as per Accounts (Rs. crore) A 433.10 346.80Number of shares subscribed B 24,86,68,756 24,86,60,346Basic EPS (Rupees) A / B 17.42 13.95

DilutedProfit after tax as per Accounts (Rs. crore) A 433.10 346.80Add: Interest (net of tax) on loan convertible into equity shares B 4.31 7.94Adjusted profit for diluted earnings per share C=A+B 437.41 354.74Number of shares subscribed D 24,86,68,756 24,86,60,346Add: Potential equity shares on conversion of loans E 5,24,02,500 9,02,48,750Add: Potential equity shares that could arise on conversion of Series IV Debentures F 3,88,956 3,91,651Add: Potential equity shares on account of stock appreciation rights and options G 1,13,80,395 77,17,202

Weighted average number of shares outstanding H 31,28,40,607 34,70,17,949

Diluted EPS (Rupees ) C/H 13.98 10.22



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20. The expenditure on Research and Development activities, as certified by the Management is Rs.22.69 crore (including capital expenditureof Rs. 0.57 crore) (previous year: Rs. 20.97 crore including capital expenditure of Rs. 1.20 crore)

21. The exchange difference arising on foreign currency transactions amounting to:(a) Rs. 10.32 crore (net credit) has been accounted under the respective revenue heads and(b) Rs. nil on account of forward contracts is to be recognised in the future accounting period.

22. The Company has entered into certain derivative transactions including transactions involving foreign currencies. These derivativetransactions, being considered as off-Balance Sheet transactions, the cash flows arising therefrom are recognised in the books ofaccount as and when the settlements take place in accordance with the terms of the respective contracts over the tenor thereof.

23. Estimated amount of contracts remaining to be executed on capital account (net of advances): Rs. 16.49 crore (previous year Rs.53.01crore).

24. Uncalled liability on shares partly paid: Rs. 26.99 crore (previous year Rs. 26.99 crore).25. Managerial remuneration

(1) Managing and Whole-time Directors’ remuneration:2002-2003 2001-2002

Rs. crore Rs. croreSalary 1.06 0.96Perquisites 0.77 0.52Commission 3.12 1.34Contribution to Provident / Superannuation Fund 1.13 0.55

Total 6.08 3.37Notes:(a) The above figures do not include contribution to gratuity fund, pension scheme and provision for leave encashment benefit as

separate figures are not available for the managing / whole time directors.(b) Commission and Contribution to Provident / Superannuation Fund include Rs. 0.59 crore and Rs. 0.16 crore respectively in

respect of the financial year 2001-02, pursuant to the increase in rates of commission in terms of the Shareholders’ resolutionpassed at the Annual General Meeting held on 8th August 2002.

(2) Computation of Managerial Remuneration:Rs crore

Profit before tax as per Profit and Loss Account 510.20Add: Managing and Whole-time Directors’ remuneration and commission 6.08

Commission paid to non-executive directors (net) 0.26Directors’ fees 0.06Depreciation and obsolescence charged to the Accounts 306.24Less: Transfer from Revaluation Reserve 1.67

304.57Loss on sale of current investments 0.34Provision for diminution in value of investments 0.69Provision for doubtful debts and advances 66.80Profit (net) on sale of fixed assets as per Section 349 of the Companies

Act, 1956 (net of capital profits) 2.65381.45891.65

Less: Profit on sale of fixed assets as per Profit and Loss Account (Net) 11.65Profit on sale of long-term investments as per Profit and Loss Account 8.63Debenture issue expenses charged to Securities Premium Account 0.86Premium on redemption of debentures charged to Securities Premium Account 0.99Depreciation and obsolescence as per Section 350 of the Companies Act, 1956 (net) 302.99

325.12Net Profit as per Section 198 of the Companies Act, 1956 566.53Maximum permissible remuneration to whole-time directors under section 198

of the Companies Act, 1956 @ 10% of the profits computed above 56.65

Restricted as per service agreements to 6.08Maximum permissible managerial remuneration to non-executive directors

under section 198 of the Companies Act, 1956 @ 1 % 5.67Restricted as per shareholder approval to 0.30



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(3) Miscellaneous expenses include provision of Rs 0.26 crore (net) [previous year: Rs. 0.24 crore (net)] towards commission payableto non-executive directors of the Company, in terms of the special resolution passed at the Annual General Meeting held on August31, 2000.

26. Major Components of Deferred Tax Assets and Deferred Tax Liabilities: Rs. croreParticulars 31.3.2003 31.3.2002

Deferred Deferred Tax Deferred Tax Deferred TaxTax Assets Liabilities Assets Liabilities

Difference between book depreciation and tax depreciation 886.45 884.84Provision for doubtful debts and advances debited to Profit and

Loss Account 60.60 49.68Disputed statutory liabilities paid and claimed as deduction for tax

purposes but not debited to Profit and Loss Account 30.36 26.21Unpaid statutory liabilities debited to Profit and Loss Account 13.51 9.29Deferred Revenue Expenditure to the extent not debited to Profit andLoss Account, but claimed as deduction for tax purposes 8.60 10.04Provision for leave encashment debited to Profit and Loss Account. 5.18 3.69Other items giving rise to timing differences 5.60 0.53 6.71 0.73Total 84.89 925.94 69.37 921.82

Net Deferred Tax Liability 841.05 852.45Net incremental liability charged to Profit and Loss Account (11.40) 29.36

27. Auditors’ remuneration (excluding service tax) and expenses charged to the accounts:

2002-2003 2001-2002Rs. crore Rs. crore

A) Auditors:Audit fees 0.40 0.32Taxation matters Nil 0.02Certification work 0.35 0.23Tax audit fees 0.13 0.10Other services 0.02 0.01Expenses reimbursed 0.14 0.10

B) Cost Auditors:Audit fees 0.02 0.02Expenses reimbursed Rs.16,008 (previous year: Rs.5,142) - -

28. Value of Imports (on C.I.F. basis):Raw materials 62.86 95.73Components and spare parts 762.87 419.24Spare parts for sale 72.58 64.65Capital goods 24.39 9.48

29. Expenditure in foreign currency:On overseas contracts 251.38 301.52Royalty and technical know-how fees 4.40 2.94Interest 24.19 44.33Professional / Consultation fees 23.91 16.73Other matters 114.81 120.53

30. Dividend remitted for the year ended March 31, 2002 in foreign currency to:10 shareholders on 7,93,300 shares held by them (previous year 7,93,300 shares) 0.44 0.52Custodian of Global Depositary Receipts (1,13,45,650 shares) (previous year 2,27,81,366 shares) 7.11 14.81

31. Earnings in foreign exchange:Export of goods {including Rs.750.13 crore on FOB basis (previous year Rs. 561.49 crore)} 785.51 596.54Construction and related activities 754.63 540.49Export of services 6.74 6.69Commission 3.78 5.60Interest and dividend received 0.70 1.80Other receipts 1.06 0.48



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32. List of Small Scale Industrial Undertakings to whom the Company owes monies for more than 30 days as at March 31, 2003:1 A S Enterprises 2 Abiram Industries 3 Able Precision Works4 Ace Polybond Pvt Ltd 5 Acmie Corporation 6 Acumac Machine Tools Pvt Ltd7 Adarsh Enterprises 8 Adhithiya Gears Pvt Ltd 9 Adithya Castings Pvt Ltd10 Advance Cooling Systems Pvt Ltd 11 Afmc Lubrication Pvt Ltd 12 Akash Ele. Maint. Services13 Alchemie Pvt Ltd 14 Alcon Electronics Pvt Ltd 15 Alf Industrial Products16 Alfa Enterprises 17 All Tools Engineerings 18 Allfab Engineers19 Aluminium Rolling & Spinning Pvt Ltd 20 Ambattur Heat Treaters Pvt Ltd 21 Ambika Patterns & Foundry Services22 Ami Engineering Works 23 Anand Polyrotex 24 Anandji Cables25 Apollo Seals Co 26 Apollo Soyuz Electricals P Ltd 27 Apt Controls & Appliances Pvt Ltd28 Apurva Industries 29 Arcee Automations 30 Are Vee Engg Works31 Ark Engineering Enterprises 32 Arkay Engg Works 33 Arun Engineering34 Arunodaya Gears & Industries 35 Ashwin Plastic Ind. 36 Asian Reprographics (P) Ltd37 Asiatic Services 38 Associated Engineers 39 Auto Parts & Accessories40 B R Industries 41 B.E.C. Industries 42 B.V.R. Industries43 Babu Industries 44 Baj Enterprises 45 Balaji Industries46 Balaji Tool Craft 47 Balcon Electronics 48 Bharat Metal Process49 Bhayani Packaging 50 Bhuvaneswari Engg Works 51 Bolt Master (I) P Ltd52 Bombay Brazing Co 53 Bombay Powerlift Electric Hoists Pvt Ltd 54 Bright Castings55 Bright Engraving 56 C. Gopal Naicker Son 57 C.S. Diesel Engg (P) Ltd58 Castwel Industries 59 Cat Engineering Co 60 Cauvery Industries61 Cha Cha Coats 62 Chaitanya Engineering Co 63 Chauhan Engineering64 Chellapandyan Industries 65 Chennai Cnc Centre 66 Chennai Hydro-Maatics Pvt Ltd67 Choksey Chemicals 68 Chozha Tool Room 69 Classic Canteen Systems70 Classic Engg Corporation 71 Classic Packaging 72 Classic Tools & Services73 Clati Engg Systems 74 Connectwell Industries Pvt Ltd 75 Consolidated Dynamics Pvt Ltd76 Corrosion Controls 77 Curvo Electronics Pvt Ltd 78 D C Metal Corporation79 D P Polymer Products 80 Dalal Plastics Corporation 81 Damodar Engineers82 Dantal Hydraulics Ltd 83 Deepa Enterprises 84 Deepak Hardware Mart85 Deepkamal Printing & Packaging 86 Designs & Prototypes 87 Devi Metal Process88 Devkishen Holdings Co 89 Dhiraj Industry 90 Digital Data Forms (P) Ltd91 Dipti Corrugating Indust Pvt Ltd 92 Drill Jig Bushing Co (Madras) Pvt Ltd 93 D’Souza Metal Cutting Pvt Ltd94 Durable Springs 95 Duralloy India 96 Dwarkesh Engineering Works Pvt Ltd97 Dyna Hitech Power Systems Ltd 98 Dynamic Engg Works 99 Eagle Rubber Indus.100 Eastern Enterprises 101 Eby Industries 102 Efficient Engg Works103 Electospark 104 Electronic Relays (I) Pvt Ltd 105 Electronics Enterprises106 Elektro Anlagen Pvt Ltd 107 Eleven Lever Engineering 108 Elite Electroplaters109 Elmec Heaters And Controllers 110 Elmech Components 111 Elmex Controls Pvt Ltd112 Em Electronix Pvt Ltd 113 Emaar Electricals 114 Emcolite Electroplaters115 Empee Engineers 116 Empkee Engineers (P) Ltd 117 Enpro Engineering118 Entex Pvt Ltd 119 Esoofali Esmailji Karachiwala & Co 120 Evans Industrial Works P Ltd121 Excel Electric Industries 122 Excell Engineering Indus 123 Excellent Products Of India124 Ezhil Industries 125 F S Engineers 126 Festo Controls Ltd127 Fitwel Enterprises 128 Flowlines Engg Pvt Ltd 129 Fluidyne Engineers India Pvt Ltd130 Fluoro Plast 131 Fluorokraft 132 Forward Alloys & Castings133 Fourstroke Diesels 134 Freeze Tech 135 Friends Industrial Works136 G.S. Alloy Castings Ltd 137 Gajanan Industries 138 Ganapathy Industries139 Ganesh Engineering 140 Ganesh Industries 141 General Industries142 Geo Chem Lab Pvt Ltd 143 German Plastic Indus 144 Gilbert & Maxwell Elec Pvt Ltd145 Glad Engineering Works 146 Globe Electrical Industries 147 Goa Sintered Products Pvt Ltd148 Gokul Industries 149 Grafic Creation 150 Grover Forging151 Guild Engineering Pvt Ltd 152 H.R. Electronic 153 Haji Iron And Steel Works154 Heavy Fab Industries 155 Hi-Tech Forgings (Bangalore) Pvt Ltd 156 Hyd-Air Engineering Pvt Ltd157 Hydrolines 158 Hyvo National Engineers 159 Imran Envelopes160 Indcoil Transformers Pvt Ltd 161 India Cast 162 India Die Services163 Indian Trading Corporation 164 Indul Chain Concern 165 Indus Foundries166 Industrial Box Co 167 Industrial Controls & Appliances Pvt Ltd 168 Industrial Controls & Drives (I) Pvt Ltd169 Industrial Insulators 170 Industrial Spares Mfg & Trading Co 171 Industrial Speciality172 Industrial Spring Mfg Co 173 Intech Systems 174 Integral Systems And Components P Ltd175 J C Engineering Industries 176 J Mangsun & Co 177 J&J Biotech And Speciality Chemical (P) Ltd178 Jagjiwan Enchem Udhyog Ltd 179 Jai Bhawani Mata Industries 180 Jai Engineers181 Jai Industrial Services 182 Jaibalaji & Co 183 Jaldoot Materials Handling P Ltd184 James Rikshaw Industries 185 Jay Industries 186 Jayalakshmi Engg Works187 Jayalakshmi Industries 188 Jayam Tyre House 189 Jayaram Engineering Works190 Jayashree Electron Pvt Ltd 191 Jayco Industries 192 Jaywant Engg Works193 Jbkm Precision Controller 194 Jothi Engg Works 195 Joy Engineering Co



82

196 JRP Tools & Gauges 197 Jude Engg Works 198 Jupiter Enterprises199 Jyoti Rubber Udyog (I) Pvt Ltd 200 Jyotsna Industries 201 K C Chemicals & General Agencies202 K C Metal Industries 203 K. R. Engineering 204 K.Dhandapani & Co Ltd205 K.R.R.Engg Pvt Ltd 206 K.R.S.Electronics Pvt Ltd 207 Kabade Electronics (Pune) Pvt Ltd208 Kabra Engineers 209 Kaivalya Technologies Pvt Ltd 210 Kala Gear Engineering Pvt Ltd211 Kalaivani Engineering Works 212 Kalyan Industries 213 Kamal & Co214 Kamal Enterprise 215 Kantilal Chhotalal & Co 216 Karthika Engineering217 Kaveri Engineering 218 Kaviya Engineering Works 219 Kaypee Traders220 Keepsake Engg Consultancy Pvt Ltd 221 Khandekar Engg Works 222 Kins Electronics223 Kiyosh Electronics 224 Kotekar Engineers 225 Kramp Products226 Lakshmi Industries 227 Latha Non Ferrous Castings 228 Lavin Enterprises229 Limra Industries 230 Lizman Engineering 231 M.J.L. Electronics Pvt Ltd232 M.K.M. & Sons 233 M.V.M. Perfect Tool Makers 234 Macro Engineering235 Madha Engineering Indus 236 Madras Air Filters Pvt Ltd 237 Madras Hardtools Ltd238 Madras Industrial Products 239 Madras Metallurgical Services Pvt Ltd 240 Madura Steel Industries (P) Ltd241 Magnatech Engg 242 Mahalakshmi Engg Co 243 Mahavir Industries244 Mahisa Electronics 245 Majestic Engineering Works 246 Majestic Enterprises Pvt Ltd247 Malnad Alloy Castings Pvt Ltd 248 Manco Wire Products 249 Mardia Non-Ferrous Foundry250 Mardia Tubes Ltd 251 Mary Rubber Products 252 Masrur Engineers253 Masturlal Pvt Ltd 254 Maya Plastics 255 Mech-Tech Engineers256 Meenakshi Engineering Works 257 Mehta Asso F.P. System 258 Mercury Pneumatics Pvt Ltd259 Metal & Chromium Platers (P) Ltd 260 Metal Craft Engg & Spring Ind. 261 Metal Form Industries262 Metal India 263 Micro Fits 264 Mihir Industries265 Miraj Welding Agencies 266 Mit Technologies 267 Monalisa Edc Pvt Ltd268 Mukesh Timber 269 Multi-Tech Engineers 270 Nadi Airtechnics Pvt Ltd271 Nagindas Kalidas Chapadia 272 Nagman Sensors Pvt Ltd 273 Nagpur Business Farms Pvt Ltd274 Nana Udyog 275 Narayan Powertech Pvt Ltd 276 Narhari Engineering Works277 National Heat Treaters 278 National Industries 279 National Refinery Pvt Ltd280 Nazareth Metals 281 Neo Ropes & Tackles (P) Ltd 282 New Delta Gear Mfrs Pvt Ltd283 New India Cable Corporation 284 New Majestic Engg Works 285 New Sakthi Engg Works286 New Stanpack Industries 287 Newton Numatics 288 Nityanand Leather Works289 Noble Rubber Industries 290 Numeric Power Systems Ltd 291 Oil Seals And Spares Corporation292 Okay Industries 293 Om Corporation 294 Om Product295 Omega Engineering Works 296 Oriental Engg Specialties 297 Orion Electrikals298 Oscar Leather Crafts 299 P.N. Safetech Pvt Ltd 300 Packshield Industries301 Padma Engg Enterprises 302 Palsons Engineers 303 Panetrical Engg P Ltd304 Pankaj Engg Co 305 Parani Steels Pvt Ltd 306 Parool Industries307 Patlon Industries 308 Peekay Industries 309 Pentagon Engg Enterprises310 Perfect & Precision Plastics 311 Pipe Support India Pvt Ltd 312 Pla Tec Industries313 Placka Instruments & Controls 314 Plant Control & Automation Technologies 315 Plastic Products Engg Co316 Plastomech Components Pvt Ltd 317 Plate Metals Pvt Ltd 318 Pluto Plastic Pvt Ltd319 Polyrub Extrusions (India) 320 Polytech India 321 Pony Motors322 Poonam Closures 323 Popular Switchgears Pvt Ltd 324 Power Vent System325 Powerflex Industries 326 Pragati Industries 327 Prakash Fibre328 Prakash Industries 329 Pranshu Electricals Pvt Ltd 330 Prathamesh Industries331 Pratik Corporation 332 Pratimesh Industries 333 Pravin Rubber & Eng Works334 Pre Mech Engineers 335 Precision Auto Ancillaries 336 Precision Engineering Works337 Precision Equipments(Chennai) Pvt Ltd 338 Precision Industries 339 Precision Machine & Auto Components P Ltd340 Precision Machine Tools Services 341 Precision Press Tools Pvt Ltd 342 Precision Tools & Fasteners343 Premier Brass Industries 344 Premier Cnc Press Shop Pvt Ltd 345 Premier Industries346 Premier Tools & Accessories 347 President Engg Works 348 Press Metal Industries349 Pressform Indus 350 Prima Industries 351 Propack Industries352 Proteck Circuits And Systems Pvt Ltd 353 Protocontrol Instruments (I) Pvt Ltd 354 R K Industries355 R R Electronics 356 R.C. Das Engineering Pvt Ltd 357 R.C. Industries358 R.K.T. Cutting Tools (P) Ltd 359 R.K.Tools 360 R.S. Electronics361 Rachamallu Forgings Pvt Ltd 362 Radha Plastics & Engg Works 363 Radha Precision Works364 Radix Pyrotech 365 Rafito Tools 366 Rajeswari Engg Works367 Rajeswari Engineering 368 Rajeswari Engineering Co 369 Raju Converters Pvt Ltd370 Ramesh & Ramesh Engg Works 371 Redema 372 Revathi Electronics & Controls373 Rexello Castors Pvt Ltd 374 Richy Tools 375 Rocks Fabricators376 Rotomag Motors & Controls Pvt Ltd 377 Runa Enterprise 378 S N Electronics379 S.K. Industries 380 S.K.M. Industries 381 S.P. Industries382 S.S. Wandler Pvt Ltd 383 Sabari Motor Mfg Co (P) Ltd 384 Sai Engg & Fabricators385 Sai Industries 386 Sai Metal Process 387 Sai Rubber Industries388 Saiforge Pvt Ltd 389 Sainatha Eng. Works 390 Sakthi Electroplaters391 Sakthi Fab 392 Sakura Industries 393 Samarth Engg Industries



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394 Samu Industries 395 Sandfits Foundries P Ltd 396 Sang Fasteners397 Santosh Industries 398 Saras Industries 399 Sargam Metals Pvt Ltd400 Sartime Horological Pvt Ltd 401 Satish Industries 402 Screen Plus403 Selvi Engineering Contractors 404 Senbar Technocrafts 405 Senthil Panthograph406 Senzo Engg & Plastic Co 407 Sertel Electronics (P) Ltd 408 Setwel Industries409 Shakti Springs 410 Shakti Wire Products 411 Sham Engg Works412 Sharad Metacom Pvt Ltd 413 Sharada Industrial & Engg Works 414 Sharpage Industries415 Sheetal Engineers 416 Sheetal Metal Products 417 Shekam Fasteners418 Sheth Impression 419 Shiltron Electronics & Engg Pvt Ltd 420 Shivalik Bimetal Controls Ltd421 Shree Industry 422 Shree International 423 Shree Jalaram Wood Works424 Shree Rasyani 425 Shree Stampings 426 Shri Jayaveeraa Enterprises427 Shri Vignesh Engineering Works 428 Sicco Engg Works 429 Siddhalaxmi Industries430 Siddhi Enterprises 431 Siddhivinayak Engineers 432 Siemag Industries433 Sigma Engineers 434 Sigma Welds 435 Simplomatic Mfg.436 Siva Shakthi Engineering 437 Sjs Enterprises 438 Sonawala Industries439 Sound Auto & Engg Co 440 Southern Gasket Products 441 Southern Heavy Engg And Fabrication442 Southern Pressings 443 Southern Refactories 444 Sparklet Engineers445 Speed-O-Graphics (India) 446 Spiraseal Gaskets Pvt Ltd 447 Sree Rama Engg Works448 Sree Venkateswara Engineers 449 Sri Balamurugan Engg Enterprises 450 Sri Ganeshraman Industries451 Sri Kali Electronics 452 Sri Kaypee Engg Co 453 Sri Lakshmana Industries454 Sri Manikandan Patterns 455 Sri Rajarajeswari Enterprises 456 Sri Saai Engineers457 Sri Saravanaa Fabs 458 Sri Vaishnavi Enterprises 459 Sri Venkateswara Engg. Enterprises460 Srinivasa Industries 461 Standard Spring & Metal Pressing Works 462 Star Fabricators463 Sterling Equipments 464 Sterling Motors 465 Structural Reliance Engg Works466 Subhash Enterprises 467 Subramaniam Enterprises 468 Sudarsan Graphics469 Sungov Engineering (P) Ltd 470 Sunmet Industries 471 Super Castings (Bombay) Pvt Ltd472 Super Platers 473 Suprabha Protective Products Pvt Ltd 474 Suraj Pressing Pvt Ltd475 Suraksha Packers 476 Sureseal Pvt Ltd 477 Surya Springs Pvt Ltd478 Suryadipta Projects Pvt Ltd 479 Swaamy Industries 480 Swastik Heavy Structural Pvt Ltd481 Switzer Instrument Ltd 482 Symatic Engg Pvt Ltd 483 Synkro Industries484 Syscon Instruments Pvt Ltd 485 System Support Services 486 Tachometric Controls487 Tamilnad Tools Pvt Ltd 488 Tamilnadu Heat Treatment And Fettling 489 Task Engineers490 Technovinyl Polymers India Ltd 491 Tee Vee Tools & Engg Indus 492 Teknic Controls493 Teknovation Engineers P Ltd 494 Teletronics 495 Texcel International P Ltd496 Texel Fabricators Pvt Ltd 497 The Madras Indul. Gear Co 498 The Megha Engg Enterprises Industries499 Thermolite Packaging (I) Pvt Ltd 500 Theta Controls 501 Thirumurthi Engineers502 Thriarr Polymers Pvt Ltd 503 Tisa Enterprises 504 Topaz Engineering505 Toughedge Industrial Tools Pvt Ltd 506 Transducers And Allied Products 507 Transmeasurement Co508 Tube Product Incorporate 509 Udhay Flex & Engineers Pvt Ltd 510 Ujwal Elec. Stampings Pvt Ltd511 Ujwal Electricals 512 Ujwal Plastic Ind. Pvt Ltd 513 Umaa Engineering Works514 Unike Industrial Components 515 Union Abrasives 516 Unique Industrial Handlers P Ltd517 Unique Trading Co 518 United Industrial Corporation 519 United Metal Industries520 United Tools & Components 521 Universal Engineering Works 522 Universal Industries523 Unnamalai Industries 524 V. V. Engineering Works 525 V.R.K. Rubber And Plastics526 Vaishnav Screws Mfg Co Pvt Ltd 527 Vajra Rubber Products Ltd 528 Vako Seals529 Vanjax Sales Pvt Ltd 530 Vardhaman Sales Corporation 531 Vee Yes Engineering Works532 Velmurugan Heavy Engg Industries (P) Ltd 533 Velmurugan Industries 534 Venkateswara Metal Fab535 Vens Hydroluft (P) Ltd 536 Venu Engineering Services 537 Venus Technical Services538 Vertex Hydraulics Pvt Ltd 539 Victory Timber & Plywood 540 Vijay Engineering Works541 Vikas Engineering Enterprises 542 Viksan Industries 543 Vinco Engineers544 Viraj Rubbers Pvt Ltd 545 Vishnu Forge Industries Ltd 546 Vita Techogy Pvt Ltd547 Vora Packaging Pvt Ltd 548 Wachsen Engg And Marketing Pvt Ltd 549 Wadhwa Brothers Engg550 Welset Moulders 551 Western Indian Forgings Ltd 552 Whiteline Prod553 Windston Springs Pvt Ltd 554 Y.M. Precision Industries 555 Yashvin Filters556 Ykm Engineers 557 Yojana Udyog Pvt Ltd 558 Young (I) Computers Pvt Ltd559 Zerobase Electronics (P) Ltd 560 Zenith Fire Services

The above amounts remained unpaid as on 31st March, 2003, mainly on account of incomplete documentation or the amounts not fallingdue contractually. A major portion of the amount has since been paid.

33. The Company has given, inter alia, the following undertakings to the debentureholders of India Infrastructure Developers Limited (IIDL),a wholly-owned subsidiary, in connection with financing the lease of a captive power plant:(i) not to reduce its shareholding in IIDL below 100% and/or relinquish management control and/or majority representation on the Board

of Directors, without the specific approval of the Trustees and(ii) to compensate the subsidiary for any shortfall in receivables on account of variations in rates of interest, depreciation, corporate

taxes, other statutory levies etc., after completion of the project.34. (a) The Company has given the following undertakings, jointly with L&T Holdings Limited (a wholly owned subsidiary of the Company),

to the term lenders of its subsidiary companies, L&T Transportation Infrastructure Limited (LTTIL) and Narmada InfrastructureConstruction Enterprise Limited (NICE) :(i) not to reduce their joint shareholding in LTTIL & NICE below 51% until the financial assistance received from the term lenders

is repaid in full by LTTIL & NICE and(ii) to jointly meet the shortfall in the working capital requirements of LTTIL & NICE until the financial assistance received f rom

the term lenders is repaid in full by LTTIL & NICE(b) Further, the Company has also given an undertaking to one of the term lenders, to meet the shortfall, if any, in repayment of FCNR-

B loan availed by NICE on account of fluctuation in exchange rates.



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35. The Company has sold 1,07,00,000 15% Cumulative Redeemable Preference Shares of HPL Cogeneration Limited (a subsidiary of theCompany), to HDFC Bank Ltd. The related agreement for sale provides for a right to HDFC Bank Ltd. to sell the shares to the Companyon 29th March, 2004 or earlier on occurrence of certain events. The Company has a right to repurchase the shares at any time after18 months. In either case, the repurchase price will be arrived at by discounting the future dividends and the redemption amountat 8.10% p.a.

36. In the current year, Accounting for Joint Ventures in which the Company is a venturer, is as per Accounting Standard AS-27 “FinancialReporting of Interests in Joint Ventures” issued by the Institute of Chartered Accountants of India. Accordingly, interest in Integrated JointVentures (being in the nature of jointly controlled entities referred to in the said Standard), has been accounted and shown as follows:

a. Company’s share of profit / loss, as a separate line item in the Profit and Loss Account

b Company’s net investment as a separate line item in the schedule of investments in the Balance Sheet

In the previous year, the said entities have been accounted on a line-consolidation basis, by adding together book values of like itemsof assets, liabilities, income and expenses. In order to facilitate comparison, previous year’s figures have been recast in line with thedisclosure in the current year.

37. Figures for the previous year have been regrouped / reclassified wherever necessary.

38. According to the Company, construction activity is a service activity and therefore, the same is covered under para 3(ii)(c) of Part II ofSchedule VI to the Companies Act, 1956.

39 Details of sales, raw materials and components consumed, capacities and production, inventories and purchases:

A. SALES:2002-2003 2001-2002

CLASS OF GOODS UNIT Quantity Value Quantity ValueRs.crore Rs.crore

Earthmoving machinery including bulldozers, dumpers, scrappers, Nos. 5 0.84 - -loaders, shovels, vibratory compactors and drag lines (excludingwalking drag lines)

Welding alloys and accessories 81.63 83.13Industrial machinery Tonnes 8,588 68.97 6,127 61.48Earthmoving and agricultural machinery and spares 107.55 114.06Crown corks Nos. in 571.0 13.53 603.6 13.65

millions

Nuclear purpose equipment, deaerators, ultra high pressure vessels, Tonnes 122 18.03 77 7.69including multiwall vessels, high pressure heat exchangers and highpressure heaters in aggregate

Plant and equipment and modules for nuclear power projects, heavy Tonnes 7,667 428.05 26,977 748.25water projects, nuclear and space research and allied projectsincluding items for chemical, oil and gas, etc. industries

Powder metallurgy and industrial products 22.50 17.48Industrial electronic control panels 15.53 20.26Valves and accessories 54.96 96.95Chemical plant and machinery including pharmaceutical, dyestuff, Tonnes 6,944 639.02 45,652 427.19

distillery, brewery and solvent extraction plants, evaporator andcrystalliser plants and pollution control equipment in aggregate

Aluminium capsules, RO and ROPP caps, other caps and cups Nos. in 77.0 8.41 122.3 13.19millions

Switchgear, all types 281.67 307.50Electro surgical unit and accessories 6.39 5.38Petrol dispensing and metering pumps Nos. 6,729 50.83 5,056 34.88Ship auxiliaries and components of mechanised sailing vessels Tonnes - - - 0.07Complete cement making machinery including rotary kilns and Nos. - 25.41 Parts for 29.51

fluxo packers in aggregate 1 plantPortland cement Lakh Tonnes 126.15# 2358.64 # 119.30 # 2373.44#Transmission line tower Tonnes 23,849 70.83 26,820 84.27Steel structural fabrication Tonnes 20,544 94.00 20,255 75.70Rubber processing machinery and accessories Nos. 129 109.63 69 79.55



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2002-2003 2001-2002CLASS OF GOODS UNIT Quantity Value Quantity Value

Rs.crore Rs.croreUltra sound equipment and accessories 24.48 19.96Patient monitoring system and accessories 31.47 27.82Glass bottles and jars Nos. in 288.3 104.28 332.4 83.86

millionsElectricity meters 66.38 56.91Crude oil bbls 44,707 5.54 52,435 5.53Power plant and machinery 761.59 225.57Others 997.58 538.40

6447.74* 5551.68*

# Includes 14.36 lakh tonnes of semi-finished goods/clinker, value: Rs. 136.99 crore; previous year: 14.86 lakh tonnes, value: Rs.124.05 crore.* Includes Rs. 1261.42 crore of construction/project related activity; previous year: Rs. 1003.66 crore.

B. RAW MATERIALS AND COMPONENTS CONSUMED :2002-2003 2001-2002

CLASS OF GOODS UNIT Quantity Value Quantity ValueRs.crore Rs.crore

(i) Items:Steel Tonnes 67,823 121.32 66,699 101.42

Metres 1,11,877 3.33 39,584 4.78Sq.Metres 1,05,885 29.53 1,84,202 30.86

Non-ferrous metals Tonnes 2,061 25.23 2,296 27.74Metres 18,60,976 0.69 25,14,642 1.00Sq.Metres 147 0.30 74 0.21Cu.Metres 6,55,338 30.03 3,75,930 13.97

Bakelite Tonnes 242 1.82 236 1.52Wads Nos. in

millions 41 0.18 83 0.39Soda ash Tonnes 11,299 9.47 9,621 8.20Quartz sand Tonnes 36,099 4.65 30,495 3.87Iron ore Tonnes 2,59,644 14.78 2,11,912 13.39Limestone Lakh Tonnes 166.14 103.70 154.92 95.32Gypsum Tonnes 3,88,160 30.75 3,74,186 31.95Clay Tonnes 1,36,416 10.69 1,14,283 9.72Slag Tonnes 5,98,525 31.11 6,22,534 34.71Cement machinery components 5.12 9.95Nuclear equipment components including items

for oil & gas industries etc., in aggregate 168.84 116.71Chemical plant components 352.40 117.65Switchgear components 180.84 157.41Electronic devices, test & measuring instruments 17.65 19.54

and industrial electronic control panel componentsFloppy disk drive/dot matrix printer, electronic exchange 78.98 65.58

and medical equipment componentsIndustrial machinery components 8.88 6.56Power plant and machinery components 460.73 268.88Others 307.70 197.19

1998.72* 1338.52*

* Includes Rs.103.70 crore being cost of raising limestone debited to various accounts; previous year: Rs.95.32 crore2002-2003 2001-2002

% to total Value % to total Valueconsumption Rs. crore consumption Rs. crore

(ii) Imported (including through canalising agencies) 32 639.46 29 387.40Indigenous 68 1359.26 71 951.12

100 1998.72 100 1338.52



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(C) CAPACITIES AND PRODUCTION:LICENSED INSTALLED ACTUAL

CLASS OF GOODS UNIT CAPACITY CAPACITY PRODUCTION

Scrapper, bulldozer, ripper and loader attachments Nos. 250 250 -(250) (250) (-)

Road rollers, hot mix plants and other road construction and bridge Nos. 150 150 -construction machinery (150) (150) (-)

Dairy machinery and equipment - various items in aggregate Nos. 35,584 35,584 -(35,584) (35,584) (-)

Chemical plant and machinery including pharmaceutical, dyestuff, Tonnes 6,067 6,067 6,862 &&distillery, brewery and solvent extraction plants, evaporator and (6,067) (6,067) (4,475)crystalliser plants and pollution control equipment in aggregate

Equipment for food processing industry Tonnes 65 65 -(65) (65) (-)

Feed milling plants and grain silos Nos. One or several One or several -(One or several) (One or several) (-)

Crude oil bbls * Not applicable 34,456 44,834(Not applicable) (34,456) (52,581)

Complete cement making machinery including rotary kilns and fluxo Nos. 2 2 -packers in aggregate

(2) (2) (Parts for2 plants)

Sugarcane and beet diffusion, beet preparation and beet pulp Nos. 2 2 -dehydration plants (2) (2) (-)

Garbage milling plants Nos. One or more One or more -(One or more) (One or more) (-)

Nuclear purpose equipment, deaerators, ultra high pressure vessels, Tonnes 5,000 3,950 197including multiwall vessels, high pressure heat exchangers and (5,000) (3,950) (77)high pressure heaters in aggregate

Plant and equipment and modules for nuclear power projects, heavy Tonnes 10,000 10,000 8,509&&water projects, nuclear and space research and allied projects (10,000) (10,000) (3,122)including items for chemical, oil and gas, etc. industries

Complete high speed bottling plants Nos. 6 6 -(6) (6) (-)

Pulp and paper making plants Tonnes 2,000 800 -(2,000) (800) (-)

Suspended particles drying plants Nos. 6 6 -(6) (6) (-)

Containers for liquefied gases and chemicals Nos. * Not applicable 1,000 tonnes -carryingcapacity

(Not applicable) (1,000 tonnes (-)carrying

capacity)Steel plant valves Nos. 40 40 -

(40) (40) (-)Ship auxiliaries and components of mechanised sailing vessels Tonnes 1,000 1,000 -

(1,000) (1,000) (-)Rubber processing machinery Nos. 109 109 129

(109) (109) (69)Switchgear, all types Nos. $ 26,78,500 31,74,750 22,40,550

(26,78,500) (31,74,750) (23,58,776)Miscellaneous electrical items Nos. 10,49,100 10,39,100 -

(10,49,100) (10,39,100) (-)Petrol dispensing and metering pumps Nos. 4,800 4,800 6,906

(4,800) (4,800) (4,596)



87

LICENSED INSTALLED ACTUALCLASS OF GOODS UNIT CAPACITY CAPACITY PRODUCTION

Press tools, jigs, fixtures, dies for pressure castings, moulds for Rs./Nos. @ Rs.220 lakh Rs.295 lakh 144 Nos.plastic injection and bakelite (Rs.220 lakh) (Rs.295 lakh) (150 Nos.)

Aluminium capsules, RO and ROPP caps, other caps and cups Nos. in 628.8 628.8 74.7millions (628.8) (628.8) (121.4)

Crown corks Nos. in 1,296 1,296 576.1millions (1,296) (1,296) (563.4)

Packaging machinery Rs./Nos. *Not applicable Rs.100 lakh -(Not applicable) (Rs.100 lakh) (-)

Glass bottles and jars Nos. in **Not applicable 400 280.8millions (Not applicable) (400) (304.2)

Portland cement Tonnes @@ 22.18 lakh 150 lakh 117.41 lakh ##(22.18 lakh) (145 lakh) (108.62 lakh)

Industrial machinery Tonnes 12,000 12,000 8,634(12,000) (12,000) (6,103)

Industrial electronic control panels Nos. 2,500 2,500 143(2,500) (2,500) (175)

Electronic devices Nos. 30,000 30,000 1,090(30,000) (30,000) (4,923)

Electro surgical unit and accessories Nos. * Not applicable 1,250 521(Not applicable) (1,250) (735)

Ultrasound equipment and accessories Nos. 1,000 900 704(1,000) (900) (646)

Patient monitoring system and accessories Nos. 5,500 4,000 3,645(5,500) (4,000) (3,168)

Relays Nos. * Not applicable 14,000 10,832(Not applicable) (14,000) (11,383)

Control & relay panels Nos. * Not applicable 100 -(Not applicable) (100) (-)

Electricity meters Nos. * Not applicable 4,80,000 4,10,004(Not applicable) (2,70,000) (1,99,244)

Transmission line tower Tonnes 42,000 42,000 26,126(42,000) (42,000) (32,076)

Steel structural fabrication Tonnes 6,000 15,600+ 11,826(6,000) (15,600) (9,815)

Steel re-rolling Tonnes 40,000 40,000 7,975(40,000) (40,000) (11,217)

Ready mix concrete M3 6,60,400 16,56,000 8,69,838(6,60,400) (11,44,840) (5,73,371)

Figures in brackets pertain to previous year.

* Licensing not applicable. Installed capacity is based on one of the following:

- Entrepreneur’s Memoranda filed with Govt. of India, Ministry of Industry, New Delhi;

- Registration with the Directorate General of Technical Development;

- Approval obtained from the Govt. of India, Ministry of Industry, New Delhi;

- Agreement with Govt. of India, Ministry of Petroleum & Natural Gas.

** As per Entrepreneur’s Memorandum no.2327/SIA/IMO/94 dated 19.07.94 filed with Government of India, Ministry of Industry, NewDelhi.

## Includes 14.36 lakh tonnes (previous year : 14.86 lakh tonnes) of clinker produced and sold.

&& Includes production from external sources.

@ Excludes Rs.200 lakh in respect of Memorandum No.1322/SIA/IMO/92 dated 27-3-92 of which capacity of Rs.75 lakh has beeninstalled.

@@ Excludes 127.82 lakh tonnes in respect of Memoranda Nos. 3377/SIA/IMO/93 dated 29-9-93, 3511/SIA/IMO/94 dated 18-10-94,

4631/SIA/IMO/94 dated 29-12-94, 1390/SIA/IMO/94 dated 13-3-95 and 1255/SIA/IMO/98 dated 29-6-98, capacity for which has beeninstalled.

$ Excludes 6,96,250 Nos. in respect of Memoranda Nos. 924/SIA/IMO/91 and 922/SIA/IMO/91 dated 11-9-91 of which capacity of4,96,250 Nos. has been installed.

+ Installed capacity includes 9,600 tonnes for which no licence is required.



88

D. INVENTORIES:As at 31-3-2003 As at 31-3-2002 As at 31-3-2001

CLASS OF GOODS UNIT Quantity Value Quantity Value Quantity ValueRs.crore Rs.crore Rs.crore

Aluminium capsules, RO and ROPP caps, other caps and cups Nos. in millions 4.0 0.24 6.3 0.37 7.0 0.52Electronic, medical and other instruments, accessories and spares - 0.80 0.91Electro surgical units and accessories 1.14 1.78 0.76Industrial machinery Tonnes 272 2.32 226 1.36 250 1.68Switchgear, all types 72.41 98.78 72.60Crown corks Nos. in millions 18.6 0.35 14.1 0.26 18.9 0.37Complete cement making machinery including rotary kilns Nos. - 0.52 Parts for 0.58 Parts for 0.75

and fluxo packers in aggregate 1 plant 1 plantPatient monitoring systems and accessories 6.10 4.33 4.89Chemical plant and machinery including Tonnes 367 90.46 467 86.04 41,644 173.49

pharmaceutical, dyestuff, distillery, brewery andsolvent extraction plants, evaporator and crystalliserplants and pollution control equipment in aggregate

Portland cement Tonnes 2.36 lakh 45.54 2.30 lakh 38.28 3.01 lakh 41.77Industrial electronic control panels 2.53 1.40 2.31Spares for earthmoving and agricultural machinery 31.32 32.17 40.07Telephonic or telegraphic switching apparatus - - 0.27Nuclear purpose equipment, deaerators, ultra high Tonnes 76 10.69 1 11.88 1 15.93

pressure vessels, including multiwall vessels, high pressureheat exchangers and high pressure heaters in aggregate

Ultrasound equipment and accessories 6.07 6.15 5.88Powder metallurgy and industrial products 1.81 2.04 2.81Petrol dispensing and metering pumps Nos. 363 2.42 186 1.13 646 3.89Valves and accessories 0.54 0.56 -Dairy machinery and equipment - various items in aggregate Nos. - - - - - 18.88Glass bottles and jars Nos. in millions 14.7 4.56 22.2 8.35 50.4 15.45Earthmoving machinery including bulldozers, dumpers, Nos. 1 - 6 - 6 -

scrappers, loaders, vibratory compactors and draglines (excluding walking drag lines)

Welding alloys and accessories 6.79 8.90 12.30Electronic test & measuring instruments 2.31 1.12 1.63Plant and equipment and modules for nuclear power Tonnes 864 578.41 22 332.52 23,877 496.38

projects, heavy water projects, nuclear and spaceresearch and allied projects including items forchemical, oil and gas, etc. industries

Ship auxiliaries and components of mechanised sailing vessels Tonnes - - - - - 0.06Power plant and machinery 96.85 163.96 25.82Others 111.48 83.28 127.47

1074.86 * 886.04* 1066.89

* includes Rs.816.86 Crore shown as construction related WIP; previous year Rs. 639.67 crore.E. PURCHASE OF TRADING GOODS:

CLASS OF GOODS 2002-2003 2001-2002Rs. crore Rs. crore

Earthmoving and agricultural machinery and spares 74.51 70.99Welding alloys and accessories 61.13 58.69Valves and accessories 47.64 79.50Electronic, medical and other instruments, 22.05 21.96

accessories and sparesPowder metallurgy and industrial products 15.87 13.55Others 390.39 132.29

611.59 376.98Notes:(a) The installed capacities are as certified by Managing/Wholetime Directors on which certificates the auditors have placed reliance.(b) In terms of note 3 to para 3 of Part II of Schedule VI, items like spare parts and accessories are given without quantities in respect

of sales, purchases and stocks.(c) Quantitative figures for sales are after exclusion of inter-divisional transfers, capitalisation/captive consumption, samples, etc.


89


Notes forming part of accounts (contd.)40. Balance Sheet Abstract and Company�s general business profile

I Registration Details

Registration No. 1 1 - 0 4 7 6 8 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 0 3

II Capital Raised during the year (Amount in Rs. Thousands)

Public Issue @ Rights Issue8 4 N I L

Bonus Issue Private PlacementN I L N I L

@ Conversion of Debentures IV series Rs. 27 Thousands & Employee Stock Options Rs. 57 Thousands

III Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands)

Total Liabilities Total Assets6 7 3 8 5 8 8 8 6 7 3 8 5 8 8 8

Sources of Funds Paid-up Capital* Reserves & Surplus2 4 8 7 1 1 5 3 3 1 3 8 8 1 4

* Including Share Application money Rs. 428 ThousandsSecured Loans Unsecured Loans

2 7 0 3 1 0 7 7 4 7 2 8 8 8 2

Application of Funds Net Fixed Assets Investments4 0 4 8 2 6 7 2 1 1 6 0 3 7 0 6

Net Current Assets Deferred Tax2 3 0 1 0 1 6 2 (-) 8 4 1 0 4 7 5

Deferred Revenue Items Accumulated Losses6 9 9 8 2 3 N I L

IV Performance of Company (Amount in Rs. Thousands)Turnover (including other income)# Total Expenditure

9 6 1 4 4 5 6 6 9 1 2 7 3 2 5 6# Excluding Excise Duty Rs. 5097100 Thousands

+ - Profit/Loss Before Tax *@ + - Profit/Loss After Tax *@✓ 5 1 0 1 9 9 6 ✓ 4 3 3 0 9 9 6

* Please tick Appropriate box + for Profit, - for loss@ Includes Company's share in profit (net of tax) of Integrated Joint Ventures: Rs. 230686 Thousands

Basic Earnings Per Share in Rs. Dividend Rate %R s. 1 7 P. 4 2 7 5

V Generic Names of Three Principal Products/Services of the Company(as per monetary terms)Item Code No. N . A .(ITC Code)Product Description Construction and project related activity

Item Code No. 2 5 2 3 2 9 . 0 1(ITC Code)Product Description Portland Cement

Item Code No. 9 8 0 1 0 0 . 0 3(ITC Code)Product Description Power Plant & Machinery

Signatures to Schedules A to Q and Notes








90


Name of the subsidiary company LTM Limited L&T Finance Larsen &Toubro HPL India Infrastructure Limited Infotech Cogeneration Developers

Limited Limited LimitedFinancial year of the subsidiary company ended on 31.3.2003 31.3.2003 31.3.2003 31.3.2003 31.3.2003

Number of Shares in the subsidiary company held by Larsen & Toubro Limitedat the above date 6,69,150 6,00,00,000 3,00,00,000 3,12,12,000 3,50,00,000

The net aggregate of profits, less losses, of the subsidiary company so far asit concerns the members of Larsen & Toubro Limited:

Rs. crore Rs. crore Rs. crore Rs. crore Rs. crore(i) Dealt with in the accounts of Larsen & Toubro Limited amounted to :

(a) for the subsidiary’s financial year ended 31st March,2003and 31st December, 2002 Nil 6.60 11.25 18.79 Nil

(b) for previous financial years of the subsidiary since it becamesubsidiary of Larsen & Toubro Limited 32.64 10.09 64.50 18.10 Nil

(ii) Not dealt with in the accounts of Larsen & Toubro Limited amounted to:(a) for the subsidiary’s financial year ended 31st March, 2003 0.03 2.49 5.75 0.41 (0.19)

and 31st December,2002(b) for previous financial years of the subsidiary since it became

subsidiary of Larsen & Toubro Limited 13.10 12.43 63.22 7.02 (14.43)Changes in the interest of Larsen & Toubro Limited between the end of the

subsidiary’s financial year and 31st March, 2003: NA NA NA NA NANumber of shares acquiredMaterial changes between the end of the subsidiary’s financial year and

31st March, 2003 NA NA NA NA NA(i) Fixed assets (net additions)(ii) Investments(iii) Moneys lent by the subsidiary(iv) Moneys borrowed by the subsidiary company other than for

meeting current liabilities

Name of the subsidiary company L&T Infocity Narmada L&T Transportation L&T-ECC NarmadaLimited Infrastucture Infrastructure Constru- Cement

Construction Limited ction (M) CompanyEnterprise SDN.BHD. Limited

LimitedFinancial year of the subsidiary company ended on 31-3-2003 31-3-2003 31-3-2003 31-12-2002 31-3-2003

Number of Shares in the subsidiary company held by Larsen & Toubro Limitedat the above date 1,60,20,000 1,26,48,501 1,08,63,994 2,24,998 6,91,71,183


Rs.crore Rs.crore Rs.crore Rs.crore Rs. crore(i) Dealt with in the accounts of Larsen & Toubro Limited amounted to :

(a) for the subsidiary’s financial year ended 31st March,2003and 31st December, 2002 Nil Nil Nil Nil Nil

(b) for previous financial years of the subsidiary since it becamesubsidiary of Larsen & Toubro Limited Nil Nil Nil 1.08 Nil

(ii) Not dealt with in the accounts of Larsen & Toubro Limited amounted to:(a) for the subsidiary’s financial year ended 31st March, 2003

and 31st December,2002 8.01 (4.55) (4.32) (0.04) (42.22)(b) for previous financial years of the subsidiary since it became

subsidiary of Larsen & Toubro Limited 19.44 (8.26) (12.56) (0.10) (57.28)Changes in the interest of Larsen & Toubro Limited between the end of the

subsidiary’s financial year and 31st March, 2003: NA NA NA Nil NA

Number of shares acquired

Material changes between the end of the subsidiary’s financial year and 31st March, 2003 NA NA NA NA(i) Fixed assets (net additions) Nil(ii) Investments Nil(iii) Moneys lent by the subsidiary Nil(iv) Moneys borrowed by the subsidiary company other than for

meeting current liabilities Nil

Statement pursuant to Section 212 of the Companies Act, 1956relating to subsidiary companies:

91


Statement pursuant to Section 212 of the Companies Act, 1956relating to subsidiary companies: (Contd.)

Name of the subsidiary company L&T Western L&T Equipment L&T Holdings L&T L&TIndia Leasing Limited Trade.Com Capital

Tollbridge Company Limited CompanyLimited Limited Limited

Financial year of the subsidiary company ended on 31-3-2003 31-3-2003 31-3-2003 31-3-2003 31-3-2003

Number of Shares in the subsidiary company held by Larsen & Toubro Limitedat the above date 1,50,00,001 50,00,000 8,40,50,000 Nil Nil


Rs. crore Rs. crore Rs. crore Rs. crore Rs crore(i) Dealt with in the accounts of Larsen & Toubro Limited amounted to :

(a) for the subsidiary’s financial year ended 31st March,2003and 31st December, 2002 1.95 Nil Nil Nil Nil

(b) for previous financial years of the subsidiary since it becamesubsidiary of Larsen & Toubro Limited Nil Nil Nil Nil Nil


and 31st December,2002 0.69 1.35 (2.15) 8.85 0.48(b) for previous financial years of the subsidiary since it became

subsidiary of Larsen & Toubro Limited 0.12 0.56 (0.18) (9.44) 0.27Changes in the interest of Larsen & Toubro Limited between the end of the

subsidiary’s financial year and 31st March, 2003: NA NA NA NA NANumber of shares acquiredMaterial changes between the end of the subsidiary’s financial year and 31st March, 2003 NA NA NA NA NA

(i) Fixed assets (net additions)(ii) Investments(iii) Moneys lent by the subsidiary(iv) Moneys borrowed by the subsidiary company other than for

meeting current liabilities

Name of the subsidiary company Larsen and L&T Cement Dakshin Larsen & L&T NetcomToubro Limited Cements Toubro Limited

Ceylinco Limited InfotechPrivate Limited GmbH

Financial year of the subsidiary company ended on 31.12.2002 31.3.2003 31.3.2003 31.3.2003 31.3.2003

Number of Shares in the subsidiary company held by Larsen & Toubro Limitedat the above date 4,00,00,000 2,99,99,993 Nil Nil 59,71,610


Rs. crore Rs. crore Rs crore Rs. crore Rs. crore(i) Dealt with in the accounts of Larsen & Toubro Limited amounted to :

(a) for the subsidiary’s financial year ended 31st March,2003and 31st December, 2002 Nil Nil Nil Nil Nil

(b) for previous financial years of the subsidiary since it becamesubsidiary of Larsen & Toubro Limited Nil Nil Nil Nil Nil


and 31st December,2002 (1.53) Nil Nil 0.63 Nil(b) for previous financial years of the subsidiary since it became

subsidiary of Larsen & Toubro Limited (10.82) Nil Nil 0.62 (1.08)Changes in the interest of Larsen & Toubro Limited between the end of the

subsidiary’s financial year and 31st March, 2003: Nil NA NA NA NANumber of shares acquiredMaterial changes between the end of the subsidiary’s financial year and 31st March, 2003 NA NA NA NA

(i) Fixed assets (net additions) Nil(ii) Investments Nil(iii) Moneys lent by the subsidiary Nil(iv) Moneys borrowed by the subsidiary company other than for

meeting current liabilities Nil

Note : L&T Cement Limited and Dakshin Cements Limited are yet to commence operations.

92


Name of the subsidiary company Hyderabad Tractor Larsen & Larsen & AndhraInternational Engineers Toubro LLC Toubro PradeshTrade Expo- Limited International Expositions

sitions Limited FZE Private LimitedFinancial year of the subsidiary company ended on 31-3-2003 31-3-2003 31-12-2002 31-12-2002 31-3-2003

Number of Shares in the subsidiary company held by Larsen & Toubro Limitedat the above date Nil 68,000 50,000 2 Nil

The net aggregate of profits, less losses, of the subsidiary company so far asit concerns the members of Larsen & Toubro Limited: Rs crore Rs crore Rs crore Rs crore Rs. crore

(i) Dealt with in the accounts of Larsen & Toubro Limited amounted to :(a) for the subsidiary’s financial year ended 31st March,2003

and 31st December, 2002 Nil Nil Nil Nil Nil(b) for previous financial years of the subsidiary since it became

subsidiary of Larsen & Toubro Limited Nil Nil Nil Nil Nil(ii) Not dealt with in the accounts of Larsen & Toubro Limited amounted to:

(a) for the subsidiary’s financial year ended 31st March, 2003and 31st December,2002 0.21 1.47 (0.13) (0.19) Nil

(b) for previous financial years of the subsidiary since it becamesubsidiary of Larsen & Toubro Limited Nil (1.19) (0.11) Nil Nil

Changes in the interest of Larsen & Toubro Limited between the end of thesubsidiary’s financial year and 31st March, 2003: NA NA Nil Nil NA

Number of shares acquiredMaterial changes between the end of the subsidiary’s financial year and 31st March, 2003 NA NA NA

(i) Fixed assets (net additions) Nil Nil(ii) Investments Nil Nil(iii) Moneys lent by the subsidiary Nil Nil(iv) Moneys borrowed by the subsidiary company other than for meeting current liabilities Nil Nil

Note : Andhra Pradesh Expositions Private Limited is yet to commence operations.

Statement pursuant to Section 212 of the Companies Act, 1956relating to subsidiary companies : (Contd.)

Name of the subsidiary company L&T Power Bhilai Power Cyber Park Raykal AluminiumInvestments Supply Company Development & Company

Private Limited Limited Construction Private LimitedLimited

Financial year of the subsidiary company ended on 31-3-2003 31-3-2003 31-3-2003 31-3-2003

Number of Shares in the subsidiary company held by Larsen & Toubro Limitedat the above date 60,000 49,950 Nil Nil

The net aggregate of profits, less losses, of the subsidiary company so far asit concerns the members of Larsen & Toubro Limited: Rs crore Rs crore Rs crore Rs crore

(i) Dealt with in the accounts of Larsen & Toubro Limited amounted to :(a) for the subsidiary’s financial year ended 31st March,2003

and 31st December, 2002 Nil Nil Nil Nil(b) for previous financial years of the subsidiary since it became

subsidiary of Larsen & Toubro Limited Nil Nil Nil Nil(ii) Not dealt with in the accounts of Larsen & Toubro Limited amounted to:

(a) for the subsidiary’s financial year ended 31st March, 2003and 31st December,2002 Nil Nil Nil Nil

(b) for previous financial years of the subsidiary since it becamesubsidiary of Larsen & Toubro Limited Nil Nil Nil Nil

Changes in the interest of Larsen & Toubro Limited between the end of thesubsidiary’s financial year and 31st March, 2003: NA NA NA NA

Number of shares acquiredMaterial changes between the end of the subsidiary’s financial year and 31st March, 2003 NA NA NA NA

(i) Fixed assets (net additions)(ii) Investments(iii) Moneys lent by the subsidiary(iv) Moneys borrowed by the subsidiary company other than for meeting current liabilities

Note : L&T Power Investments Private Limited, Bhilai Power Supply Company Limited, Cyber Park Development & Construction Limited and Raykal Aluminium Company PrivateLimited are yet to commence operations.








93

We have examined the attached Consolidated Balance Sheet of Larsen & Toubro Limited and its Subsidiaries, Associates and Joint Ventures(the L&T group) as at 31st March, 2003, the Consolidated Profit & Loss Account for the year ended on that date annexed thereto, and theConsolidated Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are prepared, in all material respects, in accordance with anidentified financial reporting framework and are free of material misstatements. An audit also includes examining, on test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statements. We believe that our audit provides areasonable basis for our opinion.

In respect of the financial statements of certain subsidiaries, associates and joint ventures, we did not carry out the audit. These financialstatements have been audited / reviewed by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates tothe amounts included in respect of the subsidiaries, associates and joint ventures is based solely on the reports of the other auditors. Thedetails of the Assets and Revenues in respect of these subsidiaries, associates and joint ventures to the extent to which they are reflected inthe Consolidated Financial Statements are given below:

Rs. crore

I Audited by other Auditors:

Name of the companies Total Assets Total Revenues

A. Indian Subsidiaries

LTM Limited 20.38 0.21

HPL Cogeneration Limited 546.22 143.92

Raykal Aluminum Company Private Limited 0.05 -

B. Foreign Subsidiaries

Larsen & Toubro LLC, USA 3.57 3.08

L&T-ECC Construction (M) SDN. BHD, Malaysia 1.12 3.85

Larsen & Toubro Infotech, GmbH, Germany 5.93 23.12

Larsen & Toubro (Oman) LLC, UAE 41.55 20.45

Larsen & Toubro International FZE, Sharjah, UAE 1.25 -

C. Joint Ventures

L&T-Demag Plastics Machinery Private Limited 14.21 48.00

HCC-L&T Purulia JV 21.17 28.39

International Metro Civil Contractors 59.32 455.19

Larsen & Toubro Limited–Shapoorji Pallonji & Co. Ltd. Joint Venture 5.14 38.33

Total 719.91 764.54

D. Associates

Name of the companies Net Carrying Current year/periodCost of Share of

Investment Profit / (loss)

L&T-Case Equipment Private Limited 5.79 0.76

L&T Crossroads Private Limited 9.00 -

International Seaports Pte. Limited, Singapore 1.65 (0.53)

Larsen & Toubro (Saudi Arabia) LLC, Saudi Arabia 2.45 0.07

Total 18.89 0.30

Consolidated Financial Statements 2002-2003Auditors’ Report to the Board of Directors on Consolidated Financial Statements


94

II Reviewed by other Auditors:

Name of the companies Total Assets Total Revenues

A. Indian Subsidiary

Narmada Cement Company Limited 304.39 149.51

B. Foreign Subsidiary

Larsen and Toubro Ceylinco (Private) Limited, Sri Lanka 55.27 77.10

Total 359.66 226.61

We further report that in respect of the following associates, we did not carry out the audit. These financial statements have been certified byManagement and have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of the associates isbased solely on these certified financial statements. Since the financial statements for the financial year ended 31st March, 2003, which werecompiled by the Management of these companies were not audited, any adjustments to their balances could have consequential effects on theattached consolidated financial statements. However, the size of these associates in the consolidated position is not significant in relativeterms. The details of the Net Carrying Cost of Investment and Current year’s Share of Profit or (Loss) in respect of these associates to theextent to which they are reflected in the Consolidated Financial Statements are given below:

Rs. crore

Certified by Management:

Name of the companies Net Carrying Current yearCost of Share of

Investment Profit / (Loss)

Associates

Sharp Business Systems India Limited 1.09 0.11

Ahmedabad Mehsana Toll Road Company Limited 18.13 (1.87)

Total 19.22 (1.76)

We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of theAccounting Standards (AS) 21 Consolidated Financial Statements (AS) 23 Accounting for Investments in Associates in Consolidated FinancialStatements and (AS) 27 Financial Reporting of Interests in Joint Ventures issued by the Institute of Chartered Accountants of India, and on thebasis of the separate audited / reviewed / certified financial statements of the L&T Group included in the consolidated financial statements.

We report that during the year one of the subsidiaries changed its accounting policy in respect of accounting for taxes on income and hasreversed deferred tax liability of Rs. 24.77 crore as at 31st March, 2002 (Refer Note 23 (c) of Notes forming part of consolidated accounts).This is not in conformity with Accounting Standard (AS) 5 Net Profit or Loss for the Period, Prior Period Items and Changes in AccountingPolicies.

Had the aforesaid change in accounting policy not been made, the profit after tax would have been Rs. 359.82 crore (as against the reportedfigure of Rs. 384.59 crore) retained earnings would have been Rs. 830.36 crore (as against the reported figure of Rs. 855.13 crore) anddeferred tax liabilities would have been Rs. 1078.32 crore (as against the reported figure of Rs. 1053.55 crore).

Subject to the foregoing, we report that on the basis of the information and explanations given to us and on the consideration of the separateaudit report on individual audited financial statements of the L&T Group, we are of the opinion that the said consolidated financial statementsgive a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Consolidated Balance Sheet, of the state of affairs of the L&T Group as at 31st March, 2003;

(b) in the case of the Consolidated Profit and Loss Account of the consolidated results of operations of the L&T Group for the year ended onthat date; and

(c) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the L&T Group for the year ended on that date.


by the hand of

F. M. KOBLAMumbai, 29th May, 2003 Partner


95

Consolidated Balance sheet as at 31st March, 2003As at 31-3-2003 As at 31-3-2002

Schedules Rs. crore Rs. crore Rs. crore Rs. crore

SOURCES OF FUNDS:SHAREHOLDERS’ FUNDS:

Share capital A 248.67 248.66Share application money 0.04 0.11Reserves and surplus B 2967.89 2888.79

3216.60 3137.56MINORITY INTEREST 50.15 44.40LOAN FUNDS:

Secured loans C 3979.65 4081.21Unsecured loans D 721.24 896.88

4700.89 4978.09TOTAL 7967.64 8160.05APPLICATION OF FUNDS:Fixed assets: E

Gross block 8273.34 8162.15Less : Depreciation 2752.50 2377.31Net block 5520.84 5784.84Less : Lease adjustment 98.04 106.53

5422.80 5678.31Capital work-in-progress 104.55 140.51

5527.35 5818.82Fixed assets held for sale 4.38 4.90(at lower of cost or estimated realisable value)Investments F 528.20 358.15Current assets, loans and advances: G

Inventories 2835.72 2852.00Sundry debtors 1967.50 1563.95Cash and bank balances 457.81 289.52Other current assets 10.04 11.10Loans and advances 1632.40 1419.76

6903.47 6136.33Less : Current liabilities and provisions: H

Liabilities 3738.67 2996.50Provisions 450.27 309.27

4188.94 3305.77Net current assets 2714.53 2830.56Deferred tax ( see Note No. 23 )

Deferred tax assets 140.54 170.12Deferred tax liabilities (1053.55) (1098.04)

(913.01) (927.92)Deferred revenue items I

Miscellaneous expenditure I ( i ) 110.36 83.87(to the extent not written-off or adjusted)Deferred income I ( ii ) (4.17) (8.33)

106.19 75.54

TOTAL 7967.64 8160.05CONTINGENT LIABILITIES JSIGNIFICANT ACCOUNTING POLICIES Q(For Notes forming part of Accounts see pages 111 to 120)









96

Consolidated Profit and loss account for the year ended 31st March, 2003

2002-2003 2001-2002 Schedules Rs. crore Rs. crore Rs. crore Rs. crore

INCOME:Sales and Service K 10856.96 9194.97Less : Excise duty 530.06 480.66

10326.90 8714.31Other income L 236.94 184.86

10563.84 8899.17EXPENDITURE:Manufacturing, construction and operating expenses M 7066.01 5516.86Staff expenses N 736.54 638.26Sales, administration and other expenses O 1560.48 1469.53Interest and brokerage P 282.28 405.22Depreciation and obsolescence 442.28 469.91

10087.59 8499.78Less : Overheads charged to fixed assets 1.98 12.30

10085.61 8487.48Profit before transfer from Revaluation reserve 478.23 411.69Add : Transfer from Revaluation reserve 1.67 1.81Profit before Tax 479.90 413.50Provision for current taxes 110.22 37.65Provision for deferred tax ( see Note no. 23 ) (14.91) 61.95

95.31 99.60Profit after tax 384.59 313.90Less : Additional tax on dividend - 3.85

384.59 310.05Less : Minority Interest in Income 20.07 20.19Profit after minority interest 364.52 289.86Add: Share in profits(net) of Associates 15.66 -Profit available for appropriation 380.18 289.86Less : Transferred to : Debenture Redemption Reserve - 0.50

Foreign Projects Reserve 3.00 8.36Housing Projects Reserve 2.25 3.98Reserve u/s 45 1C of RBI Act 1.23 2.24

6.48 15.08Profit available for distribution 373.70 274.78Proposed dividend 186.80 174.34Additional Tax on Proposed Dividend 23.93 -Balance carried to Balance Sheet 162.97 100.44Basic earnings per equity share (Rupees) 15.29 11.66Diluted earnings per equity share (Rupees) 12.29 8.58Face value per equity share (Rupees) 10.00 10.00

SIGNIFICANT ACCOUNTING POLICIES Q(For Notes forming part of Accounts see pages 111 to 120)

} (See Note No. 19)









97

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 20032002-2003

Rs. croreA. Cash flo w from operating activities:

Net Profit before tax ... ... 479.90Adjustments for :Depreciation ... ... 440.61Unrealised Foreign Exchange difference ... ... (3.79)Interest(Net) ... ... 282.28Dividend Received ... ... (28.65)(Profit)/Loss on sale of Fixed Assets (Net) ... ... (14.87)(Profit)/ Loss on sale of Investments (Net) ... ... (9.38)Provision for diminution in value of investments 0.71Operating Profit before working capital changes ... ... 1146.81Adjustments for :(Increase) / Decrease in Trade and Other receivables ... ... (536.33)(Increase) / Decrease in Inventories ... ... (16.28)(Increase) / Decrease in Miscellaneous Expenditure not written off ... (36.67)Increase/ (Decrease) in Trade Payables ... ... 817.49Cash generated from Operations ... ... 1375.02Direct Taxes Paid ... ... (61.52)Net Cash from Operating Activities ... ... 1313.50

B. Cash flo w from in vesting activities:Purchase of Fixed Assets ... ... (279.73)

(Including interest capitalised Rs.3.34 crore)Sale of Fixed Assets ... ... 153.33Purchase of Investments ... ... (5181.07)Sale of Investments ... ... 4947.50Loans/Deposits made with Associates(Net) ... ... (1.79)Advance to Associates towards equity commitment (Net) ... (31.64)Interest Received ... ... 41.73Dividend received from Associates ... ... 10.57Dividend received from Other Investments ... ... 18.08Net Cash (used in)/ from Investing Activities ... ... (323.02)

C. Cash flo w from financing activities:Proceeds from Issue of Share Capital ... ... 0.03Proceeds from long term borrowings ... ... 480.81Repayment of long term borrowings ... ... (875.96)(Repayments) / Proceeds from other borrowings (Net) ... ... 112.34Dividends Paid ... ... (194.13)Additional Tax on Dividend ... ... (2.93)Interest Paid ... ... (342.35)Net Cash (used in)/ from Financing Activities ... ... (822.19)Net (decrease) / increase in cash and cash equivalents (A + B + C) 168.29Cash and cash equivalents at beginning of the year ... ... 289.52Cash and cash equivalents at end of the year ... ... 457.81

Notes :1. Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard - 3 issued by the Institute of Chartered

Accountants of India.2. Purchase of fixed assets includes movements of Capital Work-in-Progress between the beginning and end of the year.3. Cash and cash equivalents represent cash and bank balances and include unrealised loss of Rs 0.02 crore on account of translation of

foreign currency bank balances.4. Comparative figures for the previous year are not given this being the first year of preparation of consolidated cash flow.









98

Schedules forming part of consolidated accountsAs at 31-3-2003 As at 31-3-2002

Rs. crore Rs. crore Rs. crore Rs. croreSchedule AShare Capital:Authorised: 32,50,00,000 Equity shares of Rs.10 each 325.00 325.00Issued: 24,90,57,712 Equity shares of Rs.10 each 249.06 249.05Subscribed: 24,86,68,756 Equity shares of Rs.10 each 248.67 248.66

248.67 248.66


Schedule BReserves and Surplus:Revaluation Reserve:

As per last Balance Sheet 36.01 38.04Less : On assets sold or obsoleted during the year - 0.22

Transferred to Profit and Loss Account 1.67 1.8134.34 36.01

Cash Subsidy Reserve:As per last Balance Sheet 0.25 0.25Add : Received during the year 0.10 -

0.35 0.25Capital Redemption Reserve:

As per last Balance Sheet 0.02 0.02Reserve u/s 45 1C of the RBI Act, 1934:

As per last Balance Sheet 7.81 5.57Add : Addition during the year 1.23 2.24

9.04 7.81Debenture Redemption Reserve:

As per last Balance Sheet 426.63 426.13Add : Transferred from Profit and Loss Account - 0.50Less: Transferred to Retained Earnings 125.38 -

301.25 426.63Capital Reserve on Consolidation

As per last Balance Sheet 12.79 12.79Add : Addition during the year 0.40 -

13.19 12.79Securities Premium Account:

As per last Balance Sheet * 1662.97 1664.47Add : Addition during the year 0.12 0.06

1663.09 1664.53Less: Debenture issue expenses 0.86 0.55

Premium on Redemption of Debentures 0.99 2.801661.24 1661.18

* Securities premium includes Rs. 1.79 crore on account ofjoint ventures consolidated for the first time during the year

Investment Allowance (Utilised) Reserve:As per last Balance Sheet 7.05 32.05Less : Transferred to Retained Earnings - 25.00

7.05 7.05Foreign Projects Reserve:

As per last Balance Sheet 66.51 63.90Add : Transferred from Profit and Loss Account 3.00 8.36

69.51 72.26Less :Transferred to Retained Earnings 11.31 5.75

58.20 66.51



99


Rs. crore Rs. crore Rs. crore Rs. croreSchedule B (Contd.) 2084.68 2218.25

Brought forwardHousing Projects Reserve:

As per last Balance Sheet 25.83 21.85Add : Addition during the year 2.25 3.98

28.08 25.83Retained Earnings:

As per last Balance Sheet 644.71 1379.49Add : Deferred Tax Assets as on 1.4.2001 - 55.35

644.71 1434.84Less : Deferred Tax Liabilities as on 1.4.2001 - 921.32

644.71 513.52Add : Accumulated Capitalised Profits of Associates and

Joint Ventures as on 1.4.2002 16.09 -Add : Accumulated Revenue Profits of Associates and

Joint Ventures as on 1.4.2002 26.89 -687.69 513.52

Less : Accumulated Unrealised Profits w.r.t Associates andJoint Venture as on 1.4.2002 132.22 -

555.47 513.52Add : Transferred from:

Investment Allowance (Utilised) Reserve - 25.00Foreign Projects Reserve 11.31 5.75Debenture Redemption Reserve 125.38 -Profit & Loss account 162.97 100.44

855.13 644.712967.89 2888.79


Schedule CSecured Loans:Secured Redeemable Non-convertible Bonds:i) FD Plus Bonds 0.43 1.29ii) Early Gain Bonds - 23.18

0.43 24.47Secured Redeemable Non-convertible Debentures:

Fixed Rate Debentures 1373.05 1363.98Floating Rate Debentures 221.82 470.66

1594.87 1834.64Loans from banks:

Cash credits / Working Capital Demand Loans 731.34 414.87Other loans 1304.08 1462.74Interest accrued and due 0.18 0.12

2035.60 1877.73Other loans and advances:

Loans from financial institutions 102.41 161.92From others 246.34 182.45

348.75 344.373979.65 4081.21


100


Rs. crore Rs. crore Rs. crore Rs. croreSchedule DUnsecured Loans:Debentures:Fixed Rate Debentures 173.39 52.46

Less : Conversion during the year 0.02 0.07Allotment money in arrears 0.21 0.21Calls in arrears 1.41 1.42

171.75 50.76Floating Rate Debentures - 14.50

171.75 65.26Fixed deposits 68.87 127.02Short term loans and advances:

From banks 157.71 84.84From others 28.73 39.60Commercial Paper - Face Value (previous year: Rs.318 crore) 100.00Less : Future Interest Obligation (previous year: Rs.3.60 crore) 0.28

99.72 314.40286.16 438.84

Other loans and advances:From banks 47.49 125.89Sales Tax Deferment Loan 134.80 106.31From others 0.24 30.82

182.53 263.02Lease finance 11.93 2.74

721.24 896.88

Cost/Valuation Depreciation/Amortisation Book Value

Fixed Assets As at As at Up to For the Up to As at As at1.4.2002 Additions Deductions 31.3.2003 31.3.2002 Year Deductions 31.3.2003 31.3.2003 31.3.2002Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore

Goodwill on Consolidation 208.90 - - 208.90 55.34 21.90 - 77.24 131.66 153.56OWNED ASSETS:Goodwill 0.07 - - 0.07 0.07 - - 0.07 - -Land -Freehold 141.94 10.02 0.38 151.58 - - - - 151.58 141.94

-Leasehold 68.16 - 0.08 68.08 7.18 1.38 0.01 8.55 59.53 60.99Mining lease 3.09 - - 3.09 1.44 0.12 - 1.56 1.53 1.65Ships 29.45 - - 29.45 5.53 8.31 - 13.84 15.61 23.92Buildings 1317.00 134.92 6.90 1445.02 225.77 43.80 0.73 268.84 1176.18 1091.14Railway sidings 157.29 0.86 - 158.15 30.99 7.47 - 38.46 119.69 126.30Plant and machinery 5161.64 125.67 41.17 5246.14 1741.07 287.49 16.99 2011.57 3234.57 3416.90Furniture and fixtures 251.05 16.08 3.34 263.79 113.46 18.25 1.98 129.73 134.06 137.42Vehicles 89.33 5.85 6.31 88.87 45.76 7.96 4.01 49.71 39.16 43.29Aircraft 9.26 - - 9.26 4.43 0.51 - 4.94 4.32 4.83Jetties 78.05 - - 78.05 37.01 12.43 - 49.44 28.61 41.04Owned Assets Leased Out : -Plant and machinery 627.76 - 125.43 502.33 103.72 25.75 34.88 94.59 407.74 524.03Vehicles 28.10 - 28.10 - 12.98 - 12.98 - - 15.12Less: Lease Adjustment - 98.04 106.53Owned Assets Sub Total (A) 8171.09 293.40 211.71 8252.78 2384.75 435.37 71.58 2748.54 5406.20 5675.60LEASED ASSETS :Plant and machinery 0.29 6.57 0.04 6.82 0.04 1.08 - 1.12 5.70 0.25Vehicles 2.78 11.52 0.56 13.74 0.32 2.59 0.07 2.84 10.90 2.46Leased Assets Sub Total (B) 3.07 18.09 0.60 20.56 0.36 3.67 0.07 3.96 16.60 2.71Total (A+B) 8174.16 311.49 212.31 8273.34 2385.11 439.04 71.65 2752.50 5422.80 5678.31Previous year 8214.85 427.08 479.78 8162.15 2051.41 464.34 138.44 2377.31Add: Capital work-in-progress 104.55 140.51

5527.35 5818.82

Schedule E


101

Schedules forming part of consolidated accounts

Notes :-1. Gross block of Fixed Assets includes Rs 12.01 crore and opening accumulated depreciation includes Rs. 7.81 crore on account of those

subsidiaries and joint ventures which were consolidated for the first time during the year2 Cost / Valuation of :-

( i ) Freehold land includes Rs.6.45 crore for which conveyance is yet to be completed.( ii ) Leasehold land includes

(a) Rs.6.09 crore for which the lease agreements have not been executed,(b) Rs.0.22 crore for land at Mysore taken on lease-cum-sale basis from Karnataka Industrial Area Devlopement Board ( KIADB ) vi de

agreement dated 14th July, 1987. The lease agreement for the land expired on 13th July, 1998. KIADB vide their letter no.KIADB /4377/ 13888 / 99-2000 dated 1st February, 2000 has granted extension of lease period upto 13th July, 2003 or till the execution of thesale deed whichever is earlier. Pending transfer, this land has been continued to be shown as leasehold land.

( c) Rs.5.45 crore for land taken at Bangalore on lease from KIADB vide agreement dated 21st January, 2002. The lease agreement is fora period of six years, at the end of which sale deed would be executed, on fulfilment of certain conditions by the Company.

3 Cost / valuation of buildings includes ownership accommodation:-(i) (a) In various co-operative societies and apartments and shop-owners' associations Rs.69.01 crore including 930 shares of Rs.50

each,177 shares of Rs.100 each,100 shares of Rs.10 each and 1 share of Rs.250.(b) In proposed co-operative societies Rs.36.11 crore.

(ii) In respect of which the deed of conveyance is yet to be executed Rs.4.53 crore.4 Additions during the year and capital work-in-progress :

(a) are net of Rs.15.91 crore (gain) being the exchange difference and(b) include Rs. 3.17 crore being borrowing cost capitalised in accordance with Accounting Standard (AS) 16 “Borrowing Costs” issued by the

Institute of Chartered Accountants of India and made mandatorily applicable in respect of accounting periods commencing on or after 1stApril, 2000.

5 Capital work-in-progress includes advances Rs.29.18 crore (previous year Rs.36.21 crore).6 By virtue of explicit agreements,the title in the jetties devolves on Gujarat Maritime Board.The Company is,however, entitled to use the jetties on

payment of port charges at concessional rates.7 Cost /valuation of plant and machinery include Rs.29.89 crore relating to railway wagons given on operating lease to the Railways under “Own

Your Wagons Scheme”.8 The Company had revalued as at October 1,1984 some of its land,buildings,plant and machinery and railway sidings at replacement/market value

which resulted in a net increase of Rs.108.05 crore.9 Cost / valuation of railway sidings includes Rs. 26.72 crore representing the Company’s share in the property at a certain location, jointly owned

with another company.As at 31-3-2003 As at 31-3-2002

Rs. crore Rs. crore Rs. crore Rs. crore

Schedule FInvestmentsLong T erm InvestmentsInvestments in Associates

Fully paid equity shares of associate companies 224.38 201.39Fully paid preference shares of associate companies 6.38 -Application monies pending allotment of shares - 21.43

230.76 222.82Less: Provision for diminution in value 0.56 0.56Less: Impact of Bonus and Buyback of Shares by Associate 0.04 -

230.16 222.26Accumulated Profits / (Loss) of Associates up to April 1, 2002(net of unrealised profits) (90.03) -

140.13 222.26Add: Share in profits(net) of Associate companies for the year 14.10 -

154.23 222.26Other fully paid equity shares 44.48 45.12

Less: Provision for diminution in value of investments 3.23 3.6341.25 41.49

Fully paid preference shares 2.00 2.00Government and trust securities 0.12 0.41Bonds 8.05 19.21Mutual funds 0.81 12.81

206.46 298.18Current InvestmentsGovernment and trust securities 151.00

Less: Provision for diminution in value 0.12150.88 -

Debentures 0.21 58.34Mutual Funds 170.65 1.63

321.74 59.97528.20 358.15

Schedule E (contd.)


102

Schedule forming part of consolidated accountsAs at 31-3-2003 As at 31-3-2002

Rs. crore Rs. crore Rs. crore Rs. crore

Schedule GCurrent Assets, Loans and Advances:Current Assets:

Inventories:Stock-in-trade, at cost or net realisable value whichever is lower:

Raw materials 59.54 58.83Components 49.68 43.62Construction materials 12.44 10.11Stores, spare parts and loose tools 219.77 206.05Finished goods 267.27 255.85Property development land / Property 22.22 65.84

630.92 640.30 Work-in-progress, including materials at site:

At cost 1217.47 1439.30At estimated realisable value on sale 7099.04 5432.29

8316.51 6871.59Less: Progress payments 6238.24 4785.02

2078.27 2086.57

Stock on hire 126.53 125.132835.72 2852.00

Sundry Debtors:Unsecured:Debts outstanding for more than 6 months

Considered good 581.83 522.62Considered doubtful 143.21 101.87

725.04 624.49Other Debts:

Considered good 1385.67 1041.33

2110.71 1665.82Less : Provision for doubtful debts 143.21 101.87

1967.50 1563.95Cash and bank balances:

Cash on hand 3.28 4.74Balances with scheduled banks:

on current accounts 171.21 195.19on call deposit accounts including interest accrued thereon 1.87 2.77on fixed deposits including interest accrued thereon 117.94 42.87on margin money deposit accounts 0.48 1.20

Balances with non-scheduled banks 163.03 42.75457.81 289.52

Other current assets:Interest accrued on investments 1.24 0.95 Others 8.80 10.15

Loans and advances: 10.04 11.10Secured:

Considered good: Loans against mortgage of house property 52.91 37.24 Loans against pledge of shares 0.02 2.90 Others - 30.55

52.93 70.69

Carried forward 52.93 5271.07 70.69 4716.57


103


Rs. crore Rs. crore Rs. crore Rs. croreSchedule G (contd.)

Brought forward 52.93 5271.07 70.69 4716.57Unsecured:

Considered good:Advance towards equity commitment:

Associate companies 27.96 0.15Others 3.83 -Inter-Corporate depositsAssociate companies 22.66 2.00Others 159.66 66.90

Advances recoverable from associates 17.67 36.54Advances recoverable in cash or in kind 1183.13 1076.95Loan to a corporate including interest accrued thereon - 67.86Bills discounted 99.33 46.88Deferred credit against sale of ships 5.00 20.30Balance with customs, port trust, etc. 23.76 31.49Lease receivables 36.47 -

Considered doubtful:Deferred credit against sale of ships 15.30 -Advances recoverable in cash or in kind 70.67 44.45

1718.37 1464.21Less: Provision for doubtful loans and advances 85.97 44.45

1632.40 1419.766903.47 6136.33


Schedule HCurrent Liabilities and Provisions:Liabilities:

Acceptances 76.57 4.64Sundry creditors :

Due to : Small Scale Industrial Undertakings 20.26 18.94 Others 2225.92 1658.87

2246.18 1677.81Advances from customers 1311.16 1185.03Investor Education and Protection Fund:( see note below)

Unpaid dividend 11.36 10.76Unpaid application money received for allotment of securities 0.03 **Unpaid matured deposits 1.35 **Unpaid matured debentures 8.03 **Interest accrued on above 0.32 **

21.09 10.76Due to Directors (net) 3.54 1.68Interest accrued but not due on loans 70.51 102.60Pension payable under Voluntary Retirement-cum-Pension Scheme 9.62 13.98

3738.67 2996.50Provisions for:

Taxes 110.10 41.43Proposed dividend 186.80 174.34Additional tax on dividend 23.93 2.93Gratuity 0.92 0.27Leave encashment 84.38 69.78Pension scheme 44.14 20.52

450.27 309.274188.94 3305.77

Note: There are no amounts due and outstanding to be credited to Investor Education and Protection Fund**Previous year's figures have not been given as the disclosure requirement came into force with effect from 13th November 2002


104


Schedule IDeferred revenue items(i) Miscellaneous expenditure:

( to the extent not written off or adjusted )

Lump sum fees for technical knowhow 0.71 0.97Mining development expenses 11.26 9.37Specialised softwares 6.62 7.51Voluntary Retirement-cum-Pension Schemes/

Voluntary Retirement Scheme 68.06 53.14Premium on pre-payment and refinancing of term loans 1.24 2.71Loss on sale and lease-back of fixed assets 3.54 7.08Preliminary Expenses 18.93 3.09

110.36 83.87(ii) Deferred income:

Profit on sale and lease-back of fixed assets (4.17) (8.33)106.19 75.54


Schedule JContingent Liabilities:(a) Claims against the Company not acknowledged as debts 108.26 17.74(b) Sales tax liability that may arise in respect of matters in appeals 223.47 222.93(c) Excise duty on fabrication of iron & steel at various project sites

net of recovery from customers and other issues for which theCompany has filed writ petitions in High Courts/ appeals whichare pending disposal 28.75 11.08

(d) Customs duty demands against which the Company hasfiled appeals before Appellate authorities which arepending disposal 52.60 15.48

(e) Taxes (including interest) that may arise in respect of whichthe Company is in appeal / the Income Tax Department is in appeal 23.19 9.76

(f) Extinguishment of debt (being sales tax defermentloans extinguished in previous years by transfer to a whollyowned subsidiary and later assigned to an associate company) 216.00 216.00

(g) Customers’ bills discounted 0.82 8.99(h) Guarantees given on behalf of Associate companies 114.95 6.27(i) Guarantees given for others 39.47 -(j) Other claims in respect of which the Company is contingently liable - 1.61


Schedule KSales & Service:Manufacturing & trading activity 5339.46 4849.61Construction, Project related and Property development activity 4777.87 3637.54Software development products and services 254.78 273.77Income from financing activity 124.41 140.51Facilitation charges for power plant 143.15 150.97Toll collection and related activity 42.30 39.71Servicing 63.49 40.71Commission 43.83 24.95Compensation, Engineering and Service fees 67.67 37.20

10856.96 9194.97



105


Schedule L

Other Income:Income from long term investments 28.65 22.19Profit on sale of investments 9.38 3.76Profit on sale of fixed assets (net) 14.87 5.61Gain on extinguishment of debt (see Note no. 21 ) 6.20 39.29Equipment and property rentals 23.16 18.50Miscellaneous Income 154.68 95.51

236.94 184.86


Schedule MManufacturing, construction and operating expenses:Raw materials and components consumed 1953.04 1282.57Add: Purchase of trading goods 535.12 376.44

2488.16 1659.01Less: Scrap sales 13.43 13.69

2474.73 1645.32Construction materials 830.96 677.30Sub contracts 1774.32 1435.85Stores, spares and tools 393.28 269.57Direct expenses on jobs 136.21 117.50

5609.50 4145.54Decrease in manufacturing and trading stocks:Closing stock:

Finished goods 267.27 255.85 Work-in-progress 277.76 300.40

545.03 556.25Less : Opening stock:

Finished goods 255.85 305.43 Work-in-progress ** 301.60 253.14

557.45 558.5712.42 2.32

Excise duty 8.24 30.74Power and fuel 735.14 714.46Royalty and technical knowhow fees 63.61 58.40Packing and forwarding 156.76 182.32Hire charges - Plant and machinery and others 113.59 40.09Repairs to plant and machinery and buildings 110.29 100.78Interest and other financing charges 78.58 76.26Software Development expenses 149.20 135.07Cost of built up Technology Park Space and Property Development land 28.68 30.88

7066.01 5516.86

** Opening Work in Progress includes Rs. 1.20 crore in respect of subsidiaries and joint ventures consolidated for the first time during the year



106


Schedule NStaff expenses:Salaries, wages and bonus 525.51 468.06Contribution to and provision for:

Provident funds and pension fund 39.93 37.84Superannuation/Pension schemes 36.98 18.99Gratuity funds 24.29 12.88Leave encashment 14.76 10.55

115.96 80.26Welfare and other expenses 95.07 89.94

736.54 638.26


Schedule OSales, administration and other expenses:Rent 69.20 63.64Rates and taxes 54.48 49.83Packing and forwarding 477.16 466.31Travelling and conveyance 172.58 164.08Telephone, postage and telegrams 40.97 49.96Advertising and publicity 46.45 58.55Stationery and printing 18.73 16.80Insurance 78.57 45.04Power and fuel 12.72 11.09Commission 21.95 24.80Bank charges 34.96 29.14General repairs and maintenance 83.41 82.79Miscellaneous expenses 226.81 238.40Provision for doubtful debts, advances and non-performing assets 82.86 59.07Bad debts and advances written off 66.31 19.50Provision for diminution in value of investments 0.71 3.12Discount on sales 72.61 87.41

1560.48 1469.53


Schedule PInterest and brokerage :Debentures and Fixed loans 270.41 354.47Others 52.17 104.66

322.58 459.13Less: (i) Received on inter-corporate deposits from associates

companies, customers and others 37.51 52.11

(ii) Income from long term investments:Interest on debentures, bonds and Government Securities 0.72 1.23

(iii) Income from current investments:Interest on debentures, bonds and Government Securities 2.07 0.57

40.30 53.91

282.28 405.22



107

1. Basis of Accounting / Basis of preparation of financial statementsThe Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally accepted accountingprinciples [“GAAP”] except for the revaluation of certain fixed assets, and in compliance with the Accounting Standards referred to in Section211(3C) and other requirements of the Companies Act, 1956. However, certain escalation and other claims, which are not ascertainable /acknowledged by customers, are not taken into account.

The preparation of financial statements in conformity with GAAP requires that the management of the company makes estimates andassumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and thedisclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates include the useful lives offixed assets, provision for doubtful debts / advances, future obligations in respect of retirement benefit plans, etc. Actual results could differfrom these estimates.

The accounts of the Indian Subsidiaries and Associates have been prepared in compliance with the Accounting Standards referred to inSection 211(3C) and other requirements of the Companies Act, 1956 and those of the foreign Subsidiaries and Associates have been preparedin compliance with the local laws and applicable Accounting Standards.

2. Revenue RecognitionThe Group recognises revenue in the following manner:

a) Sales and service include excise duty, cash subsidy and adjustment for liquidated damages and price variation.

b) Revenue from construction and project related activity and contracts executed in Joint Ventures under work-sharing arrangement (JointlyControlled Operations, in terms of Accounting Standard 27 “Financial Reporting of Interests in Joint Ventures”), is recognised based onpercentage of completion method.

c) In respect of contracts executed in Integrated Joint Ventures under profit-sharing arrangement (Jointly Controlled Entities, in terms ofAccounting Standard 27 “Financial Reporting of Interests in Joint Ventures”), profit / loss is accounted when the same is determined bythe Joint Venture. Services rendered to Integrated Joint Ventures under profit-sharing arrangement are accounted as income on accrualbasis.

d) Revenue from property development activity is recognised when the equitable share of property in the land and/or building is transferredto the customer.

e) Revenue from software development is recognised based on software developed or time spent in person hours or person weeks andbilled to customers as per the terms of specific contracts.

f) Toll collections from users of facility are accounted when the amount is due and recovery is certain. Licence fees for wayside amenitiesare accounted on accrual basis

g) Income from hire purchase transactions are accounted on accrual basis, pro-rata for the period, at the rates implicit in the transaction.Income from Bill Discounting, Advisory and Syndication Services and other financing activities is accounted on accrual basis.

3. Principles of consolidationa) The financial statements of the Parent Company and its Subsidiaries have been consolidated on a line-by-line basis by adding together

the book values of like items of assets, liabilities, income and expenses, after eliminating intra-group balances and the unrealised profits/losses on intra-group transactions, and are presented to the extent possible, in the same manner as the Company’s separate financialstatements.

b) Investment in Associate companies have been accounted for using “equity method” of accounting prescribed by Accounting Standard(AS) 23:’Accounting for Investments in Associates in Consolidated Financial Statements’ issued by the Institute of Chartered Accountantsof India, whereby investment is initially recorded at cost and the carrying amount is adjusted thereafter for post-acquisition change inthe Company’s share of net assets of the Associate.

4. Research & DevelopmentRevenue expenditure on research and development is charged under respective heads of account. Capital expenditure on research anddevelopment is included as part of fixed assets and depreciated on the same basis as other fixed assets.

5. Retirement BenefitsProvisions for / contributions to retirement benefits schemes are made as follows:

a) Provident fund on actual liability basis

b) Gratuity based on actuarial valuation

c) Leave Encashment Benefit on retirement on actuarial valuation basis.

d) Superannuation / Pension schemes on the basis of actual liability/actuarial valuation.

6. Fixed AssetsFixed assets are stated at original cost net of tax / duty credits availed, if any, and those which were revalued as on October 1, 1984 arestated at the value determined by the valuers. Assets acquired on hire purchase basis are stated at their cash values. Specific know-howfees paid, if any, relating to plant and machinery is treated as part of cost thereof.

SIGNIFICANT ACCOUNTING POLICIES

Schedule Q

Schedule forming part of consolidated accounts


108

Revenue expenses incurred in connection with project implementation on insofar as such expenses relate to the period prior to thecommencement of commercial production are treated as part of project cost and capitalised.Own manufactured assets are capitalised at cost including an appropriate share of overheads.

7. Leasesa) Lease transactions entered into prior to April 1, 2001

Assets leased out are stated at original cost. Lease equalisation adjustment is the difference between capital recovery included in thelease rentals and depreciation provided in the books.Lease rentals in respect of assets acquired under leases are charged to Profit and Loss Account.

b) Lease transactions entered into on or after April 1, 2001i. Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as finance

leases. Such assets are capitalised at the inception of the lease at lower of the fair value or the present value of minimum leasepayments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interestcost, so as to obtain a constant periodic rate of interest on the outstanding liability for each period.

ii. Assets acquired as leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classifiedas operating leases. Lease rentals are charged to the Profit and Loss Account on accrual basis.

iii. Assets given under a finance lease are recognised as a receivable at an amount equal to the net investment in the lease. Leaseincome is recognised over the period of the lease so as to yield a constant rate of return on the net investment in the lease.

iv. Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over the lease term.v. Initial direct costs relating to assets given on finance leases are charged to Profit and Loss Account.

8. Depreciationi. Indian companies

a) Owned assets:Depreciation on revalued assets is calculated on straight line basis on the values and at the rates given by the valuers. The differencebetween depreciation on assets based on revaluation and that on original cost is transferred from Revaluation Reserve to Profitand Loss account.Depreciation on original cost is provided on the written down value basis on assets acquired up to March 31, 1968 (at the ratesprescribed under Schedule XIV to the Companies Act, 1956) and on straight line basis on assets acquired subsequently (at therates prevailing at the time of their acquisition on assets acquired up to September 30, 1987 and at the rates prescribed underSchedule XIV on assets acquired after that date). However, motor cars have been depreciated at 14.14% p.a. Depreciation onadditions/deductions is calculated pro rata from / to the month of additions/deductions. Extra shift depreciation is provided on alocation basis. The value of leasehold land is amortised over the residual period of the lease. Capital expenditure incurred by theCompany, not represented by assets, is amortised over a period of five years, and similar expenditure incurred on Jetty is amortisedover the period of the relevant agreement such that the cumulative amortisation is not less than the cumulative rebate availed bythe Company. Assets constructed on land given under the concession agreement with the Ministry of Surface Transport, Governmentof India, are amortised over the tenor of such concession agreement.

b) Leased assets:i. Lease transactions entered into prior to April 1, 2001:

Assets given on lease are depreciated over the primary period of the lease. Accordingly, while the statutory depreciation onsuch assets is provided for on straight line method as per Schedule XIV to the Companies Act, 1956, the difference is adjustedthrough lease equalisation and lease adjustment account.

ii. Lease transactions entered into on or after April 1, 2001:Assets acquired under finance leases are depreciated on a straight line basis over the lease term. Where there is reasonablecertainty that the Company shall obtain ownership of the assets at the end of the lease term, such assets are depreciated atthe rates prescribed in Schedule XIV to the Companies Act, 1956. In other cases, the assets are depreciated over the term ofthe lease.

ii. Foreign companiesDepreciation has been provided by the foreign companies on methods and at the rates required / permissible by the local laws so as towrite off the assets over their useful lives.

iii. Goodwill arising out of acquisition of equity stake in a Subsidiary or an Associate is amortized in equal amounts over a period of 10years from the date of first acquisition. In the event of cessation of operations of a Subsidiary or an Associate, the unamortised goodwillis written off fully.

9. InvestmentsCurrent investments are carried at lower of cost or market value. The determination of the carrying costs of such investments is done on thebasis of specific identification. Long term investments (other than Associates) are carried at cost, after providing for any diminution in value, ifsuch diminution is of a permanent nature.

10. InventoriesInventories are valued, after providing for obsolescence, as under:a) Raw materials, components, construction materials, stores, spares and loose tools at weighted average cost.

Schedule forming part of consolidated accountsSchedule Q (contd.)


109

b) Work-in-Progressi. Work in progress (Other than project and construction-related) at cost including related overheads.ii. Project and Construction-related Work-in-progress at cost till a major portion of the job is completed and thereafter at realisable

value.In the case of qualifying assets, cost includes applicable borrowing costs vide policy relating to Borrowing Costs.

c) Finished goods at lower of cost or net realisable value. Cost includes related overheads and excise duty paid / payable on such goods.d) Property Development Land at lower of cost or net realisable value.

11. Securities Premium Accounta) Securities premium includes:

i. The difference between the market value and the consideration received in respect of shares issued pursuant to Stock AppreciationRights Scheme.

ii. The discount allowed, if any, in respect of shares allotted pursuant to Stock Options Scheme.b) The following expenses are written off against Securities Premium Account:

i. Issue expenses pertaining to Shares/Debentures/Bonds.ii. Premium paid on redemption of Debentures/Bonds.

12. Borrowing CostsBorrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of cost of suchassets till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily requires a substantialperiod of time to get ready for its intended use or sale. All other borrowing costs are recognised as an expense in the period in which they areincurred.

13. InterestThe difference between the Face Value and the Issue Price of the Deep Discount Bonds, being in the nature of interest, is charged to theProfit and Loss Account, on a compound interest basis determined with reference to the yield inherent in the discount.

14. Employee Stock Ownership Schemesa) Discount in respect of Stock Appreciation Rights [“SARs”] issued pursuant to Stock Appreciation Rights Scheme is charged to the

Profit and Loss Account as employee compensation in the year in which the shares are allotted.SEBI (Employee Stock Options Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 require the accounting for discount onthe grant of options over the period of vesting. However, in the case of SARs, the number of shares comprised in the grant is not quantifiableuntil the options vest. Hence, the charge to revenue is confined to options that are allotted.

b) In respect of stock options issued pursuant to the Stock Options Scheme, the difference between market price and the grant price, ifany, on the date of grant of option, i.e., the discount is treated as employee compensation and deferred over the period of vesting.

15. Deferred Revenue ExpenditureThe expenses disclosed under Miscellaneous Expenditure are amortised as follows:a) Lump sum fees for technical know-how, other than those relating to plant and machinery, over a period of six years in case of foreign

technology and three years in the case of indigenous technology.b) Mining development expenses over a period of five years.c) Specialised softwares over a period of three years.d) Lump sum compensation paid under Voluntary Retirement Schemes launched from the year 2001-02 and onwards are amortised over

a period of five years. Payments made under the earlier schemes are amortised over a period of three years. The future pensions underVoluntary Retirement-cum-Pension Scheme are amortised over the period for which pensions are payable.

e) Premium paid on prepayment and refinancing of term loans is charged off over the tenor of the new loans in proportion to the principalamount outstanding.

16. Foreign Currency TransactionsTranslation of overseas jobs / branches is as under:a) Closing inventories at rates prevailing at the end of the year.b) Fixed assets as at April 1, 1991 at rates prevailing at the end of the year in which additions were made. Subsequent additions at rates

prevailing on the dates of additions. Depreciation is accounted for at the same rate at which assets are converted.c) Other assets and liabilities at rates prevailing at the end of the year.d) Net revenues at the average rate for the year.All other foreign currency transactions are accounted for at the rates prevailing on the dates of the transactions.Foreign currency assets and liabilities (other than those relating to overseas jobs / branches) are converted at contracted / year-end rates asapplicable.The exchange differences on settlement/conversion are adjusted to:a) Cost of fixed assets, if the foreign currency liability relates to fixed assets.b) Profit and Loss account in other cases.c) Wherever forward contracts are entered into, the exchange differences are dealt with in the Profit and Loss Account over the period of

the contracts.



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Financial statements of overseas Group companies are converted as under:

a) Assets and liabilities at the rate prevailing at the end of the year. Depreciation is accounted at the same rate at which assets are converted.

b) Revenues and expenses at yearly average exchange rates prevailing during the year.

The resulting translation adjustment is credited / charged to the Profit and Loss account.

17. Segment accountingi. Segment accounting policies

Segment accounting policies are generally in line with the accounting policies of the Company. However, the following specific accountingpolicies have been followed for segment reporting:

(a) Segment Revenue includes Sales and other income directly identifiable with / allocable to the segment including inter-segmentrevenue.

(b) Expenses that are directly identifiable with / allocable to segments are considered for determining the Segment Result. The expenses,which relate to the Company as a whole and not allocable to segments, are included under “Other Unallocable expenditure.”

(c) Income which relates to the Company as a whole and not allocable to segments is included in “Unallocable Corporate Income”.

(d) Segment Result includes margins on inter-segment capital jobs, which are reduced in arriving at the profit before tax of the Company.

(e) Segment assets and liabilities include those directly identifiable with the respective segments. Unallocable corporate assets andliabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment. Unallocableassets mainly comprise trade investments in Associate companies. Unallocable liabilities include mainly loan funds, provisions foremployee retirement benefits and proposed dividend.

ii. Inter-Segment Transfer PricingSegment Revenue resulting from transactions with other business segments is accounted on the basis of transfer price agreed betweenthe segments. Such transfer prices are either determined to yield a desired margin or agreed on a negotiated basis.

18. Taxes on IncomeIndian companies:

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisionsof the Income Tax Act 1961, and based on expected outcome of assessments / appeals.

Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year, and quantified usingthe tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable incomewill be available against which such deferred tax assets can be realised.

Foreign companies:

Foreign companies recognise tax liabilities and assets in accordance with the applicable local laws.

19. Accounting for Joint VenturesAccounting for Joint Ventures has been done as follows:

Type of Joint Venture Accounting treatmentJointly Controlled Operations Company’s share of revenues, common expenses, assets and liabilities are included in Revenues,

Expenses, Assets and Liabilities respectively.

Jointly Controlled Assets Share of the assets according to nature of the assets and share of the liabilities shown as part ofGross Block and Liabilities. Share of expenses incurred on maintenance of the assets accountedas expense. Monetary benefits if any from use of the assets reflected as income.

Jointly Controlled Entities The Company’s interest in the Joint Venture has been consolidated on a line-by -line basis byadding together the book values of assets, liabilities, income and expenses, after eliminating theunrealised profits/losses on intra group transactions.

Joint Venture interests accounted as above have been included in segments to which they relate.



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Notes forming part of consolidated accounts1. Basis of preparation

(a) The Consolidated Financial Statements (CFS) are prepared in accordance with Accounting Standard (AS) 21 on “Consolidated FinancialStatements”, Accounting Standard (AS) 23 on “Accounting for Investments in Associates in Consolidated Financial Statements”, AccountingStandard (AS) 27 on “Financial Reporting of Interests in Joint Ventures”, issued by the Institute of Chartered Accountants of India (ICAI).The CFS comprise the financial statements of Larsen & Toubro Limited (L&T), its Subsidiaries, Associates and Joint Ventures. Referencein these notes to L&T, Company, Parent Company, Companies or Group shall mean to include Larsen & Toubro Limited or any of itsSubsidiaries, Associates and Joint Ventures, unless otherwise stated.

(b) The notes and significant policies to the CFS are intended to serve as a guide for better understanding of the Group’s position. In thisrespect, the Company has disclosed such notes and policies, which represent the needed disclosure.

2. The list of Subsidiaries and Associates included in the consolidated financial statements are as under:

Name of the Subsidiary Country of Proportion of ownershipIncorporation as at March 31, 2003

Indian Subsidiaries

1 Tractor Engineers Limited India 100%

2 L&T Finance Limited India 100%

3 L&T Capital Company Limited India 100%

4 L&T Trade.com Limited India 100%

5 Larsen & Toubro Infotech Limited India 100%

6 LTM Limited India 100%

7 L&T Transportation Infrastructure Limited India 100%

8 HPL Cogeneration Limited India 51%

9 Narmada Cement Company Limited India 96.91%

10 Narmada Infrastructure Construction Enterprise Limited India 80%

11 L&T Western India Tollbridge Limited India 100%

12 L&T Equipment Leasing Company Limited India 100%

13 India Infrastructure Developers Limited India 100%

14 L&T Netcom Limited India 100%

15 L&T Cement Limited India 100%

16 Dakshin Cements Limited India 100%

17 L&T Holdings Limited India 100%

18 L&T Infocity Limited India 89%

19 Hyderabad International Trade Expositions Limited

(formerly known as Hyderabad International Trade Exposition Centre Limited) India 89%

20 Andhra Pradesh Expositions Private Limited India 89%

21 Bhilai Power Supply Company Limited India 99.9%

22 L&T Power Investments Private Limited India 100%

23 Raykal Aluminium Company Private Limited India 100%

24 Cyber Park Development & Construction Limited India 100%

Foreign Subsidiaries1 Larsen & Toubro Infotech GmbH Germany 100%

2 Larsen and Toubro Ceylinco (Private) Limited Sri Lanka 80%

3 Larsen & Toubro LLC* USA 100 %

4 Larsen & Toubro International FZE** UAE 100%

5 L&T-ECC Construction (M) SDN. BHD.** Malaysia 30%

6 Larsen & Toubro (Oman) LLC [w.e.f. 25.01.2003 ] UAE 65%

* Accounts have been consolidated for the 9 months period ended December 31, 2002.

** Accounts have been consolidated for the 12 months period ended December 31, 2002.

Name of the Associate Country of Incorporation Proportion of ownershipas at March 31, 2003

1 Audco India Limited India 50%

2 EWAC Alloys Limited India 50%

3 L&T-Chiyoda Limited India 50%


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4 L&T-Niro Limited India 50%

5 L&T-Sargent & Lundy Limited India 50%

6 L&T-Komatsu Limited India 50%

7 L&T-Ramboll Consulting Engineers Limited India 50%

8 L&T-John Deere Private Limited India 50%

9 L&T-Case Equipment Private Limited India 50%

10 Gujarat Leather Industries Limited India 50%

11 Voith Paper Technology (India) Limited India 50%

12 Larsen & Toubro (Saudi Arabia) LLC** Saudi Arabia 49%

13 L&T Crossroads Private Limited India 50%

14 L&T Infocity Ascendas Limited India 44.5%

15 International Seaports Pte. Limited** Singapore 33.3%

16 The Dhamra Port Company Limited India 33.3%

17 Sharp Business Systems (India) Limited India 26%

18 Ahmedabad Mehsana Toll Road Company Limited India 50%

19 International Seaports (Haldia) Private Limited India 22.3%

20 Larsen & Toubro (Oman) LLC [up to 25.01.2003] UAE 49%

** Accounts have been consolidated for the 12 months period ending December 31, 2002.

3. Goodwill / Capital Reserves:

Goodwill represents the difference between the Group’s share in the net worth of a Subsidiary, and the cost of acquisition at each point oftime of making the investment in the Subsidiary . For this purpose, the Group’s share of net worth is determined on the basis of the latestfinancial statements prior to the acquisition after making necessary adjustments for material events between the date of such financial statementsand the date of respective acquisition. Negative goodwill is shown separately as Capital Reserve on Consolidation.

Goodwill arising out of an acquisition of equity stake in a Subsidiary is amortized in equal amounts over a period of 10 years from the date offirst acquisition. In the event of cessation of operations of a Subsidiary , the unamortised goodwill is written off fully.

Consequently, an amount of Rs. 33.44 crore was adjusted against the opening reserves in the previous year, Rs. 12.79 crore has been shownas capital reserve on consolidation as on March 31, 2002. During the year Rs. 21.90 crore (previous year Rs.21.90 crore) was amortisedfrom goodwill and Rs. 0.40 crore was recognised as capital reserve on consolidation.

4. Reserves shown in the consolidated balance sheet represent the Group’s share in the respective reserves of the Group companies. Retainedearnings comprise general reserve and profit and loss account.

5. Up to last year, investments in Associate companies were accounted at cost as per Accounting Standard (AS) 13 “Accounting for Investments”issued by the Institute of Chartered Accountants of India. From the current year the same are being accounted as per Accounting Standard(AS) 23 “Accounting for investments in Associates” under the equity method. Consequently the Group’s share of post acquisition reserves ofAssociate companies has been shown as an adjustment to the opening retained earnings/ reserves as at April 1, 2002.

6. In case of Larsen & Toubro (Saudi Arabia) LLC and International Seaports Pte. Limited (both Associate companies) financial results up toDecember 31, 2002 have been considered. No material adjustments are required to be made for the effects of any significant events ortransactions between the said Associate companies and the other entities in the Group between the date of the Associates’ financial statementsand the date of Consolidated Financial Statements.

7. (a) During the year, L&T subscribed to 2,00,00,000 shares of Larsen and Toubro Ceylinco (Private) Limited. However the stake of L&T inLarsen and Toubro Ceylinco (Private) Limited continues to remain at 80% post issue.

(b) Larsen & Toubro (Oman) LLC, earlier an Associate Company, became a Subsidiary on January 25, 2003 on acquisition of an additional16% stake. As a result of this change, the stake of L&T in Larsen & Toubro (Oman) LLC stands at 65%. The financial performance ofLarsen & Toubro (Oman) LLC has been suitably included in the Consolidated Financial Statements in line with the change in the ownershipduring the year.

(c) On November 25, 2002, L&T subscribed to 49,900 shares of Bhilai Power Supply Company Limited (BPSCL), as a result of whichBPSCL became a 99.9% subsidiary of the Company.

(d) On November 30, 2002, L&T subscribed to 59,998 shares of L&T Power Investments Private Limited, as a result of which it became a100% subsidiary of the Company.

(e) On March 26, 2003, L&T Holdings Limited subscribed to 50,000 shares of Cyber Park Development & Construction Limited, as a resultof which it became a 100% subsidiary of L&T Holdings Limited. L&T Holdings Limited is a 100% subsidiary of L&T.

(f) During the year Hyderabad International Trade Expositions Limited (HITEX) subscribed to 9,998 shares of Andhra Pradesh ExpositionsPrivate Limited, as a result of which it became a 100% subsidiary of HITEX. HITEX is a 100% subsidiary of L&T Infocity Limited, whichis in turn a subsidiary (89% stake) of L&T.

(g) On December 12, 2002, L&T Power Investments Private Limited subscribed to 50,000 shares of Raykal Aluminium Company PrivateLimited, as a result of which it became a 100% subsidiary of L&T-Power Investments Private Limited. L&T Power Investments PrivateLimited is a 100% subsidiary of L&T.

Notes forming part of consolidated accounts (contd.)


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(h) The effect of acquisitions and disposals of stake in Subsidiaries during the year on the Consolidated Financial Statements are as under:Rs.crore

Name of Company Effect on Group Effect on Group Netprofit after Minority Assets as at

Interest March 31, 2003Bhilai Power Supply Company Limited Nil 0.05L&T Power Investments Private Limited Nil 0.06Raykal Aluminium Company Private Limited Nil 0.05Andhra Pradesh Expositions Private Limited Nil 0.01Cyber Park Development and Construction Limited Nil 0.05Larsen & Toubro(Oman) LLC Nil 3.38Total 3.60

8. Of the Equity Shares

(i) 18,39,882 Equity Shares were allotted as fully paid up, pursuant to contracts, without payment being received in cash.

(ii) 3,41,29,743 Equity Shares were issued as bonus shares by way of capitalisation of General Reserve: Rs.23.49 crore, Share Premium:Rs. 9.68 crore and Capital Redemption Reserve: Rs. 0.96 crore.

(iii) 1,10,033 Equity Shares were allotted as fully paid up on exercise of options under the Employee Stock Ownership Schemes.

9. Stock Ownership Schemes:In terms of the approval of the shareholders at the Annual General Meeting held on the 26th August 1999, the Company has established twoschemes of employees stock ownership, namely, Stock Appreciation Rights Scheme and Stock Options Scheme. The grant of options to theemployees under these Schemes is on the basis of their performance and other eligibility criteria. The options are vested over a period of fouryears, subject to fulfilment of certain conditions. Upon vesting, the grantees are eligible to apply for and secure the allotment of equity sharesof the Company on payment of (a) Rs. 10 each in the case of shares allotted, as per a predetermined formula, pursuant to Stock AppreciationRights Scheme and (b) the grant price in the case of shares allotted pursuant to Stock Options Scheme.The details of the grants under the aforesaid Schemes are summarized below:a) Stock Appreciation Rights [SAR]-1999

1 Grant price per share (Rs.) 1992 Grant date 1.9.19993 Vesting commences on 1.9.20004 Vesting schedule 25% of grant each year commencing one year from the date of grant.

Particulars (Number of SARs) 2002-2003 2001-20025 SARs outstanding at the beginning of the year 7,94,250 7,99,5006 SARs exercised in respect of which shares were allotted during the year Nil Nil7 SARs lapsed during the year on separation Nil 5,2508 SARs outstanding at the end of the year (5-6-7) 7,94,250 7,94,250

Of which -SARs vested 5,61,125 3,03,250-SARs yet to vest (due to vest on 1.9.2003) 2,33,125 4,91,000

The number of equity shares in respect of 7,94,250 SARs outstanding as on March 31, 2003 is not quantifiable presently.b) Stock Options [ESOP]: E S O P

2000 2002 (A series) 2002 (B series)1 Grant price per share (Rs.) 184 172 1722 Grant date 1.6.2000 19.4.2002 19.4.20023 Vesting commences on 1.6.2001 19.4.2003 19.4.20034 Vesting schedule 25% of grant each year commencing one year from the date of grant.

Particulars (Number of Options) 2002-2003 2001-2002 2002-2003 2001-2002 2002-2003 2001-20025 Options outstanding at the

beginning of the year 39,08,450 39,48,800 Nil N.A. Nil N.A.6 Options granted during the year Nil Nil 37,81,100 N.A. 37,81,660 N.A.7 Options exercised in respect of

which shares were allotted 5,715 Nil Nil N.A. Nil N.A.8 Options lapsed during the year on

separation 46,400 40,350 32,200 N.A. 6,500 N.A.9 Options outstanding at the end of

the year (5+6-7-8) 38,56,335 39,08,450 37,48,900 N.A. 37,75,160 N.A.Of which - Options vested 20,38,985 10,44,425 Nil N.A. Nil N.A.

- Options yet to vest 18,17,350 28,64,025 37,48,900 N.A. 37,75,160 N.A.

During the year, 37,58,700 options granted on 20th April 2001 at a grant price of Rs.212 per share were cancelled.



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10. Conversion of 12.5% Fully Convertible Debentures (IV Series) into 3,88,956 equity shares have not been effected, as all amounts due onthem have not been received from the debentureholders. Additions to the Subscribed/Paid up Capital will be accounted as and when furtherallotments are made. However, provision for dividend has been made on all the shares including those due on conversion.

11. Closing work-in-progress includes a sum of Rs.185.19 crore towards retention money withheld by customers.

12. Loans and advances include:

(i) amount due from an officer of the Company: Rs. 0.06 crore (previous year Rs. 0.06 crore ). The maximum amount outstanding at anytime during the year: Rs. 0.06 crore (previous year Rs. 0.07 crore).

(ii) rent deposit with three whole-time directors: Rs. 3,39,000 (previous year Rs.3,26,400). The maximum amount outstanding at any timeduring the year: Rs. 3,80,400 (previous year Rs.3,26,400).

(iii) amount, including interest, due from the Managing Director, the Deputy Managing Director and five whole-time directors in respect ofHousing Loan: Rs. 2.99 crore (including interest accrued) (previous year Rs.2.39 crore). Maximum amount outstanding at any time duringthe year: Rs. 2.99 crore (previous year Rs.2.39 crore).

13. Sales and service include:

(a) (i) Rs.54.84 crore for price variation net of liquidated damages in terms of contracts with the customers.

(ii) Increase in work-in-progress relating to construction and project related activity as under:

Rs. crore

Work-in-progress including materials at site

- At close (previous year Rs. 6571.19 crore) 8038.75

Less : - At commencement (previous year Rs. 6277.24 crore) 6571.19

1467.56

iii) Rs. 4.02 crore relating to earlier years

(b) Manufacturing, construction and operating expenses and Selling, administration and other expenses include Rs. 4.54 crore andRs. 2.60 crore respectively relating to earlier years.

14. During the year, the Company changed the revenue recognition policy with respect to long-cycle turnkey project / construction contracts, soas to recognize margin when 25% of the job is complete. In earlier years, margins on such jobs were recognised when a completion stage of50% was achieved. Consequent upon the change, Sales for the year is higher by Rs.14.94 crore and profit before tax is higher by a likeamount.

15. Disclosures in respect of Joint Ventures

[a] List of Joint Ventures

Sl. Name of Joint Venture Description of interest Proportion ofNo. Ownership Country of

Interest Incorporation Residence

1 L&T-Hochtief Seabird Joint Venture Jointly Controlled Entity (construction of breakwater) 90% ** India

2 Desbuild-L&T Joint Venture Jointly Controlled Entity (Renovation of US Consulate, Chennai) 49% ** India

3 International Metro Civil Contractors Jointly Controlled Entity (Construction of Delhi Metro Corridor- Mass Rapid Transport System Ph I Tunnel Projects “MC1A & MC1B”) 26% ** India

4 Bauer-L&T Diaphragm Wall JV Jointly Controlled Entity (Construction of Diaphragm Wall for

International Metro Civil Contractors) 50% ** India

5 HCC-L&T Purulia JV Jointly Controlled Entity (Construction of Pumped Storage Project) 43% ** India

6 Larsen & Toubro Limited-Shapoorji Jointly Controlled Entity (Execution of main ContractPallonji & Co. Limited Joint Venture work (Civil & Associated works) for Ebene Cybercity Project, Mauritius) 50% ** Mauritius

7 L&T-Demag Plastics Machinery Jointly Controlled Entity (Manufacture and marketing of InjectionPrivate Limited Moulding Machines) 50% India India

8 L&T-Joshi Technologies Inc. Joint Venture Jointly Controlled Operations (Exploration & development of Dholka &Wavel Oilwells) - ** India

9 L&T-HCC Joint Venture Jointly Controlled Operations (Four laning and strengthening of existingtwo lane sections from 240 km to 320 km on NH-2 [Constructionpackage VB] in the States of Bihar & Jharkhand) - ** India

** Country of incorporation not applicable as these are Unincorporated Joint Ventures.

[b] Contingent liabilities, if any, incurred in relation to interests in Joint Ventures as on 31.3.2003 - Rs. Nil (previous year - Rs. Nil)

[c] Capital Commitments, if any, incurred in relation to interests in Joint Ventures as on 31.3.2003 - Rs. Nil (previous year. - Rs. Nil)

[d] The Company has made an application to the Directorate General of Hydrocarbons (DGH) for assignment of its participating interest inthe Oil Production Sharing Contract, in favour of Joshi Technologies International Inc., the JV partner. The Company has not shareddevelopment expenses incurred after the submission of the said application.



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16. Segment Reporting :(a) Information about Business Segments (Information provided in respect of revenue items for the year ended March 31, 2003 and in

respect of Group assets / liabilities as at March 31, 2003) – denoted as “CY” below, previous year denoted as “PY”)(i) Primary Segments (Business Segments) :

Rs. croreParticulars Engineering & Cement Electrical & Power Others Eliminations Total

Construction ElectronicsCY PY CY PY CY PY CY PY CY PY CY PY CY PY

RevenueExternal Revenue 6458.24 4658.33 2686.28 2783.11 781.15 705.51 143.15 150.97 877.14 957.53 - - 10945.96 9255.45Inter-Segment Revenue 33.99 216.93 132.39 124.53 83.99 30.56 - - 37.94 22.26 (288.31) (394.28) - -Total Revenue 6492.23 4875.26 2818.67 2907.64 865.14 736.07 143.15 150.97 915.08 979.79 (288.31) (394.28) 10945.96 9255.45ResultSegment Result 452.85 402.61 140.41 271.38 103.83 81.36 101.29 106.85 48.46 76.72 - - 846.84 938.92Less : Inter-Segment margin on capital jobs / Interest (net) on transactions with Financial Services Segment 10.10 39.40

836.74 899.52Unallocable Corporate Income / (Expenditure)(Net) (74.56) (80.80)Operating Profit (PBIT) 762.18 818.72Interest Expense (322.58) (459.13)Interest Income 40.30 53.91Profit before Tax (PBT) 479.90 413.50Other InformationSegment Assets 4996.01 4238.92 3684.16 4030.98 601.53 583.97 457.71 418.66 2146.65 1958.47 - (20.25) 11886.06 11210.75Unallocable Corporate Assets 1183.53 1182.63Total Assets 13069.59 12393.38Segment Liabilities 3036.12 2133.56 471.99 369.88 157.06 148.16 20.20 4.51 977.95 861.90 - (20.25) 4663.32 3497.76Unallocable Corporate Liabilities 5139.52 5713.66Total Liabilities 9802.84 9211.42Capital Expenditure 77.33 79.22 28.89 171.48 6.09 8.80 0.08 9.53 153.92 99.40Depreciation 72.63 85.77 243.09 218.79 9.95 11.40 21.97 22.50 82.41 96.51Non-cash expenses otherthan depreciation 7.30 6.38 12.88 7.67 7.56 6.48 0.08 - 10.39 1.54

(ii) Secondary Segments (Geographical segments) : Rs.crore

Domestic Overseas TotalCY PY CY PY CY PY

External Revenue 8986.92 7841.55 1959.04 1413.90 10945.96 9255.45Carrying amount of Segment Assets 11254.79 10757.32 631.27 473.68 11886.06 11231.00Capital expenditure 274.22 365.13 1.48 3.30 275.70 368.43(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 Company’s 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 individualbusinesses, the organisational structure and the internal reporting system of the Company.

(iii) Reportable SegmentsReportable segments have been identified as per the quantitative criteria specified in Accounting Standard (AS) 17 “SegmentReporting” issued by the ICAI.

(iv) Segment Compositionl 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 sectors/ infrastructure industries. The segment capabilities include process technology, basic / detailed engineering, equipmentfabrication / supply, erection & commissioning, procurement/ construction and project management.

l Cement Segment is engaged in the manufacture and sale of various types of cement, clinker and ready mix concrete inIndia and abroad. The cement is sold in bagged as well as bulk form.

l Electrical & Electronics Segment comprises manufacture and sale of low voltage switchgear and control gear, custom-builtswitchboards, petroleum dispensing pumps & systems, electronic energy meters/ protection (relays) systems, control &automation products and medical equipment.



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l Power Segment is engaged in the generation of power and steam for the captive consumption of Haldia PetrochemicalsLimited.

l “Others” primarily include financial services, leasing, software development, toll collecting activity, property development,manufacture and sale of undercarriage assemblies, metal and glass packaging business and marketing of [a] welding / industrialproducts [b] construction equipment and [c] earthmoving equipment

17. Disclosure of related parties / related party transactions:I. Names of the Related Parties with whom transactions were carried out during the year and description of relationship:

Associate Companies:1 EWAC Alloys Limited 2 L&T-Ramboll Consulting Engineers Limited3 Audco India Limited 4 L&T Crossroads Private Limited5 L&T-Niro Limited 6 L&T-Case Equipment Private Limited7 L&T-Chiyoda Limited 8 Sharp Business Systems (India) Limited9 L&T-Sargent & Lundy Limited 10 L&T Infocity-Ascendas Limited11 L&T-Komatsu Limited 12 The Dhamra Port Company Limited13 International Seaports Pte. Limited 14 Voith Paper Technology(India) Limited15 L&T-John Deere Private Limited 16 Larsen & Toubro(Oman) LLC [upto 25.01.2003]17 Larsen & Toubro (Saudi Arabia) LLC

Joint Ventures1 Desbuild - L&T Joint Venture 2 Bauer-L&T Diaphragm Wall JV3 Larsen & Toubro Limited-Shapoorji Pallonji & Co. Ltd. Joint Venture 4 L&T-Joshi Technologies Inc. Joint Venture5 L&T-Hochtief Seabird Joint Venture 6 L&T-Demag Plastics Machinery Pvt. Ltd.7 HCC-L&T Purulia JV 8 L&T-HCC Joint Venture9 International Metro Civil Contractors

Key Management Personnel & their relatives1 Mr. A M Naik, Managing Director and Chief Executive Officer 2 Mr. K Venkataramanan, Whole-time Director3 Mr. A Ramakrishna, Deputy Managing Director 4 Mr. R N Mukhija, Whole-time Director

Mrs. A Suryakumari (Wife) Mrs. Sushma Mukhija (Wife)Mr. A Narsimha Rao (Brother)

5 Mr. Y M. Deosthalee, Whole-time Director 6 Mr. P.M.Mehta, Whole-time Director (w.e.f. 14.6.2002 )7 Mr. J P Nayak, Whole-time Director

Mr. Nitin J. Nayak (Son)Mrs Neeta J. Nayak(Wife)Mrs. Rohini P. Nayak (Mother)Mrs. Nina D. Nayak (Daughter)

II. Disclosure of Related Party Transactions

Rs. croreSl.

No. Nature of relationship / Transaction Associates & Key Management Relatives of

Joint Ventures Personnel [“KMP”] KMP Total

1 Purchase of goods & services (including Commission paid) 278.01 NIL NIL 278.01

(237.26) (NIL) (NIL) (237.26)2 Sale of goods/ power/ contract revenue & services 77.96 NIL NIL 77.96

(16.27) (NIL) (NIL) (16.27)3 Purchase/Lease of fixed assets 1.34 NIL NIL 1.34

(5.25) (NIL) (NIL) (5.25)4 Sale of fixed assets 0.18 NIL NIL 0.18

(0.04) (NIL) (NIL) (0.04)5 Subscription to equity and preference shares 16.38 NIL NIL 16.38

(18.11) (NIL) (NIL) (18.11)6 Sale of Investments NIL NIL NIL NIL

(0.70) (NIL) (NIL) (0.70)7 Receiving of services / overheads charged 8.38 NIL NIL 8.38

(5.54) (NIL) (0.01) (5.55)8 Rent paid, including lease rentals under leasing or hire purchase

arrangements including loss sharing on equipment finance 0.02 0.05 0.15 0.22

(0.02) (0.01) (0.06) (0.09)9 Lease Rentals and facilitation charges received NIL NIL NIL NIL

(0.87) NIL NIL (0.87)



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10 Guarantees and collaterals 164.95 NIL NIL 164.95

(5.72) (NIL) (NIL) (5.72)11 Charges for deputation of employees to related parties 1.10 NIL NIL 1.10

(1.65) (NIL) (NIL) (1.65)12 Dividend received 10.57 NIL NIL 10.57

(15.18) (NIL) (NIL) (15.18)13 Commission received including those under agency agreements 41.63 NIL NIL 41.63

(22.32) (NIL) (NIL) (22.32)14 Rent Received, Overheads recovered & Miscellaneous Income 44.26 NIL NIL 44.26

(15.38) (NIL) (NIL) (15.38)15 Interest received 2.00 0.01 NIL 2.01

(5.26) (0.02) (NIL) (5.28)16 Interest paid 3.29 NIL NIL 3.29

(3.60) (0.14) (0.07) (3.81)17 Commission paid NIL NIL NIL NIL

(0.18) NIL NIL (0.18)18 Assets taken over NIL NIL NIL NIL

(1.64) (NIL) (NIL) (1.64)19 Liabilities taken over NIL NIL NIL NIL

(1.16) (NIL) (NIL) (1.16)20 Transfer of loan liabilities /extinguishment of debt NIL NIL NIL NIL

(85.99) (NIL) (NIL) (85.99)21 Transfer of Research & Development know-how NIL NIL NIL NIL

(NIL) (NIL) (NIL) (NIL)22 Payment of salaries / perquisites NIL 6.08 0.05 6.13

(NIL) (3.37) (0.05) (3.42)Note: Figures in brackets represents corresponding amounts of previous yearIII. Amount Due to / from Related Parties

Rs. croreSl. Nature of relationship/ Associates & Key Management Relatives ofNo. Transaction Joint ventures Personnel [“KMP”] KMP Total

1 Trade Receivables (including WIP) 43.93 NIL NIL 43.93(40.78) (NIL) (NIL) (40.78)

2 Trade Payables 78.48 NIL NIL 78.48(52.54) (NIL) (NIL) (52.54)

3 Loans and advances receivable 29.17 3.03 0.04 32.24(98.80) (2.39) (0.04) (101.23)

4 Provision for doubtful debts and advances NIL NIL NIL NIL(8.00) (NIL) (NIL) (8.00)

5 Loans and advances payable NIL NIL NIL NIL(28.83) (1.34) NIL (30.17)

6 Advances against equity contribution 24.53 NIL NIL 24.53(0.15) (NIL) (NIL) (0.15)

7 Lease rentals receivable NIL NIL NIL NIL(3.17) (NIL) (NIL) (3.17)

8 Bonds and Debentures NIL NIL NIL NIL(NIL) (0.13) (0.06) (0.19)

9 Advances from Customers 0.92 NIL NIL 0.92(NIL) (NIL) (NIL) (NIL)

10 Due to whole time directors NIL 3.24 NIL 3.24(NIL) (1.38) (NIL) (1.38)

Note: Figures in brackets represents corresponding amounts of previous year



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IV. Notes to Related Party Transactions:

a) The Parent Company has a sole-selling agency agreement with L&T-Komatsu Ltd (LTK), an Associate company since 1st February1998. The agreement shall be in effect as long as the Joint Venture Agreement between the Parent Company and M/s. KomatsuAsia Pacific Pte. Ltd., Singapore (which is a Subsidiary of Komatsu Ltd., Japan) remains in force. As per the terms of the agreement,the Parent Company is the exclusive agent of L&T-Komatsu Ltd to market LTK machines and provide product support. Pursuant tothe aforesaid agreement LTK is required to pay commission to the Company at specified rates on the sales effected by the ParentCompany. The Parent Company is also the exclusive distributor of LTK spare parts, authorised to purchase and resell the spareparts in accordance with the terms stipulated in the agreement.

b) The Parent Company has a sole selling agency agreement with L&T-Case Equipment Private Ltd (LTCEPL), an Associate companysince 16.3.2000. The agreement shall be in effect for a period of 5 years and is renewable thereafter for successive five year periods.As per the terms of the agreement, the Parent Company is the exclusive agent to market LTCEPL machines and to provide productsupport. Pursuant to the aforesaid agreement LTCEPL is required to pay commission to the Parent Company at specified rates onthe sales effected by the Parent Company. The Company is also the exclusive distributor of LTCEPL spare parts, authorised topurchase and resell the spare parts in accordance with the terms stipulated in the agreement.

c) The Parent Company has entered into a five-year distributorship agreement from 26.4.2002 with Audco India Limited (AIL), anAssociate company. Pursuant to the aforesaid agreement, AIL is required to pay commission to the Parent Company at specifiedrates on the sales effected by the Parent Company. Further, as per the terms of the agreement, the Parent Company is the non-exclusive distributor of AIL products and is authorised to purchase and resell the same in accordance with the terms stipulated inthe agreement.

d) The Parent Company has entered into a five-year selling agency agreement from 1.10.1998 with EWAC Alloys Limited (EWAC),an Associate company. As per the terms of the agreement, the Parent Company is the selling agent authorised to purchase andresell EWAC products in accordance with the prices and other conditions stipulated in the agreement.

e) The Parent Company has entered into an agreement with L&T-Demag Plastics Machinery Private Limited [“LTDPML”], a joint venturecompany, effective 1.1.2001. As per the terms of the agreement, the Parent Company markets and services plastic processingmachinery manufactured by LTDPML, in consideration of commission payable at specified rates on sales effected by the ParentCompany.

Note : The financial impact of these agreements mentioned at (a) to (e) above have been disclosed vide Note 17 (II) supra.18. Leases

a. Finance Leasesi. Assets acquired prior to April 1, 2001 under finance leases have been accounted in accordance with the “Guidance Note on Leases”

issued by the Institute of Chartered Accountants of India. The cost of the assets taken on lease is Rs. 18.31crore, the future leaseobligation against which is Rs. 6.88 crore as at March 31, 2003.

ii. a) Assets acquired on finance lease mainly comprise cars and personal computers. The leases have a primary period, which isfixed and non-cancellable. In the case of cars, the Company has an option to renew the lease for a secondary period. Theagreements 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 lessor’s cost of borrowings. There are no exceptional/ restrictive covenants in the lease agreements.

b) The minimum lease rentals as at 31.3.2003 and the present value as at 31.3.2003 of minimum lease payments in respect ofassets acquired under finance leases are as follows: Rs. crore

Minimum Lease Present Value ofPayments Minimum Lease

PaymentsAs at As at As at As at

31.3.2003 31.3.2002 31.3.2003 31.3.2002i. Payable not later than 1 year 5.11 0.69 3.25 0.63ii. Payable later than 1 year and not later than 5 years 10.17 2.93 8.45 2.11iii. Payable later than 5 years 0.36 - 0.23 -

Total 15.64 3.62 11.93 2.74Less: Future finance charges 3.71 0.88Present Value of Minimum Lease Payments 11.93 2.74

Contingent rents recognised / (adjusted) in the Profit & Loss Account in respect of finance leases: (Rs. 0.04 crore)iii. a) The Company has given on finance leases certain items of plant and machinery. The leases have a primary period which is

fixed and non-cancellable and a secondary period. There are no exceptional / restrictive covenants in the lease agreements.b) The total gross investment in these leases as on March 31, 2003 and the present value of minimum lease payments receivable

as on March 31, 2003 are as under:Rs. crore

Particulars(1) Receivable not later than 1 year 59.99(2) Receivable later than 1 year and not later than 5 years 302.91(3) Receivable later than 5 years 0.13Gross investment in lease (1+2+3) 363.03Less: Unearned finance income 93.49Present Value of Receivables 269.54



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b. Operating leases:

i. The Company has taken various residential / commercial premises and plant and machinery under cancellable operating leases.These lease agreements are normally renewed on expiry.

ii. The Company has taken on non-cancellable operating leases certain assets [including assets referred to in (a) (iii) above], thefuture minimum lease payments in respect of which, as at March 31, 2003 are as follows:

Rs croreParticulars

i. Payable not later than 1 year 74.22

ii. Payable later than 1 year and not later than 5 years 30.78

iii. Payable later than 5 years 0.98

Total Minimum Lease Payments 105.98iii. The rental expense in respect of operating leases was Rs. 172.12 crore (previous year Rs. 153.18 crore)iv. Contingent rents recognised in the Profit & Loss Account: Rs. Nil

c. In respect of the lease referred to in a. (iii)(a) above, at the inception, the lease receivables were recorded at the present value of minimumlease payments. Subsequently, the Company securitised the lease receivables.

19. Earnings per share [“EPS”] computed in accordance with Accounting Standard 20: “Earnings per Share”:

Basic Earnings Per ShareParticulars 2002-2003 2001-2002Profit available for appropriation as per Accounts (Rs. crore) A 380.18 289.86Number of shares subscribed B 24,86,68,756 24,86,60,346Basic EPS (Rupees) A / B 15.29 11.66

Diluted Earnings Per ShareParticulars 2002-2003 2001-2002Profit available for appropriation as per Accounts (Rs. crore) A 380.18 289.86Add: Interest (net of tax) on loan convertible into equity shares B 4.31 7.94Adjusted profit for diluted earnings per share C=A+B 384.49 297.80Number of shares subscribed D 24,86,68,756 24,86,60,346Add: Potential equity shares on conversion of loans E 5,24,02,500 9,02,48,750Add: Potential equity shares that could arise on conversion of Series IV Debentures F 3,88,956 3,91,651Add: Potential equity shares on account of stock appreciation rights and options G 1,13,80,395 77,17,202

Weighted average number of shares outstanding H 31,28,40,607 34,70,17,949Diluted EPS (Rupees ) C/H 12.29 8.58

20. The Company has entered into certain derivative transactions including transactions involving foreign currencies.These derivative transactionsbeing considered as off-Balance-Sheet transactions, the cash flows arising therefrom are recognised in the books of account as and whenthe settlements take place in accordance with the terms of the respective contracts over the tenor thereof.

21. During the year, the Company prepaid certain Deferred Sales Tax loans in accordance with the scheme providing for such prepayment.Resultantly, an amount of Rs 6.20 crore, being excess of the loan amount extinguished thereby over the amount paid has been accounted asgain on extinguishment of debt.

22. Estimated amount of contracts remaining to be executed on capital account (net of advances):Rs 18.64 crore (previous year Rs 55.60 crore)23. Deferred tax:

a) Computation of cumulative deferred tax asset / liabilities has not been made in respect of the foreign Subsidiaries of the Group. In theopinion of the management, the impact is not material.

b) In the case of a Subsidiary company, as per the terms of the interim injunction dated December 6, 2001 restraining the Institute ofChartered Accountants of India from implementing the Accounting Standard (AS) 22 “Accounting for Taxes on Income” with reference toNon Banking Finance Companies (NBFC), issued by the High Court of Judicature at Chennai in response to the Miscellaneous Petitionno.27682 of 2001 in Writ Petition no. 18827 of 2001 filed by the Association of Leasing & Financial Services Companies (ALFS), ofwhich the Company is a member, pending final disposal of this Petition, no provision has been made in the Accounts towards deferredtax liability, if any.

c) Adopting the same practice as mentioned in (b) above, another subsidiary, also an NBFC and a member of ALFS, has during the yearchanged its accounting policy and accordingly reversed the deferred tax liability of Rs.24.77 crore as at March 31, 2002. This has beenadjusted against provision for deferred taxes in the Consolidated Financial Statements of the current year.



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d) Major Components of Deferred Tax Assets and Deferred Tax Liabilities: Rs. croreParticulars 31.3.2003 31.3.2002

Deferred Tax Deferred Tax Deferred Tax Deferred TaxAssets Liabilities Assets Liabilities

Difference between book depreciation and tax depreciation 1003.19 - 1059.74Provision for Doubtful Debts and Advances debited to Profit &

Loss account. 60.83 49.68 -Disputed Statutory Liabilities paid and claimed as deduction for tax

purposes but not debited to Profit & Loss Account - 30.35 - 26.21Unpaid Statutory Liabilities debited to Profit & Loss Account. 13.51 - 48.02 -Deferred Revenue Expenditure to the extent not debited to Profit &

Loss Account, but claimed as deduction for tax purposes - 9.02 - 10.42Provision for Leave Encashment debited to Profit & Loss Account 5.21 - 3.69 -Unabsorbed depreciation 39.58 - 59.15 -Other items giving rise to timing differences 21.41 10.99 9.58 1.67Total 140.54 1053.55 170.12 1098.04Net Deferred Tax Liability 913.01 927.92Net incremental liability charged to Profit & Loss Account (14.91) 61.95

24. The Company has given, inter alia, the following undertakings to the debentureholders of India Infrastructure Developers Limited (IIDL), awholly-owned Subsidiary, in connection with financing the lease of a captive power plant :(i) not to reduce its shareholding in IIDL below 100% and/or relinquish management control and/or majority representation on the Board of

Directors, without the specific approval of the Trustees.(ii) to compensate the Subsidiary for any shortfall in receivables on account of variations in rates of interest, depreciation, corporate taxes,

other statutory levies etc., after completion of the project.25. a) The Company has given the following undertakings, jointly with L&T Holdings Limited (a wholly owned Subsidiary of the Company), to

the term lenders of its Subsidiary companies, L&T Transportation Infrastructure Limited (LTTIL) and Narmada InfrastructureConstruction Enterprise Limited (NICE) :(i) not to reduce their joint shareholding in LTTIL & NICE below 51% until the financial assistance received from the term lenders is

repaid in full by LTTIL & NICE(ii) to jointly meet the shortfall in the Working Capital requirements of LTTIL & NICE until the financial assistance received from the

term lenders is repaid in full by LTTIL & NICE.b) Further, the Company has also given an undertaking to one of the term lenders, to meet the shortfall, if any, in repayment of FCNR-B

loan availed by NICE on account of fluctuation in exchange rates.26. The Company has sold 1,07,00,000 15% Cumulative Redeemable Preference Shares of HPL Cogeneration Limited (a Subsidiary of the

Company), to HDFC Bank Ltd. The related agreement for sale provides for a right to HDFC Bank Ltd. to sell the shares to the Company onMarch 29, 2004 or earlier on occurrence of certain events. The Company has a right to repurchase the shares at any time after 18 months. Ineither case, the repurchase price will be arrived at by discounting the future dividends and the redemption amount at 8.10% p.a.

27. One of the companies of the Group has not obtained confirmation from a State Electricity Board for security deposit including interest accruedthereon at Rs 78.45 crore. However the Honourable Supreme Court has directed the State Electricity Board to refund the sum along withinterest in twelve equal monthly instalments commencing from June 1,2003.

28. A Group company has assigned/sold some of the lease and hire purchase receivables amounting to Rs 166.46 crore. The assignment / saleis without recourse to the Company. The Company has given additional cash collateral of Rs 3.63 crore to the assignees/purchasers and hasalso hypothecated underlying lease and hire purchase assets in favour of assignees/purchasers. The Company does not expect any contingentor other liability in future in respect of these assigned/sold receivables except to the extent of cash collateral placed with the assignees/purchasers.

29. In case of one of the companies of the Group, loans and advances include Rs 10.42 crore representing expenses incurred on developmentof infrastructure facilities for 87 acres of saleable land in the HITEC city area, owned by the Government of Andhra Pradesh. As and whenland is sold by the Government of Andhra Pradesh, the Government will reimburse expenses to the Company. Accordingly, the total amountincurred net of recovery made has been shown as recoverable.

30. Figures pertaining to the Subsidiary companies have been reclassified wherever necessary to bring them in line with the Parent Company’sfinancial statements.

31. Figures of the previous year have been regrouped/reclassified wherever necessary.









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