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Larsen & Toubro Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2023

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying Standalone Financial Statements of Larsen & Toubro Limited (the "Company"), which comprise the Balance Sheet as at March 31,2023, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information, which includes 31 joint operations accounted on proportionate basis.

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the other auditors on separate financial statements of the joint operations referred to in the Other Matters section below, the aforesaid Standalone Financial Statements give the information required by the Companies Act, 2013 (the "Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS"), and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing ("SA"s) specified under section 143(10) of the Companies Act, 2013 (the "Act"). Our responsibilities under those Standards are further described in the Auditor''s Responsibility for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditors in terms of their reports referred to in the Other Matters section below, is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements of the current financial year. These matters were addressed in the context of our audit of the Standalone Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Revenue recognition

- accounting for construction contracts

Key audit matter description

There are significant accounting judgements in estimating revenue to be recognised on contracts with customers, including estimation of costs to complete. The Company recognises revenue on the basis of stage of completion in proportion of the contract costs incurred at balance sheet date, relative to the total estimated costs of the contract at completion. The recognition of revenue is therefore dependent on estimates in relation to total estimated costs of each such contract.

Significant judgements are involved in determining the expected losses, when such losses become probable based on the expected total contract cost. Cost contingencies are included in these estimates to take into account specific risks of uncertainties or disputed claims against the Company, arising within each contract. These contingencies are reviewed by the Management on a regular basis throughout the life of the contract and adjusted where appropriate. The revenue on contracts may also include variable consideration (variations and claims). Variable consideration is recognised when the recovery of such consideration is highly probable.

Refer to Note No. [1](II)(e) and 31 to the Standalone Financial Statements

Revenue recognition

- accounting for construction contracts

Principal Audit

Our audit procedures related to the (1) identification of distinct performance obligations, (2) evaluation of the

Procedures

process for estimation of costs to complete (3) evaluation of implications of change orders on costs estimates of costs to complete and revenue and (4) evaluation of any variable consideration included the following, amongst others:

• We tested the effectiveness of controls relating to the (a) evaluation of performance obligations and

identification of those that are distinct; (b) estimation of costs to complete each of the performance obligations including the contingencies in respect thereof, as work progresses and the impact thereon as a consequence of change orders; (c) the impact of change orders on the transaction price of the related contracts; and (d) evaluation of the impact of variable consideration on the transaction price.

• We selected a sample of contracts with customers and performed the following procedures:

a. Obtained and read contract documents for each selection, change orders, and other documents that

were part of the agreement.

b. Identified significant terms and deliverables in the contract to assess management''s conclusions

regarding the (i) identification of distinct performance obligations; (ii) changes to costs to complete as work progresses and as a consequence of change orders; (iii) the impact of change orders on the transaction price; and (iv) the evaluation of the adjustment to the transaction price on account of variable consideration.

c. Compared costs incurred with Company''s estimates of costs incurred to date to identify significant

variations and evaluated whether those variations have been considered appropriately in estimating the remaining costs to complete the contract.

d. Tested the estimate for consistency with the status of delivery of milestones and customer acceptance to

identify possible delays in achieving milestones, which require changes in estimated costs or efforts to complete the remaining performance obligation.

Measurement of contract assets in respect of overdue milestones and receivables in respect of overdue invoices

Key audit matter

The Company, in its contract with customers, promises to transfer distinct services to its customers, which may

description

be rendered in the form of engineering, procurement, and construction ("EPC") services through design-build contracts, and other forms of construction contracts. The recognition of revenue is based on contractual terms, which could be based on agreed unit price or lump-sum revenue arrangements. At each reporting date, revenue is accrued for costs incurred against work performed that may not have been invoiced. Identifying whether the Company''s performance has resulted in a service that would be billable and collectable where the works carried out have not been acknowledged by customers as of the reporting date, or in the case of certain defence contracts, where the evidence of work carried out and cost incurred are covered by confidentiality arrangements, involves a significant judgement. Assessing the recoverability of contract assets related to overdue milestones and amounts overdue against invoices raised which have remained unsettled for a significantly long period after the end of the contractual credit period also involves a significant amount of judgment. Refer to Note Nos. [1](II)(e), [1](II)(m), 11 and 16 to the Standalone Financial Statements

Principal Audit

Our audit procedures related to the (1) evaluation of evidence supporting the execution of work; (2) evaluation

Procedures

of recoverability of the overdue amounts including the impact on the expected credit loss allowance; and (3) assessment of adjusting events after the reporting date i.e. March 31,2023 and the date when the financial statements are approved by the Company''s Board of Directors included the following amongst others:

• We tested the design, implementation and operating effectiveness of internal controls relating to the (a)

gathering and evaluation of evidence supporting the execution of work; (b) evaluation of recoverability of the overdue amounts including the impact on the expected credit loss allowance; and (c) assessment of adjusting events after the reporting date i.e. March 31, 2023 and the date when the financial statements are approved by the Board of Directors and the impact thereof on the carrying amount of the related contract assets, measurement of contract assets in respect of overdue milestones and receivables in respect of overdue

invoices.

• We selected a sample of contracts assets with corresponding trade receivables that were overdue and

evaluated the basis for management''s conclusions regarding the (1) evidence supporting the execution of work for which the contract assets were recognised; (2) reasons for the delays in recovery of invoices and the basis on which recoverability of the contract assets was assessed; (3) impact on the allowance for expected credit losses; and (4) adjusting events after the reporting date i.e. March 31, 2023 and the date when the financial statements are approved by the Board of Directors and the impact thereof on the carrying amount of the related contract assets.

• In respect of the sample contracts, we compared previous estimates relating to recoverability of contract assets

and compared it with actual collections during the year.

Impairment of Investment in a Subsidiary

Key audit matter

As at March 31,2023, the Company held investment with a carrying amount of X 3,759.00 crore (excluding

description

X 2,835.84 crore in inter corporate deposits and investment of X 1,078.31 crore in debentures) in L&T Metro Rail (Hyderabad) Limited, a wholly owned subsidiary. This investment is carried at cost less impairment in the Company''s Standalone Financial Statements. Consequent to accumulation of losses incurred by the subsidiary, the Company''s management has tested this investment for impairment in accordance with Ind AS 36 by comparing its recoverable amount with its carrying amount as at March 31, 2023. The recoverable amount of the investment in the subsidiary is assessed based on future discounted cash flows of the subsidiary.

We considered this as a key audit matter due to significant judgement involved in estimating future cash flows of the subsidiary and in determining the discount rate to be used. Changes in inputs and assumptions could impact the results of the impairment assessment.

Refer to Note Nos. [1](II)(m) and 5 to the Standalone Financial Statements.

Principal Audit

Our audit procedures related to forecasts of future traffic, revenue, free cash flows generated, selection of the

Procedures

method for estimating recoverable value and discount rate for the entity:

• We tested the effectiveness of controls over forecasts of future traffic, revenue, free cash flows and selection of the discount rate;

• We evaluated the reasons for variation between the management''s previous estimate of traffic, revenue and cash flow forecasts and obtained our understanding of the manner in which revised forecasts were obtained;

• With the assistance of our fair value specialists who have specialised skill and knowledge, we evaluated the reasonableness of the methodology and discount rate by testing the source information underlying the determination of the discount rate and mathematical accuracy of the calculations; and

• We performed sensitivity analysis of the discount rate to assess the extent of change in discount rate that would be required for the investment to be impaired.

Information Other than the Financial Statements and Auditor''s Report Thereon (''other information'')

The Board of Directors of the Company is responsible for the preparation of other information. The other information comprise the information included in the Management Discussion and Analysis, Board''s Report including Annexures to Board''s Report, Business Responsibility & Sustainability Report, Corporate Governance and Shareholder''s Information, but does not include the Standalone Financial Statements and our auditor''s report thereon.

Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (the "Act") with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Company''s Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to Standalone Financial Statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the Standalone Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its joint operations to express an opinion on the Standalone Financial Statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the Standalone Financial Statements of which we are the independent auditors. For the other entities included in the Standalone Financial Statements, which have been audited by the other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

• We did not audit the financial information of 30 joint operations included in the Standalone Financial Statements, whose financial information reflects total assets of X 3,261.18 crore as at March 31, 2023, total revenues of X 3,138.07 crore and net cash inflows of X 89.94 crore for the year ended March 31, 2023, respectively, as considered in the Standalone Financial Statements. The financial information of these joint operations has been audited by the other auditors whose reports have been furnished to us by the Management of the Company, and our opinion in so far as it relates to the amounts and disclosures included in respect of these joint operations, is based solely on the reports of such other auditors and the procedures performed by us as stated under Auditor''s Responsibilities section above.

Our opinion on the Standalone Financial Statements and our report on Other Legal and Regulatory Requirements below is not modified in respect of the these matters.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit and based on the consideration of the reports of other auditors on the

separate financial information of the joint operations referred to in Other Matters section above we report, to the extent applicable that:

a) We have sought and 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 and its joint operation companies so far as it appears from our examination of those books and the reports of the other auditors.

c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid Standalone Financial Statements comply with the Ind AS specified under Section 133 of the Act.

e) On the basis of the written representations received from the directors as on March 31,2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls with reference to Standalone Financial Statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls with reference to Standalone Financial Statements.

g) With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements (Refer Note No. 29 to the Standalone Financial Statements);

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts, including derivative contracts;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company;

iv. a. The Management has represented that, to the best of it''s knowledge and belief, no funds (which are material either

individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

b. The Management has represented, that, to the best of it''s knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

c. Based on the audit procedures that has been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) contain any material mis-statement; and

v. The amount of dividend is in accordance with Section 123 of the Act.

a) The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with Section 123 of the Companies Act 2013 to the extent it applies to payment of dividend.

b) As stated in Note No. 17 to the financial statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The amount of dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company w.e.f. April 1,2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31,2023.

2. As required by the Companies (Auditor''s Report) Order, 2020 ("the Order") issued by the Central Government in terms of Section

143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm''s Registration No.117366W/W-100018)

Rupen K. Bhatt

Partner

(Membership No. 046930)

UDIN: 23046930BGXRJY4784

Place: Mumbai

Date: May 10, 2023


Mar 31, 2022

TO THE MEMBERS OF LARSEN & TOUBRO LIMITED

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of Larsen & Toubro Limited (the "Company"), which comprise the Balance Sheet as at March 31,2022, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information, which includes 31 joint operations accounted on proportionate basis.

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the other auditors on separate financial statements of the joint operations referred to in the Other Matters section below, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (the "Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS"), and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2022, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing ("SA"s) specified under section 143(10) of the Companies Act, 2013 (the "Act"). Our responsibilities under those Standards are further described in the Auditor''s Responsibility for the Audit of the Standalone Financial Statements section of our report.

We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditors in terms of their reports referred to in the Other Matters section below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current financial year. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Revenue recognition

- accounting for construction contracts

Key audit matter description

There are significant accounting judgements in estimating revenue to be recognised on contracts with customers, including estimation of costs to complete. The Company recognizes revenue on the basis of stage of completion in proportion of the contract costs incurred at balance sheet date, relative to the total estimated costs of the contract at completion. The recognition of revenue is therefore dependent on estimates in relation to total estimated costs of each such contract.

Significant judgements are involved in determining the expected losses, when such losses become probable based on the expected total contract cost. Cost contingencies are included in these estimates to take into account specific risks of uncertainties or disputed claims against the Company, arising within each contract. These contingencies are reviewed by the Management on a regular basis throughout the life of the contract and adjusted where appropriate. The revenue on contracts may also include variable consideration (variations and claims). Variable consideration is recognised when the recovery of such consideration is highly probable.

Refer to Note No. [1](ii)(e) to the Standalone Financial Statements

Revenue recognition

- accounting for construction contracts

Principal Audit

Our audit procedures related to the (1) identification of distinct performance obligations, (2) evaluation of the

Procedures

process for estimation of costs to complete (3) evaluation of implications of change orders on costs estimates of costs to complete and revenue and (4) evaluation of any variable consideration included the following:

• We tested the effectiveness of controls relating to the (a) evaluation of performance obligations and

identification of those that are distinct; (b) estimation of costs to complete each of the performance obligations including the contingencies in respect thereof, as work progresses and the impact thereon as a consequence of change orders; (c) the impact of change orders on the transaction price of the related contracts; and (d) evaluation of the impact of variable consideration on the transaction price.

• We selected a sample of contracts with customers and performed the following procedures:

a. Obtained and read contract documents for each selection, change orders, and other documents that

were part of the agreement.

b. Identified significant terms and deliverables in the contract to assess management''s conclusions

regarding the (i) identification of distinct performance obligations; (ii) changes to costs to complete as work progresses and as a consequence of change orders; (iii) the impact of change orders on the transaction price; and (iv) the evaluation of the adjustment to the transaction price on account of variable consideration.

c. Compared costs incurred with Company''s estimates of costs incurred to date to identify significant

variations and evaluated whether those variations have been considered appropriately in estimating the remaining costs to complete the contract.

d. Tested the estimate for consistency with the status of delivery of milestones and customer acceptance to

identify possible delays in achieving milestones, which require changes in estimated costs or efforts to complete the remaining performance obligation.

Measurement of contract assets in respect of overdue milestones and receivables in respect of overdue invoices.

Key audit matter

The Company, in its contract with customers, promises to transfer distinct services to its customers, which may

description

be rendered in the form of engineering, procurement, and construction ("EPC") services through design-build contracts, and other forms of construction contracts. The recognition of revenue is based on contractual terms, which could be based on agreed unit price or lump-sum revenue arrangements. At each reporting date, revenue is accrued for costs incurred against work performed that may not have been invoiced. Identifying whether the Company''s performance has resulted in a service that would be billable and collectable where the works carried out have not been acknowledged by customers as of the reporting date, or in the case of certain Defence contracts, where the evidence of work carried out and cost incurred are covered by confidentiality arrangements, involves a significant amount of judgement. Assessing the recoverability of contract assets related to overdue milestones and amounts overdue against invoices raised which have remained unsettled for a significantly long period after the end of the contractual credit period also involves a significant amount of judgment. Refer to Note Nos. [1](ii)(e), [1](ii)(m) to the Standalone Financial Statements

Principal Audit

Our audit procedures related to the (1) evaluation of evidence supporting the execution of work; (2) evaluation

Procedures

of recoverability of the overdue amounts including the impact on the expected credit loss allowance; and (3) assessment of adjusting events after the reporting date i.e. March 31,2022 and the date when the financial statements are approved by the Company''s Board of Directors included the following:

• We tested the effectiveness of controls relating to the (a) gathering and evaluation of evidence supporting

the execution of work; (b) evaluation of recoverability of the overdue amounts including the impact on the expected credit loss allowance; and (c) assessment of adjusting events after the reporting date i.e. March 31, 2022 and the date when the financial statements are approved by the Board of Directors and the impact thereof on the carrying amount of the related contract assets. Measurement of contract assets in respect of overdue milestones and receivables in respect of overdue invoices.

• We selected a sample of contracts assets with corresponding trade receivables that were overdue and

evaluated the basis for management''s conclusions regarding the (1) evidence supporting the execution of work for which the contract assets were recognised; (2) reasons for the delays in recovery of invoices and the basis on which recoverability of the contract assets was assessed; (3) impact on the allowance for expected credit losses; and (4) adjusting events after the reporting date i.e. March 31, 2022 and the date when the financial statements are approved by the Board of Directors and the impact thereof on the carrying amount of the related contract assets.

• In respect of the sample contracts, we compared previous estimates relating to recoverability of contract assets

and compared it with actual collections during the year.

Impairment of Investment in a Subsidiary

Key audit matter

As at March 31,2022, the Company held investment with a carrying amount of R 2,439.00 crore (excluding

description

R 3,726.70 crore in inter corporate deposits and R 1,145.63 crore in debentures) in L&T Metro Rail (Hyderabad) Limited, a wholly owned subsidiary. This investment is carried at cost less impairment in the Company''s standalone financial statements. Consequent to accumulation of losses incurred by the subsidiary, the Company''s management has tested this investment for impairment in accordance with Ind AS 36 by comparing its recoverable amount with it carrying amount as at March 31, 2022. The recoverable amount of the investment in the subsidiary is assessed based on future discounted cash flows of the subsidiary.

We considered this as a key audit matter due to significant judgement involved in estimating future cash flows of the subsidiary and in determining the discount rate to be used. Changes in inputs and assumptions could impact the results of the impairment assessment.

Refer to Note Nos. [1](ii)(m) to the Standalone Financial Statements.

Principal Audit

Our audit procedures related to forecasts of future traffic, revenue, free cash flows generated, selection of the

Procedures

method for estimating recoverable value and discount rate for the entity included the following:

• We tested the effectiveness of controls over forecasts of future traffic, revenue, free cash flows and selection of the discount rate;

• We evaluated the reasons for variation between the management''s previous estimate of traffic, revenue and cash flow forecasts and obtained our understanding of the manner in which revised forecasts were obtained;

• With the assistance of our fair value specialists who have specialised skill and knowledge, we evaluated the reasonableness of the methodology and discount rate by testing the source information underlying the determination of the discount rate and mathematical accuracy of the calculations; and

• We performed a sensitivity analysis on the discount rate to assess the extent of change in discount rate that would be required for the investment to be impaired.

Information Other than the Financial Statements and Auditor''s Report Thereon (''other information'')

The Boards of Directors of the Company is responsible for the preparation of other information. The other information comprise the information included in the Management Discussion and Analysis, Board''s Report including Annexures to Board''s Report, Business Responsibility Report, Corporate Governance and Shareholder''s Information, but does not include the standalone financial statements and our auditor''s report.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (the "Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Company''s Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its joint operations to express an opinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the standalone financial statements of which we are the independent auditors. For the other entities included in the standalone financial statements, which have been audited by the other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

• We did not audit the financial information of 29 joint operations included in the standalone financial statements, whose financial information reflects total assets of R 2,972.06 crore as at March 31, 2022, total revenues of R 3,217.48 crore, total net loss after tax (net) of R 187.97 crore, total comprehensive loss (net) of R 187.97 crore and net cash inflows of R 97.18 crore for the year ended March 31, 2022, respectively, as considered in the standalone financial statements. The financial information of these joint operations has been audited by the other auditors whose reports have been furnished to us by the Management of the Company, and our opinion in so far as it relates to the amounts and disclosures included in respect of these joint operations, is based solely on the reports of such other auditors and the procedures performed by us as stated under Auditor''s Responsibilities section above.

• We did not audit the financial information of 1 joint operation included in the standalone financial statements, whose financial information reflects total assets of R 1,067.79 crore as at March 31, 2022, total revenues of R 352.96 crore, total net profit after tax (net) of R 11.91 crore, total comprehensive profit (net) of R 11.91 crore and net cash inflows of R 5.10 crore for the year ended March 31, 2022, respectively, as considered in the standalone financial statements. The financial information of this joint operation has not been audited by the auditor whose financial information has been furnished to us by the Management of the Company, and our opinion in

so far as it relates to the amounts and disclosures included in respect of this joint operation, is based solely on the financial information certified by the management of the Company. According to the information and explanations given to us by the Management, the financial information of this entity is not material to the Company.

Our opinion on the standalone financial statements and our report on Other Legal and Regulatory Requirements below is not modified in respect of the these matters with respect to our reliance on the work done and the reports of the other auditors and the financial information certified by the management.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit and based on the consideration of the reports of the other auditors on the

separate financial information of the joint operations referred to in Other Matters section above we report, to the extent applicable that:

a) We have sought and 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 and its joint operation company so far as it appears from our examination of those books and the reports of the other auditors.

c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.

e) On the basis of the written representations received from the directors as on March 31,2022 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2022 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

g) With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of section 197(16) of the Act, as amended. In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts, including derivative contracts;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company;

iv. a. The Management has represented that, to the best of it''s knowledge and belief, no funds (which are material either

individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

b. The Management has represented, that, to the best of it''s knowledge and belief, no funds (which are material either individually or in the aggregate) have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

c. Based on the audit procedures that has been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) contain any material mis-statement; and

v. The amount of dividend is in accordance with Section 123 of the Act.

a) The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with Section 123 of the Companies Act 2013 to the extent it applies to payment of dividend.

b) As stated in note 17 to the financial statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The amount of dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.

2. As required by the Companies (Auditor''s Report) Order, 2020 ("the Order") issued by the Central Government in terms of Section

143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm''s Registration No.117366W/W-100018)

Sanjiv V. Pilgaonkar

Partner

(Membership No. 39826)

UDIN: 22039826AIVCQV7676

Place: Mumbai

Date: May 12, 2022


Mar 31, 2021

INDEPENDENT AUDITORS'' REPORT

TO THE MEMBERS OF LARSEN & TOUBRO LIMITED

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of Larsen & Toubro Limited (the "Company"), which comprise the Balance Sheet as at 31 March 2021, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information, which includes 31 joint operations accounted on proportionate basis.

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of report of the other auditor on separate financial statements of the joint operation referred to in the Other Matters section below, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (the "Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS"), and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2021, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing ("SA"s) specified under section 143(10) of the Companies Act, 2013 (the "Act"). Our responsibilities under those Standards are further described in the Auditor''s Responsibility for the Audit of the Standalone Financial Statements section of our report.

We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditors in terms of their reports referred to in the Other Matters section below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Revenue recognition - accounting for construction contracts

Key audit matter description

As described in Note No. 1(ii)(e) of the standalone financial statements, the Company recognises revenue from contracts with customers when it satisfies its performance obligations.

There are significant accounting judgements in estimating revenue to be recognised on contracts with customers, including estimation of costs to complete and determining the timing of revenue recognition.

The Company recognises revenue on the basis of stage of completion in proportion of the contract costs incurred at balance sheet date, relative to the total estimated costs of the contract at completion. The recognition of revenue is therefore dependent on estimates in relation to total estimated costs of each such contract.

Significant judgements are also involved in determining the expected losses, when such losses become probable based on the expected total contract cost.

Revenue recognition - accounting for construction contracts

Cost contingencies are included in these estimates to take into account specific risks of uncertainties or disputed claims against the Company, arising within each contract. These contingencies are reviewed by the Management on a regular basis throughout the life of the contract and adjusted where appropriate.

The revenue on contracts may also include variable consideration (variations and claims). Variable consideration is recognised when the recovery of such consideration is highly probable.

Principal Audit Procedures

Our audit procedures related to the (1) identification of distinct performance obligations, (2) evaluation of the process for estimation of costs to complete (3) evaluation of implications of change orders on costs estimates of costs to complete and revenue and (4) evaluation of any variable consideration included the following, amongst others:

1. We tested the effectiveness of controls relating to the (a) evaluation of performance obligations and identification of those that are distinct; (b) estimation of costs to complete each of the performance obligations including the contingencies in respect thereof, as work progresses and the impact thereon as a consequence of change orders; (c) the impact of change orders on the transaction price of the related contracts; and (d) evaluation of the impact of variable consideration on the transaction price.

2. We selected a sample of contracts with customers and performed the following procedures:

a. Obtained and read contract documents for each selection, change orders, and other documents that were part of the agreement.

b. Identified significant terms and deliverables in the contract to assess management''s conclusions regarding the (i) identification of distinct performance obligations; (ii) changes to costs to complete as work progresses and as a consequence of change orders; (iii) the impact of change orders on the transaction price; and (iv) the evaluation of the adjustment to the transaction price on account of variable consideration.

c. Compared costs incurred with Company''s estimates of costs incurred to date to identify significant variations and evaluated whether those variations have been considered appropriately in estimating the remaining costs to complete the contract.

d. Tested the estimate for consistency with the status of delivery of milestones and customer acceptance to identify possible delays in achieving milestones, which require changes in estimated costs or efforts to complete the remaining performance obligation.

Measurement of contract assets in respect of overdue milestones and receivables in respect of overdue invoices.

Key audit matter description

The Company, in its contract with customers, promises to transfer distinct services to its customers, which may be rendered in the form of engineering, procurement, and construction (EPC) services through design-build contracts, and other forms of construction contracts. The recognition of revenue is based on contractual terms, which could be based on agreed unit price or lump-sum revenue arrangements. At each reporting date, revenue is accrued for costs incurred against work performed that may not have been invoiced.

Identifying whether the Company''s performance has resulted in a service that would be billable and collectable where the works carried out have not been acknowledged by customers as of the reporting date, or in the case of certain defence contracts, where the evidence of work carried out and cost incurred are covered by confidentiality arrangements, involves a significant amount of judgement.

Assessing the recoverability of contract assets related to overdue milestones and amounts overdue against invoices raised which have remained unsettled for a significantly long period after the end of the contractual credit period also involves a significant amount of judgement.

Refer to Note Nos. 1(ii)(e) and 1(ii)(m) to the standalone financial statements.

Principal Audit Procedures

Our audit procedures related to the (1) evaluation of evidence supporting the execution of work; (2) evaluation of recoverability of the overdue amounts including the impact on the expected credit loss allowance; and (3) assessment of adjusting events after the reporting date i.e. March 31, 2021 and the date when the financial statements are approved by the Parent''s Board of Directors included the following amongst others:

1. We tested the effectiveness of controls relating to the (a) gathering and evaluation of evidence

supporting the execution of work; (b) evaluation of recoverability of the overdue amounts including the impact on the expected credit loss allowance; and (c) assessment of adjusting events after the reporting date i.e. March 31, 2021 and the date when the financial statements are approved by the Board of Directors and the impact thereof on the carrying amount of the related contract assets.

Measurement of contract assets in respect of overdue milestones and receivables in respect of overdue invoices.

2. We selected a sample of contracts assets with corresponding trade receivables that were overdue and evaluated the basis for management''s conclusions regarding the (1) evidence supporting the execution of work for which the contract assets were recognised; (2) reasons for the delays in recovery of invoices and the basis on which recoverability of the contract assets was assessed; (3) impact on the allowance for expected credit losses; and (4) adjusting events after the reporting date i.e. March 31, 2021 and the date when the financial statements are approved by the Board of Directors and the impact thereof on the carrying amount of the related contract assets.

3. We compared previous estimates relating to recoverability of contract assets and compared it with actual collections during the year.

Information Other than the Financial Statements and Auditor''s Report Thereon

The respective Board of Directors of the Company and its Joint Operations are responsible for the preparation of other information. The other information comprise the information included in the Management Discussion and Analysis, Board''s Report including Annexures to Board''s Report, Business Responsibility Report, Corporate Governance and Shareholder''s Information, but does not include the standalone financial statements and our report.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (the "Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Company''s Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its joint operations to express an opinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the standalone financial statements of which we are the independent auditors. For the other entities included in the standalone financial statements, which have been audited by the other auditors, such other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

(a) We did not audit the financial information of 30 joint operations included in the standalone financial statements, whose financial information reflect total assets of R 3839.10 crore as at 31st March, 2021, total revenues of R 3129.20 crore, total net loss after tax (net) of R 287.32 crore, total comprehensive loss (net) of R 287.32 crore and net cash inflows (net) of R 71.01 crore for the year ended 31st March, 2021, respectively, as considered in the standalone financial statements. The financial information of these joint operations have been audited by the other auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these joint operations, is based solely on the reports of such other auditors and the procedures performed by us as stated under Auditor''s Responsibilities section above.

Our report on the standalone financial statements is not modified in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit we report that:

a. We have sought and 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 it appears from our examination of those books and the reports of the other auditors.

c. The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d. In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.

e. On the basis of the written representations received from the directors as on 31st March, 2021 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2021 from being appointed as a director in terms of Section 164(2) of the Act.

f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

g. With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of section 197(16) of the Act, as amended,

h. In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.

i. With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts; and

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor''s Report) Order, 2016 (the "Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm''s Registration No.1 17366W/W-100018)

SANJIV V. PILGAONKAR

Partner

(Membership No. 39826)

UDIN: 21039826AAAAEI1765

Place: Mumbai Date: May 14, 2021


Mar 31, 2019

Report on the Audit of Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of Larsen & Toubro Limited (the “Company”), which comprise the Balance Sheet as at March 31, 2019, and the Statement of Profit and Loss (including Other Comprehensive income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information and which includes 29 joint operations whose legal status is an entity.(Hereinafter referred to as the “Standalone Financial Statements”).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (the “Act”) in the manner so required and give a true and fair view in conformity with indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (indian Accounting Standards) Rules 2015, as amended (“ind AS”) and other accounting principles generally accepted in india, of the state of affairs of the Company as at March 31, 2019 and its profit/loss, total comprehensive income/loss, its cash flows and the changes in equity for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the institute of Chartered Accountants of india (iCAi) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Companies Act, 2013 and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the iCAi’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matters to be communicated in our report.

Revenue recognition

accounting for construction contracts

Key audit matter description

There are significant accounting judgements including estimation of costs to complete, determining the stage of completion and the timing of revenue recognition.

The Company recognises revenue and profit/loss on the basis of stage of completion based on the proportion of contract costs incurred at balance sheet date, relative to the total estimated costs of the contract at completion. The recognition of revenue and profit/loss therefore rely on estimates in relation to total estimated costs of each contract.

Cost contingencies are included in these estimates to take into account specific uncertain risks, or disputed claims against the Company, arising within each contract. These contingencies are reviewed by the Management on a regular basis throughout the contract life and adjusted where appropriate.

The revenue on contracts may also include variable consideration (variations and claims). Variable consideration is recognised when the recovery of such consideration is highly probable.

Refer to Note Number. 1(e) of the Standalone Financial Statements

Principal Audit Procedures

our procedures included :

- testing of the design and implementation of controls involved for the determination of the estimates used as well as their operating effectiveness;

- testing the relevant information technology systems’ access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard;

- testing a sample of contracts for appropriate identification of performance obligations;

- For the sample selected, reviewing for change orders and the impact on the estimated costs to complete;

- Engaging technical experts to review estimates of costs to complete for sample contracts; and

- Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings

Assessment of the carrying value of unquoted equity instruments in loss making subsidiaries and joint ventures.

Key audit matter description

the impairment review of unquoted equity instruments and debt, with a carrying value of RS. 2,669 crore, is considered to be a risk area due to the size of the balances as well as the judgmental nature of key assumptions, which may be subject to management override.

the carrying value of such unquoted equity instruments and debt is at risk of recoverability. the net worth of the underlying entities has significantly eroded and the orders in hand are below the break-even production levels of this facilities. the estimated recoverable amount is subjective due to the inherent uncertainty involved in forecasting and discounting future cash flows.

Refer to note number 1(j) of the Standalone Financial Statements

Principal Audit Procedures

Besides obtaining an understanding of Management’s processes and controls with regard to testing the impairment of the unquoted equity instruments in loss making subsidiaries and joint ventures.

our procedures included the following:

- engaged internal fair valuation experts to challenge management’s underlying assumptions and appropriateness of the valuation model used;

- compared the company’s assumptions with comparable benchmarks in relation to key inputs such as long-term growth rates and discount rates;

- assessed the appropriateness of the forecast cash flows within the budgeted period based on their understanding of the business and sector experience;

- considered historical forecasting accuracy, by comparing previously forecasted cash flows to actual results achieved; and

- Performed a sensitivity analysis in relation to key assumptions.

Revenue recognition and measurement of contract assets in respect of un-invoiced amounts and measurement of receivables in respect of overdue invoices.

Key audit matter description

the company, in its contract with customers, promises to transfer distinct services to its customers which may be rendered in the form of engineering, procurement and construction (EPc) services through design-build contracts, and other forms of construction contracts. the recognition of revenue is based on contractual terms, which could range from cost plus fee to agreed unit price to lump-sum arrangements. at each reporting date, revenue is accrued for costs incurred against work performed that may not have been invoiced. identifying whether the company’s performance have resulted in a service that would be billable and collectable where the works carried out have not been acknowledged by customers as of the reporting date, or in the case of certain defence contracts, where the evidence of work carried out and cost incurred are covered by confidentiality arrangements involves a significant amount of judgment.

- Recognition of revenue before formal acknowledgment of receipt of services by the customer could lead to an over or under-statement of revenue and profit, whether intentionally or in error; and

- assessing the recoverability of amounts overdue against invoices raised which have remained unsettled for a significantly long period after the end of the contractual credit period also involves a significant amount of judgment.

Refer to Note Number 1(e) and 1(m) of the Standalone Financial Statements

Principal Audit Procedures

The procedures performed included the following:

- obtained an understanding of the company’s processes in collating the evidence supporting execution of work for each disaggregated type of revenue. auditors have also obtained an understanding of the design of key controls for quantifying units of items / services that would be invoiced and the application of appropriate prices for each of such services;

- tested the design and operating effectiveness of management’s key controls in collating the units of services delivered and in the application of accurate prices for each of such services for samples of the un-invoiced revenue entries, which included testing of access and change management controls exercised in respect of related information systems;

- tested samples of un-invoiced revenue entries with reference to the reports from the information system that records the costs incurred against the services delivered to confirm the work performed and application of appropriate margin applied for the respective services. the auditors have also tested whether appropriate adjustments have been made for the element of variable consideration related to committed service levels of performance. With regard to incentives, auditors tests were focused to ensure that accruals were restricted to only those items where contingencies were minimal;

- tested cut-offs for revenue recognized against un-invoiced amounts by matching the revenue accrual against accruals for corresponding cost;

- For defence contracts which are covered under by statutory confidentiality arrangements, the auditors have compared the revenue recognised with amounts collected from customers to ensure that the gap between revenue recognised and collections is below the materiality threshold;

- extended the testing upto the date of approval of financial statements by the Board of Directors of the Parent entity to verify adjustments, if any, that may have been necessary upon receipt of approvals from customers for services delivered prior to the reporting date and/or collections there against;

- Reviewed the delivery and collection history of customers against whose contracts un-invoiced revenue is recognised; and

- Verification of subsequent receipts, post balance sheet date.

Evaluation of uncertain tax positions

Key audit matter description

the company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes.

Refer to note. number 1(u) and 1(w) of the Standalone Financial Statements

Principal Audit Procedures

our procedures included the following:

- obtained understanding of key uncertain tax positions;

- obtained details of completed tax assessments and demands for the year ended March 31, 2019 from the management;

- We along with our internal tax experts -

i. Discussed with appropriate senior management and evaluated the Management’s underlying key assumptions in estimating the tax provision;

ii. Assessed management’s estimate of the possible outcome of the disputed cases; and

iii. Considered legal precedence and other rulings in evaluating management’s position on these uncertain tax positions.

- Additionally, considered the effect of new information in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to management’s position on these uncertainties.

Information Other than the Standalone Financial Statements and Auditor’s Report

The respective Board of Directors of the Company and its Joint Operation Companies are responsible for the preparation of other information. The other information comprise the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, corporate Governance and Shareholder’s information, but does not include the standalone financial statements and our auditor’s report.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Management’s Responsibility for the Standalone Financial Statements

The company’s Board of directors is responsible for the matters stated in section 134(5) of the companies act, 2013 (the “act”) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, cash flows and changes in equity of the Company including its joint operation companies in accordance with the ind AS and accounting principles generally accepted in india.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the respective Companies and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibility for the Audit of the standalone Financial statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

- Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

- Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls systems in place and the operating effectiveness of such controls.

- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

- Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Company’s ability to continue as a going concern. if we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

- Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its joint operations to express an opinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the audit of the standalone financial statements of such entities included in the standalone financial statements.

Materiality

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced.

We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial statements.

Communication with those charged with governance

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

(a) We did not audit the financial information of 24 joint operations included in the standalone financial statements whose financial information reflect total assets of RS. 4,540.71 crore as at march 31, 2019, total revenues of RS. 6,018.63 crore and net cash outflows amounting to RS. 170 crore for the year ended on that date, as considered in the standalone financial statements. the financial information of these joint operations have been audited by the other auditors whose reports has been furnished to us by the management, and our opinion in so far as it relates to the amounts and disclosures included in respect of these joint operations and our report in terms of subsection (3) of section 143 of the act, in so far as it relates to the aforesaid joint operations, is based solely on the report of such other auditors.

Our opinion on the standalone financial statements and our report on other Legal and Regulatory Requirements below is not modified in respect of these matters.

(b) the standalone financial statements also includes the financial information of 4 joint operations which have not been audited by their auditors, whose financial information reflect total assets of RS. 41.12 crore as at march 31, 2019 and total revenues of RS. 4.99 crore and net cash outflows amounting to RS. 0.13 crore for the year ended on that date, as considered in the standalone financial statements. the financial information of these joint operations has been unaudited and has been furnished to us by the management and our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of these joint operations, is based solely on such unaudited financial information which is certified by management. in our opinion and according to the information and explanation given to us by the management, the financial information of these joint operations are not material to the company.

Report on Other Legal and Regulatory Requirements

As required by the companies (auditor’s Report) order, 2016 (“the order”), issued by the central Government of india in terms of subsection (11) of section 143 of the companies act, 2013, we give in the annexure a statement on the matters specified in paragraphs 3 and 4 of the order, to the extent applicable

As required by Section 143(3) of the act, we report that:

a) We have sought and 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 it appears from our examination of those books.

c) the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) on the basis of the written representations received from the directors as on March 31, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of Section 164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”.

g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the Company has disclosed the impact of pending litigations on its financial position in its financial statements;

ii. the Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. there has been no delay in transferring amounts, required to be transferred, to the investor Education and Protection Fund by the Company.

ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S REPORT

(Referred to in paragraph 1 (f) under ‘Report on other Legal and Regulatory Requirements’ section of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of Larsen & toubro Limited (the “Company”) as at March 31, 2019 in conjunction with our audit of the standalone ind AS financial statements of the Company as for the year ended on that date which includes internal financial controls over financial reporting, which is applicable to 1 of the 29 joint operations, being a Company incorporated in india audited by another auditor.

Management’s Responsibility for Internal Financial Controls

the Board of Directors of the Company and those charged with governance of the joint operation referred to above, which is a company incorporated in india, are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of internal Financial Controls over Financial Reporting issued by the institute of Chartered Accountants of india. these responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to respective Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting of the Company and its joint operation Company incorporated in india, based on our audit. We conducted our audit in accordance with the Guidance Note on

Audit of internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the institute of Chartered Accountants of india and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained by the other auditor of the joint operation, which is a Company incorporated in india, in terms of their report referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of internal Financial Controls over Financial reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of internal Financial Controls over Financial reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

in our opinion, to the best of our information and according to the explanations given to us and based on the consideration of the report of the other auditor on internal financial controls system over financial reporting of the joint operation referred to in the Other Matters paragraph below, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2019, based on the internal control over financial reporting established by the respective company considering the essential components of internal control stated in the Guidance Note.

Other matters

Our aforesaid report under Section 143(3)(i) of the Act on the adequacy and operating effectiveness of the internal financial controls over financial reporting insofar as it relates to 1 joint operation, which is a company incorporated in india, is solely based on the corresponding report of the other auditor of such company.

Our opinion is not modified in respect of this matter.

Annexure “B” to the independent auditors’ report

(Referred to in paragraph 2 under ‘Report on other Legal and Regulatory Requirements’ section of our report to the members of Larsen & toubro Limited of even date)

(i) in respect of the company’s property, plant and equipment:

(a) the company has maintained proper records showing full particulars, including quantitative details and situation of property, plant and equipment.

(b) the company has a program of physical verification of its property, plant and equipment to cover all the items of property, plant and equipment in a phased manner over a period of 3 years which, in our opinion, is reasonable having regard to the size of the company and the nature of its property, plant and equipment. Pursuant to the program, certain property, plant and equipment were physically verified by the management during the year. according to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) according to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings are held in the name of the company as at the balance sheet date, except the following:

Rs. crore

Type of asset

Total no. of cases

Leasehold / freehold

Gross block as at March 31, 2019

Net block as at March 31, 2019

Remarks

Land

3

Freehold

1.27

1.27

Conveyance deed pending to be executed as the matter is sub judice.

Buildings

2

Freehold

3.53

0.59

In respect of immovable properties of land and buildings that have been taken on lease and disclosed as property, plant and equipment in the financial statements, the lease agreements are in the name of the company, where the company is the lessee in the agreement.

(ii) As explained to us, the inventories were physically verified during the year by the management at reasonable intervals and no material discrepancies were noticed on physical verification between the physical stock and the books of accounts.

(iii) According to the information and explanations given to us, the company has not entered into any contracts or arrangements covered under section 189 of the companies Act, 2013 (the “Act”) and hence reporting under paragraph 3 (iii) of the order is not applicable to the company.

(iv) in our opinion and according to the information and explanations given to us, the company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to the information and explanations given to us, the company has not accepted any deposits during the year and does not have any unclaimed deposits as at march 31, 2019 and hence, the provisions of the clause 3 (v) of the order is not applicable to the company.

(vi) the maintenance of cost records has been specified by the central Government under section 148(1) of the Act. We have broadly reviewed the cost records maintained by the company pursuant to the companies (cost Records and Audit) Rules, 2014, as amended and prescribed by the central Government under sub-section (1) of Section 148 of the Act, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained by the company. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) the company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees’ State insurance, income-tax, Goods and Service tax, customs Duty, cess and other material statutory dues applicable to it to the appropriate authorities.

(b) there were no undisputed amounts payable in respect of Provident Fund, Employees’ State insurance, income-tax, Goods and Service tax, customs Duty, cess and other material statutory dues in arrears as at march 31, 2019 for a period of more than six months from the date they became payable.

(c) Details of dues of income-tax, Sales tax, Service tax, Customs Duty, Excise Duty, Goods and Service tax and Value Added tax which have not been deposited as on March 31, 2019 on account of disputes are given below:-

Name of Statute

Nature of Dues

Forum where Dispute is Pending

Period to which Amount Relates

Amount Involved (Rs. crore)

Amount Unpaid (Rs. crore)

the Central Excise Act,1944, Service tax under Finance Act, 1994 and Customs Act, 1962

Classification dispute and other matters

Supreme Court

2002-2003, 20032004, 2011-12 to 2015-16

7.34

6.79

Dispute regarding questions of law, classification dispute and other matters

High Court

2003-04 to 2012-13

114.28

85.25

Disallowance of CENVAT credit, short payment of service tax, MRP Valuation disputes, dispute regarding classification of services, disallowances of excise duty exemption, Non Maintenance of Separate Books of Accounts, Export rebate disallowance, and other matters.

CESTAT

1991-92, 2001-02 to 2013-14, 2016-17

303.46

297.35

Disallowance of CENVAT credit, short payment of service tax ,service tax rate dispute, valuation dispute and other matters

Commissioner (Appeal)

2006-07 to 2012-13

7.27

6.13

the Central Sales tax Act, Entry tax, Local Sales tax Act, Works Contract tax Act and Goods & Services tax Act

taxability of sub-contractor turnover, rate of tax for declared goods, disallowance of labour turnover and non- submission of forms

Supreme Court

2000-01 to 2006-07, 2010-11

16.07

7.03

Dispute regarding questions of law, classification dispute, local Vat and Works contract disputes.

High Court

1986-87, 1987-88, 1993-94, 1994-95, 1999-00 to 2012-13

71.55

65.18

Non submission of Forms, classification disputes, inter-state sale turnover, Rate of tax of declared goods, Labour & service charges disallowed, Disallowance of exemptions claimed for imports & Sales in transit, Sale mismatch & levy of tax on import of goods through Way bill, Road permit issue and other matters

Sales Tax/VAT tribunal

1989-90, 1991-92, 1993-94 to 1996-97, 1999-00 to 2015-16

593.04

510.07

Dispute regarding questions of law, classification dispute, sales in transit, high sea sales, nonsubmission of C forms & E1 forms, disallowance of iTC, valuation of goods and other matters

Commissioner (Appeal)

1999-00 to 2015-16

31.92

30.66

Additional Commissioner

2005-06, 2007-08 to 2014-15

4.08

3.10

Joint Commissioner

2007-08 to 2015-16

14.04

10.00

Joint Commissioner (Appeal)

1995-96, 1996-97, 1999-00 to 2017-18

2,443.83

2,377.28

The Central Sales Tax Act, Entry tax, Local Sales Tax Act, Works Contract Tax Act and Goods & Services Tax Act

Dispute regarding questions of law, classification dispute, sales in transit, high sea sales, nonsubmission of C forms & E1 forms, disallowance of iTC, valuation of goods and other matters

Assistant/ Deputy Commissioner

1996-97 to 2017-18

531.73

528.68

Assessing / Commercial Tax Officer

1996-97 to 2016-17

8.80

8.22

income Tax Act, 1961

Demand arising out of Regular Assessment/Reassessment

ITAT

2004-05 & 2009-10 to 2012-13

1,066.36

287.60

Demand arising out of Regular Assessment/Reassessment

CIT(A)

2015-16

569.35

569.35

(viii) in our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions and banks and dues to debenture holders. The Company has not borrowed any funds from the government

(ix) in our opinion and according to the information and explanations given to us, the Company has not raised any money by way of initial public offer or further public offer (including debt instruments) or term loans and hence reporting under paragraph 3 (ix) of the Order is not applicable to the Company.

(x) To the best of our knowledge and according to the information and explanations given to us, no material fraud by the Company and no material fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) in our opinion and according to the information and explanations given to us, the Company has paid / provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) in our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company and hence reporting under paragraph 3 (xii) of the Order is not applicable to the Company.

(xiii) in our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Act, where applicable, for all transactions with related parties and the details of such related party transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, during the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under paragraph 3 (xiv) of the Order is not applicable to the Company.

(xv) in our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its directors or persons connected with him and hence provisions of section 192 of the Act is not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-iA of the Reserve Bank of india Act, 1934.

FOR DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm Registration No. 117366W/W-100018)

SANJIV V. PILGAONKAR

(Partner)

(Membership No. 039826)

MUMBAI, May 10, 2019


Mar 31, 2018

INDEPENDENT AUDITORS'' REPORT

TO THE MEMBERS OF LARSEN & TOUBRO LIMITED Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of LARSEN & TOUBRO LIMITED (the "Company"), which also includes 29 Joint Operations accounted on a proportionate basis, which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Ind AS Financial Statements

The Board of Directors of the Company and those charged with governance of the joint operation referred to above, which is a company incorporated in India, are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (the "Act") with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity in accordance with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the respective companies and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view, and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under and the Order issued under section 143(11) of the Act.

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditors in terms of their reports referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the other auditors on financial information of joint operations referred to in the Other Matters paragraph below, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with Ind AS and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Other Matters

a) We did not audit the financial information of 25 joint operations included in the standalone Ind AS financial statements of the Company whose financial information reflect total assets of r 4,583.15 crore as at March 31, 2018 and total revenues of r 5,285.06 crore and net cash inflows of r 203.19 crore for the year ended on that date, as considered in the standalone Ind AS financial statements. The financial information of these joint operations has been audited by the other auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these joint operations and our report in terms of subsection (3) of Section 143 of the Act, in so far as it relates to the aforesaid joint operations, is based solely on the report of such other auditors.

Our opinion on the standalone financial statements and our report on Other Legal and Regulatory Requirements below is not modified in respect of this matter.

b) The Statement includes the unaudited financial information of 3 joint operations included in the standalone Ind AS financial statements of the Company whose financial information reflect total assets of r 34.28 crore as at March 31, 2018 and total revenues of r 5.32 crore and net cash outflows of less than r 0.01 crore for the year ended on that date, as considered in the standalone Ind AS financial statement.

The financial information of these joint operations is unaudited and have been furnished to us by the Management and our opinion on the Statement, in so far as it relates to the amounts and disclosures included in respect of these joint operations, is based solely on such unaudited financial information. In our opinion and according to information and explanation given to us by the Management, such financial information is not material to the Company.

c) The audit of standalone financial statements for the year ended March 31, 2017 were carried out by us jointly with another firm of chartered accountants, and the report had expressed an unmodified opinion in relation thereto.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit and on the consideration of the reports of the other auditors on the financial information of joint operation, referred to in the Other Matters paragraph above we report, to the extent applicable that:

a) We have sought and 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 and its joint operation companies so far as it appears from our examination of those books and the reports of the other auditors;

c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of accounts;

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act;

e) On the basis of the written representations received from the Directors of the Company as on March 31, 2018 taken on record by the Board of Directors and the report of statutory auditor of its joint operation company incorporated in India, none of the directors is disqualified as on March 31, 2018 from being appointed as a director in terms of Section 164(2) of the Act;

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and joint operation which are companies incorporated in India and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s and its joint operation internal financial controls over financial reporting; and

g) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts and

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act")

We have audited the internal financial controls over financial reporting of Larsen & Toubro Limited (the "Company") as at March 31, 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company as for the year ended on that date which includes internal financial controls over financial reporting of 1 of the 29 joint operations, which is a Company incorporated in India.

Management''s Responsibility for Internal Financial Controls

The Board of Directors of the Company and those charged with governance of the joint operation referred to above, which is a Company incorporated in India, are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to respective Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditor''s Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting of the Company and its joint operation Company incorporated in India, based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained by the other auditor of the joint operation which is a Company incorporated in India, in terms of their reports referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanations given to us and based on the consideration of the report of the other auditor on internal financial controls system over financial reporting of the joint operation referred to in the Other Matters paragraph below, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on the internal control over financial reporting established by the respective Company considering the essential components of internal control stated in the Guidance Note.

Other Matters

Our aforesaid report under Section 143(3)(i) of the Act on the adequacy and operating effectiveness of the internal financial controls over financial reporting insofar as it relates to 1 joint operation, which is a Company incorporated in India, is solely based on the report furnished to us by the other auditor of such Company.

(i) In respect of the Company''s property, plant and equipment:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of property, plant and equipment.

(b) The Company has a program of physical verification of its property, plant and equipment to cover all the items of property, plant and equipment in a phased manner over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its property, plant and equipment. Pursuant to the program, certain property, plant and equipment were physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings (including land whose title deed have been pledged as security against debentures issued by the Company), are held in the name of the Company as at the balance sheet date, except the following:

V crore

Type of asset

Total no. of cases

Leasehold / freehold

Gross block as at March 31, 2018

Net block as at March 31, 2018

Remarks

Land

3

Freehold

1.27

1.27

Conveyance deed pending to be executed as the matter is sub judice.

Buildings

2

Freehold

3.52

0.73

In respect of immovable properties of land and buildings that have been taken on lease and disclosed as property, plant and equipment in the financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement.

(ii) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification between the physical stock and the books of accounts.

(iii) According to the information and explanations given to us, the Company has not entered into any contracts or arrangements covered under section 189 of the Act and hence reporting under paragraph 3 (iii) of the Order is not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to the information and explanations given to us, the Company has not accepted any deposits during the year and does not have any unclaimed deposits as at March 31, 2018 and hence, the provisions of the clause 3 (v) of the Order is not applicable to the Company.

(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Act. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under sub-section (1) of Section 148 of the Act, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained by the company. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Service Tax, Goods and Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other statutory dues applicable to it to the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Service Tax, Goods and Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other statutory dues in arrears as at March 31, 2018 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Goods and Service Tax and Value Added Tax which have not been deposited as on March 31, 2018 on account of disputes are given below:

Name of Statute

Nature of Dues

Forum where Dispute is Pending

Period to which Amount Relates

Amount Involved (V crore)

Amount Unpaid (V crore)

Central Sales Tax Act, Local Sales Tax Acts, Entry Tax and Works Contract Tax Act

Taxability of sub-contractor turnover, rate of tax for declared goods, inter-state sales and non-submission of forms

Supreme

Court

2000-01 to 2006-07

12.12

3.13

Name of Statute

Nature of Dues

Forum where Dispute is Pending

Period to which Amount Relates

Amount Involved (V crore)

Amount Unpaid (V crore)

Central Sales Tax Act, Local Sales Tax Acts, Entry Tax and Works

Dispute regarding question of law, classification dispute, local VAT and Works contract disputes.

High Court

1986-87 to1987-88, 1993-94, 1994-95, 1998-99 to 2002-03, 2005-06, 2006-07 to 2012-13

61.96

54.43

Contract Tax Act

Non-submission of forms, classification disputes, inter-state sales turnover, rates of tax of declared goods, classification dispute, disallowance of Entry Tax and other matters

Sales Tax/ VAT Tribunal

1989-90 to 2013-2014

505.84

442.41

Dispute regarding question of law, non-submission of forms,

Commissioner

(Appeal)

1995-1996 to 2013-2016

35.27

34.36

classification dispute, disallowance of setoff, valuation of goods, sales in transit and high sea sales, and other matters.

Commissioner

1994-1995 to 2016-2017

8.67

8.67

Additional

Commissioner

2011-12 to 2012-13

2.62

1.99

Joint

Commissioner

2012-2013 to 2015-2016

10.87

6.27

Joint

Commissioner

(Appeal)

1995-96 to 2012-13

1,414.85

1,325.03

Non submission of forms and other matters

Assistant /

Deputy

Commissioner

1996-97 to 2013-14

499.29

497.10

Assessing/ Commercial Tax Officer

1999-00 to 2001-02, 2013-2014

0.94

0.93

The Central

Excise

Act,1944,

Dispute regarding question of law, classification dispute and other matters.

High Court

2005-06 , 2007-2008, 2009 to 2011

113.87

85.13

Service Tax under Finance Act, 1994 and Customs Act, 1962

Disallowance of CENVAT credit, short payment of service tax,

MRP Valuation disputes, dispute regarding classification of services and other matters.

CESTAT

1991-92, 2001-02 to 2011-12

413.35

408.54

Disallowance of CENVAT credit, short payment of service tax,

Commissioner

(Appeal)

2006-07 to 2014-15

25.92

24.85

service tax rate dispute, valuation dispute and other matters

Commissioner

2012-2013

2.05

2.05

Mine and Minerals (Regulation and

Development) Act, 1957

Demand notice for royalty on alleged use of excavated minor minerals.

High Court

2013-2014 to 2015-2016

20.79

10.39

Income-tax Act, 1961

Demand arising out of Regular Assessment/Reassessment

ITAT

2004-2005, 2007-2008 to 2012-2013

1,564.30

482.31

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions and banks and dues to debenture holders. The Company has not borrowed any funds from the government.

(ix) In our opinion and according to the information and explanations given to us, the Company has not raised any money by way of initial public offer or further public offer (including debt instruments) or term loans and hence reporting under paragraph 3 (ix) of the Order is not applicable to the Company.

(x) To the best of our knowledge and according to the information and explanations given to us, no material fraud by the Company and no material fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid / provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company and hence reporting under paragraph 3 (xii) of the Order is not applicable to the Company.

(xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Act, where applicable, for all transactions with related parties and the details of such related party transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, during the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under paragraph 3 (xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its directors or persons connected with him and hence provisions of section 192 of the Act is not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm Registration No. 117366W/W-100018)

P. R. RAMESH

(Partner)

(Membership No. 70928)

MUMBAI, May 28, 2018


Mar 31, 2017

We have audited the accompanying standalone Ind AS financial statements of Larsen & Toubro Limited (the “Company”), which comprise the Balance Sheet as at March 31, 2017, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information, which includes 25 Joint Operations (herein after referred to as “standalone Ind AS financial statements”).

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (the “Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company including its joint operation in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (“Ind AS”) prescribed under section 133 of the Act.

The Boards of Directors of the Company and those charged with governance of its joint operation are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and its joint operation and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence obtained by us and other auditors in terms of their reports referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports of the other auditors on separate financial statements of joint operations referred to in the Other Matters paragraph below, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2017, and its profit, total comprehensive income, cash flows and the changes in equity for the year ended on that date.

Other Matters

a) We did not audit the financial statements / information of 16 joint operations included in the standalone Ind AS financial statements of the Company whose financial statements reflect total assets of RS.3,647.41 crore as at March 31, 2017, total revenues of RS.4,360.69 crore, total profit after tax (net) of RS.268.96 crore and total comprehensive income (net) of RS.269.03 crore for the year ended on that date, as considered in the standalone Ind AS financial statements. The financial statements of these joint operations have been audited by the other auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these joint operations and our report in terms of subsection (3) of Section 143 of the Act, in so far as it relates to aforesaid joint operations, is based solely on the reports of such other auditors.

Out of above, there are 7 joint operations which are located outside India whose financial results have been prepared in accordance with accounting principles generally accepted in their respective countries and which have been audited by other auditors under generally accepted auditing standards applicable in their respective countries. The Company’s management has converted the financial statements of such joint operations located outside India from accounting principles generally accepted in their respective countries to accounting principles generally accepted in India. We have audited these conversion adjustments made by the Company’s management. Our audit report in so far as it relates to the balances and affairs of such joint operations located outside India is based on the reports of other auditors and the conversion adjustments prepared by the management of the Company and audited by us.

b) The comparative financial information of the Company for the transition date opening balance sheet as at 1st April 2015 included in these standalone Ind AS financial statements, are based on the statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited by one of the joint auditors whose report for the year ended March 31, 2015 dated May 30, 2015 expressed an unmodified opinion on those standalone financial statements, and have been restated to comply with Ind AS. Adjustments made to the previously issued said financial information prepared in accordance with the Companies (Accounting Standards) Rules, 2006 to comply with Ind AS have been audited by us.

c) The comparative financial information for the year ended March 31, 2016 in respect of 4 joint operations included in this standalone Ind AS financial statements prepared in accordance with the Ind AS have been audited by the other auditors.

The comparative financial information for the year ended March 31, 2016 in respect of 16 joint operations included in this standalone Ind AS financial statements prepared in accordance with the Ind AS have not been audited by their auditors and have been furnished to us by the Management.

Our opinion on the standalone Ind AS financial statements, and our report on Other Legal and Regulatory Requirements below, is not modified in respect of these matters with respect to our reliance on the work done and the reports of the other auditors and the financial information certified by the Management.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit and on the consideration of the reports of the other auditor on the separate financial statements / information of the joint operation, referred to in the Other Matters paragraph above we report, to the extent applicable that:

a) We have sought and 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 and its joint operation so far as it appears from our examination of those books and the reports of the other auditors;

c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account;

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act read with relevant rules issued thereunder;

e) On the basis of the written representations received from the directors as on March 31, 2017 taken on record by the Board of Directors and the report of the statutory auditor of its joint operation company incorporated in India, none of the directors is disqualified as on March 31, 2017 from being appointed as a director in terms of Section 164(2) of the Act;

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and joint operation which is a Company incorporated in India and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s and it’s joint operation’s internal financial controls over financial reporting; and

g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company; and

iv. To the best of our information and according to the information and explanations given to us and having regard to the nature of business and size of its operations and cash payments made by the Company in the ordinary course of business and based on the Company’s practices for recording such transactions, the Company has provided the requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8th November, 2016 of the Ministry of Finance, during the period from November 8, 2016 to December 30, 2016. Based on audit procedures performed and the representations provided to us by the management, we report that the disclosures are in accordance with the relevant books of account maintained by the Company and as produced before us and other auditor by the management.

2. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.

ANNEXURE “B” TO THE INDEPENDENT AUDITORS’ REPORT

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a program of verification of its fixed assets to cover all the items in a phased manner over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its fixed assets. Pursuant to the program, certain fixed assets were physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings (including land whose title deed have been pledged as security against debentures issued by the Company), are held in the name of the Company as at the balance sheet date, except the following:

Rs. crore

Type of asset

Total no. of cases

Leasehold / freehold

Gross block as at March 31, 2017

Net block as at March 31, 2017

Remarks

Land

3

Freehold

1.27

1.27

Conveyance deed pending to be executed.

Buildings

2

Freehold

3.54

0.94

Conveyance deed pending to be executed.

In respect of immovable properties of land and buildings that have been taken on lease and disclosed as fixed asset in the financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement.

(ii) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification between the physical stock and the book records.

(iii) According to the information and explanations given to us, the Company has granted loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Act, in respect of which:

(a) The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company’s interest.

(b) The schedule of repayment of principal and payment of interest has been stipulated and repayments or receipts of principal amounts and interest have been regular as per stipulations.

(c) There is no overdue amount remaining outstanding as at the balance sheet date.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 1 86 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to the information and explanations given to us, the Company has not accepted any deposit during the year and hence reporting under paragraph 3 (v) of the Order is not applicable to the Company.

(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Act. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended and prescribed by the Central Government under sub-section (1) of Section 148 of the Act, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees’ State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues applicable to it to the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues in arrears as at March 31, 2017 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, and Value Added Tax which have not been deposited as on March 31, 2017 on account of disputes are given below:

Name of Statute

Nature of Dues

Forum where Dispute is Pending

Period to which Amount Relates

Amount Involved (Rs. crore)

Amount Unpaid Rs. crore)

Central Sales Tax Act, Local Sales Tax Acts and Works

Taxability of sub-contractor turnover, rate of tax for declared goods, inter-state sales and non-submission of forms

Supreme Court

2000-01 to 2006-07

12.13

3.14

Contract Tax Act

Dispute regarding question of law, non-submission of forms, classification dispute, tax deducted at source at lower rate, sales in transit, high seas sales, labour turnover, local VAT, rate of tax on declared goods and other matters.

High Court

1986-87 to 1987-88, 1993-94, 1994-95, 1998-99 to 2002-03, 2005-06, 2006-07 to 2012-13

74.62

65.49

Non-submission of forms, classification disputes, disallowance of sales occasioning import, arbitrary demand raised, sub-contractors turnover disallowed, pumping and freight charges, inter-state sales turnover, tax deducted at source disallowed, rates of tax of declared goods, classification dispute, disallowance of Entry tax and other matters.

Sales Tax/VAT Tribunal

1989-90 to 2013-14

417.09

360.28

Dispute regarding question of law, non-submission of forms, classification

Commissioner

(Appeal)

2000-01,2003-04 to 2012-13, 2014-15 to 2015-16

43.44

40.82

dispute, disallowance of setoff, valuation of goods, sales in transit and high seas sales, and other matters.

Commissioner

2008-09, 2012-13

0.33

0.33

Non Submission of Forms and other matters.

Additional

Commissioner

2011-12 to 2012-13

2.59

2.58

Dispute regarding question of law, non-submission of forms, sales in transit, local VAT and other matters.

Joint

Commissioner

2006-07, 2009-10, 2011-12 to 2015-16

27.18

4.02

Non-submission of forms, additional demands for pending forms, rate of tax dispute, disallowance of branch transfer, sub-contractors turnover, considering supply agreement as Works Contract Tax, disallowance of sales in transit, stock transfer and other matters.

Assistant/ Deputy/ Joint Commissioner - Appeals

1998-99, 2000-01 to 2014-15

1219.32

1128.36

Sales in transit, local VAT and other matters.

Assessing/ Commercial Tax Officer

1996-97 to 1998-99, 2001-02 to 2007-08, 2009-10 to 2012-13

7.97

7.13

The Central Excise Act, 1944, Service Tax under Finance Act,

Export rebate claim, service tax on commercial construction services, service tax liability against rate change and penalty imposed for wrong availment of CENVAT credit.

High Court

2005-06 to 2007-08, 2009-10 to 2012-13

42.48

40.74

1994 and Customs Act, 1962

Demand of excise duty on Fabrication of Cable tray supports/ ED exemption/ Export rebate disallowance / Service Tax on Business Auxiliary Services/ Valuation Dispute pertaining to Excise/ Duty on Supply of Bolts & nuts/ GTA services, site jobs, export rebate disallowance, MRP valuation disputes, CENVAT credit availed, non-maintenance of separate records, and other matters.

CESTAT

1991-92,2001-02 to 2011-12

1025.48

1001.52

Disallowance of CENVAT credit, excise duty refund, excise duty on site jobs, short payment of service tax, service tax rate dispute, valuation dispute and other matters.

Commissioner

(Appeal)

2006-07 to 2012-13, 2015-16

13.87

13.57

Disallowance of CENVAT credit, short payment of service tax, service tax rate dispute, valuation dispute and other matters.

Commissioner

2005-06 to 2013-14

78.69

77.58

Disallowance of CENVAT credit, short payment of service tax and other matters.

Tribunal

2006-07 to 2009-10, 2011-12 to 2012-13

78.97

78.12

Non fulfilment of Export Obligations under Export promotion scheme

Directorate General of Foreign Trade

2015-16 to 2016-17

12.49

12.49

Income-tax Act, 1961

Demands arising out of Regular Assessment/ Reassessment

ITAT

2003-04, 2006-07 to 2011-12

1616.42

491.16

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions and banks and dues to debenture holders. The Company has not borrowed any funds from the government.

(ix) In our opinion and according to the information and explanations given to us, the Company has not raised any money by way of initial public offer or further public offer (including debt instruments) or term loans and hence reporting under paragraph 3 (ix) of the Order is not applicable to the Company.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid / provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company and hence reporting under paragraph 3 (xii) of the Order is not applicable to the Company.

(xiii) In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Act, where applicable, for all transactions with the related parties and the details of related parties and the details of related party transactions have been disclosed in the financial statements etc. as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, during the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under paragraph 3 (xiv) of the Order is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its directors or persons connected with him and hence provisions of section 192 of the Act are not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For DELOITTE HASKINS & SELLS LLP For SHARP & TANNAN

Chartered Accountants Chartered Accountants

(Firm Registration No. 1 17366W/W-100018) (Firm Registration No. 109982W)

P. R. RAMESH FIRDOSH D. BUCHIA

(Partner) (Partner)

(Membership No. 70928) (Membership No. 38332)

MUMBAI, May 29, 2017


Mar 31, 2016

We have audited the accompanying standalone financial statements of Larsen & Toubro Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (the "Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act, as applicable.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors'' Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder and the Order under section 143 (11) of the Act.

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors'' considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016, and its profit and its cash flows for the year ended on that date.

Other Matters

a) The Standalone financial statements include the financial statements/information of 9 jointly controlled entities whose financial statements/financial information reflect the Company''s share in net assets of v 474.73 crore as at March 31, 2016 and share in profit (net) v 221.15 crore for the year ended on that date. The financial statements/information of these jointly controlled entities have been audited by the auditors of jointly controlled entities whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of these jointly controlled entities, is based solely on the report of such auditors of jointly controlled entities.

b) The Standalone financial statements include the financial statements/information of 7 jointly controlled entities whose financial statements/financial information reflect the Company''s share in net assets of v 296.62 crore as at March 31, 2016 and share in profit (net) v 24.79 crore for the year ended on that date. These financial statements/information have been furnished to us by management and our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of these jointly controlled entities is based solely on such financial statements/information certified by management. In our opinion and according to the information and explanations given to us by the management, these financial statements are not material to the Company.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act, we report that:

a) We have sought and 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 it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards prescribed under section 133 of the Act, as applicable.

e) On the basis of the written representations received from the directors as on March 31, 2016 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

g) With respect to the other matters to be included in the Auditors'' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts; and

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

2. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order.

ANNEXURE "B" TO THE INDEPENDENT AUDITORS'' REPORT

(Referred to in paragraph 2 under ''Report on Other Legal and Regulatory Requirements'' section of our report of even date)

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Company has a program of verification of fixed assets to cover all the items in a phased manner over a period of 3 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed / transfer deed / conveyance deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings (including land whose title deed have been pledged as security against debentures issued by the Company), are held in the name of the Company as at the balance sheet date, except the following: Rs. crore

Type of asset Total no. of Leasehold / Gross block as at Net block as at Remarks cases freehold March 31, 2016 March 31, 2016

Land 2 Freehold 0.27 0.27 Conveyance deed pending to be executed.

Buildings 16 Freehold 3.94 1.43 Conveyance deed pending to be executed.

In respect of immovable properties of land and buildings that have been taken on lease and disclosed as fixed asset in the financial statements, the lease agreements are in the name of the Company, where the Company is the lessee in the agreement.

(ii) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) According to the information and explanations given to us, the Company has granted loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013, in respect of which:

(a) The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company''s interest.

(b) The schedule of repayment of principal and payment of interest has been stipulated and repayments or receipts of principal amounts and interest have been regular as per stipulations.

(c) There is no overdue amount remaining outstanding as at the balance sheet date.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to the information and explanations given to us, the Company has not accepted any deposit during the year and hence reporting under clause (v) of CARO 2016 is not applicable to the Company.

(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Companies Act, 2013. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended prescribed by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues applicable to it to the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, Employees'' State Insurance, Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues in arrears as at March 31, 2016 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, and Value Added Tax which have not been deposited as on March 31, 2016 on account of disputes are given below:

Name of Nature of Dues Forum where Statute Dispute is Pending

Central Sales Taxability of sub-contractor turnover, Supreme Court Tax Act, Local rate of tax for declared goods, Sales Tax Acts inter-state sales and non- submission and Works of forms Contract Tax Dispute regarding question of High Court Act law, non-submission of forms, classification dispute, tax deducted at source at lower rate, sales in transit, high seas sales, labour turnover, local VAT, rate of tax on declared goods and other matters.

Non-submission of forms, Sales Tax/ VAT classification disputes, disallowance Tribunal of sales occasioning import, arbitrary demand raised, sub-contractors turnover disallowed, pumping and freight charges, inter-state sales turnover, tax deducted at source disallowed, rates of tax of declared goods, classification dispute, disallowance of Entry tax and other matters.

Dispute regarding question of Commissioner law, non-submission of forms, (Appeal) classification dispute, disallowance Commissioner of setoff, sales in transit and high seas sales, and other matters.

Non Submission of Forms and other Additional/ matters. Assistant Commissioner

Dispute regarding question of Joint law, non-submission of forms, Commissioner classification dispute and disallowances made for credit notes and occasioning imports, Input credit reversals, sales in transit, high seas sales, deficiency in documents, local VAT, rate of tax on declared goods and other matters.

Non-submission of forms, additional Deputy demands for pending forms, rate of Commissioner tax dispute, disallowance of branch (Appeal) transfer, sub-contractors turnover, considering supply agreement as Works Contract Tax, disallowance of sales in transit, stock transfer and other matters.

Non-submission of forms, Assessing/ disallowance of sales occasioning Commercial imports, rate of tax dispute, Tax Officer deficiency in documents, sales in transit, high seas sales and other matters.

The Central Excise Duty dispute on site mix Supreme Court Excise Act, concrete & PSC grinder. 1944, Service Export rebate claim, service tax on High Court Tax under commercial construction services, Finance Act, service tax liability against rate 1994 change and penalty imposed for wrong availment of CENVAT credit.

Demand of excise duty on CESTAT Fabrication of Cable tray supports/ ED exemption/ Export rebate disallowance / Service Tax on Business Auxiliary Services/ Valuation Dispute pertaining to Excise/ Duty on Supply of Bolts & nuts/ GTA services, site jobs, export rebate disallowance, MRP valuation disputes, CENVAT credit availed, non-maintenance of separate records, and other matters.

Disallowance of CENVAT credit, Commissioner excise duty refund, excise duty (Appeal) on site jobs, short payment of Additional/ service tax, service tax rate dispute, Assistant valuation dispute and other matters. Commissioner

Disallowance of CENVAT Credit. Commissioner (Appeal)

Income-tax Assessment under section 143(3), ITAT Act, 1961 Assessment under section 143(3) read with section 147, Assessment under section 143(3) read with section 144C(13) and demand of tax deducted at source on Internet Charges, Reimbursement of Data card expenses and Bank Guarantee Charges.

Name of Statute Period to which Amount Amount Amount Relates Involved Unpaid (Rs. crore) (Rs. crore)

Central Sales Tax Act 1991-92, 1995-96, 15.53 3.19 1997-98, 1999-00 to 2006-07

1986-87 to 1999-00, 65.23 48.51 2005-06 to 2010-11, 2012-13

1989-90 to 2012-13 373.09 326.54

2003-04 to 2011-12 16.42 15.77

2008-09, 2010-11, 7.01 4.57 2011-12

1995-96 to 2012-13 16.32 15.11

1994-95 to 2013-14 139.92 91.71

1996-97 to 2013-14 1,541.53 1,493.20

1999-00 to 2015-16 486.02 484.76

The Central Excise Act, 1944 1997-98 0.97 0.27

2003-04, Oct 2005 to 42.48 42.48 Aug 2007

1991-92 to 2014-15 611.84 608.98

2006-07 to 2014-15 4.73 4.55

2015-16 0.14 0.14

2003-04 to 2011-12 3.94 3.80

Income Tax Act, 1961 2002-03, 2003-04, 1,462.11 833.77 2006-07 to 2010-11

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions, banks and government and dues to debenture holders.

(ix) In our opinion and according to the information and explanations given to us, the Company has not raised money by way of initial public offer or further public offer (including debt instruments) and money raised by way of the term loans have been applied by the Company during the year for the purposes for which they were raised.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid / provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the CARO 2016 is not applicable.

(xiii) In our opinion and according to the information and explanations given to us the Company is in compliance with Section 188 and 177 of the Companies Act, 2013, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the financial statements etc. as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, during the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause (xiv) of CARO 2016 is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its directors or persons connected with him and hence provisions of section 192 of the Companies Act, 2013 are not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

For DELOITTE HASKINS & SELLS LLP For SHARP & TANNAN

Chartered Accountants Chartered Accountants

(Firm Registration No. 117366W/ W-100018) (Firm Registration No. 109982W)

P. R. RAMESH FIRDOSH D. BUCHIA

(Partner) (Partner)

(Membership No. 70928) (Membership No. 38332)

MUMBAI, May 25, 2016


Mar 31, 2015

We have audited the accompanying standalone financial statements of Larsen & Toubro Limited ("the Company"), which comprise the balance sheet as at 31 March 2015, the statement of profit and loss, the cash flow statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management's responsibility for the standalone financial statements

The Company's board of directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2015, and its profit and its cash flows for the year ended on that date.

Report on other legal and regulatory requirements

1 As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the central government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2 As required by section 143 (3) of the Act, we report that:

(a) We have sought and 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 it appears from our examination of those books.

(c) The balance sheet, the statement of profit and loss, and the cash flow statement dealt with by this report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on 31 March 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2015 from being appointed as a director in terms of section 164 (2) of the Act.

(f) With respect to the other matters to be included in the Auditor's Report in accordance with rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - refer notes I, note (II) in Q(16) and Q(17) to the financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - refer notes C(II), D(IV) and Q(7)(a) to the financial statements; and

iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure to the Independent Auditors' report (Referred to paragraph (1) under 'Report on other legal and regulatory requirements' of our report of even date)

1 (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed assets.

(b) 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 having regard to the size of the Company and nature of its assets. 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 (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventory followed by management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3 According to the information and explanations given to us, there are no companies, firms and other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, paragraphs 3(iii)(a) and (b) of the Order are not applicable.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control systems.

5 According to the information and explanations given to us, the Company has not accepted deposits from the public and accordingly, paragraph 3(v) of the Order is not applicable.

6 We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules prescribed by the central government for the maintenance of cost records under section 148(1) of the Companies Act, 2013 in respect of all its manufacturing and construction activities and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The contents of these accounts and records have not been examined by us.

7 (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues including provident fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues as applicable with the appropriate authorities. According to the information and explanations given to us, there were no undisputed amounts payable in respect of provident fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, cess and other statutory dues outstanding as at 31 March 2015 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of income-tax, sales-tax, wealth tax, service tax, duty of custom, duty of excise, value added tax or cess as at 31 March 2015 which have not been deposited on account of a dispute pending are as under:

Name of the Nature of the disputed dues Amount statute Rs. crore*

Central Sales Tax Taxability of sub-contractor turnover, rate of tax for 3.20 Act, Local Sales Tax declared goods, inter-state sales and non- submission of Acts and Works forms

Contract Tax Act Dispute regarding question of law, non-submission of 260.26 forms, classification dispute, tax deducted at source at lower rate, sales in transit, high seas sales, labour turnover, local VAT, local WCT, rate of tax on declared goods and other matters

Non-submission of forms, classification disputes, 344.55 disallowance of sales occasioning import, arbitrary demand raised, sub-contractors turnover disallowed, pumping and freight charges, inter-state sales turnover, tax deducted at source disallowed, rates of tax of declared goods, classification dispute, disallowance of WCT and other matters

Forms submitted but rejected by Assessing Officer 0.78





Name of the statute Period to which the amount relates Forum where disputes are pending

Central Sales Tax Act, Local Sales Tax Acts and Works Contract Tax Act 1991-92, 1995-96, 1997-98, 1999-2000 Supreme Court to 2005-06

1986- 87 to 2011-12 High Court

1987- 88 to 1991-92, 1994-95 to 2011-12 Sales Tax Tribunal

2008-09 Commissioner (Appeals)



Name of the Nature of the disputed dues Amount statute Rs. crore*

Non-submission of forms 13.92

Non-submission of forms, disallowance of sales in transit, 158.19 high seas sales, sales occasioning imports and other matters

Non-submission of forms, additional demands for 986.17 pending forms, rate of tax dispute, disallowance of branch transfer, sub-contractors turnover, interest demand on road permit, disallowance of sales in transit, sales occasioning imports and other matters

Non-submission of forms, disallowance of sales 1.83 occasioning imports, rate of tax dispute and other matters

Non-submission of forms and dispute related to sales 1.73 in transit

The Central Excise Dispute of excise duty on site mix concrete and PSC 0.27 Act, 1944, Service grinder

Tax under Finance Demand of excise duty on site fabricated steel structures, 565.06 Act, 1994 export rebate disallowance, valuation disputes, excise duty on concrete mix made at site, non-maintenance of separate records and other matters

Disallowance of cenvat credit, excise duty refund, short 1.76 payment of service tax, excise duty on concrete mix made at site, service tax rate dispute and other matters

Export rebate claim, service tax on commercial 42.48 construction services, service tax liability against rate change and penalty imposed for wrong availment of cenvat credit

Demand of service tax including penalty, interest on 15.24 lump-sum turnkey jobs, demand of penalty on late payment of service tax and other matters

Income-tax Act, Assessment under section 143(3) read with section 454.90 1961 144C(13) and demand of tax deducted at source on bank guarantee charges and internet charges Dispute regarding tax deducted at source at lower rates 0.05

Name of the statute Period to which the amount relates Forum where disputes are pending

1995-96, 1997-98, 2001-02 to 2004-05, Additional Commissioner 2006-07 to 2012-13 (Appeals)

1997-98, 1999-2000, 2001-02, 2003-04 Joint Commissioner to 2011-12 (Appeals)

1991-92, 1992-93, 1994-95, 1996-97, Deputy Commissioner

1997-98, 1999-2000 to 2013-14 (Appeals)

1991-92, 1992-93, 1996-97 to 2005-06 Assistant Commissioner and 2008-09 (Appeals)

1994-95 to 2014-15 Commercial Tax Officer

The Central Excise Act, 1944, Service Tax under Finance Act, 1994 1997-98 Supreme Court

1991-92, 2001-02 to 2011-12 CESTAT

2006- 07, 2008-09 to 2012-13 and 2014-15 Commissioner (Appeals)

2003- 04, 2005-06 and 2006-07 High Court

2004- 05 to 2010-11 CESTAT

Income-tax Act, 1961 2007- 08 to 2012-13 ITAT

2005- 06 Commissioner (Appeals)

*Net of pre-deposit paid in getting the stay/appeal admitted

(c) The amounts required to be transferred to the investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1 956 (1 of 1 956) and rules made thereunder are transferred to such fund within time.

8 The Company has no accumulated losses as at 31 March 2015 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

9 According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

10 I n our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by others from banks or financial institutions are prima facie not prejudicial to the interests of the Company.

11 In our opinion and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purposes for which they were obtained.

12 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP & TANNAN Chartered Accountants Firm's Registration No. 109982W by the hand of

MILIND P PHADKE Partner

Membership No.33013

Mumbai, May 30, 2015


Mar 31, 2014

Report on the financial statements

We have audited the accompanying financial statements of Larsen & Toubro Limited (“the Company”), which comprise the balance sheet as at March 31, 2014, and the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 (“the Act”) read with the General Circular 15/2013 dated 13 September 2013, of the Ministry of Corporate Affairs, in respect of section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2014;

(b) in the case of the statement of profit and loss, of the profit for the year ended on that date; and

(c) in the case of the cash flow statement, of the cash flows for the year ended on that date.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditor’s Report) Order, 2003 (“the Order”) issued by the central government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 purpose 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, statement of profit and loss and cash flow statement dealt with by this Report are in agreement with the books of account;

d. in our opinion, the balance sheet, statement of profit and loss, and cash flow statement comply with the Accounting Standards notifed under the Act read with the General Circular 15/2013 dated 13 September 2013, issued by the Ministry of Corporate Affairs, in respect of section 133 of the Companies Act, 2013; and

e. on the basis of written representations received from the directors as on March 31, 2014, and taken on record by the board of directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

2 (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventory followed by management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3 (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(b), (c) and (d) of the Order are not applicable. (b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(f) and (g) of the Order are not applicable.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control systems.

5 According to the information and explanations given to us, we are of the opinion that there are no contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956; accordingly paragraph 4(v) (b) of the Order is not applicable.

6 The Company had 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 and 58AA and the relevant provisions of the Companies Act, 1956 and rules framed thereunder, where applicable, have been complied with. We are informed that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal. As of the date of the balance sheet, the Company has no fixed deposits other than unclaimed matured deposits.

7 In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

8 We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules prescribed by the central government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of all its manufacturing and construction activities and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The contents of these accounts and records have not been examined by us.

9 (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. According to the information and explanations given to us, there were no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues outstanding as at 31 March 2014 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of sales tax, excise duty, service tax, customs duty, income tax and profession tax as at 31 March 2014 which have not been deposited on account of a dispute pending are as under:

Name of the statute Nature of the disputed dues Amount

Rs. crore*

Central Sales Tax Non-submission of forms 1.46 Act, Local Sales Tax

Acts and Works Non-submission of forms, dispute related to sales in transit, 3.56

Contract Tax Act rejection of exemption certificates, rate of tax dispute and other matters

Non-submission of forms, additional demand for pending 399.00 forms, rate of tax dispute, disallowance of branch transfer, sub-contractor’s turnover, interest demand on road permit, disallowance of exemptions on sale of assets, transit sale and other matters

Non-submission of forms, disallowance of transit sales, high 51.65 seas sales, classification dispute and other matters Non-submission of forms 8.52

Non-submission of forms, dispute related to sales in transit and 0.52 other matters

Non-submission of forms, labour and service charges, sub- 325.24 contractors turnover, pumping and freight charges, inter-state sales turnover, arbitrary demand raised, TDS disallowed, rate dispute, classification dispute, disallowance of works contract tax and other matters

Classification dispute,tax deducted at source at lower rate, sales 259.46 in transit, local VAT, local WCT, rate of tax of declared goods

Name Period to which the amount relates Forum where disputes are pending

Central Sales Tax 1991-92, 1992-93, 1994-95, 1996-97 to 2003-04, Commercial Tax Officer 2005-06 to 2009-10

1991-92, 1992-93, 1993-94, 1996-97, 1997-98 Assistant Commissioner and 1999-00 to 2011-12 (Appeals)

1989-90, 1991-92 to 2011-12 Deputy Commissioner(Appeals)

1993-94, 1996-97, 1997-98, 1999-00, 2001-02 Joint to 2009-10 Commissioner(Appeals)

1997-98, 2002-03 to 2011-12 Additional Commissioner(Appeals)

2001-02 to 2004-05, 2006-07 and 2008-09 Commissioner (Appeals)

1987-88, 1989-90 to 2011-12 Sales Tax Tribunal

1986-87, 1987-88, 1998-99 to 2011-12 High Court

10 The Company has no accumulated losses as at March 31, 2014 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

11 According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

12 According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Company has invested surplus funds in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

15 In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by subsidiary companies from banks or financial institutions are not prima facie prejudicial to the interests of the Company.

16 In our opinion and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purposes for which they were obtained.

17 According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short term basis have been used for long term investments.

18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

19 According to the information and explanations given to us and the records examined by us, security or charge has been created in respect of the debentures issued.

20 The Company has not raised any money by public issues during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP & TANNAN

Chartered Accountants

Firm’s Registration No.109982W

by the hand of

MILIND P. PHADKE

Partner

Mumbai, May 30, 2014 Membership No. 33013


Mar 31, 2013

We have audited the accompanying financial statements of Larsen & Toubro Limited ("the Company"), which comprise the balance sheet as at March 31, 2013, and the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Managements responsibility for the financial statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of bur information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2013;

(b) in the case of the statement of profit and loss, of the profit for the year ended on that date; and

(c) in the case of the cash flow statement, of the cash flows for the year ended on that date.

Report on other legal and regulatory requirements

1. As required by the Companies (Auditors Report) Order, 2003 ("the Order") issued by the central government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 purpose 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, statement of profit and loss and cash flow statement dealt with by this Report are in agreement with the books of account;

d. in our opinion, the balance sheet, statement of profit and loss, and cash flow statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; and -

e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the board of directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Annexure to the Auditors report

(Referred to in paragraph (1) of our report of even date)

1 (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed assets.

(b) 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 having regard to the size of the Company and nature of its assets. 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.

(c) The Company has not disposed off any substantial part of its fixed assets so as to affect its going concern status.

2 (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventory followed by management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3 (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iiiXb), (c) and (d) of the Order are not applicable,

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(f) and (g) of the Order are not applicable.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control systems. .

5 According to the information and explanations given to us, we are of the opinion that there are no contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956; accordingly paragraph 4(v) (b) of the Order is not applicable.

6 The Company had 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 and 58AA and the relevant provisions of the Companies Act, 1956 and rules framed thereunder, where applicable, have been complied with. We are informed that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal. As of the date of the balance sheet, the Company has no fixed deposits other than unclaimed matured deposits.

7 In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

8 We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules prescribed by the central government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of all its manufacturing and construction activities and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The contents of these accounts and records have not been examined by us.

9 (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. According to the information and explanations given to us, there were no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues outstanding as at March 31,2013 for a period of more than six months from the date they became payable except for tax deducted at source on works contract aggregating to Rs. 0.02 crore which has since been paid.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of sales tax, excise duty, service tax, customs duty and income tax as at March 31,2013 which have not been deposited on account of a dispute pending are as under .

Name of the statute Nature of the disputed dues Amount Rs. crore*

Central Sales Tax Act, Non-submission of forms and other matters 0.87 Local Sales Tax Acts and Works Contract Non-submission of forms, dispute related to sales-in-transit, 6.10 Tax Act rejection of exemption certificates, rate of tax dispute and other matters

Non-submission of forms, additional demand for pending 956.03 forms, rate of tax dispute, disallowance of branch transfer, sub-contractors turnover, interest demand on road permit, disallowance of exemptions on sale of assets, transit sale and other matters

Non-submission of forms, disallowance of transit sales, high 143.19 seas sales, classification dispute and other matters

Non-submission of forms and disallowance of exemption 12.81 certificates

Non-submission of forms, dispute related to sales-in-transit 0.99 and other matters

Non-submission of forms, labour and service charges, sub- 290.62 contractors turnover, pumping and freight charges, inter- state sales turnover, arbitrary demand raised, TDS disallowed, rate dispute, classification dispute, disallowance of works contract tax and other matters

Inter-state sales, classification dispute and disallowance of 298.38 deemed sales in course of imports and taxability of sub- contractors turnover

Taxability of sub-contractor turnover, rate of tax for declared 197.89 goods, inter-state sales, non-submission of forms and high seas sales

Name of the Statute Period to which the amount relates Forum where disputes are pending

Central Sales Tax Act, Local Sales Tax Acts and Works Contract Tax Act 1991-92,1992-93, 1996-97 to 2000-01, 2005-06 to Commercial Tax Officer 2008-09

1991 -92,1992-93,1996-97, 1997-98,1999-00 to Assistant Commissioner 2008-09,2010-11 and 2011-12 (Appeals)

1989-90,1991-92 to 2011-12 Deputy Commissioner (Appeals)

1993-94,1996-97,1997-98, 2001-02 to 2009-10 Joint Commissioner (Appeals)

2001-02, 2003-04 to 2008-09,2010-11 and 2011-12 Additional Commissioner (Appeals)

1994-95,2001 -02,2002-03 and 2005-06 to 2008-09 Commissioner (Appeals)

1987-88, 1989-90 to 2011-12 Sales Tax Tribunal

1986-87,1987-88,1998-99 to 2011-12 High Court

1991-92,1995-96,1997-98 and 1999-00 to 2006-07 Supreme Court

Name of the statute Nature of the disputed dues Amount Rs. crore*

The Central Excise Demand of excise duty on steel price variation claims, 0.86 Act, 1944, Service Tax changes in assessable value due to reduction in billing under Finance Act, schedule quantity and demand on fabrication of tanks, 1994 and Customs platforms and ladders Act, 1962 interest on excise duty demand for duty paid on trading 0.02 registration in place of manufacturing registration and demand for custom duty on software

Demand of excise duty on site fabricated steel structure, 131.76 export rebate disallowance, valuation dispute, excise duty on concrete mix made at site, non-maintenance of proper records, demand of service tax on various services and other matters

Dispute on site mix concrete and PSC grinder 0.27

Demand of service tax on lumpsum turnkey jobs and other 220.02 matters

Demand of service tax including penalty and interest on 151.59 lumpsum turnkey jobs and demand of penalty on late payment of service tax

Export rebate claim and service tax on commercial 7.00 construction service

Income-tax Act, 1961 Dispute regarding tax not deducted on bank guarantee 2.20 charges, interest charges and purchase of software

Dispute regarding tax deducted at source at lower rate on 0.03 maintenance charges

Difference in rate of tax deducted at source 2.23

Name of the Statute Period to which the amount relates Forum where disputes are pending

The Central Excise Act, 1994, Service Tax under Finance Act, 1994 and Cutoms Act, 1962 1989-90 to 2011-12 Additional Commissioner

2006-07 and 2012-13 Commissioner (Appeals)

1991-92,2001-02,2003-04 to 2009-10, and 2011-12 CESTAT

1997-98 Supreme Court

2003-04 to 2011-12 Commissioner (Appeals)

1991-92,2001-02, 2003-04 to 2009-10 and 2011-12 CESTAT

2003-04,2006-07 to 2008-09 High Court

Income-tax Act 1961 2010-11 and 2011-12 Assessing Officer

2005-06 Commissioner (Appeals)

2007-08 and 2008-09 Director of Income Tax (International Taxation)

*Net of pre-deposit paid in getting the stay/appeal admitted

10 The Company has no accumulated losses as at March 31, 2013 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

11 According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

12 According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Company has invested surplus funds in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

15 In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by subsidiary companies from banks or financial institutions are not prima facie prejudicial to the interests of the Company.

16 In our opinion and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purposes for which they were obtained.

17 According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short term basis have been used for long term investments.

18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

19 According to the information and explanations given to us and the records examined by us, security or charge has been created in respect of the debentures issued.

20 The Company has not raised any money by public issues during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP & TANNAN

Chartered Accountants

Firms Registration No. 109982W

by the hand of

MIUND P. PHADKE

Partner

Mumbai, May 22, 2013 Membership No.33013


Mar 31, 2012

We have audited the attached Balance Sheet of Larsen & Toubro Limited as at March 31, 2012 and also the Statement of Profit and Loss and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys 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 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 statement 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 Companies (Auditors Report) Order, 2003, issued by the central government of India under sub-section (4A) of section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, 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, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Art, 1956; and

(e) on the basis of written representations received from directors as on March 31, 2012, and taken on record by the board of directors, we report that none of the directors is disqualified as on March 31, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

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 notes 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 the affairs of the Company as at March 31, 2012;

2) in the case of the Statement of Profit and Loss, of the profit of the Company 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.

Annexure to the Auditors report

(Referred to paragraph (1) of our report of even date)

1 (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed assets.

(b) 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 having regard to the size of the Company and nature of its assets. 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. .

(c) The Company has not disposed off any substantial part of its fixed assets so as to affect its going concern status.

2 (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventory followed by management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3 (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(b), (c) and (d) of the Order are not applicable.

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(f) and (g) of the Order are not applicable.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control systems.

5 (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered in the register maintained under section 301 of the Companies Act, 1956 have been entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6 The Company had 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 and 58AA and the relevant provisions of the Companies Act, 1956 and rules framed thereunder, where applicable, have been complied with. We are informed that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal. As of the date of the balance sheet, the Company has no fixed deposits other than unpaid matured deposits.

7 In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

8 We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules prescribed by the central government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 in respect of all its manufacturing and construction activities and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The contents of these accounts and records have not been examined by us.

9 (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. According to the information and explanations given to us, there were no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues outstanding as at March 31, 2012 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of sales tax, excise duty, service tax, customs duty and income tax as at March 31, 2012 which have not been deposited on account of a dispute pending are as under:

Name of the Nature of the disputed dues Amount Period to which the amount relates stature Crore

Central Sales Non-submission of forms, dispute regarding rate of tax and 0.47 1997-1998 to 1999-2000,2005-2006 and

Tax Act, Local other matters 2007-2009

Sales Tax Acts Non-submission of forms, disallowance of deemed inter- 298.26 1991-1992 to 2011-2012 and Works state sales, classification dispute and other matters

Contract Tax Non-submission of forms, additional demand for pending 37.23 1989-1990,1991-1992 and 1993-1994 to Act forms, rate of tax dispute, disallowance of branch transfer, 2010-2011 transit sale, export claim disallowance and other matters

Non-submission of forms, disallowance of transit sales, 146.22 1993-1994, 1994-1995,1996-1997 to 2009-2010 classification dispute and other matters

Non-submission of forms, additional demand for pending 14.94 1991-1992, 1992-1993, 1996-1997 to 2011-12 forms, disallowance of inter-state sales and other matters

Non-submission of forms, dispute related to sales in transit 79.39 2003-2004 to 2008-2009 and other matters

Non-submission of forms, inter-state sales, sub- contractors 162.80 1987-1988 to 2005-2006 and 2008-2009

turnover, rate dispute, disallowance under composition scheme and other matters

Inter-state sales, classification dispute and disallowance of 934.83 1987-1988 to 2008-2009, 2010-2011 and deemed sales in course of imports and taxability of sub- 2011-2012 contractors turnover

Taxability of sub- contractor turnover, rate of tax for declared 6.14 1991-1992, 1995-1996, 1997-1998 and 1999- goods and inter-state sales 2000 to 2004- 2005

The Central Demand of excise duty on fabrication 0.39 1989-1990 to 2011-2012

Excise Demand for custom duty for fuel, software and on export 0.02 2006-2007 and 2008-2009 Act, 1944, under rebate Service Tax under Finance Classifi cation dispute, exemp tions denied, valuation 84.72 1991-1992, 2001-2002, 2003-2004 to 2006-2007, Act, 1994 and disputes and other matters 2008-2009 and 2009-2010

Customs Act, Dispute on site mix concrete and PSC grinder 0.27 1997-1998

1962 Valuation dispute and disallowance of cenvat against 220.46 2003-2004 to 2010-2011 service tax on freight onward

Demand of service tax including penalty and interest on 127.47 2002-2003 to 2006-2007 lumpsum turnkey jobs and demand of penalty on late payment of service

Export rebate claim, service tax on commer cial construction 0.07 2003-2004 service

The Income- tax Dispute regarding tax not deducted on purchase of software 1.92 2010-2011 Act, 1961 Dispute regarding tax deducted at source at lower rate on 0.03 2005-2006 maintenance charges

Difference in rate of tax deducted at source 2.07 2007-2008 and 2008-2009 Name of the Forum where disputes Statute are pending

Central sales Commercial Tax Officer Tax Act,Local Sales Tax Acts Assistant Commissioner and Works (Appeals) Contract Tax Deputy Commissioner Act (Appeals)

Joint Commissioner (Appeals)

Additional Commissioner (Appeals) Commissioner (Appeals)

Sales Tax Tribunal

High court

Supreme Court

The Central Additional Commissioner Excise Act,1944, Commissioner (Appeals) Service Tax Under Finance CESTAT Act,1994 and Supreme Court Customs Act, commissioner (Appeals) 1962 CESTAT High court

The income Assessing officer tax Act,1961 Commissioner (Appeals) Director of Income Tax (International Taxation)

*Net of pre-deposit paid in getting the stay/appeal admitted_;_

10 The Company has no accumulated losses as at March 31, 2012 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

11 According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

12 According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Company has invested surplus funds in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

15 In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by subsidiary companies from banks or financial institutions are not prima facie prejudicial to the interests of the Company.

16 In our opinion and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purposes for which they were obtained.

17 According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short term basis have been used for long term investments.

18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

19 According to the information and explanations given to us and the records examined by us, security or charge has been created in respect of the debentures issued.

20 The Company has not raised any money by public issues during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP & TANNAN

Chartered Accountants

ICAI registration no. 109982W

by the hand of

R. D. KARE

Partner

Mumbai, May 14, 2012 Membership no. 8820


Mar 31, 2011

We have audited the attached Balance Sheet of Larsen & Toubro Limited as at March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement of the Company 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 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 statement 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 Companies (Auditor's Report) Order, 2003, issued by the central government of India under sub-section (4A) of section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, 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, 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 with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; and

(e) on the basis of written representations received from directors as on March 31, 2011, and taken on record by the board of directors, we report that none of the directors is disqualified as on March 31, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

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 and the 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 the affairs of the Company as at March 31, 2011;

2) in the case of the Profit and Loss Account, of the profit of the Company 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.

Annexure to the Auditors7 report {Referred to paragraph (1) of our report of even date)

1 (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed assets.

(b) 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 having regard to the size of the Company and nature of its assets. Accordingly, the physical verification of the fixed assets have been carried out by management during the year and no material discrepancies were noticed on such verification.

(c) The Company has not disposed off any substantial part of its fixed assets so as to affect its going concern status.

2 (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventory followed by management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3 (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956 Accordingly, paragraphs 4(iii)(b), (c) and (d) of the Order are not applicable,

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecurec from companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956 Accordingly, paragraphs 4(iii)(f) and (g) of the Order are not applicable.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurat* with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods am services. Further, on the basis of our examination of the books and records of the Company, and according to the information anc explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesse in the aforesaid internal control systems.

5 (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangement; that need to be entered in the register maintained under section 301 of the Companies Act, 1956 have been entered. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of sucr contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding th< value of rupees five lakhs in respect of any party during the year, have been made at prices which are reasonable having regarc to the prevailing market prices at the relevant time.

6 The Company had accepted deposits from the public and in our opinion and according to the information and explanations giver to us, the directives issued by the Reserve Bank of India and the provisions of section 58A and 58AA and the relevant provisions o the Companies Act, 1956 and rules framed thereunder, where applicable, have been complied with. We are informed that no orde has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any othe tribunal. As of the date of the balance sheet, the Company has no fixed deposits other than unpaid matured deposits.

7 In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

8 We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules prescribed by the central government for the maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 in respect of electronic products viz. industrial electronics including all control instrumentation and automation equipment and are of the opinion that prim; fade the prescribed accounts and records have been made and maintained. The contents of these accounts and records have not beer examined by us.

9 (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, th« Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protectior fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other materia statutory dues as applicable with the appropriate authorities. According to the information and explanations given to us, there were no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees stats insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues outstanding a; at March 31, 2011 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars oi sales tax, excise duty, service tax, customs duty and income tax as at March 31, 2011 which have not been deposited on accoun" of a dispute pending are as under:

Name of the Nature of the disputed dues Amount statute Rs. crore*

Central Sales Tax Non-submission of forms, dispute regarding rate of tax and 1.37 Act, Locai Sales other matters Tax Acts and Non-submission of forms, disallowance of deemed inter-state 141,51 Works Contract sales, classification dispute and other matte's Tax Act Non-submission of forms, additional demand for oending 33.61 forms, rate of tax dispute, disallowance of branch transfer, transit sale, export claim disallowance and other matters Non-suomission of forms, disallowance of transit sales, 10.27 classification dispute and otner matters

Non-submission of forms, additional demand for pending 2.85 forms, disallowance of inter-state sales and other matters Non-submission of forms, dispute related to sales in transit and 19,95 other matters

Non-suomission of forms, inter-state sales, sub-contractors 65.28 turnover, rate dispute, disallowance under composition scheme and other matters Inter-state sales, classification dispute and disallowance of 495.03 deemed sales in course of imports ano taxability of sub- contractors turnover Taxability of sub-contractor turnover, rate of tax for declared 2,35 goods and inter-state saies



Name of the Period to which the amount relates Forum where disputes Statue are pending

Central Saies Tax Act, Local Sales Tax Acts and Works Contract Tax Act 1996-1997 to 2005-2006 Commercial Tax Officer

1991-1992 to 1994-1995, 1997-1998, Assistant Commissioner

1999-2000 to 2007-2008 and 2009-2010 (Appeals)

1989-1990 and 1993-1994 to 2010-2011 Deputy Commissioner (Appeals)

1993-1994, 1994-1995, 1997-1998 to joint Commissioner

2007-2008 and 2009-2010 (Appeals)

1991-1992, 1992-1993, 1996-1997 and Additional Commissioner

2000-2001 to 2006-2007 (Appeals)

2003-2004 to 2007-2008 Commissioner (Appeals)

1987-1988 to 1996-1997, 1998-1999 to Sales Tax Tribunal 2003-2004 and 2005-2006

1987-1988 to 2006-2007 High Court

1991-1992, 1995-1996, 1997-1998 and Supreme Court 1999-2000 to 2004-2005

Name of the Nature of the disputed dues Amount statute Rs. crore*

The Central Excise Demand for custom duty for fuel, software and on export 0.70 Act, 1944, Service under rebate

Tax under Finance Classification dispute, exemptions denied, valuation disputes 40.71 Act, 1994 and and other matters Customs Act, Dispute on site mix concrete and PSC grinder 0.27 1962 Valuation dispute and disallowance of cenvat against service 219.96 tax on freight onward

Demand of service tax including penalty and interest on 124.19 lumpsum turnkey jobs and demand of penalty on late payment of service tax Export rebate claim, service tax on commercial construction 0.07 service

Income-tax Act, Dispute regarding tax not deducted on purchase of software 0.52 1961 Dispute regarding tax deducted at source at lower rate on 0.03 maintenance charges

Difference in rate of tax deducted at source 1.90

Name of the Period to which the amount relates Forum where disputes Statue are pending



The Central Excise Art, 1944, Service Tax under Finance Act, 1994 and Customs Act, 1962 2006-2007 to 2008-2009 Commissioner (Appeals)

1991-1992, 2001-2002, 2003-2004 to CESTAT 2006-2007, 2008-2009 and 2009-2010

1997-1998 Supreme Court

1997-1998, 2003-2004 to 2010-2011 Commissioner (Appeals)

2002-2003 to 2006-2007 CESTAT

2003-2004 High Court

Income-tax Ad, 1961 2006-2007 to 2009-2010 Assessing Officer 2005-2006 Commissioner (Appeals)

2007-2008 and 2008-2009 Director of Income Tax (International Taxation)

* Net of pre-deposit paid in getting the stay/appeal admitted.

10 The Company has no accumulated losses as at March 31, 2011 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

11 According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the Balance Sheet date.

12 According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Company has invested surplus funds in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

15 In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by subsidiary companies from banks or financial institutions are not prima facie prejudicial to the interests of the Company.

16 In our opinion and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purposes for which they were obtained.

17 According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long term investments.

18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

19 According to the information and explanations given to us and the records examined by us, security or charge has been created in respect of the debentures issued.

20 The Company has not raised any money by public issues during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP & TANNAN

Chartered Accountants

ICAI Registration no. 109982 W

by the hand of

R. D. KARE

Partner

Mumbai, May 19, 2011 Membership no.8820


Mar 31, 2010

We have audited the attached Balance Sheet of Larsen & Toubro Limited as at 31 March 2010 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys 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 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 statement 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 Companies (Auditors Report) Order, 2003, issued by the Central Government of India under sub-section (4A) of section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, 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, 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 with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; and

(e) on the basis of written representations received from directors as on 31 March 2010, and taken on record by the Board of Directors. we report that none of the directors is disqualified as on 31 March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

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 and the 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 the affairs of the Company as at 31 March 2010;

2) in the case of the Profit and Loss Account, of the profit of the Company 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.

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

1 (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed assets

(b) 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 having regard to the size of the Company and nature of its assets. Accordingly, he physical verification of the fixed assets have been carried out by management during the year and no material discrepancies were noticed on such verification.

(c) The Company has not disposed off any substantial part of its fixed assets so as to affect its going concern status.

2 (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us, the procedures of physical verification of inventory followed by management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material.

3 (a) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(b), (c) and (d) of the Order are not applicable.

(b) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii)(f) and (g) of the Order are not applicable.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control systems.

5 (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements

that need to be entered in the register maintained under section 301 of the Companies Act, 1956 have been entered. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

6 The Company had 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 and 58AA and the relevant provisions of the Companies Act, 1956 and rules framed thereunder, where applicable, have been complied with. We are informed that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal. As of the date of the Balance Sheet, the Company has no fixed deposits other than unpaid matured deposits.

7 In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

8 We have broadly reviewed the books of account and records maintained by the Company pursuant to the rules prescribed by the central government for the maintenance of cost records under section 209(1 )(d) of the Companies Act, 1956 in respect of electronic products viz. industrial electronics including all control instrumentation and automation equipment and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. The contents of these accounts and records have not been examined by us.

9 (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the

Company is generally regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities. According to the information and explanations given to us. there were no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues outstanding as at 31 March 2010 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of sales tax, excise duty, service tax and income tax as at 31 March 2010 which have not been deposited on account of a dispute pending, are as under:

Name of the statute Nature of the disputed dues Amount Rs.crore*

Central Sales Tax Act, Non-submission of forms, dispute regarding rate 0.55 Local Sales Tax Acts of tax and other matters and Works Contract Non-submission of forms, disallowance of 85.84 Tax Act deemed inter-state sales, classification dispute and other matters

Non-submission of forms, additional demand for 32.69 pending forms, rate of tax dispute, disallowance of branch transfer, transit sale, export claim disallowance and other matters

Non-submission of forms, disallowance of transit 10.92 sales, classification dispute and other matters

Non-submission of forms, additional demand for 3.08 pending forms, disallowance of inter-state sales and other matters

Non-submission of forms, dispute related to 8.40 sales in transit and other matters

Non-submission of forms, inter-state sales, sub- 38.05 contractors turnover, rate dispute, disallowance under composition scheme and other matters Inter-state sales, classification dispute and 229.34 disallowance of deemed sales in course of imports and taxability of sub-contractors turnover

Name of the Period to which the amount Forum where disputes are relates pending

Central Sales Tax, 1997-1998 to 2001-2002 and Commercial Tax Officer Local Sales Tax 2004-2005 to 2005-2006 and Works Contract 1991 -1992,1992-1993, 1996-1997 Assistant Commissioner Tax Act and 1998-1999 to 2005-2006 (Appeals)

1989-1990,1991 -1992 to Deputy Commissioner 1997-1998 and 1999-2000 to (Appeals) 2007-2008

1993-1994 to 2005-2006 Joint Commissioner (Appeals)

2000-2001 to 2006-2007 Additional Commissioner (Appeals)

2003-2004 and 2005-2006 Commissioner (Appeals) 1987-1988 to 1991-1992 and Sales Tax Tribunal 1994-1995 to 2005-2006

1987-1988 to 2006-2007 High Court



Name of the statute Nature of the disputed dues Amount Rs.crore*

Taxability of sub-contractor turnover, rate of tax 5.78 for declared goods and inter- state rate The Central Excise Classification dispute, exemptions denied, 36.63 Act,1944 and Service valuation disputes and other matters Tax under Finance Act, Dispute on site mix concrete and PSC grinder 0.27 1994

Valuation dispute and disallowance of cenvat 215.09 against service tax on freight onward

Demand of service tax including penalty and 120.72 interest on lumpsum turnkey jobs and demand of penalty on late payment of service tax

Export rebate claim, service tax on commercial 4.11 construction service

Income Tax Act, 1961 Dispute regarding tax deducted at source at 0.03 lower rate on maintenance charges Difference in rate of tax deducted at source 1.73





Income Tax Act, 1961

Name of the Period to which the amount Forum where disputes are Statue relates pending

1991-1992,1995-1996,1997- Supreme Court 1998 and 1999-2000 to2004-2005

The Central Excise Act,1944 and Service Tax under Finance Act, 1994 2002-2003 to 2005-2006 CESTAT 1997-1998 Supreme Court

2003-2004 to 2005-2006 and Commissioner (Appeals) 2009-2010

2002-2003 and 2005-2006 CESTAT

2003-2004 to 2005-2006 High Court

Income Tax Act, 1961 2005-2006 Commissioner (Appeals) 2007-2008 and 2008-2009 Director of Income Tax (International Taxation)

*Net of pre-deposit paid in getting the stay/appeal admitted

10 The Company has no accumulated losses as at 31 March 2010 and it has not incurred cash losses in the financial year ended on that date or in the immediately preceding financial year.

11 According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the Balance Sheet date.

12 According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Company has invested surplus funds in marketable securities and mutual funds. According to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The investments in marketable securities and mutual funds have been held by the Company in its own name.

15 In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees given by the Company for loans taken by subsidiary companies from banks or financial institutions are not prima facie prejudicial to the interests of the Company.

16 In our opinion and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purposes for which they were obtained.

17 According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long term investments.

18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

19 According to the information and explanations given to us and the records examined by us, security or charge has been created in respect of the debentures issued.

20 The Company has not raised any money by public issues during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP & TANNAN

Chartered Accountants

ICAI registration no. 109982W

by the hand of

R. D. Kare

Partner Membership no. 8820

Mumbai, 17 May 2010

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