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Larsen & Toubro Ltd.

BSE: 500510 Sector: Engineering
NSE: LT ISIN Code: INE018A01030
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OPEN 1216.80
PREVIOUS CLOSE 1216.30
VOLUME 126477
52-Week high 1274.00
52-Week low 868.00
P/E 39.59
Mkt Cap.(Rs cr) 170,410
Buy Price 1218.10
Buy Qty 25.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1216.80
CLOSE 1216.30
VOLUME 126477
52-Week high 1274.00
52-Week low 868.00
P/E 39.59
Mkt Cap.(Rs cr) 170,410
Buy Price 1218.10
Buy Qty 25.00
Sell Price 0.00
Sell Qty 0.00

Larsen & Toubro Ltd. (LT) - Auditors Report

Company 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 comprise the Balance Sheet as at March 312017 the Statement of Profit and Loss (including Other Comprehensive Income) theStatement of Cash Flows and the Statement of Changes in Equity for the year then endedand a summary of the significant accounting policies and other explanatory informationwhich includes 25 Joint Operations (herein after referred to as "standalone Ind ASfinancial statements").

Management's Responsibility for the Standalone Ind AS Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 (the "Act") with respect to the preparation ofthese standalone Ind AS financial statements that give a true and fair view of thefinancial position financial performance including other comprehensive income cash flowsand changes in equity of the Company including its joint operation in accordance with theaccounting principles generally accepted in India including the Indian AccountingStandards ("Ind AS") prescribed under section 133 of the Act.

The Boards of Directors of the Company and those charged with governance of its jointoperation are responsible for maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding the assets of the Company and its jointoperation and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe standalone Ind AS financial statements that give a true and fair view and are freefrom material misstatement whether due to fraud or error.

Auditor's Responsibility

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

In conducting our audit we have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit 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 withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the standalone Ind AS financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the standalone Ind AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the standalone Ind ASfinancial statements. We believe that the audit evidence obtained by us and other auditorsin terms of their reports referred to in the Other Matters paragraph below is sufficientand appropriate to provide a basis for our audit opinion on the standalone Ind ASfinancial statements.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of reports of the other auditors on separatefinancial statements of joint operations referred to in the Other Matters paragraph belowthe aforesaid standalone Ind AS financial statements give the information required by theAct in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India of the state of affairs of the Companyas at March 31 2017 and its profit total comprehensive income cash flows and thechanges in equity for the year ended on that date.

Other Matters

a) We did not audit the financial statements / information of 16 joint operationsincluded in the standalone Ind AS financial statements of the Company whose financialstatements reflect total assets of Rs 3647.41 crore as at March 31 2017 total revenuesof Rs 4360.69 crore total profit after tax (net) of Rs 268.96 crore and totalcomprehensive income (net) of Rs 269.03 crore for the year ended on that date asconsidered in the standalone Ind AS financial statements. The financial statements ofthese joint operations have been audited by the other auditors whose reports have beenfurnished to us and our opinion in so far as it relates to the amounts and disclosuresincluded in respect of these joint operations and our report in terms of subsection (3) ofSection 143 of the Act in so far as it relates to aforesaid joint operations is basedsolely on the reports of such other auditors.

Out of above there are 7 joint operations which are located outside India whosefinancial results have been prepared in accordance with accounting principles generallyaccepted in their respective countries and which have been audited by other auditors undergenerally accepted auditing standards applicable in their respective countries. TheCompany's management has converted the financial statements of such joint operationslocated outside India from accounting principles generally accepted in their respectivecountries to accounting principles generally accepted in India. We have audited theseconversion adjustments made by the Company's management. Our audit report in so far as itrelates to the balances and affairs of such joint operations located outside India isbased on the reports of other auditors and the conversion adjustments prepared by themanagement of the Company and audited by us.

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

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

The comparative financial information for the year ended March 31 2016 in respect of16 joint operations included in this standalone Ind AS financial statements prepared inaccordance with the Ind AS have not been audited by their auditors and have been furnishedto us by the Management.

Our opinion on the standalone Ind AS financial statements and our report on OtherLegal and Regulatory Requirements below is not modified in respect of these matters withrespect to our reliance on the work done and the reports of the other auditors and thefinancial 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 theconsideration 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 wereport to the extent applicable that: a) We have sought and obtained all the informationand explanations which to the best of our knowledge and belief were necessary for thepurposes of our audit; b) In our opinion proper books of account as required by law havebeen kept by the Company and its joint operation so far as it appears from our examinationof those books and the reports of the other auditors; c) The Balance Sheet the Statementof Profit and Loss including Other Comprehensive Income the Statement of Cash Flows andStatement of Changes in Equity dealt with by this Report are in agreement with therelevant books of account; d) In our opinion the aforesaid standalone Ind AS financialstatements comply with the Indian Accounting Standards prescribed under section 133 of theAct read with relevant rules issued thereunder; e) On the basis of the writtenrepresentations received from the directors as on March 31 2017 taken on record by theBoard of Directors and the report of the statutory auditor of its joint operation companyincorporated in India none of the directors is disqualified as on March 31 2017 frombeing appointed as a director in terms of Section 164(2) of the Act; f) With respect tothe adequacy of the internal financial controls over financial reporting of the Companyand joint operation which is a Company incorporated in India and the operatingeffectiveness of such controls refer to our separate Report in "Annexure A".Our report expresses an unmodified opinion on the adequacy and operating effectiveness ofthe Company's and it's joint operation's internal financial controls over financialreporting; and g) With respect to the other matters to be included in the Auditor's Reportin accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amendedin our opinion and to the best of our information and according to the explanations givento us:

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

ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts;

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

iv. To the best of our information and according to the information and explanationsgiven to us and having regard to the nature of business and size of its operations andcash payments made by the Company in the ordinary course of business and based on theCompany's practices for recording such transactions the Company has provided therequisite disclosures in its financial statements as to holdings as well as dealings inSpecified Bank Notes as defined in the Notification S.O. 3407(E) dated the 8th November2016 of the Ministry of Finance during the period from November 8 2016 to December 302016. Based on audit procedures performed and the representations provided to us by themanagement we report that the disclosures are in accordance with the relevant books ofaccount maintained by the Company and as produced before us and other auditor by themanagement.

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 theOrder.

ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1 (f) under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting under Clause (i) ofSub-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 of March 31 2017 in conjunction withour audit of the standalone Ind AS financial statements of the Company as at end for theyear ended on that date which includes internal financial controls over financialreporting of the Company's joint operation 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 its jointoperation which is a Company incorporated in India are responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to respective company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Companies Act 2013.

Auditor's Responsibility

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

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial 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 bythe other auditor of the joint operation which is a Company incorporated in India interms of their report referred to in the Other Matters section of our report of even dateis sufficient and appropriate to provide a basis for our audit opinion on the Company'sinternal 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 designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany'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 financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe 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 givento us and based on the consideration of the report of the other auditor on internalfinancial controls system over financial reporting of the joint operation referred to inthe Other Matters section of our report of even date the Company has in all materialrespects an adequate internal financial controls system over financial reporting and suchinternal financial controls over financial reporting were operating effectively as atMarch 31 2017 based on the internal control over financial reporting criteriaestablished by the respective Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India.

Other Matters

Our aforesaid report under Section 143(3)(i) of the Act on the adequacy and operatingeffectiveness of the internal financial controls over financial reporting insofar as itrelates to a joint operation which is a Company incorporated in India is based on thecorresponding report of the other auditor of such Company incorporated in India.

ANNEXURE "B" TO THE INDEPENDENT AUDITORS' REPORT

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

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

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

(c) According to the information and explanations given to us and the records examinedby 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 theimmovable properties of land and buildings (including land whose title deed have beenpledged as security against debentures issued by the Company) are held in the name of theCompany 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 leaseand disclosed as fixed asset in the financial statements the lease agreements are in thename 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 bythe Management at reasonable intervals and no material discrepancies were noticed onphysical verification between the physical stock and the book records.

(iii) According to the information and explanations given to us the Company hasgranted loans secured or unsecured to companies firms Limited Liability Partnershipsor other parties covered in the register maintained under section 189 of the Act inrespect of which: (a) The terms and conditions of the grant of such loans are in ouropinion prima facie not prejudicial to the Company's interest. (b) The schedule ofrepayment of principal and payment of interest has been stipulated and repayments orreceipts 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 theCompany has complied with the provisions of Sections 185 and 186 of the Act in respect ofgrant of loans making investments and providing guarantees and securities as applicable.

(Rs) According to the information and explanations given to us the Company has notaccepted any deposit during the year and hence reporting under paragraph 3 (Rs) of theOrder is not applicable to the Company.

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

(vii) According to the information and explanations given to us in respect ofstatutory dues:

(a) The Company has been generally regular in depositing undisputed statutory duesincluding Provident Fund Employees' State Insurance Income-tax Sales Tax Service TaxCustoms Duty Excise Duty Value Added Tax cess and other material statutory duesapplicable to it to the appropriate authorities. (b) There were no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income-tax Sales TaxService Tax Customs Duty Excise Duty Value Added Tax cess and other material statutorydues in arrears as at March 31 2017 for a period of more than six months from the datethey became payable.

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

Name of Statute Nature of Dues Forum where Dispute is Pending Period to which Amount Relates Amount Involved Amount Unpaid
(Rs crore) (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 dispute disallowance of setoff valuation of goods sales in transit and high seas sales and other matters. Commissioner (Appeal) 2000-01 2003-04 to 2012- 13 2014-15 to 2015-16 43.44 40.82
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 1994 and Customs Act 1962 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
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 usthe Company has not defaulted in the repayment of loans or borrowings to financialinstitutions and banks and dues to debenture holders. The Company has not borrowed anyfunds from the government.

(ix) In our opinion and according to the information and explanations given to us theCompany 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) ofthe Order is not applicable to the Company.

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

(xi) In our opinion and according to the information and explanations given to us theCompany has paid / provided managerial remuneration in accordance with the requisiteapprovals 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 theCompany is not a Nidhi Company and hence reporting under paragraph 3 (xii) of the Order isnot applicable to the Company.

(xiii) In our opinion and according to the information and explanations given to usthe Company is in compliance with Section 177 and 188 of the Act where applicable forall transactions with the related parties and the details of related parties and thedetails of related party transactions have been disclosed in the financial statements etc.as required by the applicable accounting standards. (xiv) According to the information andexplanations given to us during the year the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures andhence 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 usduring the year the Company has not entered into any non-cash transactions with itsdirectors or persons connected with him and hence provisions of section 192 of the Act arenot applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank 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 29 2017