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Larsen & Toubro Ltd.

BSE: 500510 Sector: Engineering
NSE: LT ISIN Code: INE018A01030
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OPEN 1146.60
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VOLUME 467174
52-Week high 1222.67
52-Week low 863.54
P/E 37.46
Mkt Cap.(Rs cr) 159,894
Buy Price 1141.65
Buy Qty 301.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1146.60
CLOSE 1146.60
VOLUME 467174
52-Week high 1222.67
52-Week low 863.54
P/E 37.46
Mkt Cap.(Rs cr) 159,894
Buy Price 1141.65
Buy Qty 301.00
Sell Price 0.00
Sell Qty 0.00

Larsen & Toubro Ltd. (LT) - Director Report

Company director report

Dear Members

The Directors have pleasure in presenting their 71st Annual Report and AuditedFinancial Statements for the year ended March 31 2016.

FINANCIAL RESULTS

Particulars 2015-16

2014-15

Rs. crore

Rs. crore
Profit before depreciation exceptional and extra ordinary items & tax 7127.71 7352.21
Less: Depreciation amortisation impairment and obsolescence 998.88 1009.74
6128.83 6342.47
Add: Transfer from Revaluation Reserve 1.59
Profit before exceptional and extraordinary items and tax 6128.83 6344.06
Add: Exceptional Items 560.28 357.16
Profit before tax 6689.11 6701.22
Less: Provision for tax 1377.65 1645.04
Profit for the period carried to Balance Sheet 5311.46 5056.18
Add: Balance brought forward from previous year 3429.11 333.45
Less: Dividend paid for the previous year (Including dividend distribution tax) 2.15 2.20
Less: Depreciation charged against retained earnings 6.14 86.28
Add: Reversal of deferred tax on depreciation charged against retained earnings 2.13 29.33
Balance available for disposal (which the directors appropriate as follows) 8734.41 5330.48
Debenture Redemption Reserve 156.50 256.50
Proposed dividend 1699.95 1510.54
Dividend Tax 140.88 134.33
1997.33 1901.37
Balance to be carried forward 6737.08 3429.11
Dividend 1699.95 1510.54

The Directors recommend payment of final dividend of ^ 18.25 per share of ^ 2/- each on931478845 shares.

CAPITAL & FINANCE

During the year under review the Company allotted 1916784 equity shares of Rs. 2/-each upon exercise of stock options by the eligible employees under the Employee StockOption Schemes.

The Company issued Non-Convertible Debentures (NCDs) worth Rs. 1000 crore. Atmaturity repayment of NCDs worth Rs. 600 crore was also made. The Company tied up along-term foreign currency loan of USD 25 million and also completed part repayment of aforeign currency long term debt of USD 5.83 million as per schedule. In addition theCompany prepaid foreign currency loans worth USD 50 million.

CAPITAL EXPENDITURE

As at March 31 2016 the gross tangible and intangible assets including leased Assetsstood at ^ 13297.13 crore and the net tangible and intangible assets including leasedassets at Rs. 7668.59 crore. Capital Expenditure during the year amounted to Rs. 776crore.

DEPOSITS

The Company does not have any unclaimed deposits as of date. All unclaimed depositshave been transferred to Investor Education & Protection Fund.

DEPOSITORY SYSTEM

As the members are aware the Company's shares are compulsorily tradable in electronicform. As on March 31 2016 97.90% of the Company's total paid up capital representing911873781 shares are in dematerialized form. In view of the numerous advantages offeredby the Depository system as well as to avoid frauds members holding shares in physicalmode are advised to avail of the facility of dematerialization from either of thedepositories.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

The Company sends letters to all shareholders whose dividends are unclaimed so as toensure that they receive their rightful dues.

During the year the Company has transferred a sum of Rs. 15131245 to InvestorEducation & Protection Fund the amount which was due & payable and remainedunclaimed and unpaid for a period of seven years as provided in Section 205C(2) of theCompanies Act 1956. Despite the reminder letters sent to each shareholder this amountremained unclaimed and hence was transferred. Cumulatively the amount transferred to thesaid fund was Rs. 145660404 as on March 31 2016.

SUBSIDIARY/ASSOCIATE/JOINT VENTURE COMPANIES

During the year under review the Company subscribed to/acquired equity/preferenceshares in various subsidiary/ associate/joint venture companies. These subsidiariesinclude companies in general insurance power real estate infrastructure andmanufacturing sectors. The details of investments in subsidiary companies during the yearare as under:

A) Shares subscribed/acquired during the year:

Name of the company Type of Shares No. of shares
L&T General Insurance Company Limited Equity 85000000
L&T Global Holdings Limited United Arab Emirates Equity 1000
L&T Hydrocarbon Engineering Limited Preference 260000000
L&T Metro Rail (Hyderabad) Limited Equity 492643
L&T Power Development Limited Equity 383400000
L&T Realty Limited Preference 648300000
L&T Seawoods Limited Preference 132250000
L&T Shipbuilding Limited Preference 1331860000
L&T Uttaranchal Hydropower Limited Preference 604750000
LTH Milcom Limited Equity 113340
Larsen & Toubro Saudi Arabia LLC Saudi Arabia Equity 625
Marine Infrastructure Developer Private Limited Equity 9990

B) Equity shares sold/transferred during the year:

Name of the Company Number of shares
L&T Finance Holdings Limited 85226706
L&T Infocity Limited 24030000
L&T Natural Resources Limited 50000
L&T Powergen Limited 50000
L&T Sapura Offshore Private Limited 6000
L&T Sapura Shipping Private Limited 9531 1850
L&T Solar Limited 50000
L&T-Gulf Private Limited 4000016

 

Name of the Company Number of shares
L&T-Valdel Engineering Limited 1179000
Larsen & Toubro International FZE United Arab Emirates 1829
PNG Tollway Limited 21543340
JSK Electricals Limited 2120040
L&T-Chiyoda Limited 4500000
Rishi Consfab Private Limited 2704000
Salzer Electronics Limited 2679808

The Company has formulated a policy on the identification of material subsidiaries andthe same is placed on the website at http://investors.larsentoubro.com/Listing-Compliance.aspx. The Company does not have any material subsidiaries.

C) Performance and Financial Position of each subsidiary/associate and joint venturecompanies:

A statement containing the salient features of the financial statement ofsubsidiary/associate/joint venture companies is provided on pages 390 to 399 of thisAnnual Report.

PARTICULARS OF LOANS GIVEN INVESTMENTS MADE GUARANTEES GIVEN OR SECURITY PROVIDED BYTHE COMPANY

The Company has disclosed the full particulars of the loans given investments made orguarantees given or security provided on pages 263 to 265 of this Annual Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The Audit Committee and the Board of Directors have approved the Related PartyTransactions Policy and the same has been uploaded on the Company's website http://investors.larsentoubro.com/Listing-Compliance.aspx.

The Company has a process in place to periodically review and monitor Related PartyTransactions.

All the related party transactions were in the ordinary course of business and at arm'slength. The Audit Committee has approved all related party transactions for the FY 2015-16and estimated transactions for FY 2016-17.

There were no material transactions with related parties during the year.

STATE OF COMPANY AFFAIRS

The gross sales and other income for the financial year under review were Rs. 62821crore as against

Rs. 59841 crore for the previous financial year registering an increase of 5%. Theprofit before tax from continuing operations including extraordinary and exceptional itemswas ^ 6689 crore for the financial year under review as against Rs. 6701 crore for theprevious financial year registering a decrease of 0.18%. The profit after tax fromcontinuing operations including extraordinary and exceptional items of Rs. 5311 crore forthe financial year under review as against Rs. 5056 crore for the previous financialyear registering an increase of 5%.

AMOUNT TO BE CARRIED TO RESERVE

The Company has not transferred any amount to the reserves during the current financialyear.

DIVIDEND

The Directors recommend payment of dividend of Rs. 18.25 (912.50%) per equity share of^ 2/- each on the share capital.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANYBETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT

There are no material changes and commitments affecting the financial position of theCompany between the end of the financial year and the date of this report.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as required to be given under Section 134(3) (m) read with Rule 8(3) of theCompanies (Accounts)

Rules 2014 is provided in Annexure 'A' forming part of this Board Report.

RISK MANAGEMENT POLICY

The Risk Management Committee comprises of Mr. A. M. Naik Mr. S. N. Subrahmanyan andMr. R. Shankar Raman. Mr. A. M. Naik is the Chairman of the Committee.

The Company has formulated a risk management policy and has in place a mechanism toinform the Board Members about risk assessment and minimization procedures and periodicalreview to ensure that executive management controls risk by means of a properly designedframework.

A detailed note on risk management is given under financial review section of theManagement Discussion and Analysis on pages 217 to 219 of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility Committee comprises of Mr. Vikram Singh Mehta Mr.D. K. Sen and Mr. R. Shankar Raman as the Members. Mr. Vikram Singh Mehta is the Chairmanof the Committee.

The details of the various projects and programs which can be undertaken by the Companyas a part of its CSR policy framework is available on its websitehttp://investors.larsentoubro.com/Listing-Compliance.aspx.

The disclosures required to be given under Section 135 of the Companies Act 2013 readwith Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules 2014 aregiven in Annexure 'C' forming part of this Board Report.

DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL APPOINTED/RESIGNED DURING THE YEAR

Mr. K. Venkataramanan retired as the Chief Executive Officer and Managing Director ofthe Company on September 30 2015 pursuant to his superannuation from the services of theCompany. The Board places on record its appreciation of the immense contribution by Mr. K.Venkataramanan as the Chief Executive Officer and Managing Director of the Company.

Mr. M. V. Kotwal retired as the Whole-time Director of the Company on August 26 201 5pursuant to his superannuation from the services of the Company. The Board places onrecord its appreciation of the immense contribution by Mr. M. V. Kotwal as a Whole-timeDirector of the Company.

Mr. Swapan Dasgupta resigned as Nominee Director of the Company on May 15 2016. TheBoard places on record its appreciation of the immense contribution by Mr. Swapan Dasguptaas Director of the Company.

The Board has appointed Mr. Subramanian Sarma as a Non-Executive Director of theCompany w.e.f. August 19 2015.

During the year the Board has appointed Mr. S. N. Subrahmanyan as Deputy ManagingDirector and President of the Company w.e.f October 1 2015 for a period of 5 yearssubject to approval of the shareholders.

The Board has appointed Mr. D. K. Sen as a Whole-time Director w.e.f. October 1 2015for a period of 5 years subject to approval of the shareholders.

The Board has appointed Mr. M. V. Satish as a Wholetime Director of the Company w.e.f.January 29 2016 for a period of five years subject to approval of the shareholders.

The Board has appointed Ms. Naina Lal Kidwai as an Independent Director of the Companyfrom March 1

2016 to February 28 2021 subject to the approval of the shareholders. Ms. Naina LalKidwai appointed as an Additional Director will hold office till the ensuing AGM and iseligible for appointment.

The Board has appointed Mr. Sanjeev Aga as an Independent Director of the Company fromMay 25 2016 to May 24 2021 subject to the approval of shareholders. Mr. Sanjeev Agaappointed as Additional Director will hold office till the ensuing AGM and is eligiblefor appointment.

The Board has appointed Mr. Narayanan Kumar as an Independent Director of the Companyat its Meeting dated May 25 2016 with effect from May 27 2016 to May 26 2021 subjectto the approval of shareholders.

Mr. Narayanan Kumar appointed as Additional Director will hold office till theensuing AGM and is eligible for appointment.

Mr. S. N. Subrahmanyan and Mr. A.M Naik retire by rotation at the ensuing AGM and beingeligible offers themselves for re-appointment. Mrs. Sunita Sharma who was appointed as aDirector in casual vacancy caused due to the resignation of Mr. N. Mohanraj holds officetill the conclusion of the ensuing AGM and being eligible offers herself forre-appointment.

It is proposed to re-appoint Mr. R. Shankar Raman as a Whole-time Director of theCompany for a period of 5 years from October 1 2016 to September 30 2021 subject to theapproval of the shareholders.

It is proposed to re-appoint Mr. Shailendra Roy as a Whole-time Director of the Companyfor the period March 9 2017 to July 7 2020 subject to the approval of the shareholders.

The notice convening the AGM includes the proposal for appointment/re-appointment ofDirectors.

The terms and conditions of appointment of the Independent Directors are placed on thewebsite of the Company http://investors.larsentoubro.com/Listing- Compliance.aspx.

The Company has also disclosed on its websitehttp://investors.larsentoubro.com/Listing-Compliance.aspx details of the familiarizationprograms formulated to educate the Directors regarding their roles rights andresponsibilities in the Company and the nature of the industry in which the Companyoperates the business model of the Company etc.

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

This information is given in Annexure 'B' - Report on Corporate Governance forming partof this Board Report. Members are requested to refer to page 79 of this Annual Report.

AUDIT COMMITTEE

The Company has in place an Audit Committee in terms of the requirements of theCompanies Act 2013 read with the rules made thereunder and Regulation 18 of the SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015. The detailsrelating to the same are given in Annexure 'B' - Report on Corporate Governance formingpart of this Board Report. Members are requested to refer to pages 81 to 83 of this AnnualReport.

COMPANY POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The Company has in place a Nomination & Remuneration Committee in accordance withthe requirements of the Companies Act 2013 read with the rules made thereunder andRegulation 19 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations2015. The details relating to the same are given in Annexure 'B' - Report on CorporateGovernance forming part of this Board Report. Members are requested to refer to pages 83to 85 of this Annual Report.

The Committee has formulated a policy on Director's appointment and remunerationincluding recommendation of remuneration of the key managerial personnel and otheremployees composition and the criteria for determining qualifications positiveattributes and independence of a Director. The Committee has formulated a policy on boarddiversity.

DECLARATION OF INDEPENDENCE

The Company has received Declarations of Independence as stipulated under Section149(7) of the Companies Act 2013 from Independent Directors confirming that he/she is notdisqualified from appointing/continuing as Independent Director. The same are alsodisplayed on the website of the Company www.larsentoubro.com

EXTRACT OF ANNUAL RETURN

As per the provisions of Section 92(3) of the Companies Act 2013 an extract of theAnnual Return in Form MGT-9 is attached as Annexure 'F' to this Board Report.

DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors of the Company confirms:

a) In the preparation of Annual Accounts the applicable accounting standards have beenfollowed along with proper explanation relating to material departures;

b) The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit of the Company for that period;

c) The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d) The Directors have prepared the Annual Accounts on a going concern basis;

e) The Directors have laid down an adequate system of internal financial controls to befollowed by the Company and such internal financial controls are adequate and operatingefficiently;

f) The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and were operating effectively.

ADEQUACY OF INTERNAL FINANCIAL CONTROL

The Company has designed and implemented a process driven framework for InternalFinancial Controls ("IFC") within the meaning of the explanation to Section134(5)

(e) of the Companies Act 2013. For the year ended March 31 2016 the Board is of theopinion that the Company has sound IFC commensurate with the nature and size of itsbusiness operations and operating effectively and no material weakness exists. The Companyhas a process in place to continuously monitor the same and identify gaps if any andimplement new and/or improved controls wherever the effect of such gaps would have amaterial effect on the Company's operations.

PERFORMANCE EVALUATION OF THE BOARD ITS COMMITTEES AND DIRECTORS

The Nomination & Remuneration Committee and the Board have laid down the manner inwhich formal annual evaluation of the performance of the Board Committees Chairman andindividual directors has to be made.

It includes circulation of questionnaires to all Directors for evaluation of the Boardand its Committees Board composition and its structure its culture its effectivenessits functioning information availability etc. These questionnaires also cover specificcriteria and the grounds on which all Directors in their individual capacity will beevaluated.

The Individual Directors' responses on the questionnaire on the performance of theBoard Committee(s) Directors and Chairman were analyzed by an independent consultant toarrive at unbiased conclusions.

The inputs given by all the Directors were discussed in the meeting of the IndependentDirectors held on April 11 2016 as per Schedule IV of the Companies Act 2013.

The performance evaluation of the Board Committees Chairman and Directors was alsoreviewed by the Nomination & Remuneration Committee and the Board.

DISCLOSURE OF REMUNERATION

The details of remuneration as required to be disclosed under the Companies Act 2013and the rules made thereunder are given in Annexure 'D' forming part of this Boardreport.

The details of employees receiving remuneration exceeding Rs. 5 lakh per month or Rs.60 lakh per annum is provided in Annexure 'G' forming part of this report. In terms ofSection 136(1) of the Act and the rules made thereunder the Report and Accounts are beingsent to the shareholders excluding the aforesaid Annexure.

Any Shareholder interested in obtaining a copy of the same may write to the CompanySecretary. None of the employees listed in the said Annexure is related to any Director ofthe Company.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND ANNUAL GENERAL MEETINGS

The Company has complied with Secretarial Standards issued by the Institute of CompanySecretaries of India on Board Meetings and Annual General Meetings.

PROTECTION OF WOMEN AT WORKPLACE

The Company has formulated a policy on 'Protection of Women's Rights at Workplace' asper the provisions of the Sexual Harassment of Women at Workplace (Prevention Prohibition& Redressal) Act 2013. This has been widely disseminated. There were no cases ofsexual harassment received by the Company in 2015-16.

OTHER DISCLOSURES

There has been no material change in the Employee Stock Option Schemes (ESOP Schemes)during the current financial year. The ESOP Schemes are in compliance with SEBI (ShareBased Employee Benefits) Regulations 2014.

The disclosures relating to ESOPs required to be made under the provisions of theCompanies Act 2013 and the rules made thereunder and the SEBI (Share Based EmployeeBenefits) Regulations 2014 are provided on the website of the Companywww.larsentoubro.com.

A certificate obtained from the Statutory Auditors confirming compliance with theCompanies Act 2013 and the above Regulations is reproduced below :

Pursuant to the SEBI (Listing Obligations & Disclosure Requirements) Regulations2015 a Report on Corporate Governance and a certificate obtained from the StatutoryAuditors confirming compliance is provided in Annexure 'B' forming part of this BoardReport.

VIGIL MECHANISM

As per the provisions of Section 177(9) of the Companies Act 2013 ('Act') the Companyis required to establish an effective Vigil Mechanism for directors and employees toreport genuine concerns.

The Company has a Whistle-blower Policy in place since 2004 to encourage and facilitateemployees to report concerns about unethical behaviour actual/suspected frauds andviolation of Company's Code of Conduct or Ethics Policy. The Policy has been suitablymodified to meet the requirements of Vigil Mechanism under the Act. The policy providesfor adequate safeguards against victimisation of persons who avail the same and providesfor direct access to the chairperson of the Audit Committee. The Audit Committee of theCompany oversees the implementation of the Whistle-Blower Policy.

The Company has disclosed information about the establishment of the Whistle BlowerPolicy on its website http://investors.larsentoubro.com/corporategovernance.aspx. Duringthe year no personnel has been declined access to the Audit Committee wherever desired.

BUSINESS RESPONSIBILITY REPORTING

The Company has been one of the first engineering and construction companies in Indiato publish its report on Corporate Sustainability.

As per Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 a separate section on Business Responsibility Report forms a part ofthis Annual Report (refer pages 18 to 35).

The detailed Corporate Sustainability Report is also available on the Company's websitehttp://www.larsentoubro.com/corporate/sustainability.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS

During the year under review there were no material and significant orders passed bythe regulators or courts or tribunals impacting the going concern status and the Company'soperations in future.

CONSOLIDATED FINANCIAL STATEMENTS

Your Directors have pleasure in attaching the Consolidated Financial Statementspursuant to Section 129(3) of the Companies Act 2013 and Regulation 34 of the SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015 and prepared inaccordance with the Accounting Standards prescribed by the Institute of CharteredAccountants of India (ICAI) in this regard.

The Auditors report to the shareholders does not contain any qualification observationor adverse comment.

SECRETARIAL AUDIT REPORT

The Secretarial Audit Report issued by M/s. S. N. Ananthasubramanian & Co.Practicing Company Secretaries is attached as Annexure 'E' to this Board Report.

The Secretarial Auditor's report to the shareholders does not contain anyqualification.

STATUTORY AUDITORS

The Company's auditors M/s. Sharp & Tannan (firm registration number 109982W) havealready completed more than ten years as Statutory Auditors of the Company.

In accordance with provisions of Section 139 of the Companies Act 2013 and theCompanies (Audit and Auditors) Rules 2014 the Company had appointed them for a period oftwo years from conclusion of 70th Annual General Meeting till the conclusion of72nd Annual General Meeting. A proposal for ratifying their appointment fromthe conclusion of the 71st AGM till the conclusion of the 72nd AGMhas been included in the Notice of the ensuing AGM.

In view of the mandatory rotation of auditor requirement and to ensure smoothtransition during this period M/s. Deloitte Haskins & Sells LLP [ICAI RegistrationNo. 1 17366W/W-100018] was appointed as Statutory Auditors for a period of 5 continuousyears from the conclusion of 70th Annual General Meeting till the conclusion of75th Annual General Meeting of the Company. A proposal for ratifying theirappointment from the conclusion of the 71st AGM till the conclusion of the 72ndAGM has been included in the Notice of the ensuing AGM.

Both the Auditors will be jointly and severally responsible during the financial year2016-17.

Sharp & Tannan and Deloitte Haskins & Sells LLP have informed the Company thattheir appointment if made would be within the limits prescribed under Section 141 of theCompanies Act 2013.

The Auditors have confirmed that they have subjected themselves to the peer reviewprocess of ICAI and hold valid certificate issued by the Peer Review Board of the ICAI.

The Auditors have also furnished a declaration confirming their independence as well astheir arm's length relationship with the Company as well as declaring that they have nottaken up any prohibited non-audit assignments for the Company.

REPORTING OF FRAUD

The Auditors of the Company have not reported any fraud as specified under Section143(12) of the Companies Act 2013.

COST AUDITORS

Pursuant to the provisions of Section 148 of the Companies Act 2013 and as per theCompanies (Cost Records and Audit) Rules 2014 and amendments thereof the Board on therecommendation of the Audit Committee at its meeting held on May 25 2016 has approvedthe appointment of M/s R. Nanabhoy & Co. Cost Accountants as the Cost Auditors forthe Company for the financial year ending March 31 2017 at a remuneration of Rs. 11lakhs.

The Report of the Cost Auditors for the financial year ended March 31 2016 is underfinalization and will be filed with the MCA within the prescribed period.

A proposal for ratification of remuneration of the Cost Auditor for financial year2016-17 is placed before the shareholders.

ACKNOWLEDGEMENT

Your Directors take this opportunity to thank the customers supply chain partnersemployees Financial Institutions Banks Central and State Government authoritiesRegulatory authorities Stock Exchanges and all the various stakeholders for theircontinued co-operation and support to the Company. Your Directors also wish to recordtheir appreciation for the continued co-operation and support received from the JointVenture partners/ Associates.

For and on behalf of the Board

A. M. Naik

Group Executive Chairman

(DIN: 00001514)

Mumbai May 25 2016