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The Directors have pleasure in presenting their 71st Annual Report and Audited Financial Statements for the year ended March 31, 2016.
CAPITAL & FINANCE
During the year under review, the Company allotted 19,16,784 equity shares of Rs. 2/– each upon exercise of stock options by the eligible employees under the Employee Stock Option Schemes.
The Company issued Non–Convertible Debentures (NCDs) worth Rs. 1,000 crore. At maturity, repayment of NCDs worth Rs. 600 crore was also made. The Company tied up a long–term foreign currency loan of USD 25 million, and also completed part repayment of a foreign currency long term debt of USD 5.83 million as per schedule. In addition, the Company prepaid foreign currency loans worth USD 50 million.
As at March 31, 2016 the gross tangible and intangible assets including leased Assets, stood at Rs. 13,297.13 crore and the net tangible and intangible assets, including leased assets, at Rs. 7,668.59 crore. Capital Expenditure during the year amounted to Rs. 776 crore.
The Company does not have any unclaimed deposits as of date. All unclaimed deposits have been transferred to Investor Education & Protection Fund.
As the members are aware, the Company's shares are compulsorily tradable in electronic form. As on March 31, 2016, 97.90% of the Company's total paid up capital representing 91,18,73,781 shares are in dematerialized form. In view of the numerous advantages offered by the Depository system as well as to avoid frauds, members holding shares in physical mode are advised to avail of the facility of dematerialization from either of the depositories.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
The Company sends letters to all shareholders, whose dividends are unclaimed so as to ensure that they receive their rightful dues.
During the year, the Company has transferred a sum of Rs.1,51,31,245 to Investor Education & Protection Fund, the amount which was due & payable and remained unclaimed and unpaid for a period of seven years as provided in Section 205C(2) of the Companies Act, 1956. Despite the reminder letters sent to each shareholder, this amount remained unclaimed and hence was transferred. Cumulatively, the amount transferred to the said fund was Rs. 14,56,60,404 as on March 31, 2016.
SUBSIDIARY/ASSOCIATE/JOINT VENTURE COMPANIES
During the year under review, the Company subscribed to/acquired equity/preference shares in various subsidiary/ associate/joint venture companies. These subsidiaries include companies in general insurance, power, real estate, infrastructure and manufacturing sectors. The details of investments in subsidiary companies during the year are as under:
The Company has formulated a policy on the identification of material subsidiaries and the 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 venture companies:
A statement containing the salient features of the financial statement of subsidiary/associate/joint venture companies is provided on pages 390 to 399 of this Annual Report.
PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY
The Company has disclosed the full particulars of the loans given, investments made or guarantees 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 Party Transactions 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 Party Transactions.
All the related party transactions were in the ordinary course of business and at arm's length. The Audit Committee has approved all related party transactions for the FY 2015–16 and 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. 62,821 crore as against Rs. 59,841 crore for the previous financial year registering an increase of 5%. The profit before tax from continuing operations including extraordinary and exceptional items was Rs. 6,689 crore for the financial year under review as against Rs. 6,701 crore for the previous financial year, registering a decrease of 0.18%. The profit after tax from continuing operations including extraordinary and exceptional items of Rs. 5,311 crore for the financial year under review as against Rs. 5,056 crore for the previous financial year, registering an increase of 5%.
AMOUNT TO BE CARRIED TO RESERVE
The Company has not transferred any amount to the reserves during the current financial year.
The Directors recommend payment of dividend of Rs. 18.25 (912.50%) per equity share of X 2/– each on the share capital.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY, BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT
There are no material changes and commitments affecting the financial position of the Company 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 the Companies (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 and Mr. 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 to inform the Board Members about risk assessment and minimization procedures and periodical review to ensure that executive management controls risk by means of a properly designed framework.
A detailed note on risk management is given under financial review section of the Management 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 Chairman of the Committee.
The details of the various projects and programs which can be undertaken by the Company as a part of its CSR policy framework is available on its website <http://investors.larsentoubro.com/Listing–Compliance.aspx>.
The disclosures required to be given under Section 135 of the Companies Act, 2013 read with Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given 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 of the Company on September 30, 2015 pursuant to his superannuation from the services of the Company. 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, 2015 pursuant to his superannuation from the services of the Company. The Board places on record its appreciation of the immense contribution by Mr. M. V. Kotwal as a Whole–time Director of the Company.
Mr. Swapan Dasgupta resigned as Nominee Director of the Company on May 15, 2016. The Board places on record its appreciation of the immense contribution by Mr. Swapan Dasgupta as Director of the Company.
The Board has appointed Mr. Subramanian Sarma as a Non–Executive Director of the Company w.e.f. August 19, 2015.
During the year the Board has appointed Mr. S. N. Subrahmanyan as Deputy Managing Director and President of the Company w.e.f October 1, 2015 for a period of 5 years, subject to approval of the shareholders.
The Board has appointed Mr. D. K. Sen as a Whole–time Director w.e.f. October 1, 2015 for a period of 5 years, subject to approval of the shareholders.
The Board has appointed Mr. M. V. Satish as a Whole–time 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 Company from March 1, 2016 to February 28, 2021, subject to the approval of the shareholders. Ms. Naina Lal Kidwai, appointed as an Additional Director, will hold office till the ensuing AGM and is eligible for appointment.
The Board has appointed Mr. Sanjeev Aga as an Independent Director of the Company from May 25, 2016 to May 24, 2021, subject to the approval of shareholders. Mr. Sanjeev Aga, appointed as Additional Director, will hold office till the ensuing AGM and is eligible for appointment.
The Board has appointed Mr. Narayanan Kumar as an Independent Director of the Company at its Meeting dated May 25, 2016 with effect from May 27, 2016 to May 26, 2021, subject to the approval of shareholders. Mr. Narayanan Kumar, appointed as Additional Director, will hold office till the ensuing AGM and is eligible for appointment.
Mr. S. N. Subrahmanyan and Mr. A.M Naik retire by rotation at the ensuing AGM and being eligible offers themselves for re–appointment. Mrs. Sunita Sharma who was appointed as a Director in casual vacancy caused due to the resignation of Mr. N. Mohanraj holds office till the conclusion of the ensuing AGM and being eligible offers herself for re–appointment.
It is proposed to re–appoint Mr. R. Shankar Raman as a Whole–time Director of the Company for a period of 5 years from October 1, 2016 to September 30, 2021, subject to the approval of the shareholders.
It is proposed to re–appoint Mr. Shailendra Roy as a Whole–time Director of the Company for 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 of Directors.
The terms and conditions of appointment of the Independent Directors are placed on the website of the Company <http://investors.larsentoubro.com/Listing–>Compliance.aspx.
The Company has also disclosed on its website <http://investors.larsentoubro.com/Listing–Compliance.aspx> details of the familiarization programs formulated to educate the Directors regarding their roles, rights and responsibilities in the Company and the nature of the industry in which the Company operates, 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 part of this Board Report. Members are requested to refer to page 79 of this Annual Report.
The Company has in place an Audit Committee in terms of the requirements of the Companies Act, 2013 read with the rules made there under and Regulation 18 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The details relating to the same are given in Annexure 'B' – Report on Corporate Governance forming part of this Board Report. Members are requested to refer to pages 81 to 83 of this Annual Report.
COMPANY POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION
The Company has in place a Nomination & Remuneration Committee in accordance with the requirements of the Companies Act, 2013 read with the rules made there under and Regulation 19 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The details relating to the same are given in Annexure 'B' – Report on Corporate Governance forming part of this Board Report. Members are requested to refer to pages 83 to 85 of this Annual Report.
The Committee has formulated a policy on Director's appointment and remuneration including recommendation of remuneration of the key managerial personnel and other employees, composition and the criteria for determining qualifications, positive attributes and independence of a Director. The Committee has formulated a policy on board diversity.
DECLARATION OF INDEPENDENCE
The Company has received Declarations of Independence as stipulated under Section 149(7) of the Companies Act, 2013 from Independent Directors confirming that he/she is not disqualified from appointing/continuing as Independent Director. The same are also displayed 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 the Annual 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 been followed along with proper explanation relating to material departures;
b) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;
c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
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 be followed by the Company and such internal financial controls are adequate and operating efficiently;
f) The Directors have devised proper systems to ensure compliance with the provisions of 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 Internal Financial Controls ("IFC") within the meaning of the explanation to Section 134(5) (e) of the Companies Act, 2013. For the year ended March 31, 2016, the Board is of the opinion that the Company has sound IFC commensurate with the nature and size of its business operations and operating effectively and no material weakness exists. The Company has a process in place to continuously monitor the same and identify gaps, if any, and implement new and/or improved controls wherever the effect of such gaps would have a material 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 in which formal annual evaluation of the performance of the Board, Committees, Chairman and individual directors has to be made.
It includes circulation of questionnaires to all Directors for evaluation of the Board and its Committees, Board composition and its structure, its culture, its effectiveness, its functioning, information availability, etc. These questionnaires also cover specific criteria and the grounds on which all Directors in their individual capacity will be evaluated.
The Individual Directors' responses on the questionnaire on the performance of the Board, Committee(s), Directors and Chairman were analyzed by an independent consultant, to arrive at unbiased conclusions.
The inputs given by all the Directors were discussed in the meeting of the Independent Directors 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 also reviewed by the Nomination & Remuneration Committee and the Board.
DISCLOSURE OF REMUNERATION
The details of remuneration as required to be disclosed under the Companies Act, 2013 and the rules made there under, are given in Annexure 'D' forming part of this Board report.
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 of Section 136(1) of the Act and the rules made there under, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any Shareholder interested in obtaining a copy of the same may write to the Company Secretary. None of the employees listed in the said Annexure is related to any Director of the Company.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND ANNUAL GENERAL MEETINGS
The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries 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' as per the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. This has been widely disseminated. There were no cases of sexual harassment received by the Company in 2015–16.
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 (Share Based Employee Benefits) Regulations, 2014.
The disclosures relating to ESOPs required to be made under the provisions of the Companies Act, 2013 and the rules made there under and the SEBI (Share Based Employee Benefits) Regulations, 2014 are provided on the website of the Company www.larsentoubro.com
A certificate obtained from the Statutory Auditors, confirming compliance with the Companies Act, 2013 and the above Regulations is reproduced below :
Pursuant to the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, a Report on Corporate Governance and a certificate obtained from the Statutory Auditors confirming compliance, is provided in Annexure 'B' forming part of this Board Report.
Pursuant to the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, a Report on Corporate Governance and a certificate obtained from the Statutory Auditors confirming compliance, is provided in Annexure ‘B’ forming part of this Board Report
As per the provisions of Section 177(9) of the Companies Act, 2013 ('Act'), the Company is required to establish an effective Vigil Mechanism for directors and employees to report genuine concerns.
The Company has a Whistle–blower Policy in place since 2004 to encourage and facilitate employees to report concerns about unethical behaviour, actual/suspected frauds and violation of Company's Code of Conduct or Ethics Policy. The Policy has been suitably modified to meet the requirements of Vigil Mechanism under the Act. The policy provides for adequate safeguards against victimisation of persons who avail the same and provides for direct access to the chairperson of the Audit Committee. The Audit Committee of the Company oversees the implementation of the Whistle–Blower Policy.
The Company has disclosed information about the establishment of the Whistle Blower Policy on its website <http://investors.larsentoubro.com/corporategovernance.aspx>. During the 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 India to 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 of this Annual Report (refer pages 18 to 35).
The detailed Corporate Sustainability Report is also available on the Company's website <http://www.larsentoubro.com/corporate/sustainability>.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
During the year under review, there were no material and significant orders passed by the regulators or courts or tribunals impacting the going concern status and the Company's operations in future.
CONSOLIDATED FINANCIAL STATEMENTS
Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to Section 129(3) of the Companies Act, 2013 and Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India (ICAI), in this regard.
The Auditors report to the shareholders does not contain any qualification, observation or 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 any qualification
The Company's auditors M/s. Sharp & Tannan, (firm registration number 109982W) have already completed more than ten years as Statutory Auditors of the Company.
In accordance with provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, the Company had appointed them for a period of two years from conclusion of 70th Annual General Meeting till the conclusion of 72nd Annual General Meeting. A proposal for ratifying their appointment from the conclusion of the 71st AGM till the conclusion of the 72nd AGM has been included in the Notice of the ensuing AGM.
In view of the mandatory rotation of auditor requirement and to ensure smooth transition during this period, M/s. Deloitte Haskins & Sells LLP [ICAI Registration No. 1 17366W/W–100018] was appointed as Statutory Auditors for a period of 5 continuous years from the conclusion of 70th Annual General Meeting till the conclusion of 75th Annual General Meeting of the Company. A proposal for ratifying their appointment from the conclusion of the 71st AGM till the conclusion of the 72nd AGM has been included in the Notice of the ensuing AGM.
Both the Auditors will be jointly and severally responsible during the financial year 2016–17.
Sharp & Tannan and Deloitte Haskins & Sells LLP, have informed the Company that their appointment if made would be within the limits prescribed under Section 141 of the Companies Act, 2013.
The Auditors have confirmed that they have subjected themselves to the peer review process 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 as their arm's length relationship with the Company as well as declaring that they have not taken 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 Section 143(12) of the Companies Act, 2013.
Pursuant to the provisions of Section 148 of the Companies Act, 2013 and as per the Companies (Cost Records and Audit) Rules, 2014 and amendments thereof, the Board, on the recommendation of the Audit Committee, at its meeting held on May 25, 2016, has approved the appointment of M/s R. Nanabhoy & Co., Cost Accountants as the Cost Auditors for the Company for the financial year ending March 31, 2017 at a remuneration of Rs. 11 lakhs.
The Report of the Cost Auditors for the financial year ended March 31, 2016 is under finalization and will be filed with the MCA within the prescribed period.
A proposal for ratification of remuneration of the Cost Auditor for financial year 2016–17 is placed before the shareholders.
Your Directors take this opportunity to thank the customers, supply chain partners, employees, Financial Institutions, Banks, Central and State Government authorities, Regulatory authorities, Stock Exchanges and all the various stakeholders for their continued co–operation and support to the Company. Your Directors also wish to record their appreciation for the continued co–operation and support received from the Joint Venture partners/ Associates.
For and on behalf of the Board
A. M. Naik
Group Executive Chairman
Place : Mumbai,
date May 25, 2016