Larsen & Toubro Ltd.
|BSE: 500510||Sector: Engineering|
|NSE: LT||ISIN Code: INE018A01030|
|BSE 00:00 | 24 Apr||Larsen & Toubro Ltd|
|NSE 05:30 | 01 Jan||Larsen & Toubro Ltd|
|Mkt Cap.(Rs cr)||119,416|
|Mkt Cap.(Rs cr)||119,416|
Larsen & Toubro Ltd. (LT) - Director Report
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Company director report
The Directors have pleasure in presenting their 74th Annual Report and Audited Financial Statements for the year ended 31st March 2019.
STATE OF COMPANY AFFAIRS:
The total income for the financial year under review was RS. 89757 crore as against RS. 76224 crore for the previous financial year registering an increase of 18%. The profit before tax from continuing operations including exceptional items was RS. 9218 crore for the financial year under review as against RS. 7262 crore for the previous financial year registering an increase of 27%. The profit after tax from continuing operations including exceptional items was RS. 6678 crore for the financial year under review as against RS. 5387 crore for the previous financial year registering an increase of 24%.
AMOUNT TO BE CARRIED TO GENERAL RESERVE:
The Company has not transferred any amount to the general reserve during the current financial year.
The Directors recommend payment of dividend of RS. 18 (900%) per equity share of RS. 2/- each on the share capital amounting to RS. 2759 crore (including DDT amounting to RS. 234 crore).
The Dividend is based upon the parameters mentioned in the Dividend Distribution Policy approved by the Board of Directors of the Company which is in line with regulation 43A of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015. The Policy is provided as Annexure `G' forming a part of this Board Report and also uploaded on the Company's website at http://investors.larsentoubro.com/Listing-Compliance.aspx.
CAPITAL & FINANCE:
During the year under review the Company allotted 1359929 equity shares of RS. 2/- each upon exercise of stock options by the eligible employees under the Employee Stock Option Schemes.
The Company repaid long-term borrowings of USD 233 million (approx. RS. 1610 crore including secured debentures of RS. 400 crore) during the year under review on scheduled due dates. On the other hand the Company raised USD 100 million of foreign currency borrowings and RS. 90 Crore of Rupee Term Loan as fresh unsecured long-term borrowings for meeting business requirements and certain capital expenditure. The Company has not defaulted on any of its dues to the financial lenders.
The Company's borrowings are rated by CRISIL and ICRA. The details of the same are given on page 105 in Annexure `B' - Report on Corporate Governance forming part of this Board Report and is also available on the website of the Company.
DIVESTMENT OF ELECTRICAL & AUTOMATION BUSINESS:
As disclosed in our previous Report on 1st May 2018 the Company had signed subject to regulatory approvals definitive agreements with Schneider Electric a global player in energy management and automation for strategic divestment of its Electrical and Automation (E&A) business for an all-cash consideration of RS. 14000 crore. The Company has been informed by Schneider Electric that it has received a communication dated 18th April 2019 from the Hon'ble Competition Commission of India (CCI) approving the proposed combination subject to the amendment filed by Schneider Electric. The Company is awaiting the detailed order of the CCI and the timelines for divestment cannot be ascertained as of now and are expected to be prolonged. In view of the above the E&A business is disclosed as a continuing operation and has not been classified as discontinued operation as on March 31 2019.
BUYBACK OF EQUITY SHARES:
The Company had proposed a buyback of up to 61016949 equity shares from its equity shareholders as on the record date being October 15 2018 on a proportionate basis by way of the tender offer route through the stock exchange mechanism at a price of RS. 1475 per equity share aggregating up to RS. 9000 crore in accordance with the applicable provisions of the Companies Act 2013 and the Securities and Exchange Board of India (Buy-Back of Securities) Regulations 2018 (`Buyback Regulations' and such buy back herein after referred to as `Buyback') inter alia considering the debt-equity ratio requirement on the basis of standalone financial statements post buyback. Pursuant to the approval of the Buyback by the shareholders of the Company a draft letter of offer (`DLOF') was submitted to the Securities and Exchange Board of India (`SEBI') in terms of Regulation 8(i)(a) of the Buyback Regulations for their comments.
By way of a letter dated 18th January 2019 SEBI advised the Company not to proceed with the buyback offer since the ratio of the aggregate of secured and unsecured debts owed by the Company and its subsidiaries after buyback (assuming full acceptance) would be more than twice the paid-up capital and free reserves of the Company based on consolidated financial statements of the Company.
Accordingly the Company decided not to proceed with the buyback.
As at 31st March 2019 the gross property plant and equipment investment property and other intangible assets including leased assets stood at RS. 12174.29 crore and the net property plant and equipment investment property and other intangible assets including leased assets at RS. 7934.32 crore. Capital Expenditure during the year amounted to RS. 1571.41 crore.
The Company has not accepted deposits from the public falling within the ambit of Section 73 of the Companies Act 2013. The Company does not have any unclaimed deposits as of date. All unclaimed deposits have been transferred to Investor Education & Protection Fund. Pursuant to the Ministry of Corporate Affairs (MCA) notification dated 22nd January 2019 amending the Companies (Acceptance of Deposits) Rules 2014 the Company is required to file with the Registrar of Companies (ROC) requisite returns in Form DPT-3 for outstanding receipt of money/loan by the Company which is not considered as deposits. The Company would be complying with this requirement within the prescribed timelines.
As the members are aware the Company's shares are compulsorily tradable in electronic form. As on 31st March 2019 98.47% of the Company's total paid up capital representing 1381325258 shares are in dematerialized form. SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 mandate that the transfer except transmission and transposition of securities shall be carried out in dematerialized form only with effect from 1st April 2019. 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. The Company has directly as well as through its RTA sent intimation to shareholders who are holding shares in physical form advising them to get the shares dematerialized.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND:
The Company sends reminder letters to all shareholders whose dividends are unclaimed so as to ensure that they receive their rightful dues. Efforts are also made by the Company in co-ordination with the Registrar to locate the shareholders who have not claimed their dues.
During the year the Company has transferred a sum of RS. 39312966 to Investor Education & Protection Fund (IEPF) the amount which was due & payable and remained unclaimed and unpaid for a period of seven years as provided in section 125 of the Companies Act 2013 and the rules made thereunder. 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. 243413796 as on 31st March 2019.
The Company has also sent communications to members whose dividends are unclaimed requesting them to provide/update bank details with RTA/Company so that dividends paid by the Company are credited to the investor's account on time.
In accordance with the provisions of the Section 124(6) of the Companies Act 2013 and Rule 6(3)(a) of the Investor Education and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules 2016 (`IEPF Rules') the Company has transferred 3634 equity shares of RS. 2 each (0.0003% of total number of shares) held by 257 shareholders (0.024 % of total shareholders) to IEPF. The said shares correspond to the dividend which had remained unclaimed for a period of seven consecutive years from the financial year 2010-11. Subsequent to the transfer the concerned shareholders can claim the said shares along with the dividend(s) by making an application to IEPF Authority in accordance with the procedure available on www.iepf.gov.in and on submission of such documents as prescribed under the IEPF Rules.
The Company sends specific advance communication to the concerned shareholders at their address registered with the Company and also publishes notice in newspapers providing the details of the shares due for transfer so as to enable them to take appropriate action. The shareholder/ claimant can file only one consolidated claim in a financial year as per the IEPF rules. All corporate benefits accruing on such shares viz. bonus shares etc. including dividend shall be credited to IEPF.
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 power defence and infrastructure sectors. The details of investments/divestments in subsidiary companies during the year are as under:
A) Shares acquired during the year:
The Company has entered into a share purchase agreement dated 18th March 2019 with Mr. V. G. Siddhartha Coffee Day Trading Limited and Coffee Day Enterprises Limited (`Sellers') for acquisition of 33360229 equity shares of Mindtree Limited aggregating to 20.32% of the paid-up equity share capital of Mindtree Limited.
The Company proposed to acquire subject to the regulatory approvals additional equity shares upto 15% of the voting share capital from the stock exchanges and make an open offer aggregating to 31% of the voting share capital of Mindtree Limited in accordance with the requirements of SEBI (Substantial Acquisition of Shares and Takeover) Regulations 2011. The Company has since received the approval from Competition Commission of India and Anti-trust authorities of US and Germany. Pursuant to the above the Company has acquired 32760229 equity shares of Mindtree Limited from the Sellers on 30th April 2019. Further 9829859 equity shares of Mindtree Limited have been acquired in the open market upto 9th May 2019.
Subsequent to the year under review the Company has acquired entire stake held by Tamil Nadu Industrial Development Corporation (TIDCO) in L&T Shipbuilding Limited on 10th April 2019. With this acquisition L&T Shipbuilding Limited is now a wholly owned subsidiary of the Company.
B) Equity shares sold / transferred / reduced during the year:
1. The Company has sold its entire stake in Marine Infrastructure Developer Private Limited a subsidiary to Adani Ports and Special Economic Zone Ltd.
2. The Company has sold shares of L&T Technology Services Limited and Larsen & Toubro Infotech Limited in the open market towards meeting its mandatory obligation to reduce promoter shareholding in these companies. With the above sale the minimum public shareholding obligation in Larsen & Toubro Infotech Limited has been complied.
3. Pursuant to an order dated 13th December 2018 passed by the National Company Law Tribunal Mumbai bench the equity share capital of L&T Seawoods Limited a wholly owned subsidiary was reduced to the extent of 34.50 crore shares aggregating to Rs 345 crore.
Subsequent to the year under review the Company has divested its entire stake in L&T Kobelco Machinery Private Limited a subsidiary to Kobe Steel Ltd. on 17th April 2019.
C) Companies Struck off:
Pursuant to the application made in the previous year the following companies were struck off by Ministry of Corporate Affairs under the provisions of Companies Act 2013 during the year under review:
D) Performance and Financial Position of subsidiary / associate and joint venture companies:
A statement containing the salient features of the financial statement of subsidiary / associate / joint venture companies and their contribution to the overall performance of the Company is provided on pages 546 to 555 of this Annual Report.
The Company has formulated a policy on identification of material subsidiaries in line with Regulation 16(c) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 and the same is placed on the website at http://investors.larsentoubro.com/Listing-Compliance. aspx. The Company does not have any material subsidiaries.
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 as required under section 186 of the Companies Act 2013 Regulation 34(3) and Schedule V of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 in Note 37 and Note 38 forming part of the financial statement.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:
The Audit Committee and the Board of Directors have approved the Related Party Transactions Policy signifying the threshold limits 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 2018-19 and estimated transactions for FY 2019-20.
There were no materially significant related party transactions that may have conflict with the interest of the Company.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT:
Other than stated elsewhere in this 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.
The Risk Management Committee comprises of Mr. S. N. Subrahmanyan Mr. R. Shankar Raman and Mr. Subramanian Sarma Directors of the Company. Mr. S. N. Subrahmanyan 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. The risk assessment includes review of geo-political developments business environment growth opportunities geographical expansion capability development talent management brand and reputation protection and enhancement cyber security and risk minimization initiatives. The Committee periodically reviews the risk 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 296 to 298 of this Annual Report.
CORPORATE SOCIAL RESPONSIBILITY:
The Corporate Social Responsibility Committee comprises of Mr. Vikram Singh Mehta Mr. R. Shankar Raman and Mr. D. K. Sen as the Members. Mr. Vikram Singh Mehta is the Chairman of the Committee.
The CSR policy framework is available on the website http://investors.larsentoubro.com/Listing-Compliance. aspx. A brief note regarding the Company's initiatives with respect to CSR is given in Annexure `B' - Report on Corporate Governance forming part of this Board Report. Please refer to pages 96 and 97 of this Annual Report. 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. M.M Chitale Mr. M. Damodaran and Mr. Vikram Singh Mehta were appointed as Independent Directors of the Company with effect from April 1 2014 to March 31 2019. Pursuant to the recommendation of the Nomination and Remuneration Committee the Board at its Meeting held on March 5 2019 has approved the re-appointment of Mr. M.M Chitale Mr. M. Damodaran and Mr. Vikram Singh Mehta for a further term of five years from April 1 2019 to March 31 2024 subject to the approval of shareholders through special resolution. Special resolution for continuation of Mr. M. Damodaran as an Independent Director who would attain the age of 75 years during his current tenure forms part of the Notice being sent to the shareholders.
Mr. Adil Zainulbhai was appointed as Independent Director of the Company with effect from May 30 2014 to May 29 2019. Pursuant to the recommendation of the Nomination and Remuneration Committee the Board at its Meeting held on March 5 2019 has approved the re-appointment of Mr. Adil Zainulbhai for a further term of five years from May 29 2019 to May 28 2024 subject to the approval of shareholders through special resolution. Based on their skills experience knowledge and report of their performance evaluation the Board was of the opinion that their association would be of immense benefit to the Company and it would be desirable to avail their services as Independent Directors.
Mr. Subhodh Bhargava was re-appointed as Independent Director with effect from March 30 2017 for a second term of five years which was approved by the shareholders through a special resolution. At the time of his re-appointment he had attained the age of 75 years and accordingly he shall continue in his present term until March 29 2022. His re-appointment is in compliance with regulation 17(1A) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 which was effective from 9th May 2018.
Mr. R. Shankar Raman Mr. Shailendra Roy Mr. M.V Satish and Mr. J. D. Patil retire by rotation at the ensuing AGM and being eligible offer themselves for re-appointment. The notice convening the AGM includes the proposal for re-appointment of Directors.
The terms and conditions of appointment of the Independent Directors are in compliance with the provisions of the Companies Act 2013 and 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 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 Report. Members are requested to refer to pages 82 and 83 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 thereunder 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 88 to 90 of this Annual Report.
COMPANY POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION:
The Company has in place a Nomination and Remuneration Committee in accordance with the requirements of the Companies Act 2013 read with the rules made thereunder 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 90 to 94 of this Annual Report.
The Committee has formulated a policy on Directors' 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. Nomination and Remuneration Policy is provided as Annexure `H' forming part of this Board Report and also disclosed on the Company's website at http://investors.larsentoubro.com/Listing-Compliance.aspx. The Committee has also formulated a separate 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 http://investors.larsentoubro. com/Listing-Compliance.aspx. The Independent Directors have complied with the Code for Independent Directors prescribed in Schedule IV to the Companies Act 2013.
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 Report. The Annual Return of the Company will be available on its website www.larsentoubro.com.
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 judgements 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 CONTROLS:
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 31st March 2019 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 DIRECTORS AND CHAIRMAN:
The Nomination & Remuneration Committee and the Board have laid down the manner in which formal annual evaluation of the performance of the Board committees individual directors and the Chairman has to be made. All Directors responded through a structured questionnaire giving feedback about the performance of the Board its Committees Individual directors and the Chairman. For the year under review the questionnaire was modified suitably based on the comments and suggestions received from Independent Directors. As in the previous years an external consultant was engaged to receive the responses of the Directors and consolidate/ analyze the responses. The same external consultant's IT platform was used from initiation and till conclusion of the entire board evaluation process. This ensured that the process was transparent and independent of involvement of the Management or the Company's IT system. This has enabled unbiased feedback. The Board Performance Evaluation inputs including areas of improvement for the Directors Board processes and related issues for enhanced Board effectiveness were discussed in the meeting of the Independent Directors held on 30th November 2018 and in the subsequent Meetings of Nomination and Remuneration Committee and the Board. The Group Chairman had a discussion with all the Independent Directors individually and the Chairman of Nomination and Remuneration Committee had a discussion with all the Executive Directors individually.
Most of the suggestions from the Board Evaluation exercise of FY 2017-18 have been suitably implemented such as meetings of Chairman of NRC with individual directors and Action Taken Report of Board decisions.
DISCLOSURE OF REMUNERATION:
The details of remuneration as required to be disclosed under the Companies Act 2013 and the rules made thereunder are given in Annexure `D' forming part of this Board report.
The information in respect of employees of the Company required pursuant to Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended from time to time is provided in Annexure `I' forming part of this report. In terms of Section 136(1) of the Act and the rules made thereunder 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 at the Registered Office of the Company. None of the employees listed in the said Annexure is related to any Director of the Company.
COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS:
The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and 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. The policy has been widely disseminated. The Company has constituted Internal Complaints Committees as per the above Act. There were 4 complaints received during the F.Y. 2018-19. All the 4 complaints were investigated and appropriate action was taken. Awareness workshops and training programs are conducted across the Company to sensitize employees to uphold the dignity of their colleagues at workplace specially with respect to prevention of sexual harassment.
ESOP 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 Securities and Exchange Board of India (Share Based Employee Benefit) Regulations 2014 (SBEB Regulations). The disclosures relating to ESOPs required to be made under the provisions of the Companies Act 2013 and the rules made thereunder and the SBEB
Regulations together with a certificate obtained from the Statutory Auditors confirming compliance is provided on the website of the Company http:// investors.larsentoubro.com/Listing-Compliance.aspx.
A certificate obtained from the Statutory Auditors confirming compliance with the Companies Act 2013 and the SBEB Regulations is also provided in Annexure `B' forming part of this Report.
Corporate Governance: Pursuant to Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 a Report on Corporate Governance and a certificate obtained from the Statutory Auditors confirming compliance are provided in Annexure `B' forming part of this Report.
Integrated Reporting: Pursuant to SEBI Circular on Integrated Reporting the Company is complying with the applicable requirements of the Integrated Reporting Framework. The Sustainability Report has been replaced by an Integrated Report which tracks the sustainability performance of the organization and its interconnectedness with the financial performance showcasing how the Company is adding value to its stakeholders. The Integrated Report encompasses areas such as Corporate Governance the IR & Sustainability Structure Sustainability Roadmap 2021 Risks & Opportunities enhancement of Financial Capital Manufactured Capital Intellectual Capital Human Capital Natural Capital and Social & Relationship Capital and alignment to sustainable development goals. It also covers strategy business model and resource allocation.
The integrated Report for the year 2017-18 is available on the Company's website http://www.larsentoubro.com/corporate/ sustainability/integrated-report/ and the report for the year 2018-19 shall be published shortly.
Statutory Compliance: The Company complies with all applicable laws and regulations pays applicable taxes on time takes care of all its stakeholders ensures statutory CSR spend and initiates sustainable activities.
MSME: The Ministry of Micro Small and Medium Enterprises vide their Notification dated 2nd November 2018 has instructed all the Companies registered under the Companies Act 2013 with a turnover of more than Rupees Five Hundred crore to get themselves onboarded on the Trade Receivables Discounting system platform (TReDS) set up by the Reserve Bank of India. In compliance with this requirement the Company is in the process of registering itself on TReDS through one of the service providers.
The Company would be complying with the requirement of submitting a half yearly return to the Ministry of Corporate Affairs within the prescribed timelines.
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 Companies Act 2017. 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 policy also establishes adequate mechanism to enable employees report instances of leak of unpublished price sensitive information. 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 person has been declined access to the Audit Committee wherever desired.
Also see page 98 forming part of Annexure `B' of this Board Report.
BUSINESS RESPONSIBILITY REPORTING:
As per Regulation 34 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 a separate section on Business Responsibility Reporting forms a part of this Annual Report (refer pages 20 to 41).
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 provisions of the Companies Act 2013 and the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules 2015 and amendments thereof issued by the Ministry of Corporate Affairs in exercise of the powers conferred by Section 133 of the Companies Act 2013.
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. Company Secretaries is attached as Annexure `E' forming part of this Board Report.
The observation of the Secretarial Auditor is self-explanatory.
In view of the mandatory rotation of auditors' requirement and in accordance with the provisions of Companies Act 2013 M/s. Deloitte Haskins & Sells LLP were 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.
The Auditors have confirmed that they have subjected themselves to the peer review process of Institute of Chartered Accountants of India (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.
The Audit Committee reviews the independence and objectivity of the Auditors and the effectiveness of the Audit process.
The Auditors attend the Annual General Meeting of the Company.
Also see pages 98 and 99 forming part of Annexure `B' of this Board Report.
REPORTING OF FRAUD:
The Auditors of the Company have not reported any instances of fraud committed against the Company by its officers or employees 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 10th May 2019 has approved the appointment of M/s R. Nanabhoy & Co. Cost Accountants as the Cost Auditors for the Company for the financial year ending 31st March 2020 at a remuneration of Rs 13 lakhs.
A proposal for ratification of remuneration of the Cost Auditor for the financial year 2019-20 is placed before the shareholders.
The Report of the Cost Auditors for the financial year ended 31st March 2019 is under finalization and shall be filed with the Ministry of Corporate Affairs within the prescribed period.
The provisions of Section 148(1) of the Companies Act 2013 are applicable to the Company and accordingly the Company has maintained cost accounts and records in respect of the applicable products for the year ended 31st March 2019.
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
Date : 10th May 2019 Place : Mumbai
Annexure `A' to the Board Report
Information as required to be given under Section 134(3) (m) read with Rule 8(3) of the Companies (Accounts) Rules 2014.
A. CONSERVATION OF ENERGY:
(i) Steps taken or impact on conservation of energy:
Implementation of LED lights in HE-Hazira campus and other project sites and Solar Pipes in SG fabrication area.
Installation and Usage of Grid Power network in place of DG sets in LSR/ISR Process.
Pre-heating of circular Seam with energy efficient IR Burners.
Procurement of renewable energy of approximately 54 Lacs KwH for HE East & West plants.
Plate Fabrication Shop furnace automation control with PLC and HMI.
Replacement of 22 Kw (2 no's) induction motor with new Yaskawa Drive on Gantry Yard Crane.
Usage of Facing Lathe Chuck Ravensberg Lathe Chuck and Cantilever crane LT.
Interlocking of coolant pump with drilling operation on Kolb Machine to avoid the idle running of coolant motor ensuring optimal utilization of electrical energy.
Built Operate and Transfer (BOT) project with ZERO Capital Expenditure (CapEx) and Operating Expenditure (OpEx) with Energy Service Companies (ESCO) in all bays for replacement of 264 nos. of Metal Halide Lamps.
Retrofitting of Hydraulic Press with IE 2 class Energy efficient motor.
Implementation of Smart Energy Saving function in SKODA FHB machine to sense idle operation and turn auxiliary motors off.
Replacement of semitransparent FRP Roof sheets for Daylight harvesting in shops.
Qualification of 15 kW small curing oven in place of 50 kW curing oven for smaller batch size
Replacement of 150 W MH Street lights (Phase # 1) with 90 W LED fittings (12 nos.)
Retrofitting of Slip Ring induction motor based EOT crane to Energy efficient Squirrel Cage motors.
Identification of compressed air Leaks through Ultrasonic Leak detection system and arrest them in various shops.
Implementation of Compressor leakage testing & reduction of use of compressor.
Revision in heating rate in PFS shop for heat exchangers.
Installation of transparent roof sheets in LEMF store.
Reduction in natural gas consumption for LSR/ ISR furnace by sequential operation of furnace burners.
IOT projects implementation for ESSC SAW process to save energy and reduce cycle time at Hazira.
Conversion of cycle into Induction heating & effective loading leading to energy saving in furnace.
Usage of permanent flue gas analyzers for fix type furnaces.
Installed Energy efficient burners for Furnaces and pre heating.
Implementation of 100% PID based LSR/ISR.
Development of Smart Energy Management System at VHEW for real time trend of Energy Intensive processes with Pareto charts report and alerts.
Development of Energy efficient screw chiller with BMS system for 120T AC plant.
Implemented robots on MDU DMC molding machines by improving OEE; optimizing cycle time at Ahmednagar location.
Implementation of Timers for Flow Lines Battery Chargers Water Coolers Auto switching off shop floor lights at Mahape location.
Installation of VFD at Scrubber and FDVS system of plating shop at Vadodara.
Installation of censors in welding machines and batching plant to identify consumption of electricity in case machines are lying idle.
Replacement of conventional light fittings with LED in Production/Utility areas at EWL Kancheepuram factory and Kansbahal works.
Replacement of 33KV 1250 KVA Transformer with Level II Energy efficient transformer due to failure of old transformer at EWL Kancheepuram factory.
Periodically conduct Tag-Your-Leak survey at Kansbahal Works
DE dusting line Replaced Cogged belt in Blower instead of V belt and maintained the rated RPM and avoided the V belt slippage in the pulley.
Replaced vertical gland pump 5HP with AOD pump
Replacement of conventional MH Lamps and fluorescent tube lights by LED lamps in working areas at office and projects as well as for street lights
Replacing existing aged inefficient Split AC units with energy efficient units
Utilization of Chiller for HVAC System - Campus FMD initiated and control the chiller running hour for HVAC need during holidays and extended working hours.
Initiative has been taken for replacement of Air-Cooled Chiller with Water Cooled Chiller.
Commissioned Air Compressor with Variable Speed Drive which reduced the air pressure from 5.5 to 6.5 bar to 5.2 bar constant pressure.
Utilisation of Solar Lights for lighting around compound walls.
(ii) Steps taken by the Company for utilizing alternate sources of energy:
Shift towards usage of windmill power in the place of State Electricity Board at Kanchipuram factory
Solar Panels installed at project sites
(iii) Capital investment on energy conservation equipments:
The measures taken have resulted in savings in cost of production power consumption and processing time at all locations.
B. TECHNOLOGY ABSORPTION:
(i) Efforts made towards technology absorption:
Usage of Triple Blend concrete for the construction of the Extradosed Bridge at Barapullah Delhi.
Implementation of formwork having height of 10 metre for the first time in India at Medigadda Barrage Telangana.
Development of IOT based digital solution for concrete pour management at Medigadda Barrage Telangana.
Usage of Secant pile as a cost effective and technically viable alternative for Jet grouting Cut off at Medigadda Barrage Telangana.
Achieved better quality and faster erection time by usage of Large diameter Single stage Anchor Rod at Medigadda Barrage Telangana.
Development of IOT based digital solution for Boulder transportation management at Kundankulam Nuclear Power Plant Hydro Technical Structures Package.
Innovative use of In-house designed Auger Cleaner Rock Splitter and Rock buster to check noise and environment pollution for construction of under- ground sections at Mumbai Metro Project.
Utilization of Floating barge for batching plant set up at Mumbai Trans Harbour Link Project.
Adaptation of Reverse Circulation Drill (RCD) for Marine piling at Mumbai Trans Harbour Link Project.
Launched 1500 Ton Truss structure by utilizing Push Launching at Hyderabad Metro Rail Project.
Implementation of Pile Base Grouting in a Bridge Project at Khulna Mongla.
Development of Insert Free Tetrapod lifting arrangement.
Installed strand jack arrangement for skidding and lowering of objects in shipbuilding.
Usage of Analytics tools such as BI Dashboard: 15/30 PROTON CREMS and ConstZon.
Utilization of smart stations smart officer with 20+ applications asset trackers in the factories.
Initiated use of Drawing Automation Advance Metrology Advanced NDT and IEMQS- Operational under SMART processes.
Implementation of Workmen Management System (Uberization) Smart Glass Safety through VR under SMART service.
Development of capabilities in High-end Finite Element Analysis including advanced non-linear FEA Analysis of complex Heat Exchanger models etc.
Development of capability for CFD simulation in areas such as Conjugate Heat Transfer analysis and analysis with Reaction kinetics.
Technology for Simulation of Manufacturing processes such as multi-layer weld overlay heat treatment and forming and its application for ongoing jobs.
Designing of Synloop Boiler with conventional `U' type configuration.
Development of Phosphoric Acid Heaters with metallic tubes.
Optimization of design of support arrangement in Heavy Reactors.
Optimization of design for internals of Nuclear Steam Generator.
Developed autonomous UnderWater Vehicle (AUV) AMOGH meeting Indian Navy requirements for underwater surveillance.
Technology absorption from National Institute of Ocean Technology Chennai for Remote Operated Vehicles (ROV) for 500m to 6000m for unmanned underwater intervention & support like diver support Submarine rescue mine counter measure etc
Technology absorption from National Institute of Oceanography Goa for Autonomous Underwater Vehicle (AUV) Maya- 200m configurable to meet military & civilian application.
Implemented Integrated Life Support System - for Tejas Aircraft (Oxygen Generation System)
Developed Chemical Warfare Agent Detection System
Designed absorption of K9 armoured vehicle manufacturing technology from Korea
Development of complete turn- key solution consisting of Search radar Track radar & antiaircraft Gun
Development of Manoeuvrable Expandable Aerial Target (MEAT) which includes Airframe design Avionics development including in house Flight Control Computer.
Development of Catapult Bungee Launcher.
Developed Fire Control Radar which tracks radar for short range air defence application.
Developing swarming algorithms and implementation with a cluster of UAVs.
Development of fully mechanized remote weapon station for guns giving capability to fire without being exposed to enemy.
Complete WaterJet Propulsion system developed in-house to benchmark performance against imported system for IBs.
Developed High Power high efficiency DC-DC converters with critical technology for increasing the endurance for Air independent propulsion (AIP) systems.
Development of design of Avionics LRUs with Standby Engine Instrument and Standby Instrumentation System for Helicopter Platforms
Work in progress with IIT Delhi under IMPRINT program for real-time imaging sonar suitable for variety of applications like AUVs ROVs Divers etc
Development of System for underwater Acoustic Signal Monitoring
Development of non-destructive Testing and geotechnical investigation of India's longest bridge (Dhola-Sadia Bridge) in Assam.
Designing and construction of Geocell and Geogrid stabilized base layers for heavy duty pavements.
Establishment of state of art testing facility for Geosynthetic materials used for various applications in construction projects.
Establishment of state of art chemical testing facility for construction materials especially testing of potable water industrial water and sewer waste water.
Launch of the new R&D brochure highlighting the capabilities and achievements of the R&D centre.
Development of in-house Chloride Migration Test set-up for qualification of concrete mixes for mega structures.
Designing of high resilient modulus (in excess of 3000 MPa) dense bituminous macadam mixes for major highway project.
Complete digitization of the testing activities at R&D laboratory with implementation of Laboratory Information Management Software (LIMS)
. Development of high flow concrete mix for (CFA)-Continuous flight auger system for pile casting
Development of accelerated mix design method for concrete using PPC OPC+Fly ash and OPC of high strength cement of 53 grade.
Development of durability of concrete testing methods and correlations
Evaluation of light gauge sections for formwork
Development of pre-stressing strands relaxation test facility as per IS 14268 and ASTM A416
Development of maturity curves for tetra mix concrete
Determining the suitable anchor cone assembly for climbing formwork
Evaluation of the proximity switches for nuclear projects under various environmental conditions
Development of customized DBM mix designed at LTCRTC for extreme weather conditions were approved and adopted for construction at Bar Bilara Jodhpur Road Project Rajasthan.
Controlled low strength material-CLSM has been implemented at CSTI administrative block to fill the hollow portions below the tiles due to improper consolidation / settlement of soils
Geo-concrete is placed for a ramp portion of heavy vehicle service station at Kanchipuram yard
CFA pile casting using high flow concrete at NPCIL Project in Haryana through DFI.
Quantitative data analytics on HSD rebar mechanical properties
Introduced DG500 KVA AMF panel to turn on automatically the EB & DG and implementation of online monitoring system.
Implemented online monitoring of Water meters & report generation automatically energy meter readings and monitoring shop wise consumption at Formwork unit.
Automation of RO plant and receipt of the running parameters by SMS such as pressure flow reject water volume total consumption PH TDS.
Implemented online LPG consumption monitoring system in Paint shop for monitoring efficient gas consumption.
Online seamless data transfer system implemented for water consumption monitoring.
Monitoring LPG Leakage system implemented in LPG line to reduce the wastage at Formwork Factory Puducherry.
Development of P55 manual bending machine fixtures as per site requirement.
Development of Robomaster Double Bender Sleeve for TL Projects 16mm short length hook job bending.
Implementation of stirrup making machine magnet tray for coil iron dust collecting to segregate iron dust and mud separately.
Reduction in water consumption through arresting the leakage and replacement with new push type tap to all gardens and labour.
Developed the Twinmaster 12S Machine Manual control device to minimize coil feeding and setting time for increasing the productivity.
To develop the clamping system in P42 manual bending machine to minimize the man power (helper).
Development of new cost-optimized meter platforms that offer better features development and integration of modules to facilitate remote communication of meter data over Radio / GSM and development of Energy Meters Pre-Paid
Meters Smart Meters Protective Relays and Panel Meters
Developed Smart and Pre-paid meter where each and every instance in power distribution will be recorded
Development of different communication modules based on communication technologies in our 1 Ph & 3 Ph Whole Current & Smart Meters
Development of Closed Door operation feature in the domestic LV Switchboards.
Development of GV3N range of Gas Insulated Switchgear (GIS) and `SMART' RMUs to cater to requirements in Smart Cities and IPDS projects.
Development of feeder pillar designs (Metallic/ Non-metallic).
Development of Ethernet switches and Data concentrators to complement LV MV product offerings.
Development of Slip power recovery system using indigenous developed IGBT based Active front End (AFE) and inverter for large Motors.
Introduction of advanced Smart Metering Infrastructure with RF based L&T make Smart Meters at Indore using public and private (Govt. Community Cloud) cloud infrastructure for hosting solution required for Smart Metering.
Development of LTLK MCBs for submersible pumps typically replacing traditional rewireable fuses in agricultural sector.
Optimized the capacity of Laminar cooling water system for SAIL RSP Hot Strip Mill Project.
Development of High Rate Mill Scale filtration system design and manufactured indigenously for SAIL RSP Hot Strip Mill Project with basic design for the Filters from Envirotherm GmbH Germany
Development of design of Scale Pit & Settling Tank for SAIL RSP Hot Strip Mill.
Developed capability to design Single Flight Pipe Conveyors for a diameter as high as 600 mm and upto a length of 8 km.
Developed twin wagon loading system with cross transfer car & wagon positioner.
Designed rotary silo extractor for coal handling of power plant for an export order.
Installation of specialized fixed stacker with twin track arrangement for coal handling in Port Stockyard.
Designed and manufactured track mounted mobile roll crusher (for Coal application).
Developed skid mounted crushing plant with impactor to meet specific customer application.
Development of higher capacity surface miner KSM404 and operational in coal application.
Developed segmented roll design for better service life of Roll Crusher.
Implementation of MIG welding in place of SMAW welding
(ii) Benefits derived like product improvement cost reduction product development or import substitution:
Usage of Analytics has resulted in Real time monitoring Quick decision making Multiple data source and Drill down available for BI dashboard.
Usage of Smart factory has resulted in increase in productivity by 30% reduction in cycle time effective utilization of machine cost control and easy and fast transaction/communication.
Implementation of Smart process has resulted into additional engineering capacity improved visualization and reduction in planning efforts.
Initiation of Smart service has resulted into efficiency in communication connecting workmen with messages effective handling of site queries and immersive trainings for workmen.
Entry in light weight AUV market with immediate business potential in South Asia
Technology Enabler to develop variants for other Platforms and to Develop Products for High Altitude survival kits.
Development of Remote Operated Gun Mount (ROGM) has resulted in unleashing the potential to be incorporated in various upcoming/ in-service armored vehicles in India
Development of WaterJet Propulsion system has provided indigenous solution for propulsion of high speed boats & ships.
Indigenous Sonar sensor solution for various underwater application
The digitalization of testing activities at R&D centre will save precious time and manpower.
Implementation of LIMS at the project sites enables us to build a comprehensive material performance data base and thus aide in improvement of quality of construction materials used at site.
Development of high flow concrete mix for (CFA)-Continuous flight auger system for pile casting
Development of accelerated mix design method for concrete using cement and cementitious materials
Development of durability of concrete testing methods and correlations
(iii) Information regarding technology imported during the last 3 years:
(iv) Expenditure incurred on Research & Development:
Annexure `B' to the Board Report
A. CORPORATE GOVERNANCE
Corporate Governance is a set of principles processes and systems which govern a company. The elements of Corporate Governance are independence transparency accountability responsibility compliance ethics values and trust. Corporate Governance enables an organization to perform efficiently and ethically generate long term wealth and create value for all its stakeholders. The Company believes that sound Corporate Governance is critical for enhancing and retaining investor trust and your Company always seeks to ensure that its performance goals are met accordingly. The Company has established systems and procedures to ensure that its Board of Directors is well informed and well equipped to fulfill its overall responsibilities and to provide management with the strategic direction needed to create long term shareholders value. The Company has adopted many ethical and transparent governance practices even before they were mandated by law. The Company has always worked towards building trust with shareholders employees customers suppliers and other stakeholders based on the principles of good corporate governance.
B. COMPANY'S CORPORATE GOVERNANCE PHILOSOPHY
The Company's essential character revolves around values based on transparency integrity professionalism and accountability. At the highest level the Company continuously endeavors to improve upon these aspects on an ongoing basis and adopts innovative approaches for leveraging resources converting opportunities into achievements through proper empowerment and motivation fostering a healthy growth and development of human resources to take the Company forward.
C. THE GOVERNANCE STRUCTURE
The Company has four tiers of Corporate Governance structure viz.:
(i) Strategic Supervision - by the Board of Directors comprising the Executive Non-Executive Directors and Independent Directors.
(ii) Executive Management - by the Corporate Management comprising of the Chief Executive Officer and Managing Director 5 Executive Directors and 1 Non-Executive Director.
(iii) Strategy & Operational Management - by the Independent Company Boards of each Independent Company (IC) (not legal entities) comprising of representatives from the Company Board Senior Executives from the IC and independent members.
(iv) Operational Management - by the Business Unit (BU) Heads.
The four-tier governance structure besides ensuring greater management accountability and credibility facilitates increased autonomy to the businesses performance discipline and development of business leaders leading to increased public confidence.
D. ROLES OF VARIOUS CONSTITUENTS OF CORPORATE GOVERNANCE IN THE COMPANY
a. Board of Directors (the Board):
The Directors of the Company are in a fiduciary position empowered to oversee the management functions with a view to ensuring its effectiveness and enhancement of shareholder value. The Board also reviews and approves management's strategic plan & business objectives and monitors the Company's strategic direction.
b. The Group Chairman (GC):
The GC is the Chairman of the Board. His primary role is to provide leadership to the Board and guidance and mentorship to the CEO & MD and Executive Directors for realizing the approved strategic plan and business objectives. He presides over the Board and the Shareholders' meetings.
c. Executive Committee (ECom):
The ECom provides a companywide operations review and plays a key role in strengthening linkages between the ICs and the Company's Board as well as in rapidly realizing inter-IC synergies. In addition the ECom deliberates upon strategic issues that cut across ICs and Corporate. The agenda includes:
Review of major order prospects (Standalone/ Group) / Integrated offerings
Review of consolidated financials including working capital cash flow capital structure etc.
Review of Monthly / Quarterly / Yearly financial performance
Review of Revenue Capital & Manpower Budget and performance there against
Review and discuss strategic issues which impact the entire organization viz.
i. International business expansion
ii. IC synergies
iii. HR Update/ Talent Management / Service contract extensions for senior management personnel iv. Digitalization & Analytics initiatives
Approval of common policies
Sharing of best practices etc.
Strategic plans and business portfolio reviews
d. The Chief Executive Officer and Managing Director (CEO & MD):
The CEO & MD is fully accountable to the Board for the Company's business development operational excellence business results people development and other related responsibilities.
e. Executive Directors (ED) / Senior Management Personnel:
The Executive Directors as members of the Board along with the Senior Management Personnel in the Executive Committee contribute to the strategic management of the Company's businesses within Board approved direction and framework. They assume overall responsibility for strategic management of business and corporate functions including its governance processes and top management effectiveness.
f. Non-Executive Directors (NED) / Independent Directors:
The Non-Executive Directors / Independent directors play a critical role in enhancing balance to the Board processes with their independent judgment on issues of strategy performance resources standards of conduct etc. besides providing the Board with valuable inputs.
g. Independent Company Board (IC Board):
Since 1999 developing and implementing five- year strategy plan is a regular process followed by the Company. This process called Lakshya has helped the company to achieve its growth aspirations and created value for all stakeholders. As a part of Lakshya 2016 the Company decided to have Hybrid Holdco Structure. Accordingly 10 Independent Companies (ICs) were created. During the process of evolving Lakshya 2021 the structure was reviewed and it was decided to continue with the IC structure with modified mandate. The Company has already implemented the new mandate given by the Board and currently we have 9 ICs. Needless to mention that the IC structure has enabled the Company to empower people and achieve substantial growth in their businesses. The strategic plan for the period 2016 - 2021 named Lakshya 2021 was developed and approved by the Board at its meeting held in May 2016.
E. BOARD OF DIRECTORS
a. Composition of the Board:
The Company's policy is to have an appropriate mix of Executive Non-Executive & Independent Directors. As on 31st March 2019 the Board comprises of the Group Chairman the Chief Executive Officer & Managing Director 5 Executive Directors 4 Non-Executive Directors (3 representing financial institutions) and 11 Independent Directors including one Independent Woman Director. The composition of the Board as on 31st March 2019 is in conformity with the provisions of the Companies Act 2013 and Regulation 17 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 (`SEBI LODR Regulations').
b. Meetings of the Board:
The Meetings of the Board are generally held at the Registered Office of the Company at L&T House Ballard Estate Mumbai 400 001 and also if necessary in locations where the Company operates. The Meetings of the Board have been held at regular intervals with a time gap of not more than 120 days between two consecutive Meetings. During the year under review 9 meetings were held on 5th April 2018 28th May 2018 25th July 2018 23rd August 2018 31st October 2018 25th January 2019 5th March 2019 25th March 2019 and 26th March 2019.
The Independent Directors met on 30th November 2018 to discuss interalia the performance evaluation of the Board Committees Chairman and the individual Directors.
The Company Secretary prepares the agenda and the explanatory notes in consultation with the Group Chairman / Chief Executive Officer & Managing Director and circulates the same in advance to the Directors. Every Director is free to suggest inclusion of items on the agenda. The Board meets at least once every quarter inter alia to review the quarterly results. The Company also provides Video Conference facility if required for participation of the Directors at the Board/Committee Meetings. Additional Meetings are held when necessary. Presentations are made on business operations to the Board by Independent Companies / Business Units. Senior management personnel are invited to provide additional inputs for the items being discussed by the Board of Directors as and when necessary. The respective Chairman of the Board Committees apprise the Board Members of the important issues and discussions in the Committee Meetings. Minutes of Committee meetings are also circulated to the Board.
The Minutes of the proceedings of the Meetings of the Board of Directors are noted and the draft minutes are circulated amongst the Members of the Board for their perusal. Comments if any received from the Directors are also incorporated in the Minutes in consultation with the Chairman. The minutes are approved and entered in the minutes book within 30 days of the Board meeting. Thereafter the minutes are signed and dated by the Chairman of the Board at the next meeting. The following is the composition of the Board of Directors as on 31st March 2019. The Directors strive to attend all the Board / Committee meetings. Their attendance at the Meetings during the year and at the last Annual General Meeting is as under:
Meetings held during the year are expressed as number of meetings eligible to attend. Note: 1. Representing equity interest of LIC
2. Representing equity interest of SUUTI
1. None of the above Directors are related inter-se.
2. None of the Directors hold the office of director in more than the permissible number of companies under the Companies Act 2013 or Regulation 17A of the SEBI LODR Regulations.
The names of the listed entities (whose equities and debt securities are listed) wherein the Director holds directorships as on 31st March 2019 are as follows:
As on 31st March 2019 the number of other Directorships & Memberships / Chairmanships of Committees of the Board of Directors are as follows:
Other Company Directorships includes directorships in all entities whose securities are listed. However it excludes private limited companies foreign companies and Section 8 companies.
The details of Committee Chairmanships / Memberships are disclosed as per Regulation 26 of the SEBI LODR Regulations.
c. Information to the Board:
The Board of Directors has complete access to the information within the Company which inter alia includes -
Annual revenue budgets and capital expenditure plans
Quarterly results and results of operations of ICs and business segments
Financing plans of the Company
Minutes of meeting of Board of Directors Audit Committee Nomination & Remuneration Committee Stakeholders Relationship Committee and Corporate Social Responsibility Committee
Details of any joint venture acquisitions of companies or collaboration agreement or sale of investments subsidiaries assets Quarterly report on fatal or serious accidents or dangerous occurrences any material effluent or pollution problems
Any materially relevant default if any in financial obligations to and by the Company or substantial non-payment for goods sold or services rendered if any
Any issue which involves possible public or product liability claims of substantial nature including any Judgment or Order if any which may have strictures on the conduct of the Company
Developments in respect of human resources/industrial relations
Compliance or Non-compliance of any regulatory statutory nature or listing requirements and investor service such as non-payment of dividend delay in share transfer etc. if any
Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement if material.
d. Post-meeting internal communication system:
The important decisions taken at the Board / Committee meetings are communicated to the concerned departments / ICs promptly. An Action Taken Report is regularly presented to the Board.
e. Board Skill Matrix:
The matrix setting out the skills / expertise/competence of the Board of Directors is given below:
The above list of core skills/expertise/competencies identified by the Board of Directors as required in the context of its business(es) and sector(s) for it to function effectively are available with the Board.
F. BOARD COMMITTEES
The Board currently has 5 Committees:
1) Audit Committee
2) Nomination and Remuneration Committee
3) Stakeholders' Relationship Committee
4) Corporate Social Responsibility Committee and
5) Risk Management Committee. The terms of reference of the Board Committees are in compliance with the provisions of the Companies Act 2013 SEBI LODR Regulations and are also decided by the Board from time to time. The Board is responsible for constituting assigning and co-opting the members of the Committees. The meetings of each Board Committee (except Risk Management Committee) are convened by the Company Secretary in consultation with the respective Committee Chairperson. The role and composition of these Committees including the number of meetings held during the financial year and the related attendance are provided below.
The Company has constituted the Audit
Committee in 1986 well before it was made mandatory by law.
i) Terms of reference:
The role of the Audit Committee includes the following:
Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct sufficient and credible.
Recommending to the Board the appointment re-appointment terms of appointment and if required the replacement or removal of the statutory auditor and the fixation of audit fees.
Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
Discussion with statutory auditors before the audit commences about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.
Reviewing with the management the annual financial statements and the audit report before submission to the board for approval with particular reference to:
1. Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in terms of subsection (5) of Section 134 of the Companies Act 2013
2. Changes if any in accounting policies and practices and reasons for the same
3. Major accounting entries involving estimates based on the exercise of judgment by management
4. Significant adjustments made in the financial statements arising out of audit findings
5. Compliance with listing and other legal requirements relating to financial statements
6. Disclosure of any related party transactions
7. Qualifications in the draft audit report.
Reviewing with the management the quarterly financial statements before submission to the board for approval.
Reviewing with the management the statement of uses / application of funds raised through an issue (public issue rights issue preferential issue etc.) the statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of public or rights issue and making appropriate recommendations to the Board to take up steps in this matter if any.
Reviewing with the management performance of statutory and internal auditors and adequacy of the internal control systems.
Reviewing the adequacy of internal audit function if any including the structure of the internal audit department staffing and seniority of the official heading the department reporting structure coverage and frequency of internal audit.
Discussion with internal auditors about any significant findings and follow up there on.
Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board.
To look into the reasons for substantial defaults in the payment to the depositors debenture holders shareholders (in case of non-payment of declared dividends) and creditors.
To review the functioning of the Whistle Blower mechanism.
Approval of appointment of CFO (i.e. the whole-time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications experience & background etc. of the candidate.
Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.
The recommendation for appointment remuneration and terms of appointment of cost auditors of the Company.
Review and monitor the auditor's independence and performance and effectiveness of audit process.
Review the management discussion and analysis of financial condition and results of operations.
Approval or any subsequent modification of transactions of the Company with related parties.
Reviewing the utilization of loans and/ or advances from/investment in the subsidiary companies exceeding rupees 100 crore or 10% of the asset size of the subsidiary whichever is lower including existing loans / advances / investments.
Valuation of undertakings or assets of the company wherever it is necessary.
Evaluation of internal financial controls and risk management systems.
Monitoring the end use of funds raised through public offers and related matters.
Minutes of the Audit Committee Meetings are circulated to the Board of Directors and discussed when necessary.
As on 31st March 2019 the Audit Committee comprised of four Independent Directors.
During the year ended 31st March 2019 8 meetings of the Audit Committee were held on 27th April 2018 27th May 2018 24th July 2018 23rd August 2018 30th October 2018 13th December 2018 24th January 2019 acnd 27th February 2019.
The members of the Audit Committee also meet without the presence of management. The attendance of Members at the Meetings was as follows:
Meetings held during the year are expressed as number of meetings eligible to attend.
@ ceased to be a member w.e.f. 2nd May 2018 # appointed as a member w.e.f 28th May 2018
All the members of the Audit Committee are financially literate and have accounting or related financial management expertise. The Chief Executive Officer & Managing Director Whole-time Director & Chief Financial Officer and Head - Corporate Audit Services are permanent invitees to the Meetings of the Audit Committee. The Company Secretary is the Secretary to the Committee. iv) Internal Audit:
The Company has an internal corporate audit team consisting of Chartered Accountants / Cost Accountants and Engineers. Over a period of time the Corporate Audit department has acquired in-depth knowledge about the Company its businesses its systems & procedures which knowledge is now institutionalized. The Company's Internal Audit function is ISO 9001:2015 certified. The Head of Corporate Audit Services is responsible to the Audit Committee. The staff of Corporate Audit department is rotated periodically to have a holistic view of the entire operations and share the findings and good practices. The Corporate Audit Services team carries out theme-based audits (revenue recognition IT controls etc.) joint audits with other Corporate departments for specific functions identifies risk-based focus areas in project audits benchmarks the audit processes with large companies encourages its team members to obtain globally renowned CISA CIA and CFE Certification etc. The audit plan is finalized based on the value of the contract in case of construction projects and the geographical spread of the Company. It is ensured that on an average all operations get covered in a span of two years. The Corporate Audit Services team has its offices at Mumbai and Chennai and all overseas audits are shared between these two zones.
From time to time the Company's systems of internal controls covering financial operational compliance IT applications etc. are reviewed by external experts. Presentations are made to the Audit Committee on the findings of such reviews. The Corporate Audit Services team of the Company also covers the internal audit of all ICs and Subsidiary Companies. An in-depth audit is conducted by the team. The major deviations are highlighted and discussed with the concerned IC and / or subsidiary company Boards and the report highlighting the variations and the suggested corrective actions are also placed before the Audit Committee of the Company. Some subsidiaries have engaged external firms for conducting internal audit.
2) Nomination & Remuneration Committee (NRC)
The Nomination & Remuneration Committee was constituted in 1999 even before it was mandated by law.
i) Terms of reference:
Identify persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down by the Committee;
Recommend to the Board appointment and removal of such persons;
Formulate criteria for determining qualifications positive attributes and independence of a director;
Devise a policy on Board diversity;
Formulation of criteria for evaluation of directors Board and the Board Committees;
Carry out evaluation of the Board and directors;
Recommend to the Board a policy relating to remuneration for the Directors and Key Managerial Personnel (KMP);
Administration of Employee Stock Option Scheme (ESOS);
Recommend to the Board all remuneration in whatever form payable to senior management.
As at 31st March 2019 the Committee comprised of 3 Independent Directors and the Group Chairman.
During the year ended 31st March 2019 7 meetings of the Nomination & Remuneration Committee were held on 5th April 2018 28th May 2018 25th July 2018 31st October 2018 25th January 2019 22nd February 2019 and 25th March 2019. The attendance of Members at the Meetings was as follows:
Meetings held during the year are expressed as number of meetings eligible to attend.
iv) Board Membership Criteria:
While screening selecting and recommending to the Board new members the Committee ensures that the Board is objective there is absence of conflict of interest ensures availability of diverse perspectives business experience legal financial & other expertise integrity leadership and managerial qualities practical wisdom ability to read & understand financial statements commitment to ethical standards and values of the Company and there are healthy debates & sound decisions.
While evaluating the suitability of a Director for re-appointment besides the above criteria the NRC considers Board evaluation results attendance & participation in and contribution to the activities of the Board by the Director.
The Independent Directors comply with the definition of Independent Directors as given under Section 149(6) of the Companies Act 2013 and all the applicable regulations of the SEBI LODR Regulations. While appointing / re-appointing any Independent Directors / Non-Executive Directors on the Board the NRC considers the criteria as laid down in the Companies Act 2013 and the SEBI LODR Regulations.
All the Independent Directors give a certificate confirming that they meet the independence criteria as mentioned in Section 149(6) of the Companies Act 2013 and SEBI LODR Regulations.
The Board has taken on record the declaration and confirmation submitted by the Independent Directors and after assessing the veracity of the same the Board is of the opinion that the Independent Directors fulfill the conditions specified in the SEBI LODR Regulations and are independent of the management.
These certificates have been placed on the website of the Company http://investors. larsentoubro.com/corporategovernance.aspx
v) Remuneration Policy:
The remuneration of the Board members is based on the Company's size & global presence its economic & financial position industrial trends compensation paid by the peer companies etc. Compensation reflects each Board member's responsibility and performance. The level of compensation to Executive Directors is designed to be competitive in the market for highly qualified executives.
The Company pays remuneration to Executive Directors by way of salary perquisites & retirement benefits (fixed components) & commission (variable component) based on recommendation of the NRC approval of the Board and the shareholders. The commission payable is based on the overall performance of the Company performance of the business / function as well as qualitative factors. The commission is calculated with reference to net profits of the Company in the financial year subject to overall ceilings stipulated under Section 197 of the Companies Act 2013.
The Independent Directors / Non-Executive Directors are paid remuneration by way of commission & sitting fees. The Company paid sitting fees of Rs 100000/- per meeting of the Board and Rs 50000/- for Audit Committee and Nomination and Remuneration Committee meetings and Rs 35000/- for Stakeholders Relationship Committee and Corporate Social Responsibility Committee meetings during the year to the Independent Directors / Non-Executive Directors. The commission is paid subject to a limit not exceeding 1% p.a. of the profits of the Company as approved by shareholders (computed in accordance with section 197 of the Companies Act 2013). The Group Chairman provides leadership to Board and guidance and mentorship to the leadership team for implementing the strategy plan and business objectives. The Group Chairman is paid a fixed commission. The commission to the Independent Directors / Non-Executive Directors is distributed broadly on the basis of their attendance contribution at the Board the Committee meetings Chairmanship of Committees and participation in IC meetings.
In the case of nominees of Financial Institutions the commission is paid to the Financial Institutions.
As required by the provisions of Regulation 46 of the SEBI LODR Regulations the criteria for payment to Independent Directors / Non-Executive Directors is made available on the investor page of our corporate website http://investors.larsentoubro.com/Listing-Compliance.aspx.
Performance Evaluation Criteria for Independent Directors:
The performance evaluation questionnaire covers specific criteria with respect to the Board & Committee composition structure culture Board processes and selection effectiveness of the Board and Committees functioning of the Board and Committees information availability remuneration framework familiarization program succession planning assessment of their independence etc. It also contains specific criteria for evaluating the Chairman and individual Directors. An external consultant was engaged to receive the responses of the Directors and consolidate/analyze the responses.
The Chairman of the Company discusses the performance evaluation results with the Chairman of the NRC and interacts with all the Non-Executive Directors & Independent Directors on a one-to-one basis. The NRC Chairman also interacts with the Executive Directors.
Members are also requested to refer to page 70 of the Board Report.
vi) Training & Succession Planning:
The Company has institutionalized Leadership Development through a Seven Step leadership pipeline for development of a robust stage-wise leadership by a structured process of talent management. The thrust is on facilitating the transformation of managers into leaders leaders into `corporate entrepreneurs (intrapreneurs)' and to create a large pool of leaders who can envision inspire and successfully deploy global growth strategies thus creating a result-oriented culture of multiplying value.
Each step of this Leadership pipeline development process has been meticulously customized to equip managers at various levels with the required knowledge skill
& mind-set to transition seamlessly to the next level of leadership and global entrepreneurship. In this effort the Company has partnered with globally renowned senior faculty and premier institutes like Harvard Business School INSEAD IIM Ahmedabad and Stephen M. Ross School of Business- University of Michigan. The programs are designed to provide inputs on vital areas of strategic importance such as innovation-based strategies integrated business models to take on global multinationals cross-cultural challenges organic and inorganic growth etc. and thus mark an important milestone in the journey towards leadership development in the global context. To facilitate enhanced global acumen & international exposure which are critical competencies for establishing a global footprint the Company continues to nominate select senior leaders for Advanced Management Programs offered by globally renowned business schools like INSEAD Wharton Harvard IMD London Business School Oxford and the likes. As a part of Leadership development at the top echelons of the organization a structured & systematic approach to mentoring has been initiated to leverage on the leadership experiences & networks of senior leaders and to enable them to leave a legacy of success mantras. In order to continuously monitor the progress of high potentials (HIGH POTS) who go through the Seven Step Leadership Development process and to ensure that they are given challenging roles and responsibilities a Top Talent Management System is also put in place which is essential to ensure progress of a strong leadership pipeline.
To ensure that the Company has sufficient pool of probable employees who can be nominated for Leadership Pipeline efforts are taken at the grass root level. There exist several structured core developmental programs conducted by reputed institutions like IIM-Bangalore IIM-Calcutta XLRI Symbiosis and NMIMS for deserving employees to develop superior management skills and capabilities. A host of strategic and behavioral programs are conducted to address specific training and developmental needs of employees. A comprehensive e-learning portal ATL (Any Time Learning) is available with multiple on-line programs and courses for employees to enable learning `at any time at any place' at locations remote or otherwise. The portal provides access to on-line data bases references management videos e-books and journals.
The NRC reviews on a periodic basis the succession planning process being followed by the Company especially at the level of the Board and senior management.
vii) Details of remuneration paid / payable to Directors for the year ended 31st March 2019:
(a) Executive Directors:
The details of remuneration paid / payable to the Executive Directors for 2018-19 is as follows:
*Represents the perquisite value related to ESOPs exercised during the year in respect of stock options granted over the past several years by the Company Larsen & Toubro Infotech Limited and L&T Technology Services Limited and includes tax on ESOPs borne by the Company wherever applicable.
Notice period for termination of appointment of Chief Executive Officer & Managing Director and other Whole-time Directors is six months on either side.
No severance pay is payable on termination of appointment.
Details of Options granted under Employee Stock Option Schemes are provided on the website of the Company www.larsentoubro.com.
Apart from ESOPs of the Company Mr. S. N. Subrahmanyan has also been vested 40000 stock options in Larsen & Toubro Infotech Limited and L&T Technology Services Limited each and he has exercised the same. Similarly Mr. R. Shankar Raman has been vested 20000 stock options in Larsen & Toubro Infotech Limited and he has exercised the same. The perquisite amount on exercise of these options is considered as a part of the remuneration of these Directors.
(b) Non-Executive Directors:
The details of remuneration paid / payable to the Non-Executive Directors for 2018-19 is as follows:
* Others include pension of Rs 3 crore and perquisite value of housing and medical Rs 0.033 crore
** Does not include the perquisite value related to ESOPs exercised during the year in respect of stock options granted over the past several years by Larsen & Toubro Infotech Limited and L&T Technology Services Limited of Rs 213.39 crore.
@ Appointed as a Director w.e.f. 28th May 2018 $ Ceased to be a Director w.e.f. 2nd May 2018 # Payable to respective Institutions they represent.
Mr. A. M. Naik has exercised 549375 & 1040000 vested outstanding stock options which were granted in Larsen & Toubro Infotech Limited and L&T Technology Services Limited respectively. The perquisite amount on exercise of these options are Rs 213.39 crore.
Details of shares and convertible instruments held by the Non-Executive Directors as on 31st March 2019 are as follows:
* held jointly with the Institution they represent.
3) Stakeholders' Relationship Committee:
i) Terms of reference:
The terms of reference of the Stakeholders' Relationship Committee are as follows:
Resolving the grievances of the security holders of the company including complaints related to transfer/ transmission of shares non-receipt of annual report non-receipt of declared dividends issue of new/duplicate certificates general meetings etc.
Review of measures taken for effective exercise of voting rights by shareholders.
Review of adherence to the service standards adopted by the company in respect of various services being rendered by the Registrar & Share Transfer Agent.
Review of the various measures and initiatives taken by the company for reducing the quantum of unclaimed dividends and ensuring timely receipt of dividend warrants/annual reports/ statutory notices by the shareholders of the company.
As on 31st March 2019 the Stakeholders' Relationship Committee comprised of 1 Non-Executive Director 1 Independent Director and 1 Executive Director.
During the year ended 31st March 2019 4 meetings of the Stakeholders' Relationship Committee were held on 28th May 2018 25th July 2018 31st October 2018 and 25th January 2019.
The attendance of Members at the Meetings was as follows-
Meetings held during the year are expressed as number of meetings eligible to attend. The meetings were chaired by Mr. Ajay Shankar in the absence of Ms. Sunita Sharma.
Mr. N. Hariharan Company Secretary is the Compliance Officer.
iv) Number of Requests / Complaints:
During the year the Company has resolved investor grievances expeditiously except for the cases constrained by disputes or legal impediments. During the year the Company / its Registrar's received the following complaints from SEBI / Stock Exchanges and queries from shareholders which were resolved within the time frames laid down by SEBI.
* Investor complaints / queries shown outstanding as on 31st March 2019 have been subsequently resolved to the complete satisfaction of the investors. The Company repeatedly sends reminders to shareholders regarding unclaimed shares and dividends. This results in an increase in the number of queries received.
The Board has delegated the powers to approve transfer of shares to a Share Transfer Committee of Executives comprising of four Senior Executives. This Committee held 40 meetings during the year and approved the transfer of shares lodged with the Company. Pursuant to SEBI press release dated 3rd December 2018 requests for effecting physical transfer of securities subsequent to 1st April 2019 shall not be approved by the Share Transfer Committee.
4) Corporate Social Responsibility Committee:
i) Terms of reference:
The terms of reference of the CSR Committee are as follows:
(a) formulate and recommend to the Board a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company;
(b) recommend the amount of expenditure to be incurred on the activities referred to in clause
(c) monitor the Corporate Social Responsibility Policy of the Company from time to time.
As on 31st March 2019 the CSR Committee comprised of 1 Independent Director and 2 Executive Directors.
During the year ended 31st March 2019 5 meetings of the CSR Committee were held on 21st May 2018 4th July 2018 8th August 2018 1st November 2018 and 14th March 2019.
The attendance of Members at the Meetings was as follows-
iv) CSR Activities & Impact Assessment:
The Company through its CSR Committee is committed to improve the social infrastructure of the country. The Company is leveraging its countrywide presence to reduce disparities through interventions in Water and sanitation Healthcare Education and Skill building. Close interactions with the local community members have enabled the Company to identify and address their most pressing needs and the social interventions for community development have been specifically aligned.
Under flagship program of Integrated Community Development (ICD) the Company has launched programs towards holistic development in the following areas based on need assessment:
Water & Sanitation: For the availability of safe drinking water and proper sanitation facilities
Education: To improve access to education (increased enrollment in pre-school children attending neighborhood schools) and improving quality of learning (better school infrastructure better teaching-learning process)
Health: Improvement in access to quality health care (expanding infrastructure of health centres increased number of people availing quality health care)
Skill development: Enhancing employability of youth (enhancing training capacity improved infrastructure of skill development centres).
Thirty Village Development Committees
(VDCs) have been formed across locations with participation from women. A quarterly review of the ICD projects is done with the village Panchayats and local authorities.
Access to cleaner water hygienic surroundings better health education and new skills has altered the lives of more than 6.5 lakh individuals through our CSR Programs in 2018-19.
All CSR projects have defined goals and milestones which are tracked as per the periodicity defined for the project. The progress is compared with the baseline data that is gathered before the commencement of the project. This is carried out through an onsite evaluation as well as the reports generated from the project. The indirect impacts that accrue are also factored and documented in the monthly reporting process. These are subsequently vetted / measured during the external Social Audit or Impact Assessment. The social audit report is discussed during the Committee meetings.
The detailed disclosures of CSR spending during the year has been given in Annexure `C' forming part of this Board Report. Please refer to pages 115 to 120 of this Annual Report.
5) Risk Management Committee:
i) Terms of reference:
The terms of reference of the Apex Risk Management Committee are as follows:
Review of the existing Risk Management Policy framework and processes Risk Management Structure and Risk Mitigation Systems. Broadly the key risks will cover strategic risks of the group at the domestic and international level including Sectoral developments risk related to market competition political and reputational issues etc.
Review of the operational risks including client quality manpower availability logistics and other aspects which impact the Company and the group.
Review of the cyber security risks.
As on 31st March 2019 the Apex Risk Management Committee comprised of 2 Executive Directors and 1 Non-Executive Director.
During the year ended 31st March 2019 5 meetings of the Apex Risk Management Committee were held on 6th April 2018 25th May 2018 5th July 2018 21st November 2018 and 15th January 2019.
The attendance of Members at the Meetings was as follows-
G. OTHER INFORMATION
a) Directors' Familiarization Program:
All our directors are aware and are also updated as and when required of their role responsibilities & liabilities. The Company holds Board meetings at its registered office and also if necessary in locations where it operates. Site / factory visits are organized at various locations for the Directors.
The internal newsletters of the Company the press releases etc. are circulated to all the Directors so that they are updated about the operations of the Company.
Presentations are made regularly to the Board / NRC / Audit Committee (AC) (minutes of AC NRC SRC and CSR Committee are circulated to the Board) where Directors get an opportunity to interact with senior managers. Presentations inter alia cover business strategies management structure HR policy management development and succession planning quarterly and annual results budgets treasury policy review of Internal Audit risk management framework operations of subsidiaries and associates etc. Independent Directors have the freedom to interact with the Company's management. Interactions happen during Board / Committee meetings when senior company personnel are asked to make presentations about performance of their Independent Company (IC) / Business Unit to the Board. Some of the Independent Directors are members of the IC Board. They share the learnings from these meetings with the remaining Non-Executive Directors / Independent Directors formally and informally. Such interactions also happen when these Directors meet senior management in IC meetings and informal gatherings. As part of the appointment letter issued to Independent Directors the Company has stated that it will facilitate attending seminars/ programs/conferences designed to train directors to enhance their role as an Independent Director. This information is also available on the website of the Company http://investors.larsentoubro. com/Listing-Compliance.aspx.
b) Risk Management Framework:
Please refer to page 68 of the Board Report.
c) Vigil Mechanism / Whistle Blower Policy :
The Company has a Whistle Blower Policy in place since April 2004. The said policy was modified in line with the requirements of the Vigil Mechanism under the Companies Act 2013. The Company has a Whistle Blower Investigation Committee (WBIC) to manage complaints from Identified Whistle Blowers. In addition WBIC considers Anonymous complaints which in their judgement are serious in nature and require investigation. The WBIC has four members viz. Chief Financial Officer Company Secretary Head-Corporate HR and Chief Internal Auditor. The WBIC is responsible for end to end management of the investigations from receipt of complaints to bringing them to a logical conclusion keeping in mind the interest of the Company.
Employees are encouraged to report any wrong-doings having an adverse effect on the Company's financials / image and instances of leak of unpublished price sensitive information. An employee can report any wrong-doing in oral or written form. Whistle-blowers are assured by the management of full protection from any kind of harassment retaliation victimization or unfair treatment.
Complaints under the Whistle Blower Policy are received by the Corporate Audit Services of the Company. The Chief Internal Auditor reviews the same and convenes a meeting of the WBIC for discussions. The WBIC after screening the complaint decides on the further course of action which will include requesting the complainant to provide further details internal investigation by the Internal Audit department investigation by external agencies wherever necessary opportunity to the defendant to present his / her case etc. Based on the findings of the investigation the WBIC decides the action to be taken and recommends the same to the Executive Committee for implementation.
The WBIC meets formally and reviews the complaints and their progress. In addition discussions also take place over video-conferencing telephone and emails amongst the WBIC members.
The Audit Committee is periodically briefed about the various cases received the status of the investigation findings and action taken if any.
During the year the Company has investigated the complaints received under the Whistle Blower Policy and suitable action has been taken against employees wherever necessary.
Also refer to page 71 of the Board Report.
d) Statutory Auditors:
In the case of appointment of new auditors a Committee comprising of the Chairman of the Audit Committee the CFO and the Company Secretary evaluates various audit firms based on approved criteria as given herein below. The Audit firms are required to make a presentation to this Committee. The Committee considers factors such as compliance with the legal provisions number / nature / size and variation in client base skill sets available in the firm both at partner level and staff level international experience systems and processes followed by the firm training and development by the firm to its partners and staff etc. during the process of evaluation. Based on merit and the factors mentioned above the Committee finalizes the firm to be appointed and recommends the same to the Audit Committee. The Audit Committee reviews the same before recommending to the Board and shareholders for approval.
The above process was followed by the Company while appointing M/s Deloitte Haskins & Sells LLP (`DHS') as the Auditors of the Company in 2015.
Deloitte Haskins & Sells LLP registered since 1983 is one of the member firms of Deloitte Touche Tohmatsu Limited a UK private company limited by guarantee (DTTL). Each DTTL member firm provides services in particular geographic areas and is subject to the laws and professional regulations of the particular country or countries in which it operates.
Deloitte Haskins & Sells LLP tied up with CC
Chokshi & Co in 1983 which was one of the largest Indian Independent audit and accounting firms. After that it got merged with Fraser & Ross PC Hansotia & Co and later with SB Billimoria (SBB) in 1999. In 2004 AF Ferguson & Co (one of India's oldest audit firm) merged into existing DHS firms.
Deloitte is now a global network with circa 286000 people with revenues over $43 billion. Deloitte India has more than 10000 professionals operating out of 13 cities - Ahmedabad Bangalore Vadodara Chennai Coimbatore Goa Gurgaon Hyderabad Jamshedpur Kochi Kolkata Mumbai and Pune providing professional services in the areas of Audit Risk Advisory Tax Consulting and Financial Advisory services to public and private clients spanning multiple industries. It draws its strength from its people which include 2500+ professionals in Audit 2350 + in Tax 1900+ in Consulting and 1000+ in Financial Advisory. For the financial year 2018-19 the total fees paid by the Company and its subsidiaries on a consolidated basis to Deloitte Haskins & Sells LLP Statutory Auditor and all entities in the network firm/network entity of which the statutory auditors are a part thereof for all the services provided by them is Rs 10.95 crore. Also refer to page 72 of the Board Report.
e) Code of Conduct:
The Company has laid down a Code of Conduct for all Board members and senior management personnel. The Code of Conduct is available on the website of the Company www.larsentourbo.com. The declaration of the Chief Executive Officer & Managing Director is given below:
To the Shareholders of Larsen & Toubro Limited
Sub: Compliance with Code of Conduct
I hereby declare that all the Board Members and Senior Management Personnel have affirmed compliance with the Code of Conduct as adopted by the Board of Directors and Senior Management Personnel.
S. N. Subrahmanyan
Chief Executive Officer & Managing Director Date: 10th May 2019 Place: Mumbai
f) General Body Meetings:
The last three Annual General Meetings of the Company were held as under:
The following Special Resolutions were passed by the members during the past 3 Annual General Meetings: Annual General Meeting held on 23rd August 2018:
To appoint Mr. A.M. Naik as a Non- Executive Director of the Company with effect from 1st October 2017 who has attained the age of 75 years.
To approve the payment of remuneration to Mr. A.M. Naik being in excess of fifty percent of the total annual remuneration payable to all the Non-Executive Directors.
To approve raising of finances through issue of debentures upto Rs 6000 crore.
Annual General Meeting held on 22nd August 2017:
To re-appoint Mr. Subodh Bhargava as an Independent Director of the Company for a five year term upto 29th March 2022.
To approve raising of capital through QIP's by issue of shares / convertible debentures / securities upto an amount of USD 600 million or Rs 4000 crore.
To approve raising of finances through issue of debentures upto Rs 6000 crore.
Annual General Meeting held on 26th August 2016:
To approve raising of capital through QIP's by issue of shares / convertible debentures / securities upto an amount of USD 600 million or Rs 3600 crore.
To approve raising of finances through issue of debentures upto Rs 6000 crore.
Note : The resolution relating to raising of finances have been taken at each of the above AGMs since the validity of the resolution is one year.
g) Approval of Members through Postal Ballot:
The members approved a Special Resolution under Section 110 of the Companies Act 2013 read with the Rule 22 of the Companies (Management and Administration) Rules 2014 on 1st October 2018 permitting the Company to buyback six crore Equity Shares or higher of the Company from all the equity shareholders on a proportionate basis through the Tender Offer Mechanism for acquisition of shares through stock exchange under the Securities and Exchange Board of India (Buyback of Securities) Regulations 2018 at a maximum price of Rs 1500 per equity share aggregating to Rs 9000 crore. Mr. S. N. Ananthasubramanian Practicing Company Secretary was appointed as the Scrutinizer for conducting the Postal Ballot process. The details of the voting pattern are as under:
Pr ocedure for Postal Ballot:
After receiving the approval of the Board of Directors Notice of the Postal Ballot text of the Resolution and Explanatory Statement relevant documents Postal Ballot Form and self-addressed postage envelopes are sent to the shareholders to enable them to consider and vote for and against the proposal within a period of 30 days from the date of dispatch. E-voting facility is made available to all the shareholders and instructions for the same are specified under instructions for voting in the Postal Ballot Notice. E-mails are sent to shareholders whose e-mail ids are available with the depositories and Company along with Postal Ballot Notice and Ballot Form. The calendar of events containing the activity chart is filed with the Registrar of Companies within 7 days of the passing of the Resolution by the Board of Directors. After the last day for receipt of ballots (physical / e-voting) the Scrutinizer after due verification submits the results to the Chairman. Thereafter the Chairman declares the result of the Postal Ballot. The same is published in the Newspapers and displayed on the Company Website and Notice Board and submitted to Stock Exchanges.
1. During the year there were no transactions of material nature with the Directors or the Management or relatives or the subsidiaries that had potential conflict with the interests of the Company.
2. Details of all related party transactions form a part of the accounts as required under IND AS 24 and the same are given in Note No. 51 forming part of the financial statements.
3. The Company has followed all relevant Accounting Standards notified by the Companies (Indian Accounting Standards) Rules 2015 while preparing the Financial Statements.
4. The Company makes presentations to Institutional Investors & Equity Analysts on the Company's performance on a quarterly basis. The same are provided to the Stock
Exchanges and also available on our website http://investors.larsentoubro.com/ Announcements.aspx.
5. There were no instances of non-compliance penalties strictures imposed on the Company by the Stock Exchanges on any matter related to the capital markets during the last three years.
6. The policies for determining material subsidiaries and related party transactions are available on our website http://investors. larsentoubro.com/Listing-Compliance.aspx.
7. Details of risk management including foreign exchange risk commodity price risk and hedging activities form a part of the Management Discussion & Analysis. Please refer to pages 296 to 298 of this Annual Report.
8. As required under the provisions of SEBI LODR Regulations a certificate confirming that none of the Directors on the Board have been debarred or disqualified by the Board/Ministry of Corporate Affairs or any such statutory authority obtained from M/s S. N. Ananthasubramanian & Co. Company Secretaries is a part of the Corporate Governance report.
9. Details in relation to the Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 form a part of the Board Report. Please refer to page 70 of this Annual Report.
i) Means of communication:
H. UNCLAIMED SHARES
The Company does not have any unclaimed shares lying with it from any public issue. However certain shares resulting out of the bonus shares issued by the Company are unclaimed by the shareholders. As required under Regulation 39(4) of the SEBI LODR Regulations the Company has already sent reminders in the past to the shareholders to claim these shares. These share certificates are regularly released on requests received from the eligible shareholders after due verification. In accordance with the provisions of the Section 124(6) and Rule 6(3)(a) of the Investor Education and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules 2016 (`IEPF Rules') the Company has transferred equity shares on which dividend has remained unclaimed for a period of seven consecutive years from the financial year 2010-11. The details are given in the Board Report. Please refer to page 66 of this Annual Report.
All corporate benefits on such shares viz. bonus shares etc. shall be transferred in accordance with the provisions of IEPF Rules read with Section 124(6) of the Companies Act 2013. The eligible shareholders are requested to note the same and make an application to IEPF Authority in accordance with the procedure available on www.iepf.gov.in and submit such documents as prescribed under the IEPF Rules to claim these shares.
I. GENERAL SHAREHOLDERS' INFORMATION
a) Annual General Meeting:
The Annual General Meeting of the Company has been convened on Thursday 1st August 2019 at Birla Matushri Sabhagar New Marine Lines Mumbai - 400020 at 3.00 p.m.
b) Financial calendar:
c) Book Closure:
The dates of Book Closure are from Friday 26th July 2019 to Thursday 1st August 2019 (both days inclusive) to determine the members entitled to the dividend for financial year 2018-2019.
d) Listing of equity shares / shares underlying GDRs on Stock Exchanges:
The shares of the Company are listed on BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). GDRs are listed on Luxembourg Stock Exchange and admitted for trading on London Stock Exchange.
e) Listing Fees to Stock Exchanges:
The Company has paid the Listing Fees for the year 2019-2020 to BSE and NSE. Fees to London Stock Exchange and Luxembourg Stock Exchange will be paid on receipt of the bill.
f) Custodial Fees to Depositories:
The Company has paid custodial fees for the year 2019-2020 to Central Depository Services (India) Limited (CDSL) and fees to National Securities Depository Limited (NSDL) will be paid on receipt of the invoice.
g) Stock Code / Symbol:
The Company's equity shares / GDRs are listed on the following Stock Exchanges and admitted for trading in London Stock Exchange:
The Company's shares constitute a part of BSE 30 Index of the BSE Limited as well as NIFTY Index of the National Stock Exchange of India Limited.
h) Stock market data for the year 2018-19:
i) Registrar and Share Transfer Agents (RTA):
Karvy Fintech Pvt. Ltd. (previously known as Karvy Computershare Private Limited) Unit: Larsen & Toubro Limited Karvy Selenium Tower B
Plot number 31 & 32
Financial District Gachibowli Nanakramguda Hyderabad Telangana - 500 032.
j) Share Transfer System:
Pursuant to SEBI press releases dated 3rd December 2018 and 27th March 2019 except in case of transmission or transposition of securities requests for effecting transfer of securities subsequent to 1st April 2019 shall not be processed by the Company unless the securities are held in the dematerialized form with a depository. The share related information is available online.
Physical shares received for dematerialization are processed and completed within a period of 21 days from the date of receipt. As required under Regulation 40 of the SEBI LODR Regulations a certificate on half yearly basis confirming due compliance of share transfer formalities by the Company from Practicing Company Secretary has been submitted to Stock Exchanges within stipulated time.
k) Distribution of Shareholding as on 31st March 2019:
l) Categories of Shareholders is as under:
m) Dematerialization of shares & Liquidity:
The Company's Shares are required to be compulsorily traded in the Stock Exchanges in dematerialized form.
The number of shares held in dematerialized and physical mode as on 31st March 2019 is as under:
n) Outstanding GDRs / ADRs / Warrants or any Convertible Instruments conversion date and likely impact on equity:
The outstanding GDRs are backed up by underlying equity shares which are part of the existing paid-up capital. The Company has the following Foreign Currency Convertible Bonds outstanding as on 31st March 2019:
0.675% USD 200 million Foreign Currency Convertible
These Convertible Bonds are listed on the Singapore Exchange Securities Trading Limited.
o) Listing of Debt Securities:
The redeemable Non-Convertible debentures issued by the Company are listed on the Wholesale Debt Market (WDM) of National Stock Exchange of India Limited (NSE) or BSE Limited (BSE).
p) Debenture Trustees (for privately placed debentures):
IDBI Trusteeship Services Limited Ground Floor Asian Building 17 R. Kamani Marg Ballard Estate Mumbai - 400 001
q) Credit Rating:
r) Plant Locations:
The L&T Group's facilities for design engineering manufacture modular fabrication and production are based at multiple locations within India including Ahmednagar Bengaluru Chennai Coimbatore Faridabad Hazira (Surat) Kattupalli (near Chennai) Kanchipuram Mumbai Navi Mumbai Mysuru Pithampur Puducherry Rajpura Kansbahal (Rourkela) Talegaon and Vadodara. L&T's international manufacturing footprint covers the Gulf (Oman Saudi Arabia UAE) South East Asia (Malaysia and Indonesia) and the U.K. The L&T Group also has an extensive network of offices in India and around the globe. See pages 12 and 13 of this Annual Report.
s) Address for correspondence:
Larsen & Toubro Limited
L&T House Ballard Estate Mumbai 400 001. Tel. No. (022) 6752 5656 Fax No. (022) 6752 5893
Shareholder correspondence may be directed to the Company's Registrar and Share Transfer Agent whose address is given below:
1. Karvy Fintech Pvt. Ltd.
Unit: Larsen & Toubro Limited Karvy Selenium Tower B
Plot 31 & 32 Gachibowli Financial District Nanakramguda Hyderabad Telengana - 500 032 Tel : (040) 6716 2222
T oll free number: 1-800-3454-001 Fax: (040) 2342 0814 Email: email@example.com Website: www.karvyfintech.com
2. Karvy Fintech Pvt. Ltd. Unit: Larsen & Toubro Limited 24-B Raja Bahadur Mansion Ground Floor Ambalal Doshi Marg Behind BSE Limited Fort Mumbai - 400 023. Tel : (022) 6623 5454/ 5412/ 5427
t) Investor Grievances:
The Company has designated an exclusive e-mail id viz. IGRC@LARSENTOUBRO.COM to enable investors to register their complaints if any.
u) Securities Dealing Code:
Pursuant to the SEBI (Prohibition of Insider Trading) Regulations 2015 (`SEBI PIT Regulations') the Company had suitably modified its Securities Dealing Code (`Code') for prevention of insider trading with effect from May 15 2015. The objective of the Code is to prevent purchase and / or sale of shares of the Company by an Insider on the basis of unpublished price sensitive information. Under this Code Designated Persons (Directors Advisors Officers and other concerned employees / persons) are prevented from dealing in the Company's shares during the closure of Trading Window. To deal in securities beyond specified limit permission of Compliance Officer is also required. Directors and designated employees who buy and sell shares of the Company are prohibited from executing contra-trades during the next six months following the prior transactions. The Company has a policy for taking action against employees who violate the SEBI PIT Regulations / Code. Pursuant to the enactment of the SEBI (Prohibition of Insider Trading) (Amendment) Regulations 2018 the Company has suitably modified the provisions of the Code and formulated requisite policies which are effective from 1st April 2019.
Mr. N. Hariharan Company Secretary has been designated as the Compliance Officer.
The Company has appointed Mr. Arnob Mondal Vice President (Corporate Accounts & Investor Relations) as Chief Investor Relations Officer. The Company also formulated Code of
Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information which is available on Company's Website http://investors. larsentoubro.com/Listing-Compliance.aspx.
v) Stakeholder Engagement:
The Company recognizes that its stakeholders form a vast and heterogeneous community. Our customers shareholders employees suppliers community etc. have been guideposts of our decision-making process. The Company engages with its identified stakeholders on an ongoing basis through business level engagements and structured stakeholder engagement programs. The Company maintains its focus on delivering value to all its stakeholders especially the disadvantaged communities.
The Company has a dedicated Corporate Brand Management & Communications department which facilitates an on-going dialogue between the Company and its stakeholders. The communication channels include:
For external stakeholders - Stakeholder engagement sessions client satisfaction surveys shareholder satisfaction assessment dealer and stockists meet analyst / investors meet periodic feedback mechanism general meeting for shareholders factory visits for shareholders online service and dedicated e-mail service for grievances corporate website and access to business media to respond to queries etc.
For internal stakeholders - Employee satisfaction surveys employee engagement surveys for improvement in employee engagement processes circulars and messages from management corporate social initiatives welfare initiatives for employees and their families online news bulletins for conveying topical developments large bouquet of print and online in-house magazines helpdesk facility etc.
Each of the businesses have their internal mechanisms to address the grievances of its stakeholders. In addition at the corporate level there are committees which can be approached if the stakeholders are not satisfied with the functioning of such internal mechanisms. As part of the vigil mechanism the Whistle Blower Policy provides access for various stakeholders to the Chairperson of the Audit Committee. The Whistle Blower Policy for Vendors & Channel Partners is displayed on the website of the Company http://investors.larsentoubro.com/ CorporateGovernance.aspx.
w) Awareness Sessions / Workshops on Governance practices:
Employees across the Company as well as the group are being sensitized about the various policies and governance practices of the Company. The Company had designed in-house training workshops on Corporate Governance with the help of an external faculty covering basics of Corporate Governance as well as internal policies and compliances under Code of Conduct Whistle Blower Policy Sexual Harassment of Women at Workplace (Prevention Prohibition & Redressal) Act 2013 SEBI PIT Regulations etc. The Company has created a batch of trainers across businesses who in turn conduct training / awareness sessions within their business regularly during the year.
x) ISO 9001:2015 Certification:
The Company's Secretarial Department which provides secretarial services and investor services for the Company and its Subsidiaries and Associates is ISO 9001:2015 certified.
y) Secretarial Audit as per SEBI requirements:
As stipulated by SEBI a Qualified Practicing Company Secretary carries out Reconciliation of Share Capital Audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. This audit is carried out every quarter and the report thereon is submitted to the Stock Exchanges. The Audit confirms that the total Listed and Paid-up capital is in agreement with the aggregate of the total number of shares in dematerialized form and in physical form.
The secretarial department of the Company at Mumbai is manned by competent and experienced professionals. The Company has a system to review and audit its secretarial and other statutory compliances by competent professionals who are employees of the Company. Appropriate actions are taken to continuously improve the quality of compliance. The Company also has adequate software and systems to monitor compliance.
z) Secretarial Audit as per Companies Act 2013:
Pursuant to the provisions of Section 204(1) of the Companies Act 2013 M/s. S. N. Ananthasubramanian & Co. Company Secretaries conducts the secretarial audit of the compliance of applicable statutory provisions and the adherence of good corporate practices by the Company.
Pursuant to the SEBI circular no. CIR/CFD/ CMD1/27/2019 dated 8th February 2019 the Company has obtained an annual secretarial compliance report from M/s. S. N. Ananthasubramanian & Co. Company Secretaries and shall submit the same to the Stock Exchanges within the prescribed timelines.
aa) Statutory Compliance System:
The Company complies with applicable laws rules and regulations impacting Company's business. These comprise of Central Acts / Rules and those of state governments where the Company generally carries on business. The applicable laws are reviewed by the Corporate Legal and Legal departments of each Independent Company (IC) as well as an external consultant on a periodic basis and updated whenever required. Each IC / Business head certifies compliance of all applicable laws by the IC on a quarterly basis. Based on these confirmations the Company Secretary gives a compliance certificate to the Board of Directors.
The Company has a process of verifying the compliances through a random review of the process / system / documentation of the location of the IC / Corporate function / Group Company. The review is placed before the Board of the respective IC / group company. Existing internal controls are also reviewed. The audit process includes planning the audit discussion with auditee before audit commencement to explain the scope and purpose of the audit verifying the compliances based on the supporting documentation post audit meeting for explaining the observations etc.
bb) Group Governance Policy:
Vide its circular dated 10th May 2018 SEBI has introduced the concept of Group Governance Unit. The circular expects listed companies to monitor their governance through a Governance Committee and establishment of a strong and effective group governance policy.
Corporate Governance in the Company and its subsidiaries broadly includes strategic supervision by the Board and its Committees compliance of Code of Conduct Statutory Compliance including compliance of Companies Act / applicable SEBI Regulations avoiding conflict of interest Risk Management Internal Controls and Audit.
The Company has three listed entities within the group. Each of these entities have their own Board and Board Committees in compliance with the Companies Act 2013 & SEBI LODR Regulations. The oversight of their subsidiaries (34 subsidiaries) is as per Companies Act 2013 & SEBI LODR Regulations. The Board Report and the annexures of these listed companies contains various disclosures dealing with subsidiary companies.
Each of these listed entities has one Executive Director and one Independent Director of the Company on its Board. Any financial assistance to the above companies or purchase/sale by the Company of their shares is dealt with by the Company's Board.
These listed entities publish their independent Auditors' certificate on Corporate Governance secretarial audit report of Practising Company Secretary and CEO/CFO's certificate for internal controls for financial reporting.
Responsibility of the Company's corporate team in the areas of statutory compliance (including corporate laws) Risk Management Internal Controls and Internal Audit covers all unlisted subsidiaries. The three listed entities have their own teams to carry out these functions.
The Company has a multi -tier governance system where major business divisions operate as Independent Companies (ICs). These ICs are not legal entities however have their own CEO's Functional Heads and Independent Boards including external independent members from the respective business sectors Executive Directors of the Company and Senior Executives from the IC's. All IC's have independent directors of the Company as their Board Members.
The ICs have separate internal teams to oversee their legal and compliance functions. All Subsidiary Companies associated with the respective ICs are reviewed by their respective IC Boards. The subsidiary companies also function independently and have separate Boards which consists of representatives of the Company who are senior executives of the Company representatives of Joint Venture partners representative of the Company's Board as well as Independent Directors as required by law. As per law these companies wherever required also have Audit Committee Nomination & Remuneration Committee and CSR Committee. Major subsidiary companies have some Executive Directors and Independent Directors of the Company on their Board. The Key Managerial Personnel of subsidiary companies like Chief Executives Chief Financial Officers and Company Secretaries are mostly employees of the Company or are nominated by the Company as per the terms of the Joint Venture Agreement. The subsidiary companies' performance is also reviewed by the Company's Board periodically (included in quarterly results presented to the Company's L&T Board). F&A heads of some of the subsidiary companies are functionally reporting to senior executives in the Company. Thus the overall functioning of these Subsidiary companies is monitored by the Group directly or through their respective IC's. A voluntary Secretarial Audit is conducted for all subsidiary companies including foreign companies and companies which are not covered under the purview of Companies Act 2013. Thus there is a complete audit of the compliance of applicable statutory provisions and adherence to good corporate practices.
The Company's Code of Conduct (Code) is required to be adhered by all group companies covering employees directors suppliers contractors etc. In addition to this the subsidiaries set up their own vigil mechanism if they meet the thresholds given in the Companies Act. The Audit Committee / Board of these companies monitor this mechanism. The Vigil Mechanism Framework to report breach of code is a structured process which encourages and facilitates all covered to report without fear wrongdoings or any unethical or improper practice which may adversely impact the image credibility and/or the financials of the company through an appropriate forum. The Secretarial Department of the Company has qualified Company Secretaries (CS) with vast experience in the field of compliance and law. It consists of fulltime professionals dedicated to performing corporate secretarial and subsidiary governance duties. Qualified CS in secretarial department monitor the compliance related to subsidiaries under Companies Act / Rules. The Company's Secretarial Department develops a broad Governance policy for the Company and its group of subsidiaries. The Company's Secretarial Department is involved in all major corporate actions of subsidiaries like IPO's raising of capital restructuring major financial assistance to subsidiaries etc. Appropriate disclosures related to subsidiaries are made in financial statements / directors' report of the Company as well as its subsidiaries as per Companies Act 2013 / applicable SEBI Regulations and applicable Accounting Standards. All companies are subject to Statutory Audit and applicable Secretarial Audit.
Independent Auditor's Certificate on Corporate Governance
TO THE MEMBERS OF LARSEN & TOUBRO LIMITED
INDEPENDENT AUDITOR'S CERTIFICATE ON CORPORATE GOVERNANCE
1. This certificate is issued in accordance with the terms of our engagement letter dated September 29 2018.
2. We Deloitte Haskins & Sells LLP Chartered Accountants the Statutory Auditors of Larsen & Toubro Limited (the Company) have examined the compliance of conditions of Corporate Governance by the Company for the year ended on March 31 2019 as stipulated in regulations 17 to 27 and clauses (b) to (i) of regulation 46(2) and para C and D of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (the Listing Regulations) as amended from time to time.
3. The compliance of conditions of Corporate Governance is the responsibility of the Management. This responsibility includes the design implementation and maintenance of internal control and procedures to ensure the compliance with the conditions of the Corporate Governance stipulated in Listing Regulations.
4. Our responsibility is limited to examining the procedures and implementation thereof adopted by the Company for ensuring compliance with the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.
5. We have examined the books of account and other relevant records and documents maintained by the Company for the purposes of providing reasonable assurance on the compliance with Corporate Governance requirements by the Company.
6. We have carried out an examination of the relevant records of the Company in accordance with the Guidance Note on Certification of Corporate Governance issued by the Institute of the Chartered Accountants of India (the ICAI) the Standards on Auditing specified under Section 143(10) of the Companies Act 2013 in so far as applicable for the purpose of this certificate and as per the Guidance Note on Reports or Certificates for Special Purposes issued by the ICAI which requires that we comply with the ethical requirements of the Code of Ethics issued by the ICAI.
7. We have complied with the relevant applicable requirements of the Standard on Quality Control (SQC) 1 Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information and Other Assurance and Related Services Engagements.
8. Based on our examination of the relevant records and according to the information and explanations provided to us and the representations provided by the Management we certify that the Company has complied with the conditions of Corporate Governance as stipulated in regulations 17 to 27 and clauses (b) to (i) of regulation 46(2) and para C and D of Schedule V of the Listing Regulations during the year ended March 31 2019.
9. We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants (Firm's Registration No. 117366W/ W-100018)
Sanjiv V. Pilgaonkar
Partner (Membership No. 039826)
Mumbai May 10 2019