Sl.No Client Job Value ( RO Mn) Value (R lakhs) 1. Larsen & Toubro Limited Fabrication of 3 Offshore Platforms

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1 DIRECTORS REPORT The Directors have pleasure in presenting the sixth Annual Report and Accounts of L&T Modular Fabrication Yard LLC for the year ended December 31, FINANCIAL RESULTS Amount (RO Mn) Amount ( R lakhs ) Amount (RO Mn) Amount ( R lakhs ) Contract Revenue , , Operating Profit/(Loss) , , Less: Finance Cost Profit before tax , Less: Tax Profit after tax , DIVIDEND The Directors do not propose any dividend for the financial year PERFORMANCE OF THE COMPANY Our Yard is a major fabrication service provider for the region s booming offshore oil & gas industry, comparable with some of the biggest fabrication yards of this kind in the region. The business portfolio during the year comprised of Upstream Oil & Gas Projects and Jack up Drill Rig Refurbishment Project for Oil & Natural Gas Corporation, India (ONGC). During the year, we also successfully completed three offshore platform Jackets & Topsides for PTTEP Limited, Thailand for their Zawtika Project and five offshore platform Jackets for ADMA-OPCO, Abudhabi for their Umm Lulu & Al-Nasr Projects. In addition, we have completed major scope of Sagar Uday Rig Refurbishment project for ONGC, India. Five Topsides for ADMA-OPCO, Abudhabi is presently under fabrication. The Organization is certified for OHSAS: , ISO : , ISO Quality System Standard and for API 2B, API 5L, and ASME with U,S,R stamps. The Company has secured orders during the year which are given below: Sl.No Client Job Value ( RO Mn) Value (R lakhs) 1. Larsen & Toubro Limited Fabrication of 3 Offshore Platforms , (Jackets, Topsides ) for PTTEP, Thailand CAPITAL EXPENDITURE Capital expenditure incurred by Company as at December 31, 2012 as under: Amount (RO Mn) Amount (R lakhs) Amount (RO Mn) Amount (R lakhs) Gross Tangible Assets , , Gross Intangible Assets Capital Work In Progress , Total , , AUDITORS REPORT The Auditors Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors Report are selfexplanatory and therefore do not call for any further comments of Directors. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Company that would render any amount stated in the financial statements misleading. DISCLOSURE OF PARTICULARS The Company being registered outside India, the disclosures required to be made in accordance with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are not relevant. Hence the same has not been furnished. S-104

2 PARTICULARS OF EMPLOYEES The Company being registered outside India, the disclosures required to be made in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are not relevant and hence have not been furnished SUBSIDIARY COMPANIES The Company has no subsidiary companies. DIRECTORS RESPONSIBILITY STATEMENT The Board of Directors of the Company confirm: i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure; ii. that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at December 31, 2012 and of the profit of the Company for the year ended on that date; iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. that the annual accounts have been prepared on a going concern basis; and v. that the Company has adequate internal systems and controls in place to ensure compliance of laws applicable to the Company. DIRECTORS The current Directors of the Company are: Mr. K. Venkataramanan Mr. Rashad M Al Zubair Mr. U. Dasgupta Mr. P. S. Kapoor Mr. C. S. Badrinath Mr. R. Srivatsan There is no change in the Directors during the year. AUDITORS The auditors M/s PKF LLC., Chartered Accountants continue to be the auditors of the Company for the financial year DISCLOSURE UNDER CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009 The Company being registered outside India, many of the particulars suggested in the guidelines are not applicable. Notwithstanding the above, the Directors wish to voluntarily disclose certain information in accordance with the said guidelines as under: SEPARATION OF OFFICES OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER The roles and offices of Chairman and Chief Executive are separated. Mr.K.Venkataramanan chairs the meetings of the Board of Directors whereas Mr. C.S.Kole is the Chief Executive. COMPANY S CORPORATE GOVERNANCE PHILOSOPHY As a part of L&T group, the Company has embraced the strong values of transparency, integrity, professionalism and accountability across its operations. The Company continuously endeavours 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 L&T Group forward. BOARD OF DIRECTORS a) Composition of the Board: The Board comprises of six non-executive directors out of which four are nominated by L&T group and two by The Zubair Corporation, L&T s Joint Venture partner. b) Meetings of the Board: The Meetings of the Board are held in Oman as well as India. The senior-most member amongst the L&T nominated directors Chair the meetings. The agenda and explanatory notes are circulated in advance to the members of the Board. The minutes of the meetings are circulated in a draft form inviting comments from the Directors before being finalised and signed by the Chairman of the Meeting. c) Information to the Board: The Board of Directors has full access to all information in the Company, which inter alia include: - Annual Revenue Budgets including Capital Expenditure budgets S-105

3 - Financial statements and books of account - Minutes of Board meetings - Reports of Statutory and Internal auditors - Financing plans of the Company - Safety statistics including fatal accidents, Lost Time Injuries and Near Miss Incidents - Compliance including non-compliances, if any, reports - Any acts of default which has a potential of materially impacting the financial performance or project performance - Localisation (Omanisation), Industrial relations and human resource related matters and issues arising there from d) Post-meeting internal communication system: The important decisions taken at the Board meeting are communicated to the concerned departments promptly. INTERNAL AUDITORS The Corporate Audit Services department of Larsen & Toubro Limited provides internal audit services to the Company. Audits are conducted on an annual basis and detailed reports are sent to the management as well as the Board of Directors of the Company. INTERNAL CONTROLS The Company has in place adequate internal control systems commensurate with its size and nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use or losses, executing transactions with proper authorisation and ensuring compliance of corporate policies. The Company has a well-defined delegation of power with authority limits for approving revenues as well as expenditure. Processes for formulating and reviewing annual and long term business plans have been laid down. The Board ensures the effectiveness of the Company s system of internal controls including financial, operational and compliance controls and risk management systems. SECRETARIAL AUDIT The Secretarial audit of the Company is conducted at regular intervals by the Corporate Secretarial department of Larsen & Toubro Limited, which has competent professionals to carry out the said audit. RELATED PARTY TRANSACTIONS The details of all the related party transactions form part of the accounts as required under AS 18 and the same is given in Note 2(c) of Schedule Q forming part of Accounts. ACKNOWLEDGEMENTS The Directors acknowledge the invaluable support extended by the customers, vendors, bankers and employees of the Company. For and on behalf of the Board Place : Mumbai Date : May 9, 2013 U. DASGUPTA P S KAPOOR Director Director S-106

4 AUDITORS REPORT TO THE MEMBERS OF L&T MODULAR FABRICATION YARD LLC The financial statements of L&T MODULAR FABRICATION YARD LLC for the year ended 31 December 2012, being a Company registered in the Sultanate of Oman, are audited by PKF L.L.C and we have been furnished with their audit report dated 24 January We are presented with the accounts in Indian Rupees prepared on the basis of the aforesaid accounts to comply with the requirements of Section 212 of the Companies Act, We give our report as under: We have audited the attached Balance Sheet of L&T Modular Fabrication Yard LLC as at 31 December 2012 and the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that: (1) As required by the Companies (Auditor s Report) Order, 2003, issued by the Central Government of India under sub-section (4A) of Section 227 of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. (2) Further to our comments in the Annexure referred to above, we report that: (a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; (b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; (c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (d) in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; and (e) as regards reporting on the disqualification of directors under Section 274(1)(g) of the Indian Companies Act, 1956, since the Company is registered in the Sultanate of Oman, no reporting is required to be made under the said section. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: 1 In the case of the Balance Sheet, of the state of affairs of the Company as at 31 December 2012; 2 in the case of the Profit and Loss Account, of the profit for the year ended on that date; and 3 in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Emphasis on Matter 1. We draw attention to note no. J (1) of Balance Sheet regarding claim against the Company of R 920,420,900 not acknowledged as debt, as the Company s management has disputed the clients claim. Matter is presently under arbitration. 2. We draw attention to note Q (2)(m) regarding change in the estimated useful lives of certain assets. Our opinion is not qualified in respect of the above matters. SHARP & TANNAN Chartered Accountants Firm s Registration No W by the hand of Place : Mumbai Date : May 9, 2013 FIRDOSH D. BUCHIA Partner Membership No S-107

5 ANNEXURE TO THE AUDITORS REPORT (Referred to paragraph (1) of our report of even date) 1 (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed asset. (b) The assets were physically verified by management during the year. In our opinion, the frequency of such verification is reasonable. We were informed that no material discrepancies were noticed on such verification (c) The assets disposed of during the year are not substantial in relation to the Company and do not affect its going concern status. 2 (a) As explained to us, inventories have been physically verified by management at reasonable intervals during the period. In our opinion, the frequency of such verification is reasonable. (b) As per the information given to us, the procedures of physical verification of inventory followed by management are, in our opinion, reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material. 3 There are no loans, secured or unsecured, either granted to or taken from companies, firms or other parties. However, no register is required to be maintained under Section 301 of the Companies Act, 1956 since the Company is incorporated and doing business only in the Sultanate of Oman. Accordingly, paragraphs 4(iii)(b) to (g) of the Order are not applicable. 4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems to commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in the aforesaid internal control systems. 5 The Company is incorporated in the Sultanate of Oman and accordingly, maintenance of records under Section 301 of the Companies Act, 1956 is not required. Accordingly, paragraphs 4(v)(a) and (b) of the Order are not applicable. 6 The Company has not accepted any deposits in terms of provisions of Sections 58A, 58AA of Companies Act, We were informed by management that the Company is not required to maintain cost accounts and records under Section 209(1)(d) of the Companies Act, The Company has not conducted an internal audit during the year. 9 (a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues with appropriate authorities and there are no undisputed statutory dues outstanding for a period exceeding six months as at December 31, (b) According to the information and explanations given to us, there are no dues towards income tax, sales tax, service tax customs duty, excise duty and wealth tax that were under dispute as at December 31, The Company has no accumulated losses as at December 31, It has not incurred cash losses in the current financial year or in preceding financial year. 11 According to records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank and neither has it issued any debentures. 12 According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company. 14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. 15 In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. 16 In our opinion and according to the information and explanations given to us, on an overall basis the term loans have been applied for the purposes for which they were obtained. 17 According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long term investments. 18 The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the period. 19 According to the information and explanations given to us and the records examined by us, no debentures have been issued during the period. Accordingly, clause (xix) of the order is not applicable. 20 The Company has not raised any money by public issues during the period. 21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case by management. SHARP & TANNAN Chartered Accountants Firm s Registration No W by the hand of Place : Mumbai Date : May 9, 2013 FIRDOSH D. BUCHIA Partner Membership No S-108

6 BALANCE SHEET AS AT DECEMBER 31, 2012 As at As at Note No. R R R R EQUITY AND LIABILITIES Shareholders funds Share capital A 327,489, ,489,633 Reserves and surplus B 706,859, ,970,151 1,034,349, ,459,784 Non- Current Liabilities Long-term borrowings C(I) 494,463, ,451, ,463, ,451,507 Current Liabilities Short-term borrowings D(I) 208,139, ,524,841 Current maturities of long term borrowings D(II) 188,540, ,155,748 Trade payables D(III) 984,447, ,372,602 Other current liabilities D(IV) 88,740,776 15,415,478 Short-term provisions D(V) 140,959, ,213,578 1,610,828,217 1,106,682,247 TOTAL 3,139,640,760 2,571,593,538 ASSETS Non- Current Assets Fixed Assets Tangible assets E(I) 1,678,142,196 1,205,414,445 Intangible assets E(II) 27,156,572 5,224,511 Capital-work-in-progress E(I) 81,133, ,142,465 Intangible Assets under Development E(II) 1,237,314 36,108,729 1,787,669,444 1,487,890,150 Current Assets Inventories H(II) 34,163,492 50,167,735 Trade receivables H(III) 288,286, ,374,297 Cash and bank balances H(IV) 102,205,315 26,527,492 Short term loans and advances H(V) 61,406, ,380,581 Other current assets H(VI) 865,908, ,253,283 1,351,971,316 1,083,703,388 TOTAL 3,139,640,760 2,571,593,538 COMMITMENTS (Capital and others) CONTINGENT LIABILITIES OTHER NOTES FORMING PART OF THE ACCOUNTS SIGNIFICANT ACCOUNTING POLICIES I J Q R As per our attached report of even date SHARP & TANNAN Chartered Accountants Firm s Registration No W by the hand of For and on behalf of the Board FIRDOSH D. BUCHIA R. BALASUBRAMANIYAN P. S. KAPOOR U. DASGUPTA Partner Head - Finance & Accounts Director Director Membership No Place : Mumbai Place : Sohar, Oman Place : Mumbai Date : May 9, 2013 Date : May 9, 2013 Date : May 9, 2013 S-109

7 STATEMENT OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, Note No. R R R R REVENUE Revenue from operations (gross) K 4,764,206,763 1,487,451,913 Other income L 73,519,308 26,430,617 TOTAL REVENUE 4,837,726,071 1,513,882,530 EXPENSES Manufacturing, Construction & Operating Expenses M Cost of raw materials, components consumed 661,527, ,907,482 Stores, spares and tools consumed 733,133 17,068,120 Sub-contracting charges 381,538,333 62,371,440 Other manufacturing,construction and operating expenses 1,117,695, ,824,598 2,161,494, ,171,640 Employee benefits expense N 1,897,049, ,602,783 Sales, administration and other expenses O 329,990, ,351,495 Finance costs P 20,892,976 15,829,338 Depreciation, obsolescence and amortisation expense 252,218, ,002,466 (Refer Note Q (2)(m)) TOTAL EXPENSES 4,661,646,392 1,426,957,722 Profit before tax 176,079,679 86,924,808 Current tax 4,855,940 Profit after tax carried to Balance Sheet 171,223,739 86,924,808 Face value per equity share RO 1 Earnings per equity share - Basic & Diluted OTHER NOTES FORMING PART OF THE ACCOUNTS Q SIGNIFICANT ACCOUNTING POLICIES R As per our attached report of even date SHARP & TANNAN Chartered Accountants Firm s Registration No W by the hand of For and on behalf of the Board FIRDOSH D. BUCHIA R. BALASUBRAMANIYAN P. S. KAPOOR U. DASGUPTA Partner Head - Finance & Accounts Director Director Membership No Place : Mumbai Place : Sohar, Oman Place : Mumbai Date : May 9, 2013 Date : May 9, 2013 Date : May 9, 2013 S-110

8 CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2012 A. Cash Flow from operating activities Net profit/(loss) before tax 176,079,679 86,924,808 Adjustments for: Depreciation & Amortisation 252,218, ,002,465 Interest (net) 19,968,064 10,924,902 (Increase)/Decrease in Translation loss 34,812, ,648,066 (Profit)/Loss on sale of fixed asset (net) 14,111,041 (76,396) Operating profit before working capital changes 497,190, ,423,845 (Increase)/decrease in trade and other receivables: (Increase)/decrease in inventories 16,004,243 (33,805,973) (Increase)/decrease in trade and other receivables (277,561,847) (678,494,218) Increase/(decrease) in trade and other payables 625,143,513 45,515,288 Changes in working capital 363,585,909 (666,784,903) Cash generated from/(used in) operations 860,775,931 (201,361,058) Less: Direct Taxes paid Net Cash generated from/(used in) operations 860,775,931 (201,361,058) B. Cash Flow from Investing Activities Purchase of Fixed assets (550,521,831) (359,684,385) Sale of fixed assets 20,336, ,579 Difference in the opening value of fixed assets/cummulative (35,923,962) (187,522,957) depreciation due to exchange difference Inter Corporate Deposits (given)/repaid 68,967,500 (10,946,250) Interest received 924,912 4,904,436 Net Cash (used in)/from investing activities (496,216,815) (552,834,577) C. Cash Flow from Financing activties Proceeds from issue of share capital Proceeds from Long Term Borrowings 332,124,691 Repayment of Long Term Loans (112,603,330) (70,855,284) Proceeds/(repayment) from Short Term Loans (net) (155,384,987) 65,769,326 Interest paid (20,892,976) (15,829,338) Net cash (used in)/from financing activities (288,881,293) 311,209,395 Net (decrease)/increase in cash and cash equivalents (A+B+C) 75,677,823 (442,986,240) Cash and cash equivalents at beginning of the year 26,527, ,513,732 Cash and cash equivalents at end of the year 102,205,315 26,527,492 Notes : 1 Cash Flow Statement has been prepared under the Indirect method as set out in the Accounting Standard (AS) 3: Cash Flow Statements as specified in the Companies (Accounting Standards) Amendment Rules, Purchase of Fixed Assets includes movement of Capital Work-in-progress during the year 3 Cash & Cash Equivalents at end of the period represents cash and bank balances and include unrealised gain of R 3,161,776 (previous year R 757,332) on account of translation of foreign currency bank balances. 4 Previous years figures have been regrouped/reclassified wherever applicable 2012 R 2011 R As per our attached report of even date SHARP & TANNAN Chartered Accountants Firm s Registration No W by the hand of For and on behalf of the Board FIRDOSH D. BUCHIA R. BALASUBRAMANIYAN P. S. KAPOOR U. DASGUPTA Partner Head - Finance & Accounts Director Director Membership No Place : Mumbai Place : Sohar, Oman Place : Mumbai Date : May 9, 2013 Date : May 9, 2013 Date : May 9, 2013 S-111

9 NOTES FORMING PART OF ACCOUNTS As at As at Number of shares R Number of shares R NOTE A SHARE CAPITAL Authorised: 28,84,615 Equity shares of RO. 1 each 2,884, ,489,633 2,884, ,489,633 Issued, Subscribed and Paidup 28,84,615 Equity shares of RO. 1 each 2,884, ,489,633 2,884, ,489,633 TOTAL 327,489, ,489,633 Reconciliation of Equity Shares Issued, Subscribed and fully paid up equity shares outstanding at beginning of the Year Issued, Subscribed and fully paid up equity shares outstanding at end of the Year 2,884, ,489,633 2,884, ,489,633 2,884, ,489,633 2,884, ,489,633 Terms/Rights attached to equity shares: The Company has only one class of share capital, i.e equity shares having face value of RO 1 per share. Each holder of equity share is entitled to one vote per share Holding Company 18,75,000 equity shares of Face Value OMR 1 each amounting to R 212,868,262 are held by Larsen & Toubro International FZE, which is the immediate holding Company. The ultimate holding Company is Larsen & Toubro Limited, India Shareholders holding more than 5% of equity shares as at the end of the year As at As at Number of shares Shareholding % Number of shares Shareholding % Larsen & Toubro International FZE, Sharjah, UAE 1,875,000 65% 1,875,000 65% The Zubair Corporation, Oman 1,009,615 35% 1,009,615 35% TOTAL 2,884, % 2,884, % As at As at R R R R NOTE B RESERVES AND SURPLUS Reserves and Surplus: Opening Legal Reserve 40,466,709 32,811,066 Addition during the year 15,893,353 7,655,643 56,360,062 40,466,709 Foreign Currency Translation Reserve As per last Balance Sheet 123,149,342 (4,498,721) Addition/(deduction) during the year 34,665, ,648, ,814, ,149,342 Surplus Statement of Profit and Loss As per last Balance Sheet 337,354, ,084,935 Profit for the year 171,223,739 86,924,808 Less: Transfer to Legal Reserve 15,893,353 7,655, ,684, ,354,100 TOTAL 706,859, ,970,151 S-112

10 As at As at R R R R NOTE C(I) LONG-TERM BORROWINGS Secured Loans Term Loan from banks (refer note C(I)(a)) 82,410, ,562,085 Unsecured Loans Shareholders Loan Account - L&T International FZE (refer note C(I)b) 267,834, ,628,125 Shareholders Loan Account - The Zubair Corporation (refer note C(I)b) 144,218, ,261,297 TOTAL 494,463, ,451,507 As at As at V V Rate of interest Terms of repayment Nature of security Note C(I)(a): Term Loan from HSBC Bank 270,951, ,717,833 Less: Current portion of long term borrowings 188,540, ,155,748 (as per Note D(II)) Long Term Borrowings as disclosed in Note C(I) 82,410, ,562,085 USD Libor + Spread Repayable in 10 semi-annual installments commencing from January 2010 Secured by Mortgage over Company s plant and machinery and sub-usufruct agreement. Note C(I)(b): The loans, received in several installments over the period from November 2006 to December 2010 are unsecured and interest free. Interest is payable on loans after settlment of debt obligations to the banks. The loans are not repayable for a minimum period of 10 years from the date of infusion. As at As at R R R R NOTE D(I) SHORT-TERM BORROWINGS Secured Loans Loans repayable on demand from banks 158,144,103 94,551,591 Short term loans from bank (refer Note D(I)(a)) 49,995,750 Unsecured Loans Inter Corporate Loan from L&T Electromech LLC 268,973,250 TOTAL 208,139, ,524,841 NOTE D(I)(a) The above loans include fund based working capital facilities viz. cash credits and demand loans. The secured portion of working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit are secured by letter of awareness from shareholders and Ultimate parent Company for R 65,99,40,000 (equivalent to USD 12,000,000), and assignment of receivables and insurance policies over stock and plant and machinery for R 27,49,75,000 (Equivalent to USD 5,000,000) NOTE D(II) CURRENT MATURITIES OF LONG TERM BORROWINGS Current maturities of long term borrowings 188,540, ,155,748 (refer note C(I)(a)) TOTAL 188,540, ,155,748 S-113

11 As at As at R R R R NOTE D(III) TRADE PAYABLES Liability for Revenue goods 208,290,398 80,423,900 Liability for Capital goods 72,801,337 Liability for Revenue Services 174,403, ,553,696 Due to Others 501,936, ,362,173 Due to related parties: Fellow subsidiaries 75,828, ,692 Companies over which significant influence is exerted by members 23,989,409 10,517,804 99,817,595 11,231,496 TOTAL 984,447, ,372,602 NOTE D(IV) OTHER CURRENT LIABILITIES Due to Ultimate holding Company 1,677,859 1,648,047 Other payables 87,062,917 13,767,431 88,740,776 15,415,478 TOTAL 88,740,776 15,415,478 NOTE D(V) SHORT-TERM PROVISIONS Provision for Employee Benefits Provision for Gratuity 55,402,755 28,940,249 Leave Encashment Payable Account 75,059,754 30,009, ,462,509 58,949,639 Others Provision for Current Tax 5,002,718 Provisions (refer note J(1)) 5,494,060 60,263,939 10,496,778 60,263,939 TOTAL 140,959, ,213,578 NOTE - E(i) FIXED ASSETS Description As at Exchange difference included in the translation reserve COST / VALUATION DEPRECIATION BOOK VALUE Additions Deductions / As at Upto For the Year Deductions / Upto As at during the Adjustment Adjustment year Exchange difference included in the translation reserve As at R R R R R R R R R R R R Leasehold land Development 80,252,794 2,856,783 37,609, ,718,809 16,753, ,794 6,100,499 23,635,195 97,083,614 63,498,892 Buildings 285,467,609 10,161,581 53,597, ,226,634 54,935,654 2,518,854 18,638,009 76,092, ,134, ,531,955 Plant and Equipment 1,367,951,650 48,694, ,036,124 45,542,414 1,914,139, ,357,899 25,676, ,129,671 11,865, ,298,387 1,145,841, ,593,751 Computers 31,294,081 1,113,929 13,488, ,835 45,642,029 11,588, ,514 6,100, ,192 18,166,162 27,475,867 19,705,324 Furniture & Fixtures 51,630,614 1,837,975 17,258,390 2,172,530 68,554,450 41,096,222 1,875,909 15,740,834 2,070,936 56,642,029 11,912,421 10,534,392 Vehicles 60,040,464 2,137,101 23,222, ,083 84,693,222 47,351,162 2,073,974 13,314, ,251 62,280,996 22,412,226 12,689,302 Office Equipments 165,620,091 5,895,488 23,572, , ,327,783 63,759,262 3,091,551 27,672, ,356 94,045, ,282, ,860,829 TOTAL 2,042,257,303 72,697, ,784,922 49,436,797 2,777,302, ,842,858 36,610, ,695,773 14,989,190 1,099,160,310 1,678,142,196 1,205,414,445 Previous Year 1,642,505, ,873,912 90,619, ,263 2,042,257, ,647, ,260, ,337, , ,842,859 1,205,414,444 1,166,857,321 Add: Capital Work in progress 81,133, ,142,465 Grand Total 1,759,275,558 1,446,556,910 Refer Note Q(2)(m) S-114

12 NOTE - E (ii) FIXED ASSETS - INTANGIBLE Description As at Exchange difference included in the translation reserve COST / VALUATION AMORTISATION BOOK VALUE Additions Deductions / As at Upto For the Year Deductions / Upto As at during the Adjustment Adjustment year Exchange difference included in the translation reserve As at R R R R R R R R R R R R Software 5,979, ,950 33,617,428 39,810, , ,198 11,523,118 12,653,529 27,156,572 5,224,511 Total 5,979, ,950 33,617,428 39,810, , ,198 11,523,118 12,653,528 27,156,572 5,224,511 Previous Year 5,979,723 5,979,723 90, , ,212 5,224,511 Add: Intangible Assets under Development 1,237,314 36,108,729 GRAND TOTAL 28,393,886 41,333,240 As at As at R R R R NOTE H(II) INVENTORIES (at cost or net realisable value whichever is lower) Raw Material 324,641 Stores, spares & tackles 6,099,260 8,213,539 Consumables 27,739,591 41,954,196 34,163,492 50,167,735 TOTAL 34,163,492 50,167,735 NOTE H(III) TRADE RECEIVABLES Unsecured Debts outstanding for more than 6 months 5,281, ,891,879 Other Debts: Considered good 283,004, ,482, ,286, ,374,297 TOTAL 288,286, ,374,297 NOTE H(IV) CASH AND BANK BALANCES Cash and cash equivalents Cash on hand 2,810,732 2,781,392 Balances with banks 99,394,583 23,746, ,205,315 26,527,492 TOTAL 102,205,315 26,527,492 NOTE H(V) S-115

13 As at As at R R R R SHORT-TERM LOANS AND ADVANCES Unsecured Loans and Advances to related parties Considered good Intercorporate deposit with related party 68,967,500 Due from related parties Ultimate Holding Company 96,420 Fellow subsidiary companies 1,507,677 12,229,559 Shareholder having significant influence 55,763 53,795 1,659,860 81,250,854 Others Considered good Unamortised expenses 41,560,256 32,372,030 Advances recoverable in cash or in kind 11,556,898 60,490,989 Balance with customs, etc 6,629,827 5,266,708 59,746,981 98,129,727 TOTAL 61,406, ,380,581 NOTE H(VI) OTHER CURRENT ASSETS Due from Customers (construction & project related activity) 865,908, ,253,283 TOTAL 865,908, ,253,283 NOTE I COMMITMENTS Estimated amount of contracts remaining to be executed on capital account (net of advances) 11,049,775 93,737,591 TOTAL 11,049,775 93,737,591 NOTE J CONTINGENT LIABILITIES Claims against the Company not acknowledged as debts 965,708, ,537,871 TOTAL 965,708, ,537,871 NOTE J (1) A customer has claimed R 925,915,005 from the Company towards losses, damages, costs expenses and loss of profits. In the prior year, Company has provided R 62,409,123 as provision for customer s claim out of which Company has reversed R 56,915,062 in current year and kept R 5,494,061 as closing provision. The balance claim of R 920,420,900 (previous year R 833,824,661) (including R 191,936,684 relating to subcontract work done by the ultimate parent company) has been disclosed above as claims against the Company not acknowledged as debt. The Company s management has strongly disputed the customer s claim. The matter is under arbitration. NOTE J (2) R 41,442,334 (previous year nil) relate towards seven labour related legal issues pending with courts in Oman and R 3,845,388 (previous year R 3,713,210) towards legal case filed by supplier pending with primary court Sohar. S-116

14 R R R R NOTE K REVENUE FROM OPERATIONS Sales & Service Construction and project related activity 4,764,206,763 1,487,451,913 TOTAL 4,764,206,763 1,487,451,913 NOTE L OTHER REVENUE Income from services to Group Companies 4,566,839 Recoveries from Group companies 16,181,111 2,895,516 Profit on Sale of Fixed Assets 427,396 76,396 Miscellaneous income 55,985,889 13,987,430 72,594,396 21,526,181 Interest Income Interest received from Bank 44,554 1,955,655 Interest received from others 880,358 2,948, ,912 4,904,436 TOTAL 73,519,308 26,430,617 NOTE M MANUFACTURING, CONSTRUCTION AND OPERATING EXPENSES Manufacturing, Construction & Operating Expenses Raw Materials & Components 47,695,850 90,129,733 Components 34,075,018 9,428,145 Less: Scrap sales 88,812,393 59,944,583 Consumables 668,569,015 95,294, ,527, ,907,482 Stores, spares & tools 733,133 17,068,120 Subcontracting Expenses 381,538,333 62,371,440 Other manufacturing,construction and operating expenses Freight 93,586,220 23,019,060 Power and fuel 30,978,368 11,738,734 Engineering & technical services 65,622,660 2,413,006 Lease Rent 62,071,329 52,432,053 Hire charges 730,169,035 16,224,335 Repairs and maintenance P&M 67,640,840 4,477,096 Repairs and maintenance Buildings 2,194,108 Repairs and maintenance Others 34,623,152 3,866,266 Cost of Software 12,102, ,114 Insurance premium 20,901,310 9,979,826 1,117,695, ,824,598 TOTAL 2,161,494, ,171,640 S-117

15 R R R R NOTE N EMPLOYEE BENEFITS EXPENSE Salaries, wages and bonus 1,631,052, ,884,392 Contribution to social security scheme 27,676,388 15,280,874 Provision for Gratuity 33,647,008 13,932,319 Welfare and other expenses 204,673,136 48,505,198 TOTAL 1,897,049, ,602,783 NOTE O SALES, ADMINISTRATION AND OTHER EXPENSES Rent 54,366,486 37,327,271 Travelling and conveyance 33,034,018 12,875,902 Telephone, postage and telegram 37,894,037 16,373,472 Professional Fees 14,197,223 12,074,270 Insurance 8,719,632 5,545,956 Stationery and printing 5,763,817 2,647,097 Entertainment expenses 6,051, ,686 Bank charges 1,641, ,712 Repairs & Maintenance Buildings 11,460,842 6,485,937 Repairs & Maintenance Others 22,590,798 7,578,883 Software 151,153 Fees paid to Ministry of Manpower 44,578,059 22,817,840 Power & Fuel 47,429,197 12,072,680 Rates & Taxes 1,344, ,182 Exchange difference (gain)/loss (1,339,912) (1,061,237) Loss on sale of fixed assets 14,538,437 Miscellaneous expenses 27,721,904 16,684,691 TOTAL 329,990, ,351,495 O(I) Aggregation of expenses disclosed vide Note M and O in respect of specific items is as follows: Nature of Expenses Note M Note O Total Note M Note O Total R R R R R R Power & Fuel 30,978,368 47,429,197 78,407,565 11,738,734 12,072,680 23,811,414 Rent 62,071,329 54,366, ,437,815 52,432,053 37,327,271 89,759,324 Repairs & Maintenance- Buildings 11,460,842 11,460,842 2,194,108 6,485,937 8,680,045 Repairs & Maintenance- Others 34,623,152 22,590,798 57,213,950 3,866,266 7,578,883 11,445,149 Insurance 20,901,310 8,719,632 29,620,942 9,979,826 5,545,956 15,525, R R R R NOTE P FINANCE COST Interest paid to banks 17,124,784 15,340,961 Interest paid to others 3,768, ,377 TOTAL 20,892,976 15,829,338 S-118

16 NOTE Q: OTHER NOTES FORMING PART OF THE ACCOUNTS 1) LEGAL STATUS L&T Modular Fabrication Yard LLC is a limited liability company, registered under the Commercial Laws of the Sultanate of Oman. The Company is engaged in execution of modular fabrication contracts. 2) OTHER NOTES FORMING PART OF THE ACCOUNTS a. The Balance Sheet as on December 31, 2012 and the Statement of Profit and Loss for the year ended December 31, 2012 are drawn and presented as per the new format prescribed under Schedule VI to the Companies Act, 1956 applicable for the financial year commencing from April 1, The amounts pertaining to the previous year have been recast to conform with the new format b. Disclosure pursuant to Accounting Standard (AS) 7 (Revised) Amount in R Particulars i) Contract revenue recognized for the financial year 4,764,206,763 1,487,451,913 ii) Aggregate amount of contract costs incurred and recognized profits (less recognized losses) as at end of the financial year for all contracts in progress as at that date 5,625,605, ,735,778 iii) Amount of customer advances outstanding for contracts in progress as at end of the financial year Nil Nil iv) Retention amounts due from customers for contracts in progress as at end of the financial year Nil Nil c. (i) Name of the Companies who exercise control Larsen & Toubro Limited Ultimate Holding Company Larsen & Toubro International FZE - Holding Company (ii) Disclosure of major transactions with related parties Amount in R Sr No Nature of transaction/ Related Party Amount Year 2012 Year 2011 Amt for major parties Amount Amt for major parties 1 Contract and other revenues 4,764,206,763 1,441,156,091 Ultimate Holding Company Larsen & Toubro Limited 4,764,206,763 1,440,756,460 2 Purchase of Plant and Machinery 44,821,470 7,816,352 Fellow Subsidiaries Larsen & Toubro Heavy Engineering LLC 19,993,907 Larsen & Toubro Infotech Limited 18,984,268 4,161,136 Larsen & Toubro Valdel Engineering Limited 1,869,525 Party on which significant influence is exerted by shareholder Zubair Enterprises (Northern) LLC 1,687,575 3 Purchase and expenses 9,557,459 12,856,859 Ultimate Holding Company Larsen & Toubro Limited 1,525,561 9,093,264 Party on which significant influence is exerted by shareholder Oasis Water Company LLC 2,549,869 1,129,161 International Heavy Equipment Co. LLC 2,439,660 Zubair General Automotive 1,690,783 1,431,330 S-119

17 Sr No Nature of transaction/ Related Party Amount Year 2012 Year 2011 Amt for major parties Amount Amt for major parties Zubair Enterprises (Northern) LLC 1,227,983 4 Subcontract expenses 104,880,126 1,515,054 Fellow Subsidiaries Larsen & Toubro Electromech LLC 104,880,126 1,515,054 5 Interest Expense 3,718, ,377 Fellow Subsidiaries Larsen & Toubro Electromech LLC 3,718, ,377 6 Interest Income 880,358 2,948,781 Fellow Subsidiaries Larsen & Toubro Heavy Engineering LLC 880,358 2,948,781 7 Term Loan taken 2,77,308, ,746,185 Fellow Subsidiaries Larsen & Toubro Electromech LLC 2,77,308, ,746,185 8 Repayment of Term loan taken 5,47,683,300 Fellow Subsidiaries Larsen & Toubro Electromech LLC 5,47,683,300 9 Term loan given 60,704,150 Fellow Subsidiaries Larsen & Toubro Heavy Engineering LLC 60,704, Repayment of Term loan given 69,327,000 60,704,150 Fellow Subsidiaries Larsen & Toubro Heavy Engineering LLC 69,327,000 60,704,150 (iii) Amount due to/due from related parties Amount in R Transaction/Related Party Nature of relationship Due from Related Party Year 2012 Year 2011 Due to Due from Related Party Related Party Trade Receivable Larsen & Toubro Limited, India Ultimate Holding Company 288,286, ,374,297 Due from Customers Larsen & Toubro Limited, India Ultimate Holding Company 865,908, ,253,283 Short Term Loans & Advances : Due from related parties Larsen & Toubro Limited, India Ultimate Holding Company 96,420 Larsen & Toubro Heavy Engineering LLC, Oman Fellow Subsidiary 1,505,749 12,229,559 1,928 Larsen & Toubro Infotech Limited Fellow Subsidiary The Zubair Corporation LLC, Oman Shareholder having significant influence 55,763 53,795 Other Current Liabilities Due to Related Party S-120

18 Transaction/Related Party Larsen & Toubro Limited, India Trade Payables: Nature of relationship Due from Related Party Year 2012 Year 2011 Due to Due from Related Party Related Party Due to Related Party Ultimate Holding Company 1,677,859 1,648,047 Due to related parties Larsen & Toubro Electromech LLC Fellow Subsidiary 75,828, ,948 Larsen & Toubro (Oman) LLC Fellow Subsidiary 27,311 Larsen & Toubro Valdel Engineering Limited Fellow Subsidiary 96,433 Marsh Oman Party on which significant influence is exerted by shareholder 19,439,957 8,165,735 Zubair Electric Northern LLC Party on which significant influence is exerted by shareholder 889,925 2,109,027 Pentagon Freight Services Oman LLC Party on which significant influence is exerted by shareholder 58,852 56,829 Zubair General Automotive LLC International Heavy Equipment Company LLC Party on which significant influence is exerted by shareholder 529,470 Party on which significant influence is exerted by shareholder 2,641,448 68,968 Party on which significant influence is exerted by shareholder 429, ,245 Oasis Water Company LLC Loans taken Larsen & Toubro International FZE Holding Company 267,834, ,628,125 The Zubair Corporation LLC, Oman Shareholder having significant influence 144,218, ,261,297 Larsen & Toubro Electromech LLC Fellow Subsidiary 268,973,250 Loans given Larsen & Toubro Heavy Engineering LLC, Oman Fellow Subsidiary 68,967,500 TOTAL 1,155,855, ,548, ,878, ,742,215 (iv) No amount due from Group companies has been written-off as bad debts during the year. S-121

19 d. Taxation The Company has obtained in Sultanate of Oman income tax exemption for a period of 5 years with effect from 1 September 2007 (date of production, till 31 August 2012), renewable for another period of 5 years on fulfillment of specific criteria. During the current year Company has applied to the Income tax Department for extension of the income tax exemption for a further period of 5 years commencing from 1 September The approval with tax authorities is under process. The management is confident of getting it renewed but on a conservative basis provision for Income tax is made in the financial statements for pro-rata period from 1 September 2012 to 31 December e. Foreign Currency Exposures There are no significant exchange rate risks as substantially all financial assets and financial liabilities are denominated in Rials Omani or UAE Dirham s/us Dollar to which the Rial Omani is fixed, except for the following: Amt in R Currency Trade Payables Due to Customer Euro 1,606, ,879 Indian Rupee 25, ,976 f. The Company is engaged only in the business of modular fabrication and hence no reporting has been made as per the requirements under Accounting Standard 17 on Primary Segmental Reporting. Secondary Segmental Reporting in respect of Contract revenue (Geographical segment) provided below: Amount in R Location India 4,763,969,676 1,440,756,460 Central America 46,695,453 All assets are located in the Sultanate of Oman g. Operating leases: The Company has taken on non-cancellable operating leases certain assets, the future minimum lease payments in respect of which, as at December 31, 2012 are as follows: Amount in R Minimum Lease Payments Dec 31, 2012 Dec 31, 2011 i. Payable not later than one year 88,205,645 95,921,654 ii. Between one year and five years 271,034, ,895,868 iii. Beyond five years 609,046, ,824,009 Total minimum lease payments 968,286, ,641,532 h. Auditor s remuneration and expenses charged to the accounts: R Particulars Audit Fees 811, ,239 Taxation 152, ,549 Auditor s Remuneration - Certification 228,768 Expenses Reimbursed 181,547 96,455 i. Under the sub-usufruct agreement between the Company and Sohar Industrial Port Company SAOC, (SIPC), the SIPC at the time of expiry or termination of the sub-usufruct agreement would require the Company to restore the land to its original form at the Company s sole costs. Since, the obligation of the Company is contingent and the liability can only be determined at the time of termination of the usufruct agreement, the Company has not made any provision towards site restoration costs in the financial statements. j. There are no transactions with micro and small enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 during the year. S-122

20 k. Borrowing costs capitalised during the year is R Nil (previous year R Nil). l. The Company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverable amount is more than the amount carried in the books. Accordingly, no provision has been made for the impairment in the accounts. m. During the year, the rate of depreciation on plant and machinery has been revised from 15% to 10% based on the revised estimates of useful life of plant & machinery items. Consequently, the profit for the year is higher by R 98,060,761 compared to the previous year. n. Basic & diluted earnings per share (EPS) computed in accordance with AS 20 are as follows: Particulars Profit for the year 171,223,739 86,924,808 Weighted Average number of Equity shares 2,884,615 2,884,615 Basic & Diluted EPS o. Figures for the previous year have been regrouped/reclassified wherever necessary. NOTE R: SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accounting The accounts have been prepared using historical cost convention and accrual basis and in accordance with the provisions of Section 211(3C) and the other provisions of the Companies Act, The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires that the management of the Company makes estimates and assumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and disclosure relating to contingent liabilities as of the date of the financial statements. Example of such estimates include the useful life of fixed assets and intangible assets, provision for doubtful debts/advances, future obligations in respect of retirement benefit plans etc. Actual results could differ from these estimates. b. Presentation of financial statements The Balance Sheet and the Statement of Profit and Loss are prepared and presented in the format prescribed in the Schedule VI to the Companies Act, 1956 ( the Act ). The Cash Flow Statement has been prepared and presented as per the requirements of Accounting Standard (AS) 3 Cash Flow Statements. The disclosure requirements with respect to items in the Balance Sheet and Statement of Profit and Loss, as prescribed in the Schedule VI to the Act, are presented by way of notes forming part of accounts along with the other notes required to be disclosed under the notified Accounting Standards c. Revenue Recognition Revenue from project related activity is recognized on percentage of completion basis. Percentage of completion is determined as a proportion of the cost incurred to date to the total estimated cost. No profit is recognized until a contract has progressed to the point where the ultimate realizable profit can be reasonably determined. Provision is made for all losses incurred to the accounting date together with any further losses that are foreseen in bringing the contracts to completion. Contract billings are recorded on the basis of progress bills prepared by the Company and are considered to the extent that they are probable of being certified and recovered. d. Retirement/Termination Benefits The Company contributes to the Social Security Scheme under Royal Decree 72/91 (defined contribution retirement plan and occupational hazard insurance for Omani employees in accordance with Omani Social Insurance Law 1991) for Omani employees administered by the Government of Sultanate of Oman. The contribution paid/payable under the said plan is recognized during the period in which the employee renders the related service. Accruals for employees benefits comprising of leave salary and end of service gratuity for non Omani employees is in accordance with Company s rules and is based on the liability which would arise if the employment of all staff were terminated at the year end. e. Fixed assets Fixed assets are stated at cost less depreciation. f. Leases Operating lease rentals are recognized as an expense on a straight line basis over the lease term. R S-123