Consolidated Financial Statements

Transcription

1 Consolidated Financial Statements Auditors Report to the Board of Directors on Consolidated Financial Statements We have examined the attached Consolidated Balance Sheet of Larsen & Toubro Limited and its Subsidiaries, Associates and Joint Ventures (the L&T group) as at 31 st March, 2004, the Consolidated Profit & Loss Account for the year ended on that date annexed thereto, and the Consolidated Cash Flow Statement for the year ended on that date. 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. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit also includes examining, on test basis, evidence supporting the amounts and disclosures in the 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. We believe that our audit provides a reasonable basis for our opinion. In respect of the financial statements of certain subsidiaries, associates and joint ventures, we did not carry out the audit. These financial statements have been audited / reviewed by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of the subsidiaries, associates and joint ventures is based solely on the reports of the other auditors. The details of the Assets and Revenues in respect of these subsidiaries, associates and joint ventures to the extent to which they are reflected in the Consolidated Financial Statements are given below: Audited by other Auditors: Names of the Companies Total Assets Total Revenues A. Indian Subsidiaries HPL Cogeneration Limited B. Foreign Subsidiaries Larsen & Toubro LLC, USA L&T-ECC Construction (M) SDN. BHD, Malaysia Larsen & Toubro Infotech, GmbH, Germany Larsen & Toubro (Oman) LLC Larsen & Toubro International FZE, Sharjah, UAE Larsen and Toubro Ceylinco (Pvt.) Limited, Sri Lanka C. Joint Ventures HCC-L&T Purulia Joint Venture International Metro Civil Contractors L&T-Demag Plastics Machinery Private Limited Larsen & Toubro Limited-Shapoorji Pallonji & Co. Ltd. (Ebene Cyber City Project) Larsen & Toubro Limited-Shapoorji Pallonji & Co. Ltd. (Les Pailles Exhibition Centre) Total D. Associates Names of the Companies Net Carrying Cost Current year / period of Investment Share of Profit / (loss) International Seaports Pte. Limited, Singapore L&T-Case Equipment Private Limited 4.99 (0.80) L&T-Crossroads Private Limited NAC Infrastructure Equipment Limited Total (0.62)

2 We further report that in respect of the following associates, we did not carry out the audit. These financial statements have been certified by Management and have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of the associates is based solely on these certified financial statements. Since the financial statements for the financial year ended 31 st March, 2004, which were compiled by the Management of these companies were not audited, any adjustments to their balances could have consequential effects on the attached consolidated financial statements. However, the size of these associates in the consolidated position is not significant in relative terms. The details of the Net Carrying Cost of Investment and Current year s Share of Profit or (Loss) in respect of these associates to the extent to which they are reflected in the Consolidated Financial Statements are given below: Certified by Management: Associates Names of the Companies Net Carrying Cost Current year/ period of Investment Share of Profit/ (loss) Ahmedabad Mehsana Toll Road Company Limited (7.23) GVK Jaipur Kishengarh Expressway Private Limited International Seaports (Haldia) Private Limited 9.56 (0.27) Larsen & Toubro (Saudi Arabia) LLC, Saudi Arabia - (10.29) L&T-Ramboll Consulting Engineers Limited Sharp Business Systems (India) Limited 1.01 (0.37) Visakhapatnam Industrial Water Supply Company Limited Voith Paper Technology (India) Limited Total (17.22) We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of the Accounting Standard (AS) 21, "Consolidated Financial Statements", (AS) 23, "Accounting for Investments in Associates in Consolidated Financial Statements" and (AS) 27, "Financial Reporting of Interests in Joint Ventures" issued by the Institute of Chartered Accountants of India, and on the basis of the separate audited / reviewed / certified financial statements of the L&T Group included in the consolidated financial statements. We report that on the basis of the information and explanations given to us and on the consideration of the separate audit report on individual audited financial statements of the L&T Group, we are of the opinion that the said consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: a) in the case of the Consolidated Balance Sheet, of the state of affairs of the L&T Group as at 31 st March, 2004; b) in the case of the Consolidated Profit and Loss Account of the consolidated results of operations of the L&T Group for the year ended on that date; and c) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the L&T Group for the year ended on that date. SHARP & TANNAN Chartered Accountants by the hand of Mumbai, June 4, 2004 F.M. KOBLA Partner Membership No

3 Consolidated Balance sheet as at 31st March, 2004 As at As at Schedules SOURCES OF FUNDS: SHAREHOLDERS FUNDS: Share capital A Share application money Reserves and surplus B Minority Interest LOAN FUNDS: Secured loans C Unsecured loans D Deferred Tax Liabilities (see Note No.30) TOTAL APPLICATION OF FUNDS: Fixed assets: E (i) Gross block Less : Depreciation and impairment Net block Less : Lease adjustment Capital work-in-progress (net of impairment) Intangible assets: E(ii) Gross block Less : Amortisation and impairment Net block Capital work-in-progress (net of impairment) Fixed assets held for sale (at lower of cost or estimated realisable value) Investments F Deferred Tax Assets (see Note No.30) Current assets, loans and advances: G Inventories Sundry debtors Cash and bank balances Other current assets Loans and advances Less : Current liabilities and provisions: H Liabilities Provisions Net current assets Deferred revenue items I Miscellaneous expenditure I ( i ) (to the extent not written-off or adjusted) Deferred income I ( ii ) - (4.17) TOTAL CONTINGENT LIABILITIES J SIGNIFICANT ACCOUNTING POLICIES Q (For Notes forming part of Consolidated Accounts see page Nos. 155 to 169) As per our report attached SHARP & TANNAN Chartered Accountants by the hand of F. M. KOBLA Partner Membership No Mumbai, June 4, 2004 A. RAMAKRISHNA J. P. NAYAK Y. M. DEOSTHALEE K. VENKATARAMANAN R. N. MUKHIJA A. M. NAIK Chairman & Managing Director S.S. MARATHE D.V. KAPUR S. RAJGOPAL KUMAR MANGALAM BIRLA RAJASHREE BIRLA B.P. DESHMUKH K. S. K. KHARE KRANTI SINHA S. V. SUBRAMANIAN Company Secretary Directors Mumbai, June 4, 2004

4 Consolidated Profit and loss account for the year ended 31st March, Schedules INCOME: Sales and Service K Less : Excise duty Other income L EXPENDITURE: Manufacturing, construction and operating expenses M Staff expenses N Sales, administration and other expenses O Interest and brokerage P Depreciation and obsolescence Amortisation of intangible assets Less : Overheads charged to fixed assets Profit before transfer from Revaluation reserve Add : Transfer from Revaluation reserve Profit before Tax and exceptional items Gain on disposal of subsidiaries pursuant to Scheme of Arrangement Profit before tax Provision for current taxes Provision for deferred tax ( see Note No. 30 ) (24.64) (14.91) Profit after tax Less : Additional tax on dividend distributed/proposed by Subsidiaries Less : Minority interest in income Profit after minority interest Add: Share in profits(net) of Associates Profit available for appropriation Less : Transferred to : Foreign Projects Reserve Housing Projects Reserve Reserve u/s 45 1C of RBI Act Profit available for distribution Add :Dividend provided in earlier years for potential equity shares written back (See Note No.16) Proposed dividend Additional Tax on Dividend Balance carried to Balance Sheet Basic earnings per equity share (Rupees) * Diluted earnings per equity Share (Rupees) * Basic Earnings per equity share excluding exceptional item (Rupees)* Diluted Earnings per equity share excluding exceptional item (Rupees)* * (See Note No. 26) Face value per equity share (Rupees) SIGNIFICANT ACCOUNTING POLICIES (For Notes forming part of Consolidated Accounts see page Nos. 155 to 169) Q As per our report attached SHARP & TANNAN Chartered Accountants by the hand of F. M. KOBLA Partner Membership No Mumbai, June 4, 2004 A. RAMAKRISHNA J. P. NAYAK Y. M. DEOSTHALEE K. VENKATARAMANAN R. N. MUKHIJA A. M. NAIK Chairman & Managing Director S.S. MARATHE D.V. KAPUR S. RAJGOPAL KUMAR MANGALAM BIRLA RAJASHREE BIRLA B.P. DESHMUKH K. S. K. KHARE KRANTI SINHA S. V. SUBRAMANIAN Company Secretary Directors Mumbai, June 4, 2004

5 Consolidated Cash Flow Statement for the year ended 31st March, A. Cash flow from Operating Activities: Net Profit before tax Adjustments for : Dividend Received (63.75) (18.08) Depreciation (including obsolescence) and Amortisation Unrealised Foreign Exchange difference - Net (gain)/loss (19.62) (3.79) Interest(Net) (Profit)/Loss on sale of Fixed Assets (Net) (30.57) (14.87) (Profit)/Loss on sale of Investments (Net) (12.50) (9.38) Provision for diminution in value of investments Gain on disposal of subsidiaries pursuant to Scheme of Arrangement (146.66) - Operating Profit before working capital changes Adjustments for : (Increase)/ Decrease in Trade and Other receivables (630.92) (536.33) (Increase)/ Decrease in Inventories (514.45) (16.28) (Increase)/ Decrease in Miscellaneous Expenditure (37.83) Increase/ (Decrease) in Trade Payables Cash generated from Operations Direct Taxes Refund/(Paid)- Net (165.91) (61.52) Net Cash from Operating Activities B. Cash flow from Investing Activities: Purchase of Fixed Assets (193.48) (285.89) (Including interest capitalised Rs.0.80 crore, previous year Rs.3.34 crore) Sale of Fixed Assets (Including monies received as advance) Purchase of Investments ( ) ( ) Sale of Investments Loans/Deposits made with Associates(Net) (8.95) (1.79) Advances to Subsidiaries/Associates towards equity commitment (10.63) (31.64) Interest Received Distributions received from Associates in the form of dividends / under buyback of equity Dividend received from Other Investments Cash and Cash Equivalents acquired pursuant to acquisition of subsidiary Net Cash (used in)/ from Investing Activities (329.18) C. Cash flow from Financing Activities: Proceeds from issue of Share Capital Proceeds from long term borrowings Repayment of long term borrowings (795.51) (875.96) (Repayments) / Proceeds from other borrowings (Net) (151.46) Dividends Paid (186.80) (194.13) Additional Tax on Dividend (23.93) (2.93) Interest Paid (174.67) (342.35) Net Cash (used in)/ from Financing Activities (588.59) (822.19) Net (decrease) / increase in cash and cash equivalents (A + B + C) Cash and cash equivalents at beginning of the year Less: Transferred pursuant to demerger of cement business/ disposal of subsidiaries Cash and cash equivalents at end of the year Notes: 1. Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS) 3 "Cash Flow Statements" issued by the Institute of Chartered Accountants of India after eliminating the assets and liabilities transferred to UltraTech CemCo Limited as on April 1, 2003 as per the Scheme of Arrangement (Please refer to Note No.4 of Notes forming part of Consolidated Accounts) 2. Purchase of fixed assets includes movement of Capital Work-in-Progress during the year. 3. Cash and cash equivalents represent cash and bank balances and include unrealised loss of Rs crore on account of translation of foreign currency bank balances. 4. Previous year s figures have been regrouped / reclassified wherever applicable. As per our report attached SHARP & TANNAN Chartered Accountants by the hand of F. M. KOBLA Partner Membership No Mumbai, June 4, 2004 A. RAMAKRISHNA J. P. NAYAK Y. M. DEOSTHALEE K. VENKATARAMANAN R. N. MUKHIJA A. M. NAIK Chairman & Managing Director S.S. MARATHE D.V. KAPUR S. RAJGOPAL KUMAR MANGALAM BIRLA RAJASHREE BIRLA B.P. DESHMUKH K. S. K. KHARE KRANTI SINHA S. V. SUBRAMANIAN Company Secretary Directors Mumbai, June 4, 2004

6 Schedules forming part of consolidated accounts As at As at Schedule A Share Capital: Authorised: 162,50,00,000 Equity shares of Rs.2 each (previous year 32,50,00,000 Equity shares of Rs.10 each) Issued: 12,44,01,796 Equity shares of Rs.2 each (previous year 24,90,57,712 Equity shares of Rs.10 each) Subscribed and Paid up: 12,44,01,796 Equity shares of Rs.2 each (previous year 24,86,68,756 Equity shares of Rs.10 each) (See Note No. 5) As at As at Schedule B Reserves and Surplus: Revaluation Reserve: As per last Balance Sheet Less : On assets sold or obsoleted during the year Transferred to Profit and Loss Account Cash Subsidy Reserve: As per last Balance Sheet Add : Received during the year Less : Reduction pursuant to the Scheme of Arrangement Capital Redemption Reserve: As per last Balance Sheet Add : Transferred from Retained Earnings Capital Reserve : Addition during the year (See Note No.6) Reserve u/s 45 1C of the RBI Act, 1934: As per last Balance Sheet Add : Addition during the year Debenture Redemption Reserve: As per last Balance Sheet Less : Transferred to Retained Earnings Reduction pursuant to the Scheme of Arrangement Capital Reserve on Consolidation As per last Balance Sheet Add : Addition during the year Securities Premium Account: As per last Balance Sheet Add : Addition during the year Less : Debenture issue expenses Premium on Redemption of Debentures Reduction pursuant to the Scheme of Arrangement Investment Allowance (Utilised) Reserve: As per last Balance Sheet Less : Transferred to Retained Earnings Foreign Projects Reserve: As per last Balance Sheet Add :Transferred from Profit and Loss Account Less : Transferred to Retained Earnings Carried forward

7 Schedules forming part of consolidated accounts Schedule B (Contd.) As at As at Brought forward Housing Projects Reserve: As per last Balance Sheet Add :Transferred from Profit and Loss Account Retained Earnings: As per last Balance Sheet Add : Adjustments pertaining to prior years (Net) Less : Reduction on account of impairment of assets (See Note No. 24) Reduction pursuant to the Scheme of Arrangement Transferred to Capital Redemption Reserve Add : Write-back of deferred tax liability on account of impairment of assets (See Note No. 24) Add : Transferred from: Foreign Projects Reserve Debenture Redemption Reserve Investment Allowance (Utilised) Reserve Profit & Loss account As at As at Schedule C Secured Loans: Secured Redeemable Non-convertible Bonds: FD Plus Bonds Secured Redeemable Non-convertible Debentures: Fixed Rate Debentures Floating Rate Debentures Loans from banks: Cash credits / Working Capital Demand Loans Other loans Interest accrued and due Loans from financial institutions Loans from others

8 Schedules forming part of consolidated accounts As at As at Schedule D Unsecured Loans: Debentures: Fixed Rate Debentures Less : Conversion during the year Forfeiture during the year Allotment money in arrears Calls in arrears Fixed deposits Short term loans and advances: From banks From others Commercial Paper - Face Value (previous year: Rs.100 crore) Less : Future Interest Obligation (previous year: Rs.0.28 crore) Other loans and advances: From banks Sales Tax Deferment Loan From others Lease finance Schedule E (i) Cost / Valuation Depreciation Impairment Book Value Transfer Transfer As at Fixed Assets (See (See As at Note (a) Deductions/ As at Up to Note (a) For the Deductions/ Up to (see Note As at As at below) Additions Adjustments below) year Adjustments (b) below) Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore OWNED ASSETS Freehold land Ships Buildings Railway sidings Plant and machinery Furniture and fixtures Vehicles Aircraft Owned Assets Leased Out: Plant and machinery Less: Lease Adjustment Owned Assets (sub total - A) LEASED ASSETS: Plant and machinery Vehicles Leased Assets (sub total - B) Total (A+B) Previous year Add : Capital work-in-progress Less: Transfer (See note (a) below) Less: Impairment of Capital work-in-progress (Buildings and Plant & Machinery) Note a): In terms of the Scheme of Arrangement, the fixed assets pertaining to the Cement business of L&T and investment in Narmada Cement Company Limited have been transferred to UltraTech CemCo Limited as on (See Note No.4) b): For details of impairment see Note No. 24.

9 Schedule forming part of consolidated accounts Schedule E (ii) Cost / Valuation Amortisation Impairment Book Value Transfer Transfer As at Intangible Assets (See (See As at Note (a) As at Up to Note (a) For the Up to (see Note As at As at below) Additions Deductions below) year Deductions (c) below) Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Rs.crore Goodwill Goodwill on consolidation (See Note (b) below) Leasehold land Leasehold buildings Mining lease Jetties Specialised Software Lump sum fees for technical knowhow Patents, Trademarks, etc Total Previous year Add : Capital work-in-progress Less: Impairment of Capital work-in-progress (Leasehold Land) Note a) In terms of the Scheme of Arrangement, the intangible assets pertaining to the Cement business of L&T and investment in Narmada Cement Company Limited have been transferred to UltraTech CemCo Limited as on (See Note No.4) b) Deduction of Goodwill represents adjustment made consequent to transfer of investment in Narmada Cement Company Limited pursuant to the Scheme of Arrangement c) For details of impairment see Note No. 24 Notes :- 1. In respect of tangible fixed assets, opening gross block includes Rs.4.75 crore and opening accumulated depreciation includes Rs.3.54 crore on account of a subsidiary which is consolidated for the first time during the year. In respect of intangible assets, opening gross block includes Rs.0.38 crore and opening accumulated depreciation includes Rs.0.37 crore on account of the subsidiary which is consolidated for the first time during the year. 2. Cost / Valuation of : (i) Freehold land includes Rs.0.14 crore for which conveyance is yet to be completed. (ii) Leasehold land includes (a) Rs.0.22 crore for land at Mysore taken on lease-cum-sale basis from Karnataka Industrial Area Development Board ( KIADB ) vide agreement dated 14th July, The lease agreement for the land expired on 13th July, KIADB vide their letter no.kiadb / 4377/ / dated 1st February, 2000 has granted extension of lease period up to 13th July, 2003 or till the execution of the sale deed whichever is earlier. Pending transfer, this land has been shown as leasehold land. (b) Rs.5.45 crore for land taken at Bangalore on lease from KIADB vide agreement dated 21st January, The lease agreement is for a period of six years, at the end of which sale deed would be executed, on fulfilment of certain conditions by the Company. 3. Cost / Valuation of Buildings includes ownership accommodation: (i) (a) In various co-operative societies and apartments and shop-owners associations: Rs crore including 930 shares of Rs.50 each, 177 shares of Rs.100 each, 100 shares of Rs.10 each and 1 share of Rs.250. (b) In proposed co-operative societies Rs crore. (ii) In respect of which the deed of conveyance is yet to be executed Rs.4.45 crore. (iii) In respect of Rs.3.42 crore representing the Company s undivided share of 7% in the property at a certain location. 4. Additions during the year and capital work-in-progress: (a) are net of Rs.9.76 crore (gain) being the exchange difference; and (b) include Rs crore being borrowing cost capitalised in accordance with Accounting Standard (AS) 16 Borrowing Costs issued by the Institute of Chartered Accountants of India.

10 Schedules forming part of consolidated accounts Schedule E (i) and (ii) (Contd.) 5. Capital work-in-progress includes advances Rs crore (previous year Rs crore). 6. By virtue of explicit agreements, the title in the Jetty at Gujarat rests in Gujarat Maritime Board. The Company is entitled to use the jetty on payment of port charges at concessional rates. 7. The Company had revalued as at October 1,1984 some of its land, buildings, plant and machinery and railway sidings at replacement/market value which resulted in a net increase of Rs crore. As at As at Schedule F Investments Long Term Investments Investments in Associates Fully paid equity shares of associate companies * (See Note below) Fully paid preference shares of associate companies Partly paid equity shares of an associate company (See Note No.8) Less: Provision for diminution in value Add/ (Deduct): Share in profit / (losses) of associate companies - prior years (75.93) (90.03) Add: Adjustments to share in profits of associate companies pertaining to prior years (net) Less: Reduction on account of an associate becoming a subsidiary Add: Share in profits(net) of associate companies for the year Add: Commitment to fresh infusion of equity in an associate Less: Dividend received from associate company during the year Other fully paid equity shares Less: Provision for diminution in value Fully paid preference shares Government and trust securities Debentures Bonds Mutual funds Current Investments Government and trust securities (previous year Rs.151 crore) Less: Provision for diminution in value (previous year Rs.0.12 crore) Bonds Mutual Funds [See Note No.17(b)] (previous year : Rs crore) Less: Provision for diminution in value (previous year : Rs crore) *Note : Investments in Associates includes Goodwill Rs crore net of amortisation of Rs 0.46 crore in respect of an associate company

11 Schedule forming part of consolidated accounts As at As at Schedule G Current Assets, Loans and Advances: Current Assets: Inventories: Stock-in-trade, at cost or net realisable value whichever is lower: Raw materials Components Construction materials Stores, spare parts and loose tools Finished goods Property development land Manufacturing work-in-progress at cost Construction and Project related work-in-progress At cost At estimated realisable value on sale Less: Progress bills raised Due from customers Stock on hire Sundry Debtors: Unsecured: Debts outstanding for more than 6 months Considered good Considered doubtful Other Debts: Considered good Less : Provision for doubtful debts Cash and bank balances: Cash on hand Balances with scheduled banks: on current accounts on call deposit accounts including interest accrued thereon on fixed deposits including interest accrued thereon on margin money deposit accounts Balances with non-scheduled banks Other current assets: Interest accrued on investments Others Loans and advances: Secured: Considered good: Loans against mortgage of house property Loans against pledge of shares (Current year : Rs.24,115) Carried forward

12 Schedules forming part of consolidated accounts As at As at Schedule G (contd.) Brought forward Unsecured: Considered good: Advance towards equity commitment: Associate companies Others Inter-Corporate deposits : Associate companies Others Advances recoverable from associate companies Advances recoverable in cash or in kind Bills discounted Deferred credit against sale of ships Balance with customs, port trust, etc Lease receivables Considered doubtful: Deferred credit against sale of ships Advances recoverable in cash or in kind Less: Provision for doubtful loans and advances As at As at Schedule H Current Liabilities and Provisions: Liabilities: Acceptances Sundry creditors : Due to : Small Scale Industrial Undertakings Others Due to customers Progress bills raised (Previous year: Rs crore) Less: Construction and Project related work-in-progress At cost: Rs crore (Previous year Rs crore) At estimated realisable value: Rs crore (Previous year Rs crore) Advances from customers Item covered by Investor Education and Protection Fund: (see note below) Unpaid dividend Interest on application money received for allotment of securities Unpaid matured deposits Unpaid matured debentures / bonds Interest accrued on bonds Due to Directors (net) Interest accrued but not due on loans Pension payable under Voluntary Retirement-cum-Pension Scheme Provisions for: Taxes Proposed dividend Additional tax on dividend Gratuity Leave encashment Pension scheme Note : There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund as at

13 Schedules forming part of consolidated accounts As at As at Schedule I Deferred revenue items: (i) Miscellaneous expenditure: ( to the extent not written-off or adjusted ) Mining development expenses Voluntary Retirement-cum-Pension Schemes/ Voluntary Retirement Scheme Loss on sale and lease-back of fixed assets Premium on pre-payment and refinancing of term loans Preliminary Expenses (ii) Deferred income: Profit on sale and lease-back of fixed assets - (4.17) As at As at Schedule J Contingent Liabilities : (a) Claims against the Group not acknowledged as debts (b) Sales-tax liability that may arise in respect of matters in appeal (c) Excise duty/service tax liability that may arise in respect of matters in appeal /challenged by the Group in writ (Net of recoveries from customers) (d) Customs duty demands against which the Group has filed appeals before Appellate Authorities which are pending disposal (e) Income tax liability (including interest) that may arise in respect of which the Group is in appeal (f) Extinguishment of debt ( Being sales tax deferment loans extinguished in previous years by transfer to a wholly-owned subsidiary and later assigned to an associate company) (g) Customers bills discounted (h) Guarantees given on behalf of associate companies (i) Guarantees given on behalf of others Schedule K Sales & Service: Manufacturing and trading activity Construction, project related and property development activity Software development products and services Income from financing activity Facilitating charges for power plant Toll collection and related activity Servicing Commission Compensation,engineering and service fees

14 Schedules forming part of consolidated accounts Schedule L Other Income: Income from long term investments Profit on sale of investments Profit on sale of fixed assets (net) Gain on extinguishment of debt (See Note No. 28 ) Equipment and property rentals Miscellaneous Income Schedule M Manufacturing, construction and operating expenses: Raw materials and components consumed Add: Purchase of trading goods Less: Scrap sales Construction materials Sub contracts Stores, spares and tools Direct expenses on jobs Operating expenses - Crude oil production (Increase)/Decrease in manufacturing and trading stocks: Closing stock: Finished goods Work-in-progress Less : Opening stock: (See Note below) Finished goods Work-in-progress (431.53) Excise duty Power and fuel Royalty and technical knowhow fees Packing and forwarding Hire charges - Plant and machinery and others Repairs to plant and machinery and buildings Interest and other financing charges Software development expenses Cost of built up Technology Park Space and Property Development Land Note: Net after transfer of stocks to UltraTech CemCo Limited in terms of the Scheme of Arrangement

15 Schedules forming part of consolidated accounts Schedule N Staff expenses: Salaries, wages and bonus Contribution to and provision for: Provident funds and pension fund Superannuation/Pension schemes Gratuity funds Leave encashment Welfare and other expenses Schedule O Sales, administration and other expenses: Rent Rates and taxes Packing and forwarding Travelling and conveyance Telephone, postage and telegrams Advertising and publicity Stationery and printing Insurance Power and fuel Commission Bank charges General repairs and maintenance Miscellaneous expenses Provision for foreseeable losses on construction contracts Provision for doubtful debts, advances and non-performing assets (net) Bad debts and advances written off Provision for diminution in value of investments Discount on sales Schedule P Interest and brokerage : Debentures and fixed loans Others Less: (i) Received on inter-corporate deposits from associates companies, customers and others (ii) (iii) Income from long term investments: Interest on debentures, bonds and government securities Income from current investments: Interest on debentures, bonds and government securities

16 Schedule forming part of consolidated accounts Schedule Q SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Accounting / Basis of preparation of financial statements The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally accepted accounting principles [ GAAP ] except for the revaluation of certain fixed assets, and in compliance with the Accounting Standards referred to in Section 211(3C) and other requirements of the Companies Act, However, certain escalation and other claims, which are not ascertainable / acknowledged by customers, are not taken into account. The preparation of financial statements in conformity with GAAP 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 the disclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates include the useful lives of fixed assets, provision for doubtful debts / advances, future obligations in respect of retirement benefit plans, etc. Actual results could differ from these estimates. The accounts of the Indian subsidiaries and associates have been prepared in compliance with the Accounting Standards referred to in Section 211(3C) and other requirements of the Companies Act, 1956 and those of the foreign subsidiaries and associates have been prepared in compliance with the local laws and applicable Accounting Standards. 2. Revenue Recognition The Group recognises revenue in the following manner: (i) Sales and service include excise duty, cash subsidy and adjustment for liquidated damages and price variation. (ii) Revenue from construction and project-related activity is recognised as follows : (a) Cost-plus contracts: Contract revenue is determined by adding the aggregate cost plus proportionate margin as agreed with the customer. (b) Fixed price contracts received up to March 31, 2003: Contract revenue is recognised by applying percentage of completion to the contract value. Percentage of completion is determined as follows : (i) in the case of item rate contracts, as a proportion of the progress billing to contract value; and (ii) in the case of other contracts, as a proportion of the cost incurred-to-date to the total estimated cost (c) Fixed price contracts received on or after April 1, 2003: Contract revenue is recognised by adding the aggregate cost and proportionate margin, using the percentage completion method. Percentage of completion is determined as a proportion of cost incurred-to-date to the total estimated contract cost. Full provision is made for any loss in the year in which it is foreseen. (iii) Revenue from construction and project related activity and contracts executed in Joint Ventures under work-sharing arrangement (Jointly Controlled Operations, in terms of Accounting Standard (AS) 27 Financial Reporting of Interests in Joint Ventures ), is recognised on the same basis as similar contracts independently executed by the Company. (iv) In respect of construction and project related activity and contracts executed in Integrated Joint Ventures under profit-sharing arrangement (Jointly Controlled Entities, in terms of Accounting Standard (AS) 27 Financial Reporting of Interests in Joint Ventures ), profit / loss is accounted when the same is determined by the Joint Venture. Services rendered to Integrated Joint Ventures under profit-sharing arrangement are accounted as income on accrual basis. (v) Revenue from property development activity is recognised when the equitable share of property in the land and/or building is transferred to the customer. (vi) Revenue from software development is recognised based on software developed or time spent in person hours or person weeks and billed to customers as per the terms of specific contracts. (vii) Toll collections from users of facility are accounted when the amount is due and recovery is certain. Licence fees for way-side amenities are accounted on accrual basis. (viii) Income from hire purchase transactions is accounted on accrual basis, pro-rata for the period, at the rates implicit in the transaction. Income from Bill Discounting, Advisory and Syndication Services and other financing activities is accounted on accrual basis. 3. Principles of consolidation a) The financial statements of the Parent Company and its Subsidiaries have been consolidated on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after eliminating intra-group balances and the unrealised profits / losses on intra-group transactions, and are presented to the extent possible, in the same manner as the Company s independent financial statements. b) Investments in associate companies have been accounted for, by using equity method whereby investment is initially recorded at cost and the carrying amount is adjusted thereafter for post acquisition change in the Company s share of net assets of the associate. c) The Company s interests in joint ventures have been consolidated as follows: Type of Joint Venture Accounting treatment Jointly Controlled Operations Company s share of revenues, common expenses, assets and liabilities are included in Revenues, Expenses, Assets and Liabilities respectively. Jointly Controlled Assets Share of the Assets and share of the Liabilities are shown as part of Gross Block and Liabilities according to their nature. Share of expenses incurred on maintenance of the assets is accounted as expense. Monetary benefits if any from use of the assets are reflected as income. Jointly Controlled Entities The Company s interest in the Joint Venture has been consolidated on a line-by -line basis by adding together the book values of assets, liabilities, income and expenses, after eliminating the unrealised profits/ losses on intra group transactions. Joint Venture interests accounted as above have been included in segments to which they relate.

17 Schedule forming part of consolidated accounts Schedule Q (contd.) 4. Research & Development Revenue expenditure on research and development is charged under respective heads of account. Capital expenditure on research and development is included as part of fixed assets and depreciated on the same basis as other fixed assets. 5. Retirement Benefits Provisions for / contributions to retirement benefits schemes are made as follows: a) Provident fund on actual liability basis b) Gratuity based on actuarial valuation c) Leave Encashment Benefit on retirement on actuarial valuation basis d) Superannuation / Pension schemes on the basis of actual liability / actuarial valuation 6. Fixed Assets Fixed assets are stated at original cost net of tax / duty credits availed, if any, and those which were revalued as on October 1, 1984 are stated at the value determined by the valuers. Assets acquired on hire purchase basis are stated at their cash values. Specific know-how fees paid, if any, relating to plant and machinery is treated as part of cost thereof. Revenue expenses incurred in connection with project implementation insofar as such expenses relate to the period prior to the commencement of commercial production are treated as part of project cost and capitalised. Own manufactured assets are capitalised at cost including an appropriate share of overheads. (Also refer to policy on Leases and Borrowing Costs, infra.) 7. Leases a) Lease transactions entered into prior to April 1, 2001: Assets leased out are stated at original cost. Lease equalisation adjustment is the difference between capital recovery included in the lease rentals and depreciation provided in the books. Lease rentals in respect of assets acquired under leases are charged to Profit and Loss Account. b) Lease transactions entered into on or after April 1, 2001: i. Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Such assets are capitalised at the inception of the lease at lower of the fair value or the present value of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate of interest on the outstanding liability for each period. ii. Assets acquired on leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals are charged to the Profit and Loss Account on accrual basis. iii. Assets given under a finance lease are recognised as a receivable at an amount equal to the net investment in the lease. Lease income is recognised over the period of the lease so as to yield a constant rate of return on the net investment in the lease. iv. Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over the lease term. v. Initial direct costs relating to assets given on finance leases are charged to Profit and Loss Account. 8. Depreciation i. Indian companies a) Owned assets: Depreciation on revalued assets is calculated on straight line basis on the values and at the rates given by the valuers. The difference between depreciation on assets based on revaluation and that on original cost is transferred from Revaluation Reserve to Profit and Loss Account. Depreciation on assets stated at historical cost is provided on written down value basis on assets acquired up to March 31, 1968 (at the rates prescribed under Schedule XIV to the Companies Act, 1956) and on straight line basis on assets acquired subsequently (at the rates prevailing at the time of their acquisition on assets acquired up to September 30, 1987 and at the rates prescribed under Schedule XIV on assets acquired after that date). However, motor cars have been depreciated at 14.14% p.a. Depreciation on additions / deductions is calculated pro rata from / to the month of additions / deductions. Extra shift depreciation is provided on a location basis. Assets constructed on land given under the concession agreement with the Ministry of Surface Transport, Government of India, are depreciated over the tenor of such concession agreement. Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the asset s revised carrying amount over its remaining useful life. b) Leased assets: i. Lease transactions entered into prior to April 1, 2001: Assets given on lease are depreciated over the primary period of the lease. Accordingly, while the statutory depreciation on such assets is provided for on straight line method as per Schedule XIV to the Companies Act, 1956, the difference is adjusted through lease equalisation and lease adjustment account.

18 Schedule forming part of consolidated accounts Schedule Q (contd.) ii. Lease transactions entered into on or after April 1, 2001: Assets acquired under finance leases are depreciated on a straight line basis over the lease term. Where there is reasonable certainty that the Company shall obtain ownership of the assets at the end of the lease term, such assets are depreciated at the rates prescribed in Schedule XIV to the Companies Act, In other cases, the assets are depreciated over the term of the lease. ii. Foreign companies Depreciation has been provided by the foreign companies on methods and at the rates required / permissible by the local laws so as to write off the assets over their useful lives. 9. Intangible Assets and Amortisation Intangible assets are recognised as per the criteria specified in Accounting Standard (AS) 26 Intangible Assets and are amortised as follows: i. Leasehold land: over the period of lease ii. Jetty: over the period of the concession agreement signed with the appropriate authority such that the cumulative amortisation is not less than the cumulative rebate availed by the Company. iii. Specialised software: over a period of three years iv. Lump sum fees for technical know-how: over a period of six years in case of foreign technology and three years in the case of indigenous technology. Amortisation on impaired assets is provided by adjusting the amortisation charge in the remaining periods so as to allocate the asset s revised carrying amount over its remaining useful life. Goodwill arising out of acquisition of equity stake in a Subsidiary or an Associate is amortized in equal amounts over a period of ten years from the date of first acquisition. In the event of cessation of operations of a Subsidiary or an Associate, the unamortised Goodwill is written off fully. 10. Investments Current investments are carried at lower of cost or market value. The determination of the carrying costs of such investments is done on the basis of specific identification. Long-term investments (other than Associates) are carried at cost, after providing for any diminution in value, if such diminution is of a permanent nature. 11. Inventories Inventories are valued, after providing for obsolescence, as under: a) Raw materials, components, construction materials, stores, spares and loose tools at weighted average cost b) Work-in-progress i. Work-in-progress (Other than project and construction-related) at cost including related overheads ii. Project and Construction-related Work-in-progress at cost till a major portion of the job is completed and thereafter at realisable value In the case of qualifying assets, cost includes applicable borrowing costs vide policy relating to borrowing costs c) Finished goods at lower of cost or net realisable value. Cost includes related overheads and excise duty paid / payable on such goods d) Property Development Land at lower of cost or net realisable value 12. Securities Premium Account a) Securities premium includes: i. The difference between the market value and the consideration received in respect of Shares issued pursuant to Stock Appreciation Rights Scheme. ii. The discount allowed, if any, in respect of shares allotted pursuant to Stock Options Scheme. b) The following expenses are written off against Securities Premium Account: i. Issue expenses pertaining to Shares / Debentures / Bonds. ii. Premium paid on redemption of Debentures / Bonds. 13. Borrowing Costs Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of cost of such assets till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised as an expense in the period in which they are incurred. 14. Employee Stock Ownership Schemes a) Discount in respect of Stock Appreciation Rights [ SARs ] issued pursuant to Stock Appreciation Rights Scheme is charged to the Profit and Loss Account as employee compensation in the year in which the shares are allotted. SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 require the accounting for discount on the grant of options over the period of vesting. However, in the case of SARs, the number of shares comprised in the grant is not quantifiable until the options vest. Hence, the charge to revenue is confined to options that are allotted. b) In respect of stock options issued pursuant to the Stock Options Scheme, the difference between market price and the grant price, if any, on the date of grant of option, i.e., the discount is treated as employee compensation and deferred over the period of vesting.