DIRECTORS REPORT On behalf of the Board of s, it gives me pleasure in presenting the Third Annual Report and Audited Accounts of Larsen & Toubro T&D SA Pty Ltd for the period ending March 31, 2013. Major Activities During the year the Company was prequalified by Eskom for Transmission Line Projects. Subsequently, the Company has participated in the contractor s prequalification tender from Eskom. Due to environmental assessment Eskom has not floated major tenders for Transmission Line projects during the year. The Company has not executed any project during the year. It is expected that the situation is likely to improve in the coming year. Accordingly, the Company is targeting to get its first project during the year 2013-14. Financial Results We have reported NIL turnover and Loss of R 2,628,756 as at March 31, 2013 and the accumulated loss of R 18,449,176 as at March 31, 2013. Capital Items Based on the board approval the Company has removed all furniture & office equipment and accordingly the Gross and Net Fixed Assets value has been reported with NIL value as at March 31, 2013. Auditors Report The Auditor s Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors Report are self explanatory and therefore do not call for any further comments of s. s Responsibility Statement The Board of s 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 judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013. iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the commercial law for safeguarding the assets of the Company and proper internal control system has been established 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. Prospects for the Company South Africa has lagged behind in investments in the power sector in the past decade, the impact of which have been felt in the past few years. Now since the country is looking for large scale development, the investment in power sector including T&D has become a priority. Eskom will generate additional fund for investments in this sector as they have been given the authority to increase the power tariff by 25% every year for next couple of years. Further with loans being tied up with the multilateral funding agencies and the South Africa Government extending guarantees, scheduled investments in the next 5 years will not be a constraint. Total of 12000 MW of additional capacity generation is scheduled till 2016. This translates into a USD 3.5 Bn addressable market in T&D by Eskom in the next 5 (Five) years. These prospective investments by ESKOM may result in good order inflow for the Company in the coming years. For and on behalf of the Board Place: Chennai J. S. SUDARSAN B. RAMAKRISHNAN S-250
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF LARSEN & TOUBRO T&D SA (PROPRIETARY) LIMITED Report on the Financial Statements The financial statements of LARSEN & TOUBRO T&D SA (PROPRIETARY) LIMITED, South Africa, for the year ended March 31, 2013, being a Company registered in the South Africa, have been audited by Grant Thornton,, South Africa ( the Component Auditors ) and we have been furnished with their audit report dated April 10, 2013 on which we have placed reliance for the purpose of giving our opinion. We are presented with the financial statements in Indian Rupees prepared on the basis of aforesaid financial statements in South African Rand to comply with the requirements of Section 212 of the Companies Act, 1956. We give our report hereunder: We have audited the accompanying financial statements of Larsen & Toubro T&D SA Proprietary Limited, ( the Company ), which comprise the Balance Sheet as at March 31, 2013 and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ( the Act ), to the extent applicable to the Company. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013; b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements 1. As required by the Companies (Auditor s Report) Order, 2003 ( the Order ) as amended, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable to the Company. 2. As required by Section 227(3) of the Act, 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, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account; d) in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the accounting standards referred to in subsection (3C) of Section 211 of the Act to the extent applicable to the Company; e) as regards reporting on the disqualification of s u/s 274(1)(g) of the Indian Companies Act, 1956, since the Company is registered in South Africa, no reporting is required to be made under the said Section. Membership No. 16368 S-251
ANNEXURE TO THE INDEPENDENT AUDITORS REPORT With reference to the Annexure referred to in paragraph 1 under the heading Report on other legal and regulatory requirements of the Independent Auditor s Report to the members of LARSEN & TOUBRO T&D SA PROPRIETARY LIMITED on the financial statements for the year ended March 31, 2013 and based on our communication with the Component Auditors by way of Group Audit Deliverables, we report that: (i) (a) The Company has maintained proper records to show full particulars including quantitative details and situation of fixed assets. (b) The Company does not have any fixed assets as at March 31, 2013 and hence reporting under clause (i)(b) of the Order does not arise. (c) The Company has disposed off all of its fixed assets during the year. However according to the information and explanations given to us by the Component Auditors, the going concern of the Company is not affected by such disposal. (ii) (a) The Company does not carry any inventories in its books, hence reporting under clauses 4(ii)(a), (b) and (c) of the Order does not arise. (iv) In our opinion, and according to the information and explanations given to us by the Component Auditors, there exists an adequate internal control system commensurate with the size of the Company and nature of its business, for purchase of fixed assets. In our opinion, and according to the information and explanations given to us by the Component Auditors, there is no continuing failure to correct major weaknesses in the aforesaid internal control system. (vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (ix) The Company being registered in South Africa, has no statutory liabilities in India and accordingly reporting under clauses 4(ix)(a) and (b) of the Order does not arise. However, according to the information and explanations given to us by the Component Auditors, the Company has complied with all local statutory laws applicable to it. (x) The Company has been registered for a period of less than five years and hence commenting on accumulated losses and cash losses under clause 4(x) of the Order does not arise. (xi) In our opinion and according to the information and explanations given to us by the Component Auditors, the Company has not availed any loan from a financial institution, bank or debenture holders and hence reporting under clause 4(xi) of the Order does not arise. (xii) According to the information and explanations given to us by the Component Auditors, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiv) In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company. (xv) According to the information and explanations given to us by the Component Auditors, the Company has not given any guarantee for loans taken by others from banks or financial institutions. (xvi) The Company has not availed any term loans during the year and hence reporting on the application of the term loans for the purpose for which they were availed does not arise. (xvii) According to the information and explanations given to us by the Component Auditors, and on an overall examination of the Balance Sheet of the Company, we report that no funds have been raised on short term basis. Hence reporting on the usage of the same does not arise. (xix) The Company has not issued any debentures during the year and accordingly, no security or charge need to be created. (xx) The Company has not raised any money by public issues during the year. Accordingly, reporting under clause 4(xx) of the Order does not arise. (xxi) 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 by the Component Auditors, we have neither come across any instances of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of such cases by management. The clauses (iii), (v), (vi), (viii), (xiii) and (xviii) of the Order are not applicable to the Company since it is registered outside India and hence no reporting has been made. Membership No. 16368 S-252
BALANCE SHEET AS AT MARCH 31, 2013 As at 31.03.2013 As at 31.03.2012 Note No. v v v v EQUITY AND LIABILITIES Shareholders funds (a) Share capital 2 6,455 6,455 (b) Reserves and surplus 3 27,511,341 33,766,410 27,517,796 33,772,865 Current liabilities (a) Other current liabilities 4 3,206,559 4,902,090 TOTAL 30,724,355 38,674,955 ASSETS (a) Fixed assets 5 (i) Tangible assets 413,357 Current assets (a) Cash and cash equivalents 6 30,522,609 37,530,245 (b) Short-term loans and advances 7 201,746 731,353 30,724,355 38,261,598 TOTAL 30,724,355 38,674,955 CONTINGENT LIABILITIES AND COMMITMENTS 8 SIGNIFICANT ACCOUNTING POLICIES 1 The accompanying notes form an integral part of the financial statements. As per our attached report of even date For and on behalf of the Board Membership No. 16368 J. S. SUDARSAN B. RAMAKRISHNAN S-253
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2013 2012-2013 2011-2012 Note No. R R REVENUE Other income 9 1,642,334 1,643,885 TOTAL REVENUE 1,642,334 1,643,885 EXPENSES Employee benefits expense 10 2,588,095 7,690,942 Depreciation expense 5 128,025 137,136 Administration and other expenses 11 1,488,675 6,780,386 TOTAL EXPENSES 4,204,795 14,608,464 Profit/(loss) before and after tax (2,562,461) (12,964,579) Earnings per equity share (Basic and diluted) 14 (2,562.46) (12,964.58) Face value per equity share (in South African Rand) 1.00 1.00 SIGNIFICANT ACCOUNTING POLICIES 1 The accompanying notes form an integral part of the financial statements. As per our attached report of even date For and on behalf of the Board Membership No. 16368 J. S. SUDARSAN B. RAMAKRISHNAN S-254
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2013 2012-2013 2011-2012 v v A. Cash flow from operating activities Profit/(Loss) before tax (2,562,461) (12,964,579) Adjustments for Depreciation expense 128,025 137,136 Loss on sale of fixed assets (net) 281,562 Interest income (1,642,334) (1,643,885) Translation difference (3,692,608) 379,914 Operating profit/(loss) before working capital changes (7,487,816) (14,091,414) Adjustments for (Increase)/decrease in loans and advances 529,607 (568,799) Increase/(decrease) in other current liabilities (1,695,531) 2,111,775 Net cash from/(used in) operating activities (A) (8,653,740) (12,548,438) B. Cash flow from investing activities Interest received 1,642,334 1,643,885 Purchase of fixed assets (19,775) (517,489) Sale of fixed assets Effect of translation difference in fixed assets and depreciation 23,545 (2,097) Net Cash from/(used in) investing activities (B) 1,646,104 1,124,299 C. Cash flow from financing activities Net cash from/(used in) financing activities (C) Net (decrease)/increase in cash and cash equivalents (A+B+C) (7,007,636) (11,424,139) Cash and cash equivalents at beginning of the year 37,530,245 48,954,384 Cash and cash equivalents at the end of the year 30,522,609 37,530,245 Notes: 1. Cash Flow Statement has been prepared under the Indirect Method as set out in Accounting Standard (AS) 3 Cash Flow Statements as specified by the Companies (Accounting Standards) Rules, 2006, as amended. 2. Cash and cash equivalents comprise balances on current accounts and deposit accounts with banks and cash on hand. 3. Figures for the previous year have been regrouped/reclassified wherever necessary. As per our attached report of even date For and on behalf of the Board Membership No. 16368 J. S. SUDARSAN B. RAMAKRISHNAN S-255
NOTES ACCOMPANYING THE FINANCIAL STATEMENTS 1 SIGNIFICANT ACCOUNTING POLICIES i. Basis of preparation The financial statements have been prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India [ Indian GAAP ], on accrual basis and in compliance with the Accounting standards as specified in the Companies (Accounting Standards) Rules, 2006 notified by the Central Government and other provisions of the Companies Act, 1956. However, certain escalation and other claims are accounted for in terms of contracts with the customers. Insurance claims are accounted for as and when admitted by the appropriate authorities. ii. iii. Use of estimates The preparation of financial statements in conformity with Indian 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 life of tangible and intangible fixed assets, allowances for doubtful debts/advances, etc. Difference, if any, between the actual results and estimates is recognised in the period in which the results are known. Fixed assets Fixed assets are stated at cost less accumulated depreciation and cumulative impairment. iv. Impairment of assets As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine 1) The provision for impairment loss, if any, required or 2) The reversal, if any, required of impairment loss recognized in previous periods. Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. v. Depreciation Depreciation is calculated on a straight-line basis over the estimated useful lives of assets as follows: 1) Furniture and fixtures - 25% 2) Office equipment - 25% The above rates are higher than the rates specified under Schedule XIV of the Companies Act 1956 for the respective categories. Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carrying amount of the assets over its remaining useful life. vi. Cash and bank balances Cash and bank balances includes fixed deposits, margin money deposits, earmarked balances with banks and other bank balances which have restrictions on repatriation. vii. Foreign currency translations The reporting currency of the Company is South African Rand. Accounts are translated in Indian Rupees as follows: 1) Share capital is retained at the initial contribution amount. 2) Fixed assets, current assets and current liabilities are translated at year-end rates. 3) Revenue transactions are translated at the average rates. 4) The resultant exchange difference is accounted as translation reserve in the Balance Sheet. viii. Revenue recognition Revenue is recognised based on the nature of activity when consideration can be reasonably measured and there exists reasonable certainty of its recovery. 1) Interest income is recognised at the agreed rates on time proportion basis. 2) Other items of income are accounted as and when the right to receive arises. ix. Operating cycle for current/non-current classification Operating cycle for the business activities of the Company is taken as twelve months for classification of its assets and liabilities into current/non-current. x. Provisions, contingent liabilities and contingent assets 1) Provisions are recognised for liabilities that can be measured only by using a substantial degree of estimation, if: a) the Company has a present obligation as a result of a past event; b) a probable outflow of resources is expected to settle the obligation; and c) the amount of the obligation can be reliably estimated. S-256
NOTES ACCOMPANYING THE FINANCIAL STATEMENTS (Contd.) 2) Reimbursements by another party, expected in respect of expenditure required to settle a provision, is recognised when it is virtually certain that reimbursement will be received if, obligation is settled. 3) Contingent liability is disclosed in the case of: a) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation; b) a present obligation when no reliable estimate is possible; c) a possible obligation arising from past events, unless the probability of outflow of resources is remote. 4) Contingent assets are neither recognised nor disclosed. 5) Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date. As at 31.03.2013 As at 31.03.2012 Numbers R Numbers R 2. SHARE CAPITAL Authorised: Ordinary shares of South African Rand 1 each 5,000 32,275 5,000 32,275 Issued, subscribed and fully paid up: Ordinary shares of South African Rand 1 each 1,000 6,455 1,000 6,455 TOTAL 1,000 6,455 1,000 6,455 a) There was no movement in share capital during the current and previous year. b) Terms/rights attached to equity shares (i) The Company has only one class of equity shares having a par value of South African Rand 1 each. Each holder of equity share is entitled to one vote per share. (ii) All shares issued carry equal rights for dividend declared by the Company. There are no restrictions attached for any specific shareholder. (iii) The Company has not issued any securities with the right/option to convert the same into equity shares at a later date. (iv) The Company has not declared any dividends during the year (Previous year R Nil) c) Shares held by the holding Company Name of shareholder As at 31.03.2013 As at 31.03.2012 Numbers R Numbers R Larsen & Toubro International FZE Sharjah, United Arab Emirates 725 4,680 725 4,680 [Ordinary shares of South African Rand 1 each fully paid up] d) Equity shares in the Company held by each shareholder holding more than 5 percent shares Name of shareholder As at 31.03.2013 As at 31.03.2012 Numbers % holding Numbers % holding Larsen & Toubro International FZE, Sharjah, 725 72.50% 725 72.50% United Arab Emirates Befula Investments, South Africa 275 27.50% 275 27.50% e) The Company has not bought back any shares or issued shares for consideration other than cash or issued bonus shares since incorporation. f) There are no shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment. S-257
NOTES ACCOMPANYING THE FINANCIAL STATEMENTS (Contd.) As at 31.03.2013 As at 31.03.2012 R R R R 3 RESERVES AND SURPLUS Securities premium As per last Balance Sheet 48,406,045 48,406,045 Additions during the year 48,406,045 48,406,045 Foreign currency translation reserve (2,511,823) 1,180,785 Surplus/(deficit) As per last Balance Sheet (15,820,420) (2,855,841) Profit/(loss) for the year (2,562,461) (12,964,579) (18,382,881) (15,820,420) TOTAL 27,511,341 33,766,410 4 OTHER CURRENT LIABILITIES Salaries and wages payable 447,631 Other liabilities 3,206,559 4,454,459 TOTAL 3,206,559 4,902,090 5. FIXED ASSETS PARTICULARS As at 01.04.2012 GROSS BLOCK DEPRECIATION NET BLOCK Additions Deductions Translation difference As at 31.03.2013 Up to 31.03.2012 For the year On Deductions Translation difference Up to 31.03.2013 As at 31.03.2013 As at 31.03.2012 Furniture and fixtures 519,940 19,775 510,100 (29,615) 129,985 120,975 243,556 (7,404) 389,955 Office equipment 31,202 29,425 (1,777) 7,800 7,050 14,407 (443) 23,402 TOTAL 551,142 19,775 539,525 (31,392) 137,785 128,025 257,963 (7,847) Previous year 30,907 517,489 2,746 551,142 137,136 649 137,785 413,357 As at 31.03.2013 As at 31.03.2012 R R R R 6 CASH AND CASH EQUIVALENTS Balances with banks on current account 1,679,617 4,068,179 on deposit account with maturity of less than three months [including interest accrued thereon R 255,874 (previous year R 324,566)] 28,842,992 33,462,066 30,522,609 37,530,245 Cash on hand TOTAL 30,522,609 37,530,245 7 SHORT-TERM LOANS AND ADVANCES (Unsecured, considered good) Deposits 192,031 216,719 Balances with excise, customs, value added tax authorities etc., 9,715 391,197 Other advances 123,437 TOTAL 201,746 731,353 S-258
NOTES ACCOMPANYING THE FINANCIAL STATEMENTS (Contd.) As at 31.03.2013 As at 31.03.2012 R R 8 CONTINGENT LIABILITIES AND COMMITMENTS (a) Contingent liabilities Nil Nil (b) Commitments Nil Nil 2012-2013 2011-2012 R R 9 OTHER INCOME Interest on bank deposits 1,642,334 1,643,885 TOTAL 1,642,334 1,643,885 10 EMPLOYEE BENEFITS EXPENSE Salaries, wages and bonus 2,582,560 7,636,971 Contribution to social security and pension 4,679 10,700 Welfare and other expenses 856 43,271 TOTAL 2,588,095 7,690,942 11 ADMINISTRATION AND OTHER EXPENSES Rent 502,263 1,527,179 Rates and taxes 33,011 468,417 Legal and professional charges [Refer Note below] 121,047 3,221,872 Repairs and maintenance 215,095 587,367 Loss on sale of fixed assets (net) 281,562 Miscellaneous expenses 335,697 975,551 TOTAL 1,488,675 6,780,386 Note : Legal and professional charges include Auditor s remuneration (paid to overseas auditor only) as follows - Statutory audit fees 56,250 59,366 12 Disclosures as required by Accounting Standard (AS) 18 Related Party Disclosures (i) List of related parties who exercise control over the Company: Name of related party Relationship a) Larsen & Toubro Limited Ultimate Holding Company b) Larsen & Toubro International FZE Holding Company (ii) There were no transactions with related parties during the current year and previous year. (iii) No amounts pertaining to related parties have been written off or written back during the current and previous year. 13 The Company is engaged only in the business of construction related activity and hence no reporting has been made as per the requirements under Accounting Standard 17 on Segment Reporting. Further the entire operation of the Company is in South Africa only and hence no secondary segment reporting has been made. S-259
NOTES ACCOMPANYING THE FINANCIAL STATEMENTS (Contd.) 14 Disclosures as required by Accounting Standard (AS) 20 Earnings Per Share Particulars 2012-13 2011-12 Profit after tax as per Statement of Profit and Loss R (2,562,461) (12,964,579) Number of equity shares outstanding Numbers 1,000 1,000 Weighted average number of equity shares outstanding Numbers 1,000 1,000 Earnings per share (basic and diluted) R (2,562.46) (12,964.58) Face value of equity share Rand/Share 1 1 15 The Company has carried forward business losses as at March 31, 2013 and does not have any taxable income for the year as per the local laws under which the Company is governed. Accordingly no provision for tax has been made for the year. 16 Previous year figures have been regrouped/reclassified, wherever necessary. As per our attached report of even date For and on behalf of the Board Membership No. 16368 J. S. SUDARSAN B. RAMAKRISHNAN S-260