INSTITUTIONAL TRAINING REPORT

2009 – 2010

UNDERGONE AT

LARSEN & TOUBRO LIMITED

Submitted to

GURUNANAK COLLEGE (EVENING)

Affiliated to

UNIVERSITY OF MADRAS

In partial fulfillment of the Degree of

B.COM (CORPORATE SECRETARYSHIP)

Under the guidance of

Mrs. P.ABIRAMI (M.COM [C.S]. M.PHIL)

NAME: K. SIVA KUMAR Register No.: CS81225

GURUNANAK COLLEGE (EVENING)

Velachery Main Road, Velachery

Chennai – 600 042.

PREFACE

The University of Madras has introduced the Institutional Project for the department

of Corporate Secretaryship. This Institutional training gives practical knowledge and

experience of working in a company.

I am glad to submit this project report which I had done in the department of

Finance&Accounts of L&T Ltd – ECC Division, Chennai. This report contains all the

information about the company and its financial position till previous financial year

2008-09.

I hope this project will gives me good response from all the persons who view this

report. I dedicated this report to all my teachers who gives me immense knowledge to

complete this project.

ACKNOWLEDGEMENT

If the words are considered as symbol of love and token of acknowledgement, then let

the words play the heralding role of expressing my gratitude to all those who have helped

me directly and indirectly during the research work.

I thank Dr. Y. Hari Prasad Reddy (M. Com., M. Phil., Ph. D) Head of the

Department of corporate secretaryship, Guru Nanak College and Ms .P. Abirami for

their motivation and encouragement to complete this project successfully.

My sincere thanks to Mr. P. JAYAPRAKASH, Assistant Finance Manager,

Larsen & Toubro Ltd (ECC), Chennai for giving me the opportunity to do the project

in his department and my project guide Mr. P.K. Bharath Raj for providing the much

needed practical insights and guidance.

I want to thank all the faculty members of L&T Finance & Accounts Department who

gave me valuable input, advice, constant support and motivated me to complete the

project successfully.

I express my thanks to L&T ECC DIVISION- Chennai, for providing me an

opportunity to work on this project.

Last but not the least; I would like to thank my parents and my friends who helped

me in completing my project.

A SHORT NOTE ON TRAINING

The University of Madras expects all the students who are studying B.Com Corporate

Secretaryship course to undergo training in a public limited Company. Therefore, I have

undergone training at Larsen & Toubro Limited at Chennai for a period of 45 days.

Institutional Training is a progress which enables the students to know about day-to-

day operation in the company. This training programme eliminates the gap between

theory and practical knowledge in the company. Training eliminates the fear of working

in a new environment and also enables the candidates to build up their communication

skills.

I am very grateful to the management for providing wonderful information required in

preparation of this project. This training session have taught me many useful things for

my future.

A BRIEF HISTORY OF THE COMPANY

HISTORY

Larsen & Toubro Limited is the biggest legacy of two Danish engineers, who

built a world-class organization that is professionally managed and a leader in India’s

engineering and construction industry. It was the business of cement that brought the

young Mr. Henning Holck- Larsen and Mr. S.K. Toubro into India. They arrived on

Indian shores as representatives of the Danish engineering firm F L Smidth & Co in

connection with the merger of cement companies that later grouped into the Associated

Cement Companies.

Together, Mr. Holck-Larsen and Mr. Toubro founded the partnership firm of

L&T in 1938, which was converted into limited company on February 7, 1946. Today,

this was metamorphosed into one of India’s biggest success stories. The company has

grown from humble origins to a large conglomerate spanning engineering and

construction. ECC was conceived as Engineering Construction Corporation Limited in

April 1944 and incorporated as wholly owned subsidiary of Larsen & Toubro for ECC. It

has today emerged as India’s leading construction organization.

Larsen & Toubro Limited (L&T) is a technology, engineering, construction and

manufacturing company. It is one of the largest and most respected companies in India's

private sector.

 

ECC – the Engineering Construction and Contracts Division of L&T is India’s largest

construction organisation with over 60 years of experience and expertise in the field.

ECC figures among the World’s Top Contractors and ranks 35th among top global

contractors and 60th among international contractors as per the survey conducted by

Engineering News Record USA(August 2008).

Many of the country’s prized landmarks – its exquisite buildings, tallest structures,

largest airports/ industrial projects, longest flyovers, highest viaducts, longest pipelines

including many other benchmark projects have been built by ECC.  ECC’s leading edge

capabilities cover every discipline of construction: civil, mechanical, electrical and

instrumentation engineering and services extend to all core sector industries and

infrastructure projects.

ECC is equipped with the requisite expertise and wide-ranging experience to

undertake Engineering Procurement and Construction (EPC) projects with single source

responsibility.  Contracts are executed using state of the art design tools and project

management techniques from concept to commissioning.

ECC today is organised in to four Operating Companies to allow for more in-depth

technology and business development as well as to focus attention on domestic and

international project execution.  Each Operating Company is further split into different

Business Units (BUs) to take care of the specific needs of various customers. The

Operating Companies (OC) includes:

o Buildings & Factories Operating Company (B&F OC)

o Infrastructure  (Infra OC)

o Metallurgical, Material Handling & Water (MMH &W OC)

o Electrical & Gulf Projects (E&GP OC)

Vision of the company

L&T shall be a professionally-managed Indian multinational, committed

to total customer satisfaction and enhancing shareholder value.

L&T-ites shall be an innovative, entrepreneurial and empowering team

constantly creating value and attaining global benchmarks.

L&T shall foster a culture of caring, trust and continuous expectation of

employees, stakeholders and society.

AWARDS AND ACCOLADES

• SGCCI Golden Jubilee Memorial Trust Award - for outstanding

performance in Export of Engineering Goods for 2004-05. This Award

highlights L&T's export of high-tech, custom-built equipment worldwide.

• Greentech Safety Awards (2005) - by the New Delhi-based non-profit

organization, Greentech Foundation, for the effort in industrial safety and

environmental management.

• Ethics is Good Business award - from the New Delhi based PHD Chamber

of Commerce & Industry (PHDCCI).

• India Manufacturing Excellence Award from Frost & Sullivan, 2004.

• Environment Excellence Award 2003-04, Greentech Foundation.

• Business world’s survey on "India's Most Respected Companies", ranked

L&T first in infrastructure sector.

• L&T was ranked first in "India's Best Managed Companies" in a 2008

survey published by Business Today, India's leading business periodical.

Forbes Global 2000 Ranking - 2008

The Forbes Global 2000 list for the year 2008 ranked Larsen & Toubro at

961[2]. Also in last year Mr.A.M.Naik has got businessman of year award in

Delhi. This year Mr.A.M.Naik received Padma Bhushan from President of

India

MANAGEMENT AND ADMINISTRATION

Board of Directors DESIGNATION

A.M.Naik Chair man& Managing Director

J.P.Nayak Whole-time Director & President

(Machinery & Industrial Products)

Y.M.Deosthalee Whole-time Director & chief financial officer

K. Venkataramanan Whole-time Director & President

(Engineering & Construction Projects)

R.N.Mukhija Whole-time Director & President

(Electricals & Electronics)

K.V.Rangaswami Whole-time Director & President

(Construction)

V.K.Magapu Whole-time Director & Senior Executive

Vice President (IT & Technology Services)

M.V.Kotwal Whole-time Director & Senior Executive

Vice President (Heavy Engineering)

S.Rajgopal Non-Executive Director

S.N.Talwar Non-Executive Director

M.M.Chitale Non-Executive Director

Thomas Mathew T. Nominee-LIC

N.Mohan Raj Nominee-LIC

ORGANISATION STRUCTURE

OFFICE LAYOUT

FUNCTIONS OF DEPARTMENTS

A company will comprises of many departments which includes Purchase

department, Production Department, Sales Department, Personnel Department, Finance

Department, Secretarial Department, Planning Department, Quality Department etc.,

Each Department will defer from the nature of the company. Some companies will

have Purchase department but will not have production works. Some companies will buy

finished goods from other companies and sell it to the customers.

The following are the departments which prevail in L&T.

1. Production Department

2. Personnel Department

3. Finance Department

4. Secretarial Department

5. R&D Department

1. PRODUCTION DEPARTMENT

Production is the functional area responsible for turning inputs into finished outputs

through a series of production processes. The Production Manager is responsible for

making sure that raw materials are provided and made into finished goods effectively. He

or she must make sure that work is carried out smoothly, and must supervise procedures

for making work more efficient and more enjoyable.

The index of Industrial Production for 2008-09 showed a growth of around 2.3% as

compared to the growth of 8.5% in the previous year.

Design and Engineering strengths in the sphere of manufacturing constitute a major

competitive advantage for L&T. It is these strengths that enable L&T to set new

benchmarks in terms of scale, sophistication and speed. The company has dedicated

engineering centres at each of the manufacturing locations of process plant equipment

and defence related equipment. Two technology Development Centres have been setup,

tasked with development of new products and of new manufacturing technologies. L&T

also has collaboration agreements with the India Space Research Organization as well as

other niche players to bolster its capabilities in the strategic sectors of aerospace, defence

and nuclear power.

L&T’s rich technology base secures widespread public recognition successfully

manufactures equipment that set bold new precedents. Recently, for instance, L&T

manufactured one of the world’s largest FCC regenerators, with an internal diameter of

16.3 metres and weight of over 1320 tonnes. Earlier, L&T engineers had also

manufactured the world’s largest reactors in the metal composition of chrome

Molybdenum Vanadium.

Manufacturing facilities of the company and its Groups are located at Ahmednagar,

Bangalore, Chennai, Coimbatore, Faridabad, Hazira (Surat), Kansbahal (Rourkela),

Mumbai, Mysore, Pithampur, Puducherry, Pune, Vadodara and Visakhapatnam; and in

Australia, China, Indonesia, Malaysia, Oman, Saudi Arabia and U.A.E.

2. PERSONNEL DEPARTMENT

Talent Management has been a prime mover in the company’s ambitious business

plans. The HR Strategy dovetails personal growth aspirations of employees with business

needs. A variety of HR interventions give the division a strong competitive edge. A menu

of career growth options and training are offered to young aspiring professionals for

achieving excellence in engineering and project management skills. Setting up of L&T

Project Management Institute at Vadodara complemented by the GLOPAT programme,

mentoring of new joinees, recognition of excellence, strategy workshops and team

building programs are some important initiatives undertaken during the year.

PERSONNEL DEPARTMENT IN ECC DIVISION :

ECC recognizes that people are the real source of competitive advantage.  It is

through people that ECC delivers total customer satisfaction.   These values are reflected

in our Human Resources practices which have earned national recognition several times.

ECC-ites go through a process of continuous learning, assisted by training

programmes.  Apart from on-the-job training and technical training, over 100

programmes on general management and behavioral topics are conducted each year.  

Interactive CD-ROM based programmes have enabled employees learn at their pace.

ECC has always believed in experimentation with and implementation of new ideas. 

HR practices such as collaborative performance appraisal, career & succession

planning, team rewards have been institutionalized.

An extensive and rigorous recruitment process ensures quality induction.  L&T's

Graduate Engineer Trainee recruitment process covers India's major engineering colleges

and institutions.  Programmes, plant visits and comprehensive information-sharing

facilitate induction.

ECC Division has an ongoing organization development programme, which is one of the

longest sustaining OD efforts in India.

HR Policy:

The basic principles of ECC's Human Resources policies include

Recruitment based solely on merit by following well-defined and systematic

selection procedures without discrimination 

Sustain motivated and quality work force through appropriate and fair

performance evaluation, reward and recognition systems 

Identify training needs within the Organisation and design and implement those

need based training programmes resulting in continuous upgradation of

knowledge, skills and attitudes of the employees 

3. FINANCIAL DEPARTMENT

FINANCIAL STATEMENT ANANLYSIS:

Financial statements are final result of accounting work done during the accounting

period. Financial statements normally include Trading, Profit and loss Account and

Balance sheet. The users of accounting information may not be able to get direct reply to

certain questions from the above statements. However, by expressing the items in the

financial statements, in relation to each other we can get meaningful information.

Analysis of financial statement has been defined as “a process of evaluating the

relationship between the component parts of the financial statements to obtain a better

understanding of a firm’s position and performance”.

Financial statement analysis is an important part of the overall financial assessment.

The different users look at the business concern from their respective view point and are

interested in knowing about its profitability and financial condition. A detailed cause and

effect study of the profitability and financial condition is the overall objectives of

financial statement analysis.

Significance of Financial Statement Analysis:

Judging the earning capacity or profitability of a business concern.

Analysing the short term and long term solvency of the business concern.

Helps in making comparative studies between various firms.

Assists in preparing budgets.

Limitations of Financial Statement Analysis:

Analysis of financial statements helps to ascertain the strength and weakness of

the business concern, but at the same time it suffers from the following

limitations.

It analyses what has happened till date and does not reflect the future.

It ignores price level changes.

Financial analysis takes into consideration only monetary matters,

qualitative aspects are ignored.

The conclusion of the analysis is based on the correctness of the financial

statements.

Analysis is a means to an end and not the end itself.

As there is variation in accounting practices followed by different firms a

valid comparison of their financial analysis is not possible.

RATIO ANALYSIS:

Ratio is an expression of one number in relation to another. Ratio analysis is the

process of determining and interpreting the numerical relationship between figures of

financial statements. A ratio is a mathematical relationship between two items expressed

in a quantitative form. An absolute figure does not convey much meaning. Generally,

with the help of other related information the significance of the absolute figure could be

understood better.

For example Nila earns Rs.50, 000 profits in her business while Nivedita earns Rs.40,

000 profits. Whose business is more profitable? Instantly we may say that as Nila earns

more profit, her business is more profitable. But in order to answer this question we must

know what was the sale made by both of them. Suppose Nila has made a sale of Rs.4,

00,000 and Nivedita Rs.3, 00,000. Now we can calculate the percentage of profit earned

on the sales to know whose business is more profitable.

Nila = 50,000/4, 00,000 *100 = 12.5%

Nivedita = 40,000/3, 00,000*100 = 13.33%

From the above calculations it is clear that the profitability of Nivedita is more than

Nila, because, she is getting 13.33% return and Nila is getting only 12.5%.

Thus, the above example explains that absolute figures by themselves may not

communicate meaningful information. Hence, business results are understood properly

only when the relevant figures are considered together.

Definition:

In the words of Kennedy and Mc Millan” the relationship of an item to another

expressed in simple mathematical form is known as ratio”.

OBJECTIVES:

The objectives of using ratios are to test the profitability, financial position and the

operating efficiency of a concern.

ADVANTAGES:

Ratio analysis is an important technique in financial analysis. It is a means for judging

soundness of the concern. The advantages of accounting ratios are as follows:

It is a useful device for analysing the financial statements.

It simplifies, summarizes the accounting figures to make it understandable.

It helps in financial forecasting.

It facilitates interfirm and intrafirm comparisons.

Ratio analysis is useful in finding the strength and weakness of a business concern.

After identifying the weakness, the ratios are also helpful in determining the causes of the

weakness.

CLASSIFICATION OF RATIOS:

LIQUIDITY RATIOS:

Liquidity ratios measure the firm’s ability to pay off current dues.i.e, repayable within

a year. Liquidity ratios are otherwise called short term Solvency ratios. The Important

liquidity ratios are

1. Current ratio

2. Liquid ratio

RATIO

LIQUIDY

CURRENT RATIO

LIQUID RATIO

ABSOLUTE LIQUID RATIO

SOLVENCY

DEBT-EQUITY RATIO

PROPRIETARY RATIO

PROFITABILITY

GROSS PROFIT RATIO

NET PROFIT RATIO

OPERATING PROFIT RATIO

OPERATING RATIO

ACTIVITY (TURNOVER)

CAPITAL TURNOVER RATIO

FIXED ASSET TURNOVER RATIO

STOCK TURNOVER RATIO

DEBTORS TURNOVER RATIO

CREDITORS TURNOVER RATIO

3. Absolute liquid ratio

1. CURRENT RATIO:

This ratio is used to assess the firm’s ability to meet its current liabilities. The

relationship of current assets to current liabilities is known as current ratio. The

ratio is calculated as:

Current Ratio = Current Assets/Current Liabilities

Current assets are those assets which are easily convertible into cash within one

year. This includes cash in hand, cash at bank, sundry debtors, bills receivable, short term

investment or marketable securities, stock and prepaid expenses.

Current liabilities are those liabilities which are payable within one year. This

includes bank overdraft, sundry debtors, bills payable and outstanding expenses.

TABLE: 1

CURRENT RATIO

YEAR CURRENT

ASSETS

CURRENT

LIABILITIES

RATIO

2004-05 8838.23 5599.39 1.57

2005-06 9536.52 6911.62 1.38

2006-07 11884.66 9337.26 1.27

2007-08 16313.52 13683.84 1.19

2008-09 23448.02 17842.41 1.31

CHART: 1

2004-05 2005-06 2006-07 2007-08 2008-090

0.2

0.4

0.6

0.8

1

1.2

1.4

1.61.57

1.38

1.271.19000000000001

1.31

CURRENT RATIO

RATIO

INTERPRETATION:-

As we know that ideal current ratio for any firm is 2:1. The current

ratio for 2004-05 is 1.578 and in 2008-09 is 1.314 times. The current ratio of company

is more than the ideal ratio. This depicts that company’s liquidity position is sound. Its

current assets are more than its current liabilities

2. LIQUID RATIO:

This ratio is used to assess the firm’s short term liquidity. The relationship of

liquid assets to current liabilities is known as Liquid ratio. It is otherwise called

as Quick Ratio or Acid Test Ratio. The ratio is calculated as:

Liquid Ratio = Liquid Assets/Current liabilities

Liquid Assets means current assets less stock and prepaid expenses.

TABLE: 2

CALCULATION OF LIQUID RATIO

YEAR LIQUID

ASSETS

CURRENT

LIABILITIES

RATIO

2004-05 6527.39 5599.39 1.16

2005-06 7326.25 6911.62 1.06

2006-07 8883.52 9337.26 0.95

2007-08 12007.61 13683.84 0.87

2008-09 17642.97 17842.41 0.98

CHART: 2

2004-05 2005-06 2006-07 2007-08 2008-090

0.2

0.4

0.6

0.8

1

1.21.15999999999999

1.06

0.9500000000000010.870000000000003

0.98

LIQUID RATIO

RATIO

INTERPRETATION:

  A quick ratio is an indication that the firm is liquidity and has the ability

to meet its current liabilities in time. The ideal quick ratio is   1:1. Company’s quick ratio

is equal to ideal ratio. This shows company has no liquidity problem.

3. ABSOLUTE LIQUID RATIO:

It is a modified form of liquid ratio. The relationship of absolute liquid assets

to liquid liabilities is known as Absolute liquid ratio. This ratio is also called as

‘Super Quick Ratio’. The ratio is calculated as:

Absolute Liquid Ratio = Absolute liquid Assets/Liquid liabilities

An absolute liquid asset means cash, bank and short term investments. Liquid

liability means current liabilities less bank overdraft.

TABLE: 3

CALCULATION OF ABSOLUTE LIQUID RATIO

YEAR ABSOLUTE

LIQUID ASSETS

LIQUID

LIABILITIES

RATIO

2004-05 839.21 5599.39 0.15

2005-06 1347.81 6911.62 0.24

2006-07 2254.89 9337.26 0.24

2007-08 5247.11 13683.84 0.38

2008-09 5654.96 17842.41 0.31

CHART: 3

2004-05 2005-06 2006-07 2007-08 2008-090

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.15

0.24 0.24

0.380000000000002

0.310000000000002

ABSOLUTE LIQUID RATIO

RATIO

INTERPRETATION:

An ideal cash position ratio is 0.75:1. It is slow down by 0.06 while comparing to

previous year. This ratio is a more rigorous measure of a firm’s liquidity position

SOLVENCY RATIOS

Solvency refers to the firm’s ability to meet its long term indebtedness. Solvency ratio

studies the firm’s ability to meet its long term obligations. The following are the

important solvency ratios:

1. Debt-Equity Ratio

2. Proprietary Ratio

1. DEBT-EQUITY RATIO:

This ratio helps to ascertain the soundness of the long term financial position of the

concern. It indicates the proportion between total long term debt and shareholders’ funds.

This also indicates the extent which the firm depends upon outsiders for its existence.

The ratio calculated as:

Debt Equity Ratio = Total long term debt/shareholders funds

Total long term debt includes debentures, long term loans from banks and financial

institutions. Shareholders’ funds include Equity share capital, preference share capital,

Reserves and surplus.

TABLE: 4

CALCULATION OF DEBT-EQUITY RATIO

YEAR TOTAL

LONGTERM

DEBT

SHARE

HOLDERS

FUNDS

RATIO

2004-05 1859.06 3369.13 0.55

2005-06 1453.57 4640.17 0.31

2006-07 2077.75 5768.43 0.36

2007-08 3583.99 9555.08 0.37

2008-09 6556.03 12459.69 0.52

CHART: 4

2004-05 2005-06 2006-07 2007-08 2008-090

0.1

0.2

0.3

0.4

0.5

0.6 0.55

0.310000000000001

0.36 0.37

0.52

DEBT-EQUITY RATIO

RATIO

INTERPRETATION:

Debt equity ratio for 2004-05 is 0.55 and 2008-09 is 0.526 times. So there

is no much change in the ratio.

2. PROPRIETARY RATIO:

This Ratio shows the relationship between proprietors or shareholders funds

and total tangible assets. The ratio is calculated as:

Proprietary Ratio = Share holders funds/Total tangible assets

Tangible assets will include all assets except goodwill, preliminary expenses etc.

TABLE: 5

CALCULATION OF PROPRIETARY RATIO

YEAR SHARE

HOLDERS

FUNDS

TOTAL

TANGIBLE

ASSETS

RATIO

2004-05 3369.13 10882 0.31

2005-06 4640.17 13060.7 0.36

2006-07 5768.43 17213.79 0.33

2007-08 9555.08 26881.22 0.36

2008-09 12459.69 36926.34 0.33

CHART: 5

2004-05 2005-06 2006-07 2007-08 2008-090.28

0.29

0.3

0.31

0.32

0.33

0.34

0.35

0.36

0.310000000000001

0.36

0.330000000000002

0.36

0.330000000000002

PROPRIETARY RATIO

RATIO

INTERPRETATION:

From the above table it is clear that the proprietary ratio in the year 2005-06 and

2007-08 was 0.36 per cent, in 2006-07 and 2008-09 ratio slightly decreased to 0.34 per

cent, in 2004-05 ratio was 0.31 per cent.

PROFITABILITY RATIO

Efficiency of a business is measured by profitability. Profitability ratio measures the

profit earning capacity of the business concern. The important profitability ratios are

discussed below:

1. Gross profit Ratio

2. Net profit Ratio

3. Operating Profit Ratio

4. Operating Ratio

1. GROSS PROFIT RATIO:

This Ratio indicates the efficiency of trading activities. The relationship of

Gross profit to Sales is known as gross profit ratio. This ratio is calculated as:

Gross Profit Ratio = Gross Profit/Sales *100

Gross profit is taken from the Trading account of the business concern. Otherwise

Gross profit can be calculated by deducting cost of goods sold from

sales. Sales mean Net Sales.

Gross Profit = Sales – Cost of goods sold

Cost of Goods Sold = Opening Stock + Purchases - Closing Stock (or) Sales – Gross

Profit

TABLE: 6

CALCULATION OF GROSS PROFIT

YEAR GROSS PROFIT SALES RATIO

IN %

2004-05 1265.50 13091.82 9.66

2005-06 1312.16 14652.92 8.95

2006-07 2003.45 17578.84 11.39

2007-08 3153.44 24854.70 12.68

2008-09 3939.10 33646.57 11.70

CHART: 6

2004-05 2005-06 2006-07 2007-08 2008-090

2

4

6

8

10

12

14

9.668.95

11.39

12.6811.7

GROSS PROFIT RATIO

RATIO

INTERPRETATION:

The gross profit ratio for 2004-05 is 9.66 and 2008-09 is 11.7 times. This

shows increase in the sales which indicates gross profit has been increased.

2. NET PROFIT RATIO:

This ratio determines the overall efficiency of the business. The relationship

of Net profit to Sales is known as Net Profit Ratio. The ratio is calculated as:

Net Profit Ratio = Net profit/sales *100

Net profit is taken from the Profit and Loss account of the business concern or the

gross profit of the concern less administration expenses, selling and distribution expenses

and financial expenses.

TABLE: 7

CALCULATION OF NET PROFIT RATIO

YEAR NET PROFIT SALES RATIO IN %

2004-05 1035.24 13091.82 7.90

2005-06 1063.34 14652.92 7.25

2006-07 1403.02 17578.84 7.98

2007-08 2173.42 24854.70 8.74

2008-09 2709 33646.57 8.05

CHART: 7

2004-05 2005-06 2006-07 2007-08 2008-090

1

2

3

4

5

6

7

8

97.9

7.257.98

8.748.05

NET PROFIT RATIO

RATIO IN %

INTERPRETATION:

The net profit ratio for 2004-05 is 7.9 and 2008-09 is 8.05 times. This

shows increase in the net profit. It is good sign for the growth of the company.

3. OPERATING PROFIT RATIO:

This ratio is an indicator of the operational efficiency of the management. It

establishes the relationship between Operating profit and sales. The ratio is

calculated as:

Operating Profit Ratio = Operating profit/sales *100

Where operating profit is Net profit + Non- operating expenses – Non-operating income.

Where, Non-operating expenses are interest on loan and loss on sale of assets.

Non-operating incomes are dividend, interest received and profit on sale of asset.

Operating Expenses include administration, selling and distribution expenses.

Financial expenses like interest on loan are excluded for this purpose.

TABLE: 8

CALCULATION OF OPERATING PROFIT RATIO

YEAR OPERATING

PROFIT

SALES RATIO IN %

2004-05 1267.04 13091.82 9.69

2005-06 1313.65 14652.92 8.96

2006-07 2004.89 17578.84 11.40

2007-08 3155.47 24854.70 12.69

2008-09 3940.41 33646.57 11.71

CHART: 8

2004-05 2005-06 2006-07 2007-08 2008-090

2

4

6

8

10

12

14

9.698.96

11.4

12.6911.71

OPERATING PROFIT RATIO

RATIO IN %

INTERPRETATION:

The Operating profit ratio for the year 2005-06 is 8.96. there was a increase in

the ratio to 11.40 in 2006-07. In the year 2007-08 was 12.69 and in the year 2008-09 it

was 11.71. There was a slight decrease over the period from 12.69 to 11.71%

4. OPERATING RATIO:

This ratio determines the operating efficiency of the business concern.

Operating ratio measures the amount of expenditure incurred in production, sales

and distribution of output. The relationship between operating cost to Sales is

known as Operating Ratio. The ratio is calculated as:

Operating Ratio = Operating Expenses/Sales *100

TABLE: 9

OPERATING RATIO

YEAR OPERATING

EXPENSES

SALES RATIO IN %

2004-05 10516.05 13091.82 80.32

2005-06 11590 14652.92 79.09

2006-07 13078.24 17578.84 74.03

2007-08 19130.46 24854.70 76.96

2008-09 26232.01 33646.57 77.96

CHART: 9

2004-05 2005-06 2006-07 2007-08 2008-0970

72

74

76

78

80

8280.32

79.09

74.03

76.96

77.96

OPERATING RATIO

RATIO IN %

INTERPRETATION:

The Operating profit ratio for the year 2005-06 is 8.96. there was a increase in

the ratio to 11.40 in 2006-07. In the year 2007-08 was 12.69 and in the year 2008-09 it

was 11.71. There was a slight decrease over the period from 12.69 to 11.71%

ACTIVITY RATIOS

Activity ratios indicate the performance of the business. The performance of a

business is judged with its sales (turnover) or cost of goods sold. These ratios are

thus referred to as Turnover ratios. A few important activity ratios are discussed

below:

1. Capital turnover ratio

2. Fixed assets turnover ratio

3. Stock turnover ratio

4. Debtors turnover ratio

5. Creditors turnover ratio

1. CAPITAL TURNOVER RATIO:

This shows the number of times the capital has been rotated in the process of

carrying on business. Efficient utilization of capital would lead to higher

profitability. The relationship between sales and Capital employed is known as

Capital Turnover Ratio. The ratio is calculated as:

Capital Turnover Ratio = Sales/Capital Employed

Where Sales means sales less sales returns and Capital employed refers to total

long term funds of the concern i.e., Equity share capital, preference share capital,

Reserves and surplus and long term borrowed funds.

TABLE: 10

CALCULATION OF CAPITAL TURNOVER RATIO

YEAR SALES CAPITAL

EMPLOYED

RATIO

2004-05 13091.82 5323 2.45

2005-06 14652.92 6171 2.37

2006-07 17578.84 7931 2.21

2007-08 24854.70 13200 1.88

2008-09 33646.57 19064 1.76

CHART: 10

2004-05 2005-06 2006-07 2007-08 2008-090

0.5

1

1.5

2

2.52.45 2.37

2.21

1.881.76

CAPITAL TURNOVER RATIO

RATIO

INTERPRETAION:

This ratio shows the efficiency of usage of capital with the sales. The ratio of capital

turnover ratio has reduced from 1.88 to 1.76 that is by 0.12. This is because of the

decrease in the sales in percentage when compared to last year showing that 41% in

2007-08 to 35% in 2008-09.

2. FIXED ASSET TURNOVER RATIO:

This shows how best the fixed assets are being utilized in the business

concern. The relationship between Sales and fixed assets is known as fixed assets

turnover ratio. The ratio is calculated as:

Fixed Assets Turnover Ratio = Sales/Fixed Assets

Fixed assets mean Fixed Assets less depreciation.

TABLE: 11

CALCULATION OF FIXED ASSET TURNOVER RATIO

YEAR SALES FIXED ASSETS RATIO

2004-05 13091.82 1082.83 12.09

2005-06 14652.92 1604.52 9.13

2006-07 17578.84 2225.72 6.82

2007-08 2485.72 3645.44 6.82

2008-09 33646.57 5194.6 6.48

CHART: 11

2004-05 2005-06 2006-07 2007-08 2008-090

2

4

6

8

10

12

1412.09

9.13

6.82 6.82 6.48

FIXED ASSET TURNOVER RATIO

RATIO

INTERPRETATION:

The fixed asset turnover has in year 2004-05 is 12.09times and in 2008-09 it

is 6.48 times. It shows difference of 5.61 times. There is an under utilization of fixed

asset by the company.

3. STOCK TURNOVER RATIO:

This ratio is otherwise called as Inventory turnover ratio. It indicates

whether stock has been efficiently used or not. It establishes a relationship

between the cost of goods sold during a particular period and the average amount

of stock in the concern. The ratio is calculated as:

Stock Turnover ratio = Cost of goods sold/Average stock

Average stock = Opening stock+ closing stock/2

If information to calculate average stock is not given then closing stock may be

taken as average stock.

TABLE: 12

CALCULATION OF STOCK TURNOVER RATIO

YEAR COST OF

GOODS SOLD

AVERAGE

STOCK

RATIO

2004-05 11826.32 2061.57 5.73

2005-06 13340.76 2235.76 5.96

2006-07 15575.39 2605.70 5.97

2007-08 21701.26 3653.52 5.93

2008-09 29707.47 5055.48 5.87

CHART: 12

2004-05 2005-06 2006-07 2007-08 2008-095.6

5.65

5.7

5.75

5.8

5.85

5.9

5.95

6

5.73

5.96 5.97

5.93

5.87

STOCK TURNOVER RATIO

RATIO

INTERPRETATION:

This ratio shows how rapidly the inventory is turning into receivable

through sales. In 2007-08 the company has high inventory turnover ratio but in 2008-09 it

has reduced to 0.10 times. This shows that the company’s inventory management

technique is less efficient as compare to last year.

4. DEBTORS TURNOVER RATIO:

This establishes the relationship between credit sales and average accounts

receivable. Debtors’ turnover ratio indicates the efficiency of the business concern

towards the collection of amount due from debtors. The ratio is calculated as:

Debtors turnover ratio = Credit Sales/Average accounts Receivable

Average Accounts Receivable = Opening + Closing Debtors/2

In case credit sales is not given, total sales can be taken as credit sales

TABLE: 13

CALCULATION OF DEBTORS TURNOVER RATIO

YEAR CREDIT SALES AVERAGE

ACCOUNTS

RECEIVABLE

RATIO

2004-05 13091.82 3639.09 3.59

2005-06 14652.92 4420.86 3.31

2006-07 17578.84 5159.4 3.40

2007-08 24854.70 6434.82 3.86

2008-09 33646.57 8710.2 3.86

CHART: 13

2004-05 2005-06 2006-07 2007-08 2008-093

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

3.59

3.31

3.4

3.86 3.86

DEBTORS TURNOVER RATIO

RATIO

INTERPRETATION:

This ratio indicates the speed with which debtors are being converted into sales.

The higher the values of debtors turnover, the more efficient is the management of credit.

But in the company the debtor turnover ratio is increased by year to year. This shows that

company is utilizing its debtor’s efficiency.

5. CREDITORS TURNOVER RATIO:

This establishes the relationship between credit purchases and average

accounts payable. Creditors’ turnover ratio indicates the period in which the

payments are made to creditors. The ratio is calculated as:

Creditors turnover ratio = Credit purchase/Average Accounts Payable

Average Accounts Payable = Opening + Closing Creditors/2

TABLE: 14

CALCULATION OF CREDITORS TURNOVER RATIO

YEAR CREDIT

PURCHASES

AVERAGE

ACCOUNTS

PAYABLE

RATIO

2004-05 10516.05 2479.66 4.24

2005-06 11590.33 2968.40 3.90

2006-07 13078.24 3505.34 3.73

2007-08 19130.46 4700.83 4.06

2008-09 26232.01 6152.86 4.26

CHART: 14

2004-05 2005-06 2006-07 2007-08 2008-093.4

3.5

3.6

3.7

3.8

3.9

4

4.1

4.2

4.3 4.24

3.9

3.73

4.06

4.26

CREDITORS TURNOVER RATIO

RATIO

INTERPRETATION:

The creditor turnover ratio for 2004-05 is 4.24 and 2008-09 is 4.26. The collection

period for 2008-09 is 95 days when compare to 2004-05 103 days.

4. SECRETARIAL DEPARTMENT

The company’s Secretarial Department which provides secretarial services and

investor services for the company and its subsidiary and Associate companies is ISO

9001:2000 certified.

As stipulated by SEBI, a Qualified Practicing Company Secretary carries out

Secretarial Audit to reconcile the total admitted capital with National Securities

Depository Limited (NSDL) and Central Depository Services (India) Limited(CSDL) and

the total issued and listed capital. This audit is carried out every quarter and the report

thereon is submitted to the stock Exchanges. The Audit confirms that the total listed and

paid up capital is in agreement with the aggregate of the total number of shares in

dematerialized form and in physical form.

FUNCTIONS:

To participate in formulation of the Company strategy and objectives

To organize and provide secretarial support to full board, all board committee,

management committee and Annual General Meeting.

To ensure Company compliance with statutory and regulatory Requirements

including good corporation governance practices.

To maintain minutes book, statutory register and executing instruction of the

board.

To deal with all matters relating to registration transfer, transmission and disposal

of shares.

To manage communication on behalf of the company as directed by the board and

the Chief Executive Officers. To ensure effective support for public and investor

relations and thus to coordinate activities of public relations and social

responsibilities.

To Co-ordinate all administrative functions of the company related to purchasing

and stores, transport and maintenance.

The Company secretary of Larsen & Toubro Limited at present is

Mr. N. HARIHARAN.

5. R&D DEPARTMENT

The R&D Group set up in July 1998, was formed to address the developmental needs

of the organisation. Its cardinal mission centers on a theme that calls for continuous

improvement in efficiency, productivity and economy. Poised to ensure continuous value

addition to our services, this department, since its inception has effectuated significant

improvements and automation in design processes for all major disciplines of the

organisation.

OBJECTIVES

Identify Potential Areas for Development

Delineate Existing Processes needing Improvements.

Infuse State of the Art Technology in Business

Processes. 

Develop Efficient Tools to address the development

needs in totality.

Highlight achievements in various national &

international forums.

The mission of R&D department is to translate technological development into design

and process innovations that will not only answer but also exceed customer expectations.

The Product Development Department has introduced several products which combine

indigenous design and international technological features. L&T was the first switchgear

manufacturer in the private sector to build a full-fledged short circuit test station in India.

Testing facilities at L&T's Electrical R&D Centre include:

70kA short circuit test station.

On-line data acquisition system for automatically acquiring and analyzing test

results

Temperature-rise test facilities for currents up to 6400A

Environment chambers to test performance in hostile environment

Electrical and mechanical endurance testing facilities

Extensive prototype making and testing facilities

CAD workstations with 3D capability

EMI test facilities.

Integration of computer-aided designing and concurrent engineering has led to the

development of designs, which keep pace with the changing demands of industry. L&T

also collaborates with the Bureau of Indian Standards (BIS) and the International Electro

technical Commission (IEC) in developing standards for the industry.

EXPENDITURE ON R&D:

2008-2009 2007-2008

(a)Capital 5.01 6.61

(b)Recurring 75.18 60.64

(c) Total 80.19 67.25

(d)Total R&D expenditure as

apercentage of total turnover

0.24% 0.27%

FOREIGN COLLABORATIONS

L&T is globalising its operations, with increasing focus on international business

opportunities. Over the years, L&T has outgrown its national barriers and extended its

activities into the outstretched arms of the Indian Ocean Rim countries. L&T’s

international presence is increasing, with worksites in 20 countries that encompass

South Asia, South East Asia, the Middle East, Russia, CIS countries including African

countries.

L&T INTERNATIONAL FZE

Larsen & Toubro International FZE (LTIFZE) is a wholly owned subsidiary of

Larsen & Toubro Limited (L&T) incorporated in 2001 at The Hamriyah Free Zone,

Sharjah, United Arab Emirates. It is the investment arm of L&T for all International

Joint Ventures and provides resource for International projects. LTIFZE is licensed

to carry out activities like hiring of Plant & Machinery, repairs & maintenance of

Plant & Machinery, project consultancy services and general trading.

LARSEN & TOUBRO (OMAN) LLC

Larsen & Toubro (Oman) LLC (LTO) is a Joint Venture between L&T

International FZE and The Muscat Trading Co. LLC, one of the leading business

groups in the Sultanate of Oman. This ISO 9001 accredited company commenced its

operations in 1994 and offers quality products and services in the construction field,

with specialisation in turnkey projects.

LARSEN & TOUBRO READYMIX CONCRETE INDUSTRIES LLC

Larsen & Toubro Ready-Mix Concrete Industries LLC (L&T RMC) is a JV

between L&T International FZE and Mr.Shukri Saleh Yahya Al Braik, an UAE

National.

L&T RMC was incorporated in the year 2006 in order to capture the vast boom

of the construction/Ready Mix Concrete industry in Dubai. The company offers the

complete design solutions for all the grades of concrete including specialized

concrete such as HPC, SCC and Colored Concrete.

LARSEN & TOUBRO CAMP FACILITIES LLC, DUBAI

Larsen & Toubro Camp Facilities was formed in association with Al-Berek

Investments in the year 2007. Main objective of this company is to Own / Take on

Lease labour camps and provide accommodation facilities to the group companies of

L&T and AL-Berek.

As on December 31, 2009, L&T had the following Associate Companies:

1. Audco India Limited

2. Ewac Alloys Limited

3. L&T-Chiyoda Limited

4. L&T-Komatsu Limited

5. L&T-Ramboll Consulting Engineers Limited

6. L&T-Case Equipment Pvt. Ltd.

7. L&T-Crossroads Private Limited

8. Gujarat Leather Industries Limited

9. The Dhamra Port Company Limited

10. Vizag IT Park Limited

11. NAC Infrastructure Equipment Limited

12. International Seaports (Haldia) Private Ltd

13. Second Vivekananda Bridge Tollway Company Private Ltd.

14. TNJ Moduletech Private Limited

15. Salzer Electronics Limited

16. Feedback Ventures Private Limited

17. L&T Camp Facilities LLC

18. Larsen & Toubro Qatar & HBK Contracting LLC

19. L&T Arun Excello Realty Private Limited

20. L&T Bombay Developers Private Limited

21. JSK Electricals Private Limited

22. Asia Alloys Precicasters Private Limited

23. Rishi Consfab Private Limited

24. International Seaport Dredging Limited

SPECIAL ACHIEVMENTS

L & T has consistently demonstrated the ability to set and surpass industry bench

marks. Here is a glimpse of some of the records set by L & T. the list is by no means

exhaustive and only serves to indicate the diversity of L & T achievement in engineering,

construction and manufacturing across several industry sectors.

India’s largest single-stream PTA plant built for Indian oil corporation’s refinery

in Panipat

The world’s largest continuous catalyst Reactor for the world’s largest refinery

The world’s biggest fluid catalytic cracking regenerator

India’s biggest marine equipment an oil and gas process platform

The world’s longest LPG pipeline from Jamnagar in Gujarat to Loni in Uttar

Pradesh, across a distance of 1270 km

India’s widest range of low tension switchgear

The world’s lightest contactor

The first power distribution products and system engineered for a tropical

environment

India’s longest coal conveyor

India’s first open sea jetty

India’s first IT park built by L&T at Bangalore

Construction of Asia’s largest blast furnace at Visakhapatnam

Construction of a cold rolling mill for a steel plant in Jamshedpur 26 months

CONCLUSION

Larsen & Toubro Limited is still going on with excellent progress and they are

declaring with foreign Countries also. Their work perfection is good and that is the main

thing is their sellers in obtaining such a well reputed name in India.

Larsen & Toubro finally started to take over the corporation on such and carrying on.

The wholesellers and Management structure is well designed which makes them so

perfect. Hence the Larsen & Toubro Limited Company established its branches in all

over the country.

Larsen & Toubro Limited Company has the main aim on its work buildings,

Construction, Bridges, Dams, and Tracks etc., In the above paragraphs the Larsen &

Toubro Limited Company’s Main objectives has been explained. Larsen & Toubro

Limited Company’s version and mission excellence in work and Complete Customer’s

satisfication. It helps them to ascertain their goal in their present and Furture.

Larsen & Toubro has grown for a long ways as compared to its previous years.

Henning Holck-Larsen and Mr.S.K. Toubro were the main persons who laid a strong

foundation to this Company.