MANAGEMENT DISCUSSION AND ANALYSIS 2015-16

Overview of World Economy:

World economic output is recovering at a slow pace with the expectations of achieving sub 3% growth in calendar year 2016. Though emerging economies from Asia could continue to drive growth, there is a potential downside risk in terms of continued slow growth in China, weak domestic consumption in Japan, volatile currency movements and sustained level of low commodity prices. There is an uncertainty over the future growth prospects of commodity driven economies like Brazil and Russia. GCC countries are also facing fiscal weakening from low crude oil prices.

The world economy is witnessing subdued corporate profits and investments, sluggish exports and manufacturing activities, and lower commodity prices. Credit growth is tepid and accommodative policies adopted by central bankers have not yet yielded the desired outcome. Prevailing fragile business sentiment is also adversely impacted by geopolitical tensions, protectionist policies adopted by some of the countries and climate & environmental concerns.

Overview of Indian Economy:

Amidst the low global growth environment, the Indian economy showed resilience and grew by 7.6% for the year 2015-16, driven mainly by the service sector. Agriculture, Forestry and Fishing  sector, which employs more than 50% of labour force of the country grew by 1.2%. Despite a muted agricultural growth occasioned by poor monsoons, India's domestic consumption remains strong on the back of favorable demographics.

India has been a beneficiary of low oil prices which has helped to improve the Government's fiscal position and has improved the profitability of PSU oil & gas marketing companies. Decline in the oil prices also underpinned lower Inflation by offsetting higher food inflation caused by poor monsoon in the brvious year. Consequently, RBI has reduced interest rates by 75 basis points during 2015-16 as compared to 50 basis points in 2014-15. The INR has debrciated against the US Dollar by around 6.5% (from a level of Rs. 62 to a level of Rs. 66) during 2015-16. FII flows were net negative in Debt & Equity markets in 2015-16 echoing the anticipation of interest rate hikes by the US Fed. China's currency devaluation stance added to weakness of the INR.

The fall in commodity prices has also had a negative impact on the Indian economy in terms of reduced profitability of metal and mining companies leading to financial stress of several businesses. This has resulted in a curtailment of fresh capital investments and some defaults in servicing debt obligations.

Capital investment spending in India has been muted. There is a strong intent from the Government to push investments and growth. However, policy implementation is progressing at a measured pace. 2016-17 appears more promising mainly due to the expectations of a good monsoon and revival of the investment cycle led by favorable government policies such as increased budgetary allocations on infrastructure projects, pushing investment through cash rich PSUs, thrust on 'Make In India', increased drive on building a strong domestic manufacturing base for Defence equipment, emphasis on increasing investments in nuclear power, initiatives to revive weak state power distribution utilities through the 'UDAY' scheme, focus on build out of Smart Cities, 'Power for All' programs and robust plans to increase investments in metro rails and roads. It is also expected that the GST Bill will be passed in parliament in 2016-17.

Business Scenario:

The Company sees good prospects in the domestic economy with the thrust on infrastructure development. The Company has invested in building up the capacities over the years and has also mapped the emerging opportunities with the internal capabilities. Increase in the pace of implementation of various initiatives by the government and revival of the investment cycle would be conducive for achieving the growth aspirations of the Company.

The Company has identified key focus areas and strategic initiatives to make the most out of the upcoming opportunities. Major thrust areas are enumerated below:

Key performance themes and focus areas for 2016-17.

• Cost competitiveness through operational efficiency:

The Company is analyzing all the aspects of its operations to improve efficiency and competitiveness on an ongoing basis. Operational Excellence programs are underway for identified areas of cost reduction and productivity improvements without compromising on quality of products and services. Employees and subcontractors play a very vital role in Company's endeavor on performance  improvements and are well sensitised, motivated and connected through a collaborative approach.

• Working capital reduction:

Working capital requirements have been on the rise given the tight liquidity position and tepid business environment. Special efforts are being taken to release cash blocked in working capital. The aim is to make each project cash positive and self-funded during the execution cycle. The focus will be on faster collections from the customers.

• Maximise benefits to the stakeholders through business value unlocking:

The Company has invested in building capacities in nuclear power forgings, shipbuilding as well as in some business segments having longer gestation periods such as power plants, ports and roads concessions. It also has  created a significant scale in service businesses in the areas of financial services and information technology. All these businesses have a potential to generate promising returns as the growth cycle of Indian economy picks up. The company is continuously exploring opportunities to unlock value from these businesses to maximise returns to its stakeholders.

• Project execution within time schedule and costs: The

Company has a large order book of close to Rs. 2500 billion to be executed over the next few years. On-going projects are led by proficient project managers, project directors and sponsors, ensuring timely project execution within targeted costs. Improved monitoring of projects under execution for achieving profitable growth is one of the major thrust areas.

Infrastructure Business

Infrastructure Business Scenario - India:

The Indian E&C sector continues to remain highly pro-cyclical. On an aggregate level, some improvements have been witnessed after many quarters of stagnant or negative growth however, interest cost remains high. Government-led CAPEX has just started to pick up through disbursement of new orders. The construction industry appears to be at the far end of  the recovery curve with delays for Government investments to trickle down as revenue.

Competitive Landscape: Many companies have resorted to the sale of assets to tide over debt obligations. Overall, the industry CAPEX upturn continued to be elusive, given the existing overcapacity and inability to invest further. Overall competition among existing players has become more intensive.

Going forward, there is a strong possibility of the CAPEX cycle recovering within 2-3 quarters.

Companies with strong balance sheet and execution capabilities are likely to sail through the current scenario.

Middle East:

Middle East economies are posting lower growth figures. The sustained low and falling oil prices  have affected their economies adversely and continue to pose a challenging scenario. Almost all GCC countries are resorting to fiscal consolidation measures, trying to diversify the economy and increase their revenue streams. With oil fiscal breakeven point for balance budget for GCC countries like Saudi Arabia, Oman and UAE hovering around $90~$100/bbl, and Qatar and Kuwait between $50~ $55/bbl, most of the Middle East countries are raising debt from domestic and international sources while brserving their currency peg. Geopolitical uncertainties continue to be the worry spot. However, most of the GCC players including Qatar, UAE, and Oman continue to pursue long term infrastructure development programs which augers well for the construction industry.

Global:

Current trend shows that the global Construction Industry could continue to perform modestly. There have been marked cancellations of a number of projects in the Middle East owing to lower oil revenues. Global contractors are focusing outside home markets and consequently flocking to select growth markets, resulting in fierce competition. MENA order awards have seen only a moderate pick-up during Q1 of calendar 2016 Y-o-Y and some sluggishness remains.

Impact of Digital technologies:

Digital technologies have the potential to create new business models, dramatically alter business processes and improve operations. While this has been demonstrated and visible in many consumer facing sectors, the opportunities in construction projects and manufacturing are also significant.

L&T proposes to implement digital technology solutions to make significant improvements in the key areas of work. The 'Digital Group' has been formed which will extensively focus on conceiving, initiating and implementing digital solutions to facilitate desired business results. Digital solutions are being developed for better project monitoring and controls by installing sensors and gateways on all the equipment deployed at project sites for tracking and monitoring the performance. Other major areas where digital solutions would be implemented are improvement in workmen productivity and safety through tagging and tracking, use of GPS and RFID for tracking to optimise logistics and material consumption, capturing of real-time data and visuals from the project sites through the use of mobile application and modern geospatial technologies including LiDAR & UAVs for surveys, analysis of data pulled in from all the initiatives into digital engine to deliver trend, actionable insights and forecast scenarios. The

Group will continue to develop breakthrough solutions for business transformation with the evolving technologies and business processes.

BUILDINGS AND FACTORIES

Overview:

L&T's Buildings & Factories (B&F) is a business vertical that has the requisite expertise to undertake Engineering, Procurement and Construction (EPC) of airports, IT parks, office buildings, institutional spaces, hospitals, stadiums, hotels, elite residential buildings, high rise structures, mass housing complexes, factory structures, cement plants and industrial warehouses. The business is pioneer in offering Total engineering solutions right from concept to commissioning across all the business lines cited above.

The competitive advantages of the business include dedicated engineering design centres, competency cells, advanced formwork systems, mechanized project execution, wide network of consultants and vendors, digitized project control and a talented pool of employees.

Business Environment:

Year 2015-16 continued to be challenging for the construction industry. Many of the customers of the business deferred their investment plans due to the liquidity crunch and low demand in the realty sector. In the international arena, the dip in crude oil prices had a major impact on investments in GCC region. The slowdown in China due to excess inventory has impacted the manufacturing sector in India. Initiatives like 'Make in India' and 'Housing for All' have led to major investment plans. However, the pace of development has been far from satisfactory.

Against all odds, Buildings & Factories has registered a steady growth and has continued to maintain its leadership position in the industry and have also expanded footprint in the Middle East to diversify the business portfolio.

Significant Initiatives:

The business implemented operational excellence initiatives across all levels to enhance profitability, like the introduction of value engineering techniques to cut down costs and improve productivity. Project cycle times were brought down by embracing technology and mechanised execution. The organisation was strengthened to improve the operational efficiency.

Safety is imbibed as a 'way of life' and implemented across all projects to educate and sensitize  all stakeholders on hazardous project activities and corresponding brventive measures. A safety innovation school was set up to impart the EHS related training. This school is the first-of-its-kind by any construction company in India.

A team of experts has been formed to study futuristic businesses and formulate suitable strategies for a competitive edge.

The projects executed by the business continued to bag various awards and recognitions during 2015-16. Four projects secured awards from The Royal Society For Prevention of Accidents (RoSPA). Four projects secured awards from the British Safety Council. Ten projects secured awards from the National Safety Council, India. Two projects secured awards from the Indian Concrete Institute. Two projects secured the Construction Week Smart Project of the Year award.

Major Orders Secured and Under Execution:

The business has secured brstigious projects in almost all their business lines like IT parks, office buildings, residential, factories, etc.

Leadership has been maintained in the construction of IT parks and office spaces in the country. Major projects were secured in the northern and southern parts of India.

Major orders were secured from its esteemed customers for the construction of elite high rise residential towers in western and southern India.

Some of the key projects commissioned by the business

this year are IT facilities and campuses for IT companies, international airports at Chandigarh and Cochin, hospitals and medical colleges for ESIC, NMC and the Government of West Bengal, high rise residential towers in various parts of the country and cement plants for Orient and Wonder Cement.

Outlook:

The GoI has a deep focus towards improving the country's infrastructure and has taken some good measures for improving the country's economy. The business is upbeat on this scenario and well positioned to capture the momentum. A few positive factors are as follows:

• The realty sector will stimulate growth in view of easing out of interest rates, relaxation in FDI norms and revival of investor sentiments.

• ' Housing for all' coupled with rapid urbanisation and a rising middle class will drive demand for affordable houses.

• The 'Make in India' initiative is expected to bolster the manufacturing industry.

• Rising healthcare quality and awareness are expected to generate more investments.

• Strong IT & BPO industry growth will drive commercial space requirements.

In the international arena, though falling oil prices may have some impact on the Middle East economy, the business is hopeful that infrastructure spending will continue  for stadiums, metro systems and healthcare related projects.

The business is poised for sustained growth in the forthcoming years against the backdrop of a reviving economy, an improving business climate, a healthy order book, a wide customer network, a strong organisational setup, an efficient supply chain management, requisite resources and a skilled workforce.

Larsen & Toubro Oman LLC (LTO): Subsidiary Company

LTO, set up in collaboration with Zubair Corporation LLC, has been providing engineering, construction and contracting services for nearly a decade in the Sultanate of Oman. The Company has an excellent track record in civil projects and continues to enjoy customer brference in the country. L&T, through its wholly-owned subsidiary L&T International FZE, holds a 65% stake in the Company.

Against stiff competition from international players, LTO successfully secured a major airport project.

The Oil price impact has limited the investment plans in the country. LTO is witnessing limited business prospects in segments like hospitals and commercial buildings. However, considering company's past performance, it is confident of maintaining the business portfolio in the region.

HEAVY CIVIL INFRASTRUCTURE

Overview:

Heavy Civil Infrastructure business undertakes Design, Engineering, and Construction of projects in the Metro, Nuclear, Hydel, Ports, Special Bridges, Tunnels and Defence segments. The goal of the business is to become a total infrastructure solutions provider, not just in India, but overseas as well. The in-house design strength and unique Construction Methodology Cell gives the business an edge over its competitors and help it serve the customers needs from concept to commissioning.

Developmental Projects Business

Developmental Projects business segment comprises (a) Infrastructure projects executed through L&T Infrastructure Development Limited and its subsidiaries and associates (L&T IDPL Group); (b) Power Development Projects executed through L&T Power Development Limited and its subsidiaries (L&T PDL Group) and (c) Kattupalli Port operations of L&T Shipbuilding Limited.

The operations of developmental projects business segment primarily involves development, operation and maintenance of basic infrastructure projects in the Public Private Partnership (PPP) format, toll collection including annuity based road projects, power development and power transmission, development and operation of port facilities and providing related advisory services. Significant cash generating assets have been created under the current business model which are being explored for monetisation on a continuous basis in order to maximise value creation for the benefits of stakeholders.

L&T IDPL Group:

Overview:

L&T Infrastructure Development Projects Limited (L&T IDPL) is a major player in the Public-Private Partnership projects in India with business interests across Roads and Bridges, Ports, Metro Rail, Wind energy and emerging sectors such as Power Transmission Lines. As of March 2016, L&T IDPL has a portfolio of 17 projects with 7,800 Km at an estimated project cost of over Rs. 186 Bn.

L&T IDPL's portfolio of infrastructure assets also includes the Hyderabad Metro Rail project, a transmission line project in Karnataka, a port berth in Haldia and windmills in Tamil Nadu.

Business Environment

The high economic growth witnessed by India during the last decade was accompanied by realisation of the need for enhanced investment in infrastructure. Rapid urbanisation and industrial growth led to demand for basic infrastructure such as water supply and sanitation, transportation and energy. Rapid growth in purchasing power in the rural areas simultaneously meant a need for improving connectivity and services for attaining a seamlessly integrated network of logistics and facilities. In order to augment economic growth, the government initiated several policies and enabling measures to support the creation of high-quality infrastructure and efficient delivery of services to its citizens.

The recent slowdown of PPP projects could be attributed to a combination of events, namely the global economic slowdown, weak regulatory and institutional frameworks, delay in issue of clearances by authorities, financing issues (over-leveraged debt and paucity of equity), acquisition of land, aggressive bidding by developers, contractual issues, including long drawn out dispute resolution arising in a maturing PPP landscape, inadequate diligence and appraisal by lenders, and lack of flexibility in contractual arrangements.

Road Sector

L&T BPP Tollway Limited (BPP)> The Beawar - Pali - Pindwara road in Rajasthan is a mega highway project covering a stretch of 244.12 Km traversing three districts in Rajasthan. It provides crucial connectivity between North India and Gujarat. BPP achieved COD on June 11, 2015 for the entire length. L&T Devihalli Hassan Tollway Limited (DHTL) has obtained COD for the residual 2.976 km vide letter dated October 6, 2015 from the independent engineer. With this, the total project length of 77.228 kms is now fully operational and tolled.

Construction is in full swing on Deccan Tollways Limited (DTL) in Telangana and Sambalpur Rourkela (SRTL) in Odisha. The two road projects are expected to commence tolling in the financial year 2017-18.

L&T Metro Rail (Hyderabad) Limited

L&T Metro Rail (Hyderabad) Limited (L&T MRHL) was incorporated on 24th August, 2010 as a special purpose vehicle to undertake the business to construct, operate and maintain the Metro Rail System including the Transit Oriented Development in Hyderabad under Public-Private Partnership model on Design, Build, Finance, Operate and Transfer (DBFOT) basis. The Company entered into a Concession Agreement with the erstwhile Government of Andhra Pradesh on 4th September, 2010.

The Metro Rail system is being constructed on three elevated corridors from Miyapur to L.B.Nagar, Jubilee Bus Station to Falaknuma and from Nagole to Shilparamam covering a total distance of 71.16 Km. The concession period of the project is for 35 years including the initial construction period of 5 years. The concession period is extendable for a further period of 25 years subject to the fulfillment of certain conditions by the Company as set out in the Concession Agreement.

The estimated project cost is Rs. 16375 crore which includes the cost of rail system and 6 million Transit Oriented Development (TOD) which is to be funded by a term loan of Rs. 11478 crore, equity share capital of Rs. 3439 crore and Viability Gap Fund from Government of Rs. 1458 crore. The Company has tied up the entire debt and achieved financial closure on 1st March, 2011.

In terms of the Concession Agreement, both the Government of Telangana (State Govt) and L&T MRHL are required to comply with certain conditions brcedent for the occurrence of appointed date which shall be the date for commencement of concession period. The State Govt has declared the appointed date as 5th July, 2012 upon fulfillment of the condition brcedents (CP) from both the parties i.e., L&T Metro Rail (Hyderabad) Limited and the State Govt.

The Company has achieved its 4th Project milestone as per the Concession Agreement and has expended 50% of the project cost by 5th July, 2015. The Company is executing the project covering a total distance of 71.16 Km in three different corridors. This entire distance is further sub-divided into six stages for ease of implementation. CMRS (Commissioner of Metro Rail Safety) approval has been obtained for Stage 1 of the project and is fully ready for commissioning. Stage 2 is expected to be ready by October 2016. The overall physical progress of the project as at 31st March, 2016 is 61%. Construction works in Stages 3, 4 and 5 are going on at a brisk pace.

During the year 2015-16, the Company successfully obtained two tranches of Viability Grant of Funding (VGF) amounting to around Rs. 660 crore from the Central Government. This confirms the certainty of Central Government participating in the project in the form of VGF.

There is an encouraging environment for commercial real estate with a few major IT and IT enabled companies announcing big plans during past few months to set up shops or expand their business plans. This would help the project to market its real estate products in retail and office segments at better prices.

Significant initiatives:

To provide a safe highway to users and to reduce maintenance costs due to overloaded vehicles, Weigh-in-Motion (WIM) system was implemented during December 2015 at L&T BPP Tollway Limited. This calculates the load of each axle of the vehicle which moves on the platform. A penalty is charged at Pay Axis (Toll Booth) if the vehicle is found to be overloaded.

Pursuant to the Investment Agreement of June 2014, the Canada Pension Plan Investment Board (CPPIB) made an initial investment of Rs. 1000 crore in L&T IDPL in December 16, 2014 and the second tranche of Rs. 1000 crore was made in December 15, 2015 by way of subscription to compulsorily convertible brference shares.

The Company has entered into a Share Purchase Agreement on April 4, 2016 for sale of its stake in L&T Infrastructure Development Projects Lanka (Private) Limited. The divestment was completed in May 2016 and has received the sale proceeds.

Outlook:

The recovery in the sector is likely to be gradual as most players are still burdened with leveraged balance sheets even as the volume of stalled or slow moving projects remains sizeable. In addition, aggressive bidding in the past and inability or limited ability to raise equity for Build-Operate-Transfer (BOT) projects have impacted the viability of infrastructure projects and reduced the risk appetite of developers for new projects. Further, structural constraints like uncertainty in land acquisition, delays in approvals and inadequacy of long-term funding avenues, if not tackled expeditiously, can slow down recovery in the infrastructure sector. The pace of recovery in the construction sector is likely to be slow and will be linked to the ground impact of the policy measures taken as well as the availability of funds.

The Group is expecting to improve toll revenues by replacing the old tolling system in some of the plazas with more robust systems and by implementation of weight-based tolling in a few more projects. Improvement in traffic is also expected on account of the revival in the economy. However, WPI has been in the negative territory in the second year which has led to reduction in toll rates in some of the projects. The negative trend in WPI is expected to partially offset the benefits accrued from traffic growth and lower interest costs. The Company will also actively participate in policy advocacy to improve and strengthen the PPP sector. The Company will continue to look for opportunity to churn its portfolio and would refinance some of the road projects during the year. Once the termination matters are resolved, the Company is expected to participate in the bids coming up in the road and transmission line sectors.

L&T Power Development Group

Overview:

L&T Power Development Limited (L&T PDL), a wholly owned subsidiary of L&T, has been incorporated as its Power Development arm with an objective of developing, investing, operating and maintaining power generation projects. Currently, L&T PDL portfolio comprises projects in thermal and hydel power generation.

Hydel Power Projects

Hydel projects with an aggregate capacity of 870 MW are in various stages of development. A brief status is depicted below:

Thermal Power Projects - Nabha Power Limited (NPL)

NPL is a 2X700 MW supercritical thermal power plant at Rajpura, Punjab. This is the first development project and the first power plant to be owned and operated by L&T. All the power generated from this plant is contracted with Punjab State Power Corporation Limited (PSPCL) for a period of 25 years under a Power Purchase Agreement (PPA). The plant is built on super critical technology of Mitsubishi, Japan. It is the first 'Made in India' supercritical power plant to be commissioned and operational in India.

The plant sources its fuel from South Eastern Coalfields Ltd. (Subsidiary of CIL - Coal India Limited) under a 20 year Fuel Supply Agreement (FSA). The Company also secured approvals to arrange coal from alternative sources to make up for any shortage in supply of coal under the FSA. Bhakra-Nangal distributary is the perennial source of water for the plant under an allocation by the state irrigation. The plant is operated by an in-house experienced team of operations and maintenance professionals.

The power plant has been running successfully for over two years with a technical plant availability of over 90%. NPL has been the most reliable source of power for the state of Punjab and has supported the state with an uninterrupted supply during peak season. NPL also happens to be the lowest cost power producer in Punjab with benchmark operational efficiency which is amongst the best in the country.

Business Environment:

Fiscal year 2015-16 witnessed muted growth in demand for power with an all India plant load factor at around 62%. Punjab state also registered a modest growth in demand. PSPCL undertook power banking transactions creating an additional demand during lean seasons. Punjab joined 'Ujwal DISCOM Assurance Yojana' scheme of the Central Government during the year. UDAY scheme is aimed at operational and financial turnaround of the DISCOMs.

Coal India Limited ended the financial year with an output of 536.5 million tonnes, 8.6% higher than brceding year. However, the output was short of targeted production by 2.4%. SECL, which supplies coal to NPL, registered a production of 135.6 million tonnes with a growth of 5.8%. Availability of railway rakes for transportation of coal from SECL to NPL's plant in Punjab improved during the year.

Regulatory environment continued to pose challenges to the IPPs (Independent power producers) particularly in tariff related areas.

Significant Milestones & Initiatives:

• 91.79% availability achieved

• Railway siding operational on 4th February, 2016

• Operational efficiency measures implemented and monitored to improve efficiency

• Unit start-up procedure optimised to reduce the time and cost

• ISO 9001, 14001 and 18001 certification awarded

• Achieved 87% materialization of linkage coal during large part of 2015-16

• NIL availability loss on account of shortage of coal

• 99% of dry fly ash disposal achieved

• Effective financing strategies and refinancing iterations helped to maintain Interest costs at sub 9%

• CSR initiatives in the area of development of village infrastructure, education, skill building, gender equality, health and environment were implemented during the year.

Outlook:

Increased private participation in the power sector is expected to play an important role in future capacity additions. Lower per capita consumption continues to promise robust long term demand. On the fuel side coal production capacity is expected to further increase in 2016-17 up to around 600 million tonnes registering 11% growth over the brceding year.

Punjab is expected to witness a flat growth of around 5% in demand for electricity during 2016-17. NPL is likely to remain the lowest cost power producer amongst the IPPs in the state which will translate into a higher plant load factor in fiscal year 2016-17 at around 70%.

Major focus areas for NPL in coming year are maximising plant availability, improving operational efficiency, enhancing fuel quality and settling the regulatory issues. Focus area for the hydel business would be expediting construction activities at its Singoli-Bhatwari hydel project.

L&T Shipbuilding Limited: Kattupalli Port Operations

L&T Shipbuilding Limited is a joint venture between L&T and Tamil Nadu Industrial Development and Corporation Limited (TIDCO) wherein L&T holds 97% and TIDCO holds 3% in the Company to develop shipyard-cum-minor port complex. Both the shipyard and the port have SEZ status. Kattupalli port at Chennai has a container terminal with two container berths.

During the year 2015-16, the Company entered into an agreement with Adani Group (a port operator) to demerge the port business and divest the stake in the resulting company. Pending formalities of the demerger process, the operations of the port have been handed over to the operator for a fixed share in revenue. It is planned to complete the transfer of the port ownership in entirety during financial year 2016-17.

Financial Review 2015-16

I. L&T CONSOLIDATED

A. PERFORMANCE REVIEW

The Company's performance during the year has been satisfactory driven by revenue growth with stable margins despite testing business conditions characterised by global slowdown, declining commodity prices, volatile currency movements and geopolitical uncertainties. Indian economy though growing at relatively faster pace did not witness pick up in investment cycle.

The Company has been focusing on conversion of order book and achieving operational excellence, cash conservation and monetising Company's non-core assets to maximise shareholder value.

As at March 31, 2016, L&T Group comprises of 125 subsidiaries, 8 associates and 22 joint venture companies. Most of the group companies are strategic extensions of the project and product businesses of L&T. Majority of the subsidiaries support L&T's core businesses and enable access to new geographies, products and business segments. While certain distinct service businesses such as Information Technology, Technology Services, Developmental Projects and Financial Services are housed in separate subsidiary and associate companies of L&T, project business catering to the hydrocarbon sector is also housed in a separate group of companies to provide the sector specific focus.

Order Inflow & Order Book

L&T group secured new orders worth Rs. 136858 crore for the year 2015-16, reflecting a decline of 11.9% over the brvious year. Domestic order inflow was lower by 20.1% y-o-y, as the investment climate remained subdued during the year. While capital spending by private sector was muted on account of lower commodity prices, weak demand and large excess capacities, investments in infrastructure development picked up in the second half of the year. The International segment grew 12.4% y-o-y and contributed 32.1% of total order wins during the year as compared to 25.2% in brvious year. Order inflows of Power, Metallurgical & Material Handling and Heavy Engineering businesses were adversely affected. Infrastructure segment contributed 62% of total order inflow during the year at Rs. 84817 crore, marginally lower by 1.1% as compared to the brvious year.

The Group has a robust order book of Rs. 249949 crore as at March 31, 2016, at 2.4 times of current revenue providing revenue visibility for next few years. Infrastructure segment contributed 75% of the consolidated order book, comprising mainly Buildings & Factories 22.7%, Transportation Infrastructure 15.8%, Heavy Civil Infrastructure 15.3%, Power Transmission & Distribution 12.3% and Water, Smart World & Communication 8.9%.

The order book grew by 7.4% over the brvious year. International orders constitute 28.3% of the order book as at March 31, 2016 as compared to 26.2% in the brvious year.

Revenue from Operations

The Group revenue rose by 11.6% y-o-y to Rs. 103522 crore during the year 2015-16. The growth was largely contributed by Infrastructure and Power segments on the back of project execution from opening order book. Financial Services, L&T Infotech and L&T Technology Services recorded healthy y-o-y increase in the Revenue. International revenue contributed 32.2% to revenue as compared to 27.9% in the brvious year.

Operating Cost and PBDIT

Manufacturing, Construction and Operating (MCO) expenses increased by 11.5% y-o-y at Rs. 74946 crore, in line with revenue growth. These expenses mainly comprise cost of construction material and other raw materials, subcontracting expenses, manpower costs and interest expenses. On a relative basis, the MCO expenses reduced marginally from 73.1% to 73.0% of net revenue led by softer commodity prices during the year.

Staff expenses for the year 2015-16 at Rs. 9205 crore increased by 14.2% as compared to the brvious year mainly on account of annual pay revisions and headcount additions especially in international operations.

Sales, Administration & Other expenses increased by 12.7% y-o-y to Rs. 6138 crore mainly due to higher provisions towards doubtful debts and non-performing assets (NPAs) and expenses on account of increased international business.

The Group operating profit (PBDIT) grew by 9.6% y-o-y at Rs. 12343 crore for the year 2015-16, while the operating margin for the year declined by 20 basis points to 12.0%.

Debrciation & Amortisation charge

Debrciation & Amortisation charge for the year 2015-16 higher by 5.1% at Rs. 2756 crore as compared to Rs. 2623 crore in the brvious year on account of amortisation on newly commissioned road projects during the year. The Debrciation & Amortisation charge for the year also includes impairment charge on the terminated road project.

Other Income

Other income for the year 2015-16 amounting to Rs.1183 crore grew by 10.1% over Rs. 1075 crore of the brvious year. This consists largely of the profit on sale of liquid investments, interest and dividend income from treasury investments.

Finance cost

The interest expense for the year 2015-16 at Rs. 3041 crore was higher by 7.1% in comparison to Rs. 2840 crore for the brvious year with increase in the level of borrowings and cessation of capitalisation of borrowing costs on certain road projects becoming operational. The average borrowing cost for the year 2015-16 was contained at 9.8% p.a. through effective refinancing and judicious selection of type & tenor of the fresh borrowings.

Exceptional Items

Exceptional items of Rs. 343 crore in the Statement of Profit and Loss in current year mainly rebrsent gain on sale of (a) part stake in L&T Finance Holdings Limited, (b) stake in Salzer Electronics Limited and (c) gain on sale of Foundry business.

Profit after Tax

Consolidated Profit after Tax (PAT) at Rs. 5091 crore for the year 2015-16 rose by 6.8% over the brvious year.

Earnings per share

Consolidated Earnings per share (EPS) including exceptional and extraordinary items for the year 2015-16 at Rs. 54.69 recorded an increase of 6.5% over the brvious year.

Net Worth, Capital employed and Returns

The Net Worth of the shareholders at Rs. 43992 crore as at March 31, 2016 increased by Rs. 3083 crore as compared to the position as at March 31, 2015. Return on Net Worth (RONW) for the year 2015-16 was stable at 12%. Capital employed increased to Rs. 92331 crore as compared to Rs. 86407 crore as at March 31, 2015.

Liquidity and Gearing

Stronger underlying business performance contributed higher cash from business operations at Rs. 7003 crore. Net borrowings during the year stood at Rs. 1159 crore, mainly attributable to Developmental projects business. L&T IDPL raised additional Rs. 1000 crore by issuance of compulsorily convertible brference shares to Canada Pension Plan Investment Board (CPPIB) during December 2015. Stake sales in subsidiary companies have also contributed Rs. 424 crore largely attributable to divestment of CSJ infrastructure Limited & L&T Infocity Limited. Dividend and treasury income rose to Rs. 627 crore during the year owing to efficient treasury management.

The Group incurred capital expenditure of Rs. 5058 crore during the year 2015-16 vis-à-vis Rs. 6095 crore in the brvious year, mainly due to lower spend in L&T Hyderabad Metro Rail project. There has been a net increase of Rs. 128 crore in the cash balances as at March 31, 2016 as compared to the beginning of the year.

The total borrowings as at March 31, 2016 stood at Rs. 101307 crore as compared to Rs. 90571 crore. The gross Debt Equity ratio is 2.30:1 as at March 31, 2016 as compared to 2.21:1 at March 31, 2015.

B. SEGMENT WISE PERFORMANCE (GROUP)

1. Infrastructure Segment

Infrastructure segment bagged fresh orders worth Rs. 84817 crore for the year 2015-16 reflecting marginal drop of 1.1% over the brvious year. International order wins led by Power Transmission & Distribution business constituted 28.5% of the total order inflow during the year up from 21.5% in the brvious year.

The order inflow declined marginally as certain anticipated domestic project awards in Heavy Civil and Transportation Infrastructure were deferred. Buildings & Factories business, though witnessed muted prospects, constituted major portion of the order intake of the Infrastructure segment.

Infrastructure segment clocked gross revenue of Rs. 50387 crore for the year 2015-16 registering 12.3% growth over the brvious year. Revenue growth was driven by Transportation Infrastructure, Power Transmission & Distribution and Water, Smart World & Communication businesses on the back of the execution of the jobs from the opening order book. Revenue from international operations constituted 28.8% of the total revenues of the segment during the year as compared to 24.1% in the brvious year.

Infrastructure Segment operating profit was higher by 18.6% y-o-y at Rs. 5684 crore for 2015-16. Operating margins improved by 60 basis points at 11.7% during the year 2015-16 owing to improved project execution and settlement of variation claims.

The Funds employed by the segment at Rs. 18101 crore as at March 31, 2016 increased by 28.0% vis-à-vis March 31, 2015, largely rebrsenting net working capital.

2. Power Segment

Power segment bagged orders worth Rs. 2702 crore as compared to Rs. 15125 crore in the brvious year. The segment was challenged by intense competition for rather limited opportunities.

Segment revenue grew 47.4% y-o-y at Rs. 7011 crore, as the jobs under execution achieved substantial progress during the year. Revenue from International projects at Rs. 1870 crore rebrsented 26.7% of total revenue.

Operating profit margins declined 450 basis points to 11.6% during the year ended March 31, 2016 as compared to 16.1% in 2014-15. Drop in margins reflects changing job mix and the relative status of the stage of completion of the projects.

The Funds employed by Power segment remains elevated at Rs. 2801 crore as at March 31, 2016 higher by 36.7% as compared to the position as at March 31, 2015. This is mainly due to the increase in the construction work-in-progress, pending completion of contractual billing milestones.

3. Metallurgical and Material Handling Segment (MMH)

Order Inflow of Rs. 3661 crore for the year was lower by 40.3% y-o-y due to sluggish domestic business environment. The soft commodity prices that brvailed through 2015-16 impacted the Capex outlay of MMH segment.

MMH segment recorded gross revenue of Rs. 2837 crore for the year ended March 31, 2016, a decline of 17.2% over the brvious year, due to depleted order book and slower implementation of projects by customers.

The Group Segment operating margins for the year declined sharply by 500 basis points to 5.5% due to under recoveries, slower project execution and cost overruns in certain projects.

Funds employed by the segment at Rs. 3191 crore as at March 31, 2016 remained at elevated levels due to delay in collecting milestone payments from customers.

4. Heavy Engineering Segment (HE)

Heavy Engineering segment recorded order inflow of Rs. 2295 crore during 2015-16 reflecting a reduction of 54% y-o-y as domestic order prospects in Process, Plant & Nuclear (PP&N) and Defence & Aerospace (D&A) businesses did not materialise. International orders constituted 62% of the total order inflow.

Reflecting depleted order book, the segment gross revenue of Rs 3323 crore fell 8.3% compared to the brvious year. Revenue from international operations constituted 42.6% of the total revenue.

The segment incurred operating loss of Rs. 21 crore for the year against an operating profit of Rs. 418 crore in the brvious year, due to cost & time overruns in certain jobs in PP&N business, provision for debts doubtful of realisation and continued under-recoveries in Forgings joint venture.

Funds employed by the segment decreased by 21.5% y-o-y at Rs. 3230 crore as at March 31, 2016 aided by growth in customer advances and higher vendor credit.

5. Electrical & Automation Segment (E&A)

E&A segment recorded gross revenue of Rs. 5446 crore for 2015-16. Stable top line in conditions of weak demand, tight liquidity and deferment of projects underscored the market acceptability of the products suite. Revenue from international operations continued to be around 31.1% of the total revenue of the segment, same as compared to 31.8% in the brvious year.

Segment operating profit for the year fell 9% y-o-y to Rs. 646 crore. Consequently operating profit margins declined by 90 basis points y-o-y to 13.9%. Group's profitability was adversely impacted by competitive brssures on pricing and losses incurred by Middle East subsidiary companies

Funds employed by the E&A segment at Rs. 2856 crore were contained at brvious year's levels.

6. Hydrocarbon Segment

Hydrocarbon segment secured fresh orders aggregating to Rs. 10447 crore during the year maintaining the level similar to that of the brvious year. Low oil prices, geopolitical uncertainties and currency volatility created a challenging business environment in which capex investments by oil producing companies were either slashed or deferred. Consequently, International orders accounted for 32.8% of total order inflow for 2015-16 as compared to 64.0% in the brvious year. Big ticket orders for fertilizer plant and offshore oil field development helped domestic order flows during the year.

Segment revenue grew by 18.9% y-o-y at Rs. 8840 crore for the year as jobs under execution progressed on expected lines. International revenue contributed 47% of the total revenue of the segment as compared to 51% in the brvious year.

The segment posted an operating profit of Rs. 197 crore as compared to operating loss of Rs.X 1128 crore in the brvious year. Close-out costs in international projects coupled with under-recoveries contained the margin improvement.

Funds employed by the segment at Rs. 2037 crore as at March 31, 2016 decreased by 10.3% as compared to March 31, 2015. The reduction was aided by lower working capital.

7. IT & Technology Services (IT & TS)

IT & TS segment comprises L&T Infotech group of companies and L&T Technology Services group of companies. Segment recorded gross revenue of Rs. 9117 crore for the year ended March 31, 2016 with robust growth of 19.1% over the brvious year. Most of the revenues of the segment are from international customers.

L&T Infotech group recorded gross revenue of Rs. 6075 crore during the year ended March 31, 2016, registering 19.9% growth over the brvious year. The revenue in USD terms increased by 9.5%. Geographical composition of the revenue includes 69% from North America, 17% from Europe, 8% from India & Asia and 6% from rest of the world. Total manpower as at March 31, 2016 stood at 20072 vis-à-vis 19479 as at March 31, 2015.

L&T Technology Services group achieved growth of 17.5% in revenue for 2015-16 at Rs. 3042 crore mainly in industrial products and process engineering vertical group. In USD terms the revenue recorded a y-o-y growth of 9.5%. About 62% of revenue are contributed by North America region as compared to 57% in the brvious year.

The Segment Operating profit rose by 25.2% y-o-y to Rs. 1938 crore for the year 2015-16 with operating margin

improvement of 120 basis points on account of higher manpower utilisation and favorable currency movement.

The Funds employed by the segment at Rs. 3142 crore as at March 31, 2016 is lower by 6.9% as compared to March 31, 2015 at Rs. 3377 crore.

8. Financial Services (FS)

Financial Services segment comprises of asset financing, mutual funds and asset management businesses housed in L&T Finance Holdings Limited and its subsidiaries. The segment also includes general insurance business. Segment revenue grew 17.8% y-o-y at Rs. 7541 crore during the year ended March 31, 2016 aided by good momentum across various businesses.

Loan book of Finance business expanded by 22.4% y-o-y to Rs. 57831 crore as at March 31, 2016, driven by healthy disbursements in operational projects in renewable energy and roads and retail products. Net interest margins at 5.67% remained stable.

Asset management business increased 16.7% y-o-y aided by growth in equity assets with Assets Under Management of Rs. 24772 crore as at March 31, 2016.

The General Insurance business reported Gross Written Premium (GWP) of Rs. 483 crore up by 40% as compared to the brvious year.

Disbursal of fresh loans and advances of Rs. 41765 crore during 2015-16, recorded a growth of 29% over the brvious year. Gross Non-performing Assets (GNPA) of the segment at 3.05% of loan assets as at March 31, 2016 improved marginally over March 31, 2015.

9. Developmental Projects (DP)

The Group has acquired concessions through competitive bidding process for the development of Power projects, Roads, Bridges, Hyderabad Metro Rail, Ports and Power Transmission Lines. Total portfolio of the group consists of 5 power projects, 14 roads & bridges projects (excluding projects under termination), 2 ports, 1 transmission line project & 1 metro rail project. Power projects are developed by L&T Power Development Limited, Kattupalli port operations are housed in L&T Shipbuilding Limited, a subsidiary company & other projects are developed by L&T Infrastructure Development Projects Limited. The total estimated cost of projects pegged at Rs. 53050 crore as at March 31, 2016, requiring equity commitment of Rs. 12976 crore of which equity infusion of Rs. 9543 crore was done as at March 2016.

The segment recorded revenue of Rs. 5146 crore for the year ended March 31, 2016 as compared to Rs. 5155 crore in the brvious year. Lower toll collections and loss of Dhamra Port revenues (business sold in 2014-15) was compensated by higher revenue from Rajpura power plant.

The segment clocked operating profit at Rs. 1367 crore for the year 2015-16 declining by 36.3% y-o-y due to lower toll collections as also Dhamra Port divestment gains counted in the brvious year.

The Funds employed by the DP segment increased by 14.8% y-o-y at Rs. 31060 crore as at March 31, 2016 owing to higher capex outlay for Hyderabad Metro Rail, Transmission and Road projects.

L&T IDPL raised Rs. 1000 crore by way of compulsorily convertible brference shares subscribed by Canada Pension Plan Investment Board (CPPIB) during December 2015 taking the total investment by CPPIB to Rs. 2000 crore.

10. Others Segment

Other Segment covers Realty, Shipbuilding, Construction & Mining equipment and Industrial Machinery businesses.

Realty business recorded growth of 3.5% in revenue at Rs. 1997 crore for the year 2015-16 and achieved operating profit of Rs. 1130 crore.

Shipbuilding business recorded revenue of Rs. 820 crore for the year. The business suffered operating loss of Rs. 328 crore for 2015-16 as against operating loss of Rs. 208 crore in the brvious year as performance was severely affected by time/cost overruns and under-recovery of overheads due to low capacity utilisation. Construction & Mining equipment and Industrial Machinery businesses recorded growth of 9.7% in revenue at Rs. 4318 crore for the year 2015-16. Operating profit declined marginally to Rs. 551 crore due to unfavorable product mix, sluggish demand & cost brssures.

Segment funds employed reduced by 12.6% to Rs. 9423 crore due to improved customer realisation in Realty business and customer advances in Shipbuilding business

II. L&T STANDALONE PERFORMANCE REVIEW

The Company's standalone financials capture performance of Infrastructure, Power, Heavy Engineering, Electrical & Automation, Metallurgical and Material Handling, Construction & Mining equipment and Industrial Machinery and a part of Shipbuilding and Realty businesses.

As the headwinds continued to slow economic revival in the country and in most major global markets, the Company focused on profitable execution, optimising working capital and monetisation of non-core assets.

Order Inflow & Order Book

Order wins during 2015-16 were Rs. 85052 crore recording a decline of 22.5% y-o-y, as domestic opportunities have delayed/deferred. Order inflow during the year is mainly contributed by Infrastructure segment at 82.7% as compared to 70.6% in the brvious year. Power, Metallurgical & Metal Handling and Heavy Engineering businesses saw significant drop in order intake during the year. International business clocked growth of over 22% with the order inflow at Rs. 18693 crore aided by success in commercial buildings space and power transmission & distribution projects. International orders are at 22% of the total order inflow for 2015-16.

Order Book as at March 31, 2016 stood at Rs. 199040 crore, 78.5% of which is contributed by Infrastructure segment. International orders constituted 16% of the current order book. Order book to revenue ratio at 3.29, gives a good revenue visibility over the next few years.

Revenue from Operations

The Company achieved Revenue of Rs. 60415 crore vis-à-vis Rs. 57558 crore in the brvious year. Revenue growth was delivered by Power segment and Infrastructure segment inspite of challenging execution conditions and delays in customer clearances. Other major traditional businesses such as Heavy Engineering and Metallurgical and Material Handling had significant decline in the revenue as order book depleted. Electrical & Automation business witnessed sluggish industrial demand and has reported marginal growth in revenue for 2015-16 over the brvious year.

Operating Cost and PBDIT

Manufacturing, Construction and Operating (MCO) expenses comprising cost of construction material, manufacturing materials, components and subcontracting expenses amounted to Rs. 46629 crore registering an increase of 5.1%. These costs rebrsent 78% of revenue,an increase of 20 basis points over the brvious year.

Operating Cost and PBDIT

Manufacturing, Construction and Operating (MCO) expenses comprising cost of construction material, manufacturing materials, components and subcontracting expenses amounted to Rs. 46629 crore registering an

The Staff expenses for the year at Rs. 4480 crore increased by 7.6% y-o-y due to annual pay revisions, manpower additions and increased international operations. The Company's manpower strength stood at 43354 as compared to 44081 as at March 31, 2015.

Sales, Administration & Other expenses for the year at Rs. 2500 crore increased by 25.9% y-o-y due to increased provision for doubtful debts and advances, outlay on operational excellence initiatives and higher spend on CSR activities.

The operating profit margin for the year at 10.3% declined by 110 basis y-o-y. Consequently, Profit before debrciation, interest and tax (PBDIT) stood at Rs. 6171 crore for the year, lower by 4.9% over the brvious year.

Debrciation & Amortisation charge

Debrciation & Amortisation charge for the year 2015-16 at Rs. 999 crore was broadly in line with the brvious year charge of Rs. 1008 crore.

Other Income

Other income for the year 2015-16 amounted to Rs. 2406 crore as against Rs. 2283 crore for the brvious year. It consists of dividend from group companies Rs. 1008 crore (brviousyear: Rs. 851 crore), interest on temporary investments in government securities and bonds Rs. 198 crore (brvious year: Rs.212 crore), interest on inter-corporate deposit given to group companies Rs. 268 crore (brvious year: Rs. 293 crore), profit on sale of long term investments Rs. 249 crore (brvious year: Nil) and cost recoveries from group companies Rs. 323 crore (brvious year: Rs. 301 crore).

Finance cost

The interest expenses for the year at Rs. 1449 crore were higher by 2.1% vis-à-vis Rs. 1420 crore for the brvious year. The increase in the interest expenses is attributable to incremental borrowings during the year to finance the working capital needs of the businesses. The average borrowing cost for the year 2015-16 was lower by 50 basis points at 9.0% p.a. led by refinancing of loans and efficient cash management.

Exceptional Item

Exceptional items of Rs. 560 crore in the Statement of Profit and Loss for the current year mainly includes gain on part stake-sale in L&T Finance Holdings Limited, gain on transfer of the Company's stake in a few subsidiary companies to its wholly-owned subsidiary L&T Hydrocarbon Engineering Ltd as a part of restructuring, gain on divestment of stake in associate Company and gain on sale of Foundry business.

The Company has impaired its investment in its subsidiary engaged in the general insurance business.

Profit after Tax

Profit after Tax (PAT), including exceptional items, for the year 2015-16 grew by 5% to Rs. 5311 crore as compared to Rs. 5056 crore in the brvious year, contributed by higher divestment gains.

Earnings per share

The Earnings per share (EPS) for the year 2015-16 at Rs. 57.07 grew by 4.8% over the brvious year.

Funds Employed and Returns

Funds Employed by the Company at Rs. 54530 crore as at March 31, 2016 increased by Rs. 4146 crore during the year.

The Company incurred Rs. 643 crore (net) towards capital expenditure during the year, largely on procurement of plant and equipment for the Infrastructure segment.

At the segment aggregate level, net working capital as on March 31, 2016 at Rs. 16870 crore increased to 27.9% of revenue as compared to Rs. 14938 crore at 26.0% of revenue as on March 31, 2015. Higher net working capital is mainly on account of unbilled construction work-in-progress, pending completion of contractual milestones and delay in realising customer receivables.

During the year, investments in and loans to subsidiary and associate companies increased by Rs. 2218 crore (net of proceeds from divestment). Major investments have been made in subsidiary companies operating in Power Development, Heavy Engineering and Shipbuilding businesses to support the operations of group companies.

Return on Net Worth (RONW) including the extraordinary items for the year 2015-16 is 13.7% as against 14.3% for the brvious year. Return on Capital Employed (ROCE) for the year 2015-16 at 11.9% is lower compared to 12.5% of the brvious year. The funds deployed in the group companies in capital intensive businesses in the last few years have not yet started yielding adequate returns, resulting in decline in ROCE and RONW.

Liquidity and Gearing

Business operations generated cash flows of Rs. 3256 crore during the year higher than Rs. 3118 crore in the brvious year. Borrowings during the year (net of repayments) were Rs. 233 crore. Dividend and treasury income flows contributed Rs. 1551 crore to the cash along with divestment proceeds of Rs. 789 crore.

The total borrowings as at March 31, 2016 stood at Rs. 13608 crore as compared to Rs. 12937 crore in the brvious year. The loan portfolio of the Company comprises a mix of domestic and suitably hedged foreign currency loans. The gross debt equity ratio marginally decreased to 0.33:1 as at March 31, 2016 from 0.35:1 as at March 31, 2015. The Company has a healthy net debt equity ratio of 0.18:1 as at March 31, 2016 after excluding short term investments in liquid funds from debt.

III. RISK MANAGEMENT

L&T has a combrhensive Enterprise Risk Management (ERM) framework in place for identification, assessment, treatment and reporting of risks. The Company's risk management processes ensure that the Company accepts risks as per the boundary conditions based on the risk appetite of the organisation. The Audit Committee of the Board oversees the efficacy of the risk management processes. Business level risks and the mitigation plans for each vertical are reviewed periodically by the respective top management/Boards. The Corporate Risk Management Committee appraises critical risks impacting the Company and ensures adherence to policies.

The Company is brdominantly in project business and has developed robust project risk management processes. The key processes include country clearance for entry into a new country, Pre-bid risk reviews, Execution risk reviews and project close out risk reviews. Pre-bid reviews are carried out based on a bid authorisation matrix as determined by the Risk Management Committees. Execution risk reviews of the projects are held at regular intervals for tracking the project performance, movement of risks in the project and effectiveness of mitigation measures. Close out risk reviews are held to capture key learnings from the projects and what went right/wrong analysis which helps in factoring the learnings in future bids.

The Company has been conferred the brstigious 'Golden Peacock Award for Risk Management' for 2015 by the Institute of Directors (IoD) in the 'Diversified' category. The Company emphasises on continuous learning and has initiated several knowledge based initiatives to improve risk awareness across the organization. One such initiative is launching of an e-learning training program on Enterprise Risk Management (ERM) for employees to enhance capabilities on risk management which will lead to better business performance. It covers topics related to basics of risk management, global risk management frameworks, processes in L&T, case studies on risk management etc. Periodic workshops on risk management are also held across the company to sbrad awareness & share learnings.

The top Enterprise level risks for the Company and the mitigation measures being implemented are:

1. Slow recovery of key sectors: Growth in some of the sectors like Power, Metals & Minerals etc. has been hampered by a number of constraints like fuel shortages, environmental clearances, restrictions on mining etc. Being a diversified conglomerate helps mitigate the risk of such slowdown in some sectors as we see compensating growth in certain other sectors. Government initiatives like Project UDAY, Make in India, revised Defence Procurement Policy (DPP), renewed impetus to Infrastructure sector namely roads and railways provide growth opportunities in the near future.

2. Fall in oil price: It has resulted in budget constraints in Middle Eastern Countries leading to decline/delay in investment with some projects being put on hold. The Company has started focusing on domestic business and selectively foraying into new markets like Africa & South East Asia.

3. Reputation and Brand: Corporate Governance and Compliance policy is in place mandating adherence to Code of conduct and Internal Controls. Regular knowledge sharing across the organisation and review & upgradation of appropriate controls ensure the same.

4. Competition: It has been observed that competition from foreign and domestic players has considerably increased in the past few years. The Company's engineering, procurement, and construction business derives its competitive strength from its excellence in executing projects of varying sizes, reputation for quality, technology, cost-effectiveness and project management expertise. This helps in gaining an edge over competition.

5. Other Operational Risks:

a. Execution challenges: Company faces execution challenges like geological developments, availability of work front, land acquisition & right of way (ROW), pending approvals and clearances from Government agencies, working in difficult/ harsh weather conditions/terrains, skilled manpower availability etc. The Company closely tracks the key risks for each project to effect timely mitigation.

b. Partner risks: Company partners with different contractors (Joint Venture/consortium projects) across businesses based on technical requirements/local market conditions. Partner's performance and financial strength is crucial for project success. Learnings from the past projects are incorporated in the inter-se agreement with the partners and clauses on liability of each partner are carefully drafted after a legal due diligence.

c. Working capital challenges: Project delays and adverse contractual payment terms lead to increased working capital requirements. Company has strengthened the process for close monitoring of cash flows at the project level. Company ensures regular follow up for delay in payments by client. Improvement in working capital is a key lever for achieving better ROE.

d. Claims management: Company maintains a strong documentation and follow up with clients/ sub-contractors/vendors for claims that are submitted. Legal teams and insurance teams are constantly consulted to ensure a robust process of claims management.

e. Talent Management: It is critical to fill leadership roles in every project being executed by the Company. Proper processes are in place across the Company for hiring the best talent across the Company and suitable retention policies are constantly reviewed to minimise attrition.

The Company has institutionalised the risk management processes to map and monitor the risks across the businesses and respond effectively to achieve the strategic objectives. The Company has been successful in tapping the opportunities both in domestic and international markets. The Company sees risk management as a business enabler and believes that risk is an integral part of every business and promotes a culture of building the ability to anticipate and manage risks effectively and converting them into opportunities.

FINANCIAL RISKS

Capital Structure, Liquidity and Interest Rate Risks

The Company continues its policy of maintaining a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also equip the Company with the ability to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund raising options for future, which is especially important in times of global economic volatility. Given the continuing tough economic conditions in 2015-16, there has been an increase in the working capital levels of the Company. The Company has been investing capital into subsidiaries as scheduled and in some cases to provide for deficits caused by the economic/ business/performance downturn, and also to optimise overall Group interest rate risks and costs. The Company continues to maintain adequate liquidity to deal with economic cycles.

The Company judiciously deploys its periodical surplus funds in short term investments in line with the corporate treasury policy. The Company constantly monitors the liquidity levels, economic and capital market conditions and maintains access to the lowest cost of sourcing liquidity through banking lines, trade finance and capital markets. In line with above, the Company continued to use a mix of short term and long term funding sources for its working capital funding. The Company further optimised the cost of debt by using subsidised export financing scheme of RBI and issuing more of short dated CPs. The Company dynamically manages interest rate risks through a mix of fund raising products, investment products and derivative products across maturity profiles and currencies within a robust risk management framework.

Foreign Exchange and Commodity Price Risks

The various businesses of the Company are exposed to fluctuations in foreign exchange rates and commodity prices. Additionally, it has exposures to foreign currency denominated financial assets and liabilities. The business related financial risks, especially involving commodity prices, by and large, are managed contractually through price variation clauses, while the foreign exchange and residual commodity price risks are managed by an appropriate choice of treasury products for balancing risks and at the same time optimising the hedging costs.

The financial year 2015-16 was characterised by a strong USD against most of the asset classes (currency / commodities) as well as increased volatility on account of sharp movements in commodity prices and Asian currencies including more particularly the Chinese Yuan. The rupee moved from 62.50 to 68.80 per US Dollar during the year though it ended the year at 66.25. In spite of the two way exchange rate volatility, the impact on the Company was, however, muted given the robust financial risk management process in place. Benign commodity prices along with the analytical risk management framework has benefited the Company.

IV. INTERNAL CONTROLS

The Company continued its efforts in providing an effective internal control environment where ethical behavior, accountability, controls and assurance are practiced. The Company has a robust framework for Internal Controls, commensurate with the size and complexity of its business. There is a system of periodically apprising the senior management and the Audit Committee of the Board on the internal processes of the Company with respect to Internal Financial Controls, Statutory Compliances and Assurance. Employees are guided by the Company's 'Code of Conduct'. The Company's 'Whistle Blower' policy enables the employees to have direct access to the members of the Board of Directors without interference from management.

Increasing focus on control and compliance requirements under the Companies Act, 2013 and the new SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 have led to reviewing the control design and effectiveness across the organisation. The Company has laid down Internal Financial Controls as detailed in the Companies Act, 2013. These have been established at the entity and process levels and are designed to ensure compliance to internal control requirements, regulatory compliance and appropriate recording of financial and operational information. The Company has reviewed and ensured sustained effectiveness of internal financial controls by adopting a systematic approach to assess design and operating effectiveness.

Heads of businesses and support functions are primarily responsible for design, establishment of internal controls and its operating effectiveness in their respective areas. Operating framework and procedures are in place in individual businesses of the Company in the form of Internal Control Manuals, Standard Operating Procedures, Accounting Guidelines and Authorisation Matrix for financial transactions including regular management reporting and monitoring thereof. Policies and procedures are reviewed periodically and updated to factor in changes in business processes as well as improvements necessitated to strengthen the internal control systems.

Internal Control department at the corporate formulates procedures and guidelines for areas of weaknesses which are identified during internal audit or as triggered by process owners or management based on internal or external risk factors. The Company also periodically engages independent professional firms to carry out review of effectiveness of various control processes in businesses and support functions.

The assurance function is carried out by the Corporate Audit Services (CAS) which makes independent assessment by conducting audit of all units of the Company and its major subsidiaries at regular intervals. The audit inter alia covers assessment of financial and operational efficiency as part of the process. Further, it conducts operating effectiveness testing of the internal financial controls with the objective of providing an independent and reasonable assurance to the Audit Committee and the Board of Directors. The entire process is reviewed periodically by the senior management and the Audit Committee which oversees the internal audit function.

The Company continually aligns to the best practices in the areas of control and compliance, to ensure high standards of governance in both domestic and international businesses.

V. INFORMATION TECHNOLOGY

The Company recognises the strategic imperative of Information Technology (IT) for efficient conduct of its business operations. The Company leverages IT as a key enabler to improve productivity through collaboration and integrate internal controls with business processes. The Company implemented Enterprise Resource Planning (ERP) and other solutions to run the various business processes. Niche bolt on systems are being deployed for Vendor Invoice Management, CRM on cloud, Advance Planning and Optimisation to provide edge to Business. Simultaneously, IT infra is continuously upgraded to deploy the latest and best in class IT assets and technology. The Company has initiated various 'Digital & IoT' projects, in the areas of risk mitigation and manufacturing to make its business processes LEAN and contribute to the Company's bottom line in today's ever challenging business scenario.

L&T's dedicated Cloud infrastructure, created a few years ago, is widely deployed across the Group companies. The Company has taken steps to embrace 'Public Cloud', and the latest office automation and collaboration applications are being rolled out.

The Company has Disaster Recovery (DR) systems which rescued the businesses from disruptions during the heavy rains in Chennai in December 2015.

The Company has a program to do a combrhensive review of its security systems and processes to address growing IT/cyber security threats. The corporate IT function of the Company has acquired Certification of ISO 27001 for Information Security Management. ISO 27001 (formally known as ISO/IEC 27001:2005) is a specification for an information security management system (ISMS). An ISMS is a framework of policies and procedures that includes all legal, physical and technical controls involved in an organisation's information risk management processes.

Business Environment:

The current year witnessed a mixed performance by the business. Revenue and order book remained strong regardless of a low-spirited market. Margins have improved overall, driven by strong cost cutting, restructuring and efficiency improvement initiatives.

Despite the GoI's attempts to boost growth through several measures in the infrastructure segment, there was a slump faced primarily due to distressed demand from the infrastructure sector. However, major orders materialised in the third and fourth quarter with the GoI's boost on foreign funding.

The business increased its market share in both the Metros and Special Bridges segments. The business grew faster than its competitors in the sector. A major order from the Bihar State Road Development Corporation Limited (BSRDCL) for the Design & Construction of a Greenfield Six-Lane extra-dosed cable bridge over the river Ganga near Kachchi Dargah (Bihar) was a crowning achievement.

One of the goals of the business as part of the new medium term business plan is to revitalise and reinforce core construction operations. Being adaptable to meet market shifts, the business has established a sound construction work system to raise productivity levels. The business plans to leverage the development of an automated system in the construction sector. This will reinforce the competitive advantage of the business and expand the portfolio.

In the International market - more particularly in the Middle East – the infrastructure industry did not show robust growth due to decline in oil prices. Moreover, GCC is promoting participation of the private sector via PPPs to compensate for the deficit. Bhutan and Bangladesh have proved promising for the Hydro Power and Special Bridge segments.

Metro Rail and Defence Sectors:

Metro rail projects in India are booming rapidly, especially in Tier 2 cities, but the environment is becoming more challenging due to commoditisation of the elevated metro projects. This has influenced the strategic outlook towards the business resulting in enhanced focus towards underground metro projects.

The Chennai Elevated Metro, the Delhi - Badarpur to Faridabad Corridor and the Hyderabad Metro Stage 2 have been successfully handed over.

Riyadh and Doha Metro projects which are being operated with a JV structure are progressing reasonably.

The Indian Defence industry is a strategically important sector. The current profile of infrastructure

held by the Indian Armed Forces suggests the Government needs to make serious efforts towards upgrading defence resources, by the modernisation, upgradation and maintenance of the existing setup and that has helped the business to see immense opportunities. With massive investments planned by the Ministry of Defence, opportunities are abundant and the business is well placed and well equipped to offer turnkey design and build proposals for the entire Defence sector. The business has recently bagged an order for a project to resurface and extend the Air force runway at Hyderabad.

Nuclear and Special Bridges:

India is fast-tracking its shift towards nuclear power. The Government of India has planned to source 25 percent of its electricity from nuclear reactors by 2050. The nuclear business of the company has seen some potential orders - IGCAR for the construction of a Fast Reactor Fuel Cycle Facility at Kalpakkam.

There have been developments on the tie-ups of the business with global players since India's nuclear power agency has cleared a long-delayed nuclear policy for reactors, marking a significant leap in the country's ambitious plans to become one of the world's top nuclear power generators.

The bridge over the river Ganga in Patna, Bihar, once constructed, will be the longest extra-dosed bridge in India. The business has entered the international market by winning the contract for the construction of the Rupsha Bridge in Khulna, Bangladesh.

In the coming years, this segment is poised for further growth. Many bridge projects are expected across India.

Hydel, Ports & Tunnels sector: Hydel: Domestic Hydro projects are stuck at various levels due to pending clearances and local protests. However, some  opportunities pertaining to construction of barrages are expected in Telangana. A conducive working environment is available at Bhutan where existing projects are progressing well. In Nepal, public sector undertakings and private players are showing interest for the development of Hydro Projects.

Tunnels: The GoI is focusing on developing strategic and all weather tunnels. Opportunities may also arise for Underground Storage Caverns for crude oil storage and "Under Sea Tunnels". Opportunities also exist in the Middle East region but low oil prices may delay these projects.

Ports: The GoI has launched the 'Sagar Mala Project' initiative and is focusing on the upgradation and development of new ports. Opportunities are expected for Marine Infrastructure projects involving Dry-docks, Marine intake structures and Defence Naval Base projects as well.

Significant Initiatives

During the year, IC has taken several initiatives to improve operational efficiency as a prime focus as under:

Engineering Design and Research Centre: On the

Engineering front, the business undertook key initiatives towards digitisation, automation and adoption of modular techniques for construction. Building Information Modelling (BIM) and design automation are being implemented across business segments to provide optimal solutions. Modular construction techniques were successfully implemented in Nuclear Power Plant construction resulting in significant time optimisation.

Risk Management: The business emphasises on achieving the corporate strategic objectives by following best practices in Risk Management.

A paradigm shift has occurred in the way the business views risk management and the trend has moved towards a holistic view of risk management. The business  has developed an efficient Conflict Management System which expedites resolution of issues with clients. The business has also initiated an analysis of mitigated activities depending on project specifics and disputes. The business believes in the re-evaluation of the project status when significant changes occur (scope, delivery method and schedule).

Environment Health & Safety (EHS): Striving to achieve a goal of 'zero harm', the business has launched the Corporate EHS Strategic Plan 2015-16 with key EHS deliverables that have been implemented across all its operations. As part of the EHS Strategy, the following significant initiatives were taken up during 2015-16:

• Successful recertification of EHS Integrated Management Systems conforming to international standards: OHSAS 18001 & ISO 14001.

• Key EHS training initiatives include IOSH Managing Safely certification courses for Project Heads, NEBOSH certification courses for Project EHS In-charges and online EHS certification courses for all technical employees.

• EHS Risk Management is an integral part of the EHS management system and the business has revamped the IMS procedure and introduced monthly EHS Risk Management audits to facilitate and monitor implementation across all its projects.

• Precast elements lifting strategy was launched with inputs from all stakeholders and training workshops were held at relevant projects to facilitate implementation.

Many EHS awards and honours are received at different levels and categories from national and internationally renowned organisations.

Workmen Management Centre:

During 2015-16, the business trained 8045 subcontractors' workmen at various sites through 'On Job Training' (OJT) programs on form work, bar bending and masonry by experienced trainers to enhance their skill level for speedy and effective execution of jobs while emphasising on safety, quality and productivity.

Quality Department: The business aims for excellence in quality, increasing the satisfaction of customers and other stakeholders through effective goal deployment, cost reduction and process improvements.

The business has started the Quality Management System transition to ISO 9001: 2015, which allows the implementation of best practices in the industry. Monthly direct customer feedback on product quality from projects has been its praxis.

A new product of polycarbonate-based admixture for water conservation in concreting, in-house resistance heating techniques for brheating of pipe joints of massive sizes and the use of semiautomatic welding processes in nuclear projects such as GMAW (Gas Metal Arc Welding) were added into its standard practices.

Training is a necessary parameter for growth and the business has prioritised the training of its staff on the latest QMS. Also, the setting up of an in-house facility for welder's qualification instead of testing by external providers has been initiated.

People Power: Growth in operations is helping the business to grow people internally and moving towards a role-based organisation. All talent investments are focused on increasing productivity, efficiencies, building a robust leadership pipeline and an orientation towards mega projects. The Frontline Supervisor Trainees program has taken root and continues to add value to the business.

The Organisation Transformation initiative through OD Labs continues and till date, the business has covered around 500 employees. The business has also started the Institution-building initiative 'THIRD-i', which aims to build a future-ready business. 65 employees have been identified as part of the leadership building initiative for tackling mega projects. Year 2016-17 will be the Year of the People with special focus on engagement and building the leadership pipeline.

Outlook

The international market has truncated, particularly in the Middle East, which continues to face its adverse impact because of declining oil prices. Unless the GCC countries revamp their business strategies, the construction sector might do a volte-face on its growth plan.

On the domestic front, the Union Budget 2016 indicated a positive outlook towards the Infrastructure sector. The budget included the formation of a National Investment and Infrastructure Fund with an annual allocation of USD 3.25 bn.

The Indian nuclear market has picked up pace both in the implementation of Indigenous PHWR and imported LWR programs. The special bridges market continues to boom. Good business prospects are seen in  the Western and Eastern parts of India. The elevated metros market has become commoditised. Though the business sees ample opportunities in Tier-II cities, its participation will be very selective on large size orders. Underground Metros will be the main playing field of the business. The thrust of the Government of India on Defence spending continues and there is an expectation that prospects will materialise. The prospects of hydropower market on the domestic front continues to be bleak with growing concerns of environmental issues, land acquisition problems and local agitations. The underground space is going to be the key market for the business in the years to come. The business expects increased domestic investments for "All Weather Tunnels".

The business is focusing on increased diversity in man power. Diversity is the key to increased involvement, commitment, and a better understanding of the needs of clients and society.

The business is confident of achieving the revenue targets for  2016-17 backed by a strong order book. The business is resilient on efficiency and cost control which remain key drivers of profit and performance.

Major Subsidiary Company L&T Geostructure LLP (LTGS):

L&T GeoStructure LLP (LTGS) is a subsidiary entity - a Joint Venture with Transworld Infraprojects Private Limited. The Company has a strong and professional foundation specialist team with the knowledge of design, equipment and methods to execute and supervise sophisticated works. L&T Geostructure was formed in 2012-13 to focus on marine foundations, deep foundation-supported bridges, deep shafts and other ground-related business. LTGS also has expertise in the areas of large diameter piling, diaphragm walls, cut-off walls, secant pile walls, sheet piles, intake structures, ground improvement, hard-rock boring and water retaining structures.

Major orders secured in 2015-16 by LTGS include Multi-cargo berth at Ennore for Chettinad International

Bulk Terminal Ltd, plastic cut-off wall for Polavaram dam, Andhra Pradesh (secured by Bauer-L&T Geo JV), LNG marine facilities at Ennore for IOCL and General Cargo berth II at Ennore, Tamilnadu.  LTGS has achieved 4.5 million safe man-hours during 2015-16. The business has executed first-of-its-kind multi chamber cellular intake well for the river linking using diaphragm wall technology in Pattisam project in Andhra Pradesh. Successful installation of 80 T reinforcement cage was done for a diaphragm wall which is first-of-its-kind in the country. The business also executed shore protection works for a length of 2.2 Km using sheet piles for the river Tapti.

TRANSPORTATION  INFRASTRUCTURE

Overview:

Transportation Infrastructure business comprises Roads, Runways (Airside Infrastructure) & Elevated Corridors (RREC), Railways Construction, Railways Systems &

International Infrastructure. It has sustained growth over the past years by securing some brstigious orders in the Roads & Railways sectors despite a slightly sluggish domestic economic growth.

The business has vast experience in Project Management, Engineering Design and Construction Management which gives it a competitive edge over its competitors. The business has a pan India brsence and also in GCC countries. It has multiple projects, Engineering Design Centres in Mumbai, Faridabad and Chennai and an Offshore Engineering Centre in Mumbai to cater to international projects besides Area Offices in India/GCC countries. In addition, it has a Competency Development centre at Kanchipuram, and also undertakes training of workmen at CSTI, Ahmadabad.

Business environment:

The Road business (RREC) has been successful in expanding its customer base during the year by securing various orders for the construction of highways.

Major orders received by the road business are:

• From Kanyakumari to Mukkola (length 87 Km).

• 4-Lane road from Yadgiri to Warangal (length 96 Km).

• Addahole to Bantawal road project (length 63 Km).

• Development of road infrastructure for Dholera smart city.

The Railway Business has been awarded a major order by DFCCIL (Dedicated Freight Corridor Corporation of India Limited) for laying of tracks from Iqbalgarh to Vadodara, a total of 725 TKm (CTP 3R project) and electrification of 897 Tkm from Vadodara to JNPT, Mumbai (EMP 16 project). The Railways business has also secured a major order from DFCCIL for signalling and telecommunications works from Vadodara to JNPT (STP 17) for a length of 897 Tkm.

On International front, the Railway Business Group has secured the first external order of Riyadh Metro Line 1&2 Track works for 152 TKm.

The projects successfully completed during the year include Hosur-Krishnagiri Road Project (60 Km, 6 Lane Highway in Tamil Nadu), Kandla-Mundra Road Project (71 Km, 4 Lane highway in Gujarat), Samakhiali-Gandhidham Road Project (56 Km, 6 Lane Highway in Gujarat), Manmad-Rahuri - Daund Railway Electrification Project (334 TKm), Rajpura composite works Project (48 TKm), DMRC CE07 Line 2 & 6 OHE (37 Km), KMDA 4 ROBs and Flyover (1.1 Km) in Kolkata and Chennai Metro Stage 1 Track works (38 Km).

The new track construction machine is capable of laying 2 km of tracks per day, setting a benchmark in high-speed rail construction on the Western Dedicated Freight Corridor project.

During the year, the business secured 8 International Safety awards - 2 RoSPA Gold, 2 RoSPA Silver, 4 British Safety Council awards and 2 brstigious safety awards from National Safety Council  (NSC), India.

Significant Initiatives:

The thrust on operational excellence continued through digitalization of equipment for quality improvement, timely completion, cost optimization, efficient resource utilization and enhancement of safety measures by adopting improved engineering models like

Inclinometers, Compact meters, GPS system and LIDAR surveys etc.

On the international front, the business is exploring new markets such as East Africa and Kuwait through business tie-ups with local partners. Special focus is being given to the selection of international consortium partners to be br-qualified for mega projects in the GCC countries. Various strategic initiatives have been undertaken in the international business to strengthen procurement, asset management & cost control teams to provide immediate onshore support to projects.

Outlook:

With signs of a recovery in the Roads sector, new projects are being awarded. On the domestic front, the prospects for pipeline looks bright. The Government has given a thrust to accelerate the development of infrastructure. Lower oil prices have fulled the growth of the domestic market. The rate of road construction has been targeted to increase from the current rate of

17 Km per day currently to 40 Km per day and the Government has plans of awarding 1,00,000 Km of National Highways which is a 20% rise over last year.

The Ministry of Road Transport & Highways has taken up a detailed review to improve road connectivity to coastal / border areas, backward areas, religious places and tourist places under 'Bharat Mala' program. In addition, there are Connectivity Improvement Programs for Char-Dham (Kedarnath, Badrinath, Yamunothri and Gangothri in Uttarakhand). Prospects of Navi Mumbai, MoPA Goa and Dholera are also on the horizon.

In the Railway Budget, the capital expenditure for 2016-17 has been pegged at Rs. 1.21 Lakh crore.

The Railway Budget has announced fast tracking of projects like track laying (new/doubling/tripling projects), Railway Electrification projects, gauge conversion, last miles connectivity projects and emphasis on decongesting existing routes mainly targeting port connectivity. Commissioning of the 2,600 Km of Broad Gauge track and 2,000 Km of Railway Electrification is also proposed in 2016-17. Three more new freight corridors (North -South, East - West and East coast) totalling about 5,700 Km with an estimated value of Rs. 2.7 Lakh crore have been proposed in the Railway Budget.

Metro Rail Projects in Tier 2 cities and high speed railway lines between Ahmedabad and Mumbai will provide more business opportunities for this segment.

On the International front, drop in oil prices has affected the construction business. However, it is expected that Qatar and Kuwait will continue to invest in infrastructure development and GCC will invest in rail infrastructure such as long distance rail projects.

POWER TRANSMISSION & DISTRIBUTION

Overview:

L&T's Power Transmission and Distribution business is a leading EPC player in the field of Power Transmission and Distribution and Solar businesses, offering integrated solutions and end-to-end services ranging from design, manufacturing, supply, installation and commissioning of Transmission Lines, Substations, Underground Cable Networks (both Power and Control), Distribution Networks, Infrastructure Electric Projects, Solar PV plants in both domestic and international markets.

Extra High Voltage Substation Systems & Power Distribution Business Unit focuses on providing turnkey solutions for Extra High Voltage Air Insulated / Gas Insulated Substations for Utilities and Power Plants, EHV Cable Networks, and Utility Power Distribution and Power Quality Improvement works, complete Electrical, Instrumentation & Communication (EI&C) solutions for various infrastructure projects such as airports, metros, OFC networks, etc.

Transmission Line business offers turnkey EPC solutions in Overhead lines for Power Evacuation and Transmission, bolstered by its state-of-the-art tower manufacturing units at Puducherry and Pithampur supplying over 1.3 lakh tones of tower components annually. Further capacity enhancement is envisaged at Kanchipuram which is expected to be operationalised by mid of 2016­17. The Testing and Research station at Kanchipuram accredited by NABL is one of the largest in Asia and is also amongst renowned testing centre in the world. (NABL: National Accreditation Board for Testing and Calibration Laboratories)

Solar business provides single point EPC turnkey solution for solar PV related projects. Experience spans across all terrains (sandy, rocky, etc.), all technologies (Thin Film Frameless and Framed, Crystalline, Tracker, etc.) and various contract structures including Turnkey EPC, Integrated Lump sum Turnkey (iLSTK) and Balance of Systems (BoS) Contracts. The business unit provides the Optimised Power Plant Design and are channel partners of MNRE with the highest Rating in the System Integrator and Renewable Energy Service Company (RESCO) categories.

The international units of the business in Middle East, Africa and ASEAN offer complete solutions in the field of Power Transmission and Distribution including High Voltage Substations, Power Transmission Lines, Extra High Voltage Cabling and Electrical, Instrumentation and Controls (EI&C) works for Infrastructure projects such as Airports, Oil & Gas Industries etc. in UAE, Qatar, Kuwait, Oman, Saudi Arabia, Bahrain, Algeria, Kenya, Ethiopia, Malaysia and Thailand.

Business Environment:

In 2015-16, the distribution sector in India maintained the momentum it gained during the past two years backed by several governmental initiatives. Supported by central funding agencies, state utilities have laid emphasis on strengthening their respective distribution networks for better efficiency, accountability and management. The business did well to capitalise on these opportunities and was successful in maintaining its leadership position.

The EHV substation related opportunities in 400kV & 765kV GIS/AIS segments were steady as central and select state utilities were concentrating on Power System Strengthening Schemes to meet their demands. Though there were positive signs on the policy front, the general lack of investments in conventional power generation and industry segments continued.

The interest shown by major players in transmission corridors awarded through the Tariff based Competitive Bidding (TBCB) process marks the advent of changing clientele from utility-based to investor-based. State Utilities are increasingly concentrating on strengthening the transmission network aided by funding from multilateral agencies.

Transmission line projects have been executed for the Central Transmission Utilities like PGCIL, NHPC, etc. and for various State Transmission Utilities like those in Uttar Pradesh, Chhattisgarh, West Bengal, Punjab, Tamil Nadu, etc.

The business has dedicated and experienced construction teams to take up projects at various voltage levels and is brsently executing various projects at 765kV AC, 400kV AC & 800kV HVDC levels across the country.

In the Middle East, though the macro economic and political scenarios were mixed during 2015-16, the business witnessed significant investments aided by FIFA 2022 related investments in Qatar, Expo 2020 related plans in UAE and stable T&D investment plans by Kuwait and Oman. Key focus on Saudi Arabia has resulted in substantial growth for its T&D business as its central power utility has gone ahead with its vast expansion plans so as to meet its demand forecast. Spend cuts induced by the oil price drop and continuing unrest in neighbouring regions caused a sense of anxiety in the business climate. However, the business secured 51 substations, 633 Km of overhead lines and 624 Km of cabling projects in the year.

The African market has started opening up in northern and  Sub-Saharan region, with the business establishing its brsence in Algeria, Kenya, Malawi and Ethiopia and selectively pursuing identified focus countries.

The efforts by the business in the ASEAN market for T&D business yielded results providing breakthrough orders in Malaysia and Thailand. The ASEAN market is steadily opening up opportunities for the business with new power generation and evacuation schemes to meet the electricity demands in the region.

The large scale investments made in improving the T&D network in Odisha providing opportunities for major orders for the domestic segment of the business. It could secure several packages in different phases of the Odisha Distribution System strengthening project related works. The urban and rural electrification orders from Uttar Pradesh, West Bengal and Odisha under the erstwhile Restructured Accelerated Power Development and Reforms Program (RAPDRP) and Rajiv Gandhi Grameen Vidyutikaran

Yojna (RGGVY) schemes too are noteworthy. Apart from securing the 765kV Aligarh GIS order, the business also secured a STATCOM order which is a breakthrough project in terms of technology.

In the Transmission Line business, major orders have been secured from the private sector in Chattisgarh and Telangana regions. Another major order from KPTCL for the 400kV D/C Quad line in the Bellary region also involves design and testing of towers. An order has been secured from the Tamil Nadu Transmission Corporation Limited

(TANTRANSCO) for a 107Km long

400kV D/C Quad line from Kamudhi to Karaikudi. The Kanchipuram Testing centre has been booking orders from reputed global customers like Dominion Virginia Power from USA, Rohas from Malaysia, etc. Having secured orders from Power Grid Corporation of

India Limited (PGCIL) and the state utilities of Bihar, Madhya Pradesh and West Bengal, the business has emerged as one of the largest market share holders in 2015-16.

The Middle East business sustained its winning streak by securing major EHV GI substation orders in Qatar including 3 packages from its key customer, KAHRAMAA. Another significant order was for design and build of 5 substations with associated cabling from Lusail. The business has also secured several Substation and Transmission Line projects at the 132kV level in Saudi Arabia. EHV GIS orders from private customers were secured in UAE.

The business continues to make good strides in its Africa initiative. The business received two major substation orders in the East African market: one for constructing a  400kV AI Substation (AIS) in Addis

Ababa, the capital city of Ethiopia from Ethiopian Electric Power and the other for a 400kV Substation at Lilongwe in Malawi from Millenium Challenge Account, an organisation funded by US Government.

There were breakthroughs in the ASEAN market through four major orders. In Malaysia, a 500kV Transmission Line order from Tenaga Nasional Berhad (TNB) and two 275kV GI & AI substations from Sarawak Energy Berhad (SEB) were secured. In Thailand, a 500kV Transmission Line order from Electricity Generating Authority of Thailand (EGAT) was received.

The business is proud to have been given an opportunity to light up thousands of households in economically backward areas and electrify hundreds of villages. In a large number of towns, it has improved the power quality and significantly reduced AT&C losses through distribution reform projects. The key substation projects commissioned include major EHV substations viz. 765kV GIS at Varanasi, 400kV GIS at Nagapattinam and Narendra for PGCIL; 400 kV AIS at Karamadai and Karavalur for TANTRANSCO; 220kV GIS for HPPTCL.

In the Transmission Line business, a major portion of India's first +/-800kV HVDC corridor project viz. 800kV HVDC TL from Biswanath Chariyali to Tangla was commissioned. 400 kV D/C RAPP - Sujalpur Transmission Line for Sterlite Power Grid Ventures Limited (202Km) was commissioned well ahead of schedule. Other projects commissioned include 765kV Gwalior to Jaipur Transmission Line (TL) of PGCIL (128Kms), 400kV

D/C (Quad) Barh - Gorakhpur TL of PGCIL (178Km), 400kV D/C (Quad) Kurukshetra - Jalandhar TL of PGCIL (133Km), 400kV D/C Kutta- Kozhikode TL of PGCIL (99Km) over an extremely hilly and difficult terrain, 220kV D/C Varahi - Kavoor TL of PGCIL (117Km), 220kV Gadag- Bagalkot TL of KPTCL (102Km) and 220 kV & 132kV Lines for

MPPTCL (225Km). The TLTRS facility at Kanchipuram achieved a major milestone by successfully testing the Saudi Electricity Company's tower measuring 101.3m high, the tallest tower ever to be tested.

The Solar business commissioned 200 MWp - a rare feat to be accomplished by an EPC in a year. It commissioned India's largest tracker based solar PV plant in Tamil Nadu.

In the International market, the Middle East business commissioned 18 substations, 2 cable projects and an Overhead Transmission Line. Having qualified for the highest voltage levels in its lines of business, it also added five new customers.

Significant Initiatives:

Having identified Digitalisation as a key enabler, the business rolled out mobility device based project monitoring tools in its Saudi Arabia projects. Several operational excellence initiatives in the areas of on-time delivery, profitability enhancement, effectiveness checks of process implementation, working capital management and risk management were pursued. The domestic back office for engineering and design to cater to international projects has been strengthened. A new Transmission Line Tower manufacturing facility is also proposed.

To enhance safety in its operations, the initiatives undertaken include upgrading Safe Operating Procedures (SOPs) for Transmission Lines, EHV Substations and Distribution projects to reflect changing work methods and mechanisation, adoption of Sagging

Bridge (Stringing Working Platform) technique and the use of motorised winch machines in place of tractors, in final sag activities and enhanced training on Behavior-based Safety, Safety Audit and Training the trainers.

The Solar business rolled out tracker technology on a large scale in one of its projects. It also tested other technological advancements such as Seasonal Tilt technology and E-W technology.

As part of its internationalization strategy to expand into key African and ASEAN economies, the business has strengthened its talent base to execute ongoing jobs, vigorously pursuing emerging potential and creating corporate brand awareness and brference. The business intends to develop long-term relationships with its customers and fosters strategic partnerships and alliances with key vendors and  OEMs.

Such initiatives promptly earned awards and recognitions for the  business during the year. These include:

• Utkrishtata Puraskar award from PGCIL.

• Earth Care Award for Innovations in Climate change from JSW - TOI.

• Plaque of Honor for successful completion and apbrciation certificate for implementation of safety norms from Bengal Aerotropolis Projects Limited (BAPL).

• Apbrciation Certificate for quality from Karnataka Power Transmission Corporation Limited (KPTCL).

• Best Infrastructure Project of the Year Award from Dossier Awards Oman 2015.

• RoSPA Safety Awards for 9 projects.

• British Safety Council Awards for 6 projects.

Outlook:

The focus of the Central government on visible results in key programs such as 'Electricity for All', 'Make in India', etc., augur well for the growth for Power Transmission & Distribution business. The improving financial health of State Utilities thanks to the Ujwal DISCOM Assurance Yojana will mean increased distribution opportunities through Integrated Power Development Scheme (IPDS) and Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) schemes. To reduce AT&C losses in general and especially in cyclone affected areas, there is continued focus on converting overhead lines to underground cables. Further, the business expects continued investments in the Extra High Voltage substation segment from PGCIL and select state utilities especially in 765kV & 400 kV levels with thrust on GIS. Some of the states are planning EHV cable links too. Power quality improvement projects such as STATCOM, new clientele out of TBCB players, state utilities strengthening their networks with funding from multilateral funding agencies etc. are expected to provide much needed impetus.

However, GoI's push towards mobilisation of major equipment and material for distribution projects in a centralised manner may significantly reduce the package size available for the EPCs and increase the physical scatter of work scope for a given package size.

In the Transmission Business, while the state and central utilities will continue to award routine packages for grid strengthening, major transmission packages shall also be witnessed through Tariff based Competitive Bidding.

While intensified competition, strategic median packaging and reverse auction in PGCIL projects may become a dampener, Transmission Lines for solar parks and lift irrigation schemes, reconductoring packages and multi circuit lines with High Transmission Low Sag (HTLS) conductors are expected to provide new opportunities. Statutory changes in land acquisition will have an impact on the Right of Way clearances in transmission line projects. Commodity prices having bottomed out late in 2015-16, the emerging upward trend may exert brssure on costs.

With its experience and expertise, the business is in an ideal position to exploit opportunities in both transmission and distribution.

The business is poised to pursue opportune prospects in Solar PV plants in the backdrop of GWs of planned solar capacity addition, solar parks being created by states like Telangana and Karnataka, favourable policy changes through Renewable Energy Act, etc.

In the Middle East, the business is cautiously optimistic in its outlook. The slow recovery of the oil price is not expected to hamper investments in the T&D sector though there may be policy measures like taxation and currency de-pegging. Infrastructure development will continue as part of diversifying the economy and aided by events like FIFA 2022. GCC grid formation, up gradation to higher voltage levels, integration of renewable energy sources to the existing power grid and interconnections of transmission networks are expected to fuel growth in power distribution throughout the Middle East. New investment  opportunities may unfold with Aramco's stock divestment plans. Though the de-subsidising of oil prices may increase the input costs in medium term, such expectation hastens decision making on project awards to take advantage of lower commodity prices. While competition from European players may intensify, the established credentials of the business in terms of brqualification and project delivery will help maintain its leadership position.

Africa's economic growth has been imbrssive and is brdicted to remain robust. To sustain and support high growth rates expected for sub-Saharan Africa through economic diversification and industrial development, closing the current gap in power infrastructure will be crucial. Regional integration, such as power pools, system strengthening projects and promotion of renewable generation could shape the energy landscape in sub-Saharan Africa. There are visible commitments from Governments to expand installation capacity and increase electrification access rates substantially. The eagerness from multilateral funding institutions to  sponsor infrastructure projects either directly through utilities or through infrastructure developers bodes well. The business has established its brsence in some of the key growth economies of Africa and is currently executing Transmission and Distribution projects. The business is concentrating on key economies of Africa that have a clear road map to build Substations and Transmission Lines to meet increasing demand.

Power Infrastructure is being ramped up by the ASEAN countries driven by growth prospects attributable to regional economic integration and strategic location. The rising power demand paves the way for significant investments in grid interconnections, grid development and strengthening in countries such as Malaysia, Thailand, Myanmar and Indonesia.

The overall outlook for the PT&D sector remains promising on both the domestic and international fronts. The business looks forward to consolidate its position in established markets and gain significantly in new growth areas; ably supported by its initiatives on cost leadership and smart delivery.

Major Subsidiary Company: Larsen & Toubro Oman LLC (LTO)

LTO, set up in collaboration with Muscat Trading Company (Zubair Corporation Group), provides engineering, construction and contracting services in the Sultanate of Oman. LTO made its maiden venture into Oman in 1994 and has completed 22 years, emerging as one of the leading construction companies. During the past year, the Company managed to bag a slew of projects including a major 400kV cabling and OHL project and maintained a healthy order inflow.

The business expects a stable political and economic scenario in Oman with growing opportunities in the T&D segment.

Larsen & Toubro Saudi Arabia LLC (LTSA)

LTSA is a wholly-owned subsidiary providing engineering, construction and contracting services in the sphere of T&D in the Kingdom of

Saudi Arabia. During the past year, the Company had secured orders for a sizeable number of projects involving 15 Substations and 2 Overhead Lines from SEC.

With a stable political environment and the continuing need for strengthening of Transmission & Distribution network, LTSA is well poised to garner sizeable opportunities in the coming year.

WATER & EFFLUENT TREATMENT

Overview:

The Water & Effluent Treatment (WET) business caters to turnkey infrastructure projects including water supply and distribution, desalination plants, water management systems, wastewater networks, water and wastewater treatment plants, industrial and large water systems, lift irrigation and canal rehabilitation.

Over 20 million people in India have benefited from L&T's water infrastructure projects. With an experience of constructing over 51,000 Kms of water and wastewater pipeline networks and more than 4,000 MLD of water, wastewater and effluent treatment plants, the business is India's largest water infrastructure organisation.

Business Environment:

The per capita water availability in the country is rapidly decreasing due to increase in population and consumption.

The GoI has plans to brvent the contamination of surface water bodies by stopping the untreated wastewater flowing into it. It also plans to adopt modern irrigation techniques so that the dependency on monsoon can be reduced.

Industries are planning to recycle and reuse their effluents by adopting advanced treatment  technologies thereby reducing the consumption of fresh water requirement for their day to day processes.

Projects Commissioned and Orders Received: The Water & Effluent Treatment business has commissioned several important water projects in 2015-16. These include Vellore Combined Water Supply Scheme -(Pkg I) with a 181 MLD Water Treatment Plant for Vellore Corporation which will provide drinking water to 24 lakh people in Vellore District, Jawai Cluster Project comprising water supply from five offtakes which will benefit 5 lakh people; State-of-the-art STP at the President Estate of The President of India for re-use of 20 lakh litres of water for horticulture works, upgradation and rehabilitation of Bhagirathi Treatment Plant (500 MLD) at Delhi; Storm Water Project at Varanasi and Mathura for Uttar Pradesh Jal

Nigam Limited, Raw Water Intake & Pipeline Package for JaiPrakash Power Ventures Ltd, and the 241 MLD Doha South Sewage Treatment Plant, Qatar for Public Works Authority (ASHGHAL).

The business has also been successful in securing orders from various domains like lift irrigation, drinking water supply, plant water systems, common effluent treatment plants, municipal wastewater collection and treatment and integrated urban infrastructure.

On the International front, the business has secured orders in Qatar and Oman.

Significant Initiatives:

With huge opportunities in integrated water supply prospects, lift irrigation, sewage and effluent treatment space, significant initiatives have been taken to ensure that the business continues to be ahead of the competition, both in terms of market share and profitability. Some of these initiatives are:-

• Foray into Specialised WTP & Desalination with Technology Partnerships.

• Participation in Mega Lift Irrigation System tenders, in which water is not transported by natural flow but is lifted with pumps or by other means.

• Focus on Zero Liquid Discharge (ZLD) process as along with combined effluent treatment packages in various states and industries across India.

• Upcoming medium to large scale STP tenders will improve the quality of urban life.

Outlook:

Large investments have been proposed by multi-lateral funding agencies for irrigation, integrated urban utilities and CETPs in India. The GoI is committed to accord high priority to water conservation and its management. Nearly 500  cities and towns are expected to be covered under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) for the development of urban infrastructure. Coming to irrigation, mega projects have been proposed across major states along with proposals to connect rivers with 15,000 Km of canals. The government has already set in motion an integrated Ganga conservation plan - 'Namami Gange' which envisages investments for sewage infrastructure across several urban habitations along the river. Stringent implementation of pollution norms is in place to encourage setting up of common effluent treatment plants. To this effect Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) has been formulated with the vision of extending the coverage of irrigation 'Har Khet ko Pani' and improving water use efficiency 'More Crop per Drop' in a focused manner with end-to-end solutions for source  creation, distribution, management, field application and extension activities. The Delhi - Mumbai Industrial Corridor (DMIC) is India's most ambitious infrastructure program aiming to develop new industrial cities as 'Smart Cities' and converging next generation technologies across infrastructure sectors. The program envisages the development of infrastructure linkages like power plants, assured water supply, high capacity transportation and logistics facilities.

In the International market, opportunities have been identified for desalination and sewage treatment plants in GCC. FIFA 2022 in Qatar and Expo 2020 in UAE are triggering water infrastructure prospects in the Middle East. Similar water infrastructure prospects are also visible in KSA, Kuwait and African countries.

SMART World & COMMUNICATION (SWC)

Overview:

The world is seeking smarter, more secure and intelligent solutions to enhance quality of life. This has led to the rise of smart cities, advanced security solutions and communication infrastructure in several advanced economies. India is also rapidly gearing up to create smart infrastructure that will soon be the backbone of the economy.

The Smart World & Communication business provides turnkey services and Operations & Maintenance as a Master Systems Integrator in the areas of city surveillance, intelligent traffic management systems, transport & logistics, border security, communication networks, telecom infrastructure, building management systems, smart grids and smart city development.

Business Environment: Security Solutions Business

The various solutions offered by this business includes City Surveillance Systems, Intelligent Traffic Management Systems (ITMS), Border/Coastal Security Systems, Security and Management Systems for Critical Infrastructure - ports, airports, metros, IT parks and public buildings.

Several of these systems have been executed by the infrastructure business in various projects across the country.

The business commissioned the brstigious project for the Home Department, Gujarat by installing  City Surveillance & Intelligent Traffic Management Systems for three cities - Ahmedabad, Gandhinagar and Vadodara. The business also executed a unique project facilitating better surveillance and management of critical infrastructure at Sabarmati Jail in Gujarat. The business is currently executing India's largest city surveillance project comprising 6,000 cameras at over 1,500 locations in Mumbai City.

The Security Solutions business segment has secured the largest surveillance project in respect to camera installation for Hyderabad and Cyberabad City. The project is city's first step towards a Safe Smart City.

It has also secured the first standalone Intelligent Traffic Management Project implementation for Hyderabad.

Communication Network & Telecom Infrastructure Business:

This business offers total solutions in areas of Wired and Wireless Networks including OFC, Emergency Response Systems, Fixed Broad Band, Satellite and Microwave RF Links, ICT / Data Centre Infrastructure, Emergency Response Systems including Dial-100, Early Warning Dissemination System and Communication Network for Metro Rails.

The business has huge experience in optical fiber cabling projects and enjoys excellent track record of installation of telecom towers and other associated works on a turnkey basis. The business has proven expertise in providing state-of-the-art IT & communication systems for airports, metros, power plants and factories. The business is currently executing the first-of-its-kind communication network at a  pan India level for IAF connecting 131 Air Force locations.

This business segment secured the combrhensive Metro communication package for the Lucknow Metro and is also executing the TETRA communication network for the Delhi Metro.

Smart Infrastructure Business:

This business segment, as a Master Systems Integrator, offers both infrastructure creating expertise, backed by state-of-the-art IT capabilities. The business has executed many projects that include most of the sub systems of the SMART city offerings like CCTV systems, VMS, Video Analytics, Access Control Systems, Telecom Systems and Command Control Centre Systems. These projects, which were being executed independently, have now been brought under one umbrella to create smart infrastructure.

The business commissioned India's First Smart City Project - Jaipur Smart City with Wi-Fi, Cameras, Interactive Kiosks, REGS and Parking Information Systems at selected locations with a central command and control centre.

Outlook:

Year 2016-17 looks promising for the business, as the new Government has provided a fillip to safe and smart cities and other digital initiatives.

Security Solutions Business:

The trigger for the surveillance business, will essentially come from the initiatives taken by State Police Departments and State Industrial Development Authorities given that the safety of people is a State subject. Central Government assistance is also committed by MoH to those state governments which take up the 'safe' initiative. Good inroads have been made into this segment in the last three years.

Communication Network & Telecom Infrastructure Business:

The Bharat Net program plans to connect 2.52 lakh Gram Panchayats across the country through high speed digital network. Seven states have offered to come up with a State or SPV approach to take this initiative forward.

Apart from this, the plan outlay for the Department of Telecom for 2016-17 includes funds for an OFC based network for the Defence services. This, together with other initiatives of various government departments will provide future opportunities.

The Union Budget has a healthy allocation for Metro projects where the business has made an entry with the LMRC project here. The focus here is on communication systems such as Radio equipment, FOTS, PA&PIDS, Clock and other surveillance equipment. The business will be active in this segment. Allied to the communication elements is the 'Automatic Fare Collection system' that requires tie-ups with a few technology players. Metro projects are funded by agencies such as JICA and DMRC, which improves the level of safety in undertaking these jobs.

Smart Infrastructure Business:

The Plan outlay in the Union Budget 2016 of the Ministry of Urban Development is Rs. 21100 crore which includes Rs.7205 crore for Smart Cities and Atal Mission for Rejuvenation & Urban Transformation (AMRUT).

The Government has already unveiled the list of cities under the 'Smart Cities Mission'. Apart from the Government's Smart Cities Mission, many cities like Naya Raipur and different SEZ corridors have plans for implementation of smart elements. Some of these cities are focusing on pilot smart city projects to secure a qualification.

Countries like USA, Japan, Germany and France are eager to provide investments and technological support for the development of many of these smart cities across India.

Leveraging the diversity and depth of L&T Construction's expertise in water supply, wastewater, solar, etc., the Smart Infrastructure business plans to get into new areas like solid waste management and all other smart elements like parking systems, intelligent traffic management systems, etc.

The business is well positioned to collaborate with State level municipal corporations and governments to share its experiences in Jaipur which include the safe city initiative and dedicated surveillance projects.

Power Business

Overview:

Power business provides integrated concept-to-commissioning of coal and gas-based power plants on turnkey basis.

The business has project management centres in Vadodara, Faridabad and Chennai along with state-of-the-art manufacturing facilities in Hazira for ultra-supercritical / supercritical Boilers, Turbines & Generators, Axial Fans,

Air-Preheaters and Electrostatic Precipitators. These factories, coupled with talented staff and decades of unparalleled experience in executing complex projects, are its competitive advantage in building the best-in-class power assets in India and abroad.

During the year, capacity worth 2,228 MW built by the business achieved commercial operation. The business has also made significant  headway in Bangladesh by winning three brstigious projects for gas-based plants, one each in the last three years.

Business Environment:

The business environment was a mixed bag during the year with promising as well as challenging developments.

The domestic market witnessed a sharp increase in tendering activity

in 2015-16. Projects worth 21 GW were decided either through bidding or nomination route. Out of this, close to 10 GW were awarded out, with formal orders for the rest yet to be placed. This increased activity was, however, marred by severe competitive brssures with aggressive pricing by competitors. The year also saw the rise of a trend of multiple state-owned utilities placing orders on nomination basis (Close to 6 GW) bypassing the established norm of inviting competitive bids.

During the year, the business fully established its footprint in Bangladesh by securing its third EPC order in as many years for BPDB 400 MW Bibiyana CCPP. In the brvious years, it won orders for NWPGCL 360 MW Bheramara CCPP and BPDB 225 MW Sikalbaha CCPP in Bangladesh.

The execution of the current coal and gas-based projects on hand also progressed satisfactorily in 2015-16, with internal execution records being surpassed in terms of time taken for achievement of major project milestones like erection of boiler structures and ceiling girder jack-up.

Significant Initiatives:

The business has recently drawn up Lakshya 2021 - its 5 year strategic plan. Under this exercise, major strategic initiatives have been identified which will lead the business to greater success under the plan period. These initiatives have been drawn up after detailed deliberations and reviews both internally as well as with external consultants to maximise the benefits to the company.

An aggressive cost reduction exercise has been initiated under this plan, to improve the profitability of its current project portfolio and improve its competitiveness for future bids.

Exports - of products, services and projects - have been selected as another major focus area. The business has made significant progress in cultivating overseas customers for its engineering wing as well as supply of boiler and turbine components.

During the year, the business also initiated groundwork for firming up technology partnerships in new areas like Flue Gas Desulphurisation (FGD) and Selective Catalytic Reduction (SCR) and is well placed to take advantage of emerging opportunities.

Outlook:

The power sector in the country is in a state of flux today. The country's growth and proactive government policies are expected to provide much needed boost  to the sector. On the other hand, the increasing focus on nuclear power and renewables like solar can fundamentally alter the power source mix in the nation.

Notwithstanding the emergence of these alternative sources, coal will remain the mainstay of the domestic power sector. The primary concern, however, will continue to be the supply glut in the coal power segment. There are prospects worth ~7 GW in the domestic coal market for 2016-17, against the annual domestic manufacturing capacity of 24 GW. While this overcapacity will continue to keep prices under brssure, the business expects the irrational pricing to finally ebb, as competitors may bid responsibly because of the mounting financial distress evident from their books in 2015-16.

For 2016-17, the situation is expected to improve on policy and economic fronts. On the policy side, the Government has issued rules on environmental protection relating to curbing the emissions of coal-based power plants. These are expected to open up new high-value business opportunities for FGD and SCR. The company is getting geared to offer these as part of its product portfolio. The Ujjwal Discom Assurance Yojana (UDAY) implemented by the Central Government is also expected to provide relief to the sector by de-stressing the discom balance sheets and reviving demand. The Government also plans to bid out at least two UMPPs during 2016-17 to developers. This will generate sizeable market for the business in subsequent periods.

The domestic gas-based power plant market is not expected to revive in the near future considering the already stranded commissioned capacity. However, the South East Asian market is expected to generate opportunities for gas based plants in the coming year. With the good experience of three Bangladesh projects under execution, the company is brparing to enter these new markets in South East Asia.

Major Subsidiary Companies: L&T-MHPS BOILERS PRIVATE LIMITED (LMB):

LMB is a joint venture incorporated in India of L&T, with a 51% stake and Mitsubishi Hitachi Power Systems Limited (MHPS) Japan, with 49% stake, for the engineering, design, manufacture, erection and commissioning of ultra-supercritical/ supercritical boilers in India. The manufacturing hub of LMB is at Hazira, Gujarat; while it has established design and engineering centers at Faridabad and Chennai. The company can manufacture ultra-supercritical/supercritical boilers up to a single unit of 1000 MW at its Hazira complex.

Projects under execution have achieved several milestones with stamp of quality and performance this year.

The manufacturing facility at Hazira has installed and commissioned its first robotic system for boiler component welding. The robotic system is being used to manufacture hanger tubes used in super heater and reheater coils of boilers.

The Company further strengthened its position in export market with brstigious orders from MHPS, Japan for supplying pulverizers, proving its cost competitiveness while matching global quality standards. LMB is committed to execute the current jobs within schedule and is also focusing on increasing exports jobs for pulverizers and brssure parts.

L&T-MHPS TURBINE GENERATORS PRIVATE LIMITED (LMTG):

LMTG is a joint venture incorporated in India of L&T and Mitsubishi Hitachi Power Systems Limited (MHPS), Japan and Mitsubishi Electric Corp. (MELCO). L&T has a 51% stake in the joint venture, with  MHPS holding 39% and MELCO  holding 10% stake. The company has a state-of-the-art manufacturing facility at Hazira, Gujarat for the manufacture of STG equipment of capacity ranging from 500 MW to 1000 MW. The company is engaged in the engineering, design, manufacture, erection and commissioning of ultra-supercritical/ supercritical turbines and generators in India.

The year saw satisfactory execution progress as planned for the projects on hand - both domestic and exports. The company has made consistent efforts to reduce costs, product improvisation of bringing in more efficient models, indigenization and optimization of facilities. Today the company is much better equipped to meet the competitive market.

Export has become a thrust area for the Company with its high quality standards and competitiveness being apbrciated. The Company has also been on the lookout for additional revenue streams like spares and services, which is bearing fruit and is well-poised to grow in future.

L&T-SARGENT & LUNDY LIMITED  (LTSL):

The Company is a joint venture of L&T and Sargent & Lundy LLC, USA (S&L), a global consulting firm in power industry. L&T's stake is just over 50% in the joint venture. LTSL's main Design Centres are located in Vadodara and Faridabad.

LTSL offers the complete gamut of Power Plant Engineering and Consultancy services - from concept to commissioning. Its experience list includes overseas projects in USA, Middle East, Africa, and South East Asia. Besides having considerable expertise in gas-based and sub-critical coal based power projects, LTSL is also involved in engineering of ultra-supercritical/  supercritical coal-based projects and forms the engineering base for L&T's thrust on turnkey execution of ultra-supercritical/supercritical technology. As of now, it has engineered around 21,000 MW of generation capacity of gas-turbine based power plants and around 22,000 MW of generation capacity of coal-based power plants across the globe.

New customers added to its client list this year included a well-known IPP based in Singapore, S. Korean EPC contractor, Turkish EPC contractor, a major European institutional investor, a power investor based in Singapore, two cement manufacturers based in Saudi Arabia and a major Infrastructure player based in Japan.

Breakthrough orders were received in new areas of business in international Lender's Engineering Assignment funded by IFC, Transmission & Distribution,  Substation Engineering and Renewables (Solar) and R&M segments.

L&T HOWDEN PRIVATE LIMITED  (LTH):

The Company is a joint venture of L&T and Howden Group, UK. L&T has 50.1% stake in the joint venture. The company supplies high end fans and air br-heaters for thermal power plants. The Company has a state-of-the-art facility for manufacture of fans and air br-heaters at Hazira, Gujarat along with a fan testing facility. It also has a design and engineering center at Faridabad.

In addition to LMB orders, the Company has bagged major orders from other Boiler OEMs. The Company will continue to pursue fresh equipment prospects from boiler OEMs as well as aftermarket orders from utilities. The recent environmental rules requiring FGDs will further boost demand for the Company's axial fans.

Metallurgical & Material Handling Business

Overview:

Metallurgical and Material Handling (MMH) business provides EPC (Engineering, Procurement & Construction) solutions for ferrous (beneficiation, iron & steel making), non-ferrous (aluminium, copper, lead and zinc) as well as bulk material handling systems in the power, port, steel and mining sectors. The business also offers specialised conveying systems and Ash Handling Plant (AHP)  solutions to the power plants sector. It has combrhensive and robust design and engineering capabilities to cater to EPC needs across all disciplines. It also has in-house facilities which design, manufacture and supply large range of products like surface miners, crushing systems, apron feeders and sand manufacturing plants. It also undertakes customised manufacturing of critical machinery for the steel, power, mining and  other industrial sectors. These manufacturing facilities are located at Kansbahal (Odisha) and Kanchipuram (Tamil Nadu).

Business Environment:

Stagnant growth in demand, coupled with the onslaught of cheap imports from China and East Europe had highly stressed profit margins for Indian steel producers in spite of the low raw material prices. Debt serviceability had been a major  concern in the year 2015-16 for a majority of the steel and power companies. All these factors have impacted investments in new projects with no major steel and power plant expansions announced by companies.

Recent Government initiatives like Safe Guard Duty (SGD), Minimum Import Price (MIP) and bringing transparency in mining allocation, coupled with an upward trend in global steel prices have brought some hope for the steel and power sectors and investments in the mining sector have commenced. However, there are risks associated with the positive sentiment on steel which include raw material and steel price volatility, removal of regulatory support by the Government under the brssure from WTO, significant rise in domestic utilisation rates and weak demand which can all play spoil sport.

Coal India has been able to achieve the production of 536 million MT in 2015-16. The Coal Ministry plans to become self-sufficient in power plant fuel in next two to three years. Major investments in Coal Handling and Washery are likely in the near future by CIL, SCCL, MDOs, etc.

India's iron ore production is expected to reach 199 million MT by 2020, opening opportunities in beneficiation and material handling sectors. Investments are planned for iron ore handling and beneficiation plants by the operators of captive mines namely SAIL and TATA.

The emphasis of all steelmakers will be on improving operational efficiencies. This is expected to lead to investments in rebuilds and de-bottlenecking.

A thrust on ordering Ultra Mega Power Projects (UMPPs) of 6000­8000 MW is expected in 2016-17. This will provide opportunities to MMH for Coal Handling Plants (CHPs) and AHPs.  

Major orders booked and executed during the year:

The business managed to stay ahead of its competitors in major bids in 2015-16 which include Beneficiation Plant for SK Mines near Udaipur, Large Tank Package for Emirates Global Aluminium at Abu Dhabi, AHP for NTPC at Tanda and Petcoke handling package for IOCL Paradip and ORPIC Oman.

The business is currently executing major metallurgical projects for Tata Steel Limited at Jamshedpur, for SAIL at Rourkela and Bokaro and for SK Mines near Udaipur. Material

Handling packages for RRVUNL at  Chhabra, NTPC Khargone, NTPC Tanda, MPPGCL Malwa, Reliance Jamnagar, for Adani at Kandla and Mundra, Northern and Mahanadi Coal field jobs at Nighai, Khadia and Lingaraj and 10 other packages are concurrently under execution for various other customers. GCC projects under execution cover customers like ORPIC, EGA, joint venture by SENAAT & JFE and others.

Plants commissioned across various business units during the year 2015-16 are Blast Furnace, Coke Oven Battery, Sinter Plant, Steel Melt Shop, Hot Strip Mill, Material Handling Package and Power Distribution System for Tata Steel at Kalinganagar; Material Handling Package for Tata Steel at Jamshedpur; Sinter Plant for SAIL at Bhilai, Emirates Steel HSM storage at Abu Dhabi; Drywall Gypsum Board plant for USG and

Zawawi Minerals at Oman, NCL at Block-B; Bucket Wheel Excavators at Neyveli, CHP for NTPL-Tuticorin,  UPRVUNL-Anpara, GCEL-Raikheda and BIDCO-Lalitpur.

The Product business is fully equipped to manufacture high-end equipment involving heavy fabrication, brcision machining and critical assembly and testing.

In the year 2015-16, Kansbahal received a repeat order from Rio Tinto for a 1600 TPH rotary breaker type crusher for Mount Thorley Mines at Singleton, Australia. This was based on satisfactory performance of the first machine supplied in 2014-15. Another brstigious international order from Awam Minerals, Oman for custom-built skid mounted gypsum crushing plant was successfully commissioned.

L&T Kansbahal introduced the very first surface miners in Northern Coalfields Limited (NCL) coal mines in 2015-16. It also continued to maintain its dominance in supplying Limestone Crushing plants to major cement plants in India.

The fabrication shop at Kanchipuram continues to provide the support and strength of critical and heavy fabrication and assembly works for Material Handling Equipment like Stackers, Reclaimers and a host of other mid brcision level equipment catering to the Steel, Mining, Power and other process plants.

Significant Initiatives:

The business has made strategic alliances with leading global  technologists as a part of its business line diversification across various segments.

The ferrous business has taken strategic initiatives in certain parts of the value chain to develop in-house technology capabilities and position itself as a LSTK player for those process plants. The non-ferrous sector has started to expand its portfolio into by-product plants for Zinc and Copper.

As part of a business augmentation drive, MMH has envisaged opportunities in Ash Handling, EPC support for MDO (Mining, Development and Operation) and Material Handling systems.

Kansbahal's manufacturing facility is strategically planning to further augment its product portfolio with the introduction of new products like advanced sand manufacturing plants, cone crushers and mobile crushers.

During the year, the business completed the restructuring of its operations by closing cluster offices. The business aggressively pursued optimisation of resources like staff, equipment, materials and formwork along with cost reduction measures to create a lean organisation and improve operational performance. Operational excellence initiatives continued to enhance productivity.

Key success factors for the business are customer satisfaction, operational efficiency and consistent performance. The business has also established offices in the Gulf (UAE, Oman and KSA), Africa and South East Asia to address international  customer needs and further increase its business potential.

Human Resources: During the year, the business continued its thrust to bring in Operation excellence in the areas of site execution and supply chain management. Interventions for advancing the skill levels of the employees were implemented through a string of strategic training programs, both technical and behavioural at various project sites. Going forward, these initiatives will enhance organisational capabilities for meeting emerging challenges on all fronts.

Outlook:

The Steel sector is currently facing sectoral challenges with global steel prices yet to stabilize and a high level of industry debt across steel players. Some of the positive regulatory interventions such as allocation of coal mines and imposition of SGD and MIP on steel have, however, started to show signs of improvement in the domestic steel sector. The Introduction of the 5:25 refinancing scheme has given some confidence and given a breather to the steel industry. All these factors have raised hopes of an improving profitability trajectory for Indian steel players in Q3 and Q4 of 2016-17.

Focus on capacity utilisation, improving efficiency, securing raw material availability and environmental factors are exerting a positive brssure on the steel companies, triggering investment in steel sector (rebuilds and de-bottlenecking). As Zinc has traditionally followed steel, the prospects in Zinc will follow steel investments. Coal under the purview of the environmental concerns, efficiency improvement brssures and mining clearances is going to see investments in 2016-17. Mining clearances and environmental concerns will pave way for Alumina refineries in 2016-17.

The Power sector has an investment potential of more than USD 200 Bn. in the next five years. 35-45 GW coal based thermal power capacity order finalisation is expected by 2021. Retrofits and replacement of old sub-critical units by super-critical units are also planned by various power producers. Stringent environmental norms will provide  opportunities for the material handling sector. All these initiatives are expected to provide a lot of opportunities for MMH business.

The business envisages opportunities overseas in material handling and downstream metal in the near future.

Heavy Engineering Business

Overview:

The Heavy Engineering (HE) business designs, fabricates and integrates custom designed, engineered critical equipment and systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas, Thermal & Nuclear Power, Aerospace and for Defence applications. The business has a track record of executing large size and complex projects with capabilities that include  in-house engineering, equipped fabrication facilities, R&D centres, an experienced project team and a safe work culture.

The business is structured into two Strategic Business Groups (SBGs):

• Process Plant Equipment and Nuclear

• Defence and Aerospace

The Process Plant Equipment and Nuclear (PP&N) SBG is involved in the manufacture of large complex equipment such as hydro-processing reactors and high-brssure heat exchangers for process plants and equipment for the nuclear power sector. Heavy manufacturing is undertaken at work centres located in Mumbai, Hazira and Sohar in Oman. Precision fabrication in stainless steel and titanium on the process plant side is handled by the

Vadodara manufacturing facility. During the year, the business of fabricating critical piping spools for applications in the power, refinery, petrochemical, fertiliser and chemical sectors (for high-brssure, temperature and corrosive services) was brought within the purview of the Heavy Engineering business, while it was earlier within the purview of Power business. The Piping business unit has a track record of export of piping spools to USA and Canada and forecasts good opportunities in supplies to EPCs in USA, Canada, Japan and Europe.

The Defence and Aerospace (D&A) SBG is involved in design, development and realisation of Naval Platforms, Artillery systems, Land & Naval Weapon systems, Fire Control systems, Naval equipment and systems, Engineering systems for Land and Marine forces, Military Bridging systems, Communication systems, Missile sub systems and Rocket Motors for Space launch vehicles. The SBG's operations span three dedicated work-centres at Talegaon near Pune, Coimbatore and Bengaluru besides production facilities at Hazira for manufacture of critical units for the strategic program, Ranoli for Advanced Composites and Powai for prototype development and testing, besides the site at Vishakhapatnam operated as a GOCO model for a strategic program.

Business Environment:

During the year 2015-16, the Process Plant Equipment segment has been impacted by a weak global economic scenario triggered by slump in the oil prices, falling commodity prices, debrciation of emerging markets' currencies vis-à-vis USD, financial market uncertainty, deferred capital investment plans, geo-political situations and delayed policy implementation in India. The sudden and steep drop in oil prices has resulted in the cancellation, suspension and deferment of capital expenditure projects of oil-producing countries. Competitors having idle capacities offered very aggressive pricing in a shrunk market. Localisation policies, brference to local suppliers and mandatory requirement of sourcing equipment from the Export Credit Agencies (ECA) financing countries by EPCs also impacted the Process Plant Equipment business. International sanctions on Russia and Iran deprived the SBG of business opportunities. The nuclear business was affected by the delay in matters related to nuclear liability and insurance as per The Indian Civil Liability for Nuclear Damage Act. PP&N SBG's order inflow and revenues were therefore adversely impacted. This caused under-utilisation of facilities resulting in under-recovery of fixed expenses. In addition cost over-runs on certain jobs also impacted the profitability of the SBG.

Defence and Aerospace is a strategic segment, and Government of India's (GoI) procurement in this segment follow the Defence Procurement Procedure (DPP). With an aim to achieve self-reliance as well as boost in defence exports in the medium and long term, the GoI has driven several initiatives in fiscal year 2015-16 aimed at attracting investments from both foreign and Indian companies and creating a level playing field for Indian private sector companies in defence. Through structured and detailed consultations with all stakeholders, a simplified DPP 2016 has been released in March 2016, which addresses the requirements of the Ministry of Defence and Industry.

Considering the long procurement cycle time, the benefits of the impact of the new DPP would be realised from the year 2017-18 onwards. In fiscal year 2015-16, the continuing linkage to earlier procedures and resultant slower pace of decision making resulted in deferment of repeat orders for Very Low Frequency (VLF) Transmitter project, Pinaka Artillery Systems and Weapons and Equipment package for Indian Navy's warships, thus resulting in reduced order inflow. However, significant progress has been achieved in certain other programs, orders for which are likely to be concluded in the near term. During the year, the SBG also embarked upon a drive for reducing capital employed in operations with added focus on productivity improvement and efficient execution to shorten the order to cash cycle, resulting in better cash generation.

Significant Initiatives:

In order to maintain leadership position in the Process Plant and Defence sectors, focussed team initiatives are taken under Organisational Excellence (OE).

The OE team facilitates the implementation of identified improvement programs across Heavy Engineering. Initiatives like Productivity Management, Total Productive Maintenance of machines, Six Sigma for process improvements, Workplace Management Systems, Knowledge Management, creation and update of Standards and Procedures and Cost Control measures harness the technical and business acumen of the business. The culture of continuous improvements in operations helps the business attain global benchmarks. In-house competency and leadership development are undertaken through Employee Engagement and Talent Development Programmes.

Sustainability and CSR is enshrined in the Vision of the business and has long been a part of its way of giving back to society at large. The sustainability and CSR initiatives  are undertaken at each of the units of the business based on the local needs. Developmental programs are identified in keeping with its thrust areas like global warming, conservation of electricity, fuels, water and reuse and recycle of material and resources.

More than 50,000 people from underprivileged and economically backward communities have been benefitted through health check-up campaigns and medical care. Over 20,000 children have gained from its education promotion programs by way of building school infrastructure and providing educational aids. Environment, Health and Safety policies and programs help in increasing awareness amongst employees, community and its stakeholders.

Product & Technology Development Centres, within Heavy Engineering, focus on new product development and development of improved  manufacturing technology. These Centres are engaged in deploying technologies related to process industries, manufacturing, mechanical systems, defence electronics and submarine designs. The Centres focus specifically on the following technology domains -welding and metallurgy, composite material, heat transfer, hydrodynamics, computational fluid dynamics, stress analysis, drives, microwave and RF, embedded systems, high availability systems and military communication. The steering group, comprising the top management of the business, plans, oversees and monitors all these initiatives through regular review meetings.

For the D&A segment, the Product & Technology Development Centres focus on development of niche products and solutions either for internal development projects or through participation in opportunities brsented under 'Make' & 'Buy & Make Indian' category programs. The SBG has also successfully partnered with foreign Original Equipment Manufacturers for engineering, development and realisation of artillery gun systems customised for the requirement of Indian Army.

In the Defence segment, the business has collaborated with national laboratories such as DRDO and ISRO as technology partners for indigenous technology development for the various defence and space launch programs, besides in-house programs such as the Autonomous Underwater Vehicle. The business is also a partner to defence public sector undertakings such as Bharat Electronics Limited, Bharat Dynamics Limited, Mazgaon Docks Limited, Garden Reach Shipbuilders and Engineers Limited etc. for detailed engineering & production of various weapon delivery & engineering systems. This augurs well for the business in future, as it aligns with the GoI's 'Make in India' initiative.

Outlook:

The business outlook for Process Plant sector looks challenging due to uncertain macro-economic environment coupled with dropping oil prices and cut on capital expenditure across the sector. The overall investment climate remains cautious with the overhang of excess capacity. However, the recent financial distress of Korean and Chinese fabricators may force EPCs to explore other low-cost countries including India. Given its execution capabilities and proven track record, the PP&N SBG is brpared to harness business prospects as they emerge and stay focused on profitable execution.

In the refinery space, oil supply has outpaced oil demand growth in 2015-16, putting significant brssure on oil prices. The declining trajectory seems likely to continue in 2016-17 and will gradually  rebalance boosting demand and dampening supply. The majority of the investments are likely to be in Asia and Middle East region. However, opportunities are seen in the medium term due to implementation of clean fuel norms in India- Bharat IV by 2017, Bharat VI by 2020 and announcement to set-up new greenfield refinery by PSU oil majors. Overseas opportunities include KNPC-Al Zour Refinery Project in Kuwait, Dangote Refinery Project in Nigeria, Hengli Refinery Project in China, PMB Hengyi Refinery Project in Brunei, TAKREER Refinery Project in the UAE, BAPCO Refinery Project in Bahrain, PEMEX Refinery projects in Mexico, etc.

In the petrochemical sector, the uncertainty in the investment is brvailing due to fall in oil prices. US Shale gas has the advantage of lower and shorter investment cycles compared to conventional oil, which makes US shale more responsive to oil prices. Availability of cheap LNG and US shale gas as a feedstock will boost investment in the petrochemical sectors (ethylene capacity additions).

In the Fertiliser space, global fertiliser demand is forecasted to expand marginally in fiscal year 2016-17. Greenfield and brownfield projects are expected in USA, Saudi Arabia, Indonesia, Nigeria, Algeria and Russia. Expected domestic greenfield and brownfield investments in the fertiliser sector shall provide business opportunities. Also, opportunities to export for upgradation projects in Iran seem to be opening up.

In the Nuclear space, the Indian Nuclear Insurance Pool (INIP) launched in June 2015 and the draft Operator's Policy and Supplier's Special Contingency Policy (against 'Right of Recourse') is being reviewed by the concerned parties (including foreign technology providers). Further, the government approved the Nuclear Liability Fund of Rs. 2000 crore which is an addition to INIP. The Company has entered into strategic teaming agreement / MoU with the concerned foreign technology suppliers and can look forward to a global brsence in this industry. Due to stiff competition in international markets, foreign OEMs are looking at cost effective solutions through plant upgrades and de-bottlenecking, and this opens up opportunities for the business. In view of the same, procurement process (re-tendering) for critical equipment is expected to begin in 2016-17.

A track record spanning three decades of the D&A SBG with emphasis on indigenous technology development distinctly positions the Company as a market leader, on its own steam and in the forefront in the defence and aerospace sector. With the DPP 2016 coming  into effect from 1st April, Defence procurement is expected to gain traction and programs worth Rs. 200000 crore are expected to be ordered with brference to the Indian industry. The brference to buy Indigenously Designed Developed and Manufactured (IDDM) products will also result in opportunities in newer domains. With FDI at 49%, competition in the form of foreign OEMs with Indian industry is likely to be increased.

Over the next 2 to 3 years, significant opportunities are envisaged in programs for new-build naval platforms, refit of conventional submarines, artillery and air defence guns, close-in-weapon system, military bridging systems, missile programs and sub­systems for space launch vehicles. The business is future-ready to play a proactive role towards self-reliance of our nation through a successful 'Make in India' initiative.

Major Subsidiary Companies L&T SPECIAL STEELS AND HEAVY FORGINGS PRIVATE LIMITED (LTSSHF):

L&T Special Steels and Heavy Forgings Private Limited (LTSSHF) is a joint venture (JV) of Larsen & Toubro Limited (L&T) and Nuclear Power Corporation of India Limited (NCPIL), with L&T and NPCIL holding 74% and 26% stakes respectively.

The JV was formed to set up a fully integrated forging facility (from steel scrap to finished forgings of alloy steels, carbon steel & stainless steels) with a capacity to produce a single piece ingot up to 300 MT and forgings up to 120 MT in the first phase. These are required for critical equipment in nuclear power and hydrocarbon industry, for rotors in power industry, blocks for oil & gas segment and for general engineering applications. The JV is a major strategic step towards achieving India's independence from imports of heavy forgings for hydrocarbon industry and ensuring timely supply of heavy forgings for nuclear power plants.

Business Scenario:

The demand for heavy forgings is a derived demand dependent on the outlook of the end use segments comprising refineries, petrochemicals, thermal and nuclear power, wind and hydro power and other industries like steel. The Company has been witnessing fierce competition from global established players having excess capacities. This has been aggravated post the Fukushima nuclear disaster. Due to very low crude oil prices, the forging demand from oil & gas sector has also diminished.

The Company has been successful in getting approvals and qualifications from many key customers. This opens a window of opportunities going forward in various segments. The Company has been successful in manufacturing of high quality Stainless Steel grade forgings required for International Thermonuclear Experimental Reactor (ITER). In yet other major milestone, the Company has successfully manufactured most of the heavy forgings for steam generators, brssurizers of 700 MW PHWR reactors for NPCIL designed nuclear plants.

The Company has also made heavy forgings - shells, tube sheets, dished ends required for refineries,fertiliser plants and heavy shafts for the mining segment. The Company has made successful supplies of Blow out Preventers (BOP) and forged blocks required for oil & gas segment.

The Company is focusing on stabilising the production processes and improve manufacturing efficiencies so as to remain competitive in the market. A series of initiatives have been initiated in the area of cost control and improving process efficiencies. A total focus on reduction of fixed costs has brought down the fixed costs by over 30%.

The Company has embarked on establishment of Quality Systems in the new facility, complying with ISO 9001. The Company has been accredited by NABL certification for laboratories and also received the U, U2 stamps from ASME, USA. This will help company in getting shop approvals from prospective reputed customers.

The strategic focus of the Company, in line with its vision, is to fill the technological and resultant manufacturing gap in the country for critical heavy forgings for the nuclear and other strategic sectors like defence. The Company has demonstrated its capability to manufacture critical forgings for the Indian Pressurized Heavy Water Reactor (PHWR) plants. It has also taken up the development of the critical forgings for the next generation IPWR - nuclear plants. Discussions are at an advanced stage with foreign technology partners for possible development of forgings to meet their specifications for future Indian nuclear installations.

SPECTRUM INFOTECH PRIVATE  LIMITED (SIPL):

SIPL is a wholly-owned subsidiary of Larsen & Toubro Limited. SIPL undertakes technology development and manufacture of avionics Line Replaceable Units (LRUs) for military applications. SIPL concentrates largely on product development in embedded solutions, sensors, control and signal processing. SIPL is certified by Centre for Military Airworthiness and Certification (CEMILAC) of the Ministry of Defence, India for the same. SIPL has obtained AS9100 Rev C, ISO 9001 and ISO 27001 certifications.

SIPL is developing a Frequency-Modulated Continuous-Wave (FMCW) based radar system, which can be utilised in a variety of military and land security applications. The company continues to work with the Ministry of Defence and Hindustan Aeronautics Limited to jointly develop new products.

The announcement of new programs in the aircrafts and helicopter domains have opened new business opportunities in avionics. However, increased  competition from smaller firms and entry of new players have resulted in a very challenging business environment.

LARSEN & TOUBRO HEAVY ENGINEERING LLC:

Larsen & Toubro Heavy Engineering LLC is a Joint Venture with Zubair Corporation, established in Sohar, Sultanate of Oman. L&T, through its wholly-owned subsidiary Larsen & Toubro International FZE, holds 70% in the Company. The heavy engineering facility was commissioned in October 2009. The Company focuses on business in the Middle East, mainly GCC countries and supplements manufacturing and fabrication facilities located in India. The company seeks to leverage the geographical advantage with Oman Government's in-country-value requirements, Oman's expected large value investments in the hydrocarbon sector, and revamp prospects in certain ageing refinery projects offer good potential for the facility which has already established itself by producing a variety of complex equipment.

Electrical & Automation Business

Overview:

The Electrical & Automation (E&A) business of Larsen & Toubro Limited offers a wide range of products and solutions for electricity distribution and control in industries, utilities, infrastructure, buildings and agriculture sectors. Its basket of offerings includes Low and Medium Voltage Switchgear components, Electrical Systems, Marine Switchgear systems, Industrial & Building Automation Solutions,

Surveillance Systems, Energy Meters and Protection Relays.

The business is supported by its five decades of experience in in-house design and development that facilitates the introduction of contemporary products and a high brcision tool manufacturing facility which is a br-requisite for high quality manufacturing. The business runs six Switchgear Training Centres across the country that impart  training and learning on good electrical practices to engineers, consultants, contractors, technicians and electricians.

Currently, E&A has manufacturing facilities at Navi Mumbai (Mahape and Rabale), Ahmednagar, Vadodara, Coimbatore and Mysuru in India as well as in Saudi Arabia, Jebel Ali (UAE), Kuwait, Malaysia, Indonesia and the UK.

The constituents of E&A business are two Strategic Business Groups (SBGs) and designated subsidiaries. In India both the SBGs have under them two Business Units(BUs) each. The Products SBG includes Electrical Standard Products (ESP) and Metering & Protection System (MPS) business units while Projects SBG comprises Electrical Systems & Equipment (ESE) and Control & Automation (C&A) business units respectively.

Business Environment:

During the year global economic growth has slowed down from 3.4% to 3.1% on the back of slowdown in China, meltdown of oil prices across globe and concerns of European market still continuing. However,India's GDP grew by 7.6% notwithstanding the contraction of global exports and two consecutive years of a deficient monsoon on the back of an excellent performance by the services sector.

New initiatives like Dindayal Upadhyaya Gram Jyoti Yojana, UDAY, Smart Cities, Smart Grid, Pradhan Mantri Krishi Sinchai Yojana & increased focus on renewable energy taken by government show a promising future. But these initiatives will take time to take root and start generating business for E&A. These initiatives will see incremental revenue for coming five years.

The LV switchgear market has been growing at slow pace over the last two years due to a muted investment cycle, weak macroeconomic environment, and a downward trend in the industry and restricted investments in infrastructure and utility projects.

The LV Switchgear market is expected to grow at CAGR of 6.5%and is expected to reach Rs. 7600 crore in 2020.

Rising investment in alternative sources of energy is expected to contribute to the growth of MV and LV switchgear used for switching and general protection. Moreover, this application area will also trigger demand for Miniature Circuit Breakers (MCBs) and Molded Case Circuit Breakers (MCCBs).

In the International market,huge Infrastructure opportunities are seen in the ASEAN region especially in Indonesia and Thailand. Major investments are seen in Infrastructure development. Also there are opportunities in Infrastructure segment in the Qatar, Saudi Arabia and UAE (metros, airports and hospitals) in the wake  of FIFA 2022 (Qatar) and EXPO 2020 (UAE).

The infrastructure sector sees a gradual growth over the coming years, however, the impact of lower oil prices is seen on future OPEX plans cancelled by all oil-producing nations (Middle East projects have  been stalled or cancelled). This has inturn affected the price-realisations for whatever opportunities existed in these markets.

Significant Initiatives:

The business continued to devote its resources and capabilities to Research & Developmental endeavors, which is one of its core strengths. Its in-house design & development capabilities are rated among the best in the industry. The facilities at Powai-Mumbai, Ahmednagar, Mysuru, Mahape and Coimbatore are approved by the Department of Scientific & Industrial Research, Ministry of Science & Technology. These centers network with international labs, testing centers and academic institutions to keep abreast of new technology trends and introduce them to customers in different segments.

During the year, E&A filed application for as many as 114 patents, 12 trademarks, 37 designs and 1 copyright in India, as well as 2 foreign patent applications (PCT National Phase applications - in Europe and China). This was the 9th consecutive year of filing more than 100 patent applications. Also  the business won the brstigious National IP Award 2015 in the category 'Top Organizations for Designs', from the Department of Industrial Policy & Promotion and Intellectual Property Office, Govt. of India, in association with CII. The honor recognises and rewards organisations across India for their contribution in harnessing the country's intellectual capital and creating an eco-system that boosts creativity and innovation.

During the year, Electrical Standard Products Business put its thrust on ramping up its capabilities to increase the production of its new products such as its new range of modular products and other MCCBs. The two major developments for the year were introduction of AHF (Automatic Harmonic Filter) and the 'Smart Comm' solution (powered by iVisionmax - Indigenous automation software). Smart Comm is a unified software platform for supporting all the products of the business including meters, MCCBs, MCBs, relays, releases, ac drives, soft starters, IO modules and building automation products, communicating to a control room through Ethernet, Modbus TCP/IP, IEC 61850 and BACNet. Smart Comm is scalable to meet requirements of all sizes of facilities and plants and it allows integration of third party devices on open standard protocols.

In 2015-16, the Metering & Protection System business introduced new products like New 1-phase Meter with IrDA, 3-Phase Meter with IrDA, 1-Phase Pre-Paid Meter (Taurus), 3-Phase Pre-Paid Meter (Atria), 1-Phase Smart Meter (Aurora), 3-Phase Smart Meter (Regor), 3-Phase Digital Panel Meter  (Nova), New Trip Supervision Relay (TCS01-nX) & Motor Protection Relay (MPR200). The introduction of the Smart and Prepaid meter will show results in the coming years as India is implementing 'Smart Cities' a key initiative taken by the Government.

During the year, the Control and Automation business made an entry into the Solar business with help of a tie-up with an Italian Company for L&T-branded Solar inverter completing the portfolio for solar solution. Also, Electrical System and Equipment business developed L&Ts Outdoor Compact substation - N-Qube which will cater to the rapidly growing infrastructure sector.

Outlook:

Even with the new reforms initiated by the government, the core sectors continue to show no signs of pickup. However, with the launch of schemes like DDUGJY and IPDS which target central procurement of meters throughout the country, there is a hope for a movement toward brmium products like AMR, Prepaid and Smart Meters in the coming years. Also, Scheme UDAY will improve health of DISCOMS and will lead to higher investment by the utilities.

The overall market will remain competitive as liquidity with major customers continues to be a cause of worry. The business has also witnessed a financial crunch at major industrial houses due to which new plants/expansion are not being announced. Overall the industrial sector shows a muted trend. However, the business sees an upward trend in the infrastructure sector (Metro, Airports, Railways,  etc.) and is optimistic that its efforts in launching products for infrastructure sector in 2015-16 will yield result although the margins in infrastructure sector are negligible due to competition from local players.

The business also sees an improvement in demand from agro / food processing industries. The Marine business sees a positive sentiment through the 'Make in India' initiative taken by the government which emphasises on indigenous content, giving the business an edge over foreign suppliers. Also the Indian Navy has reckoned the company as a strategic partner resulting in thrust on setting up Life Cycle Support facilities in its Navi Mumbai factory.

With continuous low oil prices, the business sentiments are being affected on the international front. Projects are expected to be deferred or delayed further. However, social infrastructure projects like hospitals and metros are expected to continue as planned and new high end infrastructure projects are being announced in the Dubai market for Expo 2020 and the Qatar market for FIFA 2022. The dedicated focus of the business on GCC metro projects is expected to yield results in 2016-17. Also ,pursuant to unrest in the Middle East and Africa regions, respective government priorities are shifting toward defence related initiatives.

The South East Asia market looks attractive as major investments are seen in the building sector in Indonesia and the power sector in Bangladesh.

Major Subsidiary Companies TAMCO GROUP OF COMPANIES:

TAMCO is the leading manufacturer of Medium Voltage switchgear in South East Asia with manufacturing facilities in Malaysia and Indonesia. Its products are widely used in the power, oil & gas, construction and manufacturing industries. Through extensive R&D and advanced manufacturing technology, TAMCO has been able to deliver high quality, safe, reliable and cost effective products and solutions. Its strength lies in the flexibility to develop and adapt products to meet customers' needs and, therefore, it has a high reference list across the globe.

The business environment in 2015-16 was tough with the steep fall in oil prices as TAMCO's main markets are in oil producing nations. Even the Malaysian market was badly affected with projects getting delayed and the government cutting its OPEX budget. Jobs were few and this affected the price levels too. However, the debrciation of the local currency (Ringgit) gave the company an advantage in the global market and it could protect its market share and margins. The Chairman of Saudi Electricity Company visited the company and encouraged it to build the switchgears in KSA. Consequently TAMCO invested 25% stake in LTEASA and have completed type tests to get its products approved. Also UK approved for the E&A business to opening doors to utility market in the UK. The company's Australian operations were not able to generate business and were making losses over the last two years. Accordingly, operations in Australia were stopped and  separation of all employees was carried out except the service engineers.

The Malaysian economy is showing signs of recovery. The local utility is coming out with a few tenders in the coming year and the Company expects to benefit from this opportunity. Also the outlook for Indonesian economy looks encouraging and a large numbers of infrastructure and power projects are seen in the pipeline. With projects drying up in core markets like UAE, Qatar and Malaysia, the Company saw a need to develop a retrofit solution for these geographies where its product and solution population is high. With some concrete efforts, the Company has developed retrofit solutions to cater to these requirements. Another key strategy for TAMCO would be to foray into European markets, Iran and other South-  East Asia countries like Vietnam following an OEM model.

L&T ELECTRICAL & AUTOMATION FZE (LTEAFZE):

L&T Electrical & Automation FZE (LTEAFZE) is a 100% subsidiary of L&T International FZE based in UAE. The company provides Systems Integration solutions in the Oil & Gas, Power, Water and Waste Water and Infrastructure space like Airports, Hospitals, Stadiums and Transportation segment like Metro and Rail. The solutions are centered around Process Automation and Telecommunication applications catering to customers / contractors in the Middle East, Africa, CIS and Turkey markets. It has a state-of-the-art integration facility in Jebel Ali Free Zone and is accredited with ISO 9001, 18001, 27001 and TUV for functional safety.

With the period 2015-16 seeing a steady decline in oil revenues

leading to shortfalls in budgeted incomes for all oil economies in the region compounded with heightened security concerns due to increased political disturbance in the region, there is a general slowdown in pace of O&G project investment. Nevertheless, O&G investments continued in Kuwait and Oman, while Qatar and KSA governments primarily are committed to improving their infrastructure. Airport, Metro / Railway, Hospital related investment continued to gain importance.

The Company has had a bad year in terms of achievements. The costs surpassed the estimation on the projects, leading to a negative bottom line. With increasing number of System Integration companies in the market, the markets have become extremely competitive. As a result, LTEAFZE saw drop in Process Automation project opportunities from the O&G and Utility industries. However, it saw considerable scope for Infrastructure Automation with

Building Management System along with Extra Low Voltage (ELV), Electronic Security (ESS) and Telecommunication (TCom) Systems. The Automation Product OEMs continue to lobby with end clients / consultants for restricting competition to limited participants through direct OEM bidder nomination or novation.

Healthcare, Transport, Power Generation and key event driven development viz. FIFA 2022 in Qatar and EXPO 2020 in Dubai would continue to generate business opportunities through 2016-17. While some countries like UAE show some investment slowdown in energy and infrastructure sector, others like Qatar and Kuwait continue to move forward with earlier announced projects finalised in 2015 and 2016 and have announced new projects that will give opportunities to LTEAFZE in 2017. Projects focused on any process Improvement, Security, Surveillance and / or Environment friendly practices will generally continue to get implemented across industries. LTEAFZE is fast aligning with the new A&T arena with delivery capability as Main Automation or Telecom Contractor, and is poised to leap forward into the next league.

L&T ELECTRICALS AND AUTOMATION SAUDI ARABIA COMPANY LIMITED, LLC  (LTEASA):

L&T Electrical & Automation Saudi Arabia Company Limited was established in 2006 as Limited Liability Company, where, 75% of shares are held by Larsen & Toubro International FZE and 25% by TAMCO Switchgear Malaysia Sdn. Bhd. It manufactures of LV/ MV switchgear/control gear panels of all sorts and undertakes installation and commissioning of these products along with associated products viz., PLCs, Drives, Transformers, cables, etc., to offer a one window solution to customers. The company been approved by almost all major end users in the Kingdom eg SABIC and Saudi Aramco.

The Company had a bad year in terms of achievements. During the year 2015-16, LTEASA saw lower order inflow in view of deferment and cancellation of projects which lead to drying up of the order book and lower sales, leading to a negative bottom line.

The Saudi economy is expected to grow slowly at 1.9 % in calendar year 2016 down from 3.4% in calendar year 2015. The non-oil private sector will continue to grow albeit at a slower pace, as reduced government spending will most likely have a negative impact on business activity. However, growth in all sectors in the non-oil private economy will remain positive. The fiscal year 2016-17 will be a tough year for LTEASA. The key focus areas for LTEASA during the year would be getting LV and MV approvals from SEC, Aramco and other consultants in KSA, providing better reach in Saudi market. As major growth opportunities will be generated from non-oil markets, the key focus area would be the infrastructure sector, especially mega metro and airport projects.

HENIKWON CORPORATION SDN BHD, MALAYSIA:

Established in 1982, Henikwon Corporation is leading manufacturer of Low Voltage (LV) & Medium Voltage (MV) bus duct systems. The Henikwon acquisition brought strong customer base of large corporations to E&A's business and complements its portfolio to make combrhensive offerings for the building and infrastructure segments. It further enhances L&T's brsence in South East Asia, India and Middle East markets. Henikwon offers high quality products that comply with international quality standards. The 12,300 sq.mt. manufacturing unit is located in Selangor state of Malaysia.

The overall business environment and market sentiment is cautious. Most of the regional economies are yet to get into higher growth orbit and are brsently in the band of 4-5% GDP growth. Significant local opportunities are seen in oil & gas and metro segment. The Company is working on a few metro projects locally as well as within India (Delhi, Chennai) and international markets (Doha, Riyadh).

The Company is working to stabilise 'S-line' range of bus duct systems, and has initiated marketing efforts in select countries. Further, it is working on development of non- segregated variants, for the LV segment, which is being specified by the oil & gas industry. Qatar remains in focus due to less dependency on  oil and the FIFA World Cup 2022.

The Company will continue to focus on its existing range (SCM) and strengthen its ADDC and SEWA segment projects.

SERVOWATCH SYSTEMS LTD, UK

Servowatch is marine automation company based in Maldon Essex UK, acquired by L&T in April 2012. Servowatch is recognized as a world leading system integrator for modern naval platforms, super yacht installations and commercial marine operators. its unique software design allows integration of third-party software into a common operator platform environment. 'Task Orientation' for specific user profiles with portability from station to station creates a highly redundant multifunctional operating environment. Typical applications include machinery, navigation, radar, electronic charting, internal and external communications, tactical sensors, auxiliary ship systems, camera networks, mission logging and playback functionality. The highly trained and professional teams at Servowatch offer an extensive range of services.

Servowatch partners with leading manufacturers of hardware and software to allow flexibility in meeting project requirements, and providing full through life product support capability.

During the year, Servowatch successfully completed FAT for MARS Project (Tankers for Re-fuelling UK Royal Navy built by DSME in South Korea) using indigenous software Winmon 9. The projects included a total of four vessels, first of which underwent sea trials. Successful commission of the first vessel will give Servowatch a huge reference for large naval vessel systems and open doors to other markets.

Going into the new financial year, the business is set to consolidate on the financial position achieved during brvious year. The business is planning to restructure its sales team to focus on select geographies. Also a permanent business development professional is deployed in its major market of South Korea and the Far East. Products have been aligned/ introduced and priced to meet the market requirements for all sectors.

Kana Controls General & Trading Contracting Company W.L.L., Kuwait

LTEAFZE acquired the Kuwait-based Kana Controls General Control & Trading Company in September 2013. Kana Controls established in 1990,offers systems for all type of automation including Field Instruments & Sensors, Flame Detection & Combustion, Termination & Wiring devices, Panel Mounted Instruments & devices, Interface devices, Power Supplies, Panels & Enclosures.

Kana Controls is approved with most customers in Kuwait and provides a good platform to serve the control and automation business opportunities in Kuwait.

Hydrocarbon Business

Overview:

The Hydrocarbon business provides 'design to build' turnkey engineering, procurement and construction solutions for the global Oil & Gas Industry including oil & gas extraction, petroleum refining, chemicals & petrochemicals, fertiliser sectors and cross country pipelines. The existing in-house capabilities enable it to deliver complete end-to-end solutions from front end design through  detail engineering, procurement, fabrication, project management, construction and installation up to commissioning services. The hydrocarbon business is primarily housed in a wholly owned subsidiary, L&T Hydrocarbon Engineering Limited (LTHE)

The business has repeatedly delivered, large, critical and complex projects, globally, by virtue of its experienced and highly skilled  project execution team, world-class HSE practices and culture of excellence. The business has a fully integrated capability chain including in-house engineering, R&D centre, engineering joint ventures, world class modular fabrication facilities and offshore installation capabilities. The principles of Company's business philosophy are striving for excellence in corporate governance, safety standards and quality standards, state-of-the-art IT  security practices ,on-time delivery and cost competitiveness.

The geographic reach of the business spans across Asia,covering Middle-East and South-East Asia. Major facilities in India include Engineering & Project Management Centres at Mumbai, Vadodara, Chennai and Faridabad and Fabrication Yards at Hazira (Surat) and Kattupalli (Chennai).Overseas facilities are located across the Middle East including in UAE (Sharjah), Saudi Arabia (Al-Khobar), Kuwait, Oman (Muscat) and Qatar (Doha). The business also has a major Modular Fabrication Facility at Sohar in Oman held through a subsidiary.

The business caters to clients across the hydrocarbon value-chain through its following business verticals:

• Hydrocarbon Offshore

• Hydrocarbon Onshore

• Hydrocarbon Construction Services

• Hydrocarbon Modular Fabrication Services

• Hydrocarbon Engineering Services

Hydrocarbon Offshore:

The business offers turnkey solutions to the Global Offshore Oil & Gas industry encompassing well-head platforms, process platforms and modules, subsea pipelines, brown field developments, jack-up rig refurbishment, floating production storage & off-loading (FPSO) topsides and subsea projects. For more than two decades the business has been successfully executing large offshore platforms and pipeline projects in east and west coasts of India, the Middle East, South East Asia and Africa, for  global companies such as ONGC, GSPC, British Gas, ADMA OPCO, Bunduq, Qatar Petroleum, Maersk Oil Qatar, PTTEP, Petronas and Songas.

The joint ventures with Sapura Crest Petroleum Bhd., Malaysia, viz., L&T Sapura Shipping Private Limited,owns and operates a Heavy Lift Pipe Lay Vessel, and L&T Sapura Offshore Private Limited provides offshore installation services. LTHE's wholly owned subsidiary, L&T-Valdel Engineering Limited, Bengaluru, renders dedicated engineering services for offshore projects.

The business has made a foray into the deepwater segment with a long term co-operation agreement with McDermott International to develop cost-effective solutions for subsea projects off the east coast of India. The Consortium of McDermott and LTHE bagged an offshore contract for development of ONGC's Vashishta and S1 deepwater fields involving supply and installation of subsea structures in the seabed at  water depths ranging from 200 to 700 metres.

During the year, the business also secured an EPCI contract from ONGC involving new process platform, well head platform, topside modifications, associated subsea pipelines and a living quarters platform in Bassein Field off India's west coast. In consortium with EMAS AMC, a Singapore based installation contractor, the Company has signed a six year Long Term Agreement with Saudi Aramco, under which the consortium will execute offshore projects in Kingdom of Saudi Arabia. This will enable the Company to tap the large value opportunities in Saudi Arabia over the medium term.

Hydrocarbon Onshore:

The business provides EPC solutions for a wide range of hydrocarbon projects covering Refining, Petrochemical, Fertiliser (ammonia & urea complexes), On-shore Oil & Gas Processing plants, and cross country pipelines.

The business has a track record of successful simultaneous execution of multiple mega projects having diverse technologies from process licensors like UOP, Axens, Haldor Topsoe, CB&I Lummus, Black & Veatch, Ortloff, ExxonMobil, BOC Parsons, Invista & Davy Process Technologies. The vertical's in-house Engineering Centres along with joint venture companies - L&T-Chiyoda Limited for onshore engineering and L&T-Gulf Private Limited for Pipeline engineering enable the vertical to offer complete spectrum of FEED, process and detailed engineering to clients. The Company's subsidiary Larsen Toubro Arabia is registered as In-Kingdom EPC ('IK-EPC') company in Saudi Arabia and addresses onshore In-Kingdom opportunities.

The business has executed Lump-Sum Turnkey(LSTK) projects in on-shore Oil & Gas Processing, Refinery & Petrochemical applications for various Indian oil  majors like IOCL, MRPL, ONGC, OMPL, BPCL, HPCL, Reliance  Industries etc., as well as fertiliser companies like NFL, GNFC, RCF and others. In recent years, the business  has also diversified into related areas like Cryogenic Terminal projects, LNG tanks and Regasification plants.

Internationally, the business group is brqualified by major international oil & gas producers such as Saudi Aramco, Kuwait Oil Company (KOC), Kuwait National Petroleum Company (KNPC), SOCAR, PETRONAS, CNPC, Dragon Oil in  Turkmenistan, Lukoil in Uzbekistan and Sonatrach in Algeria. It has a successful track record of project execution with international bellwethers like Abu Dhabi Gas Industries (GASCO), Petroleum Development Oman (PDO), Petronas, Chemanol, KNPC, etc.

During the year, the business has received an EPC contract from Gujarat State Fertilisers & Chemicals Limited for setting up 40k MTA Melamine Plant at Vadodara using process technology from Casale SA. Internationally, the business has bagged twin EPC orders from Petroleum Development Oman LLC (PDO) i.e. Saih Nihayadah Depletion Combrssion Phase 2 & Kauther Depletion Combrssion Phase 2 in  central Oman, to overcome brssure depletion and maintain potential to sustain production.

Hydrocarbon Construction Services:

The vertical renders turnkey construction services for refineries, petrochemicals, chemical plants, fertilizers, gas gathering stations, crude oil & gas terminals and underground cavern storage systems for LPG and cross country oil & gas pipelines.

The vertical's major capabilities include heavy lift competency, advanced welding technologies and Quality systems. The business has also invested in strategic construction equipment, a range of pipeline sbrad equipment, automatic welding machines and other plant and machinery for electro-mechanical construction works. The business has executed projects for major private sector customers like Cairn Energy, Reliance Industries, HPCL Mittal Energy as well as major oil PSUs like BPCL, IOCL, ONGC and international customers like Abu Dhabi Company for Onshore Oil Operations (ADCO), Abu Dhabi Oil Refining Company (TAKREER).

The Company's country specific joint ventures with local partners render construction support to international onshore projects -Larsen & Toubro Electromech LLC in Oman, Larsen & Toubro ATCO Saudia LLC in Saudi Arabia, Larsen & Toubro Kuwait Construction General Contracting WLL in Kuwait.

During the year, the business received an order for construction of onshore Gas Pipelines & Associated facilities including Pipe-laying works in western part of India.

Hydrocarbon Modular Fabrication Services:

The Modular Fabrication Services vertical offers combrhensive Engineering, Procurement, Fabrication (EPF) modular

solutions primarily in oil & gas and petrochemical sectors, and renders fabrication support to offshore and onshore verticals. The vertical's two strategically located state-of-the-art fabrication facilities in India, ensure round the year delivery of process platforms, wellhead platforms, modular structures, heavy jackets and oil rigs. The Hazira yard near Surat caters to the west coast of India and Kattupalli yard near Chennai caters to the east coast of India and South East Asia. The Company's Oman subsidiary caters to opportunities in Middle East arising from UAE, Oman, Qatar and Saudi Arabia. The three yards altogether have a total fabrication capacity of about 150000 MT per year.

During the year, the business has received a number of orders for fabrication and supply of Piping systems, Manifold Skids, etc. for  supply to international locations ranging from Middle East to the Americas.

Hydrocarbon Engineering Services:

The Engineering Services vertical offers combrhensive solutions covering the entire spectrum of engineering across the oil & gas value chain, from two Centres of Excellence within India: the Technology Centre in Mumbai and the Engineering Centre at Faridabad near Delhi within the National Capital Region (NCR).The Mumbai Centre primarily focuses on Front End Engineering Design (FEED), advanced engineering solutions, specialised studies and engineering for special applications (such as reformers, cryogenic systems and modular solutions) while the Faridabad Centre specialises in a broad range of detailed engineering and project management functions.

The Engineering Services vertical has a large resource pool of over 3.5 million engineering man hours. A large portfolio of industry-standard software tools, robust IT infrastructure and in-house R&D facility further augment its capabilities. Benchmarked through leading certification and accreditation systems, the engineering work processes offer consistent product quality with on-time delivery. Backed by decades of experience and rich domain knowledge, the team is geared to provide value-added services to customers across the hydrocarbon sector.

Business Environment:

The volatility and sharp fall in crude oil prices during the year created an environment of investment uncertainty for the entire hydrocarbon industry, with international offshore segment being affected the most. New field development plans were deferred and most of the private sector players announced reduction in capex spends. This shrinkage of market opportunities is less pronounced in the Middle East. Gas-based projects have been relatively less affected by the decline in oil prices and national oil companies continue to tender these type of projects. However, there is an increasing thrust on local 'in-country' value add by governments and national oil companies.

In the domestic sector, the government announced a new Hydrocarbon Exploration & Licencing Policy (HELP) providing for unified open acreage licensing policy, i.e. allowing producers

to exploit conventional and unconventional hydrocarbons (CBM/ shale/hydrates) under a single license. Simultaneously, a new gas pricing formula was announced providing for market linked prices for deepwater & Ultra deepwater fields to incentivise exploration activity. During the year, ONGC continued its capex projects notwithstanding the fall in crude prices. However, brdatory pricing was seen from a few South East Asian players with idle capacity. On the flip side, lower crude prices have led to a boost in refining and petrochemical expansion plans. Reduced naphtha and gas prices have also led to the revival of LNG Re-gasification Terminal projects & fertiliser projects, primarily, in the nature of upgradation and energy efficiency.

In light of the above challenging external environment and multiple headwinds, the business has done well to maintain order inflow at brvious year levels of approx. Rs. 10000 crore.

Significant Initiatives:

Fiscal year 2015-16 has been a year of transformation and turnaround for the hydrocarbon business. There were several top leadership changes starting with appointment of Mr. Subramanian Sarma, a veteran in global oil & gas contracting industry, as the CEO & MD of L&T Hydrocarbon Engineering Limited. A business re-organisation and transformation plan was unveiled during the year with a view to avoid silos, reduce costs, improve competitiveness and aid profitable execution.

The entire hydrocarbon business operations have been re-grouped as five business verticals with targeted revenue streams, catering to global opportunities across the hydrocarbon value chain, including creation of two new verticals, viz., Modular Fabrication Services & Engineering Services to provide growth impetus for the future. Consolidation of erstwhile geographically dispersed operations into India-centric verticals has been accomplished. A new risk/reward sharing model has been adopted to create better alignment amongst verticals and rationalisation of profit centers. Tie-ups with global majors are under negotiation to address Indian deepwater projects, subsea manifolds, engineering services, augment utilisation of yards, etc.

Manpower rationalisation and relocation initiatives are expected to result in annualised savings of over X 200 crore from 2016-17 onwards. The business development set-up has been consolidated with distinct focus groups for product as well as geographies. The proposal and estimation group has been centralised and the estimation process has been streamlined to improve bid-win ratio. Initiatives have also been undertaken for consolidating key resources to create centres of excellence and identifying and addressing leadership gaps. As a result of these initiatives, the hydrocarbon segment is poised to improve its bottom-line significantly from 2016-17 onwards.

Risk Management & Internal Controls:

Pro-active Risk Management has been identified as a key strategic initiative to ensure sustainable growth. Risk Management is an integral part of the overall governance process to identify, segregate, mitigate, control and monitor various risks at business, individual bid and operational levels. The risk management policy and guidelines incorporates global best practices and procedures which enables building the ability to anticipate challenges and opportunities for achieving strategic objectives.

The major risks such as limited investments due to falling oil prices, onerous contract terms by client, tight schedule, stringent localization requirements, forex exposure, etc. are mitigated through specific actions like operational excellence initiatives, alliances, cost optimisation, improved customer relationship, compliance with stringent HSE standards, proactive forex hedging, strong contract & claims management and identification of key personnel and talent at the br-bid stage.

All projects undergo a structured br-bid risk review by the Apex Risk Management Committee (ARMC) at business and at corporate level as per well-defined authorisation limits. This process involves a detailed assessment of risks and deliberation on mitigation measures by the ARMC. Periodically risk reviews are conducted for ongoing projects. Project managers/ selected project team members undergo a certified Risk Induction Programme conducted by ECRI (Engineering & Construction Risk Institute) on a continuous basis to become acquainted with industry's best practices.During the year, a dedicated Business Assurance  Group has been established to institutionalise execution risk management on a pro-active basis.

A strong Internal Control framework is an important part of operations and corporate governance. The management has established internal control systems commensurate with the size and complexity of the business. The internal control manual provides a structured approach for identification, rectification, monitoring and reporting of gaps in the internal control systems and processes. The Group follows well documented Standard Operating Procedures (SOPs) and the operating effectiveness of various controls is periodically tested and deficiencies, if any, are promptly rectified.

During the year, an in-depth exercise for evaluating the adequacy of Internal Financial Controls and their Operating Effectiveness was undertaken, as per the provisions of Companies Act 2013. This activity included understanding and testing of Internal Financial Controls and evaluating its operating effectiveness based on the assessed risk factors.

Human Resource Development: The Group has a set of unique mix of experienced professionals and young dynamic passionate individuals working in various disciplines. HR efforts are targeted to ensure that the right talent is sourced, selected, trained and are deployed across the organisation. In line with the business transformation, HR has also initiated its transformation exercise. The Group leverages on technology and automation by using SAP &  multiple in-house IT capabilities for managing various 'Hire to Retire' processes.

The specially designed 'Seven Step Leadership Development Programs' for high potential employees strengthen the leadership pipeline of the organisation at various levels. The Group utilises various state-of-art training infrastructure and resources like L&T Leadership Development Academy, Institute of Project Management and Technical training centres to train its employees on Project management skills, functional and leadership competencies. The business also has tie ups with brmier institutes like IIMs, XLRI and IITs for conducting 'Core Development Programs', EMBA, M. Tech and e-learning programmes (Harvard, DDI and other certification programme) at regular intervals.

The Group continues to foster a high performance culture by recognising and rewarding good performers, and providing them with career development opportunities. The CEO & MD periodically interacts with employees through various forums like 'Town Hall', webcast, video conferencing and emails. Various other interventions and initiatives like ICONS, Long Service Awards, Team Building Workshops, non-monetary recognition events, etc. are periodically undertaken to enhance employee motivation.

Health Safety Environment (HSE) & Sustainability:

Health, Safety & Environment is the cornerstone of the Group's business philosophy. The business strives for continuous improvement for the protection and development of health, safety, and environmental assets of its employees and stakeholders. During the year, five projects were safely commissioned without any significant incidents. The business actively participated in Global HSE Conference and Golden Jubilee celebration of Directorate General, Factory Advice Service and Labour Institutes (DGFASLI).

During the year, as a part of Corporate HSE Plan, cross-functional HSE audits were initiated across all business units. All HSE Systems and procedures were IT enabled to make them more user friendly. Senior Management involvement and visibility was reinforced through systematic senior management site safety observation. To sbrad safety awareness, various theme based campaigns were observed on various important dates during  the year. Lessons learnt during project execution were shared throughout the organisation by way of well documented HSE Learnings and HSE alerts. Various HSE training programs were held, and motivational schemes were instituted.

The Company has released its Sustainability Report - "Journey Begins" in December 2015 which covers various initiatives taken across the Company and highlights need to enhance performance across all sustainability parameters - safety, energy, water conservation and productivity. As a responsible Corporate Citizen, the Group is aware of its responsibility towards social upliftment which is an integral part of the corporate culture. The Group's CSR Framework lays down the principles and programs for the community at large, in accordance  with section 135 of the Companies Act 2013. In-line with Group's theme "Building India's Social Infrastructure" L&T Hydrocarbon is committed to implementing projects that will contribute to the quality of life, including schools, hospitals, skill training institutes, water supply and distribution and sanitation facilities.

During the year, the business won several national and international accolades from eminent institutions and clients like National Safety Council - Maharashtra Chapter, British Gas, Petronas Carigali Myanmar, Frost and Sullivan (F&S) & The Economic Times India Manufacturing Excellence Award  (IMEA).

Outlook:

Oil prices are expected to hover in the range of USD 40 to 50 per barrel in the near future. In the  domestic offshore sector, ONGC has indicated that it will be investing close to USD 5 billion in next 4 years on development of its deepwater field KG/98-2 on the east coast of India. This will provide significant opportunities to the Group's offshore and fabrication verticals over the medium term, given its strategically located Kattupalli yard on the east coast and the recent tie-up with McDermott to develop cost effective subsea solutions. The Long Term Agreement signed with Saudi Aramco is expected to provide large offshore project wins in Middle East in the near future.

The Indian Government has recently announced that Bharat Stage-VI (BS-VI) emission norms would be enforced from April 2020  which is a year earlier than the planned roll-out target of 2021. The Government has decided to altogether skip Stage-V and directly adopt BS-VI which are equivalent to Euro 6 norms. To meet these norms, the Public Sector refineries will need to spend an estimated Rs. 68000 crore on upgradation projects, providing visibility of order prospects for the next 2 years. The Government has also cleared a combrhensive Urea Policy 2015 which will incentivize indigenous production of urea and promote energy efficiency by encouraging units to adopt the latest technology. Under the policy, the Government has also announced revival of closed Public Sector urea units having capacity of 26 lakh tonnes located across the country like Talcher,

Ramagundam, Barauni, Gorakhpur, etc. Private sector companies are also expected to initiate brownfield expansion projects which will provide opportunities over medium term.

In the Middle East, gas processing projects are expected to be awarded in UAE, Oman and Saudi Arabia. Large value cross country crude oil & gas pipeline prospects are expected in Saudi Arabia, Kuwait and Oman. Mega Integrated Refining cum Petrochemical Projects are expected in Saudi Arabia, and fertiliser projects in Oman. Further, with the prospective moderation of sanctions, Iran is expected to offer good growth opportunities.

Information Technology Business

Overview:

The Group's Information Technology business housed in L&T Infotech Limited ('L&TInfotech') forms part of the IT & Technology Services segment of Larsen & Toubro. L&T Infotech is one of India's global IT services and solutions companies. In 2015, NASSCOM ranked the Company as the sixth largest Indian IT services company in terms of export revenues. The company was amongst the top 20

IT service providers globally in 2015 according to the Everest Group's PEAK Matrix for IT service providers. Its clients comprise some of the world's largest and well-known organisations, including 49 of the Fortune Global 500 companies.

L&T Infotech offers an extensive range of IT services to its clients in diverse industries such as banking and financial services, insurance, energy and process,  consumer packaged goods, retail and pharmaceuticals, media and entertainment, hi-tech and consumer electronics and automotive and aerospace. Its range of services includes application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions and platform-based solutions. The company serves its clients across these industries, leveraging  its domain expertise, diverse technological capabilities, wide geographical reach, an efficient global delivery model, thought partnership and 'new age' digital offerings.

L&T Infotech was incorporated in 1996 and is headquartered in Mumbai, India. It leverages the strengths and heritage of its promoter. The L&T Group provides access to professionals with deep industry knowledge in the sectors in which the Company does business. L&T Infotech has also inherited from L&T group its corporate and business culture and corporate governance practices, which places the Company in good stead in relation to its business. In addition, it benefits from the commonality of business verticals with its promoter.

The Company's growth has been marked by significant expansion of business verticals and geographies in which it does business. Besides India, it provides services globally from North America, Europe, Asia Pacific and the rest of the world. As of March 31, 2016, the Company has 22 Delivery Centres and 44 sales offices globally.

The Company serves clients across verticals such as BFS, Insurance, Energy, CPG, Retail & Pharma, Hi-Tec, Media and Entertainment and Audit Aero & Others.

Business Environment:

The Global IT-BPM Market as noted by NASSCOM saw increasing number of firms using custom application development as a means to enhance customer service with tailored solutions. The need to differentiate their company and  competitors and the need to comply with regulations and industry mandates are driving growth in the segment. CADM services are using cloud computing and mobility considered as a strategic tool to enhance business processes and improve customer satisfaction and acquisition. SMAC adoption across industries became all pervasive driving growth in IT services.

The year was marked by spinoffs, buyouts, divestitures and focused acquisitions among service providers which helped bolster the bottom line for the vendors and their customers. Technology M&A deals in volume registered a record high of USD 713 Bn. in 2015 on a global basis. Driven by increased competition, some other firms took the restructuring of businesses route to improve profits and reduce costs.

Significant Initiatives:

• Focus on emerging technologies: L&T Infotech has established business relationships with a number of players in the digital space and, in addition to its existing capabilities, such relationships will further enable it to develop sophisticated ecosystems along with its partners as a value-added proposition to its clients. Further, it plans to invest seed capital in startups, which will allow them to benefit from their innovation capabilities and digital offerings. The Company believes this will help them enhance their digital offerings and in turn, give a platform and opportunity to scale up to startups. In addition, as part of its strategic focus in India, it is inter alia positioning itself to cater to 'Smart Cities' opportunities that it has identified therein.

L&T Infotech regularly tracks new technologies, industry segments and market trends in the IT solutions market and believes that digitalisation will increasingly become systematically critical in the future. It looks to assist its clients to 'engage the future' through its focus on emerging technologies. The Company invests in new technologies and tracks new business trends, and believes that every industry will increasingly adopt digital as a key component of its overall IT solutions and services expenditure. It defines digital business as solutions and services offered to clients through the fusion of 'new age' technologies for disruptive business transformations, including as part of its Thought Partnership® program. Such transformations are enabled by creating innovative business models leading to enhancing client experiences and greater operational efficiencies.

Over the past few years, the Company has aligned its areas of expertise and have created focused initiatives in developing capabilities in emerging technologies, which it eventually intends to offer under a specific brand. The Company's investment in the digital practice is focused on providing its clients with a competitive edge, as well as giving them a competitive advantage in the market. Its digital assets have received multiple industry recognitions.

Focus on a targeted client portfolio and higher total contract values: L&T Infotech continues building long-term sustainable business relationships with its clients to generate greater revenues. This involves inter alia increasing the scope of engagements with its existing clients; selling additional services to them; deploying project managers, delivery specialists and other professionals to provide value-added business solutions; and eventually become a thought partner with them in terms of their existing and future business needs by identifying priority solutions in consultation with industry experts.It has a track record of high client retention and as its client relationships matures and deepens, it seeks to expand the scope of services offered to those clients to achieve incremental revenue growth. Its ability to establish and strengthen client relationships and expand the scope of services it offers to clients will help grow its revenues and profits.

The Company is targeting clients who have the potential to offer  opportunities with large total contract values. It intends to originate large engagements by either identifying opportunities with its client accounts or by targeting new clients whose existing engagements with IT vendors will be up for renewal. It plans to achieve a higher value client portfolio by focusing on annuity applications and infrastructure management service deals, which tend to be long-term in nature.

Expand focus on infrastructure management service (IMS) offerings:

L&T Infotech's IMS service practice offers a wide spectrum of end-to-end services covering IT infrastructure consulting, design, managed services, migration services, operational support, desktop support, and Cloud enablement, hosting and migration. It aims to leverage its 'Business 1st™' approach with respect to IMS, which provides extensive services to  clients inter alia using application development, maintenance, support and testing services, which collectively help its clients automate their business processes through customised service delivery plans that are aligned with their business needs and objectives. Similar to its approach in relation to emerging technologies, the Company has agreements with a number of players in delivering its IMS service offerings in a technologically-agnostic way. This approach is beneficial to clients and helps establish its credibility with them with a view to eventually becoming their thought partners and long-term service providers. In addition, the Company is currently looking for strategic acquisition opportunities in relation to its IMS business. It is specifically looking to acquire a complementary business, technology, service or product that can provide it with access to new markets, capabilities or assets in relation thereto.

Expand geographical brsence: L&T Infotech markets and distributes its solutions directly through its global delivery model. It has historically been dependent on North America and Europe for most of its revenues. While it intends to continue expanding its brsence in the United States and Europe, it also plans to expand its geographical reach in other markets that it has identified as having potential, including Australia, Singapore, Japan, South Africa, India and the Middle East. It is in the process of augmenting its teams in these markets to further explore the opportunities therein.

With respect to the Company's operations in South Africa, the Nordic region and the Middle East, the Company views these regions as gateways to the rest of Africa, Eastern Europe/the Baltic region and the Middle East/ North Africa region, respectively. As such, it intends to allocate resources to these markets not only for pure-play market opportunities therein, but also as stepping-stones to other client opportunities that it can identify through greater regional experience, expertise and client referrals. viz., in South Africa, it recruits local nationals to assist in market penetration efforts, in addition to complying with local regulatory requirements. In the Middle East, the Company intends to leverage the strong brsence of the L&T Group, which is engaged in the oil and gas, construction and transportation sectors.

The Company has identified Germany, France and the Nordic region as important markets going forward and it would like to enhance its capabilities and address gaps in language capability, industry expertise, technical expertise and geographic coverage in these  countries. As such, it is also currently contemplating pursuing strategic acquisitions in these markets.

• Focus on greater internal operational efficiency: L&T Infotech plans to continue developing and investing in frameworks, accelerators, in-house proprietary solutions and customised software processes to drive efficiencies internally. It also plans to increase its profitability by streamlining cost structure with a focus on high employee utilisation and optimising resource mix. To this end, business process digitalisation is important in streamlining cost structure to make them more operationally efficient. It plans to automate various project delivery processes as well as internal IT service processes to enhance human productivity and once various tools are developed in relation thereto, it plans to institutionalise their usage across its business units, which will provide them with the appropriate business platform to be more efficient. The company also plans to introduce specific business process digitalisation initiatives in relation to its business verticals and service lines for them to realise operational cost savings.

It believes that the foregoing initiatives will allow them to move up the value chain with respect to services offered.

Outlook

Enterprise applications are becoming increasingly consumer oriented with mobile and 'on-the-go' applications' delivery mechanism shifting to cloud-based environment. Demand for migration, porting and re-platforming of traditional on brmise application to SaaS from both clients and ISVs provide significant opportunity. Agile testing is growing in acceptance even though it is yet to fully mature. Crowd-sourced testing is gaining popularity and testing automation as well as data management are adapting to the new technology demands. Key drivers for third party and GICs are cloud based testing, IP-led testing, testing-as-a-service, automated testing and testing in domain-specific niche services along with transformational programs using SMAC and IoT. (Source: NASSCOM Report)

With the appropriate mix of initiatives in emerging technologies, client focus and geography expansion, L&T Infotech is optimistic of its prospects in the near to medium term.

Technology Services Business

Overview:

A leading player in the global Engineering, Research and Development ('ER&D') space, L&T Technology Services Limited (LTTS) is a wholly-owned subsidiary of Larsen & Toubro Limited and forms part of Group's IT & Technology Services business segment. With L&T's engineering heritage, the Company provides, 'one-stop shop' to its customers across the product engineering life cycle from  product conceptualisation, design and engineering to prototype and certification support services. It has long term engagements with a large number of marquee clients across multiple industry segments like Industrial Products, Medical Devices, Transportation, Telecom and Hi-Tech Computing and Product Software and Process industries. It also has differentiated offerings in the Plant Engineering and Sustenance Services which is unique when  compared with the other Indian ER&D service providers.

The Company is investing significantly in new age technologies like Engineering Analytics, Digital Engineering and Internet of Things (IoT). A well-defined Digital Engineering strategy leverages its unique strengths along with best-of-breed partners and delivers differentiated solutions for building Smart Products, Smart

Manufacturing and enabling Smart Services. As part of this, the Company has developed IP led solutions like UBIQWeise, i-BEMS that have been launched in the global market. The Company has also filed around 260 patents, some owned by itself and some co-authored with its customers.

L&T Technology Services has a global reach to its customers through its 12 delivery centers and 25 sales offices. It also has set up domain specific labs that replicates customer's work environment and works closely with the customer R&D wings on product innovation through technology infusion. Its global delivery model of Offshore, Nearshore, Onshore and Client Proximity centres, combined with these labs, provides customers with high quality solutions in reduced timeframes that deliver operating efficiencies and better value for its shareholders.

With around 19% CAGR (Financial year 2012 to 2016) and over 170 global customers, the company added 17 new clients to its portfolio while maintaining focus on expanding business among existing clients. Of its total client base, 53 clients are Fortune 500 companies.

In the Global R&D Service Providers Rating 2015, Zinnov Consulting has placed L&T Technology Services in the leadership zone in eleven categories. The Zinnov survey also placed eight of the Company's verticals in the leadership zone - Automotive, Aerospace, Telecommunication, Energy & Utilities, Industrial Automation, Transport, Construction & Heavy Machinery and Medical Industries in  addition to technology horizontals like Mechanical Engineering Services and Embedded Systems.

Business Environment:

India as an engineering services destination has witnessed enormous growth and has become the global hub for outsourced engineering services. As per NASSCOM, the Engineering Research & Development spend has seen a double-digit growth in recent times and is expected to touch total spends worth USD 850-900 Bn. with exports  worth USD 30-38 Bn. by 2020.

Further, the addressable market for ER&D Globalisation and Services is expected to increase at a CAGR of 4.3% till 2020. Engineering innovation in digitisation, product life-cycle management, and value-engineering services is creating a plethora of new opportunities and business models across industries.

As technologies converge and find applications across industries, some mega-trends in the ER&D space have emerged. These include:

• Smart Services, Smart Products & Smart Manufacturing - Condition based Monitoring, Remote Guided Services and Smart Wearables, Smart Home Products, Connected Vehicle, Industrial IoT, Augmented Reality and Smart Supply Chain and Logistics.

• Energy & Efficiency - Power Electronics, Energy Management and WAGES (Water, Air, Gas, Electric, Steam) Engineering.

• I maging & video - Imaging Algorithms, Edge Detection, Video Surveillance and ADAS (Advanced Driver Assistance Systems).

Significant initiatives:

The Company has been agile in adopting new technology trends and addressing business challenges of customers. This has resulted in a faster growth trajectory compared to peers in the engineering services industry. Investment in new technologies and labs, account mining, operation improvement programs, global delivery models and continued focus on the multi-vertical strategy have proven to be a great success.

LTTS is addressing opportunities in the marketplace through a multi-vertical strategy. Key initiatives include:

• Expanding Services footprint:

While the Company is focused on growth verticals like Automotive and Consumer Electronics, it is creating competencies in next-gen Computing and ISV which will give it a scalable growth. It is tapping the enormous market potential in digital engineering and green energy that are driving usage of new age technologies across industries.

• Investing in new Lab facilities:

In line with its philosophy to invest in state-of-the-art for concept design and innovation, the Company has set up a number of cutting edge labs including Smart Manufacturing Lab, Global Internet of Things (IoT) Solutions Centre and Material Testing Lab at its facilities.

• Expansion to new geographies and investments in Infrastructure: The Company has established new onshore and nearshore delivery centres in the US and the Middle East.

Key HR initiatives: Employees are at the heart of L&T Technology Services' success. The Company has partnered with the Great Place to Work ™ institute to transform the workplace and create the perfect culture in which big ideas flourish. The Company has also initiated 'Techleap' a technical career path program for encouraging in-house engineering talent.

With the belief system that reflects 'People are our greatest assets', HR practices are focused on creating performance driven environment where innovation and collaboration is encouraged, performance is recognised and employees are motivated to realise their potential. HR is at the core of the Company, influencing change, building culture and developing capabilities. The HR  processes are continuously evolving and aligning with the changing business requirements. The HR team is structured into specialised units to respond quickly to the needs of the organisation.

The employee strength of the Company has grown from 9327 employees in fiscal year 2015 to 9406 employees in 2016. The Company has one of the lowest attrition rate in the industry at around 12%.

In the area of talent retention, there is a relentless effort towards developing competencies in technology, domain and processes aligned to customer requirements that helps the Company's employees to stay relevant and realise their potential. Continuous learning  initiatives include an Online Learning Portal and Leadership Development Programs to groom potential leaders right from operational to strategic levels. The state-of-the-art learning centre at Lonavala specialises in personal leadership, building organisational knowledge and ethical business practices. This has created a rich leadership pipeline that supports the fast paced business growth of the company.

Awards and Accolades in 2015 - 16:

• I T: EMC Transformation Award and 'Dataquest Business Technology award'.

• The Golden Globe Tigers Award for Excellence in Training & Development.

• Recognised by Gartner among 'Key vendors in the IoT Embedded Space'.

• ' Certificate of Excellence' from  NASSCOM.

• Quality Excellence for Product development at the World Quality Congress.

• Wins Supplier of the Year Award from UTC Aerospace Systems; also wins ÛTC Supplier Gold title.

• Celebrates a decade of strong partnership with Danaher.

• "LTTS' testing framework is a unique offering to test the interoperability of multiple systems": IDC.

• Zinnov says, 'most important aspect of LTTS' success story is nurturing curiosity towards technology innovation within the organisation and among customers'.

• Company has 'very diversified portfolios among the service providers in terms of industry verticals, service offerings and geographical sbrad': ARC Advisory.

Outlook:

With growth of 'IoT' in both product and plant segments, the market offers huge opportunities for Smart Products, Smart Manufacturing and Smart Services. This market is to set to reach USD 1.7 Tn. by 2020 according to research firm IDC. With the investments LTTS is making in this space, it is all set to tap and capture this market and be one of the leading engineering service providers globally. With its marquee client base across industry segments, the Company is confident of continuing to grow at a robust pace and increasing its market share across geography and industry segments.

Financial Services Business

The Financial Services business segment comprise retail and corporate finance, housing finance, infrastructure finance, investment and wealth management business carried through the subsidiaries of L&T Finance Holdings Limited. The Financial Services business also includes general insurance which is housed in a wholly-owned subsidiary, L&T General Insurance Company Limited.

L&T Finance Holdings

L&T Finance Holdings' business organised under verticals structured as the Retail and Wholesale Platform, Investment Management and Wealth Management business, is carried out through its wholly-owned subsidiaries.

The Management's focus is to achieve a healthy return on equity (ROE) on a sustainable basis. It has been a conscious decision of the

Management to have diversified businesses to protect the overall profitability from the cyclicality of individual businesses. Hence, the Company has focused on combrhensive product offerings. Some of these products have been developed as flagship products. While creating the product-mix, three parameters are taken into account: profitability, scalability and the Company's ability to have clear market advantage in a particular product segment. These three parameters influence the ultimate choice of the Company's product offerings, for which it has earned admiration in the wider marketplace.

Business Environment Retail Platform - Retail, Corporate & Housing Finance Business:

The business of the retail platform including retail, corporate and housing finance businesses is carried out by the Company's wholly-owned subsidiaries, L&T Finance Limited, Family Credit Limited and L&T Housing Finance Limited. These comprise loans for income generation as well as for the purchase of consumer assets, working capital loans for SMEs, term loans for medium and large companies, loans under micro-finance, loans for purchase of homes and loans against property.

The product portfolio under the Retail Platform includes:  shift, it will increase yields while at the same time dispersing the risk that is inherent in B2B businesses of being lumpy.

During the year 2015-16, with deficient monsoons and mounting delinquencies, the tractor market posed severe challenge to growth. Although the tractor market shrank by 11%, the Company's market share decreased by 3%. Despite a strong tie-up with notable manufacturers, the slowdown in the tractor market let to this decline in market share. To counteract this, the Company focussed on financing br-owned tractors and refinancing opportunities. This constituted more than 15% of disbursements during the year. In the area of two-wheeler loans, while the industry volume increased by 3% during 2015-16, the Company's volumes grew by 14%, leading to an increase in its market share. This performance was facilitated by better penetration in existing locations and active efforts to extend reach to new markets. In a strategic move, the Company de-emphasised its focus on S&LCV and car loans. Given the extant mismatch in the risk-return paradigm of these products, the Company believes that they are not suited to management's vision of delivering superior return on equity to shareholders.

The SME segment, especially the supply chain segment, has been fast emerging as another flagship segment for the Company. During the year under review, the Company undertook appropriate investment in technology for this business to be able to deliver an enhanced customer experience. It has already considerably advanced its credit delivery processes by developing parameterised lending models that ensure a fast turnaround time.

In the mid and large corporate segment, the Company adopted a selective strategy for its corporate loans and leases and offered credit only to well-rated companies with tight monitoring of loan usage.

In the Housing Finance segment, the Company has undertaken several initiatives with an objective to diversify distribution channels, improve customer experience and overall focus on process improvement. It also scaled up the business by increasing geographical sbrad as well as by increasing its market share in existing markets.

The Microfinance segment is another flagship business of the Company. Robust risk control  processes and the ability to raise liabilities to match growth aspirations in a timely manner, gives the Company a unique market advantage in this segment.

Wholesale Platform:

The Wholesale Platform of the Company comprises infrastructure financing and non-infra wholesale financing through three lending entities viz. L&T Infrastructure Finance Company Limited (L&T Infra Finance), L&T FinCorp Limited and L&T Infra Debt Fund Limited (L&T IDF). The Company's Wholesale Platform offers both fund based and fee based products and services. They are designed to efficiently meet term finance needs of infrastructure and industrial projects/ players in India. The Financial Advisory Services (FAS) Group provides advisory services to customers enabling the raising of debt and equity capital from market sources. The team also provides financial structuring solutions to customers to optimise their capital and financing structure. The FAS Group, which has been consistently stepping up the range and depth of offerings to clients, works in close coordination with the Debt Capital Market (DCM) Desk. The latter provides structured funding solutions to select clients in the form of innovatively structured Non Convertible Debentures (NCDs)/ Bonds that are initially subscribed in full by one or more entities within the Wholesale Platform and subsequently sold down in smaller tranches to eligible investors. During the year, the FAS Group and DCM Desk together generated an income of Rs. 100 crore by way of fees and capital gains.

The Wholesale Platform team, which possesses the requisite skill set and experience, has over the years, honed its project appraisal skills such that it has emerged as a brferred choice for mid-sized infra players - particularly those setting up solar and wind power projects. Its robust, internally developed risk assessment framework enables the Platform to offer to underwrite entire term debt needs of meritorious renewable power projects. Given that implementation timelines for such projects are rather fine, this offering of one-stop-debt funding solution - with suitably structured tenors, reflective of realistic assessment cash-flows -enables the developers combrss their project gestation periods and thus enhance their equity returns. Similarly, under L&T IDF's lead, successfully operating road projects are offered optimally priced refinance packages - often having extended tenures that are based on conservative estimates of the (residual) economic life of projects.

Consequently, renewable energy, annuity and toll road and transmission projects - which constitute the Wholesale Platform's niche business areas - accounted for a major part of the disbursements made during 2015-16. Further, the focus has been on ensuring that operational projects comprise a significantly high proportion of total loan assets so as to contain well the element of underlying risk in the portfolio.

Of particular note is the level of new business done by the L&T IDF during the year. Its book has recorded a sharp growth wherein the business assets as at March 31, 2016 crossed the Rs. 2350 crore mark as compared to a modest Rs. 350 crore as the end of brvious year. This was attributable inter alia to more number of operational PPP projects now becoming eligible to seek assistance from L&T IDF - consequent to RBI's decision to include additional sectors that can be financed by L&T IDF without execution of a tripartite agreement. Notwithstanding this liberalised regulation, it would be L&T IDF's endeavour to ensure an optimal blend of operational PPP projects in its portfolio so as to brserve its AAA rating.

On the assets quality front, the Wholesale Platform's management has remained pro-active in dealing with the stressed assets portfolio. However, given the rather slow economic revival coupled with the highly leveraged position of promoters/ borrowers, the challenges being faced by all lenders are not expected to abate in the near term. Nevertheless, the Wholesale Platform's on-going strategy of pursuing resolutions through closer co-ordination with both promoters and co-lenders -such that credit costs are brought down - will be continued.

The Wholesale Platform has evolved from being a corporate lender to a specialised project financier and focused on operating projects to balance the overall risk of the portfolio.

Investment Management Business:

The Investment Management business of the Company is carried out through L&T Investment Management Limited (L&TIM), a wholly-owned subsidiary. During the period under review, average assets under management (AAUM) grew by 15% to Rs. 25945 crore for the quarter ended March, 2016  198  as compared to Rs. 22497 crore for the corresponding period in the brvious year. This was achieved through a combination of consistent fund performance, building scale in existing product offerings and improving acceptance in various distribution channels.

During 2015-16, the Investment Management business of the Company continued the momentum from 2014-15 and managed to grow at a better pace than the industry. The growth was contributed by equity assets which grew 21% over the brvious year while debt assets grew at an encouraging 13%.The equity mix for the company increased to 44% (Equity and Arbitrage) this year from 42% in the brvious year thereby leading to an increase in equity market share to 2.59% from 2.4%. The asset growth and increase in market share was a result of strong gross and net sales, acceptance amongst the investor community as well as quality fund performance. The company closed 2015-16 with an overall market  share of 2.01%.

During the year, the Company's strategy of building scale in core funds, both on the equity and debt side paid rich dividends as the number of funds with AUM of more than Rs. 1000 crore (ex-Liquid and Ultra) increased to 7 (5 equity and 2 debt) from 3 in the brvious year.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Wealth Management Business:

The Company's Wealth Management business is carriedout through L&T Capital Markets Limited - it's wholly-owned subsidiary, offering services to Ultra High Net worth (UHNI) and High Net Worth Individual (HNI).

The Company is brsent in eight locations in India and one in Dubai. 85 experienced and high skilled relationship managers service clients on their investment needs across asset classes and the spectrum of products in local and international markets.

The business has been progressing well led by a robust model built on the fundamental tenets of client centricity, intellectual property and execution efficiency. Average assets under service for the quarter ended March 2016 grew to Rs. 9315 crore, accounting for an increase of 33% from Rs. 6996 crore for the corresponding period in the brvious year. The Wealth Management business has a client base of over 4600 and is operational in Mumbai, Delhi, Bengalure, Chennai, Kolkata, Hyderabad, Ludhiana, Ahmedabad, and Dubai. The Dubai Financial Services Authority ('DFSA') granted an upgrade from a Rebrsentative Office License to a Category 4 license whereby, L&T Capital

Markets Limited, DIFC Branch will be regulated by DFSA to offer Wealth Management Solutions by way of arranging deals in credit and investments, providing advice on financial products and services, including equities, debt, structured products, investments in alternate asset classes etc., to the High Net Worth Individuals based in the UAE and the neighbouring countries.

Significant Initiatives:

During the year 2015-16, the Company undertook several initiatives with an objective to enhance market reach and customer centricity, build scalability, manage risks effectively, attain process excellence, business continuity, aid cost flexibility and result in providing shareholder their fair returns.

• Mobility solutions: Loan origination and collection in the Consumer and Auto Finance as well as Microfinance business are completely based on mobility solutions. Loan origination is carried out through Android based tablets/ mobile handsets that aim to drive sales effectiveness through use of technology for reducing turnaround time. Collections are carried out through mobile phones coupled with thermal Bluetooth printers to issue receipts.

• A mobile based rule engine, with a brdictable and steady approval rate, has been developed to improve TAT. Minimising human handoff reduces the chances of error based on minimum human underwriting interventions.

Productivity, maximising cost efficiency and customer  convenience as central themes were embedded into routine business as well as new initiatives during the year. Back-office operations are now consolidated into two hubs viz. Mumbai and Chennai through extensive workflow automation and centralisation to make the branches hub for sales and service.

Outlook:

Indian rural economy is dependent on monsoon to a large extent. With the expectation of a good monsoon, consensus outlook on the farm industry remains positive for the year 2016-17. There is also a growing trend in the levels of rural income and therefore, demand for ownership of personal vehicles is also rising. The Company is confident of capitalising the expectation of growth in rural economy for its three key retail products - farm equipment finance, two-wheeler finance and microfinance. In the infrastructure space, GOI has taken several steps to speed up decision making and fast-tracked project clearances. Nevertheless, concerns on the asset quality still remain which may take several quarters to resolve.

As the norms for recognition of Non-Performing Assets in the coming year gets advanced to 120 days of delinquency as against 150 days of delinquency as per RBI norms, credit costs may remain elevated in the coming year.

The Financial Service businesses have implemented a strategy called 'Transform. Focus. Deliver'. The crux of the strategy is to transform the portfolio by focussing on key businesses in order to deliver superior returns on equity (RoE). The entire portfolio of products was critically studied on parameters of industry attractiveness and our ability to create a distinctive position. As a result, three businesses have been identified as the key growth drivers - rural finance (farm equipment finance, two-wheeler finance and microfinance), housing finance (home loans, loans against property and developer finance) and wholesale finance (infrastructure finance and structured corporate lending). The other products in the portfolio would be de-emphasised. With this strategy, the Financial Services business is expected to deliver top-quartile RoE to shareholders by the year 2019-20.

L&T General Insurance

Overview:

L&T General Insurance's Gross Written Premium (GWP) grew from Rs. 344 crore in 2014-15 to Rs. 483 crore in 2015-16, thereby registering a growth of 40% over the brvious year. Motor remains the largest contributor to the GWP with a share of 63%. Health and other Commercial lines of the business (primarily

Fire and Engineering) contributed 14% and 23% of the total GWP respectively. L&T General Insurance has a pan India brsence with 28 branches.

Business Environment:

General insurance industry (excluding specialised insurers such as AIC and ECGC) has reported a growth of 13.63% in the top line from Rs. 80584 crore in 2014-15 to Rs. 91564 crore in 2015-16. The growth in brmium has improved from 9.83% to 13.12% in 2015-16 for private players and from 10.3% to 12.1% in 2015-16 for PSUs. The market share of private players increased marginally from 47%  to 48% in 2015-16. All lines of  the business except Marine and Fire have shown improvement in the growth rate compared to the brvious year. Health, PA and Liability have grown at a higher rate than the market growth rate. The motor segment continues to dominate the market with a 46% share in the overall brmium and the share of Health has increased from 25% to 27%. While the top line grew, profitability of the industry was negatively impacted by the devastating floods in Tamilnadu.

Significant Initiatives:

The Company entered into certain significant arrangements which will help it in augmenting the business in the Motor segment. It also succeeded in improving the portfolio mix for Motor and Health.

The extensive use of the robust technology platform coupled with the improvement in process efficiencies resulted in a better productivity levels for the Company. This will further help the Company to optimise its operating costs in future.

Outlook:

With increase in the permissible FDI under the Insurance Laws (Amendment) Act 2015, this year saw many foreign partners increasing their stake in their joint ventures, thereby showing commitment to expand their brsence in India. IRDAI has issued several regulations including some revisions aimed at driving the transparency, improving accountability, increasing penetration and creating a favourable ecosystem for all the stakeholders. These regulations amongst others include regulations on corporate agency, point of sale person, insurance marketing firms, expenses of management, surveyor and loss assessor, dismantling of the declined pool, implementation of Indian accounting standards etc.

Improving macro parameters, legislative reforms along with above normal rainfall this year are expected to drive the industry growth in 2016-17. With Motor and Health lending support to the current growth drivers, L&T General Insurance is poised to leverage the opportunities on the back of its operational efficiencies supported by its state-of-the-art technology platform.