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ANNEXURE TO DIRECTORS’ REPORT 2005-2006ANNEXURE TO DIRECTORS’ REPORT 2005-2006ANNEXURE TO DIRECTORS’ REPORT 2005-2006ANNEXURE TO DIRECTORS’ REPORT 2005-2006ANNEXURE TO DIRECTORS’ REPORT 2005-2006REPORTS AND ACCOUNTS - SUBSIDIARY COMPANIESREPORTS AND ACCOUNTS - SUBSIDIARY COMPANIESREPORTS AND ACCOUNTS - SUBSIDIARY COMPANIESREPORTS AND ACCOUNTS - SUBSIDIARY COMPANIESREPORTS AND ACCOUNTS - SUBSIDIARY COMPANIES

Contents Pages

Larsen & Toubro Infotech Limited S 2 - 22Larsen & Toubro Infotech GmbH S 23 - 34

Larsen & Toubro Information Technology Canada Limited S 35 - 43

Spectrum Infotech Private Limited S 44 - 58

L&T Finance Limited S 59 - 84L&T Capital Company Limited S 85 - 98

L&T Transportation Infrastructure Limited S 99 - 114L&T Western India Tollbridge Limited S 115 - 129

Narmada Infrastructure Construction Enterprise Limited S 130 - 142L&T Infrastructure Development Projects Limited S 143 - 160Cyberpark Development & Construction Limited S 161 - 173

L&T Tech Park Limited S 174 - 185L&T Panipat Elevated Corridor Private Limited S 186 - 197L&T Krishnagiri Thopur Toll Road Private Limited S 198 - 206

L&T Western Andhra Tollways Private Limited S 207 - 216L&T Vadodara Bharuch Tollway Limited S 217 - 226

L&T Infocity Limited S 227 - 245L&T Infocity Lanka Private Limited S 246 - 258L&T Infocity Infrastructure Limited S 259 - 272

Andhra Pradesh Expositions Private Limited S 273 - 277Hyderabad International Trade Expositions Limited S 278 - 288HPL Cogeneration Limited S 289 - 306

Bhilai Power Supply Company Limited S 307 - 312India Infrastructure Developers Limited S 313 - 330Raykal Aluminium Company Private Limited S 331 - 334

International Seaports Pte Limited S 335 - 345International Seaports (India) Private Limited S 346 - 357

Larsen & Toubro LLC S 358 - 369

L&T Overseas Projects Nigeria Limited S 370 - 377L&T-ECC Construction (M) SDN.BHD S 378 - 389Larsen & Toubro (Oman) LLC S 390 - 403

Larsen & Toubro International FZE S 404 - 415Larsen & Toubro Qatar LLC S 416 - 427Larsen & Toubro Electromech LLC S 428 - 442

Tractor Engineers Limited S 443 - 464

L&T-Sargent & Lundy Limited S 465 - 482

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LARSEN & TOUBRO INFOTECH LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ Report

The Directors have pleasure in submitting the Nineth Annual Report and Accounts of Larsen & Toubro Infotech Limited for the year endedMarch 31, 2006.

FINANCIAL RESULTS Rs. Million

2005-06 2004-05

Total Income 7980.77 5602.20

Operating Profit (PBIDT) 1126.07 803.96Less : Interest 53.02 34.23

Less : Depreciation and amortisation 274.37 252.81

Less : Amortisation of deferred revenue expenditure — 11.13

Profit Before Tax (PBT) 798.69 505.79

Less : Provision for Tax (including Rs.33 mn for Fringe Benefit Tax) 96.87 31.22

Add/ Less: (Writeback) / further provision for earlier years — 14.52

Add/ Less: (Writeback )/ further provision for Deferred Tax — 1.04

Profit After Tax (PAT) 701.82 459.01

Add : Balance brought forward from previous year 316.75 292.15

Balance available for disposal which Directors appropriate as follows : 1018.57 751.16

Dividend 150.00 225.00

Tax on Dividend 21.04 29.41

Transfer to General Reserve 300.00 180.00

Balance to be carried forward 547.53 316.75

DIVIDEND

The Directors have paid Interim dividend of Rs. 5 per share 150.00 225.00on 30,000,000 Equity Shares of Rs. 5/- each (previous Rs.7.50 per share)The Directors do not recommend any final dividend.

FINANCIAL PERFORMANCE

Total income from all sources was Rs. 7980.77 million (increase of 42% over previous year). Software exports amounted to Rs. 7617.16 million(increase of 43% over previous year).

Operating profit (PBIDT) was Rs. 1126.08 million (increase of 40% over previous year). Profit before tax was Rs. 798.69 million (increase of 58% overprevious year) and Profit after tax was Rs. 701.82 million (increase of 53% over previous year). Earnings per share were Rs. 23.39 per equity shareof Rs.5 each.

YEAR IN RETROSPECT

The year 2005-06 witnessed an increase in the worldwide IT spending and several large corporations continued their outsourcing initiatives. Companiesare looking to outsource beyond non-core functions as part of a broader effort to improve profitability and are looking for service providers having theability and flexibility to cater to diverse requirements.

Over the year 2005-06, billing rates were fairly stable. The rising wage costs and build up of resources for meeting certain large requirements haveresulted in pressure on operating margin. The volatility of exchange rates also continues to cause concern.

With the proven offshore outsourcing model and expectation of long term cost leveraging, US Companies continue large-scale outsourcing, despitelocal pressure to retain jobs. Servicing of engagements in the country of the client (especially USA) is becoming very restrictive and will be the majorlimiting factor in the growth of business, in view of the visa restrictions and cost of resources.

ORGANISATION

During the past year the Company added some key clients in Communication Systems and Financial Services and further consolidated its presencein the Manufacturing and Oil and Gas space. The Company continues to leverage its parentage in the manufacturing IT space.

The Company had undertaken a study for repositioning on the basis of Industry verticals with McKinsey & Co. in 2003 and partially implemented theverticalisation in BFSI and telecommunication areas while waiting for business volumes to grow in other areas. A follow up study by McKinsey wasinitiated in late 2005 and the implementation is underway for completing the exercise of verticalisation. As a result of this, we have launched thefollowing verticals :

• Banking, Financial Services and Insurance• Telecommunications Infrastructure Software• Energy and Petrochemical• Select Manufacturing Areas comprising sub verticals like High Tech (Silicon products, Electronic and Communication components), Automotive

and Construction equipment, Consumer Packaged Goods, Industrial products and Utilities

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QUALITY INITIATIVES

During the year the Company has launched CMMi initiative, while continuing select programmes of six-sigma implementation. The launch andcertification of PCMM 5 will enable the Company in vastly enhancing the capability to deal optimally with the human resources which constitutepractically the entire value adding constituency in this industry.

CAPITAL EXPENDITURE

As at March 31, 2006 the gross Fixed Assets stood at Rs. 2267.24 million out of which assets amounting to Rs. 555.66 million were added duringthe year.

DEPOSITS

During the period under review, the Company has not accepted any deposits from the public.

SUBSIDIARY COMPANIES

During the year, Larsen & Toubro Information Technology Canada Limited became a wholly owned subsidiary of the Company.

As required under Section 212 of the Companies Act, 1956, the Audited Statement of Accounts, the Reports of the Board of Directors and Auditors ofthe subsidiary are annexed.

AUDITORS’ REPORT

The Auditors’ Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further comments of Directors.

DISCLOSURE OF PARTICULARS

Information as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 relating to conservation of energy,technology absorption, foreign exchange earnings and outgo is given in Annexure A forming part of this report.

PERSONNEL

The Board of Directors wishes to express its appreciation to all the employees of the Company for their outstanding contribution to the operations ofthe Company during the year.

The information required under Section 217 (2A) of the Companies, Act, 1956 & the rules made thereunder, are given in a separate annexure to thisReport and forms part of the Report. The Report and the Accounts are being sent to the shareholders excluding the aforesaid annexure. Anyshareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered office of the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) which was introduced by the Companies (Amendment) Act, 2000, your Directors confirm that :-

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure.

(ii) The Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as on March 31, 2006 and of the profit or loss of the Companyfor the year ended March 31, 2006.

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions ofthe Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the annual accounts on a going concern basis.

DIRECTORS

Mr. V.K.Magapu retires from the Board of Directors by rotation and is eligible for re-appointment.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. Y M Deosthalee, Mr. A M Naik and Mr. V. K. Magapu, all non-wholetime directors of the Company with Mr. YM Deosthalee as its Chairman. The role, terms of reference, the authority and power of the Audit Committee are in conformity with the requirementsof the Companies Act, 1956.

AUDITORS

The Auditors, M/s. Sharp & Tannan, hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment.Certificate from the auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under section 224(1B) of the Companies Act, 1956.

ACKNOWLEDGEMENTS

The Directors acknowledge the invaluable support extended to the Company by the Bankers, Vendors and Customers.

For and on behalf of the Board

Y M DEOSTHALEE V K MAGAPUPlace : Mumbai Director DirectorDate : May 3, 2006

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Annexure - AAnnexure - AAnnexure - AAnnexure - AAnnexure - AINFORMATION AS PER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES,1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED MARCH 31, 2006.

A. CONSERVATION OF ENERGY(a) Since the Company is engaged in software development, it is not a major consumer of energy.

B. TECHNOLOGY ABSORPTION(b) Efforts made in technology absorption as per Form B of the Annexure Details furnished in Form B.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO(c) Activities relating to exports; initiatives taken to increase exports, The Company exports customised software and

development of new export markets for products and services; professional services mainly to North America,and export plans Western Europe, Japan, Korea and Singapore. The

Company plans to conduct road shows in USA topromote offshore execution of software services fromIndia. It also maintains constant contact withprospective customers for its offerings by way ofparticipation in International Trade Fairs.

(d) Total foreign exchange used and earned 2005-06 (Rs. Million)

Used 3489.58

Earned 7618.50

FORM B(Disclosure of particulars with respect to Technology Absorption)

RESEARCH AND DEVELOPMENT (R & D)

1. Specific areas in which R & D carried out by the Company Not Applicable

2. Benefits derived as a result of the above R & D “

3. Future plan of action “

4. Expenditure on R & D “

a) Capital

b) Recurring

c) Total

d) Total R&D expenditure as a percentage of total Turnover

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION1. Efforts in brief made towards technology absorption, adaptation and innovation : The Company operates Centres of Excellence in respect of

emerging and existing technologies which collate,disseminate and spread knowledge to all employees in theCompany. Employees are trained using state of the artmethodologies, which results in better productivity. TheCompany has created a software component library toensure reusability of software and consistency inimplementation. These find particular use in B2Bmarketplace implementations where adherence to standardsand compatibility with different platforms is very important.

2. Benefits derived as a result of the above efforts : Repeat business, expansion into various new technologydomains and productivity improvements through use of latestsoftware tools.

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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF LARSEN & TOUBRO INFOTECH LIMITED

We have audited the attached balance sheet of Larsen & Toubro Infotech Limited as at March 31, 2006 and the annexed profit and loss accountand the cash flow statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility ofthe Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

In accordance with the provisions of section 227 of the Companies Act, 1956, we report as under:

1. As required by the Companies (Auditor’s Report) Order, 2003, issued by the central government of India under section 227 (4A) of theCompanies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. Further to our comments in the Annexure referred to in paragraph 1 above, we report that:

a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes ofour audit;

b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination ofthose books;

c) the said balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books ofaccount;

d) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accountingstandards referred to in section 211 (3C) of the Companies Act, 1956; and

e) on the basis of written representations received from directors as on March 31, 2006, and taken on record by the board of directors, wereport that none of the directors is disqualified as on March 31, 2006, from being as appointed as director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

We report that in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together withthe significant accounting policies in schedule M and the notes appearing thereon, give the information required by the Companies Act, 1956, inthe manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the balance sheet, of the state of the affairs of the Company as at March 31, 2006;

ii) in the case of the profit and loss account, of the profit of the Company for the year ended on that date; and

iii) in the case of the cash flow statement, of the cash flows for the year ended on that date.

SHARP & TANNANChartered Accountants

By the hand ofR.D.KARE

Partner(Membership No. 8820)

Place: MumbaiDate: May 3, 2006

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ Report(Referred to in paragraph 1 of our report of even date)

1. (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed assets.

(b) The assets were physically verified by management during the year. In our opinion, the frequency of such verification is reasonable. Wewere informed that no material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year are not substantial in relation to the Company and do not affect the going concern status of theCompany.

2. The Company has no inventories and hence reporting under clause 4(ii) (a), (b) and (c) is not applicable.

3. We are informed by management that there are no companies, firms or other parties that are required to be listed in the register maintainedunder section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(iii) (b) (c) and (d) of the Order are not applicable.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate withthe size of the Company and the nature of its business for the purchase of fixed assets and for the sale of goods and services. Further, on the

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basis of our examination of the books and records of the Company and according to the information and explanations given to us, we haveneither come across nor have we been informed of any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

5. We are informed by management that there are no companies, firms or other parties that are required to be listed in the register maintainedunder section 301 of the Companies Act, 1956. Accordingly, paragraphs 4(v) (a) and (b) of the Order are not applicable.

6. The Company has not accepted any deposits in terms of provisions of section 58A and 58AA of the Companies Act, 1956.

7. We are of the opinion that the Company has an internal audit system commensurate with the size and the nature of its business.

8. We are informed by management that the Company is not required to maintain cost accounts and records under section 209(1)(d) of theCompanies Act, 1956.

9. (a) According to the information and explanations given to us and as per the records of the Company examined by us, in our opinion, theCompany is regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, income tax,sales tax, wealth tax, custom duty, excise duty and other material statutory dues as applicable with the appropriate authorities. Accordingto the information and explanations given to us, there were no undisputed amounts payable in respect of provident fund, investor educationand protection fund, income tax, sales tax, wealth tax, custom duty, excise duty and other statutory dues outstanding as at March 31, 2006for a period of more than six months from the date they became payable. We were informed by management that there are no duespayable under the Employees State Insurance Act.

(b) According to the information and explanations given to us and according to the records of the Company, there are no dues of sales tax,income tax, custom duty, wealth tax, and excise duty that have not been deposited with the appropriate authorities on account of anydispute except as follows:

Name of the Statute Nature of the disputed Amount Period to which the Forum wheredues (Rs.)* amount relates disputes are pending

Central Sales Tax Act and Sales tax on export sales,Local Sales Tax Act business rights, interest 7,83,50,271 2002-03 Assistant Commissioner

and penalty (Appeals)

*Net of pre-deposit paid in getting the stay/appeal admitted

10. The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current financial year or in theimmediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted inrepayment of dues to any financial institution or bank or debenture holder as at the balance sheet date.

12. The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14. The Company is not dealing in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks orfinancial institutions.

16. In our opinion and according to the information and explanations given to us, we are of the opinion that the Company has applied term loans forthe purpose for which the loans were obtained.

17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report that nofunds raised on short term basis have been used for long term investments.

18. The Company has not made any preferential allotment of shares during the year.

19. The Company did not have any outstanding secured debentures during the year. Accordingly, no securities have been created.

20. The Company has not raised any money by public issue during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of fraud on or bythe Company, noticed or reported during the year, nor have we been informed of such case by management.


By the hand ofR.D.KARE

Partner(Membership No. 8820)


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Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006As at 31-3-2006 As at 31-3-2005

Schedules Rupees Rupees

SOURCES OF FUNDSShareholders’ Funds

Share Capital A 150,000,000 150,000,000Reserves and Surplus B 1,547,529,047 1,016,750,933

1,697,529,047 1,166,750,933Loan Funds

Secured Loans C 1,276,286,452 804,591,602Unsecured Loans D 64,815,297 9,467,942

Deferred Tax Liability (net) 1,341,101,749 814,059,544(See Schedule O, Note 12) 1,488,235 1,760,656

TOTAL 3,040,119,031 1,982,571,133

APPLICATION OF FUNDSTangible Assets E1

Gross Block 1,711,299,808 1,217,107,954Less : Depreciation 771,577,394 610,305,992

Net Block 939,722,414 606,801,962Capital work-in-progress 98,728,015 31,205,065

1,038,450,429 638,007,027Intangible Assets E2

Gross Block 555,939,262 494,471,490Less : Amortisation 414,378,398 319,697,852

Net Block 141,560,864 174,773,638Capital work-in-progress 19,125,266 10,387,257

160,686,130 185,160,895Investments F 7,747,114 1,140,649Current Assets, Loans and Advances

Sundry Debtors G 1,961,497,072 1,330,449,398Cash and Bank Balances H 192,109,662 41,408,112Loans and Advances I 883,235,747 443,248,328

3,036,842,481 1,815,105,838Less : Current Liabilities and Provisions J

Current Liabilities 1,041,153,774 581,101,205Provisions 162,453,349 75,742,071

1,203,607,123 656,843,276

Net Current Assets 1,833,235,358 1,158,262,562

TOTAL 3,040,119,031 1,982,571,133

SIGNIFICANT ACCOUNTING POLICIES OAND NOTES TO ACCOUNTS

Y M DEOSTHALEE Director

V K MAGAPU Director / Manager

Place : MumbaiDate : May 3, 2006

As per our report attachedSHARP & TANNANChartered Accountants

by the hand of

R D KARE S S PRABHUDESAIPartner Company Secretary(Membership No. 8820)


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Profit and Profit and Profit and Profit and Profit and LLLLLoss oss oss oss oss AAAAAccountccountccountccountccount for the year ended March 31, 2006 for the year ended March 31, 2006 for the year ended March 31, 2006 for the year ended March 31, 2006 for the year ended March 31, 2006

2005-06 2004-05

Schedules Rupees RupeesINCOMESoftware development services and productsOverseas 7,617,155,025 5,339,253,135Domestic 316,602,372 249,686,813Other income K 47,009,233 13,256,536

7,980,766,629 5,602,196,484

EXPENDITURESoftware development expenses L 5,032,229,700 3,394,687,870Sales, administration and other expenses M 1,822,463,846 1,403,549,640

6,854,693,546 4,798,237,510

Operating profit (PBIDT) 1,126,073,083 803,958,974Interest N 53,017,576 34,234,582Depreciation on tangible assets 179,689,490 133,463,523Amortisation of intangible assets 94,680,546 119,343,855Amortisation of deferred revenue expenditure — 11,128,350

Profit before tax (PBT) 798,685,471 505,788,664Provision for taxes 60,075,174 31,227,373(including Rs 10,000 for wealth tax; previous year Rs. 104,000)Short provision for taxes in previous years 4,067,103 14,516,055Deferred tax (272,421) 1,038,356Fringe Benefit Tax 33,000,000 —

Profit after tax (PAT) 701,815,615 459,006,880Add : Balance brought forward from previous year 316,750,933 292,148,742Profit available for appropriation 1,018,566,547 751,155,622Less: Transfer to general reserve 300,000,000 180,000,000

Profit available for distribution 718,566,547 571,155,622Interim dividend 150,000,000 225,000,000Tax on dividend 21,037,500 29,404,689

Balance to be carried forward 547,529,047 316,750,933

Basic and diluted earnings per share (EPS) 23.39 15.30

Equivalent number of shares of Rs.5 each 30,000,000 30,000,000

SIGNIFICANT ACCOUNTING POLICIES OAND NOTES ON ACCOUNTS





by the hand of



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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 20062005-06 2004-05

Rupees RupeesCash flow from operating activitiesNet profit before tax 798,685,471 505,788,664Adjustments for:Depreciation and amortisation 274,370,036 252,807,378Interest paid 53,017,576 34,234,583Unrealised foreign exchange gain (1,088,314) 28,645,730Income from investments (620,998) (320,851)Deferred revenue expenditure amortised — 11,128,350Cost of long term projects amortised 17,874,871 15,429,014Cost of long term projects — (6,841,538)Profit on sale of fixed assets (2,654,861) (10,320)

Operating profit before working capital changes 1,139,583,781 840,861,010Changes in working capitalIncrease in trade receivables (623,269,413) (562,291,464)Increase in other receivables (473,734,972) 36,451,592Increase in trade payables 473,715,946 314,330,805Decrease in working capital (623,288,438) (211,509,067)Cash generated from operations 516,295,342 629,351,943Direct taxes paid (33,466,312) 13,468,125

Net cash from operating activities 482,829,030 642,820,068

Cash flow from investing activitiesPurchase of fixed assets (661,776,292) (282,840,961)Sale of fixed assets 14,092,480 10,320Investments (6,606,465) —Interest received 1,570,235 1,940,563Income from investments 620,998 320,851

Net cash used in investing activities (652,099,044) (280,569,227)

Cash flow from financing activitiesProceeds from borrowings 472,042,205 9,272,453Proceeds from intercorporate deposits 55,000,000 (78,000,000)Financial expenses (47,269,078) (41,724,178)Dividend paid (150,000,000) (225,000,000)Dividend tax paid (9,801,563) (29,404,689)

Net cash from financing activities (319,971,564) (364,856,414)

Net increase in cash and cash equivalents 150,701,550 (2,605,573)Cash and cash equivalents - 31 March 2005 41,408,112 (44,013,684)Cash and cash equivalents - 31 March 2006 192,109,662 41,408,112




As per our report attachedSHARP & TANNANChartered Accountantsby the hand of



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Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSCHEDULE A As at 31-3-2006 As at 31-3-2005

Rupees RupeesShare CapitalAuthorised :

3,05,00,000 Equity shares of Rs.5 each( Previous year 3,05,00,000 of Rs. 5 each) 152,500,000 152,500,000

Issued and Subscribed :3,00,00,000 Equity Shares for Rs. 5 each 150,000,000 150,000,000( Previous year 3,00,00,000 of Rs. 5 each)

Paid up :3,00,00,000 Equity Shares for Rs. 5 each 150,000,000 150,000,000( Previous year 3,00,00,000 of Rs. 5 each)

All the above Equity shares (Same as previous year)are held by Larsen & Toubro Limited, the holding Company 150,000,000 150,000,000

SCHEDULE BReserves and SurplusGeneral ReserveAs per last balance sheet 700,000,000 520,000,000Add : Transferred from

Profit and Loss Account 300,000,000 180,000,000

1,000,000,000 700,000,000Profit and Loss Account 547,529,047 316,750,933

1,547,529,047 1,016,750,933

SCHEDULE CSecured LoansTerm loans from bank 495,704,455 137,482,500Other loans from banks 780,581,997 667,109,102

1,276,286,452 804,591,602

SCHEDULE DUnsecured LoansInter corporate borrowings (from holding company) 55,000,000 —Lease finance (due within one year Rs. 4,606,761) 9,815,297 9,467,942

64,815,297 9,467,942SCHEDULE EFixed AssetsSCHEDULE E1 – Tangible Assets – Own Rupees

Gross Block Depreciation / Amortisation Net Block Net Block

Fixed Assets As at Additions Deductions As at As at For the Deductions Up to As at As at1-Apr-05 31-Mar-06 1-Apr-05 Year 31-Mar-06 31-Mar-06 31-Mar-05

Buildings 133,360,561 7,994,398 — 141,354,959 22,323,348 4,332,528 — 26,655,876 114,699,083 111,037,212Plant and machinery 159,069,734 101,310,345 1,582,004 258,798,075 76,594,395 10,190,842 346,921 86,438,316 172,359,759 82,475,340Computers 469,729,277 193,483,383 — 663,212,660 304,957,493 95,164,440 — 400,121,933 263,090,726 164,771,784Furniture and fixtures 430,125,909 217,640,513 28,273,703 619,492,719 193,622,574 64,032,480 18,071,167 239,583,887 379,908,834 236,503,335Vehicles 4,811,355 — — 4,811,355 2,852,260 613,924 — 3,466,184 1,345,171 1,959,095

Sub Total (A) 1,197,096,836 520,428,639 29,855,707 1,687,669,768 600,350,070 174,334,214 18,418,088 756,266,196 931,403,573 596,746,766

Tangible Assets – leasedComputers 20,011,118 3,618,922 — 23,630,040 9,955,922 5,355,276 — 15,311,198 8,318,841 10,055,196

Sub Total (B) 20,011,118 3,618,922 — 23,630,040 9,955,922 5,355,276 — 15,311,198 8,318,841 10,055,196

Add: Capital work-in-progress(including Advances) 98,728,015 31,205,065

Total Of Tangible Assets 1,217,107,954 524,047,561 29,855,707 1,711,299,808 610,305,992 179,689,490 18,418,088 771,577,394 1,038,450,430 638,007,027

Total Of Tangible Assets(Previous Year) 932,530,788 304,675,481 20,098,315 1,217,107,954 496,940,785 133,463,523 20,098,315 610,305,992 638,007,027 541,815,826

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As at 31-3-2006 As at 31-3-2005

SCHEDULE F Rupees Rupees

Investments (at cost,unquoted)Long term investment in wholly owned subsidiaries1, fully paid equity share of Euro 25,000/- in 1,140,649 1,140,649

Larsen & Toubro Infotech GmbH100, fully paid equity shares of CAD 1 each in 6,606,465 —Larsen & Toubro Information Technology Canada Ltd.

Details of investments purchased and sold during the year — —

(11,98,35,845 units of Principal Mutual Fund- Liquid Institutional Planpurchased and sold during the year)

7,747,114 1,140,649

SCHEDULE G

Sundry Debtors

Unsecured

Debts outstanding for a period exceeding six months

Considered good 106,435,250 54,927,466

Considered doubtful 133,517,482 108,666,571

239,952,732 163,594,037Other DebtsConsidered good– Due from subsidiaries 16,366,453 78,627,732

– Others 1,838,695,370 1,196,894,200Considered doubtfulLess : Provision for doubtful debts 133,517,483 108,666,571

1,961,497,072 1,330,449,398

Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of Accounts

SCHEDULE E2 – Intangible Assets Rupees

Gross Block Depreciation / Amortisation Net Block Net BlockFixed Assets As at Additions Deductions As at As at For the Deductions Up to As at As at

1-Apr-05 31-Mar-06 1-Apr-05 Year 31-Mar-06 31-Mar-06 31-Mar-05

Leasehold Land 12,268,579 — — 12,268,579 1,343,348 128,820 — 1,472,168 10,796,411 10,925,231

Software 384,152,911 61,467,772 — 445,620,683 274,232,004 74,941,726 — 349,173,730 96,446,953 109,920,907

Business Rights 98,050,000 — — 98,050,000 44,122,500 19,610,000 — 63,732,500 34,317,500 53,927,500

Add: Capital work-in-progress(including Advances) 19,125,266 10,387,257

Total Of Intangible Assets 494,471,490 61,467,772 — 555,939,262 319,697,852 94,680,546 — 414,378,398 160,686,130 185,160,895

Total Of Intangible Assets(Previous Year) 424,972,753 69,498,737 — 494,471,490 200,353,997 119,343,855 — 319,697,852 185,160,895 251,318,513

Note: Electrical installations and air—conditioning equipments have been reclassified from buildings to plant and machinery. Accordingly opening balance (gross block) and depreciationof buidlings is lower by Rs. 96,634,458 and Rs. 20,099,710 respectively and gross block and depreciation of plant and machinery is higher by Rs. 96,634,458 and Rs. 20,099,710respectively.

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As at 31-3-2006 As at 31-3-2005

Rupees RupeesSCHEDULE H

Cash and Bank Balances

Cash on hand 1,426,455 1,857,308

Balances with scheduled banks

in current accounts (including remittances in transit) 99,961,169 4,154,587

Balances with non-scheduled banks 90,722,038 35,396,217(see schedule O note 2)

192,109,662 41,408,112

SCHEDULE I

Loans and Advances

Secured :

Loans against mortgage of house property 5,513,873 5,994,675

Unsecured :

Unbilled revenues 176,925,712 52,822,341

Due from subsidiary company 4,880,000 4,880,000

Advances recoverable in cash or in kind 693,213,017 359,387,672

Cost of long term projects 2,703,145 20,163,640(see schedule O note 17 )

883,235,747 443,248,328

SCHEDULE J

Current Liabilities and Provisions

Current Liabilities :

Sundry Creditors 617,413,404 452,076,727

Advance billing 40,769,445 33,036,109

Due to holding Company 382,710,924 95,748,369

Due to directors 260,000 240,000

1,041,153,774 581,101,205Provisions :

Taxes 103,077,349 40,867,071

Leave encashment 59,376,000 34,875,000

162,453,349 75,742,071

1,203,607,123 656,843,276

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2005-06 2004-05

Rupees RupeesSCHEDULE KOther incomeIncome from investments 620,998 320,851Provision no longer required 21,241,490 —Gain on sale of fixed asset 2,654,861 10,320Miscellaneous income 22,491,884 12,925,365

47,009,233 13,256,536

SCHEDULE LSoftware development expensesSalaries including overseas staff expenses 3,461,961,559 2,429,922,071Staff welfare 227,209,391 153,010,992Contribution to provident and other funds 65,054,588 42,306,021Contribution to superannuation fund 25,384,841 18,449,289Contribution to gratuity fund 3,800,040 4,730,000Communication expenses 89,952,279 98,970,872Consultancy charges 1,028,293,723 563,636,251Cost of Software packages for own use 44,196,666 44,595,166Cost of bought-out items for resale 86,376,613 39,067,208

5,032,229,700 3,394,687,870

SCHEDULE MSales, Administration and other expensesSalaries including overseas staff expenses 584,840,650 490,144,345Travelling and conveyance 247,971,944 174,595,822Rent (lease rent Rs. 27,626,294 ; previous year Rs. 20,477,873 ) 277,868,324 141,261,367Telephone charges and postage 104,048,863 86,069,988Legal and professional charges 102,090,983 91,031,397Printing and stationery 46,392,448 26,719,443Advertisement 17,405,111 7,314,531Advertisement for Vacancies 24,802,540 20,735,586Repairs to building 5,957,749 4,448,696Repairs to computers 19,527,038 20,087,672General repairs and maintenance 78,814,450 50,326,458Power and fuel 80,335,962 54,040,096Establishment expenses 40,667,392 29,198,798Equipment hire charges 22,815,605 22,899,583Insurance charges 33,058,519 25,860,830Rates and taxes 14,815,026 9,954,339Auditors’ remuneration 1,201,500 875,500Bad debts — 36,918,376Provision for doubtful debts (net) 24,850,912 26,485,937Commission charges 12,955,142 14,995,360Books and periodicals 7,392,951 7,560,385Entertainment 16,019,386 11,304,832Directors fees 260,000 240,000Miscellaneous expenses 40,496,481 29,023,071Amortisation of cost of long term projects 17,874,871 21,457,228

1,822,463,846 1,403,549,640

SCHEDULE NInterest paid onFixed loans 12,554,843 3,106,589On others 39,760,394 28,338,534Lease finance charges 2,272,574 4,730,022Less : Interest received 1,570,235 1,940,563

53,017,576 34,234,582

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SCHEDULE O

SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF ACCOUNTING

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with Generally Accepted AccountingPrinciples (“GAAP”) and in compliance with the Accounting Standards referred to in section 211(3C) and other requirements of the CompaniesAct, 1956.

The preparation of financial statements in confirmity with GAAP requires the management of the Company to make estimates and assumptionsthat affect the income and expense reported for the period and assets and liabilities reported as of the date of the financial statements. Examplesof such estimates include the useful lives of the fixed assets, provision for doubtful debts, future obligations in respect of retirement benefit plans,etc. Actual results could vary from these estimates.

2. REVENUE RECOGNITION

Revenue earned from services provided on “time and material” basis is recognised based on software developed or time spent in person hoursor person weeks and billed to customers as per the terms of specific contracts.

Revenue from services performed on “fixed-price” basis is recognised using the percentage of completion method. Unbilled revenue representsvalue of services performed in accordance with the contract terms but not billed.

Revenue on sale of software packages is accounted on despatch to customers.

3. RETIREMENT BENEFITS

Contribution to provident and super-annuation funds are accounted on actual liability basis. Provision for leave encashment benefit on retirementis made on the basis of actuarial valuation. Gratuity contribution is made to the group gratuity scheme of the Life Insurance Corporation of India.

4. FIXED ASSETS

Tangible

Fixed Assets are stated at cost less depreciation.

Intangible

Computer software developed in-house is capitalised at cost.

5. LEASES

(a) Lease transactions entered into prior to April 1, 2001:

The lease rentals in respect of such assets are charged to the profit and loss account.

(b) Lease transactions entered into on or after April 1, 2001:

(i) Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as financeleases. Such assets are capitalised at the inception of the lease at the lower of the fair value and the present value of minimum leasepayments and a liability is created for an equivalent amount. Each lease rental is allocated between the liability and the interest cost,so as to obtain a constant periodic rate of interest on the outstanding liability for each period.

(ii) Assets acquired under lease where a significant portion of the risks and rewards of ownership are retained by the lessor are classifiedas operating leases. Lease rentals are charged to the profit and loss account on accrual basis.

6. DEPRECIATION

Tangible - Owned assets

Depreciation on all assets is calculated using straight line method at rates prescribed by schedule XIV to the Companies Act, 1956, except forthe following:

● Plant and machinery 20%

● Computers 30%

● Servers 25%

● Furniture and fixtures 10%

● Office equipments 20%

● Motor cars 14.14%

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Tangible - Leased assets

Assets acquired under finance leases are depreciated at the rates applicable to similar assets owned by the Company as there is reasonablecertainty that the Company shall obtain ownership of the assets at the end of the lease term.

Intangible assets

The basis of amortisation of intangible assets is as follows:

● Leasehold land over the residual period of the lease

● Computer software 33.33%

● Business Rights over a period of five years

Depreciation / amortisation on additions / disposals is calculated pro-rata from / to the month of additions / disposals.

7. BORROWING COST

Borrowing cost that are attributable to the acquisition and construction of qualifying assets are capitalised as part of cost of such assets till suchtime as the asset is ready for its use. A qualifying asset is one that requires a substantial period of time to get ready for its intended use. All otherborrowing costs are recognised as an expense in the period in which they are incurred.

8. FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are recorded at the rates prevailing on the date of the transaction.

Translation of foreign currency transaction of overseas branches is as under:

● revenue items at the average rate for the period;

● fixed assets and investments at the rates prevailing on the date of the transaction; and

● other assets and liabilities at year end rates.

Exchange difference on settlement / year end conversion is adjusted to:

● profit and loss account

Profit or loss on forward contracts is accounted over the period of the contract.

9. INCOME TAX

Provision for income tax for the current year is based on the taxable profits for the year after considering tax exemptions / allowances.

Deferred tax is recognised subject to the consideration of prudence in respect of deferred tax asset, on timing differences being the differencesbetween taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

10. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the company has a present obligation as a result of a past event,

b) a probable outflow of resources is expected to settle the obligation and

c) the amount of the obligation can be reliably estimated

Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursementwill be received.

Contingent liability is disclosed in the case of

a) a present obligation arising from a past event when it is not probable that an outflow of resources will be required to settle the obligation

b) a possible obligation unless the probability of outflow of resources is remote

Contingent assets are neither recognized nor disclosed.

Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.

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11. NOTES FORMING PART OF ACCOUNTS

1. The secured loans from banks are secured against hypothecation of the Company’s movable assets and accounts receivables.

2. Balances with non-scheduled banks held in : Rupees

As at As at Max. amount outstanding during

31.3.06 31.3.05 2005-06 2004-05

Current account

ABN Amro Bank, Amsterdam 3,124,729 – 10,418,581 –

Bank of America, New Jersey 2,140,167 6,234,769 7,089,888 6,216,954

Citibank N.A., New Jersey (Collection) 3,322,557 8,125,388 164,551,705 107,278,741

Citibank N.A., New Jersey (Checking) 10,895,946 645,351 210,322,049 64,887,968

Citibank N.A., Paris 5,323,759 6,344,499 30,193,624 17,525,364

Citibank N.A., Singapore 862,007 652,823 9,124,439 4,997,228

HSBC, London (GBP) 12,221,289 (1,117,489) 18,959,584 13,727,623

HSBC, London (USD) 18,083,316 4,488,647 55,343,291 26,510,455

HSBC, London (EUR) 4,888,839 175,112 13,767,140 9,329,044

State Bank of India, Tokyo 693,334 735,593 18,465,076 9,048,309

Tokyo Mitshubishi Bank, Tokyo 21,488,823 1,735,588 67,651,361 16,595,219

Total 83,044,766 28,020,28128,020,28128,020,28128,020,28128,020,281

Deposit account

Citibank N.A., New Jersey 7,677,272 7,375,936 7,677,272 7,375,936

Total 90,722,038 35,396,21735,396,21735,396,21735,396,21735,396,217

3. The Company is mainly engaged in the business of software development. This is not capable of being expressed in the form of generic units.Hence it is not possible to give quantitative details and information required under Paragraphs 3, 4c of part II of Schedule VI to the CompaniesAct, 1956.

4. During the year Larsen & Toubro Information Technology Canada Limited became a wholly owned subsidiary of the Company.

5. Expenditure in foreign currency :

Rupees Rupees2005-06 2004-05

Overseas staff costs 2,257,143,630 1,746,790,236

Foreign travel 27,928,631 22,695,316

Agency commission 13,123,456 14,995,189

Interest 6,597,003 4,168,701

Others (includes overseas office expenses ) 1,184,787,245 740,283,232

Total 3,489,579,965 2,528,932,674

6. Earnings in foreign currency :

Rupees Rupees2005-06 2004-05

Software exports 7,617,155,025 5,339,253,135

Other income 1,343,735 2,303,480

Total 7,618,498,760 5,341,556,615

S-17


7. The net exchange loss arising on foreign currency transactions amounting to Rs. 4,829,186 (previous year gain of Rs. 51,381,635) has beenaccounted under respective revenue heads.

8. There are no forward contracts outstanding as on March 31, 2006.

9. Auditors’ remuneration (excluding service tax) charged to the accounts include:

Rupees2005-06 2004-05

Audit fees 700,000 640,000

Tax audit fees 280,000 219,500

Certification fees 221,500 16,000

Total 1,201,500 875,500

10. Value of imports on C.I.F. basis :

Rupees2005-06 2004-05

Capital goods 145,827,147 70,311,735

Others 14,848,948 12,433,519

Total 160,676,094 82,745,254

11. Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for: Rs. 100,124,377 (previousyear: Rs. 45,819,526)

12. The break-up of net deferred tax liability as at March 31, 2006 is as under:

RupeesDeferred tax asset/ Current year Deferred tax asset/

(liability) as at (charge) / credit (liability) as atMarch 31, 2005 March 31, 2006

Deferred tax liabilities

● Depreciation / amortisation (2,935,895) (801,441) (3,737,336)

● Amortisation of intangible assets (95,401) 126,987 31,586

● Cost of long-term projects (339,354) 293,860 (45,494)

● Others (7,338) 23,248 15,910

● Total (3,377,988) (357,346) (3,735,334)

Deferred tax asset

● Provision for doubtful debts 1,617,332 629,767 2,247,099

● Total 1,617,332 629,767 2,247,099

Net deferred tax liability (1,760,656) 272,421 (1,488,235)

13. “Provisions, Contingent Liabilities and Contingent Assets” as per Accounting Standard 29

a) Movement in provisions:

Particulars of disclosure Sales tax

Balance as at April 1, 2005 Nil

Provision made during 2005-06 Rs. 4,000,000

Balance as at March 31, 2006 Rs. 4,000,000

Provision for sales tax pertains to claim made by the authorities on certain transaction of capital nature for the year 2002-03.

b) There is no contingent liability.


S-18


14. LEASES

Finance Leases

In accordance with Accounting Standard 19 “Leases” issued by the Institute of Chartered Accountants of India, the assets acquired underfinance leases on or after April 1, 2001 are capitalised and a loan liability is recognised for an equivalent amount. Consequently depreciation isprovided on such leases. Lease rentals paid are allocated to the liability and the interest charged to profit and loss account.

Assets acquired on finance lease comprise of servers. The minimum lease rentals and their present value as at March 31, 2006 in respect ofassets acquired under finance lease are as follows:

Rupees2005-06 2004-05

Minimum Leave Payments

– Payable not later than 1 year 5,577,652 3,826,902

– Payable after 1 year but not later than 5 years 5,860,017 7,171,218

Total 11,437,669 10,998,120

Less : future finance charges 1,622,372 1,530,178

9,815,297 9,467,942

Present value of minimum lease payments



Total 9,815,297 9,467,942

Operating Leases

The Company has taken employee used cars under non-cancellable operating leases. The rental expense in respect of operating leases was27,626,294 (Rs. 27,022,515) and the future rentals payable are as follows: Rupees

Minimum lease payments 2005-06 2004-05



Total 132,589,084 99,102,812

15. RELATED PARTY DISCLOSURE:

The related parties with whom the Company had transactions during the year are :

Name Relationship

Larsen & Toubro Limited Holding company

Larsen & Toubro Infotech GmbH 100% subsidiary

Larsen & Toubro Information Technology Canada Limited 100% subsidiary

Tractor Engineers Limited Fellow subsidiary

L&T Finance Limited Fellow subsidiary

L&T Infocity Ltd Fellow subsidiary


S-19


A summary of transactions with related parties is given below:

RupeesTransaction Holding Co. Subsidiaries Fellow Subsidiaries

● Sale of services / products 112,588,323 126,389,086 2,807,500(114,104,644) (130,703,503) (4,055,000)

● Purchase of goods and assets/ lease of assets 13,818,586 – 3,618,921(13,523,053) – (1,373,391)

● Sale of assets 16,022,420 – –– – –

● Purchase of services 544,680,202 30,081,021 –(168,747,016) (52,771,151) –

● Overheads charged by 123,450,280 – 6,863,145(72,720,360) – –

● Overheads charged to 26,112,985 – 4,342,220(526,907) – –

● Lease rent paid – – 35,603,131– – (30,465,285)

● Interest / Dividend received – – –– – –

● Interest / Dividend paid 150,473,558 – 1,064,342(229,276,102) – (1,441,044)

● Unsecured loan taken 55,000,000 – –– – –

● Trade receivable – 16,366,453 1,631,433– (78,627,732) –

● Trade payable 382,710,924 – –(96,562,625) – (5,338,294)

Figures in brackets pertain to the previous year.

No amounts were written off / provided or written back in respect of related party transactions during the year.

16. SEGMENTAL REPORTING

Segmental reporting of revenues for the Company is on the basis of the geographical location of the customers and is as under:

Rupees

USA Europe Asia Pacific India Rest of Totalthe World

Revenue 5,341,376,202 1,308,808,937 882,187,214 316,602,371 84,782,673 7,933,757,397(3,543,100,525) (1,074,210,307) (692,799,929) (249,686,813) (29,142,374) (5,588,939,948)

Fixed assets used and liabilities contracted for performing the Company’s business have not been identified to any of the above reportedsegments as the fixed assets and services are used interchangeably among segments.


S-20



17. Cost incurred for long term projects mainly comprise of legal and employee related costs to secure long term projects. These costs are amortisedover a period of two years commencing from the date of securing the project.

18. Based on the information and records available with the Company, there are no amounts payable to small-scale undertakings due for more than30 days as at March 31, 2006.

19. Previous year’s figures have been regrouped, wherever necessary, to conform to classifications of the current year.

S-21


20. Balance sheet abstract and company’s general businss profile

I. Registration Details:

Registration No. 1 1 1 0 4 6 9 3 State Code No. 1 1

Balance Sheet Date 3 1 0 3 2 0 0 6Date Month Year

II. Capital raised during the year (Amount in Rs.Thousands)

Public Issue@ Rights Issue

N I L N I LBonus Issue Private Placement

N I L N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs.Thousands)

Total Liabilities Total Assets

3 0 4 0 1 1 9 3 0 4 0 1 1 9Sources of Funds

Paid up Capital Reserves & Surplus

1 5 0 0 0 0 1 5 4 7 5 2 9

Secured Loans Unsecured Loans

1 2 7 6 2 8 7 6 4 8 1 5Deferred Tax

1 4 8 8

Application of FundsNet Fixed Assets Investments

1 1 9 9 1 3 7 7 7 4 7

Net Current Assets Misc.Expenditure

1 8 3 3 2 3 5 N I L

IV. Performance of Company (Amount in Rs.Thousands)Turnover (including other income) Total Expenditure

7 9 8 0 7 6 7 7 1 8 2 0 8 1

Profit/Loss before Tax Profit/Loss after Tax

7 9 8 6 8 6 7 0 1 8 1 6

Earning per share Rs. 5 Dividend Rate %

R S 2 3 P 3 9 1 0 0

V. Generic Names of Principal Products/Services of Company (as per monetary terms)

Item Code No.(ITC Code) N A

Product Description S O F T W A R E D E V E L O P M E N T

Schedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of Accounts

+ –+

+ –+






by the hand of



+ –+

S-22


Name of the subsidiary company: Larsen & Larsen & ToubroToubro Information

Infotech TechnologyGmbH Canada Ltd

Financial year of the subsidiary company ended on: 31/3/2006 31/3/2006

Number of Shares in the subsidiary company held by Larsen & Toubro Infotech Limitedat the above date 1 100

The net aggregate of profits, less losses, of the subsidiary company so far as it concernsthe members of Larsen & Toubro Infotech Limited :

(i) Dealt with in the accounts of Larsen & Toubro Infotech Limited amounted to:

(a) for the subsidiary’s financial year ended March 31, 2006 Nil Nil

(b) for previous financial years of the subsidiarysince it became subsidiary of Larsen &Toubro Infotech Limited Euro 600,000 Not Applicable

(ii) Not dealt with in the accounts of Larsen & Toubro Infotech Limited amounted to:

(a) for the subsidiary’s financial year ended March 31, 2006 Euro 70,658 (CAD 91,482)

(b) for previous financial years of the subsidiary since itbecame subsidiary of Larsen & Toubro Infotech Limited. Euro 493,583 (CAD 14,390)

Changes in the interest of Larsen & Toubro Infotech Limited between the end ofthe subsidiary’s financial year and March 31, 2006

Number of shares acquired Nil Nil

Material changes between the end of the subsidiary’s financial year and March 31, 2006 Not applicable Not applicable

Statement pursuant to Section 212 of theStatement pursuant to Section 212 of theStatement pursuant to Section 212 of theStatement pursuant to Section 212 of theStatement pursuant to Section 212 of theCompanies Act, 1956 relating to subsidiary company:Companies Act, 1956 relating to subsidiary company:Companies Act, 1956 relating to subsidiary company:Companies Act, 1956 relating to subsidiary company:Companies Act, 1956 relating to subsidiary company:





by the hand of


Mumbai, 3rd May, 2006

S-23

LARSEN & TOUBRO INFOTECH GMBH

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting the Seventh Annual report and the audited accounts of the Company for the year ended March 31, 2006.

2005-06 2004-05

EURO RUPEES EURO RUPEESFinancial Results

Total Income 4,602,992 248,331,404 5,896,483 336,252,137

Profit before tax 147,024 5,983,816 262,583 16,326,085

Taxes (incl.Euro 64121 for prior years, Previous year Nil) 76,366 4,119,959 7,507 424,573

Profit after tax 70,658 1,863,856 255,076 15,901,512

REVIEW OF OPERATIONS

The Company registered total income of Euro 4.60 Million during the year 2005-06. The profit before tax amounted to Euro 0.15 Million.

The revenues were lower compared to the previous year primarily due to the slowdown in the Telecom segment. The Company has been able tomake an entry into new customers including insurance, financial services and automotive OEMs. The Company has also increased its sales effortsand entered into strategic partnerships with key German System Integrators. These steps are expected to result in improved performance in thecoming year.

DIVIDEND

In order to conserve the resources for future business growth, the Directors do not recommend dividend for the current year.


As per the Company, the Company being registered outside India, the disclosures required to be made in accordance with Companies (Disclosure ofParticulars in the Report of Board of Directors) Rules, 1988, are not relevant.

PARTICULARS OF EMPLOYEES

There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees)Rules, 1975.


The Board of Directors of the Company confirms:

i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no materialdeparture;

ii. that the selected accounting policies were applied consistently and the Directors made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006;

iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. that the annual accounts have been prepared on a going concern basis.

AUDITORS

M/s Sharp & Tannan, the Auditors of the Company have indicated their willingness and are eligible for reappointment.

For and on behalf of the Board,

KARAN SINGH SUNIL SAPRE Director Director

Place : LeipzigDate : May 3, 2006

S-24


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF LARSEN & TOUBRO INFOTECH GMBH

The financial statements of Larsen & Toubro Infotech GmbH for the year ended March 31, 2006, being a Company registered in Germany, are auditedby Günther Pöhner and Christoph von Loeben and we have been furnished with their audit report dated April 28, 2006.

We are presented with the accounts in Indian Rupees prepared on the basis of the aforesaid accounts to comply with the requirements of section 212of the Companies Act, 1956. We give our report as under:

We have audited the attached balance sheet of Larsen & Toubro Infotech GmbH as at March 31, 2006 and the annexed profit and loss account andthe cash flow statement of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides areasonable basis for our opinion.

In accordance with the provisions of section 227 of the Companies Act, 1956, we report that:

(1) As required by the Companies (Auditor’s Report) Order, 2003, issued by the central government of India under sub-section (4A) of section 227of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate andaccording to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and5 of the said Order.

(2) Further to our comments in the Annexure referred to above, we report that:

(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes ofour audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of thosebooks;

(c) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; and

(e) as regards reporting on the disqualification of directors under section 274(1)(g) of the Indian Companies Act, 1956, since the Company isregistered in Germany, no reporting is required to be made under the said section.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the significantaccounting policies in schedule O and notes appearing thereon, give the information required by the Companies Act, 1956 in the manner so requiredand give a true and fair view in conformity with the accounting principles generally accepted in India:

1 in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;

2 in the case of the profit and loss account, of the profit for the year ended on that date; and

3 in the case of the cash flow statement, of the cash flows for the year ended on that date.


by the hand of

R D KarePartner

Membership No. 8820Place : MumbaiDate : May 3, 2006

S-25


Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ Report(Referred to paragraph (1) of our report of even date)

1. (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed asset.

(b) We are informed that the Company has physically verified the fixed assets during the year and no material discrepancies were noticed onsuch verification. In our opinion, the frequency of such verification is reasonable.

(c) Fixed assets disposed of during the year are not substantial in relation to the Company and do not affect the going concern.

2. The Company has no inventories and hence reporting under paragraphs 4(ii) (a), (b) and (c) is not applicable.

3. There are no loans, secured or unsecured, either granted to or taken from companies, firms or other parties. However, no register is required tobe maintained under section 301 of the Companies Act, 1956 since the Company is incorporated and doing business only in Germany.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate withthe size of the Company and the nature of its business for the purchase of fixed assets and for the sale of services. In our opinion and accordingto the information and explanations given to us, there is no continuing failure to correct major weaknesses in the aforesaid internal controlprocedures.

5. The Company is incorporated in Germany and accordingly, maintenance of records under section 301 of the Companies Act, 1956 is notrequired.

6. The Company has not accepted deposits from the public.

7. We are of the opinion that the Company has an internal audit system commensurate with the size and the nature of its business.

8. Cost records are not required to be maintained under section 209(1)(d) of the Companies Act, 1956 by the Company as it is incorporated inGermany and is doing business outside India.

9. The Company being registered in Germany, has no statutory liabilities in India and accordingly reporting for paragraphs 4 (ix) (a) and (b) is notrequired.

10. The Company has no accumulated losses as at 31 March 2006 and it has not incurred any cash losses in the financial year ended on that date.

11. According to the information and explanations given by management, the Company has neither borrowed from a bank or financial institution norhas it issued any debentures.

12. The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or other securities.


14. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities.

15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks orfinancial institutions.

16. The Company has not availed any term loans during the year.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that nofunds raised on short term basis have been used for long term investments.

18. The Company has not made any preferential allotment of shares to any party during the year.

19. The Company has not issued debentures during the period and accordingly, no security is required to be provided.

20. The Company has not raised any money by public issues during the year.

21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraudon or by the Company, noticed or reported during the year, nor have we been informed of such case by management.


by the hand of

R D KarePartner

Membership No. 8820Place : MumbaiDate : May 3, 2006

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Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006

As at 31-03-2006 As at 31-03-2005

Schedule EUROS RUPEES EUROS RUPEESSOURCES OF FUNDS

SHAREHOLDERS’ FUNDS

Share Capital A 25,000 1,140,650 25,000 1,140,650

Reserves and Surplus B 564,240 31,667,807 493,583 29,803,951

589,240 32,808,457 518,583 30,944,601

LOAN FUNDS

Unsecured loans C 110,000 4,880,000 110,000 4,880,000

110,000 4,880,000 110,000 4,880,000

TOTAL 699,240 37,688,457 628,583 35,824,601

APPLICATION OF FUNDS

Fixed Assets D

Gross Block 26,167 1,236,305 22,766 1,052,851

Less: Depreciation 20,824 1,021,764 17,205 826,549

Net Block 5,343 214,541 5,561 226,302

Investments

Pan Health, U.S.A. E 1 53 1 53

1 53 1 53

Current assets, loans and advances

Sundry debtors F 1,156,544 62,459,150 1,398,906 79,567,629

Cash and bank balances G 222,697 12,026,738 236,564 13,406,061

Loans and advances H 105,750 5,711,044 1,035,918 58,705,496

1,484,991 80,196,932 2,671,388 151,679,186

Less: Current liabilities and provisions

Liabilities I 540,208 29,173,916 1,646,316 93,296,710

Provisions J 250,887 13,549,152 402,051 22,784,230

791,095 42,723,069 2,048,367 116,080,940

Net current assets 693,896 37,473,864 623,021 35,598,246

TOTAL 699,240 37,688,457 628,583 35,824,601



KARAN SINGH Director

SUNIL SAPRE Director

Place: LeipzigDate: May 3, 2006


R D KAREPartner(Membership No. 8820)


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2005-06 2004-05

Schedule EUROS RUPEES EUROS RUPEES

INCOME

Software development services and products

Overseas 285,760 15,416,747 315,374 17,837,556

Domestic 4,254,609 229,536,180 5,538,247 313,243,262

Other income K 62,622 3,378,477 42,862 5,171,319

4,602,992 248,331,404 5,896,483 336,252,137

EXPENDITURE

Software development expenses L 3,986,619 214,490,638 5,244,795 297,510,951

Sales, administration and other expenses M 453,310 26,991,690 364,419 21,018,869

4,439,930 241,482,327 5,609,214 318,529,820

Operating profit (PBIDT) 163,062 6,849,078 287,269 17,722,317

Interest 12,420 670,047 20,420 1,154,972

Depreciation on tangible assets 3,618 195,215 4,266 241,260

Profit before tax 147,024 5,983,816 262,583 16,326,085

Taxes on income N 76,366 4,119,959 7,507 424,573

Profit after tax 70,658 1,863,856 255,076 15,901,512

Add: Balance brought forward from previous year 493,583 29,803,951 238,506 13,902,438

Balance carried to Balance Sheet 564,240 31,667,807 493,583 29,803,951

Number of equity share 1 1

Basic and diluted earnings per share (EPS) 1,863,856 15,901,512









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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 20062005-06 2004-05Rupees Rupees

A. Cash flow from operating activities :

Net profit before tax 5,983,816 16,326,085

Adjustments for :

Depreciation and ammortisation 195,215 241,260

Interest paid 389,884 991,061

Unrealised foreign exchange difference — (2,353,024)

Operating profit before working capital changes 6,568,915 15,205,382

Changes in working capital

(Increase)/decrease in trade receivables 17,108,479 (51,974,087)

(Increase)/decrease in other receivables 51,476,017 (44,183,021)

Increase/(decrease) in trade payables (75,530,564) 73,673,071

(Increase)/decrease in working capital (6,946,068) (22,484,037)

Cash generated from operations (377,154) (7,278,655)

Direct taxes paid (428,831) 7,791,860

Net cash from operating activities (805,985) 513,205

B. Cash flow from investing activities :

Purchase of fixed assets (183,454) (81,287)

Interest received 280,162 163,911

Net cash from investing activities 96,709 82,624

C. Cash flow from financing activities :

Financial expenses (670,047) (1,154,972)

Net cash from financing activities (670,047) (1,154,972)

Net (decrease)/increase in cash and cash equivalents (A+B+C) (1,379,323) (559,143)

Cash and cash equivalents at the beginning of the year 13,406,061 13,965,203

Cash and cash equivalents at the end of the year 12,026,738 13,406,061

Notes:

1 Cash flow has been prepared under the indirect method as set out in the Accounting Standard - 3 issued by the Institute of Chartered Accountantsof India.

2 Previous year’s figures have been regrouped /reclassified wherever applicable.








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As at 31-03-2006 As at 31-03-2005

EUROS RUPEES EUROS RUPEES

SCHEDULE A

Share Capital

Authorised: 1 equity share of EUR 25,000 25,000 1,140,650 25,000 1,140,650

Issued and Subscribed

1 Equity Share of Eur 25,000 25,000 1,140,650 25,000 1,140,650

Paid up

1 Equity Share of Eur 25,000 25,000 1,140,650 25,000 1,140,650

All the above Equity shares are heldby Larsen & Toubro Infotech Ltd.

25,000 1,140,650 25,000 1,140,650

SCHEDULE B

Reserves and Surplus

Profit & Loss Account 564,240 31,667,807 493,583 29,803,951

564,240 31,667,807 493,583 29,803,951

SCHEDULE CUnsecured LoansLoan from Larsen & Toubro Infotech Limited,the holding Company 110,000 4,880,000 110,000 4,880,000

110,000 4,880,000 110,000 4,880,000

As at 31-03-2006 As at 31-03-2005

EUROS RUPEES EUROS RUPEESSCHEDULE E

Investments (at cost, unquoted)

100000 fully paid Equity Shares of USD 1 each

in Pan Health, U.S.A. 1 53 1 53

1 53 1 53

SCHEDULE D – Fixed Assets

Currency Gross Block Depreciation Net Block

Assets WDV As at Additions Disposal Cost As at As at For the On disposal As at As at01-04-05 during the 31-03-06 01-04-05 Year 31-03-06 31-03-06

Computer Equipment RUPEES 1,052,851 183,454 – 1,236,305 826,549 195,215 – 1,021,764 214,541

EUROS 22,767 3,400 – 26,167 17,206 3,618 – 20,824 5,343.00

S-30


SCHEDULE FSundry DebtorsDebts outstanding for a period exceeding six monthsConsidered good – – 10,370 587,675

Considered doubtful – – 162,112 9,186,868

– – 172,482 9,774,543

Other DebtsConsidered good 1,156,544 62,459,150 1,373,233 77,821,140

1,156,544 62,459,150 1,545,715 87,595,683Less: Provision for doubtful debts – – 146,809 8,028,054

1,156,544 62,459,150 1,398,906 79,567,629

SCHEDULE GCash and Bank balancesBalance with banks 222,697 12,026,738 236,564 13,406,061

222,697 12,026,738 236,564 13,406,061

SCHEDULE HLoans and AdvancesUnsecured, considered goodDeposits for premises 3,963 214,027 13,857 785,284Unbilled revenue – – 779,287 44,162,194Advances recoverable in cash or in kind 20,774 1,121,882 75,160 4,259,296VAT Prepayments – – 63,617 3,605,152

Advance Taxes 81,014 4,375,135 103,998 5,893,570

105,750 5,711,044 1,035,918 58,705,496

SCHEDULE ILiabilitiesDue to holding Company 250,725 13,540,403 1,387,467 78,627,732VAT payable 97,413 5,260,811 – –Social insurances – – 41,197 2,334,654Wage withholding tax – – 37,083 2,101,481Due to employees 15,238 822,906 1,267 71,801Sundry creditors 66,679 3,601,010 21,260 1,204,819Others 101,683 5,491,404 154,742 8,769,212

Interest accrued but not due on loans 8,469 457,383 3,300 187,011

540,208 29,173,916 1,646,316 93,296,710

SCHEDULE JProvisionsProvision for municipal trade tax 148,012 7,993,388 343,951 19,491,703Provision for corporate income tax 85,800 4,633,629 45,500 2,578,485

Provision for solidarity surcharge tax 4,800 259,224 2,500 141,675

238,612 12,886,241 391,951 22,211,863

Accidential insurance for employees 12,275 662,911 10,100 572,367

250,887 13,549,152 402,051 22,784,230

As at 31-03-2006 As at 31-03-2005



S-31



2005-06 2004-05


SCHEDULE KOther IncomeInterest income 5,193 280,162 2,898 163,911Other Income 56,900 3,069,776 36,943 2,089,477Insurance reimbursement 529 28,540 – –

Currency exchange income – – 3,021 2,917,931

62,622 3,378,477 42,862 5,171,319

SCHEDULE LSoftware development services and productsSalaries including overseas staff expenses 1,285,472 69,351,218 2,357,242 133,325,608Staff welfare 151,942 8,197,280 279,623 15,815,460

Software development services 2,549,205 136,942,139 2,607,930 148,369,883

3,986,619 214,490,638 5,244,795 297,510,951

SCHEDULE MSales, administration and other expensesTravelling charges and conveyance 39,363 2,123,640 49,232 2,784,571Car expenditures 13,507 728,708 3,033 171,522Rent 29,477 1,590,257 8,978 507,792Telephone charges 18,881 1,018,609 18,637 1,054,129Legal and professional charges 86,389 4,660,665 107,039 6,054,143Printing and stationery 3,143 169,561 1,148 64,946Advertisement & Exhibitions 53,469 2,884,642 – –Gifts 558 30,091 230 13,020General repairs and maintenance 527 28,451 396 22,372Power and fuel 549 29,603 817 46,197Establishment expenses 133 7,198 216 12,228Insurance charges 55,170 2,976,421 9,634 544,910Auditors’ remuneration 8,750 472,063 8,500 480,760Provision for doubtful debts – – 49,152 3,187,367Bad Debts 28,332 1,528,518 – –Books and periodicals 19 1,008 336 19,006Entertainment 3,951 213,152 1,533 86,681Bank charges 3,944 212,779 8,827 499,228Exchange difference 25,413 3,906,629 – –Stamps and courier 2,732 147,383 3,049 172,429Education and training 4,400 237,380 12,750 721,140Municipal trade tax 66,878 3,608,089 50,224 2,840,669

Miscellanous expenses 7,726 416,842 30,689 1,735,758

453,310 26,991,690 364,419 21,018,869

SCHEDULE NTaxesCorporate income tax 72,513 3,912,076 5,414 306,216

Solidarity surcharge tax 3,853 207,883 2,093 118,357

76,366 4,119,959 7,507 424,573

S-32



SCHEDULE O

1. Legal Status

Larsen & Toubro Infotech GmbH is a Company registered in Germany and is engaged in the business of software development services. It iswholly owned subsidiary of Larsen & Toubro Infotech Limited which is a Company incorporated in India.

2. Significant Accounting Policies

a. Basis of preparation

The accounts have been prepared using the historical cost convention in accordance with generally accepted accounting principles(“GAAP”) and in compliance with the Accounting Standards referred to in section 211(3C) and other requirements of the Companies Act,1956.

The preparation of financial statements in confirmity with GAAP requires the management of the Company to make estimates andassumptions that affect the income and expense reported for the period and assets and liabilities reported as of the date of the financialstatements. Actual results could vary from these estimates.

b. Revenue recognition

Revenue from software development is recognised based on software developed or time spent in person hours or person weeks and billedto the customer as per the terms of specific contracts.

c. Fixed assets and depreciation

Fixed Assets are stated at original purchase less accumulated depreciation.

Depreciation is calculated using the straight line method over the estimated useful lives of the assets. The rate of depreciation is 25% forcomputer equipment which is higher than the rates specified under schedule XIV of the Companies Act, 1956.

d. Foreign currency transactions

The accounts are translated in Indian Rupees as follows :

● Share capital is retained at the initial contribution amount

● Revenue transactions are translated at the average rates.

● Current assets and current liabilities are translated at rates prevailing on the date of balance sheet.

● The resultant differences are accounted as exchange difference in the Profit & Loss Account.

e. Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the law ofincome tax in Germany.

3. Related Parties

The related parties with whom the Company had transactions during the year are:

Name Relationship

Larsen & Toubro Infotech Limited Holding Company

Larsen & Toubro Limited Holding Company of holding Company

The nature of significant related party transactions and the amounts involved are as under: Rupees

Larsen & Toubro Infotech Ltd. Larsen & Toubro Ltd.

Purchase of services 124,217,754 5,522,185(130,703,503) (3,788,703)

Sale of services 30,081,021 –(52,771,151) (–)

Trade payable 13,540,403 1,629,971(78,627,732) (3,634,530)

S-33



4. Balances with non-scheduled banks

Rupees

As at 31.3.06 Max. amount outstanding at any timeduring the year

Current account

Deutsche Bank 10,530,439 48,886,503

Dresdner Bank 1,496,299 1,738,624

5. The Company has not taken any asset on operating / finance lease.

6. Borrowing cost capitalised during the year : Rs. Nil

7. Auditors’ remuneration charged to the accounts amounted to Rs. 472,063 during the year (Rs. 480,760 in previous year)

8. The Company is mainly in the business of software development. This is not capable of being expressed in the form of generic units. Hence itis not possible to give quantitative details and information required under Paragraphs 3, 4c of part II of Schedule VI to the Companies Act, 1956.

10. Segmental reporting

Segmental reporting of revenues for the Company is on the basis of the geographical location of the customers and is as under:Rupees

Germany Rest of World Total

Revenue 229,536,180 15,416,747 244,952,927(313,243,262) (17,837,556) (331,080,818)

Fixed assets used and liabilities contracted for performing the Company’s business have not been identified to any of the above reportedsegments as the fixed assets and services are used interchangeably among segments.

11. Deferred tax is not accounted for as temporary timing differences are not material.

12. The Company is considered an integral part of operation of Larsen & Toubro Infotech Limited (the holding Company). In accordance withAccounting Standard – 11 (revised 2003) the exchange differences on translation are accounted in the profit and loss account.

S-34


13. Balance sheet abstract and Company’s general businss profile


Registration No. H R B 1 5 9 5 8 State Code No. N A





N I L N I L



3 7 6 8 8 3 7 6 8 8Sources of Funds


1 1 4 0 3 1 6 6 8


N I L 4 8 8 0Deferred Tax

N I L


2 1 4 N I L


3 7 4 7 4 N I L


2 4 8 3 3 1 2 4 2 3 4 7

Profit/Loss before Tax Profit/Loss after Tax

5 9 8 4 1 8 6 4

Earning per share Dividend Rate %

1 8 6 3 8 5 6 N I L

V. Generic Names of Principal Products/Services of Company (as per monetary terms)



Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accounts

+ –+

+ –+

+ –+








S-35

LARSEN & TOUBRO INFORMATION TECHNOLOGY CANADA LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting the report and the audited accounts of the Company for the period ended March 31, 2006.

January 1, 2005 to March 31, 2006Canadian Dollars Rupees

FINANCIAL RESULTSTotal Income 1,179,664 42,844,000Loss from operations 64,495 3,420,033REVIEW OF OPERATIONSConsequent to the acquisition of control of the Company on October 14, 2005 by Larsen & Toubro Infotech Limited, India, the Company registered totalincome of CAD 589,284 upto March 31, 2006. The Company is making investment in the sales and marketing efforts, which are expected to yield results inthe coming years.DIRECTORSMr.Sunil Pande and Mr.Alfred Page were appointed as directors of the Company.DIVIDENDIn view of the loss during the period, the Directors do not recommend dividend for the current period.AUDITORSM/s Sharp and Tannan, the Auditors of the Company have indicated their willingness and are eligible for reappointment.DISCLOSURE OF PARTICULARSAs per the Company, the Company being registered outside India, the disclosures required to be made in accordance with Companies (Disclosures ofParticulars in the Report of Board of Directors) Rules, 1988, are not relevant.PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees)Rules, 1975.DIRECTORS RESPONSIBILITY STATEMENTThe Board of Directors of the company confirm:i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;ii. that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and prudent so as

to give a true and fair view of the state of affairs of the company as at March 31, 2006 and losses of the company for the year ended on that date;iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the

Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;iv. that the annual accounts have been prepared on a going concern basis.


SUNIL PANDE ALFRED PAGEPlace : Toronto Director DirectorDate : May 3, 2006

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTo the members of Larsen & Toubro Information Technology Canada LimitedThe financial statements of Larsen & Toubro Information Technology Canada Limited for the year ended March 31, 2006, being a company registered inCanada, are audited by Kapadia & Company and we have been furnished with their audit report dated April 20, 2006.We are presented with the accounts in Indian Rupees prepared on the basis of the aforesaid accounts to comply with the requirements of Section 212 ofthe Companies Act, 1956. We give our report as under:We have audited the attached balance sheet of Larsen & Toubro Information Technology Canada Limited as at March 31, 2006 and the annexed profit andloss account and the cash flow statement of the Company for the year ended on that date, annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basisfor our opinion.In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that:(1) As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of India under sub-section (4A) of Section 227 of the

Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to theinformation and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

(2) Further to our comments in the Annexure referred to above, we report that:(a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our

audit;(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those

books;(c) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;(d) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards

referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; and(e) as regards reporting on the disqualification of directors under Section 274(1)(g) of the Indian Companies Act, 1956, since the Company is

registered in Canada, no reporting is required to be made under the said section.In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with thesignificant accounting policies in Schedule O and notes appearing thereon, give the information required by the Companies Act, 1956 in themanner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:1 in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;2 in the case of the profit and loss account, of the profit for the year ended on that date; and3 in the case of the cash flow statement, of the cash flows for the year ended on that date.


by the hand ofR D Kare

Place : Mumbai PartnerDate : May 3, 2006 Membership No. 8820

S-36



1 (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of all fixed asset.

(b) We are informed that the Company has physically verified the fixed assets during the year and no material discrepancies were noticed on suchverification. In our opinion, the frequency of such verification is reasonable.

c) Fixed assets disposed of during the year are not substantial in relation to the Company and do not affect the going concern.

2 The Company has no inventories and hence reporting under paragraphs 4(ii) (a), (b) and (c) is not applicable.

3 There are no loans, secured or unsecured, either granted to or taken from companies, firms or other parties. However, no register is required to bemaintained under Section 301 of the Companies Act, 1956 since the Company is incorporated and doing business only in Canada.

4 In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with thesize of the Company and the nature of its business for the purchase of fixed assets and for the sale of services. In our opinion and according to theinformation and explanations given to us, there is no continuing failure to correct major weaknesses in the aforesaid internal control procedures.

5 The Company is incorporated in Canada and accordingly, maintenance of records under Section 301 of the Companies Act, 1956 is not required.

6 The Company has not accepted deposits from the public.

7 We are of the opinion that the Company has an internal audit system commensurate with the size and the nature of its business.

8 Cost records are not required to be maintained under Section 209(1)(d) of the Companies Act, 1956 by the Company as it is incorporated in Canadaand is doing business outside India.

9 The Company being registered in Canada, has no statutory liabilities in India and accordingly reporting for paragraphs 4 (ix) (a) and (b) is not required.

10 The Company’s accumulated losses as at March 31, 2006 exceed fifty percent of its net worth and it has incurred cash losses in the current financialyear and in the immediately preceding financial year.

11 According to the information and explanations given by management, the Company has neither borrowed from a bank or financial institution nor hasit issued any debentures.

12 The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or other securities.

13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities.

15 According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financialinstitutions.

16 The Company has not availed any term loans during the year.

17 According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no fundsraised on short term basis have been used for long term investments.

18 The Company has not made any preferential allotment of shares to any party during the year.

19 The Company has not issued debentures during the period and accordingly, no security is required to be provided.

20 The Company has not raised any money by public issues during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on orby the Company, noticed or reported during the year, nor have we been informed of such case by management.


by the hand ofR D Kare

Place : Mumbai PartnerDate : May 3, 2006 Membership No. 8820

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Schedule CAD RUPEES CAD RUPEESSOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare Capital A 100 3,779 100 3,779

TOTAL 100 3,779 100 3,779

APPLICATION OF FUNDSFixed Assets BGross Block 22,458 786,616 18,705 647,380Less: Depreciation 13,410 469,802 11,128 385,140

Net Block 9,048 316,815 7,577 262,240

Current assets, loans and advancesSundry debtors C 395,517 15,173,021 18,377 663,088Cash and bank balances D 275,040 10,551,223 48,714 1,757,723Loans and advances E 100 3,836 13,939 502,954

670,657 25,728,080 81,030 2,923,765

Less: Current liabilities and provisionsLiabilities F 785,477 30,023,778 129,884 4,686,539

785,477 30,023,778 129,884 4,686,539

Net current assets (114,820) (4,295,697) (48,854) (1,762,774)

Profit & Loss Account 105,872 3,982,662 41,377 1,504,314

TOTAL 100 3,779 100 3,779

SIGNIFICANT ACCOUNTING POLICIES JAND NOTES TO ACCOUNTS

As per our report attachedSHARP & TANNANChartered Accountantsby the hand of SUNIL PANDE

DirectorsR D KARE ALFRED PAGEPartnerMembership No. 8820Place : Mumbai Place : TorontoDate : May 3, 2006 Date : May 3, 2006

}

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Profit & Loss Account for the period from January 1, 2005 toProfit & Loss Account for the period from January 1, 2005 toProfit & Loss Account for the period from January 1, 2005 toProfit & Loss Account for the period from January 1, 2005 toProfit & Loss Account for the period from January 1, 2005 toMarch 31, 2006March 31, 2006March 31, 2006March 31, 2006March 31, 2006

2005-06 2004Schedule CAD RUPEES CAD RUPEES

INCOME

Software development services and productsDomestic 1,180,431 43,793,990 405,642 14,039,269Other income G 213 7,902 19,142 662,505

1,180,644 43,801,892 424,784 14,701,774

EXPENDITURESoftware development expenses H 987,828 36,648,419 368,520 12,754,464Sales, administration and other expenses I 251,061 9,399,947 120,970 4,259,041

1,238,889 46,048,365 489,490 17,013,505Operating Profit / (Loss) (58,245) (2,246,473) (64,706) (2,311,730)Depreciation 2,282 84,662 2,586 89,501

Profit / (Loss) before tax (60,527) (2,331,135) (67,292) (2,401,232)Taxes on income 3,968 147,213 (11,842) (409,852)

Profit / (Loss) after tax (64,495) (2,478,348) (55,450) (1,991,380)Add: Balance brought forward from previous year (41,377) (1,504,314) 14,073 487,067

Balance carried to Balance Sheet (105,872) (3,982,662) (41,377) (1,504,314)

Number of equity share 100 100Basic and diluted earnings per share (EPS) (24,783) (19,914)

SIGNIFICANT ACCOUNTING POLICIES JAND NOTES TO ACCOUNTS



}

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Cash Flow Statement for the period ended March 31, 2006Cash Flow Statement for the period ended March 31, 2006Cash Flow Statement for the period ended March 31, 2006Cash Flow Statement for the period ended March 31, 2006Cash Flow Statement for the period ended March 31, 20062005-2006 2004

RUPEES RUPEES

A Cash flow from operating activities :Net profit before tax (2,331,135) (2,401,232)

Adjustments for :Depreciation and ammortisation 84,662 89,501Interest paid 31,646 16,094Interest received (7,902) (2,942)Unrealised foreign exchange difference - (14,761)Operating profit before working capital changes (2,222,729) (2,313,340)

Changes in working capital(Increase)/decrease in trade receivables (14,509,933) (139,206)(Increase)/decrease in other receivables 71,829 1,427,604Increase/(decrease) in trade payables 25,185,016 808,681(Increase)/decrease in working capital 10,746,911 2,097,079

Cash generated from operations 8,524,182 (216,261)Direct taxes paid 432,299 (64,010)Net cash from operating activities 8,956,481 (280,271)

B Cash flow from investing activities :Purchase of fixed assets (139,236) -Interest received 7,902 2,942Net cash from investing activities (131,334) 2,942

C Cash flow from financing activities :Financial expenses (31,646) (16,094)

Net cash from financing activities (31,646) (16,094)

Net (decrease)/increase in cash and cash equivalents (A+B+C) 8,793,500 (293,423)

Cash and cash equivalents at the beginning of the year 1,757,723 2,051,146Cash and cash equivalents at the end of the year 10,551,223 1,757,723

Notes:

1 Cash flow has been prepared under the indirect method as set out in the Accounting Standard - 3 issued by the Institute of Chartered Accountantsof India.

2 Previous year’s figures have been regrouped / reclassified wherever applicable.



}

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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsAs at 31-03-2006 As at 31-12-2004

CAD RUPEES CAD RUPEESSCHEDULE AShare CapitalAuthorised: Unlimited common shares of CAD 1 each 100 3,779 100 3,779

Issued, Subscribed and Paid up100 common shares of CAD 1 each 100 3,779 100 3,779All the above shares are held by Larsen &Toubro Infotech Ltd w.e.f 15th October, 2005

100 3,779 100 3,779

As at 31-03-2006 As at 31-12-2004CAD RUPEES CAD RUPEES

SCHEDULE CSundry DebtorsDebts outstanding for a period exceeding six monthsConsidered good 395,517 15,173,021 18,377 663,088Considered doubtful - - - -

395,517 15,173,021 18,377 663,088Other DebtsConsidered good - - - -Considered doubtful - - - -

395,517 15,173,021 18,377 663,088

SCHEDULE DCash and Bank balancesBalance with non-scheduled banks on current account 275,040 10,551,222 48,714 1,757,723

275,040 10,551,222 48,714 1,757,723

SCHEDULE ELoans and AdvancesUnsecured, considered goodIncome tax refund receivables - - 11,842 427,289Advances - - 1,997 72,057Prepaid expenses 100 3,836 100 3,608

100 3,836 13,939 502,954

SCHEDULE FLiabilitiesDue to holding company 693,809 26,507,164 - -Accounts payable 49,276 1,890,351 129,884 4,686,539Income Tax payable 3,968 152,222 - -Goods and Services Tax payable 22,603 867,108 - -Due to employees 3,260 125,062 - -Others 12,561 481,871 - -

785,477 30,023,778 129,884 4,686,539

SCHEDULE BFIXED ASSETS

Assets Currency Gross Block Depreciation Net Block

Cost as at Additions Disposals Cost as at As at For the On As at As at As at01-01-05 during 31-03-06 01-01-05 period disposal 31-03-06 31-03-06 31-12-04

the period

Computer RUPEES 424,769 139,236 - 564,005 290,759 51,680 - 342,439 221,566 134,010Equipment CAD 12,273 3,753 - 16,026 8,401 1,393 - 9,794 6,232 3,872

Furniture RUPEES 222,612 - - 222,612 94,381 32,982 - 127,363 95,248 128,230Equipment CAD 6,432 - - 6,432 2,727 889 - 3,616 2,816 3,705

RUPEES 647,380 139,236 - 786,616 385,140 84,662 - 469,802 316,814 262,240CAD 18,705 3,753 - 22,458 11,128 2,282 - 13,410 9,048 7,577

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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accounts2005-06 2004

CAD RUPEES CAD RUPEESSCHEDULE GOther IncomeInterest income 213 7,902 85 2,942Miscellaneous income - - 3,750 129,788Currency exchange income - - 15,307 529,775

213 7,902 19,142 662,505

SCHEDULE HSoftware development services and productsSalaries including overseas staff expenses 45,875 1,701,963 36,185 1,252,350Software development services 941,953 34,946,456 332,335 11,502,114

987,828 36,648,419 368,520 12,754,464

SCHEDULE ISales, administration and other expensesTravelling charges and conveyance 21,057 781,215 16,179 559,955Car expenditures 9,632 357,347 - -Rent 35,396 1,313,192 41,892 1,449,896Telephone charges 8,362 310,230 7,568 261,928Courier & Postage - - 639 22,101Management and Consulting Fees 133,599 4,956,523 37,125 1,284,896Legal and professional charges 16,307 604,990 4,025 139,305Conference and membership fees - - 5,987 207,210Printing and stationery 4,555 168,991 1,538 53,230Equipment Rentals 1,414 52,459 264 9,137Insurance charges 5,732 212,657 2,773 95,974Auditor’s remuneration 8,518 316,018 - -Entertainment 2,975 110,373 2,116 73,235Interest 853 31,646 465 16,094Education and training 1,681 62,365 - -Currency exchange loss 980 36,358 - -Exchange loss on translation - 85,584 - 72,270Others - - 399 13,809

251,061 9,399,947 120,970 4,259,041

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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSCHEDULE J

1. Legal Status

Larsen & Toubro Information Technology Canada Ltd. is incorporated under the provisional business corporations acts and is engaged in the businessof software development services. During the period it has been acquired by Larsen & Toubro Infotech Limited which is a company incorporated inIndia.

2. Significant Accounting Policies


The accounts have been prepared using the historical cost convention in accordance with Generally Accepted Accounting Principles (“GAAP”)and in compliance with the Accounting Standards referred to in Section 211(3C) and other requirements of the Companies Act, 1956.

The preparation of financial statements in confirmity with GAAP requires the management of the Company to make estimates andassumptions that affect the income and expense reported for the period and assets and liabilities reported as of the date of the financialstatements. Actual results could vary from these estimates.

b. Revenue recognition

Revenue from software development is recognised based on software developed or time spent in person hours or person weeks and billed tothe customer as per the terms of specific contracts.

c. Fixed assets and depreciation

Fixed Assets are stated at original purchase less accumulated depreciation.

Depreciation is calculated using the declining balance method. The rate of depreciation is 30% for computer equipment and 20% for furniturewhich is higher than the rates specified under Schedule XIV of the Companies Act, 1956.

d. Foreign currency transactionsThe accounts are translated in Indian Rupees as follows :• Share capital has been translated on the acquisition date and is retained at that amount.• Revenue transactions are translated at the average rates.• Current assets and current liabilities are translated at rates prevailing on the date of balance sheet.• The resultant differences are accounted as exchange difference in the Profit & Loss Account.

3. Related Parties

The related parties with whom the Company had transactions during the year are:

Name Relationship

Larsen & Toubro Infotech Limited Holding company

Larsen & Toubro Limited Holding company of holding company

The nature of significant related party transactions and the amounts involved are as under:Rs.

Larsen & Toubro Infotech Ltd. Larsen & Toubro Ltd.

Purchase of services 2,171,332 17,358,346

Trade payable 6,539,096 19,968,068

4. Balances with non-scheduled banksRs.

As at 31.3.06 Max. amount outstanding atany time during the year

Current account 10,551,223 18,680,702

5. Deferred tax asset has not been accounted on grounds of prudence.

6. The Company has not taken any asset on operating / finance lease.

7. Borrowing cost capitalised during the period : Rs. Nil

8 Auditor’s remuneration charged to the accounts amounted to Rs. 316,018 during the period.

9. There are no transactions with small-scale industries during the period.

10. The Company is mainly in the business of software development. This is not capable of being expressed in the form of generic units. Hence it isnot possible to give quantitative details and information required under Paragraphs 3, 4c of part II of Schedule VI to the Companies Act, 1956.

11. Segmental reportingThe company operates wholly in Canada.

Fixed assets used and liabilities contracted for performing the Company’s business have not been identified to any segment as the fixed assets andservices are used interchangeably among segments.

12. Figures for the previous year are not comparable as the current period is for fifteen months against twelve months of last year.

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13. Balance Sheet abstract and Company’s general business profile

I Registration Details

Registration No. 0 1 4 1 5 0 2 6 State Code N A

Balance Sheet Date 3 1 0 3 0 6

II Capital Raised during the year (Amount in Rs. Thousands)

Public Issue Rights Issue

Bonus Issue Private Placement

III Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands)


4 4

Sources of Funds

Paid-up Capital + - Reserves & Surplus

4 - 3 9 8 3


0 0

+ - Deferred Tax

+

Application of Funds

Net Fixed Assets Investments

3 1 7 0

Net Current Assets Misc. Expenditure

- 4 2 9 6 0

IV Performance of Company (Amount in Rs. Thousands)

Turnover (including other income) Total Expenditure

4 3 8 0 2 4 6 1 3 3

+ - Profit/Loss Before Tax + - Profit/Loss After Tax

- 2 3 3 1 - 2 4 7 8

Please tick Appropriate box + for Profit, - for Loss

+ - Earnings Per Share Dividend Rate %

- 2 4 7 8 3 N I L

V Generic Names of Principal Products/Services of the Company(as per monetary items)

Item Code No. N A

(ITC Code)




}


N I L N I L

N I L N I L

N I L

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SPECTRUM INFOTECH PVT. LTD.


The Directors have pleasure in presenting their Annual Report and Accounts for the year ended March 31, 2006.

1. FINANCIAL RESULTS

2005-2006 2004-2005Rs. Lacs Rs. Lacs

Sales and Service Income 477.85 312.75

Profit before Depreciation and Tax 83.19 34.55

Less: Depreciation & obsolescence 8.79 9.51

Profit before Tax 74.41 25.04

Provision for Tax 28.84 8.88

Profit after Tax 45.57 16.16

Balance brought forward from previous years 181.11 164.95

Deferred Tax Liability 1.20 -

Profit available for appropriation 225.48 181.11

Less: Transfer to General Reserve 22.55 -

Profit available for Distribution 202.93 181.11

Interim Dividend 35.20 -

Dividend Distribution Tax 4.94 -

Balance Carried to Balance Sheet 162.80 181.11

2. YEAR IN RETROSPECT

Sales and Servicing Income registered an increase of 46% (up from Rs. 312.75 Lakhs in 2004-05 to Rs. 456.16 Lakhs in 2005-06).Profit before Tax for the same period improved by 211%.

3. CHANGE IN OWNERSHIP

Consequent to the purchase of all of the 4,40,000 equity shares of the Company by Larsen & Toubro Limited on March 27, 2006,Spectrum Infotech Private Limited has become a wholly owned subsidiary of Larsen & Toubro Limited.

4. DIVIDEND

The Company paid an interim dividend of 80% (Rs. 8 per share - each of Face Value Rs. 10) during the year.

5. CAPITAL EXPENDITURE

During the period under review, the Company did not incur any capital expenditure.

6. SUBSIDIARY COMPANIES

The Company has no Subsidiary companies.

7. AUDITORS’ REPORT

The Auditors’ Report to the Shareholders does not contain any qualifications.

8. DISCLOSURE OF PARTICULARS

Information as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 relating to conservationof energy, technology absorption, foreign exchange earnings and outgo is given as follows -

– The Consumption of electricity by the Company for its operation is insignificant and negligible. Consequently reporting requirementas contemplated in Section 217 (1) (e) of the Companies Act is not considered necessary.

– In view of the nature of the business of the Company, the reporting requirement relating to the technology absorption contemplatedin Section 217 (7) (e) of the Companies Act is not applicable to this Company.

9. DIRECTORS’ RESPONSIBILITY STATEMENT


i. that in the preparation of Annual Accounts, the applicable Accounting Standards have been followed and there has been nomaterial departure;

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ii. that the selected Accounting policies were applied consistently and the Directors made judgments and estimates that are reasonableand prudent as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profits of theCompany for the year ended on that date;

iii. that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance withthe provisions of the Companies Act,1956 for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; and


10. DIRECTORS

During the year under review, Capt. S. Prabhala, Mr. J.I. Devadatta, Mr. A.J. Paulraj and Mr. A. Chockalingam resigned as Directorsof the Company.

Mr. J.D. Patil, Mr. H.N.L.N. Simha and Mr. S.A. Gune were appointed as Directors in the casual vacancy caused by the resignationof Mr. Devadatta, Mr. Paulraj and Mr. Chockalingam respectively.

Mr. S.A. Gune is liable to retire by rotation and is eligible of re-appointment.

11. AUDITORS

The Auditors M/s Eesh and Company retire at the Annual General Meeting and are eligible to be reappointed.

12. ACKNOWLEDGEMENT

The Board of Directors thank the previous Management of this Company for their contribution in developing the Company, theemployees who are instrumental in Research & Development and also the Banks, Central and State Government authorities and allthe stakeholders for their continued cooperation and support to the Company.


H.N.L.N. SIMHA J.D. PATIL SATISH A. GUNEDirector Director Director

Place: BangaloreDate: April 29, 2006

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE SHARE HOLDERS SPECTRUM INFOTECH PRIVATE LIMITED

1. We have audited the attached Balance Sheet of SPECTRUM INFOTECH PRIVATE LIMITED, BANGALORE as at March 31, 2006and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of subsection (4A)of section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5of the said Order.

4. We report that :

i. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for thepurpose of our audit.

ii. In our opinion, proper books of account as required by law have been kept by the Company, so far as it appears from ourexamination of those books.

iii. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of accounts.

iv. In our opinion, the Profit and Loss Account and the Balance Sheet dealt with by this report comply with the accounting standardsreferred to in sub-section (3C) of section 211 of the Companies Act, 1956.

v. As per the information received from the directors, we further report that none of the directors is disqualified as on March 31, 2006from being appointed as a director under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

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vi. In our opinion and to the best of our information and according to the explanations given to us, the accounts read together withnotes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair viewin conformity with the accounting principles generally accepted in India:

a. in the case of Balance Sheet, of the affairs of the Company as at March 31, 2006 and

b. in the case of Profit and Loss Account, of the Profit for the year ended on that date.

c. in the case of Cash Flow Statement, of the Cashflow for the year ended on that date.

For EESH & COChartered Accountants

By the hand of

K.G. SATHISHPlace: Bangalore ProprietorDate: April 29, 2006 Membership No.20011

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportSTATEMENT REFERRED TO IN PARAGRAPH 3 OF OUR AUDIT REPORT OF EVEN DATE

As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India under section 227(4A) of theCompanies Act, 1956, we further report that :

1. a) The Company has maintained proper records showing full particulars including quantitative details and situation of the fixed assets.

b) As per the information and explanations given to us the fixed assets have been physically verified by the management at the endof the year which in our opinion is reasonable, having regard to the size of the Company and nature of the assets. No discrepancieswere found out on such verification.

c) No substantial part of the fixed assets has been disposed off during the year so as to affect the going concern status.

2. a) As explained to us, the inventories have been physically verified by the management at the end of the year. In our opinion thefrequency of such verification is reasonable having regard to the size of the Company and the nature of its business.

b) In our opinion and according to the information and explanations given to us, the procedure for physical verification of inventoriesfollowed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) No material discrepancies have been noticed on such physical verification of stocks as compared to book records.

3. As informed to us, the Company has neither granted nor taken any loan from companies, firms or other parties listed in the registermaintained under section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control procedurecommensurate with the size of the Company and the nature of its business for purchase of inventory and fixed assets and for the saleof goods. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct majorweaknesses in internal control.

5. As explained to us there has not been any transaction exceeding Rs 5,00,000 during the year in respect of any party that need to beentered in the register maintained under section 301 of the Companies Act, 1956.

6. The Company has not accepted any deposit from public, and hence the requirement of item (6) of paragraph 4 of the Order is notapplicable to the Company.

7. In our opinion, the internal audit system is commensurate with the size of the Company and the nature of its business.

8. As explained to us, the maintenance of cost records has not been prescribed by the Central Government under section 209(1)(d) ofthe Companies Act, 1956, for the products of the Company.

9. According to the information and explanations given to us, there are no undisputed amounts payable in respect of Provident Fund,Employees State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any otherstatutory dues which are outstanding as at March 31, 2006 for a period of more than six months from the date they became payable.

10. There is no accumulated loss at the end of the financial year, and hence the requirement of item (10) of paragraph 4 of the Order isnot applicable to the Company.

11. According to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions.

12. According to the information and explanations given to us, the Company has not granted any loans on the basis of security by wayof pledge of shares, debentures and other securities, and hence the requirement of item (12) of paragraph 4 of the Order is notapplicable to the Company.

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13. The Company is not a Chit Fund, Nidhi or Mutual Benefit Society, and hence the requirement of item (13) of paragraph 4 of the Orderis not applicable to the Company.

14. The Company is not trading in shares, securities, debentures and other investments, and hence the requirement of item (14) ofparagraph 4 of the Order is not applicable to the Company.

15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others.

16. The Company has not taken any term loan, and hence the requirement of item (16) of paragraph 4 of the Order is not applicable tothe Company.

17. The Company has not raised any short term or long term funds, and hence the requirement of item (17) of paragraph 4 of the Orderis not applicable to the Company.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained undersection 301 of the Companies Act, 1956 during the year.

19. The Company has not issued any debentures, and hence the requirement of item (19) of paragraph 4 of the Order is not applicableto the Company.

20. The Company has not raised money by public issues, and hence the requirement of item (20) of paragraph 4 of the Order is notapplicable to the Company.

21. According to the information and explanations given to us, we have neither come across any instances of material fraud on or by theCompany, noticed or reported during the year, nor have we been informed of such case by management.

For EESH & COChartered Accountants

By the hand of

K.G. SATHISHPlace: Bangalore ProprietorDate: April 29, 2006 Membership No.20011

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Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006As at 31.3.2006 As at 31.3.2005

Schedules Rupees Rupees

SOURCES OF FUNDS

Shareholders’ fundsShare capital A 4,400,000 4,363,000Reserves and surplus B 18,684,398 18,261,201

23,084,398 22,624,201Loan funds

Secured loans C 75,167 362,036Unsecured loans D 5,100,000 1,100,000

5,175,167 1,462,036

Total 28,259,565 24,086,237

APPLICATION OF FUNDSFixed assets E

Gross block 9,236,087 10,078,830Less: Depreciation 7,035,869 7,029,332

Net block 2,200,218 3,049,498Deferred tax asset 5,424 –––––Current assets, loans and advances

Inventories 11,299,000 30,265,000Sundry Debtors F 12,568,470 8,166,525Cash and bank balances G 7,374,018 10,183,518Loans and advances H 3,697,125 4,087,619

34,938,613 52,702,662

Current liabilities and provisionsCurrent liabilities I 5,249,824 30,805,138Provisions J 3,634,866 860,785

8,884,690 31,665,923

NET CURRENT ASSETS 26,053,923 21,036,739

Total 28,259,565 24,086,237

Contingent liabilities Nil Nil

Significant Accounting Policies P

As per our report attached H.N.L.N. SimhaEESH & CoChartered Accountants J.D. Patil

By the hand of Satish A. GuneK.G. SATHISHProprietor DirectorsMembership No. 20011

Place: Bangalore Place: BangaloreDate: April 29, 2006 Date: April 29, 2006

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Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006

As at 31.3.2006 As at 31.3.2005Schedules Rupees Rupees

IncomeResearch & development charges K 46,664,231 30,984,005Other income L 1,120,965 291,462

47,785,196 31,275,467

ExpenditureMaterials and Operating expenses M 12,239,271 6,662,236Staff expenses N 19,378,057 14,635,027Sales, Administration and other expenses O 7,848,465 6,523,102Depreciation and obsolescence 878,695 950,698

40,344,488 28,771,063

Profit before tax 7,440,708 2,504,404

Provision for taxProvision for current taxes (including FBT) 3,009,255 888,327Provision for deferred tax (125,163) –

2,884,092 888,327

Profit after tax 4,556,616 1,616,077

Balance brought forward from previous years 18,111,201 16,495,124Less: Deferred tax liability as at April 1, 2005 119,739 –

17,991,462 16,495,124

Profit available for appropriation 22,548,078 18,111,201Less: Transferred to:

General Reserve 2,254,808 –

Profit available for distribution 20,293,270 18,111,201

Interim dividend 3,520,000 –Dividend Distribution tax 493,680 –

Balance carried to Balance sheet 16,279,590 18,111,201

Basic and Diluted Earnings per equity share [See note 5.] 10.42 3.71Face value per equity share 10.00 10.00Significant Accounting Policies P




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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006

Year ended Year ended31-3-2006 31-3-2005

Rs. Rs.

A. Cash flow from Operating Activities:Net Profit before tax (after extraordinary item) 7,440,708 2,504,404Adjustments for :Depreciation (including obsolescence), amortisation and impairment 878,695 950,698Preliminery expenses written off in books – 5,332Interest (net) (140,526) (290,543)(Profit) / Loss on sale of fixed assets (net) 67,029 –(Profit) / Loss on sale of investments (net) – 117,118Provision / (Reversal) for diminution in value of investments – –

Operating profit before working capital changes 8,245,906 3,287,009Adjustments for :(Increase)/ Decrease in trade and other receivables (3,832,601) (6,964,338)(Increase)/ Decrease in inventories 18,966,000 (1,812,000)(Increase)/ Decrease in miscellaneous expenditure – –Increase / (Decrease) in trade payables (25,019,345) 11,138,936

Cash generated from operations (1,640,040) 5,649,607Direct taxes refund/(paid)- net (1,126,000)

Net Cash from Operating Activities (2,766,040) 5,649,607

B. Cash flow from Investing Activities:Purchase of fixed assets (121,444) (696,473)Sale of fixed assets (Including monies received as advance) 25,000 67,713Sale of investments – 2,207Interest received 346,348 358,990

Net Cash (used in)/ from Investing Activities 249,904 (267,563)

C. Cash flow from Financing Activities:Proceeds from issue of share capital 37,000 90,000Repayment of long term borrowings (286,869) (1,517,620)Interim dividend paid (3,520,000) –Additional tax on dividend (493,680) –Loans (to) / from subsidiaries / associates (net) 4,000,000 –Interest paid (29,815) (68,447)

Net Cash (used in)/ from Financing Activities (293,364) (1,496,067)

Net (decrease) / increase in cash and cash equivalents (A + B + C) (2,809,500) 3,885,977

Cash and cash equivalents at beginning of the period 10,183,518 6,297,541

Cash and cash equivalents at end of the period 7,374,018 10,183,518

Notes1. Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS) 3 Cash Flow Statements

issued by the Institute of Chartered Accountants of India.2. Previous year’s figures have been regrouped / reclassified wherever applicable.




S-51



As at 31.3.2006 As at 31.3.2005

Rupees Rupees Rupees RupeesSCHEDULE A

Share CapitalAuthorised:6,00,000 (previous year 6,00,000) Equity shares of Rs. 10 each 6,000,000 6,000,000

Issued, subscribed and paid–up:4,40,000 (previous year 4,36,300) Equity shares of Rs. 10 each 4,400,000 4,363,000(All the shares are held by Larsen & Toubro Limited, the holding Company)

4,400,000 4,363,000

SCHEDULE B

Reserves and SurplusGeneral ReserveAs per last balance sheet – –Add: Transferred from profit and loss account 2,254,808 –

2,254,808 –Securities premium 150,000 150,000Profit and loss account 16,279,590 18,111,201

18,684,398 18,261,201

SCHEDULE C

Secured loans — —Other loans 75,167 362,036

75,167 362,036

SCHEDULE D

Unsecured loansLoans and advances from fellow subsidiary

Inter-corporate borrowing from L&T Finance Limited 4,000,000 –Short-term loans and advances

Advance from a Director – 1,100,000Advance from others 1,100,000 –

5,100,000 1,100,000

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Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)

SCHEDULE E

Fixed Assets as at March 31, 2006

Cost / Valuation Depreciation Book Value

Particulars As at Additions Sales Obsolescence As at As at Adjustment Adjustment for Provision As at As at As at1-4-2005 31-3-2006 1-4-2005 for sales Obsolescence for the year 31-3-2006 01-04-2005 31-03-2006

translationreserve

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Plant and Machinery

General Plant andMachinery 241,050 – – – 241,050 90,813 – – 20,898 111,711 150,237 129,339

Computers,Accessories andNetworking 4,357,215 97,200 – 506,850 3,947,565 3,581,504 – 477,594 344,385 3,448,295 775,711 499,270

Software 757,175 – – 48,500 708,675 447,889 – 25,873 114,664 536,680 309,286 171,995

Electricalequipment andfittings 467,756 – – – 467,756 259,309 – – 28,994 288,303 208,447 179,453

Office Equipment 359,652 – – – 359,652 115,499 – – 33,962 149,461 244,153 210,191

Air Conditioner 48,500 – – – 48,500 24,947 – – 3,276 28,223 23,553 20,277

Test Equipment 442,758 19,894 – – 462,652 194,295 – – 40,760 235,055 248,463 227,597

Furniture andFixtures

Furniture andFixtures – General 1,240,026 4,350 – – 1,244,376 727,038 – – 93,179 820,217 512,988 424,159

Vehicles

Motor Cars 2,164,698 – 408,837 – 1,755,861 1,588,038 316,808 – 146,694 1,417,924 576,660 337,937

Total 10,078,830 121,444 408,837 555,350 9,236,087 7,029,332 316,808 503,467 826,812 7,035,869 3,049,498 2,200,218

Previous year asat March 31, 2005 9,479,257 696,473 96,900 – 10,078,830 6,107,821 29,187 – 950,698 7,029,332 3,371,436 3,049,498

As at 31.3.2006 As at 31.3.2005

Rupees Rupees Rupees RupeesSCHEDULE F

Sundry DebtorsUnsecuredDebts outstanding for more than six months, considered good 87,600 229,651Other debts, considered good 12,480,870 7,936,874

12,568,470 8,166,525

SCHEDULE G

Cash and bank balancesCash on hand 2,350 3,118Balances with scheduled banks on current accounts 2,948,117 1,545,472 on fixed deposits – 3,000,000 on margin money deposit accounts 4,423,551 5,634,928

7,371,668 10,180,400

7,374,018 10,183,518

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As at 31.3.2006 As at 31.3.2005

Rupees Rupees Rupees RupeesSCHEDULE H

Loans and advancesAdvances to suppliers 404,313 387,500Deposits paid 1,020,000 1,020,000Interest receivable on margin money 226,168 312,533Advance payment of income–tax 1,126,000 –Advance to employees – 15,000Tax deducted at source receivable 920,644 2,220,933Prepaid expenses – 131,653

3,697,125 4,087,619

SCHEDULE I

Current liabilitiesSundry Creditors:

Due to others 2,398,474 1,257,388 Advances from customers 2,851,350 29,547,750

5,249,824 30,805,138

SCHEDULE J

ProvisionsCorporate income tax (including FBT) 3,009,255 860,785Leave encashment 625,611 –

3,634,866 860,785

SCHEDULE K

Research and Development chargesDomestic research and development charges 66,059,551 29,594,317Overseas research and development charges – 408,017

66,059,551 30,002,334Less: Excise Duty 429,320 830,329

65,630,231 29,172,005

Increase / (Decrease) in project inventoriesClosing stock of work-in-progress 11,299,000 30,265,000Opening stock of work-in-progress 30,265,000 28,453,000

(18,966,000) 1,812,000

46,664,231 30,984,005

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As at 31.3.2006 As at 31.3.2005

Rupees Rupees Rupees RupeesSCHEDULE L

Other incomeInterest incomeInterest on bank deposits 80,317 358,990(tax deducted at source Rs. 64,766; previous year Rs. 60,704)Interest on income–tax refund 179,666 –

259,983 358,990

Interest expenseInterest on other loans 29,815 68,447Interest on delayed payment of income–tax 89,642 –

119,457 68,447

140,526 290,543Miscellaneous income [See Note 2.] 980,439 919

1,120,965 291,462

SCHEDULE M

Materials and Operating ExpensesPurchase of Materials and consumables for projects 12,205,204 6,475,169Other consumables and supplies 34,067 187,067

12,239,271 6,662,236

SCHEDULE N

Staff ExpensesSalaries and wages 16,398,851 12,276,444Contribution to and provision for– Provident fund 550,755 463,172– Gratuity fund 401,586 519,006– Superannuation 796,065 749,709– Leave encashment 625,611 –

2,374,017 1,731,887Staff welfare and other expenses 605,189 626,696

19,378,057 14,635,027

SCHEDULE O

Sales, Administration and other expensesRent 1,348,944 1,426,944Rates and taxes 118,023 372,441Travelling and conveyance 928,520 1,038,126Directors’ fees 1,500 500Power and fuel 339,241 282,150Telephone, postage and telegrams 378,571 539,590Advertising and sales promotion 282,270 82,251Stationery and printing 188,619 166,215Insurance 41,208 41,317Bank and guarantee charges 525,717 898,572General repairs and maintenance 653,784 382,180(Profit) / Loss on sale of fixed assets 67,029 –Consultation fees 2,541,693 618,496Miscellaneous expenses 433,346 674,320

7,848,465 6,523,102

S-55



SCHEDULE P

Significant Accounting Policies

1. Basis of accounting

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally acceptedaccounting principles and in compliance with the Accounting Standards referred to in Section 211(3C) and other requirements of theCompanies Act, 1956.

2. Revenue Recognition

i. Research and development charges include excise duty and adjustment for liquidated damages.

ii. Revenue from research and development activity is recognised as per the terms of contracts, based on acceptance by clients oncompletion of contracts undertaken by the Company, or milestones thereof.

3. Retirement benefits

Provisions for / contributions to retirement benefit schemes are made as follows:

i. Provident fund on actual liability basis.

ii. Payments made to Gratuity fund under Group gratuity scheme of the Life Insurance Corporation of India (LIC) and paymentsmade to Superannuation fund under Group Superannuation scheme of the LIC on actuarial valuation, on the basis of premiumdetermined and intimated by LIC.

iii. Leave encashment on actual liabililty basis.

4. Fixed assets

Fixed assets are stated at original cost net of tax/ duty credits availed, if any, less accumulated depreciation.

5. Depreciation

Depreciation is provided on written down value basis at the rates prescribed under Schedule XIV to the Companies Act, 1956.

6. Foreign currency transactions

Foreign currency transactions are recorded on initial recognition using the exchange rate at the date of the transaction. At eachbalance sheet date, foreign currency monetary items are reported using the closing rate. Exchange differences that arise on settlementof monetary items or on reporting at each balance sheet date of the monetary items at the closing rate are recognised as income orexpense in the period in which they arise.

7. Taxes on income

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with theprovisions of the Income-tax Act, 1961. Deferred tax is recognised on timing differences between the accounting income and thetaxable income for the year, and quantified using the tax rates and laws enacted as at balance sheet date. Deferred tax assets arerecognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be availableagainst which such deferred tax assets can be realised.

S-56


Notes forming Part of AccountsNotes forming Part of AccountsNotes forming Part of AccountsNotes forming Part of AccountsNotes forming Part of Accounts

1. Research and development charges [Schedule K] includes Rs. 1,43,250 for liquidated damages in terms of contracts with customers.

2. Miscellaneous income [Schedule L] includes Rs. 9,36,000 being recovery of a debt written off in earlier years.

3. Segment reporting

i. Primary segment (Business segment)

The Company operates in only one segment, research and development.

ii. Secondary segments (Geographical segments)Rupees

Particulars Domestic Overseas TotalExternal revenue by location of customers CY 46,664,231 – 46,664,231

PY 30,575,988 408,017 30,984,005

Carrying amount of segment assets by location CY 37,144,255 - 37,144,255

of assets PY 55,752,160 - 55,752,160

Cost incurred for acquisition of fixed assets CY 121,444 - 121,444

PY 696,473 - 696,473

4. Disclosure of related parties / related party transactions

i. List of related parties over which control exists

Holding CompanyLarsen & Toubro Limited

Fellow subsidiary CompaniesTractor Engineers Limited L&T Power Investments Private Limited

L&T Finance Limited Raykal Aluminum Company Private Limited

L&T Capital Company Limited Cyberpark Development & Construction Limited

Larsen & Toubro Infotech Limited L&T-Sargent & Lundy Limited

Larsen & Toubro Infotech GmbH, Germany Larsen & Toubro Qatar LLC

L&T Transportation Infrastructure Limited L&T Overseas Projects Nigeria Limited

HPL Cogeneration Limited L&T Infocity Infrastructure Limited

Narmada Infrastructure Construction Enterprise Ltd Larsen & Toubro Electromech LLC

L&T Western India Tollbridge Limited L&T Infocity Lanka Private Limited

India Infrastructure Developers Limited L&T (WUXI) Electric Company Limited

Larsen & Toubro LLC, USA International Seaports Pte. Ltd. Singapore

Larsen & Toubro International FZE, Sharjah International Seaports (India) Pvt. Ltd.

L&T Infrastructure Development Projects Ltd L&T Panipat Elevated Corridor Pvt Ltd

L&T Infocity Limited L&T Tech Park Ltd

Hyderabad International Trade Exposition Centre Limited L&T Krishnagiri Thopur Toll Road Private Limited

Andhra Pradesh Expositions Private Limited L&T Western Andhra Tollways Private Limited

L&T -ECC Construction (M) SDN. BHD. Malaysia L&T Vadodara Bharuch Tollway Limited

Bhilai Power Supply Company Limited L&T Interstate Road Corridor Ltd.

Larsen & Toubro (Oman) LLC L&T Urban Infrastructure Limited

ii. Disclosure of related party transactions

During the year, the Company has taken an Inter-corporate borrowing of Rs. 40,00,000 from L&T Finance Limited, a fellowsubsidiary.

There are no other transactions with any other related parties during the year or in any previous year.

5. Earnings per share

Rupees

2005-2006 2004-2005

Profit after tax as per accounts (Rupees) A 4,556,616 1,616,077

Number of shares subscribed B 437,334 435,905Basic and Diluted Earnings per equity share (Rupees) A / B 10.42 3.71

S-57



6. Deferred tax asset and liability

i. The Company has in the current year determined deferred tax asset / liability as at March 31, 2006 for all previous years. Anamount of Rs.119,739 being deferred tax liability pertaining to previous years has been charged to the opening balance of profitand loss account on such determination.

ii. Major components of deferred tax liability

As at 31.3.2006 As at 31.3.2005

Deferred Deferred Deferred DeferredTax Tax Tax Tax

Particulars Asset Liability Asset Liability

Difference between book depreciation and tax depreciation 5,424 119,739

Total 5,424 119,739

Net deferred tax asset / liability 5,424 119,739

Incremental deferred tax asset credited to profit

and loss account of the current year 125,163Deferred tax liability charged to opening balance of

profit and loss account (119,739)

7. Auditor remuneration (excluding service tax)

2005-2006 2004-2005Rupees Rupees

Audit fees 27,500 17,500Tax audit fees 12,500 12,500

8. Value of imports on CIF basis

Components and spare parts 7,921,258 3,462,515

9. Expenditure in foreign currency

Consultation fees 77,475 -

10. Earnings in foreign currency

Research and development charges - 408,017

11. Details of materials purchased, consumed, capacities and production

The Company is engaged in the business of research and development and hence production and sales are not capable of

being expressed in any generic unit.

12. Figures for the previous year have been regrouped / reclassified wherever necessary.

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13. Balance sheet abstract and Company’s general business profile


Registration No. 0 1 8 1 1 2 State Code No. 0 8


II. Capital raised during the year (Amount in Rupees)



N I L 3 7 0 0 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rupees)Total Liabilities Total Assets

3 7 1 4 4 2 5 5 3 7 1 4 4 2 5 5Sources of Funds


4 4 0 0 0 0 0 1 8 6 8 4 3 9 8

Secured loans Unsecured Loans

7 5 1 6 7 5 1 0 0 0 0 0Application of Funds


2 2 0 0 2 1 8 N I L

Net Current Assets Deferred Tax

2 6 0 5 3 9 2 3 ( + ) 5 4 2 4

Miscellaneous expenditure Accumulated losses

N I L N I L

IV. Performance of Company (Rupees)Turnover (including other income) Total Expenditure

4 7 7 8 5 1 9 6 4 0 3 4 4 4 8 8

+ - Profit/Loss before Tax + - Profit/Loss after Tax

✓ 7 4 4 0 7 0 8 ✓ 4 5 5 6 6 1 6

Basic earning per share Rs. Dividend Rate %

R s 1 0 . 4 2 8 0

V. Generic Names of three Principal Products/Services of the Company(as per monetary terms)

Item Code No. N A

Product R E S E A R C H A N D D E V E L O P M E N TDescription

Signatures to Schedules A to P and Notes


By the hand of Satish A. GuneK G SATHISHProprietor DirectorsMembership No. 20011


S-59

L&T FINANCE LTD.

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their Report and Accounts for the year ended 31st March, 2006.


Year ended Year ended31.03.2006 31.03.2005

Rs. Cr. Rs. Cr.

Gross Income 149.06 110.05


Provision for Tax & Fringe Benefit Tax 7.72 2.08

Profit after Tax 35.13 24.03

Add: Balance brought forward from previous years 2.96 2.04

Balance available for appropriations 38.09 26.07

Appropriations:

Reserve u/s 451C of RBI Act, 1934 7.10 4.81

Debenture Redemption Reserve — (1.50)

General Reserve - 1 11.00 —

General Reserve - 2 16.00 10.00

Interim Dividend — 4.33

Tax on Dividend — 0.57

Final Dividend — 4.33

Tax on Dividend — 0.57

Surplus c/f to Balance Sheet 3.99 2.96

2. DIVIDEND

The Directors do not recommend any Dividend for the year. It is thought prudent to plough back profits considering the large businessexpansion plans.

3. PERFORMANCE OF THE COMPANY

The last twelve months witnessed stable economic growth in most countries. On the domestic front, there was a marked improvementin several key segments of the economy. This upturn was reflected in a strong credit off take and buoyant capital markets.

The Company registered significant growth in disbursements across all its business segments. The Company is confident of continuingto show growth in its operations during the coming years.

4. RESOURCES

The holding company - Larsen & Toubro Limited, has subscribed to 1,25,00,000 equity shares of Rs.10/- each, at a premium of Rs.30/- per share. This resulted in increase of equity capital by Rs. 12.5 cr. and share premium of Rs. 37.50 cr.

During the year under review the Company has borrowed on different instruments from various sources for varying tenors aggregatingRs. 4036.42 cr. During the year, loans aggregating Rs. 3624.00 cr. were repaid on respective due dates. The quantum of long-termloans raised during the year is Rs. 486.68 cr.

5. DEPOSITS

The Company has repaid all the fixed deposits during the year. However, there are 164 nos. deposits totalling Rs. 0.16 cr. are due forrepayment, which were unclaimed by depositors. The company has sent reminders / intimations to depositors for these unclaimeddeposits.

6. SUBSIDIARY COMPANY

As required u/s 212 of the Companies Act, 1956, the Audited Statement of Accounts, the reports of the Board of Directors andAuditors of the subsidiary company is annexed.

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L&T FINANCE LTD.


The Auditors’ Report to the shareholders does not contain any qualifications. The notes to the Accounts referred to in the Auditors’Report are self-explanatory and do not call for further comments.


As the Company is engaged in rendering non-banking financial services there are no particulars to be disclosed as per Companies(Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

The Company has no foreign exchange inflow. There has been foreign exchange outgo of Rs. 23.68 cr. for import of Lease / HirePurchase assets, interest on loans and others.

9. PERSONNEL

There are no employees covered by the provisions under Section 217(2A) of the Companies Act, 1956, read with the Companies(Particulars of the Employees) Rules, 1975.



i. That in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been nomaterial departure;

ii. That the selected accounting policies were applied consistently and the Directors made judgments and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and the profit of thecompany for the year ended on that date;

iii. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

iv. That the annual accounts have been prepared on a going concern basis.

11. DIRECTORS

Mr. J. P. Nayak retires by rotation and being eligible offers himself for re-appointment.

Mr. N. Sivaraman was appointed as an Additional Director with effect from 18th March, 2006. His term would end at the conclusion ofthis Annual General Meeting. It is proposed to re-appoint him as a Director.

Mr. S. Raghavan was appointed as an Additional Director with effect from 4th May, 2006. His term would end at the conclusion of thisAnnual General Meeting. It is proposed to re-appoint him as a Director.

12. AUDIT COMMITTEE

The present members of the Committee are Mr. J. P. Nayak, Mr. Y. M. Deosthalee and Mr. R. Shankar Raman. Mr. Y. M. Deosthalee isthe Chairman of the Audit Committee.

The role, terms of reference, the authority and power of the Chairman are in conformity with the requirements of the Companies Act,1956.

The Committee met periodically during the year and had discussions with the auditors on internal control systems and internal auditreport.

13. AUDITORS

The Auditors, M/s Sharp and Tannan, Chartered Accountants, hold office until conclusion of the ensuing Annual General Meeting andare recommended for reappointment. Certificate from the Auditors has been received to the effect that their re-appointment, if made,would be within the limits prescribed under Section 224 (1B) of the Companies Act, 1956.

14. NON-BANKING FINANCIAL COMPANIES AUDITORS’ REPORT (RESERVE BANK) DIRECTIONS, 1998

Pursuant to the Non-Banking Financial Companies Auditors’ Report (Reserve Bank) Directions, 1998, a report from the statutoryauditors to the Board of Directors, has been received by the Company. This report has certified that the Company has complied withall the Directions and Prudential Norms as prescribed under the Reserve Bank of India Act, 1934.

15. ACKNOWLEDGEMENT

The Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, Vendors, Suppliersand Customers. The Directors are pleased to place on record their appreciation for the contributions made by the employees of theCompany.


Y.M. Deosthalee N. SivaramanDirector Director


S-61

L&T FINANCE LTD.

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAUDITORS’ REPORT TO THE MEMBERS OF L&T FINANCE LIMITED

We have audited the attached Balance Sheet of L&T Finance Limited as at 31st March, 2006, the Profit and Loss Account and the CashFlow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.

In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that:

1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227(4A)of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the saidOrder.

2. Further to our comments in the Annexure referred to above, we report that:

(a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for thepurposes of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;

(c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the booksof account;

(d) in our opinion, the Profit and Loss Account, the Balance Sheet and Cash Flow Statement dealt with by this report comply with theaccounting standards referred to in Section 211(3C) of the Companies Act, 1956;

(e) on the basis of the written representations received from directors of the Company as at 31st March, 2006 and taken on recordby the Board of Directors, we report that none of the director is disqualified as on 31st March, 2006 from being appointed as adirector in terms of Section 274(1)(g) of the Companies Act, 1956; and

(f) in our opinion and to the best of our information and according to the explanations given to us, the said accounts read togetherwith the Significant Accounting Policies in Schedule - ‘13’ and Notes on Accounts - ‘14’ appearing thereon, give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India;

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.


By the hand ofMILIND P. PHADKE

Place: Mumbai PartnerDate: May 4, 2006 Membership No. 33013


1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) In respect of owned assets as explained to us, all the fixed assets have been physically verified by the management during theyear. In respect of leased assets the company has formulated a programme of physical verification of all the fixed assets over aperiod of three years which in our opinion, is reasonable having regard to the size of the company and the nature of its assets.No material discrepancies were noticed on such verification.

(c) The Company has not disposed of any substantial part of its fixed assets during the year so as to affect its going concern status.

2. The Company is a non-banking finance company and does not hold any inventories. Accordingly, reporting under paragraph 4 (ii) (a),(b) and (c) of the Order is not applicable.

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L&T FINANCE LTD.

3. According to the information and explanations given to us, Company has neither granted nor taken any loans, secured or unsecured,to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly,reporting under paragraph 4 (iii) (b), (c), (d), (f) and (g) of the Order is not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensuratewith the size of the Company and the nature of its business for the purchase of fixed assets and for services rendered. We haveneither come across nor have been informed of any continuing failure to correct major weaknesses in internal control system.

5. According to the information and explanations given to us, we are of the opinion that there are no contracts or arrangements that needto be entered in to the register maintained under Section 301 of Companies Act, 1956. Accordingly, reporting under paragraph 4 (iii)(b) of the Order is not applicable.

6. The Company has not accepted any deposits during the year from the public to which the directives issued by the Reserve Bank ofIndia and the provisions of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framedthereunder apply.

7. The Company is having an internal audit system commensurate with the size of the Company and the nature of its business.

8. According to the information and explanations given to us, the Central Government has not prescribed the maintenance of costrecords under Section 209 (1) (d) of the Companies Act, 1956.

9. (a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory duesincluding provident fund, investor education and protection fund, income tax, sales tax, wealth tax, cess and other statutory duesas applicable with the appropriate authorities. According to the information and explanations given to us, there are no arrears ofoutstanding statutory dues as at the last day of the financial year for a period exceeding six months from the date they becamepayable.

(b) According to the information and explanations given to us, the Company have no dues of wealth-tax, service tax, excise duty,custom duty, cess, which have not been deposited on account of any dispute. However, with respect to income tax and sales tax,demands amounting to Rs. 153,443,201 and Rs. 18,326,515 respectively are in appeal with various forum/ authorities.

10. The Company has no accumulated losses as at 31st March, 2006 and it has not incurred cash loss in the financial year and also inthe immediately preceding financial year.

11. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that theCompany has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

12. Based on our examination of documents and records, we are of the opinion that the company has maintained adequate records wherethe company has granted loans and advances on the basis of security by way of pledge of shares, debenture and other securities.

13. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.Accordingly, reporting under paragraph 4 (xiii) of the Order is not applicable.

14. The Company is dealing and trading in shares, securities, debentures and other investments. The Company has maintained properrecords of the transactions and contracts and timely entries have been made therein and the shares, securities, debentures and othersecurities have been held by the company, in its own name.

15. The Company has not given any guarantee for loans taken by others from bank or financial institutions. Accordingly, reporting underparagraph 4 (xv) of the Order is not applicable.

16. In our opinion and according to the information and explanations given to us, on an overall basis, the term loans have been applied forthe purposes for which they were obtained.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, wereport that there are no funds raised on short-term basis which are used for long-term investments.

18. The Company has not made any preferential allotment of shares during the year to parties and companies covered in the registermaintained under Section 301 of the Companies Act, 1956.

19. As at the year end 270 debentures of Rs.10,000,000 each were outstanding, out of which the Company has not created any securityin respect of 70 debentures of Rs.10,000,000 each.

20. The Company has not raised any money by public issues during the year. Accordingly, reporting under paragraph 4 (xx) of the Orderis not applicable.

21. During the course of our examination of the books and records of the Company, carried out in accordance with generally acceptedauditing practices in India, and according to information and explanations given to us, we have neither come across any fraud on orby the Company noticed or reported during the year, nor have we been informed of such case by management.


By the hand ofMILIND P. PHADKE

Place: Mumbai PartnerDate: May 4, 2006 Membership No. 33013

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Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006As at 31.3.2006 As at 31.3.2005

Schedules Rs. Lacs Rs. Lacs

SOURCES OF FUNDS :

Shareholders’ FundsShare Capital 1 9,919.15 8,669.15Reserves and Surplus 2 11,590.90 4,727.45

Loan FundsSecured Loans 3 57,870.31 27,721.53Unsecured Loans 4 55,184.97 44,207.01

Total 134,565.33 85,325.14

APPLICATION OF FUNDS :Fixed Assets

Gross Block 5 24,162.82 14,746.53Less : Depreciation 4,204.09 2,342.19

Net Block 19,958.73 12,404.34Capital work-in-progress 2,360.76 2,697.11

22,319.49 15,101.45Investments 6 1,161.12 6,234.93Current Assets, Loans and Advances 7

Stock-on-Hire 756.98 2,165.47Sundry Debtors 2,229.96 1,426.44Cash and Bank Balances 3,177.90 1,683.65Other Current Assets 32.71 25.68Loans and Advances 114,366.13 65,689.67

120,563.68 70,990.91Less: Current Liabilities and Provisions 8

Liabilities 8,651.51 6,275.46Provisions 827.45 726.69

9,478.96 7,002.15Net Current Assets 111,084.72 63,988.76

Total 134,565.33 85,325.14

Significant Accounting Policies 13

Notes forming part of Accounts 14

Balance Sheet Abstract & Company’s General

Business Profile 15

As per our report attachedSHARP & TANNAN A.N. Mani Y.M. DeosthaleeChartered Accountants Manager

by the hand of Directors

MILIND P. PHADKE V.C. Raje N. SivaramanPartner Vice President – Accounts &Membership No. 33013 Company Secretary

Place: Mumbai Place: MumbaiDated: May 4, 2006 Dated: May 4, 2006

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L&T FINANCE LTD.

Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006

Year ended Year endedSchedules 31.3.2006 31.3.2005

Rs. Lacs Rs. LacsINCOME :

Income from operations 9 14,905.60 11,004.79

Total 14,905.60 11,004.79

EXPENDITURE :Personnel Expenses 10 520.19 355.86Administration and Other Expenses 11 1,077.89 1,982.34

Interest and Other Finance Charges 12 7,081.33 4,710.50

Depreciation 1,941.41 1,344.90

Total 10,620.82 8,393.60

Profit before taxes 4,284.78 2,611.19

Provision for taxes 754.00 208.00

Provision for fringe benefit tax 17.32 –

Profit after taxes 3,513.46 2,403.19

Balance brought forward from the previous year 295.89 203.91

Profit available for appropriation 3,809.35 2,607.10

Transfer to Reserve u/s. 45-1C of RBI Act,1934 710.00 481.00

Transfer from Debenture Redemption Reserve – (150.00)

Transfer to General Reserve - I 1,100.00 –Transfer to General Reserve - II 1,600.00 1,000.00

Proposed dividend - Final – 433.46

Interim dividend – 433.46

Additional tax on dividend – 113.29

Balance carried to Balance Sheet 399.35 295.89

Basic and Diluted Earnings per Equity Share See Note No. K(iii) 4.02 2.77

Face value per Equity Share 10 10

Significant Accounting Policies 13Notes Forming Part of Accounts 14Balance Sheet Abstract & Company’s General

Business Profile 15





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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006

Year ended Year ended31-Mar-2006 31-Mar-2005

Rs. Lacs Rs. Lacs

A. Cash Flow from Operating ActivitiesNet Profit before tax 4,284.78 2,611.19Adjustment for:Depreciation 1,941.41 1,344.90(Profit)/Loss on Sale of Investments (net) (499.62) (162.98)(Profit)/Loss on Sale of Fixed Assets (20.31) (36.44)Interest and Dividend received on Investments (298.44) (202.09)Provision for Leave Encashment 18.55 2.28Provision for Diminution in value of Investments (239.68) 240.33Provision for non performing assets/write offs 47.37 163.24Operating Profit before Working Capital Changes 5,234.06 3,960.43Adjustment for :(Increase)/Decrease in net Stock on hire 1,408.49 4,677.67(Increase)/Decrease in Trade and Other Receivables (49,934.38) (23,745.14)Increase/(Decrease) in Trade and other payables 2,476.81 616.93

Cash Generated from Operations (40,815.02) (14,490.11)Direct Taxes paid (771.32) (208.00)

Net Cash Flow from Operating Activities (A) (41,586.33) (14,698.11)

B. Cash Flows from Investing ActivitiesPurchase of fixed assets (including capital work in progress) (9,301.68) (7,045.91)Proceeds/Adjustments from sale of fixed assets 143.98 1,507.40Purchase of Investments (13,707.15) (36,336.03)Sale of investments 19,520.26 34,088.42Interest or Dividend received on Investments 298.44 202.09

Net Cash from Investing Activities (B) (3,046.15) (7,584.02)

C. Cash Flows from Financing ActivitiesIncrease / (Decrease ) in Secured Loans 30,148.77 (3,961.36)Increase / (Decrease ) in Unsecured Loans (net) 10,977.96 26,567.71Dividends paid during the year – (490.11)Increase / (Decrease ) in Share Capital 5,000.00 –

Net Cash Generated (Used in) / from Financing Activities (C) 46,126.74 22,116.24

Net Cash increase/(Decrease) in Cash And Cash Equivalents (A+B+C) 1,494.25 (165.89)Cash and Cash Equivalent as at beginning of the year 1,683.65 1,849.54Cash and Cash Equivalent as at end of the year 3,177.90 1,683.65

Notes:1) Cash Flow statement has been prepared under indirect method as set out in the Accounting Standard (AS) 3 Cash Flow Statements

issued by The Institute of Chartered Accountants of India.2) Purchase of fixed assets includes movements of capital work in progress between the beginning and end of the year.3) Cash and Cash Equivalents represent cash and bank balances.





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As at 31.3.2006 As at 31.3.2005

Rs. Lacs Rs. LacsSCHEDULE-1SHARE CAPITALAuthorised10,00,00,000 Equity Share of Rs. 10/- each 10,000.00 10,000.00

10,000.00 10,000.00

Issued and Subscribed99,191,500 Equity Shares of Rs. 10/- each fully paid-up 9,919.15 8,669.15

(Previous year 86,691,500 Equity Shares of Rs.10/- each)Of the above:26,691,500 Equity shares are allotted as fully paid-up for a consideration

other than cash consequent on amalgamation99,191,449 (Previous year 86,691,494) Equity Shares are held by

Larsen & Toubro Limited, the holding company

9,919.15 8,669.15

SCHEDULE-2RESERVES AND SURPLUSReserve u/s. 45-1C of RBI Act, 1934As per last Balance Sheet 1,654.89 1,173.89Add : Transferred from Profit and Loss Account 710.00 481.00

2,364.89 1,654.89Debenture Redemption ReserveAs per last Balance Sheet – 150.00Less : Transferred to Profit and Loss Account – (150.00)

– –General Reserve - IAs per last Balance Sheet 700.00 700.00Add : Transferred from Profit and Loss Account 1,100.00 –Less : Utilised during the year 400.00 –

1,400.00 700.00General Reserve - IIAs per last Balance Sheet 1,994.41 994.42Add : Transferred from Profit & Loss Account 1,600.00 1,000.00

3,594.41 1,994.42Capital Redemption Reserve 82.25 82.25Securities Premium Account 3,750.00 –Profit and Loss Account 399.35 295.89

11,590.90 4,727.45

SCHEDULE-3SECURED LOANSSecured Redeemable Non-Convertible Debentures 20,000.00 3,500.00From Banks :

Cash credit / Working capital demand loans – 1,500.00Term loan 27,541.86 16,651.45Foreign currency loan 10,328.45 6,070.08

57,870.31 27,721.53

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As at 31.3.2006 As at 31.3.2005

Rs. Lacs Rs. Lacs

SCHEDULE-4UNSECURED LOANSFixed deposits – 48.16Loans and advances from subsidiary 605.00 299.00Short term loans and advances :From Banks

Short term loans 30,499.99 32,000.00Commercial papers 9,500.00 –

From OthersNon-Convertible Debentures 7,000.00 7,800.00Others 7,557.15 4,000.00

Other loans and advancesLease finance 22.83 59.85

55,184.97 44,207.01

SCHEDULE-5

FIXED ASSETS

GROSS BLOCK DEPRECIATION Net Net FIXED ASSETS Block Block

Opening Additions Sa le / As on Opening For the Dedu- As on As on As onbalance as on Adjustment 31.3.2006 balance as period ction/ 31.3.2006 31.3.2006 31.3.2005

1.4.2005 on 1.4.2005 AdjustmentRs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs

OWNED ASSETSBuilding 3,419.04 278.65 – 3,697.69 207.21 57.24 – 264.45 3,433.24 3,211.83Plant & Machinery 6,710.48 6,239.36 0.10 12,949.74 1,210.43 915.92 0.10 2,126.25 10,823.49 5,500.05Furniture & Fixtures 32.21 74.79 – 107.00 8.04 4.07 – 12.11 94 .89 24.17Motor Car 3,562.06 2,676.78 168.03 6,070.81 543.01 721.30 46.46 1,217.85 4,852.96 3,019.05Vehicles 599.08 66.95 – 666.03 215.56 104.20 – 319.76 346.27 383.52Specialised Software 70.07 27.93 32.25 65.75 16.20 49.39 32.25 33.34 32 .41 53.87Computers 271.95 252.90 2.80 522.05 101.35 73.91 0.70 174.56 347.49 170.60

14,664.89 9,617.36 203.18 24,079.07 2,301.80 1,926.03 79.51 4,148.32 19,930.75 12,363.09

ASSETS TAKENON LEASEPlant & Machinery 5.85 – – 5.85 3.71 2.14 – 5.85 – 2.14Vehicles 75.79 2.11 – 77.90 36.68 13.24 – 49.92 27 .98 39.11

81.64 2.11 – 83.75 40.39 15.38 – 55.77 27 .98 41.25

TOTAL 14,746.53 9,619.47 203.18 24,162.82 2,342.19 1,941.41 79.51 4,204.09 19,958.73 12,404.34

Previous Year 11,014.26 5,569.96 1,837.69 14,746.53 1,364.01 1,344.90 366.72 2,342.19

Add: Capital Work-in-Progress 2,360.76 2,697.11

22,319.49 15,101.45

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As at 31.3.2006 As at 31.3.2005

Rs. Lacs Rs. Lacs

SCHEDULE-6

INVESTMENTS

At costLong term investmentsGovernment Securities 0.03 0.03Fully paid equity shares 1,150.00 4,043.07

1,150.03 4,043.10Current investmentsFully paid equity shares 61.59 2,482.01Others 0.01 0.01

61.60 2,482.02

1,211.63 6,525.12Less: Diminution in value of investments 50.51 290.19

Total 1,161.12 6,234.93

Note :Quoted investments (Market value - Rs.1,107,830) 11.08 2,191.82(Previous year Rs.219,181,852)Unquoted investments 1150.04 4,043.11

1161.12 6,234.93

Particulars of investments :LONG TERM INVESTMENTSGovernment Securities :12% National Saving Certificate 2002 0.03 0.03(Face value Rs.3,000)(Pledged as security deposit with sales tax authorities)

Total (A) 0.03 0.03Fully paid equity shares of Rs.10/- eachSubsidiary Company :L&T Capital Company Limited 550.00 550.00(54,99,997 Equity Shares)

550.00 550.00Other Companies:Narmada Infrastructure Construction Enterprise Limited – 1,656.92(86,77,250 Equity Shares sold during the year)L & T Transportation Infrastructure Limited – 1,236.15(1,02,50,000 Equity Shares sold during the year)L & T Demag Plastics Machinery Limited 300.00 300.00(30,00,000 Equity Shares)NAC Infrastructure Equipment Limited 300.00 300.00(30,00,000 Equity Shares)

600.00 3,493.07

Total (B) 1,150.00 4,043.07

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SCHEDULE-6 (Contd.)

INVESTMENTS (Contd.)

As at 31.3.2006 As at 31.3.2005Face value Rs. Lacs Face value Rs. Lacs

Rs. per unit Rs. per unit

CURRENT INVESTMENTSFully paid equity sharesMetropoli Overseas Ltd. 10 14.91 10 14.91(99,400 equity shares)Anil Chemicals Ltd. 10 8.00 10 8.00(40,000 equity shares)Elque Polyesters Ltd. 10 19.43 10 19.43(1,94,300 equity shares)Monnet Industries Ltd. 10 7.52 10 7.52(18,800 equity shares)Ahmedabad Electricity Company Ltd. 10 – 10 14.65(10,000 equity shares)Andhra Sugars Ltd. 10 – 10 36.01(24,000 equity shares)Apollo Hospitals Enterprise Ltd. 10 – 10 82.66(25,000 equity shares)Arvind Mills Ltd. 10 – 10 66.90(50,000 equity shares)Associated Cement Companies Ltd. 10 – 10 91.07(25,000 equity shares)Atul Products Ltd 10 – 10 16.84(20,000 equity shares)Bank of Baroda 10 – 10 22.18(10,000 equity shares)Bank of Rajasthan 10 – 10 17.65(24,000 equity shares)Bharat Petroleum Corporation Ltd. 10 – 10 113.31(24,000 equity shares)Bharati Tele Ltd. 10 – 10 90.22(40,000 equity shares)BOC Ltd. 10 – 10 24.71(25,000 equity shares)Canara Bank 10 – 10 43.96(20,000 equity shares)Century Textiles & Industries Ltd. 10 – 10 61.78(25,000 equity shares)CESC Ltd. 10 – 10 22.37(10000 equity shares)Chennai Petroleum Corporation Ltd 10 – 10 0.22(100 equity shares)Crompton Greaves Ltd. 10 – 10 89.78(20,000 equity shares)Cummins India Ltd. 2 – 2 34.34(25,000 equity shares)Eveready Industries Ltd. 10 – 10 0.80(1,000 equity shares)Exide Industries Ltd. 10 – 10 4.89(3,109 equity shares)Gujarat Ambuja Cement Ltd. 10 – 10 205.89(45,000 equity shares)Gujarat NRE Coke Ltd. 10 – 10 24.28(25,120 equity shares)HDFC Bank Ltd. 10 – 10 122.32(20,000 equity shares)HEG Ltd. 10 – 10 13.99(10,000 equity shares)

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SCHEDULE-6 (Contd.)




India Glycol Ltd. 10 – 10 29.74(20,000 equity shares)India Tobacco Company Ltd. 10 – 10 105.76(7,866 equity shares)Indian Petrochemicals Corporation Ltd. 10 – 10 36.98(20,000 equity shares)Jaiprakash Associates Ltd. 10 – 10 28.39(15,000 equity shares)Jayshree Tea Ltd. 10 – 10 21.97(19,999 equity shares)Jet Airways Ltd. 10 – 10 64.82(5,000 equity shares)Kesoram Industries Ltd. 10 – 10 4.40(3,448 equity shares)Mahanagar Telephone Nigam Ltd. 10 – 10 6.57(4,602 equity shares)National Thermal Power Corporation Ltd. 10 – 10 30.80(32,712 equity shares)New Delhi Television Ltd. 4 – 4 48.02(25,000 equity shares)Neyveli Lignite Corporation Ltd. 10 – 10 37.13(50,000 equity shares)Nicholas Piramal India Ltd. 2 – 2 48.00(15,893 equity shares)Opto Circuits (India) Limited 10 – 10 43.84(25,000 equity shares)Orient Paper & Industries Ltd. 10 – 10 32.09(20,000 equity shares)Rashtriya Chemicals and Fertilizers Ltd. 10 – 10 20.54(50,000 equity shares)Reliance Industries Ltd. 10 – 10 148.99(25,330 equity shares)Shree Cements Ltd. 10 – 10 32.20(10,000 equity shares)State Bank of India 10 – 10 72.88(10,000 equity shares)Steel Authority of India Ltd. 10 – 10 17.40(25,000 equity shares)Strides Arcolab Ltd. 10 – 10 22.21(10,000 equity shares)Tata Motors Ltd. 10 – 10 74.89(15,000 equity shares)Tata Tea Ltd. 10 – 10 55.27(10,000 equity shares)Tata Teleservices (Maharashtra) Ltd. 10 – 10 15.77(50,000 equity shares)Thermax Ltd. 10 – 10 62.17(10,000 equity shares)Tinplate Company of India Ltd. 10 – 10 14.42(25,000 equity shares)Titan Industries Ltd. 10 – 10 52.67(20,000 equity shares)Trent Ltd. 10 – 10 61.33(10,000 equity shares)Videocon International Ltd. 10 – 10 32.29(50,000 equity shares)

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SCHEDULE-6 (Contd.)




Zensar Technology Ltd. 10 – 10 9.79(4,500 equity shares)Icnet Ltd 10 11.73 – –(3,83,334 equity shares)

Total (C) 61.59 2,482.01OthersLTFL Securitisation Trust 2002 0.01 0.01

Total (D) 0.01 0.01

Total (A+B+C+D) 1,211.63 6,525.12

Less: Diminution in value of investments 50.51 290.19

Total 1,161.12 6,234.93

Details of investments purchased and sold during the yearFace Value Nos. Cost

Money Market Mutual Fund : Rs. Per Unit Rs. Lacs

Birla Cash Plus Institutional Premium Plan 10 171,745,001 17,208HSBC Cash Fund 10 430,373,187 43,061UTI Liquid Cash Plan Institutional - Daily Income Plan 1,000 3,409,492 34,623Principal Floating Rate Fund SMP 10 50,021,526 5,003– Instit Option - Dividend Reinvestment DailyPrincipal Cash Management Fund 10 83,515,756 8,352– Liquid Option Institutional Prem Plan - Dividend Reinvestment DailyHDFC Cash Management Fund-Savings Plan 10 263,581,655 28,036– Daily Dividend ReinvestmentHDFC Cash Management Fund-Call Plan 10 63,338,322 6,604– Daily Dividend ReinvestmentKotak Liquid (Institutional premium) - Daily Dividend 10 165,105,534 20,189Grindlays Cash Fund - Super Inst Plan C - Daily Dividend 10 233,521,592 23,352Grindlays Floating Rate ST-Super Inst. Plan C 10 620,599,870 62,063– Daily DividendStandard Chartered Liquidity Manager-Daily Dividend 10 266,815,634 26,684Magnum Institutional Income -Savings Dividend 10 101,704,141 10,203DSP Merrill Lynch Liquidity Fund Daily 10 16,569,248 1,659DSP Merrill Lynch Floating Rate Fund– Regular Plan - Daily Dividend 10 201,162,682 20,163– Institutional Plan - Daily Dividend 10 200,054 2,001Equity SharesAftek Infosys Ltd. 2 5,000 4Amtek Auto Ltd. 2 38,935 102Andhra Sugars Ltd. 10 135 0Aplab Ltd. 10 73,617 84Apollo Hospitals Ltd. 10 54,074 184Archies Ltd. 10 5,000 8Areva T & D Industries Ltd. 10 13,182 50Arvind Mills Ltd. 10 15,000 19Associated Cement Companies Ltd. 10 53,920 271Auto Axel Ltd. 10 6,155 35Bajaj Auto Ltd. 10 1,839 26Bajaj Hindustan Ltd. 1 15,998 51Ballarpur Industries Ltd. 10 13,174 15


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SCHEDULE-6 (Contd.)


Face Value Nos. CostEquity Shares Rs. Per Unit Rs. Lacs

Bank of India 10 5,000 5BASF India Ltd. 10 30,350 67Bharat Forge Ltd. 2 10,000 32Bharat Heavy Electricals Ltd. 10 33,682 458Bharti Televentures Ltd. 10 19,222 68BOC Ltd. 10 30,000 32Cadila Healthcare Ltd. 5 500 3Century Textiles & Industries Ltd. 10 101,686 267Chennai Petroleum Corp Ltd. 10 10,000 22Cipla Ltd. 2 6,000 33Crompton Greaves Ltd. 10 39,677 187Cummins India Ltd. 2 10,000 14Dhampur Sugar Mills Ltd. 10 5,000 6EID Parry India Ltd. 2 10,000 13Escorts Ltd. 10 35,000 37Finolex Cables Ltd. 10 9,570 23GAIL (India) Ltd. 10 31,000 81Gammon India Ltd. 2 10,892 32Goetze India Ltd. 10 32,500 70Grasim Industries Ltd. 10 2,000 24Great Eastern Shipping Ltd. 10 5,000 8Gujarat Ambuja Cements Ltd. 2 25,000 20Gujarat Narmada Valley Fertilizer Ltd. 10 50,000 43Gujarat NRE Coke Ltd. 10 5,000 6HCL Technology Ltd. 2 35,000 141HDFC Bank Ltd 10 51,150 370HDFC Ltd. 10 22,650 288Hero Honda Motors Ltd. 2 10,000 54Hindalco Ltd. 1 2,000 26Hindustan Lever Ltd. 1 10,000 16Hindustan Zinc Ltd. 10 39,852 101ICICI Bank Ltd. 10 5,000 21I-Flex Solutions Ltd. 5 32,661 299India Cements Co Ltd. 10 25,000 19India Glycol Ltd. 10 35,695 59Indian Hotels Ltd. 10 9,923 95Indian Petrochemicals Corp Ltd. 10 25,000 45Infosys Technologies Ltd. 5 66,910 1,827Infotech Enterprises Ltd. 10 36,265 105ITC Ltd. 1 94,584 1,231Jaiprakash Associates Ltd. 10 10,000 21Jayshree Tea & Industries Ltd. 10 2,129 3Jindal Saw Ltd. 10 52,324 186JK Paper Ltd. 10 25,000 15Karnataka Bank Ltd. 10 25,250 26Mahanagar Telephone Nigam Ltd. 10 5,000 6Mahindra & Mahindra Ltd. 10 39,500 213Maruti Udyog Ltd. 5 99,568 581Max India Ltd. 10 10,000 51Mphasis BFL Ltd. 10 15,000 43National Aluminium Co Ltd. 10 5,000 9Narmada Chematur Petrochem Ltd. 10 50,000 18Nelco Ltd. 10 5,000 2New Delhi Television Ltd 4 45,000 87Omax Auto Ltd. 10 24,887 28Oil & Natural Gas Corporation Ltd. 10 45,268 519Orchid Chemicals Ltd. 10 7,000 26


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Face Value Nos. CostEquity Shares Rs. Per Unit Rs. Lacs

Oriental Bank of Commerce 10 10,000 26Patni Computers Systems Ltd. 2 20,000 72Polaris Software Lab. Ltd. 5 5,000 7Punjab National Bank 10 39,489 171Radico Khaitan Limited 2 15,000 51Ranbaxy Laboratories Ltd. 5 8,330 37Reliance Capital Ltd. 10 12,500 49Reliance Energy Ltd. 10 12,500 81Reliance Industries Ltd. 10 116,000 787Rico Auto Ltd. 1 10,000 8Rolta India Ltd. 10 5,000 7Satyam Computers Ltd. 2 67,500 354Selan Exploration Ltd. 10 5,000 4Sesa Goa Ltd. 10 5,000 35Shipping Corporation of India Ltd. 10 8,000 12Shree Cements Ltd. 10 11,774 41SRF Ltd. 10 10,000 15State Bank of India 10 74,032 606Sterlite Industries Ltd. 5 5,000 39Strides Arcolab Ltd. 10 2,500 6Suryalakshmi Cotton Mills Ltd. 10 5,341 21Tata Chemicals Ltd. 10 69,500 139Tata Consultancy Services Ltd. 1 44,300 730Tata Motors Ltd. 10 61,500 373Tata Power Co. Ltd. 10 24,687 99Tata Steel Ltd. 10 96,800 356Tata Tea Ltd. 10 21,500 149Tata Teleservices (Maharashtra) Ltd. 10 60,000 16Television Eighteen India Ltd. 10 10,000 39Thermax Ltd. 2 23,768 174Titan Industries Ltd. 10 35,340 89Trent Ltd. 10 1,000 6UTI Bank Ltd. 10 24,400 71Videsh Sanchar Nigam Ltd. 10 5,000 21Wipro Ltd. 2 10,111 67Zee Telefilms Ltd. 1 5,000 8

SCHEDULE-7As at 31.3.2006 As at 31.3.2005

Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs

CURRENT ASSETS, LOANS AND ADVANCESStock-on-hire 415.24 2,131.63(Secured by Hire Purchase Agreements)Stock on hire of assets repossessedOn Hire Purchase agreements – 33.84On Term Loan Agreements 341.74 –(At cost or market value, whichever is less)

756.98 2,165.47

Sundry DebtorsUnsecured, considered goodOutstanding for more than six months 137.58 286.05Others 2,092.38 1,140.39

2,229.96 1,426.44


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SCHEDULE-7 (Contd.)As at 31.3.2006 As at 31.3.2005

Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs

Cash and Bank BalancesCash in hand 1.95 0.55Cheques on hand – 2.48Balances with Scheduled Bankson current account 3,159.49 1,649.93on deposit account (including interest accrued thereon) 16.46 30.69(pledged with sales tax authorities as security andwith banks as margin money against guarantees issued)

3,177.90 1,683.65Other Current AssetsAccrued Interest : Investments 3.58 3.58

Others 29.13 22.10

32.71 25.68Loans and AdvancesSecured, considered good

Loans against pledge of shares 8,336.62 450.00Unsecured, considered good :

Bills discounted 16,619.54 6,450.49Other loans 76,071.99 33,495.96(including intercorporate deposits Rs.157,360,000 Lacs,previous year Rs.Nil)

Unsecured, considered doubtfulOther loans 158.68 44.59

Less: Provision for Non-Performing Assets 18.77 16.84

139.91 27.75Advances towards capital assets 53.56 66.56Advances recoverable in cash or in kind or for value to be received 13,144.51 25,198.91

114,366.13 65,689.67

SCHEDULE-8

CURRENT LIABILITIES AND PROVISIONS

Liabilities :Sundry Creditors 6,979.27 4,990.52Security Deposits 547.68 822.49Advances Received - Hire Purchase / Lease – 41.72Interest accrued but not due 1,124.56 420.73

8,651.51 6,275.46

Provisions for:Taxes 754.00 208.00Fringe benefit tax 17.32 –Proposed dividend – 433.45Additional tax on dividend – 56.65Gratuity 10.44 1.45Leave encashment 45.69 27.14

827.45 726.69


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As at 31.3.2006 As at 31.3.2005Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs

SCHEDULE-9INCOME FROM OPERATIONSLease and Hire Purchase 3,939.14 3,473.36Bills Discounting 845.48 737.00Term Loan and Other Financing Activities 8,493.64 5,989.04Networking Activity 398.64 394.86Income from Investments– Dividend from Subsidiary Company 82.50 –– Others 715.56 365.08

798.06 365.08Other Income 430.64 45.45

14,905.60 11,004.79

SCHEDULE-10

PERSONNEL EXPENSES

Salaries 414.69 306.50Contribution to and provision for :

Provident fund and Pension fund 19.87 12.81Gratuity fund 10.44 1.45Superannuation fund 5.38 3.92Leave encashment 19.67 5.37

55.36 23.55Welfare and Other Expenses 50.14 25.81

520.19 355.86

SCHEDULE-11

ADMINISTRATIVE & OTHER EXPENSES

Travelling and Conveyance 202.56 163.34Printing and Stationery 26.47 14.10Telephone, Postage and Telegrams 227.25 298.57Directors’ Sitting Fees 0.42 0.48Brokerage and Service Charges 104.42 222.20Advertising and Publicity 6.21 8.25Repairs and Maintenance - Building 3.42 0.50– Plant & Machinery 6.46 3.98– Others 63.07 95.49Rent 19.86 32.07Rates and Taxes 70.33 70.46Electricity Charges 13.61 13.00Insurance 69.15 41.80Auditors Remuneration :

Audit Fees 2.70 3.32Tax Audit Fees 0.78 0.78Certification 1.18 1.10Expenses Reimbursed 0.26 0.59

4.92 5.79Provision for Non-Performing Assets / Write offs 447.37 163.24Less : Transfer from General Reserve - I 400.00 –

47.37 163.24Provision for diminution in value of investments (239.68) 240.33Miscellaneous Expenses 452.05 608.74

1,077.89 1,982.34


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As at 31.3.2006 As at 31.3.2005Rs. Lacs Rs. Lacs Rs. Lacs Rs. Lacs

SCHEDULE-12INTEREST AND OTHER FINANCE CHARGESFixed loans 6,163.20 4,503.39Others 918.13 207.11

7,081.33 4,710.50

SCHEDULE-13SIGNIFICANT ACCOUNTING POLICIESA. Method of Accounting :

The Company maintains its accounts on accrual basis following the historical cost convention, in compliance with the AccountingStandards specified to be mandatory by the Institute of Chartered Accountants of India and the relevant provisions of the CompaniesAct, 1956.

B. Revenue Recognition :(i) Income from Hire purchase and Lease transactions are accounted on accrual basis, pro-rata for the period, at the rates implicit

in the transactions. Processing fees / Management Fees, Income from Bill Discounting, Other financing activities, Other compensationand Investments are accounted on accrual basis.

(ii) Income from Operating lease is recognized on straight line basis over the lease term and accounted on the dates as per theContractual terms.

C. Brokerage on Fixed Deposits is charged over the period of Deposits.D. The Company complies with the guidelines issued by the Reserve Bank of India in respect of Prudential Norms for Income Recognition

and Provisioning for Non-Performing Assets.E. Retirement Benefits :

Contributions to Provident Fund, Family Pension Fund and Superannuation are accounted on actual liability basis. Contributions toGratuity fund and Provision for Leave encashment benefit on retirement are made on the basis of actuarial valuation.

F. Fixed Assets :i) Owned Assets :

Assets held for own use are stated at original cost less accumulated depreciation.ii) Leased Assets :

Assets leased under finance lease are stated as “Loans & Advances” as required by Accounting Standards (AS) - 19 Leasesissued by the Institute of Chartered Accountants of India.Assets under operating lease are stated at original cost less accumulated depreciation.

iii) Assets Taken on Lease :Assets taken on lease on or after 1.4.2001 are stated at original cost less accumulated depreciation as required by AccountingStandards (AS) - 19 Leases issued by the Institute of Chartered Accountants of India.

G. Depreciation on Fixed Assets :i) Owned Assets :

Depreciation on assets held for own use has been provided on Straight Line Basis as per Schedule XIV to the Companies Act,1956, except for Computer Software. Computer Software is depreciated at 33.33% per annum. These rates are fixed in consonancewith the expected useful life of the assets.Depreciation on assets acquired and given to employees under the Hard Furnishing Scheme has been provided at 18% per annumon Straight Line Basis, except assets costing Rs. 5000 or less which are depreciated on Straight Line Basis as per Schedule XIVto the Companies Act, 1956.

ii) Assets given on Lease :(a) In respect of the assets given on finance lease, Accounting Standards (AS) - 19 - Leases has been applied. Investment in

leased assets is shown under Loans & Advances duly adjusted for recoveries during the lease period as required under thesaid Standard.

(b) In respect of assets given on operating lease, depreciation is provided on straight line basis pro-rata from the month ofacquisition/capitalization at the rates which have been determined on the basis of type of the asset, lease tenor, economic lifeof the asset etc. These rates vary from 7% to 20% per annum.

iii) Assets taken on Lease :Accounting Standards (AS) - 19 - Leases, has been applied to the assets taken on lease on or after 1.4.2001. These assets havebeen depreciated over the period of lease for a value net of its residual value implied in the transactions.

H. Investments :Current investments are carried at lower of cost or market value. The determination of the carrying costs of such investments is doneon the basis of specific identification. Long-term investments are carried at cost, after providing for any diminution in value, if suchdiminution is of a permanent nature.


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L&T FINANCE LTD.

I. Foreign Currency Transactions :Foreign Currency transactions are accounted for at the rates prevailing on the date of transactions. Wherever forward contracts areentered into, the exchange difference is dealt with in the Profit & Loss Account over the period of the Contracts.Foreign Currency assets & liabilities are converted at contracted rates as applicable. The exchange difference on settlement areadjusted to the Profit & Loss Account.

J. Borrowing Costs :Borrowing Costs attributable to the acquisitions, constructions or production of qualifying assets are capitalised as part of the cost ofsuch assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.All other borrowing costs are recognized as an expense in the period in which they are incurred.

SCHEDULE-14NOTES FORMING PART OF ACCOUNTS AS AT 31st MARCH, 2006A. Contingent Liabilities :

i) Income Tax Liability in respect of matters in Appeal : Rs. 1534.43 lacs (P.Y. Rs. 1574.67 lacs)ii) Interest Tax liability in respect of matters in Appeal : Rs. 53.67 lacs (P.Y. Rs. 53.67 lacs)iii) Sales Tax Liability in respect of matters in Appeal : Rs. 183.27 lacs (P.Y. Rs. 347.00 lacs)iv) Bond executed in respect of legal matters Rs. 10.00 lacs (P. Y. Rs. 10.00 lacs)

B. Secured Redeemable Non-convertible Debentures :Sr. Face Value Date of Allotment Amount Interest RedemptionNo. Rs. In Lacs

i) Rs. 100.00 Lacs each April 4, 2005 2500.00 6.70% Redeemable at par, at the end of 30 monthsfrom the date of allotment or on exercise of Putor Call Option on 22.06.2006.

ii) Rs. 100.00 Lacs each April 25, 2005 2500.00 6.60% Redeemable at par, at the end of 36 monthsfrom the date of allotment or on exercise of Putor Call Option-15 months from the dateof allotment.

iii) Rs. 100.00 Lacs each May 12, 2005 2500.00 NSE MIBOR Redeemable at par, at the end of 36 months+ 110 bps from the date of allotment or on exercise ofdaily Put or Call Option-24 months from the date ofCompounding allotment.

iv) Rs. 100.00 Lacs each May 24, 2005 2500.00 1 Yr. Reuters Redeemable at par, at the end of 36 months fromINBMK + 45 the date of allotment or on exercise of Put or Callbps Option - 24 months from the date of allotment.

v) Rs. 100.00 Lacs each June 23, 2005 2500.00 NSE MIBOR Redeemable at par, at the end of 36 months from+ 110 bps the date of allotment or on exercise of Put or Calldaily Option - 24 months from the date of allotment.Compounding

vi) Rs. 100.00 Lacs each March 14, 2006 2500.00 8.90% Redeemable at par, at the end of 13 months fromthe date of allotment or on exercise of Put or CallOption - 24 months from the date of allotment.

vii) Rs. 100.00 Lacs each March 29, 2006 5000.00 8.82% Redeemable at par, at the end of 36 months fromthe date of allotment or on exercise of Put or CallOption - 24 months from the date of allotment.

TOTAL 20000.00

Security: The Debentures are secured by way of first/second charge, having pari passu rights, as the case may be, on the company’sspecified immovable properties and specified Hire Purchase/Lease/Term Loan receivables.

C. i) Cash Credit/Working Capital Demand Loan of Rs. Nil lacs is secured by hypothecation of specified Hire Purchases/Lease Assetsand book debts relating to Lease, Hire Purchase and other Activities.

ii) Term Loan of Rs. 25,970.43 lacs is secured by hypothecation of specified Hire Purchase/Lease/Term Loan receivables.iii) Foreign Currency Loan of Rs. 10,328.45 lacs is secured by hypothecation of specified Hire Purchases/Lease Assets and Term

Loan receivables and book debts relating to Lease, Hire Purchase and other Activities.iv) Term Loan of Rs. 1,571.42 lacs is secured by hypothecation of specified fixed assets of the Company and exclusive first charge

on specified receivables.D. The Company has taken certain assets on lease costing Rs.77.91 lacs (P.Y. Rs. 75.79 lacs) the future lease obligation against which

is Rs. 25.50 Lacs (P.Y. Rs.65.46 lacs)E. i) Finance Lease Obligations taken on lease on or after 1.4.2001 :

The Company normally acquires assets/equipments under finance lease with the respective underlying assets/equipments assecurity. Minimum lease payments outstanding as of 31st March 2006 in respect of these assets are as under:


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L&T FINANCE LTD.

(Rs. Lacs)Due Total Minimum Lease Interest Present Value of

Payments Outstanding Not Due Minimum Leaseas on March 31, 2006 Payments

Within one year 14.63 1.76 12.87Later than one year and not later than five years 10.87 0.91 9.96Later than five years Nil Nil Nil

25.50 2.67 22.83

ii) Finance Lease Obligations given on lease on or after 1.4.2001 :The Company has given assets on finance lease to its customers with respective underlying assets/equipments as security.Minimum lease payments outstanding as of 31st March, 2006 in respect of these assets are as under:

(Rs. Lacs)Due Total Minimum Lease Interest Present Value of

Payments Outstanding Not Due Minimum Leaseas on March 31, 2006 Payments

Within one year 625.06 142.17 482.89Later than one year and not later than five years 1,213.62 134.49 1,079.13Later than five years Nil Nil Nil

1,838.68 276.66 1,562.02

F. Income from other financing activities include interest on Loans & Advances of Rs. 7,414.88 Lacs (P.Y. Rs. 5,075.30 Lacs) {Taxdeducted at source Rs. 273.27 lacs (P.Y. Rs. 183.17 lacs)}

G. Advances recoverable in cash or in kind includei) Loan to Officers Rs. 2.78 Lacs (P.Y. Rs. 5.59 Lacs), Maximum amount outstanding during the year Rs. 5.59 Lacs (P.Y. Rs. 5.80

Lacs).ii) Rs. 28.18 Lacs being sales tax paid upto 31.12.97 in various states on inter-state lease/Hire Purchase transactions. Due to

ambiguity in certain provisions of Sales Tax Act in respective states with respect to such transactions, recovery of the same fromthe customers is kept in abeyance. The Company has since then been paying sales tax on such transactions under protest invarious states to the extent it is collected from the customers.

H. Assignment of Receivables :The Company has assigned/sold some of the Lease, Hire Purchase Assets/receivables and Term Loan receivables amounting to Rs.19,432.58 Lacs. This assignment/sale is without recourse to the Company. The Company does not expect any contingent or otherliability in future in respect of these assigned/sold assets/receivables.

I. Managers salary and perquisites amounting to Rs. 20.82 Lacs (P.Y. Rs. 17.25 Lacs) have been charged to the Accounts.J. Value of imports (on CIF basis) :

Capital Goods Rs. 1,863.03 Lacs (P.Y. Rs. 2,694.60 Lacs)K. (i) Segment Reporting : AS-17

The Company operates mainly in the business segment of fund based financing activity. The other business segment does nothave income and/or assets more than 10% of the total income and/or assets of the Company.

(ii) Related Party Disclosure : AS-18The following related party transaction were carried out during the year ended 31.03.2006

Rs. Lacs

No. Name of Company Relationship Nature of Amount Amount Amounttransaction due to due fromTransaction

1 Larsen & Toubro Holding ICD Borrowed 22241.57 3557.14Limited Company Equity Shares issued 5000.00

Lease finance given 7241.22ExpenditureInterest on ICD borrowed 25.32 6.50Service Charges 66.13IncomeLease Finance Charges 11.14Operating Lease Rental 3437.95 476.29Service Charges 354.02 30.88

Transaction2 India Infrastructure Fellow Assignment of Hire Purchase/

Developers Limited Subsidiary Term loan Receivables 11244.13ICD Lent 3000.00 1573.10

Sundry CreditorsIncomeService Charges 14.40Interest 47.55


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L&T FINANCE LTD.

Rs. Lacs

No. Name of Company Relationship Nature of Amount Amount Amounttransaction due to due fromTransaction

3 HPL Cogeneration Fellow ICD Borrowed 4000.00 4000.00Limited Subsidiary Expenditure

Interest 274.45 1.15

Transaction4 L&T Capital Subsidiary ICD Borrowed 605.00 605.00

Company Limited Company ExpenditureInterest 47.65Professional Fees 24.37 24.37IncomeService Charges 9.07 9.07Dividend 82.50 82.50

Transaction5 Larsen & Toubro Fellow Lease Finance Given 538.83

Infotech Limited SubsidiaryCompany Expenditure

Service Charges 52.55 28.15IncomeLease Finance Charges 3.11Operating Lease Rentals 67.24Service Charges 22.15

Transaction6 L&T - Sargent & Fellow Lease Finance Given 13.02

Lundy Limited Subsidiary IncomeCompany Lease Finance Charges 2.70

Income7 Tractors Engineers Fellow Operating Lease Rentals 2.17

Limited Subsidiary Service Charges 2.00 1.10Company

Transaction8 L & T Infrastructure Fellow Investment Sale 2893.07

Development SubsidiaryProjects Limited Company

(iii) Earnings per share (“EPS”) computed in accordance with Accounting Standard (AS) 20 : “Earnings per share” :2005-06 2004-05

(a) Profit after tax for the year 3513.46 2403.19(b) Weighted average number of equity shares 8,73,42,185 8,66,91,500(c) i) Nominal value of shares (Rs) 10.00 10.00

ii) Earnings per share Basic and diluted (Rs.) 4.02 2.77

L. Disclosure in respect of Operating Leases as required under Accounting Standards (AS) 19 - Leases :a) Gross Value of assets and accumulated depreciation as on Balance Sheet date :

2005-06 2004-05Rs. Lacs Rs. Lacs

– Gross Value of assetsPlant & Machinery 12198.93 6493.40Vehicles 6736.84 4613.22Computers 865.80 138.61– Accumulated DepreciationPlant & Machinery 1969.95 1091.27Vehicles 1537.62 952.29Computers 62.79 9.62b) The total lease depreciation recognised in the Profit and Loss Account for the year is Rs. 1758.85 lacs (P. Y. Rs. 1198.01 lacs). No

contingent rent has been recognised in the Profit and Loss Account during the year (P. Y. Rs Nil).c) The Company provides vehicles, computers, construction equipment and other plant & machinery on operating lease for varying

periods and the lease can be renewed as per mutual agreement. Contractually, the lessee has the option to reduce the leaseperiod and hence the agreements are treated as cancellable in nature.


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L&T FINANCE LTD.

M. Expenditure in Foreign currency:On Interest Rs. 503.92 Lacs (P.Y. Rs. 418.38 Lacs)On other matters Rs. 1.12 Lacs (P.Y. Rs. 1.12 Lacs)

N. Provision for taxes :(a) i) Income Tax Rs. 740.00 Lacs (P.Y. Rs. 200.00 Lacs)

ii) Wealth Tax Rs. 14.00 lacs (P.Y. Rs. 8.00 lacs)iii) Fringe Benefit Tax Rs. 17.32 Lacs (P.Y. Rs. Nil Lacs)

(b) Deferred Tax Liability : In terms of the interim injunction dated 6th December 2001 restraining the Institute of Chartered Accountantsof India from implementing the Accounting Standard (AS) -22 -Accounting for Taxes on Income, with reference to Non-bankingFinance Companies, issued by the High Court of Judicature at Madras in response to the Miscellaneous Petition no. 27682 of 2001in Writ Petition No. 18827 of 2001 filed by the Association of Leasing & Financial Services Companies of which the company is amember, pending final disposal of this Petition no provision has been made in the accounts towards deferred tax liability, if any.

O. The Company has entered into certain derivative transactions including transactions involving foreign currencies. These derivativetransactions, being considered as off-Balance Sheet transactions, the cash flows arising therefrom are recognised in the books ofaccount as and when the settlements take place in accordance with the terms of the respective contracts over the tenor thereof.

P. Miscellaneous Expenditure includes Rs. 10.58 Lacs (P.Y. Rs.48.10 Lacs) on account of loss on foreclosure of certain Hire Purchaseagreements.

Q. Schedule to the Balance Sheet of a Non-Banking Financial Company as required in terms of Paragraph 9BB of Non-Banking FinancialCompanies Prudential Norms (Reserve Bank) Directions, 1998

Rs. LacsParticularsLiability Side Amount Amount

Outstanding Overdue

1. Loans and advances availed by the NBFCs inclusive of interest accrued thereon but not paid(a)Debentures :

Secured 20000.00 –Unsecured (Other than falling within 7000.00 –the meaning of Public Deposits)

(b)Deferred Credits – –(c)Term Loans 58041.85 –(d) Inter-Corporate Loans and borrowings 8162.15 –(e)Commercial Paper 9500.00 –(f) Public Deposits * – –(g)Other Loans (Foreign Currency Loan) 10328.45 –(h)Lease Finance 22.83 –

2. Break-up of (1)(f) above (Outstanding public deposits inclusive ofinterest accrued thereon but not paid) :(a) In the form of Unsecured debentures – –(b) in the form of partly secured debentures i.e. debentures where there

is a shortfall in the value of security – –(c)Other Public deposits – –

3. Break-up of Loans and Advances including bills receivables [Other than those included in (4) below](a)Secured 74662.49 –(b)Unsecured 38141.62 –

4. Break-up of Leased Assets and Stock on Hire and hypothecation loanscounting towards EL/HP activities(i) Lease assets including lease rentals under sundry debtors :

(a)Financial Lease 1562.02 –(b)Operating Lease 16231.21 –

(ii) Stock on hire including hire charges under sundry debtors(a)Assets on Hire 415.24 –(b)Repossessed Assets – –

(iii)Hypothecation loans counting towards EL/HP activities(a)Loans where assets have been repossessed – –(b)Loans other than (a) above – –

5. Break-up of InvestmentsCurrent Investments1. Quoted

(i) Shares :(a) Equity 11.08 –(b) Preference – –

(ii) Debentures and Bonds – –(iii) Units of Mutual Funds – –(iv) Government Securities – –(v) Others (please specify) – –


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L&T FINANCE LTD.

Rs. LacsParticularsLiability Side Amount Amount

Outstanding Overdue

2. Unquoted :(i) Shares :

(a) Equity – –(b) Preference – –


Long Term Investments1. Quoted

(i) Shares :(a) Equity – –(b) Preference – –


2. Unquoted :(i) Shares :

(a) Equity 1150.00 –(b) Preference – –

(ii) Debentures and Bonds – –(iii) Units of Mutual Funds – –(iv) Government Securities 0.03 –(v) Others (please specify) 0.01 –

Rs. LacsSecured Unsecured Total

6. Borrower group-wise classification of all leased assets, stock-on-hire andloans and advancesCategory Amount net of provisions1. Related Parties

(a) Subsidiaries – – –(b) Companies in the same group 14537.54 – 14537.54(c) Other related parties – – –

2. Other than related parties 76771.40 39703.64 116475.04

Total 91308.94 39703.64 131012.58

Market Value/ Book ValueBreak up or (Net offair value or Provisions)

NAV

7. Investor group-wise classification of all investments (current and long termin shares and securities) (both quoted and unquoted):Category1. Related Parties

a) Subsidiaries 550.00 550.00b) Companies in the same group 600.00 600.00c) Other related parties – –

2. Other than related parties 11.12 11.12

Total 1161.12 1161.12


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L&T FINANCE LTD.

Particulars Amount

8. Other information(i) Gross Non-Performing Assets

(a) Related parties –(b) Other than related parties 187.66

(ii) Net Non-Performing Assets(a) Related parties –(b) Other than related parties 168.89

(iii)Assets acquired in satisfaction of debt 1353.43

R. Sundry Creditors include unclaimed matured fixed deposits of Rs. 15.97 Lacs. There is no amount due and outstanding to be creditedto Investor Education and Protection Fund as at 31st March, 2006.

S. Previous year figures have been regrouped/reclassified wherever necessary.






}

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L&T FINANCE LTD.

SCHEDULE-15Balance sheet abstract and company’s general business profile


Registration No. 1 1 - 8 3 1 4 7 State Code No. 1 1



Note: 1,25,00,000 equity shares of Rs. 10/- each issued for cash at a premium of Rs. 30/- per share aggregating to Rs. 5,00,000.00(Rs. in Thousands)



N I L 5 0 0 0 0 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rs.Thousands)Total Liabilities Total Assets

1 3 4 5 6 5 3 3 1 3 4 5 6 5 3 3Sources of Funds


9 9 1 9 1 5 1 1 5 9 0 9 0

Secured Unsecured Loans

5 7 8 7 0 3 1 5 5 1 8 4 9 7Application of Funds


2 2 3 1 9 4 9 1 1 6 1 1 2

Net Current Assets Miscellaneous Expenditure

1 1 1 0 8 4 7 2 N I L

Accumulated Losses

N I L

IV. Performance of Company (Amount in Rs.Thousands)Turnover Total Expenditure

1 4 9 0 5 6 0 1 0 6 2 0 8 2

Profit before Tax Profit after Tax

4 2 8 4 7 8 3 5 1 3 4 6

**Earning per share Rs. Dividend Rate %

4 . 0 2 0**Annualised

V. Generic Names of three Principal Products

Item Code No. N A

Product L O A N SDescription L E A S I N G / H I R E P U R C H A S E

B I L L D I S C O U N T I N G






}

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L&T FINANCE LTD.

Statement pursuant to Section 212 of the Companies Act, 1956 relating toStatement pursuant to Section 212 of the Companies Act, 1956 relating toStatement pursuant to Section 212 of the Companies Act, 1956 relating toStatement pursuant to Section 212 of the Companies Act, 1956 relating toStatement pursuant to Section 212 of the Companies Act, 1956 relating toSubsidiary CompaniesSubsidiary CompaniesSubsidiary CompaniesSubsidiary CompaniesSubsidiary Companies

Name of the subsidiary company L&T Capital Company Ltd.

Financial year of the subsidiary ended on 31st March, 2006Number of shares of the subsidiary company held 55,00,000by L & T Finance Ltd. and / or its nominee at the above dateThe net aggregate of profits/(losses), of the subsidiary company so far as itconcerns the members of L&T Finance Ltd.(i) Dealt with in the accounts of L&T Finance Ltd. amounted to

a) for the subsidiary’s financial year ended 31.03.2006 Rs. 82.50 lacsb) for the previous years of the subsidiary since it Rs. 55.00 lacs

became subsidiary of L&T Finance Ltd(ii) Not dealt with in the accounts of L&T Finance Ltd amounted to:

a) for the subsidiary’s financial year ended 31.03.2006 Rs. 38.27 lacsb) for the previous years of the subsidiary since it Rs. 149.58 lacs

became subsidiary of L&T Finance Ltd.

A.N. Mani Y.M. DeosthaleeManager

Directors

V.C. Raje N. SivaramanVice President – Accounts &Company Secretary

Place: MumbaiDated: May 4, 2006

}

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L&T CAPITAL COMPANY LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their Report and Audited Accounts for the year ended 31st March, 2006.

1. FINANCIAL RESULTS (Rs. In lakhs)Year Ended

31.03.2006 31.03.2005

Gross Income 397.69 321.95Total Expenses 223.12 235.58Profit Before Tax 174.57 86.37Current Taxes 59.35 32.03Adjustments (Deferred Tax) (7.76) (0.74)Fringe Benefit Tax 2.21 -Balance brought forward from previous year 149.58 94.50Profit After tax 120.77 55.08Equity Dividend - 0.00Surplus carried forward 270.35 149.58

2. DIVIDENDThe Directors recommend a final dividend of Rs. 1.50 per equity share on a pro rata basis as compared to no dividend for the previous year.

3. YEAR IN RETROSPECT/ PERFORMANCE OF THE COMPANYThe Company’s income recorded an increase of 24% over last financial year, at Rs. 397.69 lakhs. The expenditure registered a decrease of over 5%,compared to last year. The Profit After Tax recorded a growth of 119% over the last year.

4. FINANCEDuring the year, the Company increased its authorized and paid up capital to Rs. 10.5 Crores. The additional shares worth Rs. 5 Cores weresubscribed by Larsen and Toubro Limited.

With the allotment of shares to Larsen & Toubro Limited, the shareholding pattern of the Company stands changed as under:

Shareholding Pattern of L&T Capital Company Limited

S.No. Name of Prior to Allotment Post AllotmentShareholder Shares % Shares %

1 L&T Finance Ltd. 5,499,994 100.00% 5,499,994 52.38%

2 Larsen & Toubro Ltd. 0 0.00% 5,000,000 47.61%

3 Others 6 0.00% 6 0.00%

Total 5,500,000 100.00% 10,500,000 100.00%

5. CAPITAL EXPENDITUREAs at 31st March, 2006 the gross fixed assets stood at Rs.82.49 lakhs and the net fixed assets at Rs.29.69 lakhs. Additions during the year amountedto Rs. 44.82 lakhs.

6. DEPOSITSDuring the period under review the Company has not accepted any deposits from the public.

7. AUDITORS’ REPORTThe Auditors’ Report to the Shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further comments of Directors.

8. DISCLOSURE OF PARTICULARSAs the Company is engaged in rendering non-banking financial services, there are no particulars to be disclosed as per the Companies’ (Disclosureof Particulars in the Report of Board of Directors) Rules, 1988 relating to conservation of energy and technology absorption.

The Foreign Exchange Earnings during the year was Rs. Nil while the Foreign Exchange outgo recorded for the year was Rs. 0.54 Lakhs.

9. PERSONNELThere are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules, 1975.

10. DIRECTORS RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirm:

i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no materialdeparture;

ii. that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for theyear ended on that date;



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11. DIRECTORSIn terms of Section 256 of the Company’s Act 1956, Mr. R. Shankar Raman retires by rotation and being eligible, offers himself for re-appointment.

12. AUDIT COMMITTEEThe Audit Committee consists of three non-executive directors. The present members of the Committee are Mr. Y. M. Deosthalee, Mr. R. ShankarRaman and Mr. N. Sivaraman. Mr. R. Shankar Raman is the Chairman of the Audit Committee. The role, terms of reference, the authority and powerof Chairman are in conformity with the requirements of the Companies Act, 1956. The Committee met periodically during the year and had discussionswith the auditors on internal control systems and internal audit report.

13. AUDITORSThe Auditors, M/s. Sharp & Tannan, hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment.Certificate from the auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section224(1B) of the Companies Act, 1956.

14. ACKNOWLEDGEMENTSThe Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, vendors, suppliers and customers.The Directors are pleased to place on record their appreciation for the valuable contribution made by the employees of the Company.


Y. M. DEOSTHALEE N. SIVARAMAN

Place: Mumbai Director DirectorDate: May 4, 2006

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportWe have audited the attached Balance sheet of L&T Capital Company Limited as at 31st March, 2006, the Profit and Loss Account and the Cash FlowStatement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

In accordance with the provisions of Section 227 of the Companies Act 1956, we report that:

1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227(4A) of theCompanies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.


(a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of ouraudit;


(c) the Balance sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the Profit and Loss Account, the Balance Sheet and Cash Flow Statement dealt with by this report comply with the accountingstandards referred to in Section 211(3C) of the Companies Act, 1956 to the extent applicable;

(e) on the basis of the written representations received from directors of the Company as at 31st March, 2006 and taken on record by the Board ofDirectors, we report that none of the director is disqualified as on 31st March, 2006 from being appointed as a director in terms of Section274(1)(g) of the Companies Act, 1956; and

(f) in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with theSignificant Accounting Policies in Schedule – ‘13’ and Notes on Accounts – ‘14’ appearing thereon, give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted inIndia;

(i) in the case of the Balance sheet, of the state of affairs of the Company as at 31st March, 2006;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.


by the hand of

MILIND P. PHADKEPlace: Mumbai PartnerDate: May 4, 2006 Membership No. 33013

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1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) We have been informed that the fixed assets have been physically verified by the management at reasonable intervals and no materialdiscrepancies were noticed on such verification.

(c) The Company has not disposed off any substantial part of its fixed assets during the year so as to affect its going concern status.

2. The Company does not hold any inventories. Accordingly, reporting on paragraph 4 (ii) (a), (b) and (c) of the Order are not applicable.

3. The Company has neither granted nor taken any loans, secured or unsecured, to companies, firms or other parties covered in the register maintainedunder Section 301 of the Companies Act, 1956. Accordingly, reporting on paragraph 4 (iii) (b), (c), (d), (f) and (g) of the Order are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with thesize of the Company and the nature of its business for the purchase of fixed assets and for services rendered. We have neither come across nor havebeen informed of any continuing failure to correct major weaknesses in internal control system.

5. According to the information and explanations given to us, there are no contracts or arrangements that need to be entered in to the registermaintained under Section 301 of Companies Act, 1956. Accordingly, reporting on paragraph 4 (v) (b) of the Order is not applicable.

6. The Company has not accepted any deposits during the year from the public to which the directives issued by the Reserve Bank of India and theprovisions of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framed there under apply.

7. The Company is having an internal audit system commensurate with the size of the Company and the nature of its business.

8. According to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under Section209 (1) (d) of the Companies Act, 1956.

9. (a) According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues including providentfund, investor education and protection fund, income tax, sales tax, wealth tax, cess and other statutory dues as applicable with the appropriateauthorities. However, there are delays in the deposit of service tax dues. According to the information and explanations given to us, there areno arrears of outstanding statutory dues as at the last day of the financial year for a period exceeding six months from the date they becamepayable.

(b) According to the information and explanations given to us, there are no dues in respect of sales tax, income tax, wealth tax or cess which havenot been deposited with the appropriate authorities on account of dispute.

10. The Company has no accumulated losses as at 31st March, 2006 and it has not incurred cash loss in the financial year and also in the immediatelypreceding financial year.

11. The Company has not availed loans from financial institutions and banks. Accordingly, reporting on paragraph 4 (xi) of the Order is not applicable.

12. The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly,reporting on paragraph 4 (xii) of the Order is not applicable.

13. The provisions of any special statute applicable to chit fund/ nidhi /mutual benefit fund/societies are not applicable to the Company. Accordingly,reporting under paragraph 4 (xiii) of the Order is not applicable.

14. The Company is dealing or trading in shares, securities, debentures and other investments. The Company has maintained proper records of thetransactions and contracts and timely entries have been made therein and the shares, securities, debentures and other securities have been held bythe Company, in its own name.

15. The Company has not given any guarantee for loans taken by others from bank or financial institutions. Accordingly, reporting on paragraph 4 (xv) ofthe Order is not applicable.

16. The Company has not availed any term loans. Accordingly, reporting on paragraph 4 (xvi) of the Order is not applicable.

17. According to the information and explanations given to us and on an overall examination of the Balance sheet of the Company, we report that thereare no funds raised on short-term basis which are used for long-term investments.

18. The Company has not made any preferential allotment of shares during the year.

19. The Company has not issued any debentures during the year. Accordingly, reporting on paragraph 4 (xix) of the Order is not applicable.

20. The Company has not raised any money by public issues during the year. Accordingly, reporting on paragraph 4 (xx) of the Order is not applicable.

21. During the course of our examination of the books and records of the Company, carried out in accordance with generally accepted auditing practicesin India, and according to information and explanations given to us, we have neither come across any fraud on or by the Company noticed or reportedduring the year, nor have we been informed of such case by management.


by the hand of

MILIND P.PHADKEPlace: Mumbai PartnerDate: May 4, 2006 Membership No.33013

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Balance Sheet as on 31st March, 2006Balance Sheet as on 31st March, 2006Balance Sheet as on 31st March, 2006Balance Sheet as on 31st March, 2006Balance Sheet as on 31st March, 2006Schedules As at 31.03.2006 As at 31.03.2005

Rupees Rupees Rupees RupeesSOURCES OF FUNDS:SHAREHOLDERS’ FUNDS

Share capital 1 105,000,000 55,000,000

Reserves and surplus 2 17,604,282 14,958,357

122,604,282 69,958,357Loan Funds

Unsecured loans 3 537,341 537,341 752,026 752,026

TOTAL 123,141,623 70,710,383

APPLICATION OF FUNDS :Fixed Assets

TangibleOwned AssetsGross block 4 3,772,439 2,605,846Less : Depreciation 1,339,393 981,655

Net block 2,433,046 1,624,191Leased AssetsGross block 4 1,276,985 1,276,985Less : Depreciation 739,644 524,959

Net block 537,341 752,026IntangibleOwned AssetsGross block 4 3,200,000 -Less : Depreciation 3,200,000 -

Net block - -Investments 5 26,854,225 42,953,434Current Assets, Loans and Advances 6

Sundry debtors 2,795,931 1,443,126Cash and bank balances 49,476,054 2,285,713Loans and advances 75,632,462 40,278,828

127,904,447 44,007,667

Less:Current Liabilities and Provisions 7Liabilities 10,805,942 9,426,147Provisions 24,648,763 9,291,809

35,454,705 18,717,956

Net current assets 92,449,742 25,289,711

Deferred tax asset (net) 867,270 91,022

Miscellaneous Expenditure 8 - -(to the extent not written off or adjusted)

TOTAL 123,141,623 70,710,383

Significant Accounting Policies 13Notes on Accounts 14


MILIND P.PHADKEPartner(Membership No.33013)Place : MumbaiDated : 4th May, 2006

M. PUSHPANGADAN Chief Executive

Y. M. DEOSTHALEE

R. SHANKAR RAMAN Directors

N. SIVARAMAN

Place : MumbaiDated : 4th May, 2006

}

S-89


Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006Profit & Loss Account for the year ended 31st March, 2006

Schedules 2005-2006 2004-2005

Rupees Rupees Rupees RupeesINCOME:

Income from operations 9 31,428,246 29,158,909

Other income 10 8,340,663 3,035,809

39,768,909 32,194,718

EXPENDITURE:

Personnel expenses 11 8,925,352 8,283,549

Administration and other expenses 12 9,495,164 14,463,095

Interest and finance charges 87,039 121,288

Depreciation 3,805,060 587,298

Preliminary expenses written off - 102,598

22,312,615 23,557,828

Profit before taxes 17,456,294 8,636,890

Provision for taxes

Current taxes 5,934,767 3,202,673

Deferred tax (776,248) (74,021)

Fringe benefit tax 221,359 -

5,379,878 3,128,652

Profit after taxes 12,076,417 5,508,238

Balance brought forward from previous year 14,958,358 9,450,119

Profit available for appropriation 27,034,774 14,958,358

Appropriations

General Reserve 700,000

Proposed Dividend 8,270,548

Additional Tax on Dividend 1,159,944

Balance carried to balance Sheet 16,904,282 14,958,358

Earnings per share

Basic and diluted (Rupees.) 2.20 1.00


Notes on Accounts 14


MILIND P.PHADKEPartner(Membership No.33013)Place : MumbaiDated : 4th May, 2006


Y. M. DEOSTHALEE


N. SIVARAMAN


}

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Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 20062005-06 2004-05Rupees Rupees

A. Cash Flow from operating activitiesProfit before taxation and extraordinary item 17,456,294 8,636,890Adjustment for :Depreciation 3,805,060 587,298Miscellaneous Expenditure written off - 102,598Provision for leave encashment 6,013 122,900Provision for Gratuity (14,318) 132,784Interest Expenses 87,039 122,365(Profit) on sale of investment (3,230,227) (994,475)(Income) from investment (117,032) (91,388)Provision for exp written back 50,143 62,630

Operating Profit before working capital changes 18,042,972 8,681,6028,681,6028,681,6028,681,6028,681,602Adjustment for :(Increase)/decrease in Sundry debtors (1,352,806) (1,105,132)(Increase)/decrease in Loans and advances (40,405,931) (17,371,164)(Increase)/decrease in Trade payables 1,108,293 (1,307,793)

Cash generated from Operations (22,607,472) (11,102,487)(11,102,487)(11,102,487)(11,102,487)(11,102,487)Direct Tax paid (5,052,297) (2,072,357)

Net cash from operating activities (17,555,175) (9,030,130)(9,030,130)(9,030,130)(9,030,130)(9,030,130)B. Cash flow from investing activities :

Sale of fixed assets 82,884 154,262Purchase of fixed asset (4,482,113) (262,845)Sale of investment 46,183,661 11,745,433Purchase of investment (26,854,225) (748,694)Income from investment 117,032 91,388

Net cash (used in)/from Investing activites 15,047,239 10,979,54510,979,54510,979,54510,979,54510,979,545C. Cash flow from financing activities :

Repayment of long term borrowings (214,685) (378,004)Proceeds from issue of shares 50,000,000 -Proceed from other borrowings (Net) (87,039) (122,365)Dividend paid (Including taxes) - (3,102,344)

Net cash (used in)/from financing activites 49,698,276 (3,602,713)

Net (decrease)/increase in cash and cash equivalents (A+B+C) 47,190,341 (1,653,299)(1,653,299)(1,653,299)(1,653,299)(1,653,299)Cash and cash equivalents at beginning of the year 2,285,713 3,939,0123,939,0123,939,0123,939,0123,939,012

Cash and cash equivalents at end of the year 49,476,054 2,285,7132,285,7132,285,7132,285,7132,285,713Notes :1. Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS) 3 ‘Cash Flow Statements’, issued

by the Institute of Chartered Accountants of India.

2. Cash and cash equivalents represent cash and bank balances.

3. Previous year’s figures have been regrouped/reclassified wherever applicable.


MILIND P.PHADKEPartner(Membership No.33013)



Y. M. DEOSTHALEE


N. SIVARAMAN


}

S-91


Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsAs at 31.03.2006 As at 31.03.2005

Rupees Rupees Rupees RupeesSCHEDULE - 1

Share CapitalAuthorised:105,00,000 Equity shares of Rs 10/- each( Previous year 55,00,000 Equity shares of Rs.10/- each ) 105,000,000 55,000,000

Issued and subscribed:105,00,000 Equity shares of Rs 10 each fully paid 105,000,000 55,000,000Of the above:54,99,994 Equity shares are held by L&T Finance Limited the holding Company50,00,000 Equity shares are held by Larsen & Toubro Limited

105,000,000 55,000,000

SCHEDULE - 2Reserves and SurplusGeneral ReserveAmount transferred from Profit and Loss Account 700,000Profit and loss account 16,904,282 14,958,358

17,604,282 14,958,358

SCHEDULE - 3Unsecured LoansFinance leaseLease finance(Due within one year) 206,500 214,685(Due beyond one year) 330,841 537,341

537,341 752,026

SCHEDULE - 4

Fixed assetsRupees

Fixed Assets Gross Block Depreciation Net Block

As at As at Upto For the Upto As at As at1.04.2005 Additions Deductions 31.03.2006 31.03.2005 Year Deductions 31.03.2006 31.03.2006 31.3.2005

Tangible AssetsOwned AssetsPlant & Machinery 1,088,492 243,286 40,646 1,291,133 240,117 108,625 8,424 340,318 950,815 884,920Furniture & Fixtures 14,400 - - 14,400 1,451 912 - 2,363 12,037 12,949Computers & Peripherals 1,502,954 1,038,827 74,875 2,466,906 740,087 280,838 24,213 996,712 1,470,194 726,322

2,605,846 1,282,113 115,521 3,772,439 981,655 390,375 32,637 1,339,393 2,433,046 1,624,191

Leased Assets

Vehicles 1,276,985 - - 1,276,985 524,959 214,685 - 739,644 537,341 752,026

1,276,985 - - 1,276,985 524,959 214,685 - 739,644 537,341 752,026

(A) 3,882,831 1,282,113 115,521 5,049,424 1,506,614 605,060 32,637 2,079,037 2,970,387 2,376,217

Intangible Assets

Software - 3,200,000 - 3,200,000 - 3,200,000 - 3,200,000 - -

(B) - 3,200,000 - 3,200,000 - 3,200,000 - 3,200,000 - -

Total (A+B) 3,882,831 4,482,113 115,521 8,249,424 1,506,614 3,805,060 32,637 5,279,037 2,970,387 2,376,217Previous Year 3,917,558 262,845 297,573 3,882,831 1,062,627 587,298 143,311 1,506,614 2,376,217

S-92


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)As at 31.03.2006 As at 31.03.2005


Investments (At cost)Long Term:

Current investmentQuotedFully paid equity shares 16,032,949 -UnquotedMutual funds 10,821,275 42,953,434

26,854,224 42,953,434

Note:Quoted Investments

Book Value 16,032,949 -Market Value 16,245,893 -

Unquoted InvestmentsBook Value 10,821,275 42,953,434

Particulars of investments:Fully paid equity sharesAplab Limited140718 shares of Rs. 10/- each 16,032,949 -Mutual funds:Chola Liquid Inst Plus - Weekly Dividend 748,6949,18,481.465 Units of Rs 10/- each 10,821,275(2,857,454.892 Units purchased during the year)(2,013,712.800 Units sold during the year)(9,976.261 Units received as dividend)Reliance Fixed Term Scheme-Annual Plan-3-Growth Option - 42,204,740Units of Rs. 10/- each(4,220,474 Units sold during the year)

26,854,224 42,953,434

SCHEDULE - 6Current Assets, Loans and Advances

Sundry Debtors -Unsecured, considered good

Outstanding for more than six months - -Other debts 2,795,931 1,443,126

2,795,931 1,443,126Cash and bank balancesCash in hand 4,716 13,156Balance with scheduled bank

in current account 47,603,706 407,864in deposit(amount invested including interest accrued thereon) 1,867,632 1,864,692

49,476,054 2,285,713Loans and advances

Unsecured, considered goodConsidered good:

Inter corporate deposits - holding Company 60,500,000 29,900,000Advances recoverable in cash or in kind or value to be received 15,132,462 10,378,828

75,632,462 40,278,828

127,904,447 44,007,668

S-93





LiabilitiesSundry creditors 10,805,942 9,426,147ProvisionsProvision for taxes 13,946,563 8,011,796Proposed dividend 8,270,548 -Addional tax on dividend 1,159,944 -Provision for gratuity 643,056 657,374Provision for leave encashment 628,652 622,639

24,648,763 9,291,809

35,454,705 18,717,95618,717,95618,717,95618,717,95618,717,956

SCHEDULE - 8

Miscellaneous Expenditure(to the extent not written off or adjusted) Amount brought forward - 102,598 Less : Amortised during the year - - 102,598 -

- -----

2005-06 2004-05


Income from OperationsArrangers fee 2,307,492 6,248,310

Tax deducted at source - Rs. 1,36,685 ;(Previous year - Rs.1,79,989)

Consultancy fees 5,630,523 1,698,338Tax deducted at source - Rs. 2,85,798 ;(Previous year - Rs.93,493)

Portfolio management services-fees 2,437,279 -Tax deducted at source - Rs. Nil

Syndication fees - money markets 21,052,952 21,212,261Tax deducted at source - Rs. 1,169 ;(Previous year - Rs.117,085)

31,428,246 29,158,90929,158,90929,158,90929,158,90929,158,909

SCHEDULE - 10

Other IncomeInterest on:

Inter corporate deposit 4,782,648 1,772,490Tax deducted at source - Rs. 13,27,248(Previous year - Rs.1,37,060)Deposit account with banks 99,070 99,639Tax deducted at source - Rs. 20,725.20(Previous year - Rs.20,834)

4,881,718 1,872,129Dividend from investments 6,000 -Income from mutual funds 117,032 91,388Profit on sale of current investment 3,230,227 994,476Provision for expenses written back 50,143 15,186Others 55,544 62,630

8,340,663 3,035,8093,035,8093,035,8093,035,8093,035,809

S-94


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)2005-06 2004-05

Rupees Rupees Rupees Rupees

SCHEDULE - 11

Personnel ExpensesSalaries and incentives 7,834372 7,019,847Contribution to and provision for :

Provident fund and pension fund 294,018 320,482 Gratuity 116,297 167,399 Superannuation 182,100 211,200 Leave encashment 186,596 265,551

779,011 964,632Staff and welfare expenses 311,969 299,069

8,925,352 8,283,5498,283,5498,283,5498,283,5498,283,549

SCHEDULE - 12

Administrative and Other Expenses

Rates and taxes 301,000 255,500Repairs and maintenance Plant and machinery 622,228 591,576 Others 293,597 915,825 2,007,600 2,599,176Insurance 911 11,995Printing and stationery 211,887 108,976Electricity charges 385,619 352,906Information Services 3,298,655 2,456,222Telephone, postage and courier 817,840 480,820Travelling and conveyance 2,412,439 2,013,201Computer software expenses 81,468 22,077Professional charges 175,000 3,460,988Auditors’ remuneration : Audit fees 75,000 75,000 Tax audit fee 21,600 21,600 Other matters 30,000 126,600 30,000 126,600Miscellaneous expenses 767,920 2,574,635

94,95,164 14,463,09514,463,09514,463,09514,463,09514,463,095

S-95


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE - 13

Significant Accounting Policies1. Basis of Accounting:

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with Generally Accepted AccountingPrinciples (’GAAP’) and in compliance with the Accounting Standards referred to in Section 211 (3C) and other requirements of the CompaniesAct, 1956.The preparation of financial statements in conformity with GAAP requires that the management of the Company makes estimates and assumptionsthat affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relatingto contingent liabilities as of the date of the financial statements. Examples of such estimates include the useful lives of fixed assets, provision fordoubtful debts/advances, future obligations in respect of retirement benefit plans, etc. Actual results could differ from these estimates. Anyrevisions to accounting estimates is recognized prospectively in the current and future periods. Wherever changes in presentation are made,comparative figures of the previous year are regrouped accordingly.

2. Revenue RecognitionFees are recognized as income on successful completion of assignments.

3. Fixed Assetsa. Fixed assets are capitalised at acquisition cost (net of duty credits availed, if any), including directly attributable costs such as freight,

insurance and specific installation charges for bringing the assets to working condition for use.b. Expenditure relating to existing fixed assets is added to the cost of the assets, where it increases the performance / life of the asset as

assessed earlier.c. Fixed assets are eliminated from financial statements either on disposal or when retired from active use.d. Assets acquired on finance lease after 1st April, 2001 are capitalized in accordance with Accounting Standard (AS) 19 Leases, issued by

Institute of Chartered Accountants of India.4. Intangible assets and Amortisation

Intangible assets are recognized as per the criteria specified in Accounting Standard (AS) 26 Intangible Assets, issued by the Institute ofChartered Accountants of India and are amortised during the year.

5. Depreciationa. Depreciation on assets held for own use has been provided on straight line method at the rates and in the manner as provided in Schedule

XIV to the Companies Act, 1956, as amended from time to time.b. Depreciation on assets taken on financial lease has been provided on straight line method over the lease term of the asset.c. Depreciation on assets acquired and given to employees under the Hard Furnishing Scheme has been provided @ 18% per annum on

straight line method.6. Investments

Long term investments are carried at cost, after providing for any diminution in value, if such diminution is of a permanent nature. Currentinvestments are carried at lower of cost or market value.

7. Retirement BenefitsProvisions for / contributions to retirement benefits schemes are made as follows:a. Provident fund on actual liability basis;b. Gratuity on actuarial valuation basis;c. Superannuation / Pension schemes on the basis of actual liability; andd. Leave encashment on retirement on actuarial valuation basis.

8. Taxes on incomea. Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the

provisions of the Income tax Act 1961, and based on expected outcome of assessments / appeals.b. Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using

the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.c. Deferred tax assets are recognized and carried forward to the extent that there is a virtual certainty that sufficient future taxable income will

be available against which such deferred tax assets can be realised.9. Provisions, Contingent liabilities and Contingent assets

a. Provisions for warranties has been made on the basis of past experience as regards the amount of expenditure incurred on repairs/replacements within warranty period.

b. Accounting for contingencies (gains and losses) arising out of contractual obligations, are accounted on the basis of mutual acceptances.c. Contingent assets are neither recognized nor disclosed.d. Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.

10. Miscellaneous expenditurePreliminary expenses are amortised over a period of five years from the year of commencement of operations.

11. Prior period and extraordinary itemsIncome and expenditure pertaining to prior period as well as extraordinary items, where material, are disclosed separately.

12. Events occurring after the date of balance sheetWhere material events occurring after the date of the Balance Sheet are considered upto the date of approval of accounts by the Board ofDirectors.

S-96


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE - 14Notes on Accounts1. Contingent Liabilities Rs.Nil2. The Manager’s salary and perquisites charged to accounts

Year ended Year ended31.03.2006 31.03.2005

Rupees RupeesSalary 1,987,854 1,978,653Perquisites 24,209 54,007PF employer’s contribution 58,303 55,423Retirement benefits 81,000 77,400

Total 2,151,366 2,165,483

3. Expenditure in foreign currency:Year ended Year ended31.03.2006 31.03.2005

Rupees RupeesOthers matter - travelling Nil 50,854

4. The Company do not owe a sum, which is outstanding for more than 30 days to the small scale industrial undertakings as at 31st March, 2006.5. Segment Reporting

The Company’s business activities fall within a single segment, viz. Portfolio Management, Mutual Fund Distribution, Merchant Banking andpredominantly operates in domestic market. Accordingly, disclosure requirements under Accounting Standard (AS) 17 Segment Reporting is notapplicable.

6. Disclosure of related parties / Related party transactions:(a) List of related parties:

Name of the Related Party Relationship1. Larsen & Toubro Limited Parent Holding Company2. L&T Finance Limited Holding Company

(b) Names of the related parties with whom transactions were carried out during the year and description of relationshipName of the Related Party Relationship1. Larsen & Toubro Limited Parent Holding Company2. L&T Finance Limited Holding Company3. L&T - Ramboll Consulting Engineers Limited Associate Company

(c) Disclosure of related party transactions: RupeesNature of Transaction Parent Holding Subsidiaries Associates

Holding Company of L&T of L&TCompanies

1 Services and Other income- Arranger’s Fees - - - -

- - (1,191,717) -- Consultancy Fees 3,135,000 - - 425,000

- (500,000) - (625,000)- Syndication Fees

Money Markets - - - -- Portfolio Management Services Fees - 2,437,279 - -

- - - -Other Income- Interest on Inter corporate deposit - 4,782,648 - -

- (1,772,490) - -- Expenses Reimbursed - - - -

(229,955) - - (1,989)2 Expenditure on Consultancy Services - - - -3 Expenditure on other services

- Professional charges paid for various services 80,000 - - -(5,361,023) - - -

4 Other expenditure- Expenses Reimbursed 6.297.702 - - -

(3,088,000) - - -5 Outstanding balances as at 31st March, 2006

- Debtors - 2,437,279 - 287,500- (1,236,137) - (76,989)

- Creditors 5,996,354 907,711 - -(8,076,553) - - -

- Loans & Advances - 60,500,000 - -- (29,900,000) - -

S-97


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)7. Lease rentals in respect of assets taken under finance lease were charged off as expense up to 31st March, 2001. In compliance with the

Accounting Standard (AS) 19 Leases issued by the Institute of Chartered Accountants of India and made mandatory in respect of all assets takenon lease on or after 1st April 2001, the assets acquired under finance leases are capitalized at fair value at the inception of the lease and a liabilityis recognized for an equivalent amount. These assets are depreciated on straight-line method over the period of lease. The interest component inthe lease rentals is charged to the profit and loss account.

Assets taken on lease prior to 1st April 2001: -Year ended Year ended31.03.2006 31.03.2005

Rupees RupeesCost 1,276,985 1,276,985Future lease obligation 537,341 752,026

Disclosures

a) Finance leases liabilities – Minimum lease paymentsAs at As at

Minimum Lease Payments 31.03.2006 31.03.2005Rupees Rupees

Payable not later than 1 year 206,500 214,685Payable later than 1 year and not later than 5 years 330,841 537,341Total minimum lease payments 537,341 752,026Less: Future finance charges of finance leases - -Present value of finance lease liabilities 537,341 752,026

b) Present value of finance lease liabilitiesAs at As at

Present value of finance lease liabilities 31.03.2006 31.03.2005Rupees Rupees

Payable not later than 1 year 206,500 214,685Payable later than 1 year and not later than 5 years 330,841 537,341Payable later than 5 years - -Total Present value of finance lease liabilities 537,341 752,026

c) Contingent rents recognized as income/expense during the year - Rs.Nil.

8. Earnings Per Share:Year ended Year ended31.03.2006 31.03.2005

Rupees RupeesBasic and Diluted Earnings Per Share 2.20 1.00Profit after tax as per profit and loss account 12,076,417 5508,238Number of Equity Shares 10,500,000 5,500,000Weighted average number of Equity Shares 5,513,699 5,500,000Nominal value per Equity Share 10 10

9. As required by the Accounting Standard (AS) 28 Impairment of Assets, issued by the Institute of Chartered Accountants of India, the Company hasreviewed potential generation of economic benefits from fixed assets and concluded that the fixed assets employed in the business will generateadequate economic returns over their useful lives. Consequently, no provision of impairment loss is required.

10. Deferred taxThe major components of deferred tax assets and deferred tax liabilities are as under:Deferred tax assets and liabilities are on account of the following timing differences:

As at As at31.03.2006 31.03.2005

Rupees RupeesDeferred tax liabilitiesDifference between Book Value of Depreciable Assets as per books of account andWritten down value for tax purposes. 369,975 400,729

Total 369,975 400,729

Deferred tax assetsExpenditure claimed on payment basis for tax purposes under Section 43B of theIncome-tax Act,1961- Provision 1,168,457 468,389Leased Assets 69,238 23,362

Total 1,237,695 491,751

Deferred tax asset (net) 867,720 91,022

11. Previous years figures have been regrouped wherever necessary.12. Figures in brackets are in respect of previous year

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13. Balance Sheet Abstract and Company’s General Business Profile


Registration No. 11-125653 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 0 6

Date Month Year

II Capital Raised during the Year (Amount in Rs. Thousands)


N I L N I L


N I L 5 0 0 0 0

III Position of Mobilisation and Deployment of Funds (Amount in Rs.Thousands)

Total Liabilities including paid up capital Total assets

1 2 3 1 4 1 1 2 3 1 4 1

Sources of Funds Paid-Up Capital Reserves & Surplus

1 0 5 0 0 0 1 7 6 0 4


N I L 5 3 7

Application of Funds Net Fixed Assets Investments

2 9 7 0 2 6 8 5 4


9 2 4 5 0 8 6 7

Accumulated Losses

N I L


Turnover including other income Total Expenditure(includes amortization of Misc. Exp.)

3 9 7 6 9 2 2 3 1 3

+ - Profit before Tax + - Profit after Tax

� 1 7 4 5 6 � 1 2 0 7 6

+ - Earning Per Share in Rs. Dividend rate %

� 2 . 2 0 1 5 . 0

Signature to Schedules 1 to 14

Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)


MILIND P.PHADKEPartner(Membership No.33013)



Y. M. DEOSTHALEE


N. SIVARAMAN


}

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L&T TRANSPORTATION INFRASTRUCTURE LIMITED


The Directors have pleasure in presenting their report and Accounts for the year ended March 31, 2006.

I. FINANCIAL RESULTS

Sl.No Particulars 2005-06 2004-05

Rs.Lacs Rs.Lacs

1 Profit Before Depreciation & Tax (PBDT) 1289.83 855.43

2 Depreciation 345.71 348.84

3 Profit / (Loss) before tax (PBT) 944.12 506.59

4 Provision for tax 80.22 3.96

5 Profit / (Loss) after tax (PAT) 863.90 502.63

6 Balance brought forward from previous year (1043.29) (1545.92)

7 Balance carried to Balance Sheet (179.39) (1043.29)

II. DIVIDENDThe Directors do not recommend dividend for the year 2005-06 in view of the accumulated losses.

III. PERFORMANCE OF THE COMPANYThe Directors are pleased to inform that the income from fee collection from the users of the facility during the year has increased by9.19% when compared to the previous year 2004-05. The overall expenditure during the year has been increased by 3.60% only whencompared with the previous year 2004-05.

IV. CAPITAL EXPENDITUREAs at March 31, 2006, while the Gross fixed assets of the Company is Rs.9945.01 Lacs, the net fixed asset value is Rs.7730.69 Lacs aftercharging off a depreciation to the extent of Rs.2214.32 Lacs.

V. DEPOSITSThe Company has not accepted any deposits from the public.

VI. AUDITORS’ REPORTThe Auditors’ Report to the Shareholders does not contain any qualifications.

VII. FOREIGN CURRENCY TRANSACTIONSDuring the year the Company repaid Rs.2773 Lakhs against the yen denominated loan availed by the Company from a nationalized bank.

VIII. DISCLOSURE OF PARTICULARSAs the Company is engaged in developing, operating and maintaining toll road cum bridge, there are no particulars to be disclosed as perthe Companies’ (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

IX. PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of the Section 217 (2A) of the Companies Act, 1956 read with the Companies(Particulars of Employees) Rules, 1975.

X. DIRECTORS RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirms:

i. That in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been nomaterial departure;

ii. That the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of theCompany for the year ended on that date;

iii. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisionsof the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;


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XI. DIRECTORSMr.K.V.Rangaswami resigned as Director with effect from 30.09.2005 and Mr.S.N.Babugovindaraj was appointed as Director in the casualvacancy that has arisen due to the resignation mentioned above.

Mr.K.Venkatesh and Mr.S.N.Babugovindaraj retire from the Board of Directors by rotation and being eligible offer themselves for re-appointment.

XII. AUDIT COMMITTEEMr.K.V.Rangaswami resigned from Directorship w.e.f 30.09.2005 and as a result there was reconstitution of Audit committee.

The Audit Committee consists of three non executive and independent directors. The present members of the committee after reconstitutionare:

1. Mr.K.Venkatesh Member

2. Mr.S.N.Babugovindaraj Member

3. Mr.B.Ramakrishnan Member

The role, terms of reference, the authority and power of Chairman are in conformity with the requirements of the Companies act, 1956.

The Committee met periodically during the year and held discussions with the auditors on internal control systems and internal auditreport.

XIII. AUDITORSThe Auditors, M/S Sharp & Tannan, Chartered Accountants, being statutory auditors of the Company hold office until the conclusion of theensuing Annual General Meeting and are recommended for reappointment. Certificate from Auditors has been received to the effect thattheir appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

XIV. ACKNOWLEDGEMENTSThe Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, employees of theCompany and management staff of the parent Company.


K. VENKATESHS. N. BABUGOVINDARAJ DirectorsB. RAMAKRISHNAN

Place : ChennaiDate : April 19, 2006

}

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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T TRANSPORTATION INFRASTRUCTURE LIMITED

We have audited the attached balance sheet of L&T Transportation Infrastructure Limited as at March 31, 2006, the profit and loss account andthe cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.


1. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) ofthe Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order.


(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for thepurposes of the audit;

(b) in our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from ourexamination of those books;

(c) the balance sheet, profit and loss accounts and cash flow statement dealt with by this report are in agreement with the books ofaccount;

(d) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(e) on the basis of the written representations received from the Directors of the Company as on March 31, 2006, and taken on record bythe Board of Directors, we report that none of the Directors is disqualified as on March 31, 2006 from being appointed as a directorin terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;

(ii) in the case of the profit and loss account, of the profit for the year ended on that date; and

(iii) in case of the cash flow statement, of the cash flows for the year ended on that date.

SHARP & TANNAN

Chartered Accountants

V.R.Lalitha

Place : Chennai Partner

Date : April 19, 2006 Membership No.18284

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor’s to the Members of L&T Transportation InfrastructureLimited on the accounts for the year ended March 31, 2006, we report that:

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) We are informed that the management of the Company has physically verified during the year all its fixed assets and no materialdiscrepancies were noticed on such verification.

(c) The Company has not disposed of any substantial part of its fixed assets so as to affect the going concern status.

(ii) The Company is engaged in the business of infrastructure development and maintenance and hence the clauses 4 (ii) (a)(b) & (c) relatingto inventory are not applicable.

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(iii) According to the information & explanation given to us, the Company has not granted or taken any loans, secured or unsecured, to / fromcompanies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence reporting underclause-4 (iii) (a) to (g) dose not arise.

(iv) In our opinion, and according to the information and explanations given to us, there are adequate internal control system commensuratewith the size of the Company and nature of its business, for the purchase of fixed assets and sale of services . In our opinion, andaccording to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal controlsystem.

(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into theregister in pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (V) (b) dose not arise .

(vi) The Company has not accepted deposits from the public with in the meaning of Section 58A, 58AA or any other relevant provisions of theCompanies Act 1956. Hence Clause 4(VI) of the Companies (Auditor’s Report) Order 2003, is not applicable to the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.

(viii) The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1)(d) of theCompanies Act, 1956 is not applicable to the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Companyhas been generally regular in depositing undisputed statutory dues including Provident Fund, Income tax, and other statutory duesduring the year with the appropriate authorities. As at March 31, 2006, there are no undisputed statutory dues payable for a period ofmore than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues which have not been deposited on account of anydispute of income tax, service tax and cess

(x) In our opinion the accumulated losses of the Company are not more than fifty percent of its networth. Further, the Company has notincurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanation given to us, the Company has not defaulted in repayment of dues tofinancial institution or bank or debenture holders.

(xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security byway of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of theCompanies (Auditor’s Report) Order, 2003 are not applicable to the Company.

(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities,debentures and other investments.

(xv) The Company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purposes for whichthey were obtained.

(xvii) According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, theprovisions of clause 4 (xvii) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.

(xviii)The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained undersection 301 of the Companies Act, 1956, during the year.

(xix) The Company has not issued debentures during the year. Accordingly, no security or charge needs to be created.

(xx) The Company has not raised any money by public issue during the year.

(xxi) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us ,we have neither come across any instances ofmaterial fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP & TANNAN


V.R.Lalitha

Place : Chennai Partner

Date : April 19, 2006 Membership No.18284

S-103



SOURCES OF FUNDS: Schedules Rupees Rupees Rupees Rupees

Shareholders’ Funds

Share Capital A 414,000,000 414,000,000

Loan Funds

Secured Loans B 840,268,335 623,383,851

Total 1,254,268,335 1,037,383,851

APPLICATION OF FUNDS :

Fixed Assets: C

Gross Block 994,501,403 994,461,123

Less : Depreciation 221,431,992 186,861,336

Net Block 773,069,411 807,599,787

Investments D - 2,092,537

Current Assets, Loan and Advances E

Sundry Debtors 288,300 1,474,284

Cash and bank balances 406,849,936 94,968,661

Loans and advances 81,107,150 40,859,544

488,245,386 137,302,489

Less : Current liabilities and provisions F

Liabilities 16,476,585 13,476,596

Provisions 8,508,567 463,210

24,985,152 13,939,806

Net Current Assets 463,260,234 123,362,683

Miscellaneous Expenditure(to the extent not written off or adjusted)

Profit & Loss account 17,938,690 104,328,844

Total 1,254,268,335 1,037,383,851

Significant Accounting Policies I

Notes forming part of Accounts J

}For and on behalf of the Board

K. VENKATESHDirectors

S. N. BABUGOVINDARAJ

Place : ChennaiDated : April 19, 2006


V. R. Lalitha K. RAMACHANDRANPartner ManagerMembership No.18284


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2005-06 2004-05

Schedules Rupees RupeesINCOME

Fee collection from users of facility 154,193,925 141,221,614

Licence fees for wayside amenities 2,044,434 1,846,340

Other income G 48,212,303 13,805,363

TOTAL 204,450,662 156,873,317

EXPENDITURE

Operating & maintenance expenses H 31,736,781 35,348,971

Interest & Finance charge on fixed loans 43,731,297 35,981,003

Depreciation 34,570,656 34,883,891

TOTAL 110,038,734 106,213,865

Profit / (Loss) before taxes 94,411,928 50,659,452

Provision for :

Current Tax 7,944,764 396,000

Fringe Benefit Tax 77,010

Profit / (Loss) after taxes 86,390,154 50,263,452

Add: Profit/(Loss) brought forward fromprevious year (104,328,844) (154,592,296)

Balance carried to Balance Sheet (17,938,690) (104,328,844)

Earnings per share (Basic & Diluted) 2.09 1.22

Significant Accounting Policies I

Notes forming part of Accounts J








S-105


Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006 2005-06 2004-05

Rupees RupeesA. Cash Flow from operating activities

Net Profit / (Loss) before tax & extraordinary items 94,411,928 50,659,452Adjustments for :Dividend Received (89,393) (544,446)Depreciation 34,570,656 34,883,891Unrealised foreign exchange difference - net (gain) / loss - (8,201,565)Interest paid 43,731,297 35,981,003Interest received (10,772,586) (4,511,858)(Profit) / Loss on sale of investments (net) (2,285) (448,091)(Profit) / Loss on sale of fixed assets (net) - 12,733

Operating Profit before Working Capital changes 161,849,617 107,831,119Adjustments For :(Increase) / Decrease in trade and other receivables 1,185,984 3,008,990(Increase) / Decrease in Loans and Advances (2,747,606) 266,151Increase / (Decrease) in trade payables 3,138,564 5,999,536

Cash generated from operations 163,426,559 117,105,796Direct taxes paid (net of refund) - -

Net Cash from operating activities (A) 163,426,559 117,105,796

B. Cash Flow from Investing activities :Purchase of Fixed Assets (40,280) (183,600)Sale of Fixed Assets 1,400Purchase of investments (89,393) (115,620,804)Sale of investments 2,184,215 113,976,357Loans / advances to subsidiaries / associates (net) (37,500,000) (36,500,000)Interest received 10,772,586 4,511,858Dividend received from other investments 89,393 544,446

Net Cash (used in) / from investing activities (B) (24,583,480) (33,270,343)

C. Cash Flow from Financing Activities(Repayment )/Proceeds from other borrowings 216,769,492 (13,715,030)Interest Paid (43,731,297) (35,981,003)

Net cash from financing activities (C) 173,038,195 (49,696,033)

Net increase in cash and cash equivalents (A+B+C) 311,881,275 34,139,420Cash and Cash equivalents as at the beginning 94,968,661 60,829,241(including cash credit from banks)

Cash and Cash equivalents as at the end 406,849,936 94,968,661

(including cash credit from banks)Notes :1. Cash flow statement has been prepared under the Indirect Method as set of in the Accounting Standard 3 issued by the Institute of Chartered

Accountants of India.2. Cash and cash equivalents represent cash and bank balances.3. Previous year’s figures have been regrouped/reclassified wherever applicable








S-106



As at 31.3.2006 As at 31.3.2005

SCHEDULE - A Rupees Rupees Rupees Rupees

Share Capital

Authorised :

5,00,00,000 Equity Shares of Rs. 10/- each 500,000,000 500,000,000

Issued and Subscribed:

41,400,000 Equity Shares of Rs. 10/- each fully paid up 414,000,000 414,000,000(The equity shares are held by L&T InfrastructureDevelopment Projects Limited, Larsen & ToubroLimited and its nominees)

414,000,000 414,000,000

SCHEDULE - B

Secured Loans

From Banks

Term Loan - Karnataka Bank 149,273,557 176,775,526

Term Loan - State Bank of India - 296,608,325

Term Loan - UnionBank of India 131,250,000 150,000,000

Term Loan - United Bank of India 279,814,893 -

Term Loan - UCO Bank 279,814,893 -

Interest accrued and due 114,992 -

(The loans are secured by a pari passu charge on allthe movable and immovable properties /receivablesof the Company present and future - Refer para 13 ofSchedule J)

840,268,335 623,383,851

SCHEDULE - C Rupees

COST DEPRECIATION BOOK VALUE

FIXED ASSETS As at Additions Deletions As at As at For the Deductions Upto As at As at1.4.2005 31.3.2006 31.03.2005 year 31.3.2006 31.3.2006 31.3.2005

Land 607,315 - - 607,315 - - - - 607,315 607,315

Building * 984,187,379 - - 984,187,379 180,382,086 33,758,910 - 214,140,996 770,046,383 803,805,293

Plant & Machinery 8,303,463 40,280 8,343,743 5,847,879 693,286 - 6,541,165 1,802,578 2,455,584

Furniture & Fixtures 343,724 - - 343,724 118,591 21,632 - 140,223 203,501 225,133

Vehicles 1,019,242 - - 1,019,242 512,780 96,828 - 609,608 409,634 506,462

Total 994,461,123 40,280 - 994,501,403 186,861,336 34,570,656 - 221,431,992 773,069,411 807,599,787

Previous Year 994,297,333 183,600 19,810 994,461,123 151,983,122 34,883,891 5,677 186,861,336 807,599,787 -

Note:* Building includes Bypass road and bridge over river Noyyal (known as Athupalam bridge) constructed on land provided by Government of Tamilnadu under the Concession

Agreement dated 3rd October, 1997 with Ministry of Surface Transport, Government of India and Department of Highways, Government of Tamilnadu, and the cost of the bridgeand bypass are being amortised equally over a period of 20 years and 30 years respectively, commencing from 12th December 1998 and 19th January 2000 respectively.

S-107


Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of Accounts (Contd.)(Contd.)(Contd.)(Contd.)(Contd.)

As at 31.3.2006 As at 31.3.2005


SCHEDULE – D

Investments

Sundram Mutual Fund Institutional Dividend Reinvest Daily 1,586,052

(157,108.0160 units sold during the year)

Sundram Floater ST Regular-Monthly Dividend – 506,485 2,092,537(50,000 units sold during the year)

– 2,092,537

Details of investments purchased and sold during the year Face value Cost

Rs. Per unit Nos. (Rs)

Mutual funds:

Sundaram Money Fund – Institutional Dividend Reinvest Daily 10.00 6,981.32 10.0953 70,479

Sundaram Money Fund – Appreciation 10.00 1,868.47 10.1228 18,914

SCHEDULE – E

Current Assets, Loans and Advances

Current Assets

Sundry Debtors

Unsecured

Debts outstanding for more than six months – 1,192,660

Other Debts:

Considered good 288,300 281,624

288,300 1,474,284Cash and bank balances

Cash on hand 842,642 785,160


on current account 286,956,204 7,028,523

on fixed deposits (including interest accrued thereon 118,156,730 86,302,802Rs24,43,230 (previous year Rs.2,31,602)

on Margin money deposits ( including interest accruedthereon Rs.42,184 ( previous year Rs.51,790) 894,360 852,176

406,849,936 94,968,661Loans & Advances


Inter-corporate deposits 74,000,000 36,500,00081,107,150 40,859,544

488,245,386 137,302,489

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As at 31.3.2006 As at 31.3.2005


SCHEDULE – F


Liabilities

Sundry Creditors

- Small scale industries - -

- Others 16,476,585 13,476,596

16,476,585 13,476,596

Provisions

Provision for Taxes 8,340,764 396,000

Provision for Fringe Benefit Tax 77,010 -

Provision for Leave Encashment 90,793 67,210

8,508,567 463,210

24,985,152 13,939,806

2005-06 2004-05

Rupees Rupees

SCHEDULE – G

Other incomeInterest on fixed deposit 5,790,983 2,538,234(tax deducted at source Rs.1,326,317 (previousyear Rs.248,952 )Interest on Inter Corporate Deposits 4,981,603Dividend Income 89,393 544,446Profit on sale of investments 2,285 448,091Exchange Gain 36,702,140 8,201,565Miscellaneous Income 645,899 2,073,027

48,212,303 13,805,363

Schedule - HOperating Maintenance Expenses

Security services 8,298,797 7,253,201Salaries & wages 7,172,723 5,827,495Rent, Rates & Taxes 225,757 269,491Printing & Stationery 600,338 489,199Travelling & conveyance 792,691 695,141Electricity charges 1,098,607 1,089,052Insurance 1,858,182 2,176,862Repairs & Maintenance

- Buildings 4,224,148 7,797,308- Plant & Machinery 440,101 294,563- Others 1,101,692 604,559

Postage & Telephone expenses 175,010 206,125Miscellaneous Expenses 5,748,735 8,645,975

31,736,781 35,348,971

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Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)SCHEDULE - I

SIGNIFICANT ACCOUNTING POLICIES:

1. Basis of Accounting

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with Generally AcceptedAccounting Principles (“GAAP”) and in compliance with the Accounting Standards referred to in Section 211 (3C) and other requirementsof the Companies Act, 1956. However, certain escalation and other claims, which are not ascertainable or acknowledged by customers,are not taken into account.

The preparation of financial statements in conformity with GAAP requires that the management of the company makes estimates andassumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and thedisclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates include useful lives offixed assets and intangible assets, provision for doubtful debts / advances, future obligations in respect of retirement benefit plans etc.Actual results could differ from these estimates.

2. Income

Fee collections from users of facility are accounted for as and when the amount is due and recovery is certain.

Licence fees for wayside amenities are accounted on accrual basis.

3. Retirement Benefits

Contributions to Provident Fund are accounted on actual liability basis. Leave encashment provision is made on actual liability basis.Provision for gratuity is made as per Payment of Gratuity Act, 1972.

4. Fixed Assets

Fixed Assets are recorded at cost. The carrying amounts are reviewed at each balance sheet date to assess whether they are recordedin excess of their recoverable amount. Where carrying values exceed this recoverable amount assets are written down to their recoverableamount.

5. Depreciation

Depreciation on assets has been provided on straight-line basis at the rates specified in the Schedule XIV of the Companies Act, 1956.Assets constructed on land not owned by the Company are amortised over a period of the rights given under the concession agreementwith the Ministry of Surface Transport, Government of India dated 3rd October 1997.

Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the assetsrevised carrying amount over its remaining useful life. Depreciation on additions/deductions is calculated prorata from/to the month ofadditions/deductions.

6. Investments

Investments are stated at cost or market value.

7. Leases

i. Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as financeleases. Such assets are capitalised at the inception of the lease at the lower of the fair value or the present value of minimum leasepayments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interestcost, so as to obtain a constant periodic rate of interest on the outstanding liability for each period.

ii. Assets acquired on lease where a significant portion of the risks and rewards of ownership are retained by the lessor are classified asoperating leases. Lease rentals are charged to the Profit & Loss Account on accrual basis.

8. Borrowing Cost

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost ofsuch assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Allother borrowing costs are recognised as an expense in the period in which they are incurred.

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9. Foreign Currency Transactions and Derivatives

(i) Foreign currency assets and liabilities are converted at contracted / year-end rates as applicable.

(ii) All other foreign currency transactions are accounted for at the rates prevailing on the dates of the transactions.

(iii) The exchange differences on settlement / conversion are adjusted to:

a) Cost of imported fixed assets, if the foreign currency liability relates to fixed assets

b) Profit & loss account in other cases. Wherever forward contracts are entered into, the exchange differences are dealt with in theProfit & Loss account over the period of the contracts

(iv) Derivative transactions are considered as off-balance sheet items and cash flows arising there from are recognised in the booksof account as and when the settlements take place in accordance with the terms of the respective contracts over the tenorthereof.

10. Taxes on Income

Tax on income for the current period is determined on the basis of taxable income andtax credits computed in accordance with theprovisions of the Income Tax Act, 1961, and based on expected outcome of assessments / appeals. Fringe benefit tax for the period iscomputed in accordance with the provisions of Chapter XII-H of the Income-tax Act, 1961.

Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified usingthe tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxableincome will be available against which such deferred tax assets can be realised.

SCHEDULE - J

Notes forming part of Accounts:

1. The Company has been awarded a composite contract on Build Operate and Transfer (BOT) basis, the construction of a bypass and abridge over the River Noyyal (known as Athupalam bridge) in Coimbatore district of Tamil Nadu state, under the Concession Agreementdated 3rd October 1997 with Ministry of Surface Transport, Government of India and Department of Highways, Government of TamilnaduThe Company had completed construction of bypass road on 18.1.2000 and Bridge on 11.12.98. The concession period is 20 years forAthupalam bridge and 30 years for the Bypass.

2. The Company had no transactions during the year with any small-scale industrial undertakings and hence reporting details of interest onoverdue outstandings and amount outstanding for more than thirty days, does not arise.

3. The Company is a service company and accordingly information required under paragraph 4(C) of Part II of Schedule VI to the CompaniesAct, 1956 has not been furnished.

4. Manager’s salary and perquisites of Rs.3,67,849 /- (Previous year: Rs. 3,11,845/ -) for the year ended 31st March, 2006 have beencharged to the accounts.

5. None of the employees have completed five years of service, hence the Provisions of Payment of Gratuity Act, 1972 are not applicable.

6. Auditor’s remuneration:(including service tax) (Rupees)

2005-06 2004-05

Audit Fees 84,180 33,060

Tax Audit Fees 16,530 16,530

Certification Fees 3,306 —

Reimbursement of Expenses — 440


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7. Provision for Income tax amounting Rs.79,44,764/- (previous year: Rs.3,96,000/-) has been made in the Accounts under MinimumAlternate Tax as per the provisions of the Income-tax Act 1961. Fringe benefit tax for the year has been provided for under the Income-taxAct, 1961.

8. No provision for wealth tax has been made for the current year as there is no taxable wealth under the Wealth Tax Act 1957.

9. As per Accounting Standard 22 on Taxes on Income - the company has a deferred tax asset as below:

(Rupees)

31.03.06 31.03.05

Deferred Tax Assets

On account of Unabsorbed loss / depreciationas per income tax return 9,62,40,647 9,34,21,899

Difference between carrying amount ofpreliminary expenses not written off 81,428

Unpaid statutory liabilities debited to Profit & Loss A/c 30,561 1,31,830

Total 9,63,52,636 9,35,53,729

Less: Deferred Tax liabilities

On account of Difference between carrying amountof fixed assets in the books and the income tax. 9,34,44,666 14,76,98,079

Net deferred tax asset 29,07,970 5,41,44,350

However on a prudent basis, the company has not accrued the said deferred tax asset in these accounts.

10. Leases:

a. The Company has taken commercial premises under cancellable operating lease. The lease agreement is renewable on expiry.

b. The Company has taken on non-cancellable operating lease certain asset, the future minimum lease payment in respect of which, asat 31st March 2006 are as follows:

Particulars : (Rupees)

31.03.2006 31.03.2005

i. Payable not later than 1 year — 87,964

ii. Payable later than 1 year and not later than 5 years — 2,08,426

Total minimum Lease payments — 2,96,390

The lease agreements provide for an option to the Company to renew the lease period at the end of the non-cancellable period. There areno exceptional/ restrictive covenants in the lease agreements.

11. Segment Reporting - The Company is in the business of operating a Toll bridge and Bypass and the majority of its income represents tollcollections. Hence, operations are under single business and geographic segment.

12. Exchange gain arising on account of foreign currency transactions amounting to Rs.3,67,02,140/- has been credited to Profit and Lossaccount (previous year: Rs. 82,01,565/-).

13. During the year the Company was sanctioned term loans from banks aggregating to Rs 150 crores by securitising its future cash flows. Asum of Rs 55,96,29,786/- was availed on 31.03.06 and was partly used to repay Rs 27,73,68,600/- to State Bank of India - one of the threeexisting lenders, viz.,. The other two existing lenders (Karnataka Bank and Union Bank of India) were repaid on April 3, 2006. Securitycreated in favour of the existing lenders is still subsisting. Once these lenders release the security, the Company will create security infavour of the new lenders i.e., UCO Bank and United Bank of India.


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14. Disclosure of Related Parties/ related party transactions

A. List of related parties

Holding company : L&T Infrastructure Development Projects Limited

Larsen & Toubro Limited (ultimate holding company)

Subsidiary company : NIL

Associates : NIL

Fellow subsidiaries : Cyber Park Development & Construction limited

Tractors Engineers Limited

L&T Finance Limited

L&T Capital Company Limited

L&T-Sargent & Lundy Limited

Larsen & Toubro Infotech Limited

Larsen & Toubro Infotech GmbH, Germany

Narmada Infrastructure Construction Enterprise Limited

HPL Cogeneration Limited

L&T Western India Tollbridge Limited

India Infrastructure Developers Limited

Larsen & Toubro LLC, USA

Larsen & Toubro International FZE, Sharjah

L&T Infocity Limited

Hyderabad International Trade Expositions Limited

Andhra Pradesh Expositions Private Limited

L&T-ECC Construction (M) SDN.BHD, Malaysia

Bhilai Power Supply Company Limited

Larsen & Toubro (Oman) LLC

L&T Power Investments Private Limited

Raykal Aluminium Company Private Limited

L&T Panipat Elevated Corridor Private Limited

L&T Tech Park Limited

L&T Western Andhra Toll Ways Private Limited

L&T Krishnagiri Thoppur Toll Road Private Limited.

L&T Interstate Road Corridor Limited

L&T Vadodara Bharuch Tollway Limited

L&T Urban Infrastructure Limited

L&T Infocity Infrastructure Limited

L&T Infocity Lanka Private Limited

Larsen & Toubro Qatar LLC

Larsen & Toubro Electromech LLC

International Seaports Pte Limited

International Seaports (India) Private Limited

L&T Overseas Projects Nigeria Limited

L&T (WUXI) Electric Company Limited

Spectrum Infotech Private Limited


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B. Transactions with related parties and amounts due to / due from related parties

Rupees

Name / Relationship/ 2005-06 2004-05Nature of transaction

Amount of Due to Due from Amount of Due to Due fromtransaction transaction

L&T Infrastructure DevelopmentProjects LimitedHolding company* ICD Given 7,40,00,000 7,40,00,000* Interest received on ICD 45,54,603 7,09,973

Larsen & Toubro LimitedUltimate holding company* Purchase of goods & services 35,85,007 77,57,712* Charges for deputation of employees 18,16,086 13,05,240* Gross rental Paid 2,14,000 2,54,000* Claims settled 28,06,312* Purchase of assets 2,000Total Accounts Payable 30,50,602 13,99,605

L&T Finance LimitedFellow subsidiary* Rental paid 40,317 — — 87,964 — —

L&T Capital LimitedFellow subsidiary* Service & agency fee — — — 13,13,212 — —

(incl. Service tax)

L&T Ramboll Consulting Engineers LimitedFellow associate* Service & agency fee (incl. Service tax) — — — 3,13,515 — —

The Dhamra Port Company Limited* ICD due 3,65,00,000 3,65,00,000* Interest accrued on ICD — — — 12,53,000 12,53,000 —

C. Amounts written off/ written back: Nil

15. We confirm that we are not aware of the existence of any condition, which could indicate that any of the assets may be impaired.

16. The Company does not have transactions during the year attracting the provisions of the following Accounting Standards:

Accounting for Intangible Assets AS - 26

Accounting for Contingent Liabilities/ Assets AS - 29

17. Previous year figures have been regrouped wherever necessary.


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N I L N I L



1 2 5 4 2 6 8 1 2 5 4 2 6 8Sources of Funds

Paid up Capital Reserves & Surplus(including adv. against Share Capital)

4 1 4 0 0 0 N I L


8 4 0 2 6 8 N I L


Net Fixed Assets (including preop exenses) Investments7 7 3 0 6 9 N I L

Net Current Assets/(Liabilities) Misc.Expenditure

4 6 3 2 6 0 N I L

Accumulated Losses

1 7 9 3 9


2 0 4 4 5 1 1 1 0 0 3 9

+ – Profit/(Loss) before Tax + – Profit/(Loss) after Tax

✓ 9 4 4 1 2 ✓ 8 6 3 9 0

Earning per share Rs. Dividend Rate %

2 . 0 9 N I L

V. Generic Names of three Principal Products/Services of Company (as per monetary terms)

Item Code No. N A

Product INFRASTRUCTURE PROJECT ON BOT BASIS









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L&T WESTERN INDIA TOLLBRIDGE LIMITED


The Directors have pleasure in presenting their report and Accounts for the year ended March 31, 2006.

FINANCIAL RESULTS

2005-06 2004-05

Rs. Lacs Rs. Lacs

Profit Before Depreciation & Tax (PBDT) 688.00 740.38

Depreciation 593.43 593.33

Profit / (Loss) before tax (PBT) 94.57 147.05

Provision for tax 8.79 11.53

Profit / (Loss) after tax (PAT) 85.78 135.52

Balance brought forward from previous year 198.53 63.01

Balance carried to Balance Sheet 284.31 198.53

DIVIDENDThe Directors do not recommend dividend for the year 2005-06.

PERFORMANCE OF THE COMPANYThe Directors wish to inform that the income from fee collection from the users of the facility during the year has reduced by 6.78% when compared tothe previous year 2004-05. The overall expenditure during the year has been reduced by 1.47% when compared with the previous year 2004-05.

CAPITAL EXPENDITUREAs at March 31, 2006, while the Gross fixed assets of the Company is Rs.5172.94 Lacs, the net fixed asset value is Rs.2220.10 Lacs after chargingoff a depreciation to the extent of Rs.2952.84 Lacs.

DEPOSITSThe Company has not accepted any deposits from the public.

AUDITORS’ REPORTThe Auditors’ Report to the Shareholders does not contain any qualifications.

FOREIGN CURRENCY TRANSACTIONSThere was no inflow or outflow of any foreign currency in the course of transactions during the year 2005-06.

DISCLOSURE OF PARTICULARSAs the Company is engaged in developing, operating and maintaining toll road cum bridge, there are no particulars to be disclosed as per theCompanies’ (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of the Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules, 1975.

DIRECTORS RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirms:

i. That in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;

ii. That the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for the yearended on that date;

iii. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;


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DIRECTORSMr. S.N.Babugovindaraj and Mr. B.Ramakrishnan retire from the Board of Directors by rotation and being eligible, offer themselves for re-appointment.

AUDIT COMMITTEEThe Audit Committee consisted of three non executive and independent directors. During the year, Mr. K.V.Rangaswami resigned from the directorshipin the Board meeting held on 30.09.2005 and the causal vacancy was filled by the appointment of Mr. S.N.Babugovindaraj as Director. The Auditcommittee was also reconstituted in the Board meeting dated 30.09.2005. The present constitution of the committee is

1. Mr. K.Venkatesh Member

2. Mr. S.N.Babugovindaraj Member

3. Mr. B.Ramakrishnan Member


The Committee met periodically during the year and held discussions with the auditors on internal control systems and internal audit report.

AUDITORSThe Auditors, M/S Sharp & Tannan, Chartered Accountants, being statutory auditors of the Company hold office until the conclusion of the ensuingAnnual General Meeting and are recommended for reappointment. Certificate from Auditors has been received to the effect that their appointment, ifmade, would be within the limits prescribed under Section 224(1B) of the Companies Act.

ACKNOWLEDGEMENTSThe Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, employees of the Company andmanagement staff of the parent Company.

K. VENKATESHB. RAMAKRISHNAN DirectorS. N. BABUGOVINDARAJ

Place: ChennaiDate: April 19, 2006

}

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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T WESTERN INDIA TOLLBRIDGE LIMITED

We have audited the attached balance sheet of L&T Western India Tollbridge Limited as at March 31, 2006, the profit and loss account and the cashflow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit providesa reasonable basis for our opinion.


1. As required by the Companies (Auditors' Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of theCompanies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order.

Further to our comments in the Annexure referred to above, we report that:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose ofthe audit;

(b) in our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from our examination ofthese books;


(d) in our opinion, the balance sheet and profit and loss account dealt with by this report comply with the accounting standards referred to insub-section (3C) of section 211 of the Companies Act, 1956;

(e) on the basis of the written representations received from the Directors of the Company as on March 31, 2006, and taken on record by theBoard of Directors, we report that none of the Directors is disqualified as on March 31, 2006 from being appointed as a director in terms ofclause (g) of subsection (1) of section 274 of the Companies Act, 1956; and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;




V. R. LalithaPartner

(Membership no. 18284)


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Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor's to the Members of L&T Western India Tollbridge Limited on theaccounts for the year ended March 31, 2006, we report that:


(b) The Company has physically verified during the year all its fixed assets. No material discrepancies were noticed on such verification.

(c) The Company has not disposed off substantial part of its fixed assets so as to affect its going concern assumption.

(ii) As the Company is engaged in the business of infrastructure development and maintenance, the clauses relating to inventory are not applicable.

(iii) The Company has not granted or taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the registermaintained under section 301 of the Companies Act, 1956. Hence reporting under clause 4 (iii) (a) to (g) does not arise.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate withthe size of the Company and nature of its business, for the purchase of fixed assets and sale of services . In our opinion, and according to theinformation and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into the registerin pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause (b) does not arise.

(vi) The company has not accepted deposits from the public with in the meaning of Section 58A, 58AA or any other relevant provisions of theCompanies Act 1956.


(viii) Maintenance of cost records under section 209 (1)(d) of the Companies Act, 1956 is not applicable to the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company hasbeen generally regular in depositing undisputed statutory dues including Provident Fund, Income tax, and other statutory dues during theyear with the appropriate authorities. As at March 31, 2006, there are no undisputed statutory dues payable for a period of more than sixmonths from the date they became payable.

(b) According to the information and explanations given to us, there are no disputed statutory liabilities in respect of income tax and cess.

(x) The Company has no accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in theimmediately preceding financial year.

(xi) The Company has not defaulted in repayment of dues to financial institution or bank or debenture holders, during the year.

(xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society.

(xiv) According to the information and explanations given to us, the Company is not a dealer or trader in shares, securities, debentures and otherinvestments.

(xv) The company has not given any guarantee for loans taken by others from bank or financial institutions.

(xvi) The Company has not obtained any Term Loan during the year.

(xvii) The Company has not raised funds on short - term basis during the year.

(xviii) The Company has not made any preferential allotment of shares during the year.

(xix) The Company has not issued debentures during the year. Accordingly, no securities need to be created.


(xxi) During the course of our examination of the books and the records of the company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us ,we have neither come across any instances of materialfraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.


V. R. LalithaPartner

(Membership no. 18284)


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Schedules Rupees Rupees Rupees Rupees

SOURCES OF FUNDS :


Share Capital A 139,500,070 139,500,070

Reserves & Surplus B 39,356,809 30,778,416

Loan Funds

Secured Loans C 66,656,504 125,706,425

Total 245,513,383 295,984,911


Fixed Assets: D

Gross Block 517,294,635 517,308,733


Net Block 222,010,127 281,321,515

Investments E 26,000 26,000

Current Assets, Loan and Advances F



35,444,670 19,110,131

Less : Current Liabilities and Provisions G

Liabilities 9,769,891 2,411,588

Provisions 2,197,523 2,061,147

11,967,414 4,472,735


Total 245,513,383 295,984,911

SIGNIFICANT ACCOUNTING POLICIES J

NOTES FORMING PART OF ACCOUNTS K


B. RAMAKRISHNAN


As per our report attached


V. R. LALITHA V. RAVICHANDRANPartner Secretary(Membership No. 18284)


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As at 31-3-2006 As at 31-3-2005


INCOME

Fee collection from users of facilities 94,325,447 101,189,907

Other income H 1,502,914 1,178,897

Total 95,828,361 102,368,804

EXPENDITURE

Operating & maintenance expenses I 19,619,842 15,695,659

Interest

On fixed loan 7,403,081 12,616,010

Others 5,872 18,530

7,408,953 12,634,540

Depreciation 59,342,523 59,333,473

Total 86,371,318 87,663,672

Profit before taxes 9,457,043 14,705,132

Provision for

Current taxes 795,810 1,153,066


878,650 1,153,066

Profit after taxes 8,578,393 13,552,066

Add : Balance brought forward from previous year 19,853,416 6,301,350

Balance carried to Balance Sheet 28,431,809 19,853,416

Earnings per share - Basic and Diluted 0.61 0.97

SIGNIFICANT ACCOUNTING POLICIES J

NOTES FORMING PART OF ACCOUNTS K


B. RAMAKRISHNAN






}

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Rupees RupeesA. CASH FLOW FROM OPERATING ACTIVITIES :

Net Profit/(Loss) before tax & extraordinary items 9,457,043 14,705,132Adjustment for :Dividend Received (95,372) (104,801)Depreciation 59,342,523 59,333,473Interest paid 7,408,093 12,634,540Interest received (1,081,437) (369,351)(Profit) / Loss on sale of investments (net) - (37,100)(Profit) / Loss on sale of fixed assets (net) 27,661 -

Operating Profit before Working Capital changes 75,059,371 86,161,893Adjustments For :(Increase) / Decrease in Loans and Advances 3,829,806 (3,601,694)Increase / (Decrease) in trade payables 7,494,679 (20,355,498)

Cash generated from operations 86,383,856 62,204,701Direct taxes paid (net of refund) (878,650) (1,153,066)


B. Cash Flow from Investing activities :Purchase of Fixed Assets (69,196) (33,002)(Interest Capitalised Rs. Nil previous year : Rs. Nil)Sale of Investments — 9,123,995Sale of Fixed Assets 10,400 -Interest received 1,081,437 369,351Dividend received from other investments 95,372 104,801

Net Cash from investing activities (B) 1,118,013 9,565,145

C. Cash Flow from Financing activities :Buy back of Equity shares - (12,075,000)(Repayment ) / Proceeds from other borrowings (59,049,921) (38,092,362)Interest Paid (7,408,953) (12,634,540)

Net cash from financing activities (C) (66,458,874) (62,801,902)

Net increase in cash and cash equivalents (A+B+C) 20,164,345 7,814,878Cash and Cash equivalents as at the beginning 11,911,025 4,096,147(including cash credit from banks)

Cash and Cash equivalents as at the end 32,075,370 11,911,025(including cash credit from banks)

Notes:

1 Cash flow statement has been prepared under the Indirect Method as set of in the Accounting Standard 3 issued by the Institute ofChartered Accountants of India.

2. Cash and cash equivalents represent cash and bank balances.3. Previous year’s figures have been regrouped/reclassified wherever applicable


B. RAMAKRISHNAN






}

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Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSCHEDULE A As at 31-3-2006 As at 31-3-2005

Rupees RupeesShare CapitalAuthorised :

21,000,000 Equity shares of Rs.10/- each 210,000,000 210,000,000Issued and Subscribed

13,950,007 Equity Shares for Rs. 10/- each 139,500,070 139,500,070fully paid-up100% of the shares are held by Larsen & Toubro Limited(the Holding Company) and its nominess

139,500,070 139,500,070

SCHEDULE BReserves and SurplusCapital Redemption Reserve Account 10,500,000 10,500,000General reserve

As per last balance sheet 425,000 12,500,000Add : Transferred during this year —Less : Transfer to Capital Redemption Reserve Account — 10,500,000Buyback premium — 1,575,000

425,000 425,000Profit and loss account 28,431,809 19,853,416

39,356,809 30,778,416

SCHEDULE CSecured loans

From BanksTerm loans- State bank of Hyderabad 66,628,227 125,680,227Interest Accrued and due on Term Loan 28,277 26,198(Secured by Pari passu charge on the company’s 66,656,504 125,706,425movable assets, present and future) 66,656,504 125,706,425

SCHEDULE D (Figures in Rupees)

Cost Depreciation Book Value

Fixed Assets As at Additions/ Deductions As at Upto For the Year/ Deductions Up to As at As at01.04.2005 Adjustments 31.03.2006 31.03.2005 Adjustments 31.03.2006 31.03.2006 31.03.2005

Building * 513,979,371 - - 513,979,371 234,154,028 58,910,599 - 293,064,627 220,914,744 279,825,343

Plant & Machinery 1,522,719 (47,000) - 1,475,719 703,901 154,693 - 858,594 617,125 818,818

Furniture & Fixtures 1,806,643 116,196 83,294 1,839,545 1,129,289 277,231 45,233 1,361,287 478,258 677,354

Total 517,308,733517,308,733517,308,733517,308,733517,308,733 69,196 83,294 517,294,635 235,987,218235,987,218235,987,218235,987,218235,987,218 59,342,523 45,233 295,284,508 222,010,127 281,321,515 281,321,515 281,321,515 281,321,515 281,321,515

Previous Year 517,275,731 33,002 - 517,308,733 176,653,745 59,333,473 - 235,987,218 281,321,515 -

Note:*Building includes bridge over River Watrak constructed on land provided by Government of Gujarat under the Concession Agreement dated 1stMarch, 1999 with Ministry of Surface Transport, Government of India and Roads and Buildings Department, Government of Gujarat. The cost incurredon the said bridge is being amortised equally over a period of 106 months from March, 2001.

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SCHEDULE E As at 31-3-2006 As at 31-3-2005

Rupees RupeesInvestments (at cost)Unquoted:

Fully paid equity shares

Intertoll ICS (Ahmedahad -Mahesana) TollManagement Company Pvt. Ltd. 26,000 26,0002600 Equity shares of Rs.10 each

26,000 26,000

Note: Book value of unquoted investmens 26,000 26,000

Details of investments purchased and sold during the year Face valueRs. Per unit Nos. Cost (Rs.)

Mutual funds:Sundaram Money Fund - Dividend Reinvestment Daily 10 2,258,018.290 22,795,372

SCHEDULE F


Cash and bank balances

Cash on hand 321,630 616,326

Balances with scheduled bank

- on current account 2,793,468 3,037,825

- on fixed deposits 28,705,650 8,013,315

Including interest accrued thereon Rs. 1,43,324 /-(previous year Rs.13,315/-)

- on margin money 254,622 243,559

Inculding the intererst accured thereon Rs.11,450/- 32,075,370 11,911,025

(previous year - Rs.387/-)

Loans & Advances


Inter Corporate Deposit - 4,500,000

35,444,670 19,110,131

SCHEDULE GCurrent Liabilities and ProvisionsLiabilitiesSundry Creditors– Small scale industrial undertakings – –– Others 9,769,891 2,411,588

9,769,891 2,411,588Provisions for:

Taxes 1,948,876 2,040,595Fringe benefit tax 82,840Gratutity 134,717Leave Encashment 31,090 20,552

2,197,523 2,061,147

11,967,414 4,472,735


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2005-2006 2004-2005Rupees Rupees

SCHEDULE H

Other income

Dividend from Mutual Funds 95,372 104,801

Other Receipts 326,105 667,645

Profit / (Loss) on Sale of Investments - 37,100

Interest 1,081,437 369,351

Tax Deducted at Source - Rs.2,35,461/- (previous year Rs.59,649/- )1,502,914 1,178,897

SCHEDULE I

Operating Maintenance Expenses

Toll Management Fees 3,928,740 3,534,748

Security Services 2,690,550 2,662,074

Salaries & wages 3,513,506 2,806,668

Contribution to and Provision forProvident Fund, Gratuity and Leave encashment 271,150 133,218

Staff Welfare expenses 349,918 247,265

Rates & taxes 27,459 2,939

Printing & stationery expenses 212,461 285,133

Travelling & conveyance 553,243 468,168

Electricity charges 475,107 535,076

Insurance 1,405,419 1,531,090

Repairs & Maintenance to

Building 3,694,166 1,356,842

Plant and Machinery 530,096 383,162

Others 1,113,033 959,564

Postage & telephone expenses 132,100 102,832

Miscellaneous Expenses 722,894 686,880

19,619,842 15,695,659

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SCHEDULE J


1. Basis of AccountingThe company maintains its accounts on accrual basis following the historical cost

convention in accordance with the generally accepted accounting principles (“GAAP”) except for the revaluation of certain fixed assets, and incompliance with the Accounting Standards referred to in Section 211 (3C) and other requirements of the Companies Act, 1956. However certainescalation and other claims, which are not ascertainable / acknowledged by customers, are not taken into account.

The preparation of financial statements in conformity with GAAP requires that the management of the company makes estimates and assumptionsthat affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosuresrelating to contingent liabilities as of the date of the financial statements. Examples of such estimates include useful lives of fixed assets andintangible assets, provision for doubtful / advances, future obligations in respect of retirement benefit plans etc. Actual results could differ fromthese estimates.

2. IncomeFee collections from users of facilities are accounted for as and when the amount is due and recovery is certain.

3. Retirement BenefitsContributions to Provident fund are accounted on actual liability basis. Leave encashment provision has been made on actual liability basis.Provision for gratuity is made as per Payment of Gratuity Act, 1972.

4. Fixed AssetsFixed assets are recorded at cost. The carrying amounts are reviewed at each balance sheet date to assess whether they are recorded inexcess of their recoverable amount. Where carrying values exceed this recoverable amount assets are written down to their recoverable amount.

5. DepreciationDepreciation on the assets has been provided on straight-line basis at the rates specified in the Schedule XIV of the Companies Act, 1956.Assets constructed on land not owned by the company and acquired / installed thereon are amortised over the period of the rights given underthe concession agreement dated 1st March, 1999 with the Ministry of Surface Transport, Government of India and Public Works Department,Government of Gujarat.

Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the assets revisedcarrying amount over its remaining useful life. Depreciation on addition / deductions is calculated pro-rata from / to the month of additions /deductions.

6. InvestmentsLong-term investments are carried at cost after providing for any diminution in value, if such diminution is of permanent nature. Current Investmentsare carried at cost or market value, whichever is lower.

7. Intangible Assets and amortisationIntangible assets are recognized as per criteria specified in Accounting Standard (AS) 26 “Intangible Assets” issued by the Institute of CharteredAccountants of India.

8. Borrowing Cost

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of suchassets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All otherborrowing costs are recognised as an expense in the period in which they are incurred.





a. Cost of imported fixed assets, if the foreign currency liability relates to fixed assets

b. Profit & loss account in other cases. Wherever forward contracts are entered into, the exchange differences are dealt with in the Profit& Loss account over the period of the contracts over the tenor thereof.


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10. Taxes on IncomeFringe Benefit Tax for the period is computed in accordance with the provisions of Chapter XII-H of the Income-tax Act, 1961. Tax on income forthe current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income-taxAct, 1961, and based on expected outcome of assessments / appeals.

Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the taxrates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income willbe available against which such deferred tax assets can be realised.

SCHEDULE K


1. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. NIL /- (previous year Rs.NIL /-).

2. The Company had no transactions during the year with any small-scale industrial undertakings and hence reporting details of interest onoverdue outstanding and amount outstanding more than thirty days, does not arise.

3. The Company has been awarded on Build Operate and Transfer (BOT) basis, the construction of the second two-lane bridge at Kheda acrossthe River Watrak on National Highway 8, in the State of Gujarat under a Concession Agreement dated 1st March 1999 with Ministry of SurfaceTransport, Government of India and Roads and Buildings Department, Government of Gujarat. The construction was completed in February2001 and the concession is valid till December 2009.

4. The Company is a service company and accordingly information required under paragraph 4C of Part II of Schedule VI to the Companies Act,1956 has not been furnished.

5. Manager’s salary and perquisites on deputation of Rs.3,63,128/- (Previous year Rs. 3,11,845/-) have been charged to accounts.

6. Auditor’s remuneration (including service tax):

(Amount in Rupees)

2005 -2006 2004 -2005

Audit Fees 84,180 55,100


Certification Fee 3,306 Nil

Reimbursement of Expenses Nil 3,785

7. (i) The Company is governed by the provisions of Sec 115JB of the Income Tax Act, 1961. Accordingly provision for Income tax amounting toRs.7,95,810/- has been made under Minimum Alternate Tax under the said Act.

(ii) Provision for Fringe benefit tax has been made under the Income Tax Act, 1961 for Rs.82,840/-.

(iii) No provision for wealth tax has been made for the current year in these accounts as there is no taxable wealth under the provisions of theWealth Tax Act, 1957.

8. Provision for gratuity is made for employees eligible under the Payment of Gratuity Act, 1972.

9. Segment Reporting – The Company operates in a single business and geographic segment of Toll Collection Activity

10. Disclosure of Related Parties/ related party transactions:

A. List of related partiesHolding company : Larsen & Toubro Limited


Associate : Intertoll ICS (Ahmedabad Mehsana) Toll ManagementCompany Private Limited

Fellow subsidiaries : L&T Infrastructure Development Projects LimitedCyber Park Development & Construction limitedTractors Engineers LimitedL&T Finance LimitedL&T Capital Company LimitedL&T-Sargent & Lundy LimitedLarsen & Toubro Infotech LimitedLarsen & Toubro Infotech GmbH, Germany

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L&T Transportation Infrastructure LimitedHPL Cogeneration LimitedIndia Infrastructure Developers LimitedLarsen & Toubro LLC, USALarsen & Toubro International FZE, SharjahL&T Infocity LimitedHyderabad International Trade Expositions LimitedAndhra Pradesh Expositions Private LimitedL&T-ECC Construction (M) SDN.BHD, MalaysiaBhilai Power Supply Company LimitedLarsen & Toubro (Oman) LLCL&T Power Investments Private LimitedRaykal Aluminium Company Private LimitedL&T Panipat Elevated Corridor Private LimitedL&T Tech Park LimitedL&T Western Andhra Toll Ways Private LimitedL&T Krishnagiri Thoppur Toll Road Private Limited.L&T Interstate Road Corridor LimitedL&T Vadodara Bharuch Tollway LimitedL&T Urban Infrastructure LimitedL&T Infocity Infrastructure LimitedNarmada Infrastructure Construction Enterprise LimitedL&T Infocity Lanka Private LimitedLarsen & Toubro Qatar LLCLarsen & Toubro Electromech LLCInternational Seaports Pte LimitedInternational Seaports (India) Private LimitedL&T Overseas Projects Nigeria LimitedL&T (WUXI) Electric Company LimitedSpectrum Infotech Private Limited

B. Transactions with related parties and amounts due to / due from related parties(Rupees)

Name/Relationship /Nature of Transaction 2005 – 2006 2004 – 2005

Amount of Due to Amount of Due to Due FromTransaction Transaction

Larsen&Toubro LimitedHolding Company

● Cost of Services received 18,80,063 30,74,840 10,72,686 9,01,643

L&T Infrastructure Development projectsLimited

Fellow subsidiary

● ICD placed 1,00,00,000 10,00,000

● Interest received 5,50,411 2,887

The Dhamra Port Company Limited

Associate Company

● ICD Placed/ (Refunded) (45,00,000) 45,00,000 45,00,000

● Interest received 12,945 1,54,479 1,54,479

L&T-RAMBOLL ConsultingEngineers Limited

Associate Company

● Services received

● Expenses reimbursed 22,866 3,22,287

Due from related parties as on 31.03.2006 : NIL

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C. Amounts written off/ written back : Nil

11. As per Accounting Standard 22 on Accounting for Taxes on Income – the Company has a deferred tax liability as detailed below:

Deferred Tax liabilities 31.03.06 31.03.05

Rs. Rs.

Difference between carrying amount of 3,23,92,091 4,49,08,159

fixed assets in the books and the income tax return.

Total (A) 3,23,92,091 4,49,08,159

Less: Deferred tax assets Unabsorbed loss / deprecation

as per income tax return 70,03,806 2,58,76,764

Disallowance U/s 43B 10,465 –-

Total (B) 70,14,271 2,58,76,764

Net deferred tax (asset) / liability 2,53,77,820 1,90,31,395

No provision for the said liability is made since the Company is eligible for benefit u/s 80-IA of the Income Tax Act, 1961 for the entire period ofits operations as per the Concession Agreement.

12. Impairment: We confirm that we are not aware of the existence of any condition, which could indicate that any of the assets may be impaired.

13. The Company does not have transactions during the year attracting provisions of the following Accounting Standards:

Accounting for foreign exchange transactions - AS 11

Accounting for Borrowing Costs - AS 16

Accounting for leases - AS 19

Accounting for Intangible Assets - AS 26

Accounting for Contingent Liabilities / Assets - AS 29

14. Figures of the previous year have been re-grouped/ re-classified where necessary.


B. RAMAKRISHNAN






}

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15. Balance sheet abstract and company’s general businss profile







N I L N I L



2 4 5 5 1 3 2 4 5 5 1 3Sources of Funds

Paid up Capital (incl. adv. against share capital) Reserves & Surplus

1 3 9 5 0 0 3 9 3 5 7


6 6 6 5 6 N I L


2 2 2 0 1 0 2 6

Net Current Assets (Liabilities) Misc.Expenditure

2 3 4 7 7 N I L

Accumulated Losses

N I L


9 5 8 2 8 8 6 3 7 1

Profit/Loss before Tax Profit/Loss after Tax9 4 5 7 8 5 7 8


0 . 6 1 – –

V. Generic Names of three Principal Products/Services of the Company (as per monetary terms)

Item Code No. N A

Product Description I N F R A S T R U C T U R E P R O J E C T S O N B O T B A S I S


+ –

✓

+ –

✓


B. RAMAKRISHNAN






}

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NARMADA INFRASTRUCTURE CONSTRUCTION ENTERPRISE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their report and Accounts for the year ended March 31, 2006.


Sl. Particulars 2005-06 2004-05No Rs.Lacs Rs.Lacs

1 Profit Before Depreciation & Tax (PBDT) 1733.40 1417.46


3 Profit / (Loss) before tax (PBT) 549.35 234.22

4 Provision for tax 46.65 18.37

5 Profit / (Loss) after tax (PAT) 502.70 215.85



II. DIVIDEND

The Directors do not recommend dividend in view of the accumulated losses.

III. PERFORMANCE OF THE COMPANY

The Directors are pleased to inform that this is the second year of profit for the company since inception. The income from fee collection from theusers of the facility during the year has increased by 11.22% when compared to the previous year 2004-05. The overall expenditure during theyear has increased by 2.08% only in comparison with the previous year 2004-05.

IV. CAPITAL EXPENDITURE

As at 31st March, 2006, while the Gross fixed assets of the company is Rs.14,177.97 Lacs, the net fixed asset value is Rs.7,795.38 Lacs aftercharging off a depreciation to the extent of Rs.6,382.59 Lacs.

V. DEPOSITS

The Company has not accepted any deposits from the public.

VI. AUDITORS’ REPORT


VII. FOREIGN CURRENCY TRANSACTIONS

During the year the company repaid Rs.657 Lakhs against the yen denominated loan availed by the company from a nationalized bank.

VIII. DISCLOSURE OF PARTICULARS

As the company is engaged in developing, operating and maintaining toll bridge, there are no particulars to be disclosed as per the Companies’(Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

IX. PARTICULARS OF EMPLOYEES

There are no employees covered by the provisions of the Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules, 1975.

X. DIRECTORS RESPONSIBILITY STATEMENT


i. That in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no materialdeparture;

ii. That the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2006 and of the profit of the Company forthe year ended on that date;



XI. DIRECTORS

Mr.K.V.Rangaswami resigned from the Directorship with effect from 30.09.2005 and Mr.S.N.Babugovindaraj was appointed as Director in thecasual vacancy that has occurred during the year.

Mr.K.Venkatesh and Mr.S.N.Babugovindaraj retire from the Board of Directors by rotation and being eligible offers himself for re-appointment.

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XII. AUDIT COMMITTEE

Mr.K.V.Rangaswami resigned from the Directorship during the Board meeting held on 30.09.2005 and as a result, the Audit Committee gotreconstituted and presently it consists of three non executive and independent directors. The present members of the committee are:

1. Mr.K.Venkatesh Member

2. Mr.B.Ramakrishnan Member

3. Mr.K.Ramchand Member


The Committee met periodically during the year and held discussions with the auditors on internal control systems and internal audit report.

XIII. AUDITORS

The Auditors, M/S Sharp & Tannan, Chartered Accountants, being statutory auditors of the Company hold office until the conclusion of theensuing Annual General Meeting and are recommended for reappointment. Certificate from Auditors has been received to the effect that theirappointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act.

XIV. ACKNOWLEDGEMENTS

The Directors acknowledge the invaluable support extended to the company by the Financial Institutions, Bankers, employees of the companyand management staff of the parent company.

MR. K. VENKATESH

MR. B. RAMAKRISHNAN Directors

MR. K. RAMACHANDPlace : ChennaiDate : April 19, 2006

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ Report

TO THE MEMBERS OF NARMADA INFRASTRUCTURE CONSTRUCTION ENTERPRISE LIMITED

We have audited the attached balance sheet of Narmada Infrastructure Construction Enterprise Limited as at March 31, 2006, the profit and loss accountand the cash flow statement for the year ended on that date annexed thereto. The financial statement is the responsibility of the Company’s management.Our responsibility is to express an opinion on the financial statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India.Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.


1. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of theCompanies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order.


(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of the audit;

(b) in our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from our examination of these books;

(c) the balance sheet, profit and loss accounts and cash flow statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the balance sheet, profit and loss account and the cash flow statement dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(e) on the basis of the written representations received from the Directors of the Company as on 31st March 2006, and taken on record by the Boardof Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointed as a director in terms of clause (g)of sub-section (1) of section 274 of the Companies Act, 1956; and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the information requiredby the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generallyaccepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006;




V.R.LALITHAPlace: Chennai PartnerDate: April 19, 2006 Membership No.18284

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Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor’s to the Members of Narmada Infrastructure Construction EnterpriseLimited on the accounts for the year ended March 31, 2006, we report that:

(i) (a) The Company is maintaining proper records to show full particulars including quantitative details and situations of fixed assets.

(b) The management has physically verified its fixed assets during the year. No material discrepancies were noticed on such verification.

(c) The Company has not disposed off any substantial part of its fixed assets so as to affect its going concern status.

(ii) As the Company is engaged in the business of investing in infrastructure Company, reporting on clauses relating to inventory 4 (ii) (a) (b) and (c) ofthe Companies (Auditor’s Report) Order 2003 does not arise.

(iii) (a) According to the information and explanations given to us, the Company has not granted or taken any loans, secured or unsecured, to / fromcompanies, firms and other parties covered in the register maintained under section 301 of the Companies Act 1956.

(b) Since the Company has not taken / granted loans, commenting on clause 4 (iii) (b), (c), (d), (e), (f) and (g) does not arise.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with thesize of the Company and nature of its business for the purchase of fixed assets. In our opinion and according to the information and explanationsgiven to us there is no continuing failure to correct major weaknesses in internal control system.

(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into a register inpursuance of Section 301 of the Companies Act, 1956. Hence reporting on clause 4 (V) (b) of the Companies (Auditor’s report) order 2003 does notarise.

(vi) The Company has not accepted any deposit from the public with in the meaning of sections 58A, 58AA or any other relevant provisions of theCompanies Act 1956.


(viii) The central government has not prescribed the maintenance of cost records under section 209 (1) (d) of the Companies Act 1956 for the operationsof the Company and hence reporting on this clause does not arise.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has beengenerally regular in depositing, Income tax, Service-tax, and any other statutory dues during the year with the appropriate authorities.

(b) According to the information and explanations given to us, there are no dues of income tax / custom duty / wealth tax / service tax / cess whichhas not been deposited with the appropriate authorities on account of any disputes.

(x) The Company has accumulated loss of less than fifty per cent of the net worth as at the end of the year and has not incurred cash loss during theyear or in the immediately preceding year.

(xi) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to bank or debenture holders. TheCompany has not availed any loans from financial institutions.


(xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society and hence commenting on clause 4(xiii), (a), (b), (c) & (d) does not arise.

(xiv) According to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and otherinvestments. Accordingly, provisions of clause 4 (xiv) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.

(xv) The Company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) The term loan availed by the Company were applied for the purpose for which they were raised.

(xvii) The Company has not raised funds on short term bais during the year.

(xviii) The Company has not made any allotments of shares during the year under audit and hence reporting whether preferential allotments made tocompanies covered in register maintained under section 301 of the Act is not prejudicial to the interest of the Company. Under clause 4 (xviii) of theCompanies (Auditor’s Report) Order 2003 does not arise.

(xix) The Company has not issued any debenture during the year and accordingly no securities or charge has been created.


(xxi) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud onor by the Company, noticed or reported during the year, nor have we been informed of such case by management.


V.R.LALITHAPlace: Chennai PartnerDate: April 19, 2006 Membership No.18284

S-133


Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006AS AT 31.03.2006 AS AT 31.03.2005

Schedule Rs. Rs. Rs RsSOURCES OF FUNDS :


Share Capital A 473,500,070 473,500,070Loan Funds

Secured Loans B 650,812,394 836,413,009

Total 1,124,312,464 1,309,913,079


Fixed Assets: C

Gross Block 1,417,796,921 1,417,895,361


Net Block 779,537,518 897,664,659

Current Assets, Loan and Advances D



330,385,696 345,353,851

Less : Current liabilities and provisions E

Liabilities 70,669,614 73,209,726

Provisions 6,625,611 1,850,409

77,295,225 75,060,135



Total 1,124,312,464 1,309,913,079

Significant Accounting Policies H

Notes forming part of Accounts I


V.R.LALITHA C. SANKARALINGAM K. VENKATESH S.N. BABUGOVINDARAJPartner Manager DirectorsMembership No.: 18284

Place : Chennai Place : ChennaiDated : April 19, 2006 Dated : April 19, 2006

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2005-06 2004-05

Schedule Rs. RsINCOME

Fee collection from users of facility 260,237,878 233,994,648

Other income F 52,096,560 41,570,867

TOTAL 312,334,438 275,565,515

EXPENDITURE

Operating & maintenance expenses G 88,347,534 72,419,796

Interest & Finance charge on fixed loans 50,646,829 61,399,618

Depreciation 118,405,207 118,324,284

TOTAL 257,399,570 252,143,698

Profit / (Loss) before taxes 54,934,868 23,421,817

Provision for :

Current tax 4,622,769 1,836,563


4,664,639 1,836,563

Profit / (Loss) after taxes 50,270,229 21,585,254

Add: Profit/(Loss) carried forward from previous year (141,954,704) (163,539,958)


Earnings per share (Basic and Diluted) 1.06 0.46Significant Accounting Policies H

Notes forming part of Accounts I

Profit and Loss Account for the period ended March 31, 2006Profit and Loss Account for the period ended March 31, 2006Profit and Loss Account for the period ended March 31, 2006Profit and Loss Account for the period ended March 31, 2006Profit and Loss Account for the period ended March 31, 2006




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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 20062005 - 06 2004 - 05

Rs. Rs.A. Cash Flow from operating activities

Net Profit/(Loss) before tax & extraordinary items 54,934,868 23,421,817

Adjustment for :

Depreciation 118,405,207 118,324,284

Unrealised foreign exchange difference- net (gain)/ loss (20,967,146) (9,784,800)

Interest paid 50,646,829 61,399,618

Interest received (19,287,713) (10,722,742)

Operating Profit before Working Capital changes 183,732,045 182,638,177

Adjustments For :

(Increase) / Decrease in Loans and Advances 16,376,420 (102,018,922)

Increase / (Decrease) in trade payables (2,429,549) 54,756,281

Cash generated from operations 197,678,916 135,375,536

Direct taxes paid (net of refund) - -


B. Cash Flow from Investing activities :

Purchase of Fixed Assets (278,066) (42,721)

Interest received 19,287,713 10,722,742

Net Cash from investing activities (B) 19,009,647 10,680,021

C. Cash Flow from Financing activities :

(Repayment ) / Proceeds from other borrowings (161,523,187) (124,674,452)

Realised exchange gain (3,110,282) (1,884,600)

Interest Paid (50,646,829) (61,399,618)

Net cash from financing activities (C) (215,280,298) (187,958,670)

Net increase in cash and cash equivalents (A+B+C) 1,408,265 (41,903,113)

Cash and Cash equivalents as at the beginning 235,767,903 277,671,016(including cash credit from banks)

Cash and Cash equivalents as at the end (including cash credit from banks) 237,176,168 235,767,903

NOTES

1. Cash flow statement has been prepared under the Indirect Method as set of in the Accounting Standard 3 issued by the Institute of CharteredAccountants of India.


3. Previous year’s figures have been regrouped/reclassified wherever applicable




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Schedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsAS AT 31.03.2006 AS AT 31.03.2005

Rs. Rs. Rs. Rs.Schedule - A

Share Capital

Authorised :6,00,00,000 Equity Shares of Rs. 10/- each 600,000,000 600,000,000

Issued and Subscribed:47,350,007 Equity Shares of Rs. 10/- each fully paid up 473,500,070 473,500,070(37,880,007 equity shares are held by L&T InfrastructureDevelopment Projects Ltd , Larsen & Toubro Limitedand its nominees)

473,500,070 473,500,070

Schedule - B

Secured Loans

Loans from Banks 263,907,633 372,127,295Loans from Financial Institutions 386,904,761 464,285,714(Above loans are secured by a pari passu charge on allthe movable and immovable properties of the Company,present and future)

650,812,394 836,413,009

Schedule - C ( Figures in Rupees )

Fixed Assets Cost Depreciation Book Value

As at Additions Deductions As at Upto For the year Deductions Upto As at As at01.04.2005 31.3.2006 01.04.2005 31.3.2006 31.3.2006 31.3.2005

Building * 1,391,113,933 - - 1,391,113,933 511,031,031 115,802,236 - 626,833,267 764,280,666 880,082,902

Plant & Machinery 24,001,082 88,516 - 24,089,598 7,614,146 2,173,360 - 9,787,506 14,302,092 16,386,936

Furniture & Fixtures andOffice Equipment 2,077,281 189,550 376,506 1,890,325 1,290,531 362,820 376,506 1,276,845 613,480 786,750

Vehicles 703,065 - - 703,065 294,994 66,791 - 361,785 341,280 408,071

Total 1,417,895,361 278,066 376,506 1,417,796,921 520,230,702 118,405,207 376,506 638,259,403 779,537,518 897,664,659

Previous year 1,417,852,640 42,721 - 1,417,895,361 401,906,418 118,324,284 - 520,230,702 897,664,659

Note:

* Building includes bridge over river Narmada constructed on land provided by Government of Gujarat under the Concession Agreement dated 21st November, 1997 with Ministry of Surface Transport, Governmentof India and Public Works Department, Government of Gujarat and the cost incurred on the said bridge is being amortised equally over a period of 12 years commencing from 11th November, 2000.

AS AT 31.3.2006 AS AT 31.03.2005

Rs. Rs. Rs. Rs.Schedule - DCurrent Assets, Loans and AdvancesCash and bank balances

Cash on hand 875,896 1,150,809Balances with scheduled banks

on current account 110,174,917 58,338,976on fixed deposits (including interest accrued

thereon Rs.13,41,622 (Previous year Rs.12,19,394) 125,066,631 175,219,394on margin money deposit accounts (including interest

Rs. 1,05,494 (Previous year Rs.58,724) 1,058,724 1,058,724

237,176,168 235,767,903Loans & Advances


ICD - L&T Infrastructure Develoment Projects Limited 82,000,000 100,000,000

93,209,528 109,585,948

237,176,168 235,767,903

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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)AS AT 31.03.2006 AS AT 31.03.2005

Rs. Rs. Rs. Rs.Schedule - E

Current Liabilities and Provisions:

Liabilities

Sundry Creditors- Small scale industrial undertakings - -- Others 63,687,756 65,069,433- Interest accrued but not due on loans 6,981,858 8,140,293

70,669,614 73,209,726Provision for :- Income Tax 6,459,332 1,836,563- Fringe Benefit Tax 41,870 -- Gratuity 102,923 -- Leave Encashment 21,486 13,846

6,625,611 1,850,409

77,295,225 75,060,135

2005-06 2004-05

Rs. Rs.Schedule - F

Other Income

Interest on fixed deposit/Inter Corporate Deposit 19,287,713 16,103,499(tax deducted at source - Rs.43,48,284)

(previous year Rs. 36,47,696/- )Exchange Gain 32,104,069 24,097,408Misecellaneous Income 704,778 1,369,960

52,096,560 41,570,867

Schedule - G

Operating Maintenance Expenses

Toll management fees 5,129,966 5,164,349Security Services 2,710,308 2,627,431Salaries,wages & bonus 3,265,812 3,678,477Contribution to and provision for- Provident fund 91,719 86,518- Gratuity 102,923 -- Leave Encashment 21,486 24,159Staff welfare expenses 249,969 206,164Rates & taxes 950 300Printing & stationery 426,672 756,282Travelling & conveyance 341,814 310,678Electricity charges 412,782 372,948Professional Fees 54,256,677 51,572,770Insurance 4,034,500 4,177,405Repairs & Maintenance- Building 15,296,389 1,274,843- Plant & Machinery 17,424 56,782- Others 320,603 393,523Postage & Telephone Expenses 72,706 96,000Miscellaneous Expenses 1,594,834 1,621,167

88,347,534 72,419,796

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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedule - H

Significant Accounting Policies:


The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally accepted accountingprinciples (“GAAP”) and in compliance with the According Standards referred to in Section 211 (3C) and other requirements of the Companies Act,1956.

The preparation of financial statements in conformity with GAAP requires that the management of the company makes estimates and assumptionsthat affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relating tocontingent liabilities as of the date of the financial statements. Examples of such estimates include useful lives of fixed assets and intangible assets,provision for doubtful debts/advances, future obligations in respect of retirement benefit plans etc. Actual results could differ from these estimates.

2. Income

Fee collections from users of facilities are accounted for as and when the amount is due and recovery of which is certain.

3. Retirement Benefits

Contributions to Provident Fund are accounted on actual liability basis. Leave encashment provision has been made on actual liability basis. Provisionfor gratuity is made as per Payment of Gratuity Act, 1972.

4. Fixed Assets

Fixed Assets are recorded at cost. The carrying amounts are reviewed at each balance sheet date to assess whether they are recorded in excess oftheir recoverable amount. Where carrying values exceed this recoverable amount assets are written down to their recoverable amount

5. Depreciation

Depreciation on assets has been provided on straight-line basis at the rates specified in the Schedule XIV of the Companies Act, 1956. Assetsconstructed on land not owned by the Company and acquired / installed thereon are amortised over a period of the rights given under the ConcessionAgreement dated 21st November, 1997 with the Ministry of Surface Transport, Government of India and Public Works Department, Government ofGujarat.

Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the assets revised carryingamount over its remaining useful life. Depreciation on additions/deductions is calculated prorata from/to the month of additions/deductions.

6. Borrowing Cost

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of suchassets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or for sale. All other borrowingcosts are recognised as an expense in the period in which they are incurred.





a. Cost of imported fixed assets, if the foreign currency liability relates to fixed assets

b. Profit & loss account in other cases. Wherever forward contracts are entered into, the exchange differences are dealt with in the Profit &Loss account over the period of the contracts.

(iv) Derivative transactions are considered as off - balance sheet items and cash flows arising there from are recognized in the books of account asand when the settlements take place in accordance with the terms of the respective contracts over the tenor thereof.

8. Taxes on Income

Fringe Benefit Tax for the period is computed in accordance with the provisions of Chapter XII-H of the Income-tax Act, 1961. Tax on income for thecurrent period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income-tax Act,1961,and based on expected outcome of assessments / appeals.

Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using the tax ratesand laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will beavailable against which such deferred tax assets can be realised.

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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedule - INotes forming part of Accounts:1. The Company has been awarded on Build Operate and Transfer (BOT) basis, the construction of the second two-lane bridge at Zadeshwar across the

River Narmada on National Highway – 8, under the Concession Agreement dated 21st November, 1997 with Ministry of Surface Transport, Governmentof India and Public Works Department, Government of Gujarat. The bridge was completed on 11.11.2000 and the concession period is for 12 yearsfrom that date.

2. The Company had no transactions during the year with any small-scale industrial undertakings and hence reporting details of interest on overdueoutstandings and amount outstanding for more than 30 days, does not arise.

3. The Company is a service company and accordingly information required under paragraph 4(C) of Part II of Schedule VI to the Companies Act, 1956has not been furnished.

4. Manager’s salary and perquisites (on deputation) of Rs.3,70,885/- (previous year: Rs.2, 60,044/-) for the year ended 31st March 2006 has beencharged to the accounts.

5. Provision for gratuity is made for employees eligible under the Payment of Gratuity Act, 1972.

6. Auditor’s Remuneration (including service tax)Rupees

2005-2006 2004-2005

Audit Fees 78,568 77,140


Certification Expenses 1,653 1,110

7. Fringe benefit tax of Rs.41,870/- and Income tax provision amounting Rs.46,22,769/- (previous year: Rs 18,36,563/-) under Minimum Alternate Taxhave been made in the Accounts as per the provisions of the Income tax Act-1961. No provision for wealth tax has been made for the current year inthese accounts as there is no taxable wealth under the provisions of the Wealth Tax Act 1957.

8. Expenditure in foreign currency:Rupees

2005-2006 2004-2005

Interest on Term Loan (FCNRB) 66,89,477 90,53,103

9. Exchange gain (net) arising on account of foreign currency transactions amounting to Rs.3,21,04,069/- has been credited to Profit and Loss account.(previous year: Rs. 2,40,97,408/-).

10. Derivative Transactions:

(a) The Company had availed in 2002 a Japanese Yen denominated Foreign Currency Loan, equivalent to Rs 42,80,18,139/- from a nationalizedbank. The loan amount outstanding as at 31st March 2006 is Rs 26,39,07,633/- (previous year: Rs. 35,36,35,200/-). The interest rate / exchangerate risks arising out of the above loan is managed by Larsen & Toubro Limited – the ultimate holding company. On advice from Larsen & ToubroLimited the Company enters into derivative transactions.

(b) Derivative instrument outstanding amount as at 31.3.2006:

Interest rate swap:

Notional Principal Amount Rs. 25,00,00,000 [USD 53, 35,041]

The periodic settlements on the interest Rate Swap are accounted for in the financial statements during the period as and when they arise.

(c) The purpose of the transactions is to hedge the underlying foreign exchange loan and interest exposure.

(d) The foreign currency exposure not hedged by a derivative instrument as on March 31, 2006 is Rs. 1,39,07,633.

11. As per Accounting Standard 22 on Taxes on Income – the Company has a deferred tax asset as given below:

31.03.2006 31.03.2005

Rupees RupeesDeferred Tax AssetsOn account of Unabsorbed loss / depreciation as per income tax 17,78,27,227 21,62,84,803Difference between carrying amount of preliminary expenses not written off 2,44,837 3,06,047Unpaid statutory liabilities debited to Profit & Loss A/c. 7,232 4,661

Total 17,80,79,296 21,65,95,511Less: Deferred Tax liabilitiesOn account of difference between carrying 14,91,77,318 16,90,80,619amount of fixed assets in the books and the income tax return.

Net deferred tax asset 2,89,01,978 4,75,14,892

The Company has not accrued the above deferred tax asset in the accounts, since the company is eligible for benefit under Section 80 IA of theIncome Tax Act during the entire concession period under the Concession Agreement and the deferred tax asset will get reversed during the period.

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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)12. The Company has not taken any asset on finance / operating lease. The income from cancelable operating lease is accounted on accrual basis.

13. Segment Reporting – The Company is in the business of operating and maintaining a toll bridge and the majority of its income represents tollcollections. Hence, operations are under single business and geographical segment.



Holding companies: L&T Infrastructure Development Projects LimitedLarsen & Toubro Limited(ultimate holding company)

Subsidiary company: NIL

Associates : NIL

Fellow subsidiaries: Cyber Park Development & Construction limited


L&T Finance Limited





L&T Transportation Infrastructure Limited














L&T Panipat Elevated Corridor Private Limite



L&T Krishnagiri Thoppur Toll Road Private Limited.













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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)B. Transactions with related parties and amounts due to / due from related parties

Name / Relationship/ Nature of transaction2005-06 2004-05

Rupees RupeesL&T Infrastructure Development Projects LimiteHolding company• Interest received on ICD 1,21,56,603 51,59,825

Larsen & Toubro LimiteUltimate holding company• Purchase of goods & services 5,99,55,488 5,15,72,770• Charges for deputation of employees 17,40,318 24,89,979• Gross rental income 2,08,356 2,08,356

Cyber Park Development & Construction LtdFellow subsidiary• Interest received on ICD - 2,20,932

C. Amounts due to/ due from related parties

31-03-2006 31-03-2005

Rupees Rupees

(i) Accounts payable (due to):Larsen & Toubro Ltd (ultimate holding company) 5,70,35,599 5,80,80,571L&T Infrastructure Development Projects Limited (holding company) 5,949 7,13,244

(ii) Loans & Advances recoverable (due from):L&T Infrastructure Development Projects Limited (holding company) 8,20,00,000 10,00,19,178

D. Amounts written off/ written back: Nil

15. We confirm that we are not aware of the existence of any condition, which could indicate that any of the assets may be impaired.

16. The Company does not have transactions during the year attracting provisions of the following Accounting Standards:

Accounting for Intangible Assets – AS 26

Accounting for Contingent Liabilities/Assets – AS 29


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18. Balance Sheet Abstract and Company’s General Business ProfileI Registration Details

Registration No. 1 8 - 3 8 1 7 5 State Code 1 8Balance Sheet Date 3 1 0 3 2 0 0 6

Date Month Year

II Capital Raised during the year (Amount in Rs. Thousands)Public Issue Rights Issue

N I L N I LBonus Issue Private placements

N I L N I L

III Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands)Total Liabilities Total Assets

1 1 2 4 3 1 2 1 1 2 4 3 1 2Sources of Funds Paid-Up Capital

(including adv. against share capital) Reserves & Surplus4 7 3 5 0 0 N I L

Secured Loans Unsecured Loans6 5 0 8 1 2 N I L

Application of Funds Net Fixed Assets Investments7 7 9 5 3 8 N I L

Net Current Assets/(Liabilities) Misc. Expensditure2 5 3 0 9 0 N I L

Accumulated Losses9 1 6 8 4

IV Performance of Company (Amount in Rs. Thousands)Turnover (Including other income) Total Expenditure

3 1 2 3 3 4 2 5 7 4 0 0Profit/Loss Before Tax Profit/Loss after Tax

5 4 9 3 5 5 0 2 7 0Earnings Per Share in Rs. Dividend Rate %

1 . 0 6 N A

V Generic Names of Three Principal Products/Services of the Company(as per monetary terms)

Item Code No. N A(ITC Code)

Product Description INFRASTRUCTURE PROJECT ON BOT BASIS

Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)

Signatures to Schedules A to I




S-143

L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their report and Accounts for the year ended 31st March, 2006.


Sl.No Particulars 2005-06 2004-05

Rs.Lacs Rs.Lacs

1 Profit Before Depreciation & Tax (PBDT) (839.44) (335.27)


3 Profit / (Loss) before tax (PBT) (839.82) (335.45)

4 Provision for taxes 0.72 0.21

5 Profit / (Loss) after tax (PAT) (840.54) (335.66)



II DIVIDEND

The Directors do not recommend dividend for the year 2005-06 in view of the accumulated losses.

III PERFORMANCE OF THE COMPANY

The Directors wish to inform that the company has registered an income of Rs.602.21 Lacs from operations during the year. The expenditure(including depreciation) incurred during the year has been Rs.1503.30 Lacs. The company has registered a loss of Rs.840.54 Lacs (Rs.335.66 inthe previous year) during the year.

Some of the projects in which the company has made its investments during the year are as follows:

Road Sector:

New Road projects were sanctioned by the NHAI and the following new SPVs were incorporated to enter into a concession agreement with theNHAI to execute the projects:

a) L&T Krishnagiri Thopur Toll Road Limited

b) L&T Panipat Elevated Corridor Limited

c) L&T Western Andhra Tollways Limited

d) L&T Interstate Road Corridor Limited and

e) L&T Vadodara Bharuch Tollway Limited

Real Estate Sector:

Your company has also made investments in Real Estate Projects as listed below:

a) L&T Tech Park Limited – to develop an IT Park in Kochi, Kerala

b) L&T Urban Infrastructure Limited

Apart from the above mentioned investments, your company has its presence in sectors such as Ports, Airports etc across the country.

IV. CAPITAL EXPENDITURE

As at 31st March, 2006, while the Gross fixed assets of the company is Rs.15.46 Lacs, the net fixed asset value is Rs.14.91 Lacs after chargingoff a depreciation to the extent of Rs.0.55 Lacs.

V. DEPOSITS


VI. AUDITORS’ REPORT


VII. FOREIGN CURRENCY TRANSACTIONS

There was no usage or earning of any foreign currency in the course of transactions during the year 2005-06.

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VIII DISCLOSURE OF PARTICULARS

As the company is engaged in Infrastructure development activities, there are no particulars to be disclosed as per the Companies’ (Disclosure ofParticulars in the Report of the Board of Directors) Rules, 1988.

IX. PARTICULARS OF EMPLOYEES

There are no employees covered by the provisions of the Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules, 1975.

X. DIRECTORS RESPONSIBILITY STATEMENT


i. That in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no materialdeparture;

ii. That the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2006 and of the profit of the Company for theyear ended on that date;



XI. DIRECTORS

Mr.R.Shankar Raman retires from the Board of the Company by rotation and being eligible, offers himself for re-appointment.

Mr.N.Sivaraman is appointed as additional director on the Board of your Company with effect from 21.04.2006.

XII. AUDIT COMMITTEE

The Audit Committee consists of three non-executive and independent directors. The present members of the Committee are:

1. Mr.Y.M.Deosthalee

2. Mr.K.V.Rangaswami

3. Mr.R.Shankar Raman

XIII. AUDITORS

The Auditors, M/S Sharp & Tannan, Chartered Accountants, being statutory auditors of the Company hold office until the conclusion of the ensuingAnnual General Meeting and are recommended for reappointment. Certificate from Auditors has been received to the effect that their appointment,if made, would be within the limits prescribed under Section 224(1B) of the Companies Act.

XIV. ACKNOWLEDGEMENTS

The Directors acknowledge the invaluable support extended to the company by the Financial Institutions, Bankers and Employees of the companyand management staff of the parent company.

K. V. RANGASWAMI R. SHANKAR RAMANDirectors

Place: ChennaiDate: May 18, 2006

S-145


Auditor’s ReportAuditor’s ReportAuditor’s ReportAuditor’s ReportAuditor’s ReportTO THE MEMBERS OF L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LIMITED (FORMERLY L&T HOLDINGS LIMITED)

We have audited the attached balance sheet of L&T Infrastructure Development Projects Limited as at 31st March 2006, the profit and loss account andthe cash flow statement for the year ended on that date annexed there to. The financial statement is the responsibility of the Company’s management.Our responsibility is to express an opinion on the financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

In accordance with the provision of Section 227 of the Companies Act, 1956, we report that:



(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of ouraudit;

(b) in our opinion, proper books of accounts as required by law have been kept by the Company so far as it appears from our examination ofthese books;

(c) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of accounts;

(d) in our opinion, the balance sheet, profit and loss account and the cash flow statement dealt with by this report comply with the accountingstandards referred to in subsection (3C) of section 211 of the Companies Act, 1956;

(e) on the basis of written representations received from the Directors of the Company as at 31st March 2006, and taken on record by the Boardof Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointed as a director in terms of clause(g) of subsection (1) of Section 274 of the Companies Act, 1956; and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the informationrequired by the Companies Act, 1956 and in the manner so required and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

(i) in the case of balance sheet, of the state of affairs of the Company as at March 31, 2006

(ii) in the case of profit and loss account, of the loss for the year ended on that date; and

(iii) in the case of cash flow statement, of the cash flows for the year ended on that date.


L.VAIDYANATHANPlace: Chennai PartnerDate : May 18, 2006 Membership No.16368

S-146


Annexure to the Auditor’s ReportAnnexure to the Auditor’s ReportAnnexure to the Auditor’s ReportAnnexure to the Auditor’s ReportAnnexure to the Auditor’s ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditors to the Members of L&T Infrastructure Development ProjectsLimited on the accounts for the year ended 31st March 2006, we report that:

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The Management has physically verified during the year all its fixed assets. No discrepancies were noticed on such verification.

(c) None of the fixed assets of the Company has been disposed off during the year and hence do not affect going concern status.

(ii) The Company is engaged in the business of providing consultancy service in infrastructure. Hence, reporting on clauses relating to inventory 4(ii) (a) (b) and (c) of the Companies (Auditor’s Report) Order 2003 does not arise.

(iii) (a) According to the information and explanations given to us, the Company has not granted or taken any loans, secured or unsecured, to /from companies, firms and others parties covered in the Register maintained under section 301 of the Companies Act, 1956.

(b) Since the Company has not taken / granted loans, commenting on clause 4 (iii) (b), (c), (d), (e), (f) and (g) does not arise.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate withthe size of the Company and nature of its business for the purchase of fixed assets and for sale of services. In our opinion, and according to theinformation and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into the registerin pursuance of section 301 of the Companies Act, 1956 and hence reporting on clause 4 (v) (b) of the Companies (Auditor’s Report) Order doesnot arise.

(vi) The Company has not accepted any deposit from the public and hence reporting compliance under the provisions of section 58A and section58AA of the Companies Act, 1956 and rules framed there under and the directives of Reserves Bank of India does not arise.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

(viii) The Central Government has not prescribed the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 for theoperations of the Company and hence, reporting on this clause does not arise.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company hasbeen generally regular in depositing Income tax, Service tax and other statutory dues during the year with the appropriate authorities.

(b) According to the information and explanations given to us, there are no dues of income tax, wealth tax, service tax and cess, which has notbeen deposited with the appropriate authorities on account of any disputes.

(x) The company has accumulated losses of less than fifty percent of its networth as at the end of the financial year and has incurred cash lossesin the financial year and in the immediately preceding financial year.

(xi) According to the information and explanations given to us, the Company has not borrowed any money from banks or financial institutions, hencereporting on default in repayment does not arise.


(xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society and hence commenting on clause 4 (xiii), (a), (b), (c) & (d) does not arise.

(xiv) According to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and otherinvestments. Accordingly, provisions of clause 4 (xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of guarantees/ undertakings given by theCompany for loans taken by others from banks or financial institutions are not prima facie prejudicial to the interests of the Company.

(xvi) The Company has obtained term loan and has applied the same for the purpose for which they were obtained.

(xvii) According to the information and explanations and on an overall examination of the balance sheet of the Company, we report that no fundsraised on short-term basis have been used for long-term investment

(xviii) The Company has not made any preferential allotment of shares during the year.

(xix) The Company has issued debentures and securities or charges have been created where necessary.


(xxi) During the course of our audit of the books and records of the company carried out in accordance with generally accepted auditing practices inIndia, and according to the information and explanations given to us, we have neither come across any instances of material fraud on or by theCompany, noticed or reported during the year nor have we been informed of such case by management.


L.VAIDYANATHANPlace: Chennai PartnerDate : May 18, 2006 Membership No.16368

S-147



Schedule Rupees Rupees Rupees Rupees

SOURCES OF FUNDS


Share Capital A 1,510,407,670 840,500,000

Advance against share capital 1,082,778,053 -

2,593,185,723 840,500,000

Loan Funds

Unsecured loans B 1,306,000,000 1,450,000,000

Deferred Tax Liability 81,196 12,178

TOTAL 3,899,266,919 2,290,512,178


Fixed Assets

Gross block C 1,546,385 1,329,550

Less: Depreciation 55,613 18,050

Net block 1,490,772 1,311,500

Investments D 3,286,817,424 1,840,203,849

Current Assets, Loan and Advances E

Debtors 14,907,856 -



468,534,045 379,457,215

Less: Current liabilities and provisions F

Liabilities 22,289,246 11,126,964

Provisions 6,447 -

22,295,693 11,126,964


Profit & Loss Account 164,720,371 80,666,578

TOTAL 3,899,266,919 2,290,512,178

Significant Accounting Policies K

Notes forming part of Accounts L

As per our report attached For and on behalf of the Board


L. VAIDYANATHAN R. SRIDHAR K. V. RANGASWAMI R. SHANKAR RAMANPartner Secretary DirectorsMembership No.16368

Place: Chennai Place: ChennaiDate: May 18, 2006 Date: May 18, 2006

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Profit and Loss Account for the year ended March 31, 2006Profit and Loss Account for the year ended March 31, 2006Profit and Loss Account for the year ended March 31, 2006Profit and Loss Account for the year ended March 31, 2006Profit and Loss Account for the year ended March 31, 20062005-06 2004-05


INCOME

Income from Operations G 60,221,000 39,701,000

Other Income H 6,126,960 5,563,319

TOTAL 66,347,960 45,264,319

EXPENDITURE

Operating Expenses I 23,180,983 622,239

Interest & Finance Charges J 127,111,409 78,169,188

Depreciation 37,563 18,050

TOTAL 150,329,955 78,809,477

Profit / (Loss) before taxes (83,981,995) (33,545,158)

Provision for taxes

Current Tax - -

Deferred Tax 69,018 20,966

Fringe Benefit Tax 2,780 -

71,798 20,966

Profit/ (Loss) after Tax (84,053,793) (33,566,124)

Add: Balance brought forward from previous year (80,666,578) (47,100,454)


Earnings per share ( Basic and diluted) (0.94) (0.40)

Significant Accounting Policies K

Notes forming part of Accounts L





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Net Profit / (Loss) before tax & extraordinary items (83,981,995) (33,545,159)

Adjustments for :


Interest paid 127,111,409 78,169,188

Interest received (6,058,560) (4,652,348)

(Profit) / Loss on sale of investments (net) - (853,971)

Operating Profit before Working Capital changes 37,108,417 39,135,760

Adjustments For :

(Increase) / Decrease in trade and other receivables (87,291,423) (113,981,192)

Increase / (Decrease) in trade payables 11,165,949 4,083,133

Cash generated from operations (39,017,057) (70,762,299)

Direct taxes paid (net of refund) - -

Net Cash from operating activities (39,017,057) (70,762,299)

B. Cash Flow from Investing activities :


Purchase of investments (1,446,613,575) (286,092,150)

Sale of investments - 90,514,384


Net Cash (used in) / from investing activities (1,440,771,850) (191,004,968)

C. Cash Flow from Financing Activities

Issue of share capital & advance against share capital 1,752,685,723 -

Proceeds from other borrowings (144,000,000) 350,000,000

Interest Paid (127,111,409) (78,169,188)

Net cash (used in) / from financing activities 1,481,574,314 271,830,812

Net increase in cash and cash equivalents (A+B+C) 1,785,407 10,063,546

Cash and Cash equivalents as at the beginning 10,172,947 109,401


NOTES



3. Previous year’s figures have been regrouped/reclassified wherever applicable





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Schedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsAs at 31.03.2006 As at 31.03.2005


SCHEDULE - A

Share Capital

Authorised :

27,50,00,000 Equity Shares of Rs. 10 each 2,750,000,000 1,750,000,000

Issued and Subscribed:

15,10,40,767 Equity Shares of Rs. 10 each fully paid 1,510,407,670 840,500,000( The entire equity shares are held by the holdingcompany Larsen & Toubro Limited and its nominees)

6,69,90,767 Equity Shares were issued during the year

1,510,407,670 840,500,000

SCHEDULE - B

Unsecured loans

Debentures

8% Redeemable non convertible Debentures - Series I 300,000,000 300,000,000

7.85 % Redeemable non convertible Debentures - Series II — 300,000,000 200,000,000 500,000,000

From others 850,000,000 850,000,000

Inter Corporate Deposits 156,000,000 100,000,000

1,306,000,000 1,450,000,000

(Figures in Rupees)SCHEDULE - C

Fixed Assets Cost Depreciation Book Value

As at Additions As at Upto For the year As at As at As at01.04.2005 31.3.2006 31.03.2005 31.3.2006 31.3.2006 31.3.2005

Building 1,329,550 — 1,329,550 18,050 21,672 39,722 1,289,828 1,311,500

Computers — 195,000 195,000 — 15,805 15,805 179,195 —

Office Equipments — 21,835 21,835 — 86 86 21,749 —

Total 1,329,550 216,835 1,546,385 18,050 37,563 55,613 1,490,772

Previous year — 1,329,550 1,329,550 — 18,050 18,050 1,311,500

Note : Cost of Building represents ownership accomodation in a co-operative society including 5 shares of Rs 50 each.

Share certificates are yet to be transferred in favour of the Company.

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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)As at 31.03.2006 As at 31.03.2005

Rupees Rupees Rupees RupeesSCHEDULE - DInvestmentsLong Term Investments (At cost)Subsidiary Companies- UnquotedFully paid equity shares :

L&T Transportation Infrastructure Ltd 531,366,014 407,751,014(3,05,36,000 equity shares of Rs. 10 each ofwhich 1,02,50,000 equity shares purchased during the year)

Narmada Infrastructure Construction Enterprise Ltd 467,995,511 248,402,835(2,52,31,500 equity shares of Rs. 10 each of which1,15,00,000 equity shares purchased during the year)

L&T Interstate Road Corridor Ltd 499,940 —(49,994 equity shares of Rs 10 each subscribed during the year)

L&T Infocity Ltd 160,200,005 —( 2,40,30,000 equity shares of Rs 10 each purchased during the year)

L&T Krishnagiri Thopur Tollroad Pvt Ltd 499,940 —(44,897 equity shares of Rs 10 each subscribed during the year5097 equity shares of Rs 10 each purchased during the year)

L&T Panipat Elevated Corridor Pvt Ltd 499,940 —(49,994 equity shares of Rs 10 each subscribed during the year)

L&T Vadodara Bharuch Tollway Ltd 499,940 —(49,994 equity shares of Rs 10 each subscribed during the year)

L&T Tech Park Ltd 14,999,940 —(14,99,994 equity shares of Rs 10 each subscribed during the year)

L&T Western Andhra Tollway Pvt Ltd 499,940 —(44,897 equity shares of Rs 10 each subscribed during the year5097 equity shares of Rs 10 each purchased during the year)

L&T Urban Infrastructure Ltd 499,940 —(49,994 equity shares of Rs 10 each subscribed during the year)

Cyberpark Development & Construction Limited(5,10,000 equity shares of Rs.10 each) 5,100,000 5,100,000

Trade Investments - UnquotedFully paid equity sharesBangalore International Airport Ltd 148,800,000 650,000

(1,48,80,000 equity shares of Rs 10 each of which1,48,15,000 equity shares subscribed during the year)(Refer Note 5 (c) in Schedule L)

Ahmedabad Mehsana Toll Road Company Limited — 214,300,000(2,14,30,000 equity shares of Rs.10 each) (Refer note 9 in Schedule L)

Gujarat Toll Road Investment Company Ltd 214,300,000 —(3,10,73,500 equity shares of Rs.10 each) (Refer note 9 in Schedule L)

International Seaports Haldia (Private) Ltd 98,300,000 98,300,000(98,30,000 equity shares of Rs.10 each)

GVK Jaipur Kishangarh Expressway Ltd 404,680,000 341,200,000(4,04,68,000 equity shares of Rs.10 each ofwhich 63,48,000 equity shares subscribed during the year)(Refer Note 5 (a) in Schedule L)

Second Vivekananda Bridge Tollway Company Ltd. 323,500,000 323,500,000(3,23,50,000 equity shares of Rs.10 each)(Refer Note 5 (b) in Schedule L)

Kakinada Seaports Ltd(2,05,50,955 equity shares of Rs 10 each of which 205,859,654 66,000,0001,39,50,955 equity shares purchased during the year)

Vishakapatnam Industrial Water Supply Company Ltd. 135,000,000 135,000,000(1,35,00,000 equity shares of Rs.10 each )

Gammon- L&T Infra MRTS Ltd 500,000 —(5,000 equity shares of Rs 100 each purchased during the year )

Ennore Tank Terminals Pvt Ltd 26,000 —(2600 equity shares of Rs 10 each purchased during the year)

The Dhamra Port Company Ltd 533,090,660 —(3,33,09,066 equity shares of Rs 10 each purchased during the year2,00,00,000 equity shares of Rs 10 each subscribed during the year)

Tidel Park Ltd 40,100,000 —( 40,00,000 equity shares of Rs 10 each purchased during the year)

3,286,817,424 1,840,203,849

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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)As at 31.03.2006 As at 31.03.2005

Rupees Rupees Rupees RupeesSCHEDULE - E


Sundry Debtors

Unsecured, considered good:

Outstanding for more than six months — —

Others 14,907,856 —

14,907,856 —

Cash and bank balances

Balances with scheduled bank

on current account 1,956,738 10,172,947on fixed deposits (including interest accruedthereon Rs 1616; previous year - Nil) 10,001,616 —

11,958,354 10,172,947

Loans & Advances:

Unsecured, considered good:

Subsidiary companies:

Loans (including interest accrued thereon) 55,274,920 52,485,329

Others 1,166,195 150,302

Advances towards share capital

Subsidiaries 225,965,120 —

Associates 100,552,578 63,600,000

Others 49,500,000 84,200,000

Inter Corporate Deposits — 4,100,000


441,667,835 369,284,268

468,534,045 379,457,215

SCHEDULE - F


Liabilities

Sundry Creditors

Small scale industries — —

Others 20,861,301 9,699,019

Interest accrued but not due 1,427,945 1,427,945

22,289,246 11,126,964

Provisions

Provision for taxes — —

Provision for Fringe benefit tax 2,780 —

Provision for Leave Encashment 3,667 —

6,447 —

22,295,693 11,126,964

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SCHEDULE - G

Income from operations

Project development and advisory fees 60,221,000 39,701,000

60,221,000 39,701,000

SCHEDULE - H

Other Income

Interest Income 6,058,560 4,652,348

(tax deducted at source: Rs.15,48,600; Previous year:- Rs.9,72,681)

Profit on Sale of Investments — 853,971

Other Income 68,400 57,000

6,126,960 5,563,319

SCHEDULE - I

Operating Expenses

Rent 1,800,000 —

Salaries & wages 184,574 —

Leave encashment 3,667 —

Staff welfare expenses 32,556 —

Cost of Services 762,806 —

Rates & Taxes 5,034,669 5,966

Professional Fees 9,604,756 491,235

Repairs & maintenance 427,500 —

Printing & Stationery 595,596 1,000

Electricity charges 1,173,336 —

Communication expenses 747,034 —

Bank charges 1,605,746 225

Miscellaneous expenses 1,208,743 123,813

23,180,983 622,239

SCHEDULE - J

Interest & Finance Charges

Interest on debentures and fixed loans 109,781,986 78,169,188

Interest - others 17,329,423 —

127,111,409 78,169,188

Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)2005-06 2004-05Rupees Rupees

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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)SCHEDULE - K

Significant Accounting Policies:

a. Basis of Accounting

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally accepted accountingprinciples [“GAAP”] and in compliance with the Accounting Standards referred to in Section 211(3C) and the other requirements of the CompaniesAct, 1956.

The preparation of financial statements in conformity with GAAP requires that the management of the Company makes estimates and assumptionsthat affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relatingto contingent liabilities as of the date of the financial statements. Actual results could differ from these estimates.

b. Revenue Recognition:

Consultancy/advisory fee for Project Development is accounted based on agreement with customers on completion of service.

c. Retirement Benefits

Leave encashment provision has been made on actual liability basis.

d. Fixed Assets

Fixed Assets are recorded at cost.

e. Depreciation

Depreciation on asset has been provided on straight-line basis at the rates specified in the schedule XIV of the Companies Act, 1956. Depreciationon additions/ deductions is calculated pro-rata from/ to the month of additions/ deductions.

Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the assets revisedcarrying amount over its remaining useful life.

f. Investments

Long-term investments are carried at cost, after providing for any diminution in value, if such diminution is of a permanent nature. Currentinvestments are stated at lower of cost or market value.

g. Impairment

The carrying amounts of assets are reviewed at balance sheet date to assess whether they are recorded in excess of their recoverable amount.Where carrying values exceed this recoverable amount, assets are written down to their recoverable amount. Where the recoverable amountexceeds the carrying value the impairment provided in earlier years is reversed to the extent of provision made earlier.

h. Foreign Currency Transactions




a. Cost of imported fixed assets, if the foreign currency liability relates to fixed assets.

b. Profit & loss account in other cases.

i. Taxes on income

Taxes on income for the current period is determined on the basis of taxable income and tax credits computed in accordance of the provisions ofthe Income-tax Act, 1961, and based on expected outcome of assessments / appeals. Fringe Benefit Tax is determined for the period as per theprovisions of Chapter XII-H of the Income-tax Act, 1961.

Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using the taxrates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income willbe available against which such deferred tax assets can be realised.

j. Provisions, Contingent liabilities and contingent assets


a) the Company has a present obligation as a result of a past event.

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c) the amount of the obligation can be reliably estimated.


Contingent Liability is disclosed in the case of

a) a present obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle the obligation.

b) a possible obligation, unless the probability of outflow of resources is remote.

Contingent Assets are neither recognized, nor disclosed.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

SCHEDULE - L

Notes forming part of Accounts

1. The Company had no transactions during the year with any small-scale industrial undertaking and hence reporting details on outstandingexceeding 30 days and interest on over due outstanding does not arise.

2. The Company’s management is of the opinion that the Company is a service company and accordingly furnishing of information required underparagraph 4(c) of Part II of Schedule VI of the Companies Act, 1956 is not applicable.

3. Unsecured loan includes

a) Loan of Rs.85 crores from a corporate body, repayable after five years against corporate guarantee issued by the holding company Larsen& Toubro Limited.

b) 8% Redeemable Non Convertible Debentures - Series I for Rs.30 crores (30 debentures of face value of Rs.1 crore each issued on 31.3.03)guaranteed by unconditional irrevocable guarantee by M/s. Larsen & Toubro Limited, the holding company, are redeemable at par on31.03.2008 or on exercise of a conditional put option by the subscriber.

4. The Company has no profit available for appropriation and hence no reserve has been created for debenture redemption.

5. a. The Company has pledged its investment in the equity shares of GVK Jaipur Kishangarh Expressway Limited to the extent of Rs.21.40 croresto the Senior Lenders as security for the Term Loans sanctioned by them to GVK Jaipur Kishangarh Expressway Limited, an associatecompany.

b. The Company had pledged its investment in the equity shares of Second Vivekananda Bridge Tollway Company Limited (SVBTC) ofRs.32.35 Crores to the Senior Lenders as security for the Term Loans sanctioned by them to SVBTC, an associate company.

c. The Company has entered into agreements with the lenders to Bangalore International Airport Limited (BIAL) for pledge and non-disposal ofshares held by it in BIAL

6. The Company has given the following undertakings jointly with Pacific Alliance Stradec Group Infrastructure Company LLC and SVBTC to the termlenders of SVBTC:

i. to meet the cost overrun and

ii. not to reduce the joint shareholding below 51% during Construction period and for 3 years following Commercial Operations Date and below26% during balance remaining operations period.

7. The Company has given the following undertakings jointly with Larsen & Toubro Limited (holding company), to the term lenders of two subsidiarycompanies viz., L&T Transportation Infrastructure Limited (LTTIL) and Narmada Infrastructure Construction Enterprise Limited (NICE):

a. not to reduce their joint shareholding in LTTIL & NICE below 51% until the financial assistance received from the term lenders is repaid in fullby LTTIL & NICE and

b. to jointly meet the shortfall in the Working Capital requirements of LTTIL & NICE until the financial assistance received from the term lendersis repaid in full by LTTIL & NICE.

8. The Company has given an undertaking to the Term lenders of SVBTC to subscribe to quasi equity to the extent of Rs.10 crores in SVBTC. In lieuthereof, the Company has subscribed during the year in cumulative redeemable convertible preference shares to the extent of Rs.10 crores.

9. Pursuant to the Order of the Honourable High Court of Gujarat dated 11th day of May 2005, Ahmedabad Mehsana Toll Road Company Limited(AMTRL) and Vadodara Halol Toll Road Company Limited (VHTRL) have been merged with Gujarat Toll Road Investment Company Ltd(GTRICL). The Company received 3,10,73,500 equity shares of GTRICL in lieu of 2,14,30,000 equity shares held by the Company in AMTRL.


S-156


10. Provisions of the Payment of Gratuity Act 1972 and the Employees Provident Fund and Miscellaneous Provisions Act 1952 are not presentlyapplicable to the Company.

11. Auditor’s Remuneration2005-06 2004-05Rupees Rupees

Audit fees (including service tax) 1,68, 360 77,140

Certification fees 5,510 45,870

Tax Audit fees 17,632 8,265

12. Expenditure in Foreign CurrencyRupees Rupees

Professional Fees 21,60,568 —

13. Segmental reporting

The Company is engaged only in the business of providing services and developing & investing in infrastructure projects in a single businesssegment in India. Hence, no primary/ geographical segment reporting has been furnished.


14. Disclosure of related parties/ related party transactions


Holding company Larsen & Toubro Limited

Subsidiary companies • Cyber Park Development and Construction Limited• L&T Infocity Limited• Hyderabad International Trade Expositions Limited• Andhra Pradesh Expositions Private Limited• L&T Infocity Infrastructure Limited• L&T Infocity Lanka Private Limited• L&T Panipat Elevated Corridor Private Limited• L&T Tech Park Limited• L&T Transportation Infrastructure Limited• Narmada Infrastructure Construction Enterprise Limited• L&T Krishnagiri Thopur Tollroad Pvt Limited• L&T Vadodara Bharuch Tollway Limited• L&T Western Andhra Tollway Private Limited• L&T Interstate Road Corridor Limited• L&T Urban Infrastructure Limited

Associates • Gujarat Toll Road Investment Company Limited• International Seaports Haldia (Private) Limited• GVK Jaipur Kishengarh Expressway Limited• Second Vivekanada Bridge Tollway Company Limited• Visakapatnam Industrial Water Supply Company Limited• Kakinada Seaports Limited• Ennore Tank Terminals Private Limited• Gammon – L&T Infra MRTS Limited• The Dhamra Port Company Limited

Fellow Subsidiaries • Tractors Engineers Limited• L&T Finance Limited• L&T Capital Company Limited• L&T-Sargent & Lundy Limited• Larsen & Toubro Infotech Limited• Larsen & Toubro Infotech GmbH, Germany• HPL Cogeneration Limited• L&T Western India Tollbridge Limited• India Infrastructure Developers Limited• Larsen & Toubro LLC, USA• Larsen & Toubro International FZE, Sharjah• L&T-ECC Construction (M) SDN.BHD• Bhilai Power Supply Company Limited

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• Larsen & Toubro (Oman) LLC• L&T Power Investments Private Limited• Raykal Aluminium Company Private Limited• Larsen & Toubro Qatar LLC• Larsen & Toubro Electromech LLC• International Seaports Pte Limited• International Seaports (India) Private Limited• L&T Overseas Projects Nigeria Limited

B Details of transactions with related parties.Name/Relationship/Nature of transaction 2005-06 20004-05

Rupees RupeesLarsen & Toubro LimitedHolding company• Project development fees earned (including service tax) 6,63,63,542 4,37,50,502• Purchase of fixed assets — 12,50,000• Inter – Corporate deposit due from — 31,00,000• Interest on ICD received 66,100 595• Interest on ICD paid — 9,56,314• Share capital/ advance received 175,26,85,723 —• Purchase of investments 39,75,39,970 —• Rent received 68,400 57,000• Overheads charged (incl. service tax) 1,22, 32,200 —• Cost of services (incl. service tax) 808,006 —Cyber Park Development and Construction LtdSubsidiary• Interest earned 54,71,233 42,90,989Narmada Infrastructure & Construction Enterprise LimitedSubsidiary• Interest on ICD paid 1,21,56,603 51,59,825• ICD received 8,20,00,000 10,00,00,000L&T Transportation Infrastructure LimitedSubsidiary• ICD received 7,40,00,000 —• Interest on ICD paid 45,54,603 7,09,973Second Vivekananda Bridge Tollway Company LimitedAssociate• Advance towards Preference capital 10,00,00,000 —L&T Panipat Elevated Corridor Private LimitedSubsidiary• Equity infused (including advance) 21,14,65,000 —L&T Tech Park LimitedSubsidiary• Equity infused (including advance) 1,50,00,000 —L&T Krishnagiri Thopur Tollroad Private LimitedSubsidiary• Equity infused (including advance) 1,54,48,970 —• Expenses reimbursed 28,20,189 —L&T Vadodara Bharuch Tollway LimitedSubsidiary• Expenses incurred 4,80,459 —• Equity infused 4,99,940 —L & T Western Andhra Tollway Private LimitedSubsidiary• Expenses incurred 3,54,162 —• Equity infused 4,48,970 —L & T Interstate Road Corridor LimitedSubsidiary• Expenses incurred 3,25,625 —• Equity infused 4,99,940 —L & T Urban Infrastructure LimitedSubsidiary• Equity infused 4,99,940 —


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L&T Western India Tollbridge LimitedFellow subsidiary• ICD received 1,00,00,000 —• Interest paid 5,50,411 2,877Tractor Engineers LimitedFellow subsidiary• Purchase of investment 5,39,00,411 —L&T Finance LimitedFellow subsidiary• Purchase of investments 28,93,07,265 —The Dhamra Port Company LimitedAssociate• ICD placed with — 10,00,000• Equity infused 20,00,00,000 —• Interest on ICD received 64,248 2,877GVK – Jaipur Kishangarh Expressway LimitedAssociate• Equity infused 6,34,80,000 12,72,00,000Kakinada Seaports LimitedAssociate• Equity infused — 6,60,00,000Gammon – L&T Infra MRTS LimitedAssociate• Equity infused (including advance) 10,52,578 —Vishakapatnam Industrial Water Supply Company LimitedAssociate• Equity infused — 9,28,92,150

C. Amount due to and due from related parties: (Rupees)2005-06 2004-05

Holding company Larsen & Toubro Limited

Accounts payable (net) — 150,302

Accounts receivable (net) 25,25,510 —

Due from subsidiary Narmada Infrastructure Construction

Enterprises Limited 5,949 7,13,244

L&T Vadodara Bharuch

Tollway Limited 4,80,459 —

L & T Western Andhra Tollway Pvt Limited 3,54,162 —

L & T Interstate Road Corridor Limited 3,25,625 —

Cyber Park Development & Construction Limited 5,52,74,920 5,24,85,329

D. No amount due to or due from has been written off or written back during the year.

15. Earnings Per Share (Basic & Diluted)2005-06 2004-05Rupees Rupees

Profit / (loss) after tax (84,053,793) (33,566,124)

Weighted Average no. of shares 89,372,554 84,050,000

Earnings per share (0.94) (0.40)

16. Deferred Tax

Taxes on income have been accounted for in accordance with the provisions of Accounting Standard 22, as per the details given below:

Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Name/Relationship/Nature of transaction 2005-06 20004-05

Rupees Rupees

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(Rupees)As at As at

31.03.2006 31.03.2005Deferred Tax Assets (DTA)Leave encashment 1,235 —

Preliminary expenses 4,122 4,122

5,357 4,122

Less: Deferred Tax liabilities (DTL)

Difference between carrying amount of fixed Assets in the books and WDV for income tax purposes. 86,553 16,300

86,553 16,300

Net deferred tax liability 81,196 (12,178)

Increase in deferred tax liability provided 69,018 20,966

Deferred Tax Assets of Rs.4,92,67,686 (previous year: Rs.2,26,61,016) on carried forward unabsorbed loss is not considered on prudent basis.

17. Impairment of asset

The Company has reviewed the cash flow from its assets based on net selling price and satisfied that there is no impairment loss required tobe provided for the year.

18. Contingent liabilities:

a) The Company has issued counter-indemnity to bank for issue of guarantees by the bank on behalf of subsidiaries. The outstanding bankguarantees as on 31st March 2006 was Rs. 24,91,00,000 (previous year: Nil).

b) The Company is contingently liable to the extent of its investments for loans taken by:

i. Associates - Refer Note 5 (a) & (b) above

Current year: Rs.53,75,00,000; Previous year: Rs.53,75,00,000

ii. Others - Refer Note 5 (c) above

Current year: Rs.14,88,00,000; Previous year: Nil


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Registration No. U65993TN2001PLC46691 State Code 1 8


Date Month Year

II Capital Raised during the Year (Amount in Rs. Thousands)


N I L N I L


N I L N I L

III Position of Mobilisation and Deployment of Funds (Amount in Rs.Thousands)

Total Liabilities Total assets

3 8 9 9 2 6 7 3 8 9 9 2 6 7

Sources of Funds Paid-Up Capital (including advance) Reserves & Surplus

2 5 9 3 1 8 6 N I L


N I L 1 3 0 6 0 0 0

Application of Funds Net Fixed Assets Investments

1 4 9 1 3 2 8 6 8 1 7


4 4 6 2 3 9 N I L

Deferred Tax Asset / (Liability) Accumulated Losses

( 8 1 ) 1 6 4 7 2 0


Turnover (including other income) Total Expenditure

6 6 3 4 8 1 5 0 3 3 0


� 8 3 9 8 2 � 8 4 0 5 4

(Please Tick Appropriate box + for Profit, - for Loss)

+ - Earning Per Share in Rs. Dividend rate %

� 0 . 9 4 - -V Generic Names of Three Principles Products / Services of Company

(as per monetary terms)Item code N A(ITC Code)Product Infrastructure Projects DevelopmentDescription

20. Figures for the previous year have been regrouped/reclassified where necessary.


Signature for Schedules A to L





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CYBERPARK DEVELOPMENT AND CONSTRUCTION LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their report and Accounts for the year ended 31st March, 2006.I. FINANCIAL RESULTS

Sl.No Particulars 2005-06 2004-05Rs.Lacs Rs.Lacs

1 Profit Before Depreciation & Tax (PBDT) (402.32) (33.11)

2 Depreciation (114.46) -

3 Profit / (Loss) before tax (PBT) (516.78) (33.11)

4 Provision for taxes (71.81) -

5 Profit / (Loss) after tax (PAT) (588.59) (33.11)



II. DIVIDENDThe Directors do not recommend dividend for the year 2005-06 in view of the accumulated losses.

III. PERFORMANCE OF THE COMPANYThe Directors wish to inform that the Company has registered an income of Rs.269.67 Lacs from operations of the facility during the year. Theexpenditure (including depreciation) incurred during the year has been Rs.841.40 Lacs.

IV. CAPITAL EXPENDITUREAs at 31st March, 2006, while the Gross fixed assets of the Company is Rs.4642.55 Lacs, the net fixed asset value is Rs.4526.99 Lacs aftercharging off a depreciation to the extent of Rs.115.55 Lacs.

V. DEPOSITSThe Company has not accepted any deposits from the public.

VI. AUDITORS’ REPORTThe Auditors’ Report to the Shareholders does not contain any qualifications.

VII. FOREIGN CURRENCY TRANSACTIONSThere was no usage or earning of any foreign currency in the course of transactions during the year 2005-06.

VIII. DISCLOSURE OF PARTICULARSAs the Company is engaged in developing, operating and maintaining buildings exclusively catering to the software sector, there are no particularsto be disclosed as per the Companies’ (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

IX. PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of the Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules, 1975.

X. DIRECTORS RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirms:i. That in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material

departure;ii. That the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and

prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for theyear ended on that date;


iv. That the annual accounts have been prepared on a going concern basis.XI. DIRECTORS

Mr.K.V.Rangaswami and Mr.V.B.Gadgil resigned as Directors with effect from 30.09.2005 and Mr.S.Hariharan and Mr.B.Ramakrishnan wereappointed as Directors in the respective Casual vacancies that have arisen due to above mentioned resignations.Mr.K.Venkatesh and MR.S.Hariharan retire from the Board of the Company by rotation and being eligible, offer themselves for re-appointment.

XII. AUDIT COMMITTEEThe Company need not have an audit committee as the Paid up capital of the Company is only Rs.1 Crore

XIII. AUDITORSThe Auditors, M/S Sharp & Tannan, Chartered Accountants, being statutory auditors of the Company hold office until the conclusion of the ensuingAnnual General Meeting and are recommended for reappointment. Certificate from Auditors has been received to the effect that their appointment,if made, would be within the limits prescribed under Section 224(1B) of the Companies Act.

XIV. ACKNOWLEDGEMENTSThe Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, employees of the Company andmanagement staff of the parent Company.


Place : Chennai B. RAMAKRISHNANDate : April 26, 2006

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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF CYBER PARK DEVELOPMENT AND CONSTRUCTION LIMITED

We have audited the attached balance sheet of Cyber Park Development and Construction Limited as at 31st March 2006, the profit and loss accountand the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.





(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of theaudit;

(b) in our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from our examination ofthose books;



(e) on the basis of the written representations received from the Directors of the Company as on 31st March 2006, and taken on record by theBoard of Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointed as a director in terms ofclause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and


i) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006;

(ii) in the case of the profit and loss account, of the loss for the year ended on that date; and


Sharp & TannanChartered Accountants

L.VAIDYANATHANPlace: Chennai PartnerDate: April 27, 2006 Membership No.16368

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Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor’s to the Members of Cyber Park Development and ConstructionLimited on the accounts for the year ended 31st March 2006, we report that:



(c) Fixed assets disposed off during the year were not material and hence does not affect the going concern assumption.

(ii) (a) As explained to us inventory representing completed property and work-in-progress have been physically verified by the management atreasonable intervals during the year. In our opinion, the frequency of such verification is reasonable.

(b) As per the information given to us the procedures of physical verification of inventory followed by the management are in our opinionreasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies if any noticed on physical verification between the physicalstock and the book stock were not material.


(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate withthe size of the Company and nature of its business, for the purpose of accounting fixed assets, lease of assets and sale of services. In ouropinion, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internalcontrol system.

(v) According the information and explanations given to us, the Company has not entered into any contract or arrangement, particulars of whichneed to be entered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly reporting under paragraph 4, clause(v) (a) & (b) of the Companies (Auditor’s Report) Order 2003, does not arise.

(vi) The Company has not accepted deposits from the public within the meaning of Section 58A, 58AA or any other relevant provisions of theCompanies Act 1956. Hence Clause 4(vi) of the Companies (Auditor’s Report) Order 2003, is not applicable to the Company.


(viii) As informed to us, maintenance of cost records has not been prescribed by the Central Government under section 209 (1)(d) of the CompaniesAct, 1956.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company hasbeen generally regular in depositing undisputed statutory dues including Provident Fund, Income tax, Service Tax, Cess and otherstatutory dues during the year with the appropriate authorities. As at 31st March 2006, there are no undisputed statutory dues payable fora period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues which have not been deposited on account of any disputeof income tax, service tax and cess.

(x) The Company has been registered for a period of less than five years and hence reporting under paragraph 4 Clause (x) of the Companies(Auditor’s Report) Order 2003, does not arise even though the Company has incurred cash losses during the year and the immediate previousyear.

(xi) In our opinion and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to financialinstitution. The Company has not issued any debentures or taken any loan from banks during the year.


(xiii) The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.



(xvi) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which theywere obtained.

(xvii) According to the information and explanations given to us, the funds raised by the Company on short-term basis have not been used for long-term investments.

(xviii) The Company has not made any preferential allotment of shares to parties and companies to be covered in the register maintained under section301 of the Companies Act, 1956, during the year.

(xix) The Company has not issued debentures during the year. Accordingly, no security or charge needs to be created.


(xxi) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us, we have neither come across any instances of materialfraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.


L.VAIDYANATHANPlace: Chennai PartnerDate: April 27, 2006 Membership No.16368

S-164


Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006

As at 31st March 2006 As at 31st March 2005

Schedule Rupees Rupees Rupees RupeesSOURCES OF FUNDS :


Share Capital A 10,000,000 10,000,000

Loan Funds

Secured Loan B 501,773,000 513,500,000

Unsecured Loans C 88,600,000 88,600,000

Deferred Tax Liability 7,156,478 -

Total 607,529,478 612,100,000


Fixed Assets: D

Gross Block 464,255,034 60,559,807

Less : Depreciation 11,555,039 212,387

Net Block 452,699,995 60,347,420

Current Assets, Loans and Advances E

Inventories 326,305,974 686,068,122



364,405,699 708,980,927

Less : Current liabilities and provisions F

Liabilities 272,811,462 161,634,032

Provisions 44,207 14,367

272,855,699 161,648,399



Total 607,529,478 612,100,000

Significant Accounting Policies M

Notes forming part of Accounts N

As per our report attached For and on behalf of the BoardSHARP & TANNANChartered Accountants

L.VAIDYANATHAN K. VENKATESHPartner B. RAMAKRISHNAN

Directors

Membership No. 16368


}

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Profit and Loss Account for the year ended 31st March 2006Profit and Loss Account for the year ended 31st March 2006Profit and Loss Account for the year ended 31st March 2006Profit and Loss Account for the year ended 31st March 2006Profit and Loss Account for the year ended 31st March 2006

2005-2006 2004-2005


INCOME

Income from Operations G 26,967,327 -

Other income H 5,494,652 282,128

32,461,979 282,128

TOTAL 32,461,979 282,128

EXPENDITURE

Opening work in progress 686,068,122 407,819,355

Add : Construction expenses during the year 55,872,151 278,248,767

741,940,273 686,068,122

Less : Transfer to Fixed Assets 415,634,299 -

Less : Transfer to Completed Property 233,239,830 -

Less : Closing work in progress I 93,066,144 686,068,122

- -Staff Expenses J 749,213 316,051

Sales, Administration and Other Expenses K 19,818,928 3,277,620

Interest & Finance charges L 52,125,854 -

Depreciation 11,446,384 -

TOTAL 84,140,379 3,593,671

Profit / (Loss) for the year (51,678,400) (3,311,543)

Provision for Taxes:

Current Tax - -

Deferred Tax 7,156,478 -


7,181,001 -

Profit / (Loss) after Tax (58,859,401) (3,311,543)

Balance brought forward (Profit / (Loss)) (4,420,052) (1,108,509)


Earning per Share - Basic/Diluted (58.86) (3.31)

Significant Accounting Policies M

Notes forming part of Accounts N



Directors



}

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Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 2006Cash Flow Statement for the year ended 31st March 2006

2005-2006 2004-2005


Net Profit/(Loss) Before Tax & extraordinary items (51,678,400) (3,311,543)

Adjust ment for :Dividend Received - -Depreciation 11,446,384 -Interest paid 52,125,854 -Interest received (263,230) (282,128)(Profit) / Loss on sale of investments (net) (5,231,422) -Provision for Lease Encashment & Gratuity 5,317

Operating Profit before Working Capital changes 6,404,503 (3,593,671)

Adjustments For :(Increase) / Decrease in Loans and Advances (7,177,327) 23,568,338(Increase) / Decrease in Inventories 359,762,148 (278,073,607)Increase / (Decrease) in Trade Payables 111,177,430 24,001,065

Cash generated from operations 470,166,754 (234,097,875)Direct taxes refund /( paid) net - -

Net Cash from operating activities (A) 470,166,754 (234,097,875)

B Cash Flow from Investing activities :

Purchase of Fixed Assets (418,627,037) (60,199,852)Sale of Fixed Assets 20,059,500 -Interest received 263,230 282,128

Net Cash from investing activities (B) (398,304,307) (59,917,724)

C Cash Flow from Financing activities :

Increase in share capital -(Repayment )/Proceeds of / from Long Term borrowings (11,727,000 302,700,000Interest Paid (52,125,854) -Misc Expenditure written off - -

Net cash from financing activities (C) (63,852,854) 302,700,000

Net increase in cash and cash equivalents (A+B+C) 8,009,593 8,684,401Cash and Cash equivalents as at the beginning 9,656,807 972,406


NOTES


2. Cash and cash equivalents represent cash and bank balances.3. Previous year’s figures have been regrouped/reclassified wherever applicable



Directors



}

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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsAs at 31st March, 2006 As at 31st March, 2005

Rupees Rupees Rupees RupeesSCHEDULE - AShare CapitalAuthorised :

1,000,000 Equity Shares of Rs. 10/- each 10,000,000 10,000,000

Issued and Subscribed and paid up1,000,000 Equity Shares of Rs. 10/- each fully paid 10,000,000 10,000,000

(Of the above 510,000 shares of Rs.10/- each is held by theholding Company,L&T Infrastructure Development Projects Limited &its nominees)

10,000,000 10,000,000

SCHEDULE - BSecured LoanTerm Loan from Financial Institution 501,773,000 513,500,000(The above loan is secured by equitable mortage ofundivided share of leasehold land and building in Phase Iconstructed thereon.)

501,773,000 513,500,000

SCHEDULE - CUnsecured LoansLoans from Shareholders:- L&T Infrastructure Development Projects Ltd 45,200,000 45,200,000(Holding Company)- JK Bros Constrafin Limited 43,400,000 43,400,000

88,600,000 88,600,000

88,600,000 88,600,000

SCHEDULE - DFixed Assets Rupees

Cost Depreciation Book Value

As at Additions Disposals As at Upto For the On Upto As at As atPARTICULARS 01.04.05 during during 31.03.06 31.03.05 Year Disposals 31.03.06 31.03.06 31.03.05

the Year the Year

Fixed AssetsBuilding- Leased out - 218,931,329 13,504,786 205,426,543 - 1,928,572 103,732 1,824,840 203,601,703 -- Self occupied - 1,302,713 - 1,302,713 - 21,234 - 21,234 1,281,479 -Computers 334,500 2,756 337,256 91,754 53,678 - 145,432 191,824 242,746Plant & Machinery 60,194,552 31,063,007 - 91,257,559 109,670 4,099,975 - 4,209,645 87,047,914 60,084,882Electrical Installations 49,637,588 - 49,637,588 2,353,515 - 2,353,515 47,284,073Office Equipments 13,500 6,790 - 20,290 8,233 311 - 8,544 11,746 5,267Furniture & Fixture 17,255 35,577,532 - 35,594,787 2,730 2,989,099 - 2,991,829 32,602,958 14,525Intangible Assets:Leasehold Land - 82,105,322 1,427,024 80,678,298 - - - - 80,678,298 -

TOTAL 60,559,807 418,627,037 14,931,810 464,255,034 212,387 11,446,384 103,732 11,555,039 452,699,995 60,347,420

Previous Year 359,955 60,199,852 - 60,559,807 37,227 175,160 - 212,387 60,347,420

Note:1. Leasehold Land represents the proportionate cost incurred for construction of 42665 SqFt given to Software Technology Parks of India in

consideration for the land taken on lease vide Development Agreement dated 16th June 2003 for a period of 66 years from the date ofOccupancy Certificate.

2. Leasehold Land will be amortised over period of 66 Years from the date of the Occupancy Certificate to be received from BangaloreDevelopment Authority.

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As at 31st March, 2006 As at 31st March, 2005


SCHEDULE - E


Current Assets

Inventories(At lower of cost or net resaleable value ascertified by a Director)Completed property 233,239,830 -Work- in- progress 93,066,144 686,068,122

326,305,974 686,068,122Cash and bank balances:

Cash on hand 4,027 1,714

Balance with scheduled bankson current account 14,013,463 2,153,671on fixed deposits including interest accrued 3,648,910 7,501,423

thereon. Deposit of Rs.3,390,920/- is held bya bank under lien towards bank guarantee

17,666,400 9,656,807Loans & Advances

Unsecured considered good

Advances recoverable in cash or in kind orfor value to be received 20,433,325 13,255,998

364,405,699 708,980,927

SCHEDULE - F


Current Liabilities

Sundry Creditors

- Small scale industrial undertakings - -- Larsen & Toubro Limited - ultimate holding Company 133,269,276 134,746,597- Others 79,694,762 4,935,783

Security Deposit from Customers 36,282,229 4,735,000Interest accrued but not due 23,565,195 17,216,652

272,811,462 161,634,032Provisions

Leave Encashment 8,434 14,367

Gratuity 11,250 -


44,207 14,367

272,855,669 161,648,399

2005-06 2004-05

SCHEDULE - G Rupees RupeesIncome from Operations -----Lease Income (Tax deducted at source: Rs.1,000,089; previous year: Nil) 20,989,068 -----Maintenance Charges (Tax deducted at source: Rs.84,614; previous year:Nil) 5,696,000Parking Charges (Tax deducted at source: Rs. 24,742; previous year:Nil) 282,259 -----

Total 26,967,327 -

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Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)2005-06 2004-05

Rupees RupeesSCHEDULE - HOther IncomeInterest Income (Tax deducted at source: Rs.59,069; previous year:Rs.57,818) 263,230 282,128Profit on Sale of Asset 5,231,422 -

Total 5,494,652 282,128

Additions duringAs at 31.03.2005 the year As at 31.03.2006

Rupees Rupees RupeesSCHEDULE- IWork- in- progress

Construction expenses 573,222,015 49,680,059 622,902,074Consultancy fee 22,528,050 - 22,528,050Fee paid for Power Connection 5,941,110 2,756,582 8,697,692Professional Charges 4,897,240 - 4,897,240Rent,Rates and Taxes 1,146,570 - 1,146,570Printing & Stationery 23,057 - 23,057Travelling & Conveyance 1,951,870 - 1,951,870Miscellaneous expenses 629,316 - 629,316Finance & Interest charges 75,516,507 3,435,510 78,952,017Depreciation 212,387 - 212,387

Sub-total 686,068,122 55,872,151 741,940,273

Less: Transfer to Fixed Assets - Buildings 220,234,042Transfer to Fixed Assets - Others 195,400,257Transfer to Completed Property 233,239,830

Total 93,066,144

2005-06 2004-05

Rupees Rupees Rupees RupeesSCHEDULE - JStaff Expenses

Salaries, wages and Bonus 610,720 273,477Contribution to and Provision for:Provident Fund 16,905 20,832Leave Encashment 11,617 8,742Gratuity Fund 11,250 -

39,772 29,574Welfare and other expenses 98,721 13,000

Total 749,213 316,051

2005-06 2004-05

Rupees RupeesSCHEDULE - KSales, administration and other expenses

Rates & taxes 251,195 6,105Insurance 409,915 599Membership and Subscription 10,081 10,824Printing and stationery 54,320 53,692Travelling and conveyance 634,852 27,815Postage and Telephone Expenses 163,505 127,180Repairs and maintenance 9,795,692 2,391,557Professional Charges 7,323,488 -Miscellaneous Expenses 1,175,880 659,848

Total 19,818,928 3,277,620

SCHEDULE - LInterest and Finance Charges

Interest on Term Loan 45,750,071 -Interest on Others 6,375,783 -

Total 52,125,854 -

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Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE-M


1. BASIS OF ACCOUNTING :

The Company mainitains its accounts on accrual basis following the historical cost convention in accordance withgenerally accepted accountingprinciples (“GAAP”) and in compliance with the Accounting Standards referred to in Section 211 (3C) and the other requirements of the CompaniesAct, 1956.

The preparation of financial statements in conformity with GAAP requires that the management of the Company makes estimates and assumptionsthat affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relatingto contingent liabilities as of the date of the financial statements. Examples of such estimates include the useful lives of fixed assets and intangibleassets, provision for doubtful debts/advances etc. Actual results could differ from these estimates.

2. FIXED ASSETS :

Fixed Assets are stated at original cost including preoperative expenses incurred upto the date of commencement of operations.

3. DEPRECIATION :

Deprciation is provided in the accounts on straight line basis at the rates and in the manner provided in schedule XIV to the Companies Act,1956.

4. INVENTORIES :

(i) Work in Progress is valued at cost plus proportionate direct expenses allocated.

(ii) Completed Property is valued at lower of cost or net realisable sales value.

5. BORROWING COSTS :

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of suchasset,till such time as the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily takes a substantial period oftime to get ready for its intended use or sale. All other borrowing costs are recognised as an expense in the period in which they are incurred.

6. RETIREMENT BENEFITS :

Contributions to provident fund and provisions for leave encashment and gratuity are made on actual liability basis.

7. LEASES

Assets given out under operating lease are capitalised at Original Cost. Income therefrom is accounted on accrual basis over the lease term.

8. REVENUE RECOGNITION

Revenue from sale of completed property is recognised when all signifiant risks, rewards & rights are transferred to the customer. Income fromleased assets is accounted for based on lease agreements with the lessees.

9. TAXES ON INCOME

Taxes on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisionsof the Income-tax Act, 1961. Deferred tax is recognised on timing difference between the accounting income and the taxable income for the yearand quantified using the tax rates and laws enacted or substantially enacted as on the Balance Sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty that sufficient future taxable income will beavailable against which such deferred tax assets can be realised.

Fringe benefit tax for the period is determined as per the provisions of Chapter XII-H of the Income-tax Act, 1961.

10. INTANGIBLE ASSETS AND AMORTISATION

Intangible assets are recognised as per the criteria specified in Accounting Standard (AS) 26 “Intangible Assets” issued by the Institute ofChartered Accountants of India and are amortised as follows:

Leasehold land: over the period of lease

11. IMPAIRMENT OF ASSETS

Impairment loss is recoginsed when the carrying amount of an asset exceeds its recoverable amount.

Recoverable amount is determined

a) in the case of an individual asset, at the higher of the net selling price and the value in use.

b) in the case of a cash generating unit (a group of assets that generates identified independent cash flows), at the higher of the cashgenerating unit’s net selling price and the value in use.

c) value in use is determined as the present value of estmated future cash flows from the continuing use of an asset and from its disposal at theend of its useful life)

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12. PROVISIONS, CONTINGENT LIABILITES AND CONTINGENT ASSETS

Provisions are recognised for liabilites that can be measured only by using a substantial degree of estimation, ifa) the Company has a present obligation as a result of a past event,b) a probable outflow of resources is expected to settle the obligation andc) the amount of the obligation can be reliably estimated.Reimbursement expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that reimbursementwill be received.Contingent Liability is disclosed in the case ofa) a present obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle the obligationb) a possible obligation, unless the probability of outflow of resources is remote.Contingent Assets are neither recognised, nor disclosed.Provision, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

SCHEDULE-NNOTES ON ACCOUNTS1. The Company has taken land on lease for the Cyber Park project from Software Technology Park of India, Government of India, New Delhi (STPI)

for a period of sixty six years from the date of obtaining Occupancy Certificate vide Development Agreement dated 16th June, 2003.2. Capital Commitment as at 31st March, 2006 is Rs.Nil (Previous year Rs.Nil).3. No provision for income tax / wealth tax has been made for the current year in the accounts as there is no taxable income / wealth under the

provisions of the Income Tax Act, 1961 and Wealth Tax Act, 1957 respectively(Previous Year Rs. Nil). Fringe Benefit tax is provided for as per theprovisions of Income Tax Act,1961

4. Auditors remuneration and expenses reckoned in the accounts. Rupees2005-06 2004-05

Audit fee (excluding service tax) 75,000 50,000Reimbursement of out of pocket expenses 16,346 11,480

5. Expenditure in Foreign Currency Rs. Nil (Previous year Rs.Nil).6. The Company does not have any dealings with small scale industrial undertakings and hence reporting interest on delayed payments and amounts

due to them does not arise.7. The Company has not entered into any lease transactions during the year, Hence reporting under AS 19 - Accounting for Lease, does not arise.8. Disclosure in respect of related parties as per Accounting Standard (AS) 18 - Annexure 1 attached

9. Basic and Diluted Earnings per Share computed in accordance with AS 20 - Earning per Share

2005-06 2004-05Profit / (Loss) after tax (Rupees) (58,859,401) (3,311,543)Weighted average number of Shares outstanding (Nos) 1,000,000 1,000,000Basic and Diluted EPS (Rupees) (58.86) (3.31)

10. Interest accrued but not due under Current Liabilities includes Rs.19,836,266/- (Previous Year Rs.12,964,450) payable to the Shareholders afterrepayment of all dues to the lenders of secured loans as per the Shareholders’ Agreement dated 30th April, 2003.

11. Major Components of Deferred Tax Assets and Deferred Tax Liabilities:

As at 31.03.2006 (Rupees) As at 31.03.2005

Deferred Tax Deferred TaxAsset Liability Asset Liability

Difference between Depreciation on Assets as per Bookson accunt and as per provisions of Income Tax Act 8,672,334

Provision for Lease Encashment & Gratuity debited to P&L Account 5,678

Preliminary Expenses 27,224 -

Unabsorbed Loss / Depreciation 1,482,954

1,515,856 8,672,334

Net Deferred Tax Liability / Asset 7,156,478 -

Net Increase in Deferred tax liability charged to Profit & Loss Account 7,156,478

12. The Company has reviewed the future discounted cashflows based on value in use of fixed assets and is satisfied that the recoverable amount ismore than the amount carried in the books. Accordingly, no provision is required to be made for the impairment in the accounts.

13. The Company is engaged in the business of development of software park and providing property/infrastructure on lease to IT and IT-EnabledServices sector. Hence there is only single business and geographic segment.


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Annexure -1 to Schedule NDisclosure of Related Parties/ related party transactions:A. List of related parties

Holding companies : L&T Infrastructure Development Projects LimitedLarsen & Toubro Limited (ultimate holding Company)

Subsidiary Company : NILAssociate : NILFellow subsidiaries : L&T Western India Tollbridge Limited

Tractors Engineers LimitedL&T Finance LimitedL&T Capital Company LimitedL&T-Sargent & Lundy LimitedLarsen & Toubro Infotech LimitedLarsen & Toubro Infotech GmbH, GermanyL&T Transportation Infrastructure LimitedHPL Cogeneration LimitedIndia Infrastructure Developers LimitedLarsen & Toubro LLC, USALarsen & Toubro International FZE, SharjahL&T Infocity LimitedHyderabad International Trade Expositions LimitedAndhra Pradesh Expositions Private LimitedL&T-ECC Construction (M) SDN.BHD, MalaysiaBhilai Power Supply Company LimitedLarsen & Toubro (Oman) LLCL&T Power Investments Private LimitedRaykal Aluminium Company Private LimitedL&T Panipat Elevated Corridor Private LimitedL&T Tech Park LimitedL&T Western Andhra Toll Ways Private LimitedL&T Krishnagiri Thoppur Toll Road Private Limited.L&T Interstate Road Corridor LimitedL&T Vadodara Bharuch Tollway LimitedL&T Urban Infrastructure LimitedL&T Infocity Infrastructure LimitedNarmada Infrastructure Construction Enterprise LimitedL&T Infocity Lanka Private LimitedLarsen & Toubro Qatar LLCLarsen & Toubro Electromech LLCInternational Seaports Pte LimitedInternational Seaports (India) Private LimitedL&T Overseas Projects Nigeria LimitedL&T (WUXI) Electric Company LimitedSpectrum Infotech Private Limited


S. No. Nature of Transations / Relationship 2005-06 2004-05

Amount of Amount Amount Amount of Amount AmountTransaction Due to Due from Transaction Due to Due from

Rupees Rupees Rupees Rupees Rupees Rupees1 L&T Infrastructure Development Projects Limited

Holding Companyi) Unsecured Loan 65,700,000 45,200,000 - 45,200,000 45,200,000 -ii) Interest on Loan 5,471,233 10,074,921 - 4,520,000 6,569,209 -

2 Larsen & Toubro LimitedUltimate Holding Companyi) Contract for Building Construction 6,133,264 118,304,742 - 220,945,036 126,974,046 -ii) Providing staff & other services 6,506,629 14,279,180 - 2,681,388 7,772,551 -iii) Rent for Premises & other services 882,153 685,354 - 520,000 - -

Accounts Payable / Receivable 133,269,276 134,746,5973 L&T Infocity Limited

Fellow SubsidiaryFacility Management Services 1,239,750 130,022 - - - -

C. No amounts pertaining to the related parties have been return off or written back during the year.


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14. BALANCE SHEET ABSTRACT AND COMPANY’S BUSINESS PROFILE


Registration No : C I N - U 4 5 2 0 2 K A 2 0 0 2 P L C 0 3 0 1 8 0

Balance Sheet Date 3 1 - 0 3 - 2 0 0 6 State Code 0 8

II Capital raised during the year (Amount in Rupees Thousands)


N I L N I L


N I L N I L

III Position of Mobilisation and Deployment of funds (Amount in Rs.Thousands)

Total liabilities Total Assets

6 0 7 5 2 9 6 0 7 5 2 9

Source of Funds

Paid up Capital Reserves and Surplus

1 0 0 0 0 N I L

Secured/Unsecured Loans Deferred tax liability

5 9 0 3 7 3 7 1 5 6



4 5 2 7 0 0 N I L

Net Current Assets Accumulated Losses Miscellaneous expenditure

9 1 5 5 0 6 3 2 7 9 N I L

IV Performance of Company (Amount Rupees in Thousands)

Turnover (including other income) Total expenditure

3 2 4 6 2 8 4 1 4 0

✓ Profit before tax ✓ Profit after tax

+ - 5 1 6 7 8 + - 5 8 8 5 9

✓ Earnings per share Dividend rate %

+ - 5 8 . 8 6 N I L

V Generic Names of Three Principal Products/Services of the Company

(as per monetary terms)

Item code No N A

Product Description D E V E L O P M E N T O F S O F T W A R E P A R K

15. Figures for the previous year have been regrouped/reclassified where necessary.


(Signatures to Schedules A to N)



Directors



}

L&T TECH PARK LIMITED

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The Directors have pleasure in presenting their first Annual Report and the Accounts for the period from 8th August 2005 (date ofincorporation) to 31st March 2006.

1. FINANCIAL RESULTS:

Since your Company is in the project implementation phase and is yet to commence commercial operation, no profit and lossaccount has been drawn for the period. The key financials parameters for the period ended 31st March 2006 are:

Description Amount inRupees

Gross Fixed Assets 1,28,77,850

Depreciation 83,468

Pre-operative Expenses 23,25,142

Preliminary Expenses 2,12,932

During the period equity shares of Rs. 2,94,11,000/- were allotted and paid–up of which L&T Infrastructure Development ProjectsLimited holds 51% and Pragnya Fund 1, Mauritius holds 49%.

2. REVIEW OF OPERATIONS:

The Company has entered into a Lease Deed on 8th September 2005 with Infoparks, Kerala for development of IT Park and ITrelated facilities at Kakkand in Kochi. The total area is 4 acres and it is expected that the first phase will be for a built up phase of3.6 lakhs Sq.ft. The project has received in principle sanction for a term-loan assistance for Rs. 56.33 crores and it is in the processof achieving financial closure.

The Company had applied as a co-developer for Special Economic Zone status for the project. Notification from the Government ofIndia is awaited in this regard.

3. CAPITAL EXPENDITURE:

As at 31st March 2006, the gross fixed assets stood at Rs. 1,28,77,850/- and the net fixed assets (including pre-operative expensesof Rs. 23,25,142/-) stood at Rs. 1,51,19,524/- .

4. DEPOSITS:


5. DISCLOSURE OF PARTICULARS:

The Companies (Disclosures of Particulars in the Report of the Board of Directors) Rules, 1988, require the disclosure of particularsregarding conservation of Energy in Form A and Technology absorption in Form B prescribed by the Rules. The Company, not beinga manufacturing Company, is advised that Forms A and B are not applicable to it.

There is no foreign exchange earned or used during the period. The Company received Foreign Direct Investment of Rs. 153 Lakhsduring the period, towards subscription of share capital.

6. PARTICULARS OF EMPLOYEES:

There are no employees covered by the provisions of the Section 217(2A) of the Companies Act, 1956, read with the Companies(Particulars of Employees) Rules, 1975.

7. FOREIGN CURRENCY TRANSACTIONS:

There was an inflow of Rs. 1,52,94,269.55/- in the form of advance against share capital and 14,41,100 equity shares of Rs. 10 each wereallotted to the Pragnya Fund 1, a Company incorporated in Mauritius.


The Auditors’ Report to the shareholders does not contain any qualifications.


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9. DIRECTORS’ RESPONSIBILITY STATEMENT:


a. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been nomaterial departure;

b. that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006;

c. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

d. that the annual accounts have been prepared on a going concern basis.

10. DIRECTORS:

Being the first Annual General Meeting all the first directors of the Company are due to retire at the meeting. The retiring directorsare eligible for re-appointment.

Mr. Subba Rao Dukkipati and Mr. Gopal Menon were appointed as Additional Directors and hold office until the forthcoming AnnualGeneral Meeting.

We have received notices from two members under Section 257 of the companies Act, 1956 for appointment of Mr. Subba Rao Dukkipatiand Mr. Gopal Menon as Directors in the forthcoming Annual General Meeting.

11. AUDITORS:

The Auditors, M/s Sharp & Tannan, Chartered Accountants, being statutory auditors of the Company hold office until the conclusionof the ensuing Annual General Meeting and are recommended for reappointment. Certificate from Auditors has been received to theeffect that their appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

12. ACKNOWLEDGEMENTS:

The Directors acknowledge the valuable support extended by the two promoters i.e. M/s. L&T Infrastructure Development ProjectsLimited and Pragnya Fund 1. Your Directors express their grateful thanks for the assistance, co-operation and support extended toyour Company by Infoparks, Kerala, commercial banks and all others who are associated with the Company. The Board wishes toplace on record its sincere appreciation for the services rendered by the employees of its holding Company.

K. VENKATESH S. HARIHARANDirectors



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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T TECH PARK LIMITED

We have audited the attached balance sheet of L&T Tech Park Limited as at 31st March 2006, and the cash flow statement for the period endedon that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.


1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of theCompanies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.


(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes ofthe audit;

(b) in our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from our examinationof those books;

(c) the balance sheet and cash flow statement dealt with by this report are in agreement with the books of account;

(d) in our opinion, the balance sheet and cash flow statement dealt with by this report comply with the accounting standards referred to insub-section (3C) of section 211 of the Companies Act, 1956;

(e) on the basis of the written representations received from the Directors of the Company as on 31st March 2006, and taken on recordby the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointed as a directorin terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and



(ii) in case of the cash flow statement, of the cash flows for the period ended on that date.


L. VaidyanathanPlace : Chennai PartnerDate : April 19, 2006 Membership No.16368

Annexure to the Auditors’ Report

With reference to the Annexure referred to in paragraph 1 of the report of the Auditor’s to the Members of L&T Tech Park Limited on the accountsfor the period ended 31st March 2006, we report that:

(i) The Company does not have any fixed assets and hence reporting on maintenance of fixed assets register, physical verification and goingconcern under clause 4 (i) of the Companies (Auditor’s Report) Order, 2003 is not applicable.

(ii) The Company is engaged in the business of infrastructure development and maintenance thereof and hence the clauses 4 (ii) (a) (b) & (c)of the Companies (Auditor’s Report) Order, 2003 relating to inventory are not applicable.

(iii) According to the information & explanation given to us, the Company has not granted or taken any loans, secured or unsecured, to / fromcompanies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence reporting underclause-4 (iii) (a) to (g) of the Companies (Auditor’s Report) Order, 2003 dose not arise.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate withthe size of the Company and nature of its business, for the acquisition of fixed assets. In our opinion, and according to the information andexplanations given to us, there is no continuing failure to correct major weaknesses in the aforesaid internal control systems.


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(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into theregister in pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (V) (b) of Companies (Auditor’s Report)Order, 2003 dose not arise.

(vi) The Company has not accepted deposits from the public with in the meaning of Section 58A, 58AA or any other relevant provisions of theCompanies Act 1956. Hence Clause 4(vi) of the Companies (Auditor’s Report) Order 2003 is not applicable to the Company.

(vii) The Company has been incorporated during the year and is in the process of instituting an internal audit system.

(viii) The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1)(d) of theCompanies Act, 1956 is not applicable to the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Companyhas been generally regular in depositing undisputed statutory dues, Income tax, and other statutory dues during the period with theappropriate authorities. As at 31st March 2006, there are no undisputed statutory dues payable for a period of more than six monthsfrom the date they became payable.

(b) According to the information and explanations given to us, there are no dues which have not been deposited on account of anydispute of income tax and cess.

(x) The Company has not commenced its commercial operations and hence reporting under clause 4 (x) of the Companies (Auditor’s Report)Order, 2003 does not arise.

(xi) The Company has not availed any loan from bank and financial institution or issued debentures. Hence reporting on default in repaymentof dues under clause 4 (xi) of the Companies (Auditor’s Report) Order, 2003 does not arise.


(xiii) In our opinion, the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of theCompanies (Auditor’s Report) Order, 2003 are not applicable to the Company.



(xvi) In our opinion and according to the information and explanation given to us, the Company has not taken term loans and hence reportingon their application under clause 4 (xvi) of the Companies (Auditor’s Report) Order, 2003 does not arise.

(xvii) According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, theprovisions of clause 4 (xvii) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.

(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained undersection 301 of the Companies Act, 1956, during the period.

(xix) The Company has not issued debentures during the period. Accordingly, no security or charge needs to be created.

(xx) The Company has not raised any money by public issue during the period.

(xxi) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us, we have neither come across any instances ofmaterial fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case by management.


L. VaidyanathanPlace : Chennai PartnerDate : April 19, 2006 Membership No.16368


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Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006Balance Sheet as at 31st March 2006

Sch. As at 31.03.2006No Rupees Rupees

SOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 29,411,000

Advance against Share Capital 889,060

TOTAL 30,300,060


Fixed Assets 2Gross Block 12,877,850

Less: Depreciation 83,468

Net Block 12,794,382

Pre-operative expenses 3 2,325,142

15,119,524

Current Assets, Loans & Advances 4Current Assets

Cash and Bank Balances 15,038,464

Loans & Advances 66,912

15,105,376

Less: Current Liabilities & Provisions 5

Current Liabilities 71,176

Provisions 66,596

137,772

Net Current Assets 14,967,604

Miscellaneous Expenditure(To the extent not written off or adjusted)

Preliminary Expenses 212,932

TOTAL 30,300,060


Notes on Accounts 7



L . VaidyanathanPartnerMembership No. 16368






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Cash Flow Statement for the period 8th August 2005 to 31st March 2006Cash Flow Statement for the period 8th August 2005 to 31st March 2006Cash Flow Statement for the period 8th August 2005 to 31st March 2006Cash Flow Statement for the period 8th August 2005 to 31st March 2006Cash Flow Statement for the period 8th August 2005 to 31st March 2006

RupeesA. Cash Flow from operating activities

Net Profit/(Loss) before tax & extraordinary items —Adjustment for:Dividend Received —Depreciation —Translation reserve —Unrealised foreign exchange difference - net (gain) / loss —Interest paid —Interest received —(Profit) / Loss on sale of investments (net) —(Profit) / Loss on sale of fixed assets (net) —Provision for diminution of value of investments —

Operating Profit before Working Capital changes —Adjustments for:(Increase) / Decrease in trade and other receivables —(Increase) / Decrease in inventories —(Increase) / Decrease in Loans and Advances (66,912)Increase / (Decrease) in trade payables 137,772

Cash generated from operations 70,860Direct taxes paid (net of refund) —

Net Cash from operating activities (A) 70,860

B. Cash Flow from Investing activities:Purchase of Fixed Assets (Interest Capitalised Rs. Nil) (15,332,456)Sale of Fixed Assets —Interest received —Dividend received from other investments —

Net Cash / (used in) from investing activities (B) (15,332,456)

C. Cash Flow from Financing activities:Issue of Equity shares and advance against share capital (Repayment) / Proceeds from other borrowings 30,300,060Realised gainDividend Paid —Tax on distributed profits —Interest Paid —

Net cash/ (used in) from financing activities (C) 30,300,060

Net increase in cash and cash equivalents (A+B+C) 15,038,464Cash and Cash equivalents as at the beginning (including cash credit from banks) —

Cash and Cash equivalents as at the end (including cash credit from banks) 15,038,464

NOTES:1. Cash flow statement has been prepared under the Indirect Method as set of in the Accounting Standard 3 issued by the Institute of Chartered

Accounts of India2. Cash and cash equivalents represent cash and bank balances.3. Cash generated from Operations represents balances in loans and advances and sundry creditors









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Schedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance Sheet

SCHEDULE – 1 As at 31.3.2006SHARE CAPITAL Rupees

Authorised:2,30,00,000 Equity Shares of Rs10 each 230,000,000

60,00,000 Redeemable Preference shares of Rs.10 each 60,000,000

290,000,000

Issued, Subscribed & Paid-up:29,41,100 Equity Shares of Rs 10 each fully paid up. 29,411,000

(15,00,000 Equity shares of Rs.10 each fully paid up are held byL&T Infrastructure Development Projects Limited,the holding Company and its nominees) 29,411,000

SCHEDULE – 2FIXED ASSETS Rupees

At Cost Depreciation/Amortisation Book Value

Additions forthe period For the period

08-08-2005 to As at 08-08-2005 to As at As at31-03-2006 31-03-2006 31-03-2006 31-03-2006 31-03-2006

Intangible Assets

Leasehold Land(Refer Note No. 2 of Schedule 7) 12,877,850 12,877,850 83,468 83,468 12,794,382

Total 12,877,850 12,877,850 83,468 83,468 12,794,382

SCHEDULE – 3 For the period fromPre-operative Expenses 8.8.2005 to 31.3.2006

Rupees RupeesSalaries & Wages 6,912

Staff Welfare Expenses 754

Travelling & Conveyance 416,886

Advertisement 30,600

Bank charges 6,394

Business Promotion Expenses 430,350

Rates and Taxes 1,360,000

Miscellaneous expenses 75,389

Amortisation 83,468

2,410,753

Less: Other Income:

Interest on Bank Deposits (Tax deducted at source Rs.34,156/-) 152,207

Provision for: — Income Tax 51,233

— Fringe Benefit Tax 15,363

66,596

TOTAL 2,325,142


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SCHEDULE – 4 As at 31.03.2006CURRENT ASSETS, LOANS & ADVANCES Rupees Rupees

CASH AND BANK BALANCES

Cash on hand —


on current account 88,573

on fixed deposits including accrued interest thereon 14,949,891

15,038,464

LOANS AND ADVANCES

Unsecured:

Considered good:

Advances recoverable in cash or in kind or for value to be received 66,912

TOTAL 15,105,376

SCHEDULE - 5CURRENT LIABILITIES & PROVISIONS

Current Liabilities:Sundry Creditors

Due to Small Scale Industrial undertakings —

Others 71,176

71,176

Provisions:

Provision for Income Tax 51,233

Provision for Fringe Benefit Tax 15,363

66,596

TOTAL 137,772

Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)


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SCHEDULE – 6SIGNIFICANT ACCOUNTING POLICIES


The financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) followed in India underhistorical cost convention, on accrual basis and are in accordance with the mandatory accounting standards referred to in sub section 3Cof Section 211 and the other provisions of the Companies Act, 1956.

The preparation of accounts under GAAP requires management to make estimates and assumptions that affect the reported amount ofassets and liabilities and the disclosure of contingent liabilities as at the date of the financial statements and the reported amount of expensesduring the period. Actual reports could differ from those estimated. Any revision to accounting estimates is recognized prospectively in thecurrent and future periods.

2. Fixed Assets

Fixed assets are stated at cost. Pre-operative expenses incurred upto the date of commencement of commercial operations are capitalized.

3. Intangible Assets and Amortisation

Intangible assets are recognized as per the criteria specified in Accounting Standard (AS) 26 “Intangible Assets” issued by the Institute ofChartered Accountants of India are as follows:

a) Leasehold land: amortised over the period of lease

b) Preliminary expenses are written off in the year of commencement of operations.

4. Taxes

Tax on income for the current period are determined on the basis of taxable income and tax credits computed in accordance with theprovisions of the Income-tax Act, 1961. Fringe benefit tax for the period is computed in accordance with the provisions of the Chapter XII-H of the Income-tax Act, 1961.

SCHEDULE – 7NOTES FORMING PART OF THE ACCOUNTS

1. The Company was incorporated on 8th August, 2005 and hence the accounts are drawn for the period from 8th August 2005 to 31st March2006. Since the Company has not commenced commercial operations, no Profit & Loss Account has been prepared.

2. The Company has taken on lease four acres of land for a period of 90 years at Kakkanad, Kochi from Infoparks, Kerala, a society registeredunder the Travancore Cochin Literary Scientific Charitable Societies Registration Act, 1955 vide Lease Deed dated 8th September,2005 todevelop buildings and other support infrastructure and amenities and market the buildings for Information Technology (IT) & IT-related use.

3. The Company had no transactions during the period with any small-scale industrial undertakings and hence reporting details of interest onoverdue outstandings and amount outstanding for more than 30 days, does not arise.

4. The Company is a service Company and accordingly information required under paragraph 4(C) of Part II of Schedule VI to the CompaniesAct, 1956 has not been furnished.

5. Provisions of Payment of Gratuity Act, 1972 and Employees Provident Fund and Miscellaneous Provisions Act 1952 are not presentlyapplicable to the Company.

6. Auditor’s Remuneration for the accounting period:

Audit Fees (including service tax) : Rs. 56,120/-

Certification expenses : Rs. 3,306/-

7. The Company has not taken any asset on finance / operating lease.

8. Provision for taxes represents Fringe Benefit Tax and tax provided on interest income earned by the Company. The Company does not havetaxable wealth under the provisions of the Wealth Tax Act 1952.



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9. Disclosure of related parties / related party transactions.


Holding Company : L&T Infrastructure Development Projects Limited (a subsidiary of Larsen & Toubro Limited)Larsen & Toubro Limited (ultimate holding Company)

Subsidiary Company : NIL

Associates : NIL



L&T Finance Limited
























L&T Krishnagiri Thopur Toll Road Private Limited













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B. Transactions with Related Parties:

Holding companies : Larsen and Toubro Limited (Reimbursement of expenses) Rs. 9,14,024/-

L&T Infrastructure Development Projects Limited(repayment of sums advanced for opening of bank account) Rs. 5,000/-

Fellow subsidiary : L&T Infocity Limited (Reimbursement of expenses) Rs. 8,61,898/-

C. Amount due to and from related parties:

Due to L&T Infocity Limited Rs. 15,056/-

D. Amount written off / written back during the period NIL

10. The provision of the following Accounting Standards are not applicable since:

a) this is the first accounting period and the Company is yet to commence commercial operations.

Valuation of Inventories AS 2

Prior period items and changes in accounting policy AS 5

Revenue Recognition AS 9

Segment Reporting AS 17

Earning Per Share AS 20

Deferred Tax AS 22

Impairment of Assets AS 28

b) the Company does not have transactions attracting provisions of the following Accounting Standards.

Accounting for Fixed Assets AS 10

Accounting for Employee benefits AS 15

Accounting for Borrowing Costs AS 16

Accounting for Leases AS 19

Accounting for Contingent Liabilities / Assets AS 29



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11. Balance Sheet Abstract and Company’s General Businss Profile


Registration No. U45209TN2005PLCO57133 State Code No. 1 8





N I L 2 9 4 1 1




Paid up Capital Reserves & Surplus(including adv. against Share Capital)

3 0 3 0 0 N I L


N I L N I L


Net Fixed Assets (incl. preop. exenses) Investments1 5 1 1 9 N I L

Net Current Assets/(Liabilities) Misc.Expenditure

1 4 9 6 8 2 1 3

Accumulated Losses

N I L


N I L N I L

Profit/(Loss) before Tax Profit/(Loss) after Tax

N I L N I L


N A N A

V. Generic Names of Three Principal Products/Services of the Company (as per monetary terms)

Item Code No. N A

Product DEVELOPMENT OF INFORMATION TECHNOLOGY PARK

12. This being the first accounting period, giving comparative figures does not arise.

Signature to Schedules 1 to 7

Schedules forming part of Schedules forming part of Schedules forming part of Schedules forming part of Schedules forming part of AccountsAccountsAccountsAccountsAccounts








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L&T PANIPAT ELEVATED CORRIDOR PRIVATE LIMITED


The Directors have pleasure in presenting their first Report and the Accounts for the period from 21st July 2005 (date of incorporation) to31st March 2006


Since your Company is in the project implementation phase and is yet to commence commercial operation, no profit and loss accounthas been drawn for the period. The key financials parameters for the period ended 31st March 2006 are:

Description Amount Rupees

Gross Fixed Assets 20,49,299

Depreciation 46,718

Pre-operative Expenses 3,34,41,560

Capital work in progress 17,65,81,400


During the period share capital of Rupees five lakhs has been issued and paid up. During the period the parent Company hasadvanced against share capital Rs.21,09,65,060/-


The Company was incorporated on 21st July 2005 and executed the Concession Agreement with National Highways Authority of Indiaon 27th July 05. The Company has established its project office at the site.

During the period EPC contract was issued to Larsen & Toubro Limited. The total project cost is estimated at Rs. 421.5 crores. Theproject finance by way of debt of Rs. 337 crores has already been tied up and the Company had executed financing agreements withthe Lender and also created security in favour of the lenders. The State Support Agreement has been signed on 29th March 2006paving the way for achieving Financial Closure for the project.

The Company got converted into Public Limited Company w.e.f. 03rd April, 2006.


As at 31st March 2006, the gross fixed assets stood at Rs.20,49,299/- and the net fixed assets including capital work in progress andpre-operative expenses stood at Rs.21,20,25,541/-.

4. DEPOSITS:


5. AUDITORS’ REPORT:



As the primary object of the Company is to develop, operate and maintain toll road cum bridge, there are no particulars to be disclosedas per the Companies’ (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

There are no foreign exchange earnings or outgo during the period.





a. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been nomaterial departure;

b. that the selected accounting policies were applied consistently and the directors made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006;

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c. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

d. that the annual accounts have been prepared on a going concern basis.

9. DIRECTORS

All the first directors of the Company are liable to retire at the first Annual General meeting and being eligible offer themselves for re-appointment.

Mr.K.Venkatesh and Mr.Chandrasekhar Shrinivas Damle were appointed as additional directors and shall hold office until the forthcomingAnnual General Meeting.

Notices under the provisions of section 257 of the companies act, 1956 have been received by the Company from two members forthe appointment of Mr.K.Venkatesh and Mr.Chandrashekhar Shirnivas Dhamle as Directors of the Company.

10. AUDITORS


1I. ACKNOWLEDGEMENTS:

The Directors acknowledge the invaluable support extended to the Company by the financial institutions, bankers, employees of theCompany, staff and management of the parent Company.

Director Director

K. VENKATESH P. JAYAVELU BABU


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T PANIPAT ELEVATED CORRIDOR PRIVATE LIMITED

We have audited the attached balance sheet of L&T Panipat Elevated Corridor Private Limited as at 31st March 2006 and the cash flowstatement for the period ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.


1. As required by the Company’s (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A)of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the saidOrder.


a. we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for thepurposes of the audit;

b. in our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from ourexamination of those books;

c. the balance sheet and cash flow statement dealt with by this report are in agreement with the books of account;

d. in our opinion, the balance sheet and cash flow statement dealt with by this report comply with the accounting standards referredto in sub-section (3C) of section 211 of the Companies Act, 1956;

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e. on the basis of the written representations received from the Directors of the Company as on 31st March 2006, and taken onrecord by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointedas a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

f. in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give theinformation required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:

i. in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006;

ii. in case of the cash flow statement, of the cash flows for the period ended on that date.


L.VAIDYANATHANPlace: Chennai PartnerDate: April 19, 2006 Membership No. 16368

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 1 of the report of the Auditors to the Members of L&T Panipat Elevated CorridorPrivate Limited on the accounts for the period ended 31st March 2006, we report that:

1. a. The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

b. We are informed that the management of the Company has physically verified during the period all its fixed assets and nomaterial discrepancies were noticed on such verification.

c. The Company has not disposed of any substantial part of its fixed assets so as to affect the going concern status.

2. The Company is engaged in the business of infrastructure development and maintenance and hence the clauses 4 (ii) (a), (b) & (c)of the Company’s (Auditor’s Report) Order 2003 relating to inventory are not applicable.

3. According to the information & explanation given to us, the Company has not granted or taken any loans, secured or unsecured,to / from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hencereporting under clause-4 (iii) (a) to (g) of the Company’s (Auditor’s Report) Order 2003 does not arise.

4. In our opinion, and according to the information and explanations given to us, there are adequate internal control systems commensuratewith the size of the Company and nature of its business, for the purchase of fixed assets. In our opinion, and according to theinformation and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

5. In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered intothe register in pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (v)(b) of the Company’s(Auditor’s Report) Order 2003 does not arise.

6. The Company has not accepted deposits from the public within the meaning of Section 58A, 58AA or any other relevant provisions ofthe Companies Act 1956. Hence Clause 4 (vi) of the Company’s (Auditor’s Report) Order 2003 is not applicable to the Company.

7. The Company has been incorporated during the year and is in the process of instituting an internal audit system.

8. The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1) (d) of theCompanies Act, 1956 is not applicable to the Company.

9. a. According to the information and explanations given to us and on the basis of our examination of the books of account, theCompany has been generally regular in depositing undisputed statutory dues, Income tax, and other statutory dues during theperiod with the appropriate authorities. As at 31st March 2006, there are no undisputed statutory dues payable for a period ofmore than six months from the date they became payable.

b. According to the information and explanations given to us, there are no dues which have not been deposited on account of anydispute of income tax and cess.

10. The Company has not commenced its commercial operations and hence reporting under clause 4 (x) of the Company’s (Auditor’sReport) Order 2003 does not arise.

11. The Company has not availed any loan from banks and financial institutions or issued debentures. Hence reporting on default inrepayment of dues under clause 4 (xi) of the Company’s (Auditor’s Report) Order 2003 does not arise.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of securityby way of pledge of shares, debentures and other securities.

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13. In our opinion, the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of theCompany’s (Auditor’s Report) Order, 2003 are not applicable to the Company.

14. In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares,securities, debentures and other investments.

15. The Company has not given any guarantee for loans taken by others from bank or financial institutions.

16. In our opinion and according to the information and explanation given to us, the Company has not taken any term loans and hencereporting on their application under clause 4 (xvi) of the Company’s (Auditor’s Report) Order 2003 does not arise.

17. According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, theprovisions of clause 4 (xvii) of the Company’s (Auditor’s Report) Order 2003 are not applicable to the Company.

18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained undersection 301 of the Companies Act, 1956, during the period.

19. The Company has not issued debentures during the period. Accordingly, no security or charge needs to be created.

20. The Company has not raised any money by public issue during the period.

21. During the course of our examination of the books and the records of the Company, carried out in accordance with the generallyaccepted auditing practices in India, and according to the information and explanations given to us, we have neither come across anyinstances of material fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case bymanagement.



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Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006

As at 31.3.2006Schedules Rs.

SOURCES OF FUNDS:Shareholders' Funds :Share Capital 1 500,000Advance against Share Capital 210,965,060

TOTAL 211,465,060

APPLICATION OF FUNDSFixed Assets 2Gross Block 2,049,299Less: Depreciation 46,718Net Block 2,002,581Capital Work-in-Progress 176,581,400

178,583,981Pre-operative expenses 3 33,441,560

212,025,541Current Assets, Loans & Advances 4Current Assets

Cash and Bank Balances 1,607,889Loans & Advances 975,332

2,583,221

Less: Current Liabilities & Provisions 5Current Liabilities 3,731,947Provisions 25,370

3,757,317

Net Current Assets (1,174,096)Miscellaneous Expenditure(to the extent not written off or adjusted)Preliminary Expenses 613,615

TOTAL 211,465,060



K. VENKATESH

C. S. DAMLEDirectors

Place: Chennai,Date: April 19, 2006


by the hand of

L . VAIDYANATHANPartnerMembership No.16368


}

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Cash Flow Statement for the period July 21, 2005 to March 31, 2006Cash Flow Statement for the period July 21, 2005 to March 31, 2006Cash Flow Statement for the period July 21, 2005 to March 31, 2006Cash Flow Statement for the period July 21, 2005 to March 31, 2006Cash Flow Statement for the period July 21, 2005 to March 31, 2006

Rupees

A. Cash Flow from operating activitiesNet Profit/(Loss) before tax & extraordinary items —Adjustment for : —Dividend Received —Depreciation —Translation reserve —Unrealised foreign exchange difference - net (gain) / loss —Interest paid —Interest received —(Profit) / Loss on sale of investments (net) —(Profit) / Loss on sale of fixed assets (net) —Provision for dimunition of value of investments —Operating Profit before working capital changes —Adjustments For :(Increase) / Decrease in trade and other receivables —(Increase) / Decrease in inventories —(Increase) / Decrease in Loans and Advances (975,332)Increase / (Decrease) in trade payables 3,757,317

Cash generated from operations 2,781,985Direct taxes paid (net of refund) —

Net Cash from Operating Activities (A) 2,781,985B. Cash Flow from Investing activities :

Purchase of Fixed Assets (212,639,156)(Interest Capitalised Rs. Nil)Sale of Fixed Assets —Interest received —Dividend received from other investments —

Net Cash / (used in) from Investing Activities (B) (212,639,156)

C. Cash Flow from Financing Activities :Issue of Equity shares and advance against share capital 211,465,060(Repayment ) / Proceeds from other borrowingsRealised gainDividend Paid —Tax on distributed profits —Interest Paid —

Net cash/ (used in) from Financing Activities (C) 211,465,060

Net increase in cash and cash equivalents (A+B+C) 1,607,889Cash and Cash equivalents as at the beginning —(including cash credit from banks)Cash and Cash equivalents as at the end 1,607,889(including cash credit from banks)

NOTES1. Cash flow statement has been prepared under the Indirect Method as set of in the Accounting Standard 3 issued by the Institute of

Chartered Accounts of India2. Cash and cash equivalents represent cash and bank balances.3. Cash generated from Operations represents balances in loans and advances and sundry creditors


K. VENKATESH




by the hand of



}

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As at 31.3.2006SCHEDULE-1 Rupees

SHARE CAPITALAuthorised8,50,00,000 Equity Shares of Rs10 each 850,000,000

Issued Subscribed & Paidup

50,000 Equity Shares of Rs 10 each fully paid up. 500,000

(The entire shares are held by L&T Infrastructure DevelopmentProjects Limited, the holding company and its nominees) 500,000

SCHEDULE-2FIXED ASSETS

Figures in Rupees

At Cost Depreciation Net Block

Description Additions for the period As at For the period As at As at21.07.2005 to 31.03.2006 31.03.2006 21.07.2005 to 31.03.2006 31.03.2006 31.03.2006

Freehold Land 1,299,680 1,299,680 - - 1,299,680

Furniture & Fixture 160,708 160,708 5,050 5,050 155,658

Office Equipment 216,729 216,729 6,699 6,699 210,030

Computers 372,182 372,182 34,969 34,969 337,213

Total 2,049,299 2,049,299 46,718 46,718 2,002,581

Capital Work-in-Progress 176,581,400

Grand Total 178,583,981

Note: Freehold Land and other assets of the Company have been mortgaged in favour of the lenders who have sanctioned termloans to the project. However, no amount has been drawn during the period up to 31st March, 2006.

SCHEDULE-3PRE-OPERATIVE EXPENSES

For the period from21.07.2005 to 31.3.2006

Rupees

Salaries & Wages 473,837Staff Welfare Expenses 103,898Rent 418,186Rates & Taxes 4,774,047Travelling & Conveyance 1,360,974Communication Expenses 183,711Printing & Stationery 110,309Insurance 215,235Power & Electricity 23,877Professional Fees 24,131,176Interest 452,055Repairs & Maintenance 327,732Miscellaneous Expenses 688,915Depreciation 46,718

33,310,670Fringe Benfit Tax 130,890

TOTAL 33,441,560

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SCHEDULE-4

CURRENT ASSETS, LOANS & ADVANCESAs at 31.3.2006

Rupees

Cash And Bank BalancesCash on hand 8,243


on current account 1,599,646

1,607,889

Loans and advancesUnsecured

Considered good

Advances recoverable in cash or in kind

or for value to be received. 975,332

TOTAL 2,583,221

SCHEDULE-5

CURRENT LIABILITIES & PROVISIONSAs at 31.3.2006

Rupees

LIABILITIESSundry Creditors

Due to Small Scale Industrial undertakings —

Others 3,731,947 3,731,947

PROVISIONSProvision for Fringe Benefit Tax 25,370

TOTAL 3,757,317

SCHEDULE-6SIGNIFICANT ACCOUNTING POLICIES:


The Company maintains its accounts on accrual basis following the historical cost convention in accordance with Generally AcceptedAccounting Principles (“GAAP”) and in compliance with the Accounting Standards referred to in Section 211 (3C) and other requirementsof the Companies Act, 1956.

The preparation of financial statements in conformity with GAAP requires that the management of the company makes estimates andassumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilitiesand the disclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates includeuseful lives of fixed assets and intangible assets, provision for doubtful debts / advances, future obligations in respect of retirementbenefit plans etc. Actual results could differ from these estimates.

2. Fixed Assets

Fixed Assets are recorded at cost. Pre-operative expenses incurred upto the date of commencement of commercial operations arecapitalised.

3. Depreciation

Depreciation on assets has been provided on straight-line basis at the rates specified in the Schedule XIV of the Companies Act, 1956.Depreciation on additions/deductions is calculated prorata from/to the month of additions/deductions.


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4. Intangible Assets and amortization

Intangible assets are recognized as per the criteria specifies in Accounting Standard (AS) 26 “Intangible Assets” issued by theInstitute of Charted Accountants of India as follows:

Preliminary expenses are written off in the year of commencement of operations.

5. Taxes

Fringe benefit tax for the period is computed in accordance with the provisions of Chapter XII-H of the Income-tax Act, 1961.

SCHEDULE-7

NOTES FORMING PART OF ACCOUNTS:

1. The Company was incorporated on 21st July, 2005 and accordingly the accounts are drawn for the period from 21st July 2005 to 31stMarch 2006.

2. The Company has been awarded on Build Operate and Transfer (BOT) basis, the widening of existing four-lane ten kilometre stretchcovering Panipat city on National Highway No. 1 in Haryana to six-lanes elevated structure covering specific stretches and wideningand construction of peripheral lanes and operation and maintenance thereof, under the Concession Agreement dated 27th July, 2005with National Highways Authority of India. The Concession Agreement is for a period of 20 years from 23rd January 2006, theAppointed Date stated in clause 1.1 of the said agreement.

3. The Company had no transactions during the period with any small-scale industrial undertakings and hence reporting details ofinterest on overdue outstanding and amount outstanding for more than 30 days, does not arise.

4. The Company is a service company and accordingly information required under paragraph 4(C) of Part II of Schedule VI to theCompanies Act, 1956 has not been furnished.

5. The provisions of Payment of Gratuity Act, 1972 and Employees Provident Funds and Miscellaneous Provisions Act 1952 are notpresently applicable to the Company.


Audit Fees (including service tax) - Rupees 56,120

Certification expenses - Rupees 3,857

7. The Company has not commenced its operations and hence no provision for income tax has been made. However, provision forFringe Benefit Tax has been made as per the provision of the Income-tax Act, 1961. The Company does not have taxable wealth underthe provisions of the Wealth Tax Act 1952.

8. Disclosure of related parties/ related party transactions.

a. List of related parties

Holding company : L&T Infrastructure Development Projects Limited (a subsidiary of Larsen & Toubro Limited)



Associates : NIL



L&T Finance Limited










S-195















L&T Krishnagiri Thoppur Toll Road Private Limited













b. Transactions with Related Parties:

Holding Companies : Larsen & Toubro Limited:

Reimbursement of Expenses - Rs. 8,81,388

Mobilisation Advance paid for construction - Rs. 15,00,00,000

L&T Infrastructure Development Projects Ltd:

Interest - Rs. 4,52,055

Equity subscription received - Rs. 4,99,940

Advance against share capital - Rs. 21,09,65,060

Fellow Subsidiary

Fellow subsidiary - Nil

c. Amount due to and from related parties: - Nil

d. Amount written off/written back during the year: - Nil.


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9. Estimated amount of contracts remaining to be executed on Capital Account (net of advances) Rs. 300,00,00,000.

10. The provisions of the following Accounting Standards are not applicable since:

a. This is the first accounting period and the Company is yet to commence commercial operations:

Prior period items and changes in accounting policies – AS 5

Revenue Recognition – AS 9

Segment Reporting – AS 17

Earnings per Share – AS 20

Deferred Tax – AS 22

Impairment of Assets – AS 28

b. The Company does not have transactions attracting provisions for the following Accounting Standards:

Valuation of Inventories – AS 2

Accounting for Employee Benefits – AS 15

Accounting for Borrowing Costs – AS 16

Accounting for Leases – AS 19

Accounting for Contingent Liabilities/Assets – AS 29


S-197



11. Balance sheet abstract and company’s general business profile


Registration No. U 4 5 2 0 3 T N 2 0 0 5 P T C 0 5 6 9 9 9 State Code No. 1 8





N I L 5 0 0


2 1 1 4 6 5 2 1 1 4 6 5Sources of Funds

Paid up Capital(including advance against share capital) Reserves & Surplus

2 1 1 4 6 5 N I L


N I L N I LApplication of Funds

Net Fixed Assets(including Preoperative Expenses) Investments

2 1 2 0 2 6 N I L

Net Current Assets/Liabilities Miscellaneous Expenditure

( 1 1 7 4 ) 6 1 3

Accumulated Losses

N I L


N I L N I L

+ - Profit/Loss before Tax + - Profit/Loss after Tax

N I L N I L


N I L N I L


Item Code No. N A

Product I N F R A S T R U C T U R E P R O J E C T O N B O TDescription B A S I S



K. VENKATESH




by the hand of



}

S-198

L&T KRISHNAGIRI THOPUR TOLL ROAD PRIVATE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their first Report and the Accounts for the period from November 2, 2005 (date of incorporation)to March 31, 2006.

1. FINANCIAL RESULTS:

Since your company is in the project implementation phase and is yet to commence commercial operation, no profit and loss accounthas been drawn for the period. The key financials parameters for the period ended March 31, 2006 are:


Gross Fixed Assets 79,600

Depreciation 2,018

Pre-operative Expenses 1,48,01,648


During the period share capital of Rupees five lakhs has been issued and paid-up. The parent company has also advanced Rs.1.50crores towards subscription of share capital.

2. PERFORMANCE OF THE COMPANY:

The Company was incorporated on November 2, 2005 and the Concession Agreement has been signed by National HighwaysAuthority of India on January 17, 2006. The total estimated project cost of Rs. 525 crores is expected to be funded by debt of Rs. 446crores and equity of Rs.79 crores.

The Company is in an advance stage for syndicating the debt requirement for the project.

The Company is currently establishing its office at the project site.

The Company got converted into a public limited company with effect from April 3, 2006.


As at March 31, 2006, the gross fixed assets stood at Rs. 79,600/- and the net fixed assets (including of pre-operative expenses)stood at Rs.1,48,79,230/-.

4. DEPOSITS:





As the Company is engaged in developing, operating and maintaining a toll road, there are no particulars to be disclosed as per theCompanies’ (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

There is no foreign exchange earnings or outgo during the period.





1. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been nomaterial departure;

2. that the selected accounting policies were applied consistently and the directors made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2006;

3. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

4. that the annual accounts have been prepared on a going concern basis.

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9. DIRECTORS:

All the first directors of the Company are liable to retire at the first Annual General Meeting and being eligible, offer themselves for re-appointment.

10. AUDITORS:



The Directors acknowledge the invaluable support extended to the company by the Financial Institutions, Bankers, employees of theCompany, staff and management of the parent company.

K. VENKATESH B. RAMAKRISHNAN S. N. BABUGOVINDARAJDirector Director Director


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T KRISHNAGIRI THOPUR TOLL ROAD PRIVATE LIMITED

We have audited the attached balance sheet of L&T Krishnagiri Thopur Toll Road Private Limited as at March 31, 2006, the cash flowstatement for the period ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.



1. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A)of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the saidOrder.






e. on the basis of the written representations received from the Directors of the Company as on March 31, 2006, and taken on recordby the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2006 from being appointed as adirector in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and


i. in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;




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Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006Balance sheet as at March 31, 2006

As at 31.3.2006Schedules

Rs. Rs.SOURCES OF FUNDS:Shareholders’ Funds :Share Capital 1 500,000Advance against Share Capital

15,000,000TOTAL

15,500,000

APPLICATION OF FUNDSFixed Assets 2Gross Block 79,600Less: Depreciation 2,018

Net Block 77,582Pre-operative expenses 3 14,801,648

14,879,230Current Assets, Loans & Advances 4Current AssetsCash and Bank Balances 59,294Loans & Advances 14,622

73,916

Less: Current Liabilities & Provisions 5Current Liabilities 56,120Provisions 6,300

62,420

Net Current Assets 11,496Miscellaneous Expenditure(to the extent not written off or adjusted)Preliminary Expenses

609,274TOTAL

15,500,000



by the hand of

L . VAIDYANATHAN K. VENKATESH B. RAMAKRISHNANPartner DirectorsMembership No.16368

Place : Chennai Place : ChennaiDate : April 19, 2006 Date : April 19, 2006

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Cash Flow Statement for the period November 2, 2005 to March 31, 2006Cash Flow Statement for the period November 2, 2005 to March 31, 2006Cash Flow Statement for the period November 2, 2005 to March 31, 2006Cash Flow Statement for the period November 2, 2005 to March 31, 2006Cash Flow Statement for the period November 2, 2005 to March 31, 2006

Rupees

A. Cash Flow from Operating ActivitiesNet Profit/(Loss) before tax & extraordinary items —Adjustment for :Depreciation —Unrealised foreign exchange difference - net (gain) / loss —Interest paid —Interest received —Operating Profit before working capital changes —Adjustments For :(Increase) / Decrease in loans and advances (14,622)Increase / (Decrease) in trade payables 62,420

Cash generated from operations 47,798Direct taxes paid (net of refund) —

Net Cash from Operating Activities (A) 47,798

B. Cash Flow from Investing Activities :Purchase of Fixed Assets (15,488,504)(Interest Capitalised Rs. Nil)Sale of Fixed Assets —Interest received —Dividend received from other investments —

Net Cash / (used in) from investing Activities (B) (15,488,504)

C. Cash Flow from Financing Activities :Issue of Equity shares and advance against share capital 15,500,000(Repayment) / Proceeds from other borrowingsInterest Paid —

Net cash/ (used in) from Financing Activities (C) 15,500,000

Net increase in cash and cash equivalents (A+B+C) 59,294Cash and Cash equivalents as at the beginning —(including cash credit from banks)Cash and Cash equivalents as at the end 59,294(including cash credit from banks)

NOTES1. Cash flow statement has been prepared under the Indirect Method as set of in the Accounting

Standard 3 issued by the Institute of Chartered Accounts of India2. Cash and cash equivalents represent cash and bank balances.3. Cash generated from Operations represents balances in loans and advances and sundry creditors


by the hand of


Place : Chennai, Place : Chennai,Date : April 19, 2006 Date : April 19, 2006

S-202



SHARE CAPITALAuthorised1,00,00,000 Equity Shares of Rs10 each 100,000,000

Issued Subscribed & Paidup50,000 Equity Shares of Rs 10 each fully paid up. 500,000(The entire shares are held by L&T Infrastructure Development

Projects Limited, the holding company and its nominees) 500,000

SCHEDULE-2

FIXED ASSETSFigures in Rupees

At Cost Depreciation Book Value


Computers 79,600 79,600 2,018 2,018 77,582

Total 79,600 79,600 2,018 2,018 77,582

SCHEDULE-3

PRE-OPERATIVE EXPENSESFor the period from

2.11.2005 to 31.3.2006Rupees

Salaries & wages 318,536

Staff Welfare Expenses 27,406

Rates & Taxes 1,528

Travelling & Conveyance 211,549

Communication Expenses 43,455

Printing & Stationery 8,611

Professional Fees 13,342,974

Repairs & Maintenance 3,970

Subcontracting Charges 751,893

Miscellaneous expenses 83,408

Depreciation 2,018

14,795,348


TOTAL 14,801,648


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SCHEDULE-4


Rupees

Cash And Bank Balances Cash on hand —

Balances with scheduled banks on current account 59,294 59,294

Loans And AdvancesUnsecured:

Considered good:

Advances recoverable in cash or in kind or for value to be received. 14,622

TOTAL 73,916

SCHEDULE-5


Rupees

CURRENT LIABILITIESSundry Creditors

Due to Small scale industrial undertaking —

Others 56120

PROVISIONS 56,120


TOTAL 62,420

SCHEDULE-6



The Company maintains its accounts on accrual basis following the historical cost convention in accordance with Generally AcceptedAccounting Principles ("GAAP") and in compliance with the Accounting Standards referred to in Section 211 (3C) and other requirementsof the Companies Act, 1956.

The preparation of financial statements in conformity with GAAP requires that the management of the company makes estimates andassumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilitiesand the disclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates includeuseful lives of fixed assets and intangible assets, provision for doubtful debts / advances, future obligations in respect of retirementbenefit plans etc. Actual results could differ from these estimates.

2. Fixed Assets


3. Depreciation

Depreciation has been provided on straight-line basis at the rates specified in the Schedule XIV of the Companies Act, 1956.Depreciation on additions / deductions is calculated prorata from / to the month of additions / deductions.

4. Intangible Assets and amortization

Intangible assets are recognized as per the criteria specified in Accounting Standard (AS 26) "Intangible Assets" issued by theinstitute of Chartered Accounts of India as follows:

Preliminary expenses are written off in the year of commencement of operations.

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Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)5. Taxes

Fringe benefit tax for the period is computed in accordance with the provisions of Chapter XII - H of the Income - tax Act,1961.

SCHEDULE-7


1. The Company was incorporated on 2nd November 2005 and hence the accounts are drawn for the period from 2nd November 2005to 31st March 2006. Since the Company has not commenced commercial operations, no Profit & Loss account has been drawn.

2. The Company has been awarded a contract on Build Operate and Transfer (BOT) basis, the widening of 62.5 kms and improvementof 7.4 kms on National Highway No.7 at Krishnagiri to Thopur in Tamilnadu State under Concession Agreement dated 17th January2006 with the National Highways Authority of India. The Concession Agreement is for a period of 20 years from the Appointed Datestated clause 1.1 of the said agreement.

3. The Company is a service company and accordingly information required under paragraph 4(C ) of Part II of Schedule VI to theCompanies Act, 1956 has not been furnished.

4. The Company had no transactions during the period with any small-scale industrial undertakings and hence reporting details ofinterest on overdue outstanding and amount outstanding for more than 30 days, does not arise.


6. Auditor's Remuneration for the accounting period:

Audit Fees (including service tax) — Rs. 56,120/-

7. The Company has not commenced its operations and hence no provision for income tax has been made. However, provision forFringe Benefit Tax has been made as per the provision of the Income-tax Act, 1961. The Company does not have taxable wealth underthe provisions of Wealth Tax Act 1952.

8. Disclosure of related parties / related party transactions.

A. List of related partiesHolding company : L&T Infrastructure Development Projects Limited (a subsidiary of Larsen & Toubro Limited)


Subsidiary company: NIL

Associates : NIL



L&T Finance Limited

















S-205




















B. Transactions with Related Parties

Holding Companies : Larsen & Toubro Limited:

Reimbursement of Expenses - Rs 8,27,911/-

L&T Infrastructure Development Projects Limited:

Reimbursement of Expenses - Rs 28,20,189/-

Subscription of Equity - Rs. 4,48,970/-

Fellow subsidiaries - Nil

C. Amount due to and from related parties - Nil

D. Amount written off / written back during the period - Nil


a. This is the first accounting period and the Company is yet to commence

commercial operations:

Prior period items and changes in accounting policies - AS 5

Revenue Recognition - AS 9

Segment Reporting - AS 17

Earning Per Share - AS 20

Deferred Tax. - AS 22

Impairment of Assets - AS 28

b. The Company does not have transactions attracting provisions for the following

Accounting Standards:

Valuation of Inventories - AS 2

Accounting of Employee Benefits - AS 15

Accounting of Borrowing Costs - AS 16

Accounting of Leases - AS 19

Accounting for Contingent Liabilities / Assets - AS 29


S-206





Registration No. U 4 5 2 0 3 T N 2 0 0 5 P T C 0 5 7 9 3 0 State Code No. 1 8





N I L 5 0 0




1 5 5 0 0 N I L




1 4 8 7 9 N I L


1 2 6 0 9

Accumulated Losses

N I L


N I L N I L

+ - Profit before Tax + - Profit/Loss after Tax

✔ N I L ✔ N I L


N A N A

V. Generic Names of Three Principal Products/Services of the Company (as per monetary term)

Item Code No. N A



Signatures to Schedules 1 to 7As per our report attached For and on behalf of the BoardSHARP & TANNANChartered Accountants


Place : Chennai, Place : Chennai,Date : April 19, 2006 Date : April 19, 2006

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L&T WESTERN ANDHRA TOLLWAYS PRIVATE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their first Report and Accounts for the period from 2nd November 2005 (date of incorporation) to31st March 2006.


Since your Company is in the project implementation phase and is yet to commence commercial operation, no profit and loss accounthas been drawn for the period. The key financials parameters for the period ended March 31, 2006 are:

Description Rupees


Depreciation 4,185



During the period, equity shares with face value of Rupees five lakhs were issued and paid-up. The parent Company also infusedadvances towards share capital to enable the Company meet its cash outflows.


The Company was incorporated on 2nd November 2005 and the Concession Agreement has been signed by National HighwaysAuthority of India on 17th January 2006. The Company is in the process of finalising debt requirements for part funding the totalestimated project cost of Rs.370 crores.

The Company is currently establishing its office at the project site.

The Company got converted into a Public Limited Company with effect from 03rd April, 2006.


As at 31st March 2006, the gross fixed assets stood at Rs.72,100/-. The net fixed assets including pre-operative expenses stood atRs. 8,00,665/-.

4. DEPOSITS:





As the Company is implementing a project for developing, operating and maintaining a toll road, there are no particulars to be disclosedas per the Companies’ (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

There are no foreign exchange earnings or outgo during the period.






2. that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006;



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9. DIRECTORS:

All the directors of the Company are liable to retire at the first Annual General Meeting of the Company and are eligible for re-appointment.

10. AUDITORS:

The Auditors, M/s Sharp & Tannan, Chartered Accountants, being statutory auditors of the Company hold office until the conclusionof the ensuing Annual General Meeting and are recommended for reappointment. Certificate from Auditors has been received to theeffect that their appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act 1956.


The Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, employees of theCompany, staff & management of the parent Company.

K. VENKATESH B RAMAKRISHNAN

Director Director


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T WESTERN ANDHRA TOLLWAYS PRIVATE LIMITED

We have audited the attached balance sheet of L&T Western Andhra Tollways Private Limited as at 31st March 2006 and the cash flowstatement for the period ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.





(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for thepurposes of the audit;

(b) in our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from ourexamination of those books;


(d) in our opinion, the balance sheet and cash flow statement dealt with by this report comply with the accounting standards referredto in sub-section (3C) of section 211 of the Companies Act, 1956;

(e) on the basis of the written representations received from the Directors of the Company as on 31st March 2006, and taken onrecord by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointedas a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give theinformation required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with theaccounting principles generally accepted in India:i) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006;(ii) in case of the cash flow statement, of the cash flows for the period ended on that date.

By the hand of SHARP & TANNANChartered Accountants

L. VAIDYANATHANPlace: Chennai PartnerDate: April 19, 2006 Membership No. 16368

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Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 1 of the report of the Auditors to the Members of L&T Western Andhra TollwaysPrivate Limited on the accounts for the period ended 31st March 2006, we report that:1) a) The Company is maintaining proper records, showing full particulars, including quantitative details and situation of fixed assets.

b) We are informed that the management of the Company has physically verified during the period all its fixed assets and no materialdiscrepancies were noticed on such verification.

c) The Company has not been disposed of any substantial part of its fixed assets so as to affect the going concern status.2) The Company is engaged in the business of infrastructure development and itsmaintenance and hence the clauses 4 (ii) (a)(b) & (c)

of the Companies (Auditor’s Report) Order, 2003 relating to inventory are not applicable.3) According to the information & explanation given to us, the Company has not granted or taken any loans, secured or unsecured, to

/ from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hencereporting under clause-4 (iii) (a) to (g) of the Companies (Auditor’s Report) Order, 2003 does not arise.

4) In our opinion, and according to the information and explanations given to us, there is adequate internal control system commensuratewith the size of the Company and nature of its business for the acquisition of fixed assets. In our opinion, and according to theinformation and explanations given to us, there is no continuing failure to correct major weaknesses in the internal control system.

5) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered intothe register in pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (v) (b) of the Companies(Auditor’s Report) Order, 2003 does not arise.

6) The Company has not accepted deposits from the public with in the meaning of Section 58A, 58AA or any other relevant provisionsof the Companies Act 1956. Hence Clause 4(vi) of the Companies (Auditor’s Report) Order 2003, is not applicable to the Company.

7) The Company has been incorporated during the year and is in the process of instituting an internal audit system.8) The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1)(d) of the

Companies Act, 1956 is not applicable to the Company.9) a) According to the information and explanations given to us and on the basis of our examination of the books of account, the

Company has been generally regular in depositing undisputed statutory dues, income tax, and other statutory dues during theperiod with the appropriate authorities. As at 31st March 2006, there are no undisputed statutory dues payable for a period of morethan six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues which have not been deposited on account of anydispute of income tax.

10) The Company has not commenced its commercial operation and hence reporting under clause 4 (x) of the Companies (Auditor’sReport) Order, 2003 does not arise.

11) The Company has not availed any loan from bank and financial institution or issued debentures. Hence reporting on default in paymentof dues under clause 4 (xi) of the Companies (Auditor’s Report) Order, 2003 does not arise.

12) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of securityby way of pledge of shares, debentures and other securities.

13) In our opinion, the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of theCompanies (Auditor’s Report) Order, 2003 are not applicable to the Company.

14) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares,securities, debentures and other investments.

15) The Company has not given any guarantee for loans taken by others from bank or financial institutions.16) In our opinion and according to the information and explanation given to us, the Company has not taken term loans and hence

reporting on their application under clause 4 (xvi) of the Companies (Auditor’s Report) Order, 2003 does not arise.17) According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, the

provisions of clause 4 (xvii) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.18) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under

section 301 of the Companies Act, 1956, during the period.19) The Company has not issued debentures during the period. Accordingly, no security or charge needs to be created.20) The Company has not raised any money by public issue during the period.21) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally

accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across anyinstances of material fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case bymanagement.

By the hand of SHARP & TANNANChartered Accountants

L. VAIDYANATHANPlace: Chennai PartnerDate: April 19, 2006 Membership No. 16368

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Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006Balance sheet as at 31st March, 2006

As at 31.3.2006Schedules Rs. Lacs

SOURCES OF FUNDSSHAREHOLDERS’ FUNDS :

Share Capital 1 500,000

TOTAL 500,000

APPLICATION OF FUNDSFixed Assets 2

Gross Block 72,100

Less: Depreciation 4,185

Net Block 67,915

Pre-operative expenses 3 732,750

800,665Current Assets, Loans & Advances 4

Current Assets

Cash & Bank Balances 325,105

Loans & Advances 13,669

338,774

Less: Current Liabilites & Provisions 5Current Liabilities 1,243,579

Provisions 4,500

1,248,079

Net Current Assets (909,305)Miscellaneous Expenditure(to the extent not written off or adjusted)

Preliminary Expenses 608,640

TOTAL 500,000



by the hand of

L. VAIDYANATHAN K. VENKATESH B RAMAKRISHNANPartner DirectorsMembership No. 16368

Place: Chennai Place: ChennaiDate: April 19, 2006 Date: April 19, 2006

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RupeesA. Cash Flow from Operating Activities

Net Profit/(Loss) before tax & extraordinary items –Adjustment for :Depreciation –Unrealised foreign exchange difference - net (gain) / loss –Interest paid –Interest received –Operating Profit before working capital changes –Adjustments For :(Increase) / Decrease in loans and advances (13,669)Increase / (Decrease) in trade payables 1,248,079

Cash generated from operations 1,234,410

Direct taxes paid (net of refund) –

Net Cash from Operating Activities (A) 1,234,410

B. Cash Flow from Investing Activities :Purchase of Fixed Assets (1,409,305)(Interest Capitalised Rs. Nil)Sale of Fixed Assets –Interest received –Dividend received from other investments –

Net Cash / (used in) from Investing Activities (B) (1,409,305)

C. Cash Flow from Financing Activities :Issue of Equity shares and advance against share capital(Repayment ) / Proceeds from other borrowings 500,000

Interest Paid –

Net cash/ (used in) from Financing Activities (C) 500,000

Net (decrease)/ increase in cash and cash equivalents (A+B+C) 325,105

Cash and Cash equivalents as at the beginning –(including cash credit from banks)

Cash and Cash equivalents as at the end 325,105(including cash credit from banks)




by the hand of



Cash flow statement for the period 2nd November 2005 toCash flow statement for the period 2nd November 2005 toCash flow statement for the period 2nd November 2005 toCash flow statement for the period 2nd November 2005 toCash flow statement for the period 2nd November 2005 to31st March 200631st March 200631st March 200631st March 200631st March 2006

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Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsAs at 31.3.2006

SCHEDULE-1 RupeesSHARE CAPITALAuthorised100,00,000 Equity Shares of Rs. 10 each 100,000,000

Issued Subscribed & Paidup50,000 Equity Shares of Rs 10 each fully paid up. 500,000(The entire shares are held by L&T Infrastructure Development Projects Limited, 500,000the holding Company and its nominees)

SCHEDULE-2

FIXED ASSETSSFigures in Rupees


Additions for the period As at For the period As at As at02.11.05 to 31.03.06 31.03.2006 02.11.05 to 31.03.06 31.03.2006 31.03.2006

Computers 72,100 72,100 4,185 4,185 67,915

Total 72,100 72,100 4,185 4,185 67,915

SCHEDULE-3

PRE-OPERATIVE EXPENSESFor the period from

2.11.2005 to 31.3.2006Rupees

Salaries and Wages 291,360

Staff Welfare Expenses 46,363

Rent 9,700

Rates and Taxes 1,500

Travelling and Conveyance 243,519

Communication Expenses 26,388

Printing and Stationery 15,440

Repairs & Maintenance Others 12,178

Miscellaneous Expenses 77,617

Depreciation 4,185

728,250


TOTAL 732,750

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SCHEDULE-4


Rupees

Cash And Bank Balancesa) Cash on hand –

b) Balances with scheduled banks on current account 325,105

325,105

Loans And AdvancesUnsecured

Considered good

Advances recoverable in cash or in kind or for value to be received 13,669

TOTAL 338,774

SCHEDULE-5


Rupees

CURRENT LIABILITIESSundry Creditors

Due to Small Scale Industries –

Due to Larsen & Toubro Limited (ultimate holding Company) 775,358

L&T Infrastructure Development Projects Ltd (holding Company) 354,162

Others 114,059

1,243,579

ProvisionsProvision for Fringe Benefit Tax 4,500

TOTAL 1,248,079

SCHEDULE-6



The Company maintains its accounts on accrual basis following the historical cost convention in accordance with Generally AcceptedAccounting Principles (“GAAP”) and in compliance with the Accounting Standards referred to in Section 211 (3C) and other requirementsof the Companies Act, 1956

The preparation of financial statements in conformity with GAAP requires that the management of the Company makes estimates andassumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and thedisclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates include useful lives offixed assets and intangible assets, provision for doubtful debts / advances, future obligations in respect of retirement benefit plans etc.Actual results could differ from these estimates.

2. Fixed Assets

Fixed Assets are recorded at cost. Pre-operative expenses incurred up to the date of commencement of commercial operations arecapitalised.

3. Depreciation

Depreciation has been provided on straight-line basis at the rates specified in the Schedule XIV of the Companies Act, 1956.Depreciation on additions / deductions is calculated prorata from / to the month of additions / deductions.

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4. Intangible Assets and amortisation

Intangible assets are recognised as per the criteria specified in Accounting Standard (AS 26) “Intangible Assets” issued by theInstitute of Chartered Accountants of India as follows:Preliminary expenses are written off in the year of commencement of operations.

5. Taxes

Fringe benefit tax for the period is computed in accordance with the provisions of Chapter XII – H of the Income tax Act, 1961.

SCHEDULE-7


1. The Company was incorporated on 2nd November 2005 and hence the accounts are drawn for the period from 2nd November 2005 to31st March 2006. Since the Company has not commenced commercial operations, no Profit & Loss account has been drawn.

2. The Company has been awarded a contract on Build Operate and Transfer (BOT) basis, the widening of existing two lane 55.740Kilometers stretch covering Jadcherla to Kotakatta on National Highway No.7 to four lanes covering specific stretches and operationand maintenance thereof, under concession agreement dated 17th January 2006 with the National Highways Authority of India. Theconcession agreement is for a period of 20 years from the appointed date stated clause 1.1 of the said agreement.

3. The Company had no transactions during the period with any small-scale industrial undertakings and hence reporting details ofinterest on overdue out standings and amount outstanding for more than 30 days, does not arise.

4. The Company is a service Company and accordingly information required under paragraph 4(C) of part II of schedule VI to theCompanies Act, 1956 has not been furnished.



Rupees

Audit Fees (including service tax) 56,120/-

7. The Company has not commenced its operations and hence no provision for income tax has been made. However provision ofFringe Benefit Tax has been made as per provisions of the income tax Act 1961. The Company does not have taxable wealth underthe provisions of the Wealth Tax Act. 1952.

8. Disclosure of related parties / related party transactions


Holding Company : L&T Infrastructure Development Projects Limited (a subsidiary of Larsen & Toubro Limited)

Larsen & Toubro Limited (Ultimate Holding Company)

Subsidiary Company : NIL

Associates : NIL

Fellow subsidiaries : Cyber Park Development & Construction limitedTractors Engineers LimitedL&T Finance LimitedL&T Capital Company LimitedL&T-Sargent & Lundy LimitedLarsen & Toubro Infotech LimitedLarsen & Toubro Infotech GmbH, GermanyL&T Transportation Infrastructure LimitedHPL Cogeneration LimitedL&T Western India Tollbridge LimitedIndia Infrastructure Developers LimitedLarsen & Toubro LLC, USALarsen & Toubro International FZE, SharjahL&T Infocity LimitedHyderabad International Trade Expositions LimitedAndhra Pradesh Expositions Private LimitedL&T-ECC Construction (M) SDN.BHD, Malaysia

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Bhilai Power Supply Company LimitedLarsen & Toubro (Oman) LLCL&T Power Investments Private LimitedRaykal Aluminium Company Private LimitedNarmada Infrastructure Construction Enterprise LimitedL&T Tech Park LimitedL&T Krishnagiri Thopur Toll Road Private LimitedL&T Panipat Elevated Corridor Private LimitedL&T Interstate Road Corridor LimitedL&T Vadodara Bharuch Tollway LimitedL&T Urban Infrastructure LimitedL&T Infocity Infrastructure LimitedL&T Infocity Lanka Private LimitedLarsen & Toubro Qatar LLCLarsen & Toubro Electromech LLCInternational Seaports Pte LimitedInternational Seaports (India) Private LimitedL&T Overseas Projects Nigeria LimitedL&T (WUXI) Electric Company LimitedSpectrum Infotech Private Limited

B. Transactions with Related Parties:

Holding Companies

Larsen & Toubro Limited

Reimbursement of Expenses – Rs. 7,75,358/-

L&T Infrastructure Development Projects Limited:

Reimbursement of Expenses – Rs. 3,54,162/-

Subscription to equity – Rs. 4,48,970/-

Fellow subsidiaries : Nil

C. Amount due to and from related parties:

Due to Larsen & Toubro Limited – Rs. 7,75,358/-

Due to L&T Infrastructure Development Projects Limited – Rs. 3,54,162/-

D. Amount written off / written back during the period : Nil


a) This is the first accounting period and the Company is yet to commence commercial operationsPrior period items and changes in accounting policies – AS 5Revenue Recognition – AS 9Segment Reporting – AS17Earnings Per Share – AS20Deferred Tax – AS 22Impairment of Assets – AS 28

b) The Company does not have transactions attracting provisions of the following Accounting Standards:Valuation of Inventories – AS2Accounting for Employee Benefits – AS15Accounting for Borrowing Costs – AS16Accounting for Leases – AS19Accounting for Contingent Liabilities/Assets – AS 29


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Registration No. U 4 5 2 0 3 T N 2 0 0 5 P T V 0 5 7 9 3 1 State Code No. 1 8





N I L 5 0 0


5 0 0 5 0 0Sources of Funds


5 0 0 N I L




8 0 1 N I L


( 9 0 9 ) 6 0 8

Accumulated Losses

N I L


N I L N I L


N I L N I L


N I L N I L


Item Code No. N A


11. This being the first accounting period giving comparative figures does not arise.


(Signatures to Schedules 1 to 7)As per our report attached For and on behalf of the BoardSHARP & TANNANChartered Accountantsby the hand of



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L&T VADODARA BHARUCH TOLLWAY LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their first Report and the Accounts for the period from 23rd December 2005 (date of incorporation)to 31st March 2006


Since your company is yet to commence commercial operation, no profit and loss account has been drawn. The key financialsparameters for the period ended 31st March 2006 are:



Depreciation 1886



Equity share capital of Rupees Five Lakhs was allotted during the period.


Letter of Award for the project for six-laning of section from Vadodara to Bharuch from Km.108.700 to Km.192.00 in the State ofGujarat on NH-8 on Build Operate and Transfer basis is awaited from National Highways Authority of India. On receipt of Letter ofAward from NHAI, your Company will execute the Concession Agreement during the financial year 2006-07.


As at 31st March 2006, the gross fixed assets stood at Rs.69,800/- and the net fixed assets including pre-operative expenses stoodat Rs. 4,68,106/- .

4. DEPOSITS:





As the Company has been formed to develop, operate and maintain a toll road, there are no particulars to be disclosed as per theCompanies’ (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

There is no foreign exchange earnings or outgo during the period.






2. that the selected accounting policies were applied consistently and the directors made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006;



9. DIRECTORS:

All the directors are liable to retire at the first Annual General Meeting and being eligible for re-appointment, have offered themselvesfor reappointment as Directors.

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10. AUDITORS:



The Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, employees of theCompany, staff and management of the parent company.

K. VENKATESH B. RAMAKRISHNANDirectors


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T VADODARA BHARUCH TOLLWAY LIMITED

We have audited the attached balance sheet of L&T Vadodara Bharuch Tollway Limited as at 31st March 2006, and the cash flow statementfor the period ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.









e. on the basis of the written representations received from the Directors of the Company as on 31st March 2006, and taken onrecord by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointedas a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and


i. in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006;




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Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 1 of the report of the Auditor’s to the Members of L&T Vadodara Bharuch TollwayLimited on the accounts for the period ended 31st March 2006, we report that:

1. a. The Company does not have any fixed assets and hence reporting on maintenance of fixed assets register, physical verificationand going concern under clause 4 (i) of the Companies (Auditor’s Report) Order, 2003 is not applicable.

2. The Company is engaged in the business of infrastructure development and maintenance thereof and hence the clauses 4 (ii) (a)(b)& (c) of the Companies (Auditor’s Report) Order,2003 relating to inventory are not applicable.

3. According to the information & explanation given to us, the Company has not granted or taken any loans, secured or unsecured, to/ from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hencereporting under clause-4 (iii) (a) to (g) of the Companies (Auditor’s Report) Order, 2003 does not arise.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensuratewith the size of the Company and nature of its business, for the acquisition of fixed assets. In our opinion, and according to theinformation and explanations given to us, there is no continuing failure to correct major weaknesses in the aforesaid internal controlsystems.

5. In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered intothe register in pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (V) (b) of Companies(Auditor’s Report) Order, 2003 does not arise.

6. The company has not accepted deposits from the public with in the meaning of Section 58A, 58AA or any other relevant provisionsof the Companies Act 1956. Hence Clause 4(vi) of the Companies (Auditor’s Report) Order 2003 is not applicable to the Company.

7. The Company has been incorporated during the year and is in the process of instituting an internal audit system.

8. The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1)(d) of theCompanies Act, 1956 is not applicable to the Company.

9. a. According to the information and explanations given to us and on the basis of our examination of the books of account, theCompany has been generally regular in depositing undisputed statutory dues, Income tax, and other statutory dues during theperiod with the appropriate authorities. As at 31st March 2006, there are no undisputed statutory dues payable for a period ofmore than six months from the date they became payable.

b. According to the information and explanations given to us, there are no dues which have not been deposited on account of anydispute of income tax and cess.

10. The Company has not commenced its commercial operations and hence reporting under clause 4 (x) of the Companies (Auditor’sReport) Order, 2003 does not arise.

11. The Company has not availed any loan from bank and financial institution or issued debentures. Hence reporting on default inrepayment of dues under clause 4 (xi) of the Companies (Auditor’s Report) Order, 2003 does not arise.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of securityby way of pledge of shares, debentures and other securities.

13. In our opinion, the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of theCompanies (Auditor’s Report) Order, 2003 are not applicable to the Company.

14. In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares,securities, debentures and other investments.

15. The company has not given any guarantee for loans taken by others from bank or financial institutions.

16. In our opinion and according to the information and explanation given to us, the Company has not taken term loans and hencereporting on their application under clause 4 (xvi) of the Companies (Auditor’s Report) Order, 2003 does not arise.

16. According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, theprovisions of clause 4 (xvii) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.

17. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained undersection 301 of the Companies Act, 1956, during the period.

18. The Company has not issued debentures during the period. Accordingly, no security or charge needs to be created.

19. The Company has not raised any money by public issue during the period.

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20. During the course of our examination of the books and the records of the company, carried out in accordance with the generallyaccepted auditing practices in India, and according to the information and explanations given to us, we have neither come across anyinstances of material fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case bymanagement.



Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006As at 31.3.2006

Schedules Rupees

SOURCES OF FUNDSShareholders’ FundsShare Capital 1 500,000

TOTAL 500,000

APPLICATION OF FUNDSFixed AssetsGross Block 69,800Less: Depreciation 1,886

Net Block 2 67,914Pre-Operative expenses 3 400,192

468,106

Current Assets, Loans & Advances 4Current AssetsCash and Bank Balances 499,779Loans & Advances 115,839

615,618

Less: Current Liabilities & Provisions 5Current Liabilities 1,195,766Provisions 1,140

1,196,906

Net Current Assets (581,288)

Miscellaneous Expenditure(to the extent not written off or adjusted)Preliminary Expenses 613,182

TOTAL 500,000

SIGNIFICANT ACCOUNTING POLICIES 6

NOTES ON ACCOUNTS 7


L. VAIDYANATHAN K. VENKATESH B. RAMAKRISHNANPartner DirectorsMembership No. 16368


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Cash Flow Statement for the period 23rd December 2005 toCash Flow Statement for the period 23rd December 2005 toCash Flow Statement for the period 23rd December 2005 toCash Flow Statement for the period 23rd December 2005 toCash Flow Statement for the period 23rd December 2005 to31st March 200631st March 200631st March 200631st March 200631st March 2006

Rupees

A. Cash Flow from operating activitiesNet Profit/(Loss) before tax & extraordinary items –Adjustment for :Dividend Received –Depreciation –Translation reserve –Unrealised foreign exchange difference – net (gain) / loss –Interest paid –Interest received –(Profit) / Loss on sale of investments (net) –(Profit) / Loss on sale of fixed assets (net) –Provision for dimunition of value of investments –Operating Profit before Working Capital changes –Adjustments For :(Increase) / Decrease in trade and other receivables –(Increase) / Decrease in inventories –(Increase) / Decrease in Loans and Advances (115,839)Increase / (Decrease) in trade payables 1,196,906

Cash generated from operations 1,081,067Direct taxes paid (net of refund)Net Cash from operating activities (A) 1,081,067

B. Cash Flow from Investing activities :Purchase of Fixed Assets (1,081,288)(Interest Capitalised Rs. Nil)Sale of Fixed Assets –Interest received –Dividend received from other investments –

Net Cash / (used in) from investing activities (B) (1,081,288)

C. Cash Flow from Financing activities :Issue of Equity shares and advance against share capital 500,000(Repayment ) / Proceeds from other borrowingsRealised gainDividend Paid –Tax on distributed profits –Interest Paid –

Net cash/ (used in) from financing activities (C) 500,000Net increase in cash and cash equivalents (A+B+C) 499,779Cash and Cash equivalents as at the beginning (including cash credit from banks) –Cash and Cash equivalents as at the end (including cash credit from banks) 499,779




L. VAIDYANATHAN K. VENKATESH B. RAMAKRISHNANPartner DirectorsMembership No. 16368


S-222




SHARE CAPITALAuthorised100,00,000 Equity Shares of Rs10 each 100,000,000Issued ,Subscribed & Paidup50,000 Equity Shares of Rs 10 each fully paid up. 500,000(The entire shares are held by L&T Infrastructure DevelopmentProjects Limited, the Holding Company and its nominees.)

500,000

SCHEDULE-2

FIXED ASSETSFigures in Rupees



Computers 69,800 69,800 1,886 1,886 67,914

Total 69,800 69,800 1,886 1,886 67,914

SCHEDULE-3PRE-OPERATIVE EXPENSES

For the period from23.12.2005 to 31.3.2006

Rupees

Professional Fees 286,520

Travelling & conveyance 45,735

Depreciation 1,886

Miscellaneous expenses 64,911 399,052


TOTAL 400,192

SCHEDULE-4


Rupees

Cash And Bank BalancesCash on hand —

Balances with scheduled banks on current account 499,779 499,779

Loans and AdvancesUnsecured:

Considered good

Advances recoverable in cash or in kind 115,839

TOTAL 615,618

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Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of Accounts (Contd.) (Contd.) (Contd.) (Contd.) (Contd.)SCHEDULE-5


RupeesCURRENT LIABILITIESSundry Creditors

Due to Small Scale Industrial undertakings – Due to Larsen & Toubro Limited (ulitmate holding company) 659,187 Due to L&T Infrastructure Development Projects Ltd -(holding company) 480,459 Others 56,120

PROVISIONSProvision for Fringe Benefit Tax 1,140

TOTAL 1,196,906

SCHEDULE-6



The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally acceptedaccounting principles (“GAAP”) and in compliance with the Accounting Standards referred to in Section 211 (3C) and other requirementsof the Companies Act, 1956. The preparation of financial statements in conformity with GAAP requires that the management of thecompany makes estimates and assumptions that affect the reported amounts of income and expenses of the period, the reportedbalances of assets and liabilities and the disclosures relating to contingent liabilities as of the date of the financial statements.Examples of such estimates include useful lives of fixed assets and intangible assets, provision for doubtful debts / advances, futureobligations in respect of retirement benefit plans etc. Actual results could differ from these estimates.

2. Fixed Assets


3. Depreciation

Depreciation on assets has been provided on straight-line basis at the rates and in the manner specified in the Schedule XIV of theCompanies Act, 1956. Depreciation on additions /deductions is calculated prorate from/to the month of additions/deductions

4. Intangible Assets

Intangible assets are recognised as per the criteria specifies in Accounting Standard (AS 26) “Intangible Assets” issued by theInstitute of Chartered Accountants of India.

Preliminary expenses are written off in the year of commencement of operations

5. Taxes

Fringe Benefit tax for the period is computed in accordance with the provisions of Chapter XII H of the Income-tax Act,1961

SCHEDULE-7

NOTES FORMING PART OF ACCOUNTS:

1. The Company was incorporated as a Special Purpose Vehicle by Larsen & Toubro for operating on BOT basis a road project fromNational Highway Authority of India on 23rd December, 2005.Since the company has not commenced its commercial operation, noProfit & Loss Account has been drawn.The accounts are drawn for the period from 23nd December 2005 to 31st March 2006.

2. The Company had no transactions during the period with any small-scale industrial undertakings and hence reporting details ofinterest on overdue outstandings and amount outstanding for more than 30 days, does not arise.

3. The Company is a service company and accordingly information required under paragraph 4(C) of Part II of Schedule VI to theCompanies Act, 1956 has not been furnished.

4. The provisions of Payment of Gratuity Act, 1972 and Employees Provident Fund and Miscellaneous Provisions Act 1952 are notpresently applicable to the Company.

5. Auditor’s Remuneration for the accounting period:Audit Fees (including service tax ) – Rupees 56,120

6. The Company has not commenced its operations and hence no provision for income tax has been made. However, provision forFringe Benefit Tax has been made as per the provisions of Income Tax Act,1961. The Company does not have taxable wealth underthe provisions of the Wealth Tax Act 1952.

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Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of Accounts (Contd.) (Contd.) (Contd.) (Contd.) (Contd.)7. Disclosure of related parties/related party transactions.

a. List of related partiesHolding company : L&T Infrastructure Development Projects Limited (a subsidiary of Larsen & Toubro Limited)

Larsen & Toubro Limited ( ultimate Holding Company)Subsidiary company: NILAssociates: NILFellow subsidiaries: Cyber Park Development & Construction Limited

Tractors Engineers LimitedL&T Finance LimitedL&T Capital Company LimitedL&T-Sargent & Lundy LimitedLarsen & Toubro Infotech LimitedLarsen & Toubro Infotech GmbH, GermanyL&T Transportation Infrastructure LimitedHPL Cogeneration LimitedL&T Western India Tollbridge LimitedIndia Infrastructure Developers LimitedLarsen & Toubro LLC, USALarsen & Toubro International FZE, SharjahL&T Infocity LimitedHyderabad International Trade Expositions LimitedAndhra Pradesh Expositions Private LimitedL&T-ECC Construction (M) SDN.BHD, MalaysiaBhilai Power Supply Company LimitedLarsen & Toubro (Oman) LLCL&T Power Investments Private LimitedRaykal Aluminium Company Private LimitedNarmada Infrastructure Construction Enterprise LimitedL&T Tech Park LimitedL&T Western Andhra Toll Ways Private LimitedL&T Panipat Elevated Corridor Private LimitedL&T Interstate Road Corridor LimitedL&T Krishnagiri Thopur Toll Road Private LimitedL&T Urban Infrastructure LimitedL&T Infocity Infrastructure LimitedL&T Infocity Lanka Private LimitedLarsen & Toubro Qatar LLCLarsen & Toubro Electromech LLCInternational Seaports Pte LimitedInternational Seaports (India) Private LimitedL&T Overseas Projects Nigeria LimitedL&T (WUXI) Electric Company LimitedSpectrum Infotech Private Limited

b. Transactions with Related Parties:

Holding Company

S.No Company Nature of Transactions Amount( in Rupees)

1. Larsen & Toubro Limited Reimbursement of expenses 6,58,192/-

2. L & T Infrastructure Development Reimbursement of expensesProjects Limited 4,80,459/-

3. L & T Infrastructure Development Subscription to equity 4,99,940/-Projects Limited

Fellow Subsidiary

S.No Company Nature of Transactions Amount(in Rupees)

1. L & T Interstate Road Reimbursement of expenses 1,15,839/-Corridor Limited

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Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of Accounts (Contd.) (Contd.) (Contd.) (Contd.) (Contd.)c. Amount due to and from related parties:

Due to Larsen & Toubro Ltd – Rs.6,58,192/-

Due to L & T Infrastructure Development Projects Ltd. – Rs.4,80,459/-

d. Amount written off/ written back during the year: NIL

8. The provision of the following Accounting Standards are not applicable since

a. The company is yet to commence commercial operations:

Prior Period items and changes in accounting policies – AS 5

Revenue Recognition – AS 9

Segment Reporting – AS 17

Earning Per Share – AS 20

Deferred Tax. – AS 22

Intangible Assets – AS 26

Impairment of Assets – AS 28

b. The Company does not have transactions of following Accounting standards

Valuation of Inventories – AS 2

Accounting for Employee benefits – AS 15

Accounting for Borrowing Costs – AS 16

Accounting for Leases – AS 19

Contingent Liabilities/ Assets – AS 29

S-226


Schedules forming part of accounts (contd.)Schedules forming part of accounts (contd.)Schedules forming part of accounts (contd.)Schedules forming part of accounts (contd.)Schedules forming part of accounts (contd.)

9. Balance sheet abstract and company’s general business profile


Registration No. U 4 5 2 0 3 T N 2 0 0 6 P L C 0 5 8 4 1 7 State Code No. 1 8





N I L 5 0 0




5 0 0 N I L




4 6 8 N I L


( 5 8 1 ) 6 1 3

Accumulated Losses

N I L


N I L N I L


✔ N I L ✔ N I L


N A N I L


Item Code No. N A



Signatures to Schedules 1 to 7As per our report attached For and on behalf of the BoardSHARP & TANNANChartered AccountantsL. VAIDYANATHAN K. VENKATESH B. RAMAKRISHNANPartner DirectorsMembership No. 16368


S-227

L&T INFOCITY LIMITED


FINANCIAL RESULTS

2005-2006 2004–2005Rs. Lakhs Rs. Lakhs

Profit before depreciation 1691.45 1536.96



Provision for Current Tax and Deferred Tax 205.75 9.66

Profit after TaxProfit after TaxProfit after TaxProfit after TaxProfit after Tax 1117.26 1189.97

Add: Balance brought forward from previous years 5406.81 4616.28

Balance available for disposal which the directors appropriate as follows 6524.07 5806.25

Dividend 378.00 324.00

Dividend Tax 53.01 45.44

Transfer to General Reserve 56.00 30.00

Balance to be carried forward 6037.06 5406.81

DIVIDEND

The Directors recommend payment of dividend of Rs. 1.40 per share ofRs. 10/- each on 2,70,00,000 shares. 378.00 324.00

PERFORMANCE OF THE COMPANY

The year 2005-06 has been an eventful year for the Company with a substantial progress in three BTS projects on hand apart from them Mega HousingProject, Serene County. The Built to suit project for HSBC with two blocks, ie.., office block and training block which was commenced duringDecember, 2004 has been completed during the current year and started yielding revenues to the Company. The Built to suit project for M/s. Deloittehas also been completed in all respects and is being handed over to the customer. The revenues from this project would commence soon. AnotherBTS project for M/s. Motorola India P. Ltd is progressing and is expected to be commissioned during the second half of 2006-07.

The first phase of Housing project launched by the Company during 2005-06 has proved to be an instant success with an unprecedented response fromthe customers. All the residential apartments proposed in the first phase consisting of 6 towers have been successfully marketed. The first two towersMagnolia and Jasmine are expected to be completed and handed over to the buyers by October,2006. The other two towers viz Daisy and Lotus areexpected to be complete by March,07. The construction of the second phase of Serene County is proposed to be commenced during the second halfof 2006-07.

The Built to suit project for HSBC at Kolkata, taken up through a subsidiary, L&T Infocity Infrastructure Ltd., has been completed during the year andstarted yielding rental revenue from October,05.

The Built to Suit campus for HSBC at Colombo taken up by subsidiary Company L&T Infocity Lanka Pvt. Ltd. Has been operational from 1- 4- 05 andhas declared profitable operations from the first year as was projected.

During the year under review, the Company continues to undertake O & M Activities at DMRC, Delhi and Cyber Park, Bangalore apart from CyberTowers and Cyber Gateway.

ICRA GRADING

The directors have pleasure to inform that during the year L&T Infocity Ltd. has been accorded the highest grading as a Developer , ie., DR 1 by ICRA.This grading indicates Very Strong Project Execution Capacity, and the prospects of execution of real estate projects as per plan are the best and theability to transfer ownership as per terms is highest.

PROSPECTS FOR 2006-07

The independent Built to Suit (BTS) campuses Motorola (1.75 Lac Sq.ft) and Deloitte Consulting (2 Lac Sq.ft) in HITEC City, Hyderabad will beoperational during the year 2006-07. While the Company would be starting the second phase of the Mega residential project with four towers during thesecond half of 2006-07, 75% of the sales revenue of first phase will be accruing during 2006-07.

With all the experience and expertise gained over the past few years, the Company is not only exploring new avenues of development through possibletie-ups at a few destinations, but also leveraging its capabilities for the success of its associates

FINANCE

During the year, the Company raised funds aggregating to Rs. 122.70 Crs. from banks to finance new projects. The Company has also repaid Rs. 17.14crores of the existing loans out of funds generated from operations.

CAPITAL EXPENDITURE

As at 31st March, 2006 the gross fixed assets stood at Rs.194.19 crores. and the net fixed assets at Rs. 178.23 crores. Additions of fixed assets during theyear amounted to Rs. 84.22 crores and Capital work in progress is Rs.118.55 crores apart from Rs. 65.47 crores Work in progress in residential towers.

DEPOSITS

During the period under review the Company has not accepted any deposits from the public.

S-228



During the year under review, THE Company acquired 80,69,996 shares of Rs. 10/- each for Rs. 8,06,99,960/- in Hyderabad International TradeExpositions Limited.

As required by Section 212 of the Companies Act, 1956, the Audited statement of Accounts, the Reports of the Board of Directors and Auditors of thesubsidiary companies are annexed.

AUDITORS’ REPORT

The Auditors’ Report to the Shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors’ Report are selfexplanatory and therefore do not call for any further comments of Directors.


As the Company is engaged in the business of construction, operation and maintenance of IT Parks, there are no particulars to be disclosed as per thecompanies (disclosure of Particulars in the report of Board of Directors) rules, 1988.

PERSONNEL

There are no employees covered by the provisions of the Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules,1975.


The Board of Directors of the Company confirm:

i) that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;

ii) that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for the year endedon that date;

iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the annual accounts have been prepared on a going concern basis.

DIRECTORS

In the Board Meeting of the Company held on 20th June 2005, Mr.K.P.Raghavan was appointed as Director of the Company in the casual vacancycaused by the resignation of Mr.A.Ramakrishna.

During the year Mr. V.B.Gadgil resigned from the Board of the Company with effect from 23-Sep-2005. Mr.L.V.Subrahmanyam resigned as Director ofthe Company with effect from 23rd September 2005. Mr. B.P.Acharya, IAS, was appointed as Director of the Company with effect from 23rd September2005 in the casual vacancy caused by the resignation of Mr.L.V.Subrahmanyam.

In terms of Section 256 of the Companies Act 1956, .Mr. K.V.Rangaswami and Mr.K.Venkatesh are retire by rotation and being eligible, offer themselvesfor reappointment.

FOREIGN EXCHANGE EARNINGS AND OUTGO

2005-2006 2004-2005Rs. Rs.

Foreign Exchange earned 70,21,999 95,79,784Foreign exchange used

Travel 5,32,476 6,05,957

TOTAL 5,32,476 6,05,957

AUDIT COMMITTEE

The Audit Committee consists of three directors. The present members of the Committee are Mr.K.V.Rangaswami, Mr.B.P.Acharya & Mr.K.Venkatesh.Mr.B.P.Acharya is the Chairman of the Audit Committee.

The role, terms of reference, the authority and power of Chairman are in conformity with the requirements of the Companies Act, 1956. The Committeemet periodically during the year and had discussions with the auditors on internal control systems and internal audit report and given its report andrecommendations to the Board of Directors for Corporate Governance and overall improvement in the functioning of the Company.

AUDITORS

The Auditors, M/s. Sharp & Tannan hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment.Certificate from the auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section224(1B) of the Companies Act, 1956.

ACKNOWLEDGEMENTS

The Directors acknowledge the invaluable support extended to the Company by APIIC, Financial Institutions, Bankers, vendors, suppliers andcustomers. The Directors are pleased to place on record their appreciation for the valuable contribution made by the employees of the Company.


K.V. Rangaswami K.P. Raghavan K. VenkateshPlace : Hyderabad DirectorsDate : April 19, 2006

S-229


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T INFOCITY LIMITED

We have audited the attached balance sheet of L&T Infocity Limited as at 31st March 2006, the profit and loss account and the cash flow statement forthe year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.









(e) on the basis of the written representations received from the Directors of the Company as on 31st March 2006, and taken on record by theBoard of Directors, we report that none of the Directors is disqualified as on 31st March 2006 from being appointed as a director in terms ofclause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and


i) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2006;




L.VAIDYANATHANPlace : Hyderabad PartnerDate : April 19, 2006 Membership No.16368

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor’s to the Members of L&T Infocity Limited on the accounts for theyear ended 31st March 2006, we report that:



(c) Fixed assets disposed off during the year, though material, has not affected the going concern assumption.

(ii) (a) The inventory has been physically verified by the management during the current year. In our opinion, the frequency of such verification isreasonable.

(b) The procedures for the physical verification of inventory followed by the management are reasonable and adequate in relation to the size ofthe Company and the nature of its business.

(c) The Company has maintained proper records of inventory. No material discrepancies were noticed on physical verification of inventory.


(iv) In our opinion, and according to the information and explanations given to us, there are adequate internal control system commensurate with thesize of the Company and nature of its business, for the purchase of inventory, fixed assets and sale of services. In our opinion, and according tothe information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

S-230


(v) a) According the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need tobe entered in the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts orarrangements entered in the register maintained under Section 301 of the Companies, Act, 1956 and exceeding the value of rupees fivelakhs in respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market pricesat the relevant time.



(viii) The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1)(d) of the Companies Act,1956 is not applicable to the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company hasbeen generally regular in depositing undisputed statutory dues including Provident Fund, Income tax, Service Tax, Cess and other statutorydues during the year with the appropriate authorities. As at 31st March 2006, there are no undisputed statutory dues payable for a period ofmore than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues which have not been deposited on account of any dispute ofincome tax, service tax and cess.

(x) The Company has no accumulated losses and has not incurred cash loss during the year and the immediate previous year and hencecommenting on this clause does not arise.

(xi) In our opinion and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to financialinstitution or bank or debenture holders.


(xiii) The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company.



(xvi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purposes for which they wereobtained.

(xvii) According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, the provisions ofclause 4 (xvii) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.

(xviii)The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301of the Companies Act, 1956, during the year.

(xix) The Company has not issued debentures during the year. Accordingly, no security or charge need to be created.


(xxi) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us ,we have neither come across any instances of material fraud onor by the Company, noticed or reported during the year, nor have we been informed of such case by management.


Sd/-L.VAIDYANATHAN

Place : Hyderabad PartnerDate : April 19, 2006 Membership No.16368

S-231


Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Sch. AS AT 31.3.2006 AS AT 31.03.2005AS AT 31.03.2005AS AT 31.03.2005AS AT 31.03.2005AS AT 31.03.2005No Rs. RsRsRsRsRs

SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS :

Share Capital 1 270,000,000 270,000,000

Reserves & Surplus 2 743,527,194 674,902,528

LOAN FUNDS

Secured Loans 3 1,662,759,264 607,089,739

DEFERRED TAX LIABILITY 19,033,760 8,206,391(Refer note no.14 of Schedule 15)

TOTAL 2,695,320,218 1,560,198,6581,560,198,6581,560,198,6581,560,198,6581,560,198,658


FIXED ASSETS 4

GROSS BLOCK 1,941,927,891 1,100,065,530

Less: Depreciation 159,631,363 122,953,951

NET BLOCK 1,782,296,528 977,111,579

Capital Work in Progress 739,578,896 390,437,992

2,521,875,424 1,367,549,571

INVESTMENTS 5 329,426,892 343,555,203

CURRENT ASSETS, LOANS & ADVANCES 6

CURRENT ASSETS

a) Inventories 654,658,721 34,280,184

b) Cash and Bank Balances 98,864,073 77,555,641

Loans and Advances 197,725,090 256,196,598

951,247,884 368,032,423

Less: CURRENT LIABILITIES & PROVISIONS 7

a) Current Liabilities 1,052,982,925 470,774,020

b) Provisions 54,247,057 48,164,519

1,107,229,982 518,938,539

NET CURRENT ASSETS (155,982,098) (150,906,116)

TOTAL 2,695,320,218 1,560,198,6581,560,198,6581,560,198,6581,560,198,6581,560,198,658


NOTES ON ACCOUNTS 15


SHARP & TANNAN K.P.Raghavan K.V.Rangaswami K.VenkateshChartered Accountants Directors

L .VaidyanathanPartner U.RamakrishnaMembership No.16368 Company Secretary

Place : Hyderabad Place : HyderabadDate : April 19, 2006 Date : April 19, 2006

S-232


Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Sch. 2005-2006 2004-20052004-20052004-20052004-20052004-2005No. Rs. Rs.Rs.Rs.Rs.Rs.

INCOME

Income from Operations 8 296,911,650 245,179,606

Other Income 9 11,845,608 58,833,491

TOTAL 308,757,258 304,013,097304,013,097304,013,097304,013,097304,013,097

EXPENDITURE

Cost of Sale of Space sold 10 — —

Staff Expenses 11 11,520,812 8,343,970

Sales, Administration and Other Expenses 12 87,569,260 72,815,658

Interest & Brokerage 13 40,521,608 41,503,505

Depreciation 36,844,298 33,732,857

Bad debts written off — 27,654,071

TOTAL 176,455,978 184,050,061184,050,061184,050,061184,050,061184,050,061

Profit / (Loss) for the Year 132,301,280 119,963,036119,963,036119,963,036119,963,036119,963,036

Provision for Taxes:

Current Tax (Net of Rs.730,821/- reversal of excess provision of earlier year) 9,122,054 10,718,702

Fringe Benefit Tax 625,741 —

Deferred Tax 10,827,369 (9,753,098)

Profit after Tax 111,726,116 118,997,432118,997,432118,997,432118,997,432118,997,432

Balance brought forward (Profit / (Loss)) 540,681,379 461,628,047

Profit available for appropriation 652,407,495 580,625,479580,625,479580,625,479580,625,479580,625,479

Appropriation

Proposed Dividend 37,800,000 32,400,000

Tax on dividend 5,301,450 4,544,100

Transfer to General Reserve 5,600,000 3,000,000

Balance Carried to Balance Sheet 603,706,045 540,681,379540,681,379540,681,379540,681,379540,681,379

Earning per Share - Basic & Diluted 4.14 4.414.414.414.414.41







S-233


Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 20062005-2006 2004-20052004-20052004-20052004-20052004-2005Rs. Lakhs Rs. LakhsRs. LakhsRs. LakhsRs. LakhsRs. Lakhs

A. Cash Flow from Operating ActivitiesNet Profit Before Tax 1,323.01 1,199.631,199.631,199.631,199.631,199.63Adjustments for:Dividend Received (43.87) (23.40)Depreciation (including obsolescence) and amortisation 368.44 337.33Unrealised foreign exchange difference - net (gain/loss) — —Interest (net) 405.22 415.04(Profit)/Loss on sale of fixed assets (net) 1.19 (346.41)(Profit)/Loss on sale of Investments (net) (68.45) (31.60)Provision for Leave encashment & Gratuity 1.65 0.46Operating Profit before Working Capital Changes 1,987.20 1,551.051,551.051,551.051,551.051,551.05Adjustiments for:(Increase)/Decrease in Loans & Advances 584.72 1,006.12(Increase)/Decrease in Inventories (6,203.79) (301.23)(Increase)/Decrease in Miscellaneous Expenditure — —Increase/(Decrease) in trade Payables 5,822.09 3,174.54Cash generated from OperationsDirect Taxes refund/(paid) (net) (99.88) (304.48)Net Cash From Operating Activities 2,090.34 5,126.015,126.015,126.015,126.015,126.01

B. Cash Flow from Investing Activities:Purchase of Fixed Assets (11,913.15) (4,280.08)Sale of Fixed Assets (including monies received as advance) 0.26 1,431.63Purchase of Investments (4,720.26) (2,708.73)Sales of Investments 5,668.54 2,358.73Loans/Deposits made with Subsidiaries/Associates (net) (807.00) (1,440.05)Advance towards Equity Commitment — —Interest Received 47.65 46.52Dividend Received from Subsidiaries 43.87 23.40Dividend Received from other Investments 68.45 31.60Net Cash used in/from Investing Activities (11,611.64) (4,536.99)(4,536.99)(4,536.99)(4,536.99)(4,536.99)

C. Cash Flow from Financing ActivitiesProceeds from issue of Share Capital — —Proceeds from Long Term Borrowings 12,270.39 1,689.14Repayment of Long Term Borrowings (1,713.69) (1,137.39)Repayments/Proceeds from other Borrowings (net) — —Gratuity paid — (3.52)Dividends Paid (324.00) (270.00)Additional Tax on Dividend (45.44) (34.59)Interest Paid (452.87) (461.55)Net Cash Used in/From Financing Activities 9,734.39 (217.91)(217.91)(217.91)(217.91)(217.91)Net Decrease/Increase in cash and Cash Equivalents (A+B+C) 213.08 371.12371.12371.12371.12371.12Cash and Cash Equivalents at the beginning of the year 775.56 404.44404.44404.44404.44404.44Less: Transfers if any — —Cash and Cash Equivalents at the end of the year 988.64 775.56775.56775.56775.56775.56

Notes:1 Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS)3:”Cash Flow Statements” issued by

the Institute of Chartered Accountants of India.2 Purchase of Fixed Assets includeds movement of Capital Work in Progress during the year.3 Cash and Cash equivalents represent cash and bank balances.





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Schedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetAS AT AS ATAS ATAS ATAS ATAS AT

31.03.2006 31.03.200531.03.200531.03.200531.03.200531.03.2005Rs. Rs.Rs.Rs.Rs.Rs.

SCHEDULE - 1SHARE CAPITALAUTHORISED :

6,00,00,000 Equity Shares of Rs10 each 600,000,000 600,000,000600,000,000600,000,000600,000,000600,000,000

ISSUED, SUBSCRIBED AND PAID UP :2,70,00,000 Equity Shares of Rs 10 each 270,000,000 270,000,000270,000,000270,000,000270,000,000270,000,000

Out of the above1) 19,80,000 shares are alloted as fully paid up pursuant to an agreement without

payments being received in cash2) 2,40,30,000 shares are held by L&T Infrastructure Development Projects Limited,

the Holding Company.3) Bonus Shares:

90,00,000 Shares of Rs.10/- each have been issued issued as Bonus shares.

SCHEDULE - 2RESERVES AND SURPLUSCapital Reserve 39,400,000 39,400,000General Reserve

As per last Balance Sheet 94,821,149 91,821,149Add: Transfer from Profit & Loss Account 5,600,000 3,000,000

100,421,149 94,821,149


TOTAL 743,527,194 674,902,528674,902,528674,902,528674,902,528674,902,528

SCHEDULE - 3SECURED LOANSTerm Loan fromHDFC Limited 200,329,253 382,993,972Andhra Bank 362,972,512 144,662,950(Including Interest accrued thereon Rs.40,18,039/-; Previous year Rs.929,850/-)Union Bank of India 696,555,783 —(Including Interest accrued thereon Rs.91,51,796/-; Previous year Rs.Nil)State Bank of Indore 336,424,062 79,432,817(Including Interest accrued thereon Rs.20,36,062/-; Previous year Rs.432,817/-)State Bank of India 66,477,654 —(Including Interest accrued thereon Rs.421,836/- ; Previous year Rs. Nil)

TOTAL 1,662,759,264 607,089,739607,089,739607,089,739607,089,739607,089,739

Term Loans from HDFC Ltd. are secured by mortgage of piece and parcel of land bearing survey no 64 admeasuring 8.65 acres and 6 acres, situated atMadhapur Village Serlingampally Mandal Ranga Reddy District, Andhra Pradesh, with construction present and future, to the extent owned by theCompany.

Term Loan of Rs.362,972,512/- from Andhra Bank is secured by parri-passu charge by way of equitable mortgage on 7.88 acres of land situated in Plotno: 3, 4 & 8, HITEC CIty layout, Madhapur Village Serlingampally Mandal Ranga Reddy District, Andhra Pradesh, with construction present and future.

Term Loans from Union Bank of India are secured by way of Hypothecation of building and other fixed assets present and future in 2.32 acres of land eachsituated in Plot no: 12 and Plot No.13 respectively of HITEC CIty layout, Madhapur Village Serlingampally Mandal Ranga Reddy District, Andhra Pradesh.

Term Loan from State Bank of Indore is secured by pari passu charge by way of equitable mortgage on 7.88 acres of land situated in Plot no: 3, 4 & 8,HITEC CIty layout, Madhapur Village Serlingampally Mandal Ranga Reddy District, Andhra Pradesh, together with construction of building present andfuture.

Term Loan from State Bank of India is secured by way of assignment of Lease Rentals with Escrow Mechanism and collateral security by way of secondcharge on 47688 sft space in Cyber Towers and Cyber Gateway originally mortaged to HDFC for the Term Loans availed by the Company.

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SCHEDULE - 4FIXED ASSETS

GROSS BLOCK DEPRECIATION NET BLOCKRs. Rs. Rs.

AS AT ADDITIONS DEDUCTIONS AS AT AS AT FOR ON AS AT AS AT AS ATFIXED ASSETS 1.04.2005 31.03.2006 1.04.2005 THE YEAR DEDUCTIONS 31.03.2006 31.03.2006 31.03.2005Owned Assets:Free Hold Land 101,593,447 — — 101,593,447 — — — — 101,593,447 101,593,447Buildings 14,390,102 — — 14,390,102 1,380,927 234,559 — 1,615,486 12,774,616 13,009,175Computers 2,039,146 463,794 130,724 2,372,216 872,569 296,143 92,868 1,075,844 1,296,372 1,166,577Furnitures & Fixtures 7,927,532 4,552,821 — 12,480,353 2,498,065 703,573 — 3,201,638 9,278,715 5,429,467Plant & Machinery 133,237,467 6,302,472 — 139,539,939 22,052,792 6,405,422 — 28,458,214 111,081,725 111,184,675Electrical Items 353,581,740 50,426,805 — 404,008,545 67,650,072 17,548,335 — 85,198,407 318,810,138 285,931,668Office Equipment 2,884,775 437,200 181,385 3,140,590 1,007,329 219,632 74,019 1,152,942 1,987,648 1,877,446Vehicles 206,045 42,537 — 248,582 65,466 22,440 — 87,906 160,676 140,579Owned Assets-Leased Out:Buildings - Leased out 484,205,276 779,948,841 — 1,264,154,117 27,426,731 11,414,194 — 38,840,925 1,225,313,192 456,778,545

TOTAL 1,100,065,530 842,174,470 312,109 1,941,927,891 122,953,951 36,844,298 166,886 159,631,363 1,782,296,528 977,111,579977,111,579977,111,579977,111,579977,111,579

Previous year 1,137,392,3401,137,392,3401,137,392,3401,137,392,3401,137,392,340 76,970,18376,970,18376,970,18376,970,18376,970,183 114,296,993114,296,993114,296,993114,296,993114,296,993 1,100,065,5301,100,065,5301,100,065,5301,100,065,5301,100,065,530 94,995,96194,995,96194,995,96194,995,96194,995,961 33,732,85733,732,85733,732,85733,732,85733,732,857 5,774,8675,774,8675,774,8675,774,8675,774,867 122,953,951122,953,951122,953,951122,953,951122,953,951 977,111,579977,111,579977,111,579977,111,579977,111,579

Capital Work inCapital Work inCapital Work inCapital Work inCapital Work inProgressProgressProgressProgressProgress 390,437,992 1,185,542,930 836,402,026 739,578,896 — — — — 739,578,896 390,437,992


SCHEDULE - 5INVESTMENTS

AS AT AS ATAS ATAS ATAS ATAS AT31.03.2006 31.03.200531.03.200531.03.200531.03.200531.03.2005

Rs. Rs.Rs.Rs.Rs.Rs.

Long Term Investments : (At cost)UnquotedA) Hyderabad International Trade Expositions Limited

(80,69,996 Shares of Rs. 10/- each fully paid up acquired during the year) 81,199,940 499,980B) L&T Infocity - Ascendas Limited

(1) 25,000 Shares of Rs. 10/- each fully paid up 250,000 250,000(2) 9,88,000 Redeemable Cumulative Preference 98,800,000 98,800,000

Shares of Rs.100/- each, out of which 350,000 were subscribed during the yearC) Vizag IT Park Ltd 23,400,000 23,400,000

23,40,000 Shares of Rs. 10/- each fully paid up, subscribed during the yearD) L&T Infocity Lanka Pvt. Ltd 42,255,223 42,255,223

91,00,000 Shares of Sri Lankan Rupees 10/- each fully paid up, subscribed during the yearE) L&T Infocity Infrastructure Ltd 43,350,000 43,350,000

43,35,000 Shares of Rupees 10/- each fully paid up, subscribed during the yearCurrent Investments - At costQuotedMutual Funds:

HDFC Cash Management Fund - Savings Plan Growth 8,080,780 50,000,000(571893.07 units of face value Rs. 10.00 each purchased during the year)HDFC Cash Management Fund - Savings Plus Plan Growth — 80,000,000(5573359.34 units of face value Rs. 10.00 each purchased during the year)Principal Cash Management Fund-Liquid Option Growth — 5,000,000(391828.035 units of face value of Rs. 10.00 purchased during the year)DSPML Liquidity Fund - Int - Growth 7,090,949 —(7069.87 units of face value of Rs. 1000.00 purchased during the year)Sundaram Money Fund - IP - Growth(1021464.37 units of face value of Rs. 10.00 purchased during the year) 15,000,000 —Reliance Floating Rate Fund - Growth 10,000,000 —(942764.75 units of face value Rs. 10.00 each purchased during the year)

TOTAL INVESTMENT 329,426,892 343,555,203343,555,203343,555,203343,555,203343,555,203

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Details of Investments in Mutual Funds No. of Units Purchase No. of Units Sale Balance Nopurchased and sold during the year Purchased Amount Sold Amount of Units

Rs. Rs.Alliance Cash Manager- Institutional Plan Growth 1,795,783.50 20,000,000 1,795,783.50 20,008,979 —HDFC Cash Management Fund- Savings Plus Plan-Growth 5,573,359.34 80,000,000 5,573,359.34 81,804,868 —HDFC Cash Management Fund- Savings Plan-Growth 13,985,866.82 195,000,000 13,413,973.76 188,394,158 571,893.07DSPML Floating Rate Fund-Growth 3,128,690.02 35,000,000 3,128,690.02 35,208,338 —DSPML Floating Rate Fund-IP-Growth 15,025.77 15,025,767 15,025.77 15,393,285 —DSPML Liquidity Fund - Int - Growth 49,851.37 50,000,000 42,781.50 43,000,000 7,069.87DSPML Mutual Fund - Growth 17,331.13 17,500,000 17,331.13 17,702,351 —Sundaram FRF - IP - Growth 1,917,545.54 20,000,000 1,917,545.54 20,472,991 —Sundaram Money Fund - IP- Growth 1,021,464.37 15,000,000 — — 1,021,464.37Principal Cash Management Fund-LO Growth 391,828.04 5,000,000 391,828.04 5,130,361 —Principal Floating Rate Fund - Growth 722,376.33 7,500,000 722,376.33 7,502,095 —Principal Floating Rate Fund - SMP - Growth 752,606.94 7,500,000 752,693.60 7,527,463 —Principal Floating Rate Fund - IO - Growth 1,869,263.70 20,000,000 1,869,263.70 20,299,643 —JM Floating Rate Fund - Growth 1,336,660.13 15,000,000 1,336,660.13 15,330,289 —Reliance Floating Rate Fund - Growth 942,764.75 10,000,000 — — 942,764.75HSBC Cash Fund 862,002.09 10,000,000 862,002.09 10,029,222 —SBI Mutual Fund MIIF Savings-Growth 4,176,732.87 46,500,000 4,176,732.87 47,008,573 —Grindlays Cash Fund 2,835,110.00 30,000,000 2,836,497.10 30,014,678 —SCB Liquidity Manager 1,500,000.00 15,000,000 1,500,000.00 15,179,400 —TOTAL 42,894,262.70 614,025,767 40,352,544.40 462,444,532 2,543,192

SCHEDULE - 6CURRENT ASSETS, LOANS & ADVANCES

AS AT AS ATAS ATAS ATAS ATAS AT31.03.2006 31.03.2005 31.03.2005 31.03.2005 31.03.2005 31.03.2005

Rs. Rs. Rs.Rs.Rs.Rs.Rs. Rs.Rs.Rs.Rs.Rs.INVENTORIES(At lower of cost or net realisablevalue as certified by a Director)Completed Property 918,302 918,302Work In Progress 653,740,419 33,361,882

654,658,721 34,280,183CASH AND BANK BALANCESCash on hand 9,492 —Bank Balances with scheduled Banks

on current accounts 39,723,845 38,776,649on fixed deposits (including interest 59,130,736 98,864,073 38,778,992 77,555,641accrued thereon Rs. 4,20,522/-Previous Year Rs. Rs.3,61,896/-)

LOANS AND ADVANCESAdvances recoverable in cash or in kind or for value to be received. 197,725,090 256,196,598(Unsecured considered good)

TOTAL 951,247,884 368,032,422368,032,422368,032,422368,032,422368,032,422

SCHEDULE - 7CURRENT LIABILITIES & PROVISIONSA) CURRENT LIABILITIES

a) Sundry Creditors 307,763,739 253,915,863b) Advances from Customers 553,004,170 89,418,157c) Security deposit from customers 192,215,016 127,440,000

(Refer note 16 of Schedule 15)1,052,982,925 470,774,020

B) PROVISIONSa) Taxation 9,852,875 10,718,702b) Proposed Dividend 37,800,000 32,400,000c) Tax on Dividend 5,301,450 4,544,100d) Leave encashment 666,991 501,717e) Fringe Benefit Tax 625,741 —

54,247,057 48,164,519

TOTAL 1,107,229,982 518,938,539518,938,539518,938,539518,938,539518,938,539

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Schedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss Account2005-2006 2004-20052004-20052004-20052004-20052004-2005

Rs. Rs.Rs.Rs.Rs.Rs.

SCHEDULE - 8INCOME FROM OPERATIONSLease Rentals(Tax Deducted at Source Rs.1,13,38,032; Previous Year Rs. 84,20,603) 157,209,912 129,436,746

Maintenance Recovery(Tax Deducted at Source Rs.2,69,349; Previous Year Rs.4,28,808) 72,563,014 71,373,286

Parking Charges(Tax Deducted at Source Rs.39,160; Previous Year Rs. 12,06,786) 16,247,681 16,738,563

Facility Management Income(Tax Deducted at Source Rs.3,82,134; Previous Year Rs. Nil) 13,794,420 —

Consultancy Income(Tax Deducted at Source Rs.18,93,132; Previous Year Rs. 6,05,955) 37,096,623 27,631,011

TOTAL 296,911,650 245,179,606245,179,606245,179,606245,179,606245,179,606

SCHEDULE - 9OTHER INCOMEMiscellaneous Income(Tax Deducted at Source Rs.14,443; Previous Year Rs. 74,884) 613,870 1,513,332

Provision for Doubtful Debts written back — 17,179,692

Income from Mutual Funds 6,844,872 3,159,777

Dividend IncomeDividend IncomeDividend IncomeDividend IncomeDividend Income 4,386,866 2,340,000

Profit on Sale of Fixed Asset (net)Profit on Sale of Fixed Asset (net)Profit on Sale of Fixed Asset (net)Profit on Sale of Fixed Asset (net)Profit on Sale of Fixed Asset (net) — 34,640,690

TOTAL 11,845,608 58,833,49158,833,49158,833,49158,833,49158,833,491

SCHEDULE - 10COST OF SPACE SOLDOpening Stock 34,236,194 4,113,399Add :Expenses on Construction during the year 1,163,096,569 325,254,821Others 642,824,899 95,305,967

Total 1,840,157,663 424,674,187424,674,187424,674,187424,674,187424,674,187Less: Internal Capitalisation during the yearBuildings 779,948,841 —Plant & Machinery 56,453,186 —Capital Work in Progress 349,140,904 390,437,992

Total 654,614,732 34,236,19534,236,19534,236,19534,236,19534,236,195Less: Closing Stock 654,614,731 34,236,194

Cost of space sold (A) 0 0

Cost of LandOpening Stock 43,990 43,990Add: Additions during the year — 74,433,950

Total 43,990 74,477,940Less : Capitalised — 74,433,950

Total 43,990 43,990Less: Closing Stock 43,990 43,990

Cost of Land sold (B) — 0

TOTAL (A + B) 0 0

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Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)2005-2006 2004-2005

Rs. Rs. Rs.Rs.Rs.Rs.Rs. Rs.Rs.Rs.Rs.Rs.SCHEDULE - 11STAFF EXPENSES

Salaries, Wages and Bonus 9,484,963 7,074,151

Contribution to and Provision for

Provident Fund 521,135 281,072

Superannuation Fund 310,647 269,222

Gratuity Fund 298,575 59,320

Leave Encashment 165,274 1,295,631 46,146 655,760

Welfare and other expenses 740,218 614,059

TOTAL 11,520,812 8,343,9708,343,9708,343,9708,343,9708,343,970

SCHEDULE - 12SALES, ADMINISTRATION AND OTHER EXPENSES

Rent 769,992 666,543

Electricity & Water Charges 7,311,370 4,876,445

Rates & Taxes 3,065,675 2,079,661

Telephone Postage & Telegrams 981,827 460,146

Advertiment & Publicity 1,736,221 4,232,843

Sundries Others 1,516,100 1,349,504

Travelling & Conveyance 5,014,973 3,758,532

Property Maintenance 58,587,572 48,757,989

Professional & Consultancy Fees 5,796,001 2,482,490

Insurance Charges 2,670,307 4,151,505

Loss on Sale of Fixed Assets 119,222 —

87,569,260 72,815,65872,815,65872,815,65872,815,65872,815,658

SCHEDULE - 13INTEREST AND BROKERAGE

Interest on Term Loan 24,680,803 20,650,807

Interest on others 20,605,879 25,504,441

45,286,682 46,155,248

less: Interest received (Tax Deducted at Source 4,765,074 4,651,743Rs.4,08,569; Previous Year Rs. 2,71,439)

TOTAL 40,521,608 41,503,50541,503,50541,503,50541,503,50541,503,505

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Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE - 14


1. BASIS OF ACCOUNTING:

The Financial statements are prepared in accordance with Generally accepted Accounting principles (GAAP) followed in India under historicalcost convention, on accrual basis and are in accordance with the mandatory accounting standards referred to in sub section 3C of Section 211and the other provisions of the Companies Act, 1956.

The preparation of accounts under GAAP requires management to make estimates and assumptions that affect the reported amount of assetsand liabilities and the disclosure of contingent liabilities as at the date of the financial statements and the reported amount of expenses during theperiod. Actual reports could differ from those estimated. Any revision to accounting estimates is recognised prospectively in the current and futureperiods.

2. FIXED ASSETS:

Fixed Assets are stated at original cost including preoperative expenses incurred up to the date of commencement of commercial operations. Thecarrying amounts of fixed assets are reviewed at each balance sheet date to ascertain whether they are recorded in excess of their recoverableamount based on value in use method. Where carrying values exceed this recoverable amount, assets are written down to their recoverableamount.

3. DEPRECIATION:

Depreciation is provided in the accounts on straight line basis at the rates and in the manner prescribed in Schedule XIV of the Companies Act,1956.


4. INVESTMENTS:

Long term investments are stated at cost. Short terms investments are stated at cost or market value whichever is lower.

5. INVENTORIES:

(i) Work in Progress is valued at cost plus proportionate direct expenses allocated.

(ii) Completed property is valued at lower of cost or net realisable sales value.

6. REVENUE RECOGNITION:

Sales are recognised when the registration of the space sold is complete. Service income is accounted for based on agreements with customers.Income from lease of premises is accounted for, based on lease agreements with the lessees.

7. RETIREMENT BENEFITS:

Contributions to Super Annuation Fund under LIC Group Super Annuation scheme is made based on the actual liability basis.

Contribution to Gratuity is made to the Employees’ Group Gratuity scheme of the Life Insurance Corporation of India.

Contributions to Provident Fund are made on actual liability basis.

Leave encashment is accounted for based on actuarial valuation.

8. PRIOR PERIOD AND EXTRA ORDINARY ITEMS:

Income and Expenditure pertaining to prior period as well as extraordinary items, where material, affecting the operating results is disclosedseparately.

9. BORROWING COSTS:

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of suchasset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowingcosts are recognised as an expense in the period in which they are incurred.

10. TAXES ON INCOME

Taxes on income for the current period is determined on the basis of taxable Income and tax credits computed in accordance with the provisionsof the Income Tax Act 1961, and based on expected outcome of assessments / appeals.

Deferred tax is recognized on timing differences between the accounting Income and the taxable income for the year and quantified using the taxrates and laws enacted or substantively enacted as on the Balance Sheet.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income willbe available against which such deferred tax assets can be realized.

11. LEASES

a) Lease rental paid on assets taken on operating lease are charged to profit & loss account.

b) Assets given out under operating lease are Capitalised at original cost. Rental income is accounted on accrual basis

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12. FOREIGN CURRENCY TRANSACTION

Foreign Currency Transactions are recorded at the exchange rate prevailing at the date of transaction. Exchange difference on settlement isrecognized in the Profit and Loss account.

13. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:


a) The Company has a present obligation as a result of a past event

b) A probable outflow of resources is expected to settle the obligation and

c) The amount of the obligation can be reliably estimated.




b) A possible obligation, unless the probability of outflow of resources is remote.

Contingent Assets are neither recognized, nor disclosed.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance sheet date.

SCHEDULE - 15

NOTES ON ACCOUNTS:

1. a) The Company does not have taxable wealth, hence no provision for wealth tax has been made as per the provisions of the Wealth Tax Act,1957.

b) The Company is governed by the provisions of section 115 JB of the Income Tax Act, 1961, since the taxable income as per normalcomputation is Nil and hence Income Tax for the year has been provided under Minimum Alternate Tax.

2. Additional information pursuant to paragraph 3 of Part II of Schedule VI to the Companies Act, 1956 has been furnished to the extent applicablesince the Company is engaged in construction and sale of immovable property together with land.

3. Expenditure in Foreign Currency:

2005-2006 2004-20052004-20052004-20052004-20052004-2005Rs. Rs.Rs.Rs.Rs.Rs.

(i) Travel 5,32,476 6,05,957

TOTAL 5,32,476 6,05,9576,05,9576,05,9576,05,9576,05,957

4. Earnings in Foreign Currency:

(i) Consultancy 32,43,962 95,79,784

(ii) Dividend income 20,46,866 Nil

(iii) Reimbursement of Expenses 17,31,171 Nil

TOTAL 70,21,999 95,79,78495,79,78495,79,78495,79,78495,79,784

5. Managerial remuneration includes:

(i) Salary 9,24,522 7,82,496

(ii) Perquisites 4,17,776 3,75,226

(iii) Contribution to Provident / Superannuation Fund 1,10,322 90,972

TOTAL 14,52,620 12,48,69412,48,69412,48,69412,48,69412,48,694

6. The Company does not have any dealings with small scale industrial undertakings and hence reporting regarding interest on delayed paymentsand amounts due to them does not arise.

7. Auditors’ remuneration and expenses charged to the accounts:

(i) Audit fees (excluding service tax) 2,50,000 2,00,000

(ii) Taxation matters 37,500 2,66,000

(iii) Expenses reimbursed 44,469 10,400

TOTAL 3,31,964 4,76,4004,76,4004,76,4004,76,4004,76,400


S-241


8. Segment Reporting:

A. PRIMARY SEGMENT INFORMATION (Rs. in Lakh)

S.No Particulars Sale of Space Lease Rental Total

2005-06 2004-05 2005-06 2004-05 2005-06 2004-05

1 SEGMENT REVENUE — — 1572.10 1,294.37 3087.57 4,297.12Under Segment Revenue

2 SEGMENT RESULT — — 1424.37 1,173.76 1663.2 1,907.97Less: Unallocated expensesnet of recoveries and other Income — — — — 101.36 25.87PROFIT BEFORE TAX — — — — 1323.01 1,199.63Provision for Taxes:Current Tax — — — — 91.22 107.19Fringe Benefit Tax — — — — 6.26 —Deferred Tax — — — — 108.27 (97.53)PROFIT AFTER TAX — — — — 1117.26 1,189.97

3 SEGMENT ASSETS — — — — 13573.09 5,113.65Unallocated assets — — — — 5846.19 5,887.01TOTAL ASSETS — — — — 19419.28 11,000.66

4 SEGMENT LIABILITIES — — — — — —Unallocated Liabilities — — — — 27459.22 11342.35TOTAL LIABILITIES — — — — 27459.22 11342.35

B. SECONDARY SEGMENT INFORMATION

The Company is engaged in the business of developing and operating Industrial Parks/Software Technology Park, and hence does not haveany exports. Therefore disclosure of secondary segment information does not arise.


A. List of related partiesHolding companies: L&T Infrastructure Development Projects Limited

Larsen & Toubro Limited (ultimate holding Company)Subsidiary Company: Hyderabad International Trade Expositions Limited

Andhra Pradesh Expositions Private LimitedL&T Infocity Infrastructure LimitedL&T Infocity Lanka Private Limited

Associates: L&T Infocity - Ascendas LimitedVizag IT Park Limited

Fellow subsidiaries: Cyber Park Development & Construction limitedTractors Engineers LimitedL&T Finance LimitedL&T Capital Company LimitedL&T-Sargent & Lundy LimitedLarsen & Toubro Infotech LimitedLarsen & Toubro Infotech GmbH, GermanyL&T Transportation Infrastructure LimitedHPL Cogeneration LimitedL&T Western India Tollbridge LimitedIndia Infrastructure Developers LimitedLarsen & Toubro LLC, USALarsen & Toubro International FZE, SharjahNarmada Infrastructure Construction Enterprise LimitedL&T-ECC Construction (M) SDN.BHD, MalaysiaBhilai Power Supply Company LimitedLarsen & Toubro (Oman) LLCL&T Power Investments Private LimitedRaykal Aluminium Company Private LimitedL&T Panipat Elevated Corridor Private LimitedL&T Tech Park LimitedL&T Western Andhra Toll Ways Private LimitedL&T Krishnagiri Thoppur Toll Road Private Limited.L&T Interstate Road Corridor LimitedL&T Vadodara Bharuch Tollway LimitedL&T Urban Infrastructure LimitedLarsen & Toubro Qatar LLCLarsen & Toubro Electromech LLCInternational Seaports Pte LimitedInternational Seaports (India) Private LimitedL&T Overseas Projects Nigeria LimitedL&T (WUXI) Electric Company LimitedSpectrum Infotech Private Limited


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B. Names of the Related Parties with whom transactions were carried out during the year (Rs. in Lakh)

S.No Name of the Group Company / Nature of transaction Amount of Amount Amount DueRelated Party Transaction Due to From

1 Larsen & Toubro Limited i) Contract for Building Construction 15641.20 1175.06 NIL(2,718.97) (1,087.78) (NIL)

ii) Dividend Income NIL NIL NIL (288.36) (288.36) (NIL)ii) Obtaining Consultancy for Design & 215.66 10.70 NIL

Architecture (23.69) (8.82) (NIL)iii) Syndication of loan NIL 131.45 NIL

(NIL) (131.45) (NIL)iv) Obtaining Staff & other services 5.95 5.95 NIL

(34.77) (13.85) (NIL)v) Providing staff & other services 7.87 NIL 7.87

(8.40) (NIL) (NIL)vi) Project Facilitation Fees 117.60 NIL NIL

(NIL) (NIL) (NIL)2 L&T Infrastructure Development i) Dividend Income 336.42 336.42 NIL

Projects Limited (NIL) (NIL) (NIL)3 Hyderabad International Trade i) Providing Staff and Other Services 20.07 NIL NIL

Expositions Limited (16.21) (NIL) (16.21)4 L&T Infocity-Ascendas Ltd i) Reimbursement of expenses 0.17 NIL 0.26

(0.85) (NIL) (0.10)ii) Lease of Office space NIL NIL NIL

(15.75) (NIL) (NIL)ii) Consultancy Services 23.46 NIL 10.52

(73.68) (NIL) (18.55)iv) Lease Deposit NIL NIL NIL

(NIL) (4.54) (NIL)5 Vizag IT Park Limited i) Dividend 23.40 NIL NIL

(23.40) (NIL) (NIL)ii) Reimbursement of expenses 0.73 NIL 0.73

(0.73) (NIL) (0.73)6 Andhra Pradesh Expositions Private Ltd. i) Reimbursement of expenses NIL NIL 1.11

(NIL) (NIL) (1.11)7 L&T Infocity Lanka Private Limited i) Project Facilitation fee NIL NIL NIL

(68.12) (NIL) (NIL)ii) Project Management Fee 32.44 NIL NIL

(27.68) (NIL) (NIL) iii) Reimbursement of expenses 5.94 NIL 5.94

(17.31) (NIL) (17.31)iv) Dividend 20.47 NIL NIL

(NIL) (NIL) (NIL)8 L&T Infocity Infrastructure Limited i) Project Management 44.87 NIL NIL

(NIL) (NIL) (NIL)ii) Project Facilitation 50.00 NIL NIL

(NIL) (NIL) (NIL)iii) Equity SHARE Capital NIL NIL NIL

(433.50) (NIL) (NIL)iv) Reimbursement of expenses 1.63 NIL NIL

(8.93) (NIL) (NIL)9 Larsen & Toubro Infotech Limited i) Lease & Maintenance of office space 64.42 NIL 1.29

(NIL) (NIL) (NIL)ii) Lease Deposit 69.15 69.15 (NIL)

(NIL) (NIL) (NIL)10 L&T Tech Park Limited i) Reimbursement of expenses 8.77 NIL 8.77

(NIL) (NIL) (NIL)11 L&T Finance Limited i) Cars - Hire Purchase 2.31 NIL NIL

(NIL) (NIL) (NIL)12 Cyberpark Development & i) Rendering Facility Management 11.25 NIL 1.30

Construction Limited (NIL) (NIL) (NIL)ii) Reimbursement of expenses 0.71 NIL 0.71

(NIL) (NIL) (NIL)

Note: Figures in bracket relate to previous year



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10. Value of Imports on CIF basis in respect of :

Capital goods Rs. 1,11,340,216/- (Previous year NIL)

Supplies Rs. NIL (Previous year NIL)

11. Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs.5466.34 lakhs net of advances. (Previousyear Rs. 13837 lakhs)

12. Contingent Liability as at 31st March 2006 – Rs. Nil (Previous year NIL)

13. The Company has not entered into any Finance lease.

The Company has taken residential premises under operating leases. These lease agreements are normally renewed on expiry. The rentalexpenses in respect of these operating leases was Rs. 877,124/- (Previous year Rs 7,26,522/-)

14. Major components of Deferred Tax Assets and Deferred Tax Liabilities:

As at 31.03.2006 As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005Rs. Rs.Rs.Rs.Rs.Rs.

Deferred Tax Deferred Tax Deferred Tax Deferred TaxAssets Liabilities Assets Liabilities

Difference between Depreciation on Assets as per booksof account and as per provisions of Income Tax Act. 16,441,150 11,807,397

Provision for Doubtful Advances debited to Profit & Loss Account 61,68,554 —

Provision for Leave encashment debited to Profit & Loss Account 56,984 134,761

Preliminary expenditure deductible u/s 35D 148,188 95,472

Total 205,172 22,609,704 2 30,2342 30,2342 30,2342 30,2342 30,234 11,807,39711,807,39711,807,39711,807,39711,807,397

Net Deferred Tax Liability 22,404,532 11,577,16311,577,16311,577,16311,577,16311,577,163

Net decrease in Deferred Tax liability charge to Profit & Loss Account 10,827,369 (9,753,098)(9,753,098)(9,753,098)(9,753,098)(9,753,098)

15. Details of Earning per Share:

Particulars 2005-2006 2004 – 20052004 – 20052004 – 20052004 – 20052004 – 2005Rs. Rs.Rs.Rs.Rs.Rs.

Profit before Tax 132,301,280 119,963,036

Less: Provision for Tax (Net of Rs.730,821/- reversal of excess provision of earlier year) 9,122,054 10,718,702

Less: Provision for Fringe Benefit Tax 6,25,741 —

Less: Provision for Deferred Tax 10,827,369 (9,753,098)

Profit after Tax 111,726,116 118,997,432118,997,432118,997,432118,997,432118,997,432

No: of Equity Shares 27,000,000 27,000,000

Earning per share – Basic 4.14 4.414.414.414.414.41

16. Security deposit of Rs.19,22,15,016/- includes Rs.13,53,69,216/- received from a customer towards rent deposit for lease of building for a periodof nine years vide Agreement for Lease dated 29-03-2005, with a lock-in period of 4 years, and Rs.56,845,800/- received from a customertowards rent deposit for lease of building for a period of ten years vide Agreement of Lease dated 09-05-2005, with a lock-in period of 5 yearscommencing from the date of lease.

17. Loans and Advances include Rs.11,16,22,500 /- due from the Govt. of Andhra Pradesh Industrial Infrastructure Fund, towards recovery ofInfrastructure Development cost vide GO Ms. 7 dated 4-2-2002, for 74.415 acres of land in HITEC City area allotted for Mega IT Projects by theGovernment of Andhra Pradesh, (Previous year Rs.10,46,62,500/-)

18. The Company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverable amount ismore than the amount carried in the books. Accordingly, no provision is required to be made for the impairment in the accounts.


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19 BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration Details

Registration No. 0 1 - 2 6 8 8 5 State Code 0 1


Date Month Year



N I L N I L


N I L N I L



2 6 9 5 3 2 0 2 6 9 5 3 2 0

Sources of Funds

Paid-up Capital Reserves & Surplus

(incl. Share Appl. Money)

2 7 0 0 0 0 7 4 3 5 2 7

Secured Loans Deferred Tax Liability

1 6 6 2 7 5 9 1 9 0 3 4


Net Fixed Assets Capital Work in Progress

1 7 8 2 2 9 6 7 3 9 5 7 9

Investments Net Current Assets

3 2 9 4 2 7 ( 1 5 5 9 8 2 )

Misc. Expenditure Accumulated Losses

N I L N I L

IV. Performance of Company (Amount in Rs.Thousands)

Turnover Total Expenditure

(incl. other income) (incl. Prior year Adj.)

3 0 8 7 5 7 1 7 6 4 5 6

+ – Profit / (Loss) before tax + – Profit / (Loss) after tax (incl. Def. Tax)

✓ 1 3 2 3 0 1 ✓ 1 1 1 7 2 6

+ – Earning per share (in Rs.) (Basic) Dividend rate %

✓ 4 . 1 4 1 4

V. Names of three Principal Products / Services of Company (as per monetary terms)

Item Code No. N A

(ITC Code)

Product D E V E L O P M E N T O F

Description S O F T W A R E P A R K





L .VaidyanathanPartner U.RamakrishnaMembership No.16368 Company SecretaryPlace : Hyderabad Place : HyderabadDate : April 19, 2006 Date : April 19, 2006

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Name of the Subsidiary Company Hyderabad Andhra Pradesh L&T Infocity L&T InfocityInternational Trade Expositions Lanka InfrastructureExpositions Limited Private Limited* Private Limited Limited

Financial year of the subsidiary ended on 31st March 2006 31st March 2006 31st March 2006 31st March 2006

Number of shares of the subsidiary Company held byL&T Infocity Ltd. and / or its nominee at the above date 49,998 — 91,00,000 4,335,000

The net aggregate of profits/(losses), of the subsidiaryCompany so far as it concerns the members of L&T Infocity Ltd.

(i) Dealt with in the accounts of L&T Infocity Ltd. amounted to:

a) for the subsidiary’s financial year ended 31-3-2006 Nil Nil 19.77 Nil

b) for the previous financial years of the subsidiarysince it became subsidiary of L&T Infocity Ltd. Nil Nil Nil Nil

(ii) Not dealt with in the accounts of L&T Infocity Ltd.

a) for the subsidiary’s financial year ended 31-3-2006 (35.30) Nil 18.86 11.80

b) for the previous financial years of the subsidiarysince it became subsidiary of L&T Infocity Ltd. (394.40) Nil Nil Nil

* Company yet to commence commercial operations

K.P.Raghavan K.V.Rangaswami K.VenkateshDirectors

U.RamakrishnaCompany Secretary

Place : HyderabadDate : April 19, 2006

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L&T INFOCITY LANKA PRIVATE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting to the shareholders, their Report together with the audited financial statements of the Company for the yearended March 31, 2006.

FINANCIAL RESULTS

2005-2006Rs. lakhs

Profit before depreciation 249.56Depreciation 61.19Profit before Tax 188.37Provision for Current Tax and Deferred Tax 0.67

Profit after TaxProfit after TaxProfit after TaxProfit after TaxProfit after Tax 187.70Add: Balance brought forward from previous years -

Balance available for disposal which the directors appropriate as follows 187.70Interim Dividend paid 38.02Proposed Dividend 113.40

Balance to be carried forward 36.28

An interim dividend @ 5% was already paid during the year. The directors recommend a second and final dividend @15% for the year endedMarch 31, 2006 from the profits available for appropriation.PERFORMANCE OF THE COMPANYDuring the year, the Company has commenced the commercial operations w.e.f 1-4-2005 and started earning income from lease rentals.DIRECTORSMr R. Sridaran was appointed as a Director on the Board of the Company on May 19,2005.Mr. K. Venkatesh and Mr. K.P.Raghavan resigned from the Board on April 20, 05 and June 10, 05 respectively.By virtue of Article 87 of the Articles of Association, Mr Subba Rao Dukkipati retires and being eligible offer himself for re election. Mr. R.Sridaran whohas been appointed during the year retires and being eligible, offer himself for reelection.CAPITAL EXPENDITUREAs at March 31, 2006, the gross fixed assets stood at Rs. 30.56 Crores and the net fixed assets at Rs. 29.95 Crores. The additions to fixed assets isRs.1,02,871 pertaining to Sewerage Treatment Plant.AUDITORS REPORTThe Auditors’ Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors Report are selfexplanatory and therefore do not call for any further comments of Directors.DISCLOSURE OF PARTICULARSThe Company being registered outside India, the disclosures required to be made in accordance with Companies (Disclosure of Particulars in theReport of Board of Directors) Rules, 1989, are not relevant. Hence the same have not been furnished.PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of the Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules,1975.DIRECTORS’ RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirm:i) that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;ii) that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for the year ended onthat date;iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;iv) that the annual accounts have been prepared on a going concern basis.FUTURE OUTLOOKWith a satisfied customer, and also having established quality in services, the Company expects do much more business in Srilanka in the years tocome.

For and on behalf of the Board.

Place : Hyderabad R. SRIDARAN T.S. SUNDARESAN

Date : April 18, 2006 Directors

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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T INFOCITY LANKA PRIVATE LIMITED

The financial statements of L & T Infocity Lanka (Private) Limited, Srilanka for the year ended March 31, 2006, being a Company registered in Srilanka, areaudited by Amerasekara & Co., Chartered Accountants, Srilanka and we have been furnished with their audit report dated April 18, 2006 on which we haveplace reliance for the purpose of our opinion given below.

We are presented with the Accounts in Indian Rupees prepared on the basis of aforesaid accounts to comply with the requirements of Section 212 of theCompanies Act, 1956. We give our report hereunder:

We have audited the attached Balance Sheet of L & T Infocity Lanka (private) limited, Srilanka as at March 31, 2006 and also the Profit & Loss Account andthe cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

In accordance with the provisions of section 227 of the Companies Act 1956, we report as under:

1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of the CompaniesAct, 1956 we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

2. Further to our comments in the Annexure referred to in paragraph (1) above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes ofour audit;

b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of thosebooks;

c. The said Balance Sheet and cash flow statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the said Balance Sheet and cash flow statement, comply with the accounting standards referred to in sub-section (3 C) of section211 of the Companies Act 1956.

e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the Company is registered inSrilanka, no reporting is required to be made under the above section.

f. In our opinion and to the best of our information and according to the explanations given to us the said accounts read together with the SignificantAccounting Policies in Schedule 9 and Notes in Schedule ‘10’ and elsewhere in the accounts give the information required by the Companies Act1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2006

(ii) in the case of profit & loss account of the profit for the year ended on that date and



L. VAIDYANATHANPlace : Chennai PartnerDate : April 18, 2006 Membership No.16368

S-248


Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ Report(Referred to in paragraph 1 of our Report of even date)

(i) (a) The Company has maintained proper records to show full particulars including quantitative details and situation of fixed assets.

(b) The management has physically verified during the year all its fixed assets. No material discrepancies were noticed on such verification.

(c) During the year, the Company has not disposed off any part of the plant and machinery and hence does not affect the going concern statusof the Company.

(ii) (a) The Company does not have an inventory and hence, reporting on clause 4(ii) (a) (b) & (c) of the Companies Auditor Report order 2003,does not arise.

(iv) In our opinion, and according to the information and explanations given to us, there is adequate internal control system commensurate with thesize of the Company and nature of its business, for the purchase of fixed assets and for the sale of services. In our opinion, and according to theinformation and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

(vi) The Company has not accepted any deposit from the public.


(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company hasbeen generally regular in depositing undisputed statutory dues towards Income-tax and any other statutory dues during the year with theappropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax and other statutorydues were in arrears as at March 31, 2006 for a period of more than six months from date they become payable.

(c) According to the information and explanations given to us, there are no dues of income tax which have not been deposited with theappropriate authorities on account of any dispute.

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial yearcovered by our audit and the immediately preceding financial year.

(xi) In our opinion and accordingly to the information and explanations given to us, the Company has not defaulted in repayment of dues to bank. TheCompany has not issued any debentures.


(xiii) The Company is not in the business of chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies(Auditor’s Report) Order 2003 are not applicable to the Company.

(xiv) In our opinion and as per information obtained from the management, the Company is not dealing in or trading in shares, securities, debenturesand other investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditors’ Report) Order, 2003 are not applicable totheCompany.


(xvi) In our opinion and according to the information and explanations given to us, on an overall basis, the term loan has been applied for the purposefor which the same has been obtained.

(xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report that nofunds have been raised on short term basis. Hence reporting on the usage of the same does not arise.

(xix) The Company did not have outstanding debentures. Accordingly, no securities have been created.


(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with generally accepted auditingpractices in India, and accordingly to the information and explanations given to us, we have neither come across any instances of material fraudon or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

(xxii) The following clauses of the Companies ( Auditor’s Report ) order, 2003 are not applicable to the Company since the Company is registered inSrilanka and is operating outside India.Clause : 4 (iii), (v), (viii) & (xviii)


Place: Hyderabad L.VAIDYANATHANDate: April 18, 2006 Partner


S-249



Schedule As at 31.03.2006 As at 31.03.2005No.

Rs. Rs.

SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS :Share Capital 1 80,645,171 80,645,161Reserves & Surplus 2 3,627,788 -

LOAN FUNDSSecured Loans 3 190,044,828 153,489,514Unsecured Loans 4 - 7,456,140

Forex Fluctuation reserve - 3,002,694

TOTAL 274,317,786 244,593,509


FIXED ASSETS 5GROSS BLOCK 305,644,015 178,544Less: Depreciation 6,119,250 -

NET BLOCK 299,524,765 178,544Add: Capital Work in Progress - 293,778,210

Pre-operative expenses - 299,524,765 2,213,841 296,170,595

CURRENT ASSETS, LOANS & ADVANCES 6CURRENT ASSETSa) Cash and Bank Balances 17,143,831 19,804,857LOANS & ADVANCES 22,488,376 34,491,460

39,632,207 54,296,317

Less: CURRENT LIABILITIES & PROVISIONS 7a) Current Liabilities 53,965,723 105,873,403b) Provisions 11,420,604 -

65,386,327 105,873,403

NET CURRENT ASSETS (25,754,120) (51,577,086)Forex Fluctuation Reserve 547,141 -

TOTAL 274,317,786 244,593,509

SIGNIFICANT ACCOUNTING POLICIES 11NOTES ON ACCOUNTS 12


L. VAIDYANATHAN R. SRIDARAN T.S. SUNDARESANPartner DirectorsMembership No.16368

Place : Hyderabad Place: HyderabadDate : April 18, 2006 Date: April 18, 2006

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Profit & Loss Account for the period ended March 31, 2006Profit & Loss Account for the period ended March 31, 2006Profit & Loss Account for the period ended March 31, 2006Profit & Loss Account for the period ended March 31, 2006Profit & Loss Account for the period ended March 31, 2006

Sch. 2005-06No. Rs.

INCOMEIncome from operations - Lease Rent 42,965,500Other Income `8 447,301

TOTAL 43,412,801EXPENDITURE

Staff Expenses 290,541Sales, Administration and Other Expenses `9 6,925,003Interest 10 11,241,406Depreciation 6,119,250

TOTAL 24,576,200

Profit for the period 18,836,601Provision For Taxes:Current Tax 66,707

Profit after tax available for appropriation 18,769,894

Less: Interim Dividend paid 3,802,034Less: Proposed Dividend 11,340,073

Balance Carried to Balance Sheet 3,627,788

Earning per Share - Basic & Diluted 1.07

SIGNIFICANT ACCOUNTING POLICIES 11NOTES ON ACCOUNTS 12




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INR INRA. Cash Flow from Operating Activities

Net Profit Before Tax 18,836,601 -Adjustments for:Dividend Received - -Depreciation (including obsolescence) and amortisation 6,119,250 -Unrealised foreign exchange difference - net (gain/loss) (3,549,835) 2,608,191Interest (net) 11,228,623 -(Profit)/Loss on sale of fixed assets (net) 21,861 -(Profit)/Loss on sale of Investments (net) - -Provision for Leave encashment & Gratuity 13,905 -Operating Profit before Working Capital Changes 32,670,405 2,608,191Adjustiments for:(Increase)/Decrease in Loans & Advances 14,664,110 6,508,964(Increase)/Decrease in Inventories - -(Increase)/Decrease in Miscellaneous Expenditure - -Increase/(Decrease) in trade Payables (51,907,680) 88,870,413Cash generated from OperationsDirect Taxes refund/(paid) (net) - -

Net Cash From Operating Activities (4,573,165) 97,987,568B. Cash Flow from Investing Activities:

Purchase of Fixed Assets (305,465,471) (178,544)Construction Work in Progress 293,778,210 (275,692,683)Pre Operative Expenses 2,213,841 (1,573,816)Sale of Fixed Assets (including monies received as advance 127,403 -Purchase of Investments - -Sales of Investments - -Loans/Deposits made with Subsidiaries/Associates (net) - -Advance towards Equity Commitment - -Interest Received 12,783 -Dividend Received from Subsidiaries - -Dividend Received from other Investments - -

Net Cash used in/from Investing Activities (9,333,234) (277,445,043)C. Cash Flow from Financing Activities

Proceeds from issue of Share Capital 10 -Receipt / issue of Share Application Money - -Refund of Share Application Money - (758,471)Proceeds from Long Term Borrowings 243,897,725 153,079,457Proceeds from Unsecured Loans (BOI, Sri Lanka) (7,370,137) 7,456,140Repayment of Long Term Borrowings (210,238,785) -Repayments/Proceeds from other Borrowings (net) - -Gratuity paid - -Dividends Paid (3,802,034) -Additional Tax on Dividend - -Interest Paid (11,241,406) -

Net Cash Used in/From Financing Activities (11,245,374) 159,777,126

Net Decrease/Increase in cash and Cash Equivalents (A+B+C) (2,661,026) (19,680,349)Cash and Cash Equivalents at the beginning of the year 19,804,857 39,485,206Less: Transfers if any - -

Cash and Cash Equivalents at the end of the year 17,143,831 19,804,857Notes:1 Cash flow statement has been prepared under the indirect method as set out in the Accounting

Standard (AS)3:”Cash Flow Statements” issued by the Institute of Chartered Accountants of India2 Purchase of Fixed Assets includes movement of Capital Workin Progress during the year.3 Cash and Cash equivalents represent cash and bank balances .As per our report attached For and on behalf of the BoardSHARP & TANNANChartered Accountants



S-252


Schedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetAs at As atAs atAs atAs atAs at

31.03.2006 31.03.200531.03.200531.03.200531.03.200531.03.2005

Rs. Rs.Rs.Rs.Rs.Rs.SCHEDULE - 1

SHARE CAPITAL

AUTHORISED :

20,000,000 Equity Shares of Sri Lankan rupees 10 each 92,165,899 92,165,89992,165,89992,165,89992,165,89992,165,899

ISSUED, SUBSCRIBED AND PAID UP :17,500,020 Equity Shares of Sri Lankan rupees 10 each 80,645,171 80,645,16180,645,16180,645,16180,645,16180,645,161

Out of the above

91,00,000 shares of Sri Lankan rupees of 10/- each are held byL & T Infocity Limited, the Holding Company.

SCHEDULE - 2

RESERVES AND SURPLUS

Profit & Loss Account 3,627,788 -

TOTAL 3,627,788 -

SCHEDULE - 3

SECURED LOANS

Term Loan from

HSBC Ltd.(Including Interest accrued thereon Rs. NIL 190,044,828 -Previous year Rs.Nil.)

State Bank of India - 153,489,514(Including Interest accrued thereon Rs.NILPrevious year Rs..4,10,057/-)

TOTAL 190,044,828 153,489,514

Term Loans from HSBC is secured by mortgage over leasehold rights on land and 1st Mortgage–charge over buildings, present and future

SCHEDULE - 4

UNSECURED LOANS

Board of Investment, Sri LankaRefer Note No: of Schedule 9 - 7,456,140

TOTAL - 7,456,140

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Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)SCHEDULE - 5

FIXED ASSETS

Gross Block Depreciation Net BlockRs. Rs. Rs.

As at Additions Deductions As at As at For the On As at As at As atDESCRIPTION 01.04.2005 during during 31.03.2006 1.04.2005 Year Deduction 31.03.2006 31.03.2006 31.03.2005

the Year the Year

Building - 305,455,790 - 305,455,790 - 6,109,116 - 6,109,116 299,346,674 -Sewerage Treatment plant - 102,871 - 102,871 - - - - 102,871 -Computers 49,430 - - 49,430 - 8,013 - 8,013 41,417 49,430Furniture & Fixtures 26,276 - - 26,276 - 1,663 - 1,663 24,613 26,276Vehicles 32,290 - 32,290 - - - - - - 32,290Office Equipment 70,548 - 60,900 9,648 - 458 - 458 9,190 70,548

Total 178,544 305,558,661 93,190 305,644,015 - 6,119,250 - 6,119,250 299,524,765 178,544

Previous year - 178,544178,544178,544178,544178,544 - 178,544178,544178,544178,544178,544 - - - - 178,544

Capital Work in Progress 295,992,051 9,463,739 305,455,790 - - - - - - 293,778,210

SCHEDULE - 6

CURRENT ASSETS, LOANS & ADVANCESAs at 31.03.2006 As at 31.03.2005

Rs. Rs.CASH AND BANK BALANCESCash on hand 2,032 5,199Bank Balances with scheduled Banks

on current accounts 17,141,799 7,587,432on fixed deposits (including interest accrued - 12,212,226thereon Rs. NIL Previous Year Rs. 4,20,522/-)

17,143,831 19,804,857LOANS AND ADVANCESAdvances recoverable in cash or 22,488,376 34,491,460in kind or for value to be received.

22,488,376 34,491,460

TOTAL 39,632,207 54,296,317

SCHEDULE -7

CURRENT LIABILITIES & PROVISIONS

A) CURRENT LIABILITIESSundry CreditorsDue to Small Scale Industries - -Due to Holding Company 587,033 -Due to Larsen & Toubro Limited, Ultimate Holding Company 1,493,469 -Others 8,919,045 63,579,982Security Deposit from a Customer 42,966,177 42,293,421

(Refer Note no. in Schedule 12) 53,965,723 105,873,403

B) PROVISIONSTaxation 66,707 -Gratuity 13,824 -Dividend 11,340,073 -

11,420,604 -

TOTAL 65,386,327 105,873,403

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Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)SCHEDULE - 8

OTHER INCOME

PARTICULARS 2005-2006Rs.

Other Income 12,783Project Facitatilation Fee 434,518

Total 447,301

SCHEDULE - 9

ADMINISTRATION AND OTHER EXPENSES


Land Lease 2,048,092Bank Charges 2,142,223Repairs & Maintenance 5,160Loss on sale of fixed assets 6,838Rates & Taxes 709,363Telephone Postage & Telegrams 52,410Printing & Stationery 5,576Sundries Others 484,208Travelling & Conveyance 768,541Professional & Consultancy Fees 224,770Insurance Charges 477,822

Total 6,925,003

SCHEDULE - 10

INTEREST AND BROKERAGE


Interest on Term Loan 11,241,406

TOTAL 11,241,406

SCHEDULE –11



The Financial statements are prepared in accordance with Generally accepted Accounting principles (GAAP) followed in India under historical costconvention, on accrual basis and are in accordance with the mandatory accounting standards referred to in sub section 3C of Section 211 and theother provisions of the Companies Act, 1956.The preparation of accounts under GAAP requires the management to make estimates and assumptions that affect the reported amount of assetsand liabilities and the disclosure of contingent liabilities as at the date of the financial statements and the reported amount of expenses during theperiod. Actual reports could differ from those estimated. Any revision to accounting estimates is recognised prospectively in the current and futureperiods.

2. Foreign Currency Transactions

The accounts are translated in Indian rupees as follows:■ Share capital is retained at the initial contribution amount.■ Revenue transactions are translated at the average rates.■ Assets and Liabilities are translated at the rates prevailing on the date of the Balance sheet.■ The resultant differences are accounted as translation reserve in the balance sheet.

Opening balances are converted to Indian Rupees at the opening exchange rate and closing balances are converted at the closing exchange rate.

Transactions during the year are converted into Indian rupees at the average exchange rate.

3. Fixed Assets

Fixed Assets are stated at original cost. Pre-operative expenses are capitalized upon commencement of commercial operations.

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4. Depreciation

Fixed assets are depreciated on the straight –line basis at rates designed to write off the cost of the assets over the estimated useful lives of theassets concerned. Additions are depreciated proportionately for the year from the month their addition. The principal annual rates used are asfollows:Buildings 2.00%Computers 16.21%Furniture & fittings 6.33 %

The above rates are higher than / equal to the rates specified under schedule XIV 1956 for the respective categories.

5. Taxes on Income

Taxes on income for the current period is determined on the basis of taxable Income.Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using the taxrates applicable to the Company.Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty.

6. Leases

a) Lease rental paid on assets taken on operating lease are charged to profit & loss account.b) Assets given out under operating lease are capitalised at original cost. Rental income is accounted on accrual basis


Revenue from lease of premises is accounted based on the agreement with the customer.

SCHEDULE-12

NOTES ON ACCOUNTS

1. Managerial remuneration is Rs. Nil. (Previous year Rs. NIL)2. Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs. Nil net of advances. (Previous year Rs. Rs.

67.05 Lakhs)3. The Company does not have any dealings with small scale industrial undertakings and hence reporting regarding interest on delayed payments

and amounts due to them does not arise.4. Auditors’ remuneration and expenses charged to the accounts during the year Rs. 1,56,663; (Previous year – Rs.33,708)5. Segment Reporting The Company’s revenue is earned from a single segment i.e. lease Rentals. Accordingly, Segment reporting is not

applicable. The Company is engaged in the business of developing and operating Industrial Parks/Software Technology Park, and hence does nothave any exports. Therefore disclosure of secondary segment information does not arise.

6. The Company is mainly in the business of developing and leasing infrastructure facility. This is not capable of being expressed in generic units.Hence it is not possible to give to quantitative details and information required under paragraphs 3 & 4c of part II of Schedule VI of Companies Act,1956.

7. Balances with non schedule banksCurrent account As on 31-3-2006 Maximum amount

outstanding at any timeduring the year

HSBC Limited Rs. 1,17,89,676/- Rs. 1,40,32,129/-

8. Borrowing cost capitalized during the year – Rs. Nil. (Previous year – Rs. 23,52,359/-)9. No deferred tax has been accounted in view of the tax holiday granted by the Board of Investment of Sri Lanka. Provision for current tax

has been made on the taxable income otherwise not exempt by the Board of Investment of Sri Lanka i.e. interest income and Project Facilitationfee.

10. Contingent Liability as at March 31, 2006 – Rs. Nil (Previous year Rs. NIL)

11. DETAILS OF EARNING PER SHARE:

Particulars 2005-2006Rs.

Profit before tax 1,88,36,601Less: Provision for tax 66,707Profit after tax 1,87,69,894

No. of equity shares 1,75,00,002

Earning per share – Basic & Diluted 1.07


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12. DISCLOSURE OF RELATED PARTIES/ RELATED PARTY TRANSACTIONS:A. List of related parties

Holding companies: a. L & T Infocity Limited (holding Company)b. L&T Infrastructure Development Projects Limited (ultimate holding Company to (a).)c. Larsen & Toubro Limited (holding Company to (b).)

Subsidiary Company: Nil

Associates: Nil

Fellow subsidiaries: Cyber Park Development & Construction limited

Tractors Engineers LimitedL&T Finance LimitedL&T Capital Company LimitedL&T-Sargent & Lundy LimitedLarsen & Toubro Infotech LimitedLarsen & Toubro Infotech GmbH, GermanyL&T Transportation Infrastructure LimitedHPL Cogeneration LimitedL&T Western India Tollbridge LimitedIndia Infrastructure Developers LimitedLarsen & Toubro LLC, USALarsen & Toubro International FZE, SharjahNarmada Infrastructure Construction Enterprise LimitedL&T-ECC Construction (M) SDN.BHD, MalaysiaBhilai Power Supply CompanyLimitedLarsen & Toubro (Oman) LLCL&T Power Investments Private LimitedRaykal Aluminium Company Private LimitedL&T Panipat Elevated Corridor Private LimitedL&T Tech Park LimitedL&T Western Andhra Toll Ways Private LimitedL&T Krishnagiri Thoppur Toll Road Private LimitedL&T Interstate Road Corridor LimitedL&T Vadodara Bharuch Tollway LimitedL&T Urban Infrastructure LimitedLarsen & Toubro Qatar LLCLarsen & Toubro (Electro Mech) LLCInternational Seaports PTE LimitedInternational Seaports India Private LimitedL&T Overseas Projects Nigeria LimitedL&T (WUXI) Electric Company LimitedSpectrum Infotech Private LimitedHyderabad International Trade Expositions LimitedAndhra Pradesh Expositions Private LimitedL&T Infocity Infrastructure Limited

B. Transactions with Related Parties (Rs. in Lacs)

S. No Nature of transaction / Relationship 2005-2006

Amount Amount Amountof transaction due to due from

1. L&T Infocity Limitedi) Project Facilitation fee Nil Nil Nil

(64.77) (Nil) (Nil)ii) Project Management Fee 32.80 Nil Nil

(26.33) (Nil) (Nil)iii) Reimbursement of Expenses 20.22 5.87 Nil

(17.52) (17.19) (Nil)

2. Larsen & Toubro LimitedContract for Building Construction 29.08 14.93 Nil

(2580.78) (592.35) (Nil)


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Note: Figures in bracket relate to previous year


13. The Company has taken land on cancelable operating lease from HSBC for a period of 30 yrs on an lease rental of Rs.20,48,092/- each year.The Company has given on lease IT Park constructed on the lease hold to HSBC for a period of 9 years.The Company has not taken any other asset on operating / finance lease.

14. The Board of Investment of Sri Lanka has released 2nd installment of the grant for an amount of Rs. 68,79,824 towards the construction of aSewage Treatment Plant on the land leased to the Company through HSBC Ltd. Along with the first installment, the total grant amounting toRs.14,223,871 has been adjusted from out of the cost of the Sewage Treatment Plant and the balance has been capitalised .


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Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)Schedules forming part of Accounts (Contd.)15. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE:


Registration No. State Code No.

N A N A

Balance Sheet Date

3 1 0 3 2 0 0 6

Date Month Year

II. Capital raised during the year (Amount in Rs. Thousands)


N I L N I L


N I L 1 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)


2 7 3 7 7 1 2 7 3 7 7 1

SOURCES OF FUNDS

Paid up Capital Reserve & Surplus

(incl.Share Appl. Money)

8 0 6 4 5 3 0 8 1

Secured Loans Diferred Tax Liability

1 9 0 0 4 5 N I L

APPLICATION OF FUNDS Capital Work in Progress

Gross Fixed Assets incl. Pre-operative expenses

3 0 5 6 4 5 N I L

Investments Net Current Assets

N I L ( 2 5 7 5 4 )

Misc.Expenditure Accumulated Losses

N I L N I L

IV. Performance of Company (Amount in Rs. Thousands)

Turnover (incl. other income) Total Expenditure (incl. Prior year Adj.)

4 3 4 1 3 2 4 5 7 6

+ - Profit/(Loss) Before Tax + - Profit/(Loss) After Tax

✓ 1 8 8 3 7 ✓ 1 8 7 7 0

+ - Earning per share (in Rs.) (Basic) Dividend Rate %

✓ 1 . 0 7 2 0

V. Names of three Principal Products / Services of Company (as per monetary terms)

Item Code No.(ITC Code)

N A

Product Description

D E V E L O P M E N T O F I T P A R K S


As per our report attached For and on behalf of the BoardSHARP & TANNANChartered AccountantsL. VAIDYANATHAN R. SRIDARAN T. S. SUNDARESANPartner DirectorsMembership No.16368Place : Hyderabad Place: HyderabadDate : April 18, 2006 Date : April 18, 2006

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L&T INFOCITY INFRASTRUCTURE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their Second Annual Report and Audited Accounts for the year ended March 31, 2006.

FINANCIAL RESULTS

The commercial operations of the Company have started during October, 05 as a part of the IT Park building was handed over to the customer andlease rentals commenced from October 1, 05.


The performance of the Company during the period under review is as follows:

Rs. In lakhs.

Profit before depreciation 105.99

Depreciation 19.90

Profit before tax 86.09

Provision for taxes 62.95

Profit after taxes 23.14

CAPITAL EXPENDITURE

As at March 31, 2006 the gross fixed assets stood at Rs.33.28 Crs. Including Rs.1.31 crores On account of land given by Government of West Bengalon long term lease for a period of 99 years.

DEPOSITS

During the period under review the Company has neither invited nor accepted any deposits from the public falling within the purview of Section 58A ofthe Companies Act, 1956.


The Company does not have any subsidiary Company.

AUDITORS’ REPORT

The Auditors’ Report to the Shareholders does not contain any qualifications. The notes to the accounts referred to, if any in the Auditors’ Report areself explanatory and therefore do not call for any further comments of Directors.


Information as per the Companies ( Disclosure of Particulars in the Report of Board of Directors) Rules 1988 relating to conservation of energy,technology absorption, foreign exchange earnings and outgo is given in Annexure A forming part of this Report.

PERSONNEL





ii) that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for the year endedon that date;



DIRECTORS

Mr U Ramakrishna and Mr P Ravishankar resigned from the Board during the year. Mr. S.N.Babu Govindaraj has been appointed to fill the casualvacancy caused by the resignation of Mr. U. Ramakrishna and Mr. D.Subba Rao was appointed as additional directors representing Pragnya InfrastructureInvestment Ltd. Mr. R.Sridaran retires by rotation from the Board and is eligible for reappointment.

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2005-2006 2004-2005

Foreign exchange earnings Nil Nil

Foreign exchange expenditure Nil Nil

AUDIT COMMITTEE

The Audit Committee consists of three directors. The present members of the Committee are Mr.S.N.Babu Govindaraj, Mr. D.Subba Rao and Mr.R.Sridaran. Mr.S N.Babu Govindaraj is the Chairman of the Audit Committee

The role, terms of reference, the authority and power of Chairman are in conformity with the requirements of the Companies Act, 1956. The Committeemet periodically during the year and had discussions with the auditors on internal control systems and internal audit report and given its report andrecommendations to the Board of Directors for Corporate Governance and overall improvement in the functioning of the Company.

AUDITORS

The Auditors, M/s. Sharp & Tannan hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment.Certificate from the auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section224(1B) of the Companies Act, 1956.

ACKNOWLEDGEMENTS

The Board of Directors acknowledge with thanks the invaluable support extended to the Company by the Financial Institutions, Bankers, vendors,suppliers and employees of the Company.


S.N.BABU GOVINDARAJ D.SUBBA RAO R.SRIDARANDirector Director Director


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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF L&T INFOCITY INFRASTRUCTURE LIMITEDWe have audited the attached balance sheet of L&T Infocity Infrastructure Limited as at March 31, 2006, the profit and loss account and the cash flowstatement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.









(e) on the basis of the written representations received from the Directors of the Company as on March 31, 2006, and taken on record by theBoard of Directors, we report that none of the Directors is disqualified as on March 31, 2006 from being appointed as a director in termsof clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and


i) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;(ii) in the case of the profit and loss account, of the profit for the year ended on that date; and(iii) in case of the cash flow statement, of the cash flows for the year ended on that date.



Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor’s to the Members of L&T Infocity Infrastructure Limited on theaccounts for the year ended March 31, 2006, we report that:



(c) The Company has not disposed of any substantial part of its fixed assets so as to affect the GOING CONCERN STATUS.

(ii) The Company is engaged in the business of Infrastructure Development and Maintenance and hence the clauses 4 (ii) (a)(b) & (c) relating toinventory are not applicable.

(iii) According to the information & explanation given to us, the Company has not granted or taken any loans, secured or unsecured, to / fromcompanies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence reporting underclause-4 (iii) (a) to (g) does not arise.

(iv) In our opinion, and according to the information and explanations given to us, there are adequate internal control system commensurate withthe size of the Company and nature of its business, for the purchase of fixed assets and sale of services . In our opinion, and according to

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the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into the registerin pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (V) (b) does not arise .



(viii) The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1)(d) of the CompaniesAct, 1956 is not applicable to the Company.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Companyhas been generally regular in depositing undisputed statutory dues including Provident Fund, Income tax, and other statutory dues duringthe year with the appropriate authorities. As at March 31, 2006, there are no undisputed statutory dues payable for a period of more thansix months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues which have not been deposited on account of any disputeof income tax, service tax and cess .

(x) The Company has no accumulated losses as at March 31, 2006 and has not incurred any cash losses in the financial year ended on that date.Since this being the first period of commercial operation for the Company commenting on cash losses for the preceding year does not arise..

(xi) In our opinion and according to the information and explanation given to us, the Company has not defaulted in repayment of dues to financialinstitution or bank or debenture holders.

(xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by wayof pledge of shares, debentures and other securities.

(xiii) The provisions of special statute applicable to chit fund / nidhi / mutual benefit fund / society are not applicable to the Company.



(xvi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purposes for which theywere obtained.

(xvii) According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, the provisionsof clause 4 (xvii) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.

(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section301 of the Companies Act, 1956, during the year.

(xix) The Company has not issued debentures during the year. Accordingly, no security or charge need to be created.


(xxi) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us ,we have neither come across any instances of materialfraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.



S-263


Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Schedules As at 31.03.2006 As at 31.03.2005


SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS :

Share Capital 1 85,000,000 85,000,000

Reserves & Surplus 2 2,313,617 -

LOAN FUNDS

Secured Loans 3 196,173,054 -

DEFERRED TAX LIABILITY 5,965,055 -

TOTAL 289,451,727 85,000,000


FIXED ASSETS 4

GROSS BLOCK 332,762,504 13,115,400

Less: Depreciation 2,177,489 88,319

NET BLOCK 330,585,015 13,027,081

Capital Work in Progress 136,538,220 149,565,301

INVESTMENTS 5 10,000,000 -


CURRENT ASSETS

a) Cash and Bank Balances 3,246,254 11,904,228

LOANS & ADVANCES 4,277,759 21,458,823

7,524,013 33,363,051


a) Current Liabilities 58,327,184 97,928,352

b) Provisions 330,117 -

58,657,301 97,928,352

NET CURRENT ASSETS (51,133,288) (64,565,301)

TOTAL 289,451,727 85,000,000



As per our report of even date attachedSHARP & TANNAN For and on behalf of the BoardChartered Accountants

L. VAIDYANATHANPartnerMembership No.16368 S. N. BABUGOVINDARAJ D. SUBBA RAO R. SRIDARAN

Director Director Director

Place: Hyderabad Place: HyderabadDate : April 18, 2006 Date : April 18, 2006

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Profit & Loss Account for the period from October 1, 2005 to March 31, 200Profit & Loss Account for the period from October 1, 2005 to March 31, 200Profit & Loss Account for the period from October 1, 2005 to March 31, 200Profit & Loss Account for the period from October 1, 2005 to March 31, 200Profit & Loss Account for the period from October 1, 2005 to March 31, 2006

INCOME Schedules 01-10-05 to 31-03-06No. Rs.

Income from Operations 16,575,441

(Tax Deducted at Source Rs. 3719529/-)

Other Income 8 15,968

TOTAL 16,591,409

EXPENDITURE

Sales, Administration and Other Expenses 9 1,138,869

Interest 10 4,197,401

Miscellanious Expenses written off 656,539

Depreciation 1,989,811

TOTAL 7,982,620

Profit for the period 8,608,789

Provision For Taxes:

Current Tax 222,470


Deferred Tax 5,965,055

Profit available for appropriation 2,313,617

Balance Carried to Balance Sheet 2,313,617

Earning per Share - Basic & Diluted 0.27







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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 20062005-2006 2004-2005Rs. Lakhs Rs. Lakhs

A. Cash Flow from Operating ActivitiesNet Profit Before Tax 86.09 -Adjustments for:Dividend Received - -Depreciation (including obsolescence) and amortisation 19.90 -Unrealised foreign exchange difference - net (gain/loss) -Interest (net) 41.97 -(Profit)/Loss on sale of fixed assets (net) - -(Profit)/Loss on sale of Investments (net) - -Provision for Leave encashment & Gratuity - -

Operating Profit before Working Capital Changes 147.96 -

Adjustiments for:(Increase)/Decrease in Loans & Advances 171.81 (214.59)(Increase)/Decrease in Inventories - -(Increase)/Decrease in Miscellaneous Expenditure - -Increase/(Decrease) in trade Payables (396.01) 979.28Cash generated from OperationsDirect Taxes refund/(paid) (net) -

Net Cash From Operating Activities (76.24) 764.69B. Cash Flow from Investing Activities:

Purchase of Fixed Assets (1,830.10) (1,495.65)Sale of Fixed Assets (including monies received as advance - -Purchase of Investments (100.00) -Sales of Investments - -Loans/Deposits made with Subsidiaries/Associates (net) - -Advance towards Equity Commitment - 850.00Interest Received - -Dividend Received from Subsidiaries - -Dividend Received from other Investments - -

Net Cash used in/from Investing Activities (1,930.10) (645.65)C. Cash Flow from Financing Activities

Proceeds from issue of Share Capital - -Proceeds from Long Term Borrowings 1,961.73 -Repayment of Long Term Borrowings - -Repayments/Proceeds from other Borrowings (net) - -Gratuity paid - -Dividends Paid - -Additional Tax on Dividend - -Interest Paid (41.97) -Net Cash Used in/From Financing Activities 1,919.76 -Net Decrease/Increase in cash and Cash Equivalents (A+B+C) (86.58) 119.04Cash and Cash Equivalents at the beginning of the year 119.04 -Less: Transfers if any -

Cash and Cash Equivalents at the end of the year 32.46 119.04

Notes:1 Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS)3:”Cash Flow Statements” issued

by the Institute of Chartered Accountants of India2 Purchase of Fixed Assets includeds movement of Capital Workin Progress during the year.3 Cash and Cash equivalents represent cash and bank balances .





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Schedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetSchedules forming part of Balance SheetAs at AS ATAS ATAS ATAS ATAS AT

31.03.2006 31.03.200531.03.200531.03.200531.03.200531.03.2005Rs. Rs.Rs.Rs.Rs.Rs.

SCHEDULE - 1SHARE CAPITAL

AUTHORISED :1,00,00,000 Equity Shares of Rs10 each 100,000,000 100,000,000100,000,000100,000,000100,000,000100,000,000

ISSUED, SUBSCRIBED AND PAID UP :85,00,000 Equity Shares of Rs 10 each 85,000,000 85,000,00085,000,00085,000,00085,000,00085,000,000

Out of the above 43,35,000 shares are held byL&T Infocity Limited, the Holding Company.

SCHEDULE - 2RESERVES AND SURPLUSProfit & Loss Account 2,313,617 -

TOTAL 2,313,617 -----

SCHEDULE - 3SECURED LOANS

Term Loan fromState Bank of Patiala 196,173,054 -(Including Interest accrued thereon Rs.11,85,513, Previous year Rs.Nil.)TOTAL 196,173,054 -

Term Loans from State Bank of Patiala is secured by mortgage of Leasehold rights over land admeasuring 3.53 acres, situated at Plot No: DJ- 6, SectorII, BidhanNagar, Saltlake City, Kolkota- 91, West Bengal, along with construction present and future.

SCHEDULE - 4FIXED ASSETS

GROSS BLOCK (Rs.)GROSS BLOCK (Rs.)GROSS BLOCK (Rs.)GROSS BLOCK (Rs.)GROSS BLOCK (Rs.) DEPRECIADEPRECIADEPRECIADEPRECIADEPRECIATION (Rs.)TION (Rs.)TION (Rs.)TION (Rs.)TION (Rs.) NET BLOCK (Rs.)NET BLOCK (Rs.)NET BLOCK (Rs.)NET BLOCK (Rs.)NET BLOCK (Rs.)

DESCRIPTIONDESCRIPTIONDESCRIPTIONDESCRIPTIONDESCRIPTION AS AAS AAS AAS AAS ATTTTT ADDITIONSADDITIONSADDITIONSADDITIONSADDITIONS DISPOSALSDISPOSALSDISPOSALSDISPOSALSDISPOSALS AS AAS AAS AAS AAS ATTTTT AS AAS AAS AAS AAS ATTTTT FOR THEFOR THEFOR THEFOR THEFOR THE ONONONONON AS AAS AAS AAS AAS ATTTTT AS AAS AAS AAS AAS ATTTTT AS AAS AAS AAS AAS ATTTTT01.04.200501.04.200501.04.200501.04.200501.04.2005 DURING THEDURING THEDURING THEDURING THEDURING THE DURING THEDURING THEDURING THEDURING THEDURING THE 31.03.200631.03.200631.03.200631.03.200631.03.2006 01.04.200501.04.200501.04.200501.04.200501.04.2005 YEARYEARYEARYEARYEAR DISPOSALSDISPOSALSDISPOSALSDISPOSALSDISPOSALS 31.03.200631.03.200631.03.200631.03.200631.03.2006 31.03.200631.03.200631.03.200631.03.200631.03.2006 31.03.200531.03.200531.03.200531.03.200531.03.2005

YEARYEARYEARYEARYEAR YEARYEARYEARYEARYEAR

Owned AssetsBuildings - 308,723,049 - 308,723,049 - 1,697,956 - 1,697,956 307,025,093 -Electrical Installations - 10,924,055 - 10,924,055 - 258,736 - 258,736 10,665,320 -

Leased AssetsLease Hold Land 13,115,400 - - 13,115,400 88,319 132,479 - 220,798 12,894,602 13,027,081

TOTAL 13,115,400 319,647,104 - 332,762,504 88,319 2,089,170 - 2,177,489 330,585,015

Previous year 13,115,40013,115,40013,115,40013,115,40013,115,400 ----- 13,115,40013,115,40013,115,40013,115,40013,115,400 ----- 88,31988,31988,31988,31988,319 ----- 88,31988,31988,31988,31988,319 - 13,027,081Capital Work in Progress 135,401,175135,401,175135,401,175135,401,175135,401,175 166,707,652166,707,652166,707,652166,707,652166,707,652 302,108,827302,108,827302,108,827302,108,827302,108,827 ----- ----- ----- ----- ----- ----- 135,401,175Pre-operative Expenses 1,137,0451,137,0451,137,0451,137,0451,137,045 17,057,77117,057,77117,057,77117,057,77117,057,771 18,194,81618,194,81618,194,81618,194,81618,194,816 ----- ----- ----- ----- ----- ----- 1,137,045

Note : Leasehold land represents land taken on sub lease from West Bengal Electronics Development Corporation Ltd for a period of 99 years with a right torenew for a further period of two terms of 99 years each vide Memorandum of Understanding dated 18th August 2004.

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Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)Schedules forming part of Balance Sheet (Contd.)As at AS ATAS ATAS ATAS ATAS AT

31.03.2006 31.03.200531.03.200531.03.200531.03.200531.03.2005Rs. Rs.Rs.Rs.Rs.Rs.

SCHEDULE - 5INVESTMENTSQuotedMutual Funds:

Sundaram Money Fund Institutuonal 10,000,000 -(679495.543 units purchased during the year atNAV at Rs.14.7168)

TOTAL INVESTMENT 10,000,000 -

Details of Investments purchased during the year

Mutual Funds Face Value No. of Units Rs. NAV on 31-03-06Rs. Per unit

Sundaram Money Fund Institutional 10 679,496 10,000,000 14.7403

SHEDULE - 6CURRENT ASSETS, LOANS & ADVANCES

As at As atAs atAs atAs atAs at31.03.2006 31.03.2005 31.03.2005 31.03.2005 31.03.2005 31.03.2005

Rs. Rs. Rs.Rs.Rs.Rs.Rs. Rs.Rs.Rs.Rs.Rs.

CASH AND BANK BALANCESCash on hand - -Bank Balances with scheduled Banks

on current accounts 3,246,254 11,904,228

3,246,254 11,904,228

LOANS AND ADVANCESAdvances recoverable in cash or 4,277,759 21,458,823in kind or for value to be received.TOTAL 7,524,013 33,363,051

SCHEDULE -7CURRENT LIABILITIES & PROVISIONS

A) CURRENT LIABILITIESSundry CreditorsDue to Small Scale Industries - -Due to Ultimate Holding Company 8,404,532 50,948,352Others 1,301,052 -Security Deposit from Customer 48,621,600 46,980,000

(Refer Note no. 12 in Schedule 7) 58,327,184 97,928,352B) PROVISIONS

a) Taxation 222,470 -b) Proposed Dividend - -c) Tax on Dividend - -d) Fringe Benefit Tax 107,647 -

330,117 -

TOTAL 58,657,301 97,928,352

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Schedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss AccountSchedules forming part of Profit & Loss Account

1-10-05 to 31-3-06Rs.

SCHEDULE - 8OTHER INCOME

Income from Mutual Fund 15,968

Total 15,968

SCHEDULE - 9ADMINISTRATION AND OTHER EXPENSES

Rent 8,191Property Tax 836,708Rates & Taxes 1,028Telephone Postage & Telegrams 3,560Printing & Stationery 1,120Audit Fees 56,120Sundries - Others 48,136Travelling & Conveyance 79,169Professional & Consultancy Fees 32,000Insurance Charges 72,837

Total 1,138,869

SCHEDULE - 10INTEREST AND BROKERAGE

Interest on Term Loan 4,197,401

TOTAL 4,197,401

SCHEDULE - 11


1. BASIS OF ACCOUNTING:

The Financial statements are prepared in accordance with Generally accepted Accounting principles (GAAP) followed in India under historical costconvention, on accrual basis and are in accordance with the mandatory accounting standards referred to in sub section 3C of Section 211 and theother provisions of the Companies Act, 1956.

The preparation of accounts under GAAP requires management to make estimates and assumptions that affect the reported amount of assets andliabilities and the disclosure of contingent liabilities as at the date of the financial statements and the reported amount of expenses during theperiod. Actual reports could differ from those estimated. Any revision to accounting estimates is recognised prospectively in the current and futureperiods.

2. FIXED ASSETS:

Fixed Assets are stated at original cost including preoperative expenses incurred up to the date of commencement of commercial operations. Thecarrying amounts of fixed assets are reviewed at each balance sheet date to ascertain whether they are recorded in excess of their recoverableamount based on value in use method. Where carrying values exceed this recoverable amount, assets are written down to their recoverableamount.

3. DEPRECIATION:

Depreciation is provided in the accounts on straight line basis at the rates and in the manner prescribed in Schedule XIV of the Companies Act,1956.


4. INVESTMENTS:

Short term investments are stated at cost or market value whichever is lower.

5. INCOME:

Income from lease of premises is accounted for, based on lease agreements with the lessees.

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Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)6. BORROWING COSTS:

Borrowing costs that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of suchasset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowingcosts are recognised as an expense in the period in which they are incurred.

7. TAXES ON INCOME:

Taxes on income for the current period is determined on the basis of taxable Income and tax credits computed in accordance with the provisionsof the Income Tax Act 1961, and based on expected outcome of assessments / appeals.

Deferred tax is recognized on timing differences between the accounting Income and the taxable income for the year and quantified using the taxrates and laws enacted or substantively enacted as on the Balance Sheet.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income willbe available against which such deferred tax assets can be realized.

8. LEASES:

a) Lease rental paid on assets taken on operating lease are charged to profit & loss account.b) Assets given out under operating lease are Capitalised at original cost. Rental income is accounted on accrual basis

SCHEDULE - 12

NOTES ON ACCOUNTS:

1. a) The Company does not have taxable wealth, hence no provision for wealth tax has been made as per the provisions of the Wealth Tax Act,1957.

b) The Company is governed by the provisions of section 115 JB of the Income Tax Act, 1961, since the taxable income as per normalcomputation is Nil, hence Income Tax for the year has been provided under Minimum Alternate Tax.

2. Additional information pursuant to paragraph 3 of Part II of Schedule VI to the Companies Act, 1956 has been furnished to the extentapplicable since the Company is engaged in construction and sale of immovable property together with land.

3. Expenditure in Foreign Currency for the year is NIL Previous year Nil

4. Earnings in Foreign Currency during the year is NIL and Previous Year NIl

5. Managerial remuneration is NIL

6. The Company does not have any dealings with small scale industrial undertakings and hence reporting regarding interest on delayed paymentsand amounts due to them does not arise.


2005-2006 2004-2005

Rs. Rs.

(i) Audit fees (excluding service tax) 50,000 25,000

(ii) Taxation matters - -

(iii) Expenses reimbursed - -

8. Segment Reporting: The Company is getting income by way of lease Rentals only. Accordingly, Segment reporting is not applicable. TheCompany is engaged in the business of developing and operating Industrial Parks/Software Technology Park, and hence does not have anyexports. Therefore disclosure of secondary segment information does not arise.

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Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)9. Disclosure of Related Parties/ related party transactions:


Holding companies: L & T Infocity Limited (holding Company)L&T Infrastructure Development Projects Limited(ultimate Holding Company)Larsen & Toubro Limited (ultimate ultimate holding Company)

Subsidiary Company: Nil

Associates: Nil

Fellow subsidiaries: Cyber Park Development & Construction limitedTractors Engineers LimitedL&T Finance LimitedL&T Capital Company LimitedL&T-Sargent & Lundy LimitedLarsen & Toubro Infotech LimitedLarsen & Toubro Infotech GmbH, GermanyL&T Transportation Infrastructure LimitedHPL Cogeneration LimitedL&T Western India Tollbridge LimitedIndia Infrastructure Developers LimitedLarsen & Toubro LLC, USALarsen & Toubro International FZE, SharjahNarmada Infrastructure Construction Enterprise LimitedL&T-ECC Construction (M) SDN.BHD, MalaysiaBhilai Power Supply Company LimitedLarsen & Toubro (Oman) LLCL&T Power Investments Private LimitedRaykal Aluminium Company Private LimitedL&T Panipat Elevated Corridor Private LimitedL&T Tech Park LimitedL&T Western Andhra Toll Ways Private LimitedL&T Krishnagiri Thoppur Toll Road Private Limited.L&T Interstate Road Corridor LimitedL&T Vadodara Bharuch Tollway LimitedL&T Urban Infrastructure LimitedLarsen & Toubro Qatar LLCLarsen & Toubro Electromech LLCInternational Seaports Pte LimitedInternational Seaports (India) Private LimitedL&T Overseas Projects Nigeria LimitedL&T (WUXI) Electric Company LimitedSpectrum Infotech Private LimitedHyderabad International Trade Expositions LimitedAndhra Pradesh Expositions Private LimitedL&T Infocity Lanka Private Limited


S. Nature of transaction / 2005-2006 2004-2005

No Relationship Amount Amount Amount Amount Amount Amountof due to due from of due to due from

transaction transaction

1 Larsen & Toubro LimitedUltimateHolding Companyi) Contract for Building Construction 168,977,421 8,459,730 Nil 135,401,175 49,117,252 Nil

2 L&T Infocity LtdHolding Companyi) Reimbursement of Expenses 162,665 NIL NIL 893,226 Nil NILi) Project Management Services 4,071,421 Nil Nil Nil Nil NiliI) Consultancy Services 5,000,000 Nil Nil Nil Nil Nil

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Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)SCHEDULE - 12

C. Amounts written off/ written back: NIL

10. Value of Imports on CIF basis in respect of :Capital goods Rs. NILSupplies Rs. NIL

11. Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs. Nil, net of advances. (Previous year1430.58lacs).

12. Contingent Liability as at March 31, 2006 is Rs .Nil (previous year NIL).

13. Security Deposit Rs.486.21 lacs from a customer represents rent deposit towards lease of building for a period of nine years vide memorandumof Understanding dated August 18, 2004 with a lock in period of six years.

14. Major components of Deferred Tax Assets and Deferred Tax Liabilities:

As at 31.03.2006 As at 31.03.2005Rs. Rs.

Deferred Deferred Deferred DeferredTax Tax Tax Tax

Assets Liabilities Assets Liabilities

Difference between Depreciationon Assets as per books of accountand as per provisions of Income Tax Act. — 59,65,055 — —

Total — 59,65,055 — —

Net Deferred Tax Liability 59,65,055 — —

15.Details of Earning per Share:

Particulars 2005-2006 2004 – 2005Rs. Rs.

Profit before Tax 8,608,789 -Less: Fringe Benefit Tax 107,647 -Less: Provision for Tax 222,470 -Less: Provision for Deferred Tax 5,965,055 -Profit after Tax 2,313,617 -

No: of Equity Shares 8,500,000 -

Earning per share – Basic 0.27 -

The Company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverable amount is morethan the amount carried in the books. Accordingly, no provision is required to be made for the impairment in the accounts.

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16. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE:I. Registration Details

Registration No. State Code No.0 1 - 4 4 4 8 8 0 1Balance Sheet Date

3 1 0 3 2 0 0 6Date Month Year

II. Capital raised during the year (Amount in Rs.Thousands)Public Issue Rights Issue


N I L N I LIII. Position of Mobilisation and Deployment of Funds (Amount in Rs.Thousands)

Total Liabilities Total Assets2 8 9 4 5 1 2 8 9 4 5 1

SOURCES OF FUNDSPaid up Capital Reserves & Surplus

(incl.Share Appl. Money) 2 3 1 38 5 0 0 0

Secured Loans Deferred Tax Liability1 9 6 1 7 3 5 9 6 5

APPLICATION OF FUNDSNet Fixed Assets Investments

3 3 2 7 6 2 1 0 0 0 0Capital Work in Progress Net Current Assets

N I L (5 1 1 3 3)Miscellaneous Expenditure Accumulated Losses

N I L N I LIV. Performance of Company (Amount in Rs.Thousands)

Turnover Total Expenditure(incl.other income) (incl.Prior year Adj.)

1 6 5 9 1 7 9 8 2+ - Profit/(Loss) Before Tax + - Profit/(Loss) After Tax (incl. Def. Tax)✔ 7 9 8 2 ✔ 2 3 1 3+ - Earning per share (in Rs.) (Basic) Dividend Rate %✔ 0 . 2 7 0 0

V. Names of three Principal Products / Services of Company (as per monetary terms)Item Code No.(ITC Code) N . A .Product Description D E V E L O P M E N T O F

S O F T W A R E P A R K

Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)Schedules forming part of Profit & Loss Account (Contd.)


As per our report of even date attached

SHARP & TANNAN For and on behalf of the BoardChartered Accountants




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ANDHRA PRADESH EXPOSITIONS PRIVATE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportYour Directors have pleasure in presenting their Third Report and Accounts for the period ending March 31, 2006.FINANCIAL RESULTSAs the Company has not started its operations, the Profit and Loss account has not been prepared. Hence there are no financial results to be reported.PROSPECTS OF THE COMPANYYour Company will function as the marketing arm of Hyderabad International Trade Expositions Limited (HITEX) and its core activity will be in marketing forbringing events in colloboration with national, international event management companies in organizing, conducting events at Hyderabad.DISCLOSURE OF PARTICULARSAs the Company is engaged in Organising, Hosting of national and International Trade Fairs, Exhibitions, Seminars, conferences and other related events,there are no particulars to be disclosed as per the companies (Disclosure of Particulars in the Report of Directors) Rules 1988.PERSONNELThere are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 read with companies (Particulars of Employees) Rules1975.DIRECTORS’ RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirm:i) that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;ii) that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable and prudent so

as to give a true and fair view of the state of affairs of the Company at March 31, 2005 and of the profit of the Company for the year ended on thatdate;

iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of thecompanies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the annual accounts have been prepared on a going concern basis.DIRECTORSShri S. Hariharan and Shri R Sridaran were appointed as directors in casual vacancy caused by the resignation of Shri K.V.Rangaswami and ShriV.B.Gadgil hold office up to the Annual General Meeting are eligible for re-appointment.AUDITORSThe Company’s auditors Sharp & Tannan, hold office upto the conclusion of the forthcoming Annual General Meeting and being eligible, are recommendedfor re-appointment. Certificate from the Auditors has been received to the effect that their re-appointment if made be within the prescribed limits u/s224(1B) of the Companies Act, 1956.ACKNOWLEDGEMENTThe Directors are pleased to place on record their appreciation of the co-operation extended by the employees of L&T Infocity Limited and HyderabadInternational Trade Expositions Limited.


Place : Hyderabad S. HARIHARAN R. SRIDARANDate : April 13, 2006 Directors

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportWe have audited the attached balance sheet of Andhra Pradesh Expositions Private Limited as at March 31, 2006, No profit and loss account for theyear has been prepared since the Company has not commenced commercial operations. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that:1. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of the

Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order.2. Further to our comments in the Annexure referred to above, we report that:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of theaudit;


(c) the balance sheet dealt with by this report are in agreement with the books of account;(d) in our opinion, the balance sheet dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211

of the Companies Act, 1956;(e) on the basis of the written representations received from the Directors of the Company as on March 31, 2006, and taken on record by the

Board of Directors, we report that none of the Directors is disqualified as on March 31, 2006 from being appointed as a director in terms ofclause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

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i) in the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006;


L. VAIDYANATHANPlace : Hyderabad PartnerDate : April 13, 2006 Membership No.16368

Annexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor’s to the Members of Andhra Pradesh Expositions Private Limitedon the accounts for the year ended March 31, 2006, we report that:(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.


(c) The Company has not disposed of any substantial part of its fixed assets so as to affect the going concern status.(ii) The Company is engaged in the business of providing and maintaining infrastructure facilities to exhibitors and hence the clauses 4 (ii) (a)(b) &

(c) relating to inventory are not applicable.(iii) According to the information & explanation given to us, the Company has not granted or taken any loans, secured or unsecured, to / from

companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Hence reporting underclause-4 (iii) (a) to (g) dose not arise.

(iv) In our opinion, and according to the information and explanations given to us, there are adequate internal control system commensurate withthe size of the Company and nature of its business, for the purchase of fixed assets . In our opinion, and according to the information andexplanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into the registerin pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (V) (b) dose not arise .


(vii) In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.(viii) The Company is engaged in service activity and we are informed that maintenance of cost records under section 209 (1)(d) of the Companies

Act, 1956 is not applicable to the Company.(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has

been generally regular in depositing undisputed statutory dues including Provident Fund, Income tax, and other statutory dues during theyear with the appropriate authorities. As at March 31, 2006, there are no undisputed statutory dues payable for a period of more than sixmonths from the date they became payable.

(b) According to the information and explanations given to us, there are no dues which have not been deposited on account of any dispute ofincome tax, service tax and cess.

(x) Since the Company has not commenced its operations this clause is not applicable.(xi) In our opinion and according to the information and explanation given to us, the Company has not raised any funds from financial institution or

bank or debenture holders. Hence this clause is not applicable.(xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of

pledge of shares, debentures and other securities.(xiii) In our opinion, the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Companies

(Auditor’s Report) Order, 2003 are not applicable to the Company.(xiv) In our opinion and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities,

debentures and other investments.(xv) The Company has not given any guarantee for loans taken by others from bank or financial institutions.(xvi) In our opinion and according to the information and explanation given to us, the Company has not borrowed any term loans.(xvii) According to the information and explanation given to us, the Company has not raised funds on short - term basis. Accordingly, the provisions of

clause 4 (xvii) of the Companies (Auditor’s Report) Order 2003 are not applicable to the Company.(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301

of the Companies Act, 1956, during the year.(xix) The Company has not issued debentures during the year. Accordingly, no security or charge need to be created.(xx) The Company has not raised any money by public issue during the year.(xxi) During the course of our examination of the books and the records of the Company, carried out in accordance with the generally accepted

auditing practices in India, and according to the information and explanations given to us ,we have neither come across any instances ofmaterial fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.


L. VAIDYANATHANPlace: Hyderabad PartnerDate : April 13, 2006 Membership No.16368

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Schedule As at 31.03.2006 As at 31.03.200531.03.200531.03.200531.03.200531.03.2005

No. Rs. Rs. Rs.Rs.Rs.Rs.Rs. Rs.Rs.Rs.Rs.Rs.SOURCES OF FUNDS


Share Capital 1 100,000 100,000

TOTAL 100,000 100,000 100,000 100,000 100,000 100,000


Pre Operative Expenses 2 141,892 133,882


CURRENT ASSETS

a) Cash and Bank Balances 99,778 99,778

99,778 99,77899,77899,77899,77899,778


a) Current Liabilities 141,670 133,660

141,670 (41,892) 133,660 (33,882)

NET CURRENT ASSETS

Miscellaneous Expenditure - - - - - -

Preliminary Expenses - -----

TOTAL 100,000 100,000 100,000 100,000 100,000 100,000


NOTES ON ACCOUNTS 6


L. VAIDYANATHAN S. HARIHARANPartner R. SRIDARAN

Directors

Membership No.16368


}

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Schedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSCHEDULE - 1SHARE CAPITAL As at 31.03.2006 As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005

Rs. Rs.Rs.Rs.Rs.Rs.AUTHORISED1,00,000 Equity Shares of Rs.10 each 1,000,000 1,000,0001,000,0001,000,0001,000,0001,000,000

ISSUED SUBSCRIBED & PAIDUP10,000 Equity Shares of Rs 10 each fully paid up 100,000 100,000100,000100,000100,000100,000

All shares are held by Hyderabad International Trade Expositions Limited, the Holding Company

SCHEDULE - 2PREOPERATIVE EXPENSESPARTICULARS As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005 For the Year As at 31.03.2006

Rs.Rs.Rs.Rs.Rs. Rs. Rs.Filing Fees & Other expenses 117972 2,500 120,472Audit Fees 15910 5,510 21,420

TOTAL 133,882 133,882 133,882 133,882 133,882 8,010 141,892

SCHEDULE - 3CURRENT ASSETS, LOANS & ADVANCES

As at 31.03.2006 As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005As at 31.03.2005

Rs. Rs.Rs.Rs.Rs.Rs.CASH AND BANK BALANCESa) Cash on hand 42 20b) Bank Balances with scheduled Banks

in current account 99,736 99,758

TOTAL 99,778 99,77899,77899,77899,77899,778

SCHEDULE - 4CURRENT LIABILITIES & PROVISIONS


Rs. Rs.Rs.Rs.Rs.Rs.Sundry Creditorsa) Due to Small Scale industrial - -

undertakings -NILb) Due to Others 141,670 133,660

TOTAL 141,670 133,660 133,660 133,660 133,660 133,660

SIGNIFICANT ACCOUNTING POLICIESSCHEDULE - 51. BASIS OF ACCOUNTING:

The Financial statements are prepared in accordance with Generally accepted Accounting principles (GAAP) followed in India under historical costconvention, on accrual basis and are in accordance with the mandatory accounting standards referred to in sub section 3C of Section 211 and theother provisions of the Companies Act, 1956.

SCHEDULE - 6NOTES ON ACCOUNTS1. Additional information pursuant to paragraph 3 of Part II of Schedule VI to the Companies Act, 1956 is not applicable since the Company is service Company.2. The Company does not have any dealings with small scale industrial undertakings and hence reporting regarding interest on delayed payments and

amounts due to them does not arise.3. Auditors’ remuneration and expenses charged to the accounts:

2005-2006 2004-20052004-20052004-20052004-20052004-2005 Rs. Rs.Rs.Rs.Rs.Rs.

Audit Fees 5,612 5,510Certification nil nil

4. Disclosure of Related PartiesA. Controlling Companies: Relationship

(i) HITEX Limited Holding Company(ii) L&T Infocity Limited Ultimate Holding Company(iii) Larsen & Toubro Limited Holding Company of L&T Infocity Limited

B. Transactions with Related Parties (Rs. in Lakh)S.No. Name of Relationship Nature of Amount Amount Amount

the Party Transaction due to due from1. Hyderabad International

Trade Expositions Limited Holding Company Nil Nil Nil Nil

2. L&T Infocity Limited Ultimate Holding Company Nil Nil Nil Nil

3. Larsen & Toubro Limited Holding Company ofL&T Infocity Limited Nil Nil Nil Nil

(No amounts pertaining to the related parties have been written off or written back during the period.)5. Previous year figures have been regrouped wherever necessary.6. The Company is yet to commence its commercial operations and hence no Profit & Loss Account has been made.

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N I L N I L

III. Position of Mobilisation and Deployment of Funds (Amount in. Rs.Thousands)



Paid up Capital(incl.Share Appl. Money) Reserves & Surplus

1 0 0 N I L



Net Fixed Assets(including CWIP &Pre-operative expenses) Investments

1 4 1 N I L


- 4 1 N I L

Accumulated Losses

N I L


(incl.other income)

N I L N I L

+ - Profit/(Loss) Before Tax + - Profit/(Loss) After Tax

N I L N I L


N I L N I LV. Names of three Principal Products / Services of Company (as per monetary terms)


ProductDescription /Service O R G A N I S I N G T R A D E F A I R S & E X H I B I T I O N S

}



L. VAIDYANATHAN S. HARIHARANPartner R. SRIDARAN

Directors

Membership No.16368


S-278

HYDERABAD INTERNATIONAL TRADE EXPOSITIONS LIMITED


Your Directors have pleasure in presenting their Third Report and the Audited Statement of Accounts for the year ended March 31, 2006.

FINANCIAL RESULTS

2005-2006 2004-2005

Rs. Rs.

Income 8,12,89,310 5,57,54,458

Profit/(Loss) before depreciation 1,44,73,651 (57,58,317)

Less : Depreciation & Miscellaneous Expenditure written off 1,04,26,702 97,48,144

Profit/(Loss) after depreciation 40,46,949 (1,55,06,461)

RESERVES

No transfer to Reserves have been made during the year.

DIVIDEND

Your Directors have not recommended any dividend since the Company has not wiped off the accumulated losses.


During the year Seventeen Events were conducted by prominent organizers like Indian Pharmaceutical congress, Government of India, Solar EnergySociety of India (SESI),Dubai World Trade Centre. Your Company itself has conducted the Hyderabad International Gem & Jewellery Show, theSmall and Medium Enterprises show (SME) 2005 supported by the Federation of Andhra Pradesh Small Industries Association (FAPSIA), andconsumer show jointly with The HINDU were well conceived and were successful shows.

OUTLOOK

Your Company has a confirmed order booking for Seventeen events for the financial year 2006-07.

FINANCE

During the financial year the Company received a sum of Rs 100 lakhs from Cyberabad Development Authority (CDA), Rs 25 lakhs from the NationalAcademy of Construction (NAC) as Equity amount..

CAPITAL EXPENDITURE

As at March 31, 2006 the gross fixed assets stood at Rs 529,824,482 and the net fixed assets at Rs.497,855,786 Additions during the year amountedto Rs.95,79,484.

DEPOSITS

The Company has not invited or accepted any deposits from the public during the year.


As required by Section 212 of the Companies Act, 1956 the Audited statement of Accounts, reports of the Board Directors and Auditors of AndhraPradesh Expositions (Pvt) Ltd is enclosed.


As the Company is engaged in providing infrastructure facilities to exhibitors there are no particulars to be disclosed as per the Companies (Disclosureof Particulars in the Report of Board of Directors) Rules, 1988.

PERSONNEL

There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees)Rules, 1975.

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ii) that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company at March 31, 2006 and of the profit of the Company for the yearended on that date;



DIRECTORS

Shri S. Hariharan, Shri N Babugovindaraj and Shri R. Sridaran were appointed in casual vacancy caused by the resignation of Shri K.V.Rangaswami,Shri V.B. Gadgil. Now Shri S. Hariharan and Shri N. Babugovindaraj, who were appointed as Directors in casual vacancy hold office up to the AnnualGeneral Meeting are eligible for re-appointment.

During the year, Shri K.V. Rao, Shri L.V. Subrahmanyam and Shri G Asok Kumar resigned from the Board and Smt Lakshmi Parthasarathy ShriB.P.Acharya, were inducted to the and Shri Jayesh Ranjan held on September 21, 2005.

Shri K.Venkatesh and Shri K.P. Raghavan were inducted as Additional Directors at the Board Meeting held on March 23, 2006 and hold office upt o theAnnual General Meeting and are eligible for reappointment.


PARTICULARS 2005-2006 2004-2005Rs. Rs.

Foreign Exchange Earnings 42,98,121 42,98,121 15,35,521 15,35,521

Foreign Exchange used

Travel 1,27,035 2,91,928

Consultancy NIL 10,85,285

Others 4,85,628 6,12,663 NIL 13,74,213

AUDIT COMMITTEE

The Audit Committee has met periodically during the year and given its report and recommendations to the Board of Directors for Corporate Governanceand overall improvement in the functioning of the Company.

AUDITORS

The Company’s auditors Sharp & Tannan, hold office upto the conclusion of the forthcoming Annual General Meeting and being eligible, are recommendedfor re-appointment. Certificate from the Auditors has been received to the effect that their re-appointment if made be within the prescribed limits u/s224(1B) of the Companies Act, 1956.

ACKNOWLEDGEMENT

The Directors are pleased to place on record their appreciation of the co-operation extended by L&T Infocity Limited, Housing Development FinanceCorporation and Government of India and the Government of Andhra Pradesh in for their active support given to the Company. The Directors placeon record their appreciation of the valuable contribution made by the staff of the Company.


R. SRIDARAN S. HARIHARAN

Directors


S-280


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTo the Members of Hyderabad International Trade Expositions Limited

We have audited the attached balance sheet of Hyderabad International Trade Expositions Limited (the Company) as at March 31, 2006 and also theprofit and loss account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.


In accordance with the provisions of Section 227 of the Companies Act, 1956, we report that :



a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes ofour audit;

b) In our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from our examination ofthose books;

c) The balance sheet and profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

d) In our opinion, the balance sheet and profit and loss account and cash flow statement dealt with by this report Comply with the accountingstandards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e) On the basis of the written representations received from directors of the Company as at March 31, 2006, and taken on record by the Boardof Directors, we report that none of the directors is disqualified as on March 31, 2006 from being appointed as a director in terms of clause(g) of sub-section (1) of section 274 of the Companies Act, 1956; and

f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

i) In the case of the balance sheet, of the state of affairs of the Company as at March 31, 2006

ii) In the case of the profit and loss account, of the loss for the year ended on that date; andiii) In case of the cash flow statement, of the cash flows for the year ended on that date.

Sharp & Tannan Chartered Accountants

Place: Hyderabad L. VaidyanathanDate : April 13, 2006 Partner

Membership No.16368

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Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 3 of the report of the Auditor’s to the Members of Hyderabad International Trade ExpositionsLimited on the accounts for the year ended March 31, 2006, we report that:(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) We are informed that the Managment of the Company has physically verified during the year all its fixed assets and no material discrepancieswere noticed on such verification.

(c) The Company has not disposed of any substantial part of its fixed assets so as to affect the going concern status.(ii) The Company is engaged in the business of providing and maintaining infrastructure facilities to exhibitors and hence the clauses 4 (ii) (a) (b)

& (c) relating to inventory are not applicable.(iii) According to the information and explanations given to us, the Company has not granted or taken any loans, secured or unsecured, to / from

Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting underclause - 4 (iii) (a) to (g) does not arise.

(iv) In our opinion, and according to the information and explanations given to us, there are adequate internal control systems commensurate withthe size of the Company and nature of its business for the purchase of inventory and fixed assets and for the services. In our opinion, andaccording to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control.

(v) In our opinion, and according to the information and explanations given to us, there are no transactions that need to be entered into theRegister in pursuance of Section 301 of the Companies Act, 1956 and hence reporting under clause 4 (V) (b) does not arise.

(vi) The Company has not accepted any deposit from the public within the meaning of section 58A , section 58AA and any other relevantprovisions of the Companies Act 1956. Hence clause 4(VI) of the Companies (Auditors’ Report) Order 2003, is not applicable to the Company.

(vii) In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.(viii) The Company is engaged in service activity and we are informed that maintainance of cost records under section 209 (1) (d) of the Companies

Act, 1956 is not applicable to the Company.(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has

been generally regular in depositing undisputed statutory dues including Provident Fund, Income-tax, Wealth Tax, Custom Duty, ServiceTax, cess and any other statutory dues during the year with the appropriate authorities. As at March 31, 2006, there are no undisputedstatutory dues payable for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues which have not been deposited on account of any disputeof income tax, service tax and cess.

(x) In our opinion the accumulated losses of the Company are not more than fifty per cent of its net worth. Further, the Company has not incurredcash losses during the financial year covered by our audit. However the Comany has incurred cash losses in the immediately precedingfinancial year.

(xi) In our opinion and according to the information and explanation given to us, The Company has not defaulted in repayment of dues to financialinstitution or bank or debenture holders.


(xiii) In our opinion, the Company is not a chit fund / nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Companies(Auditors’ Report) Order, 2003 are not applicable to the Company.


(xv) The Company has not given any guarantee for loans taken by others from banks and financial institutions.(xvi) In our opinion and according to the information and explanation given to us, the term loans have been applied for the purposes for which they

were obtained.(xvii) According to the information and explanations given to us, the Company has not raised funds on short-term basis. Accordingly, the provisions

of clause 4 (xvii) of the Companies (Auditors’ Report) Order 2003 are not applicable to the Company.(xviii) The Company has not made any preferential allotment of shares to parties and Companies covered in the register maintained under section

301 of the Companies Act 1956, during the year.(xix) The Company has not issued debentures during the year. Accordingly, no security or charge need to be created.(xx) The Company has not raised any money by public issues during the year.(xxi) During the course of audit of the books of account and other records of the Company carried out in accordance with the generally excepted

auditing practices in India, we have not come across any instance of fraud on or by the Company, noticed or reported during the year, nor havewe been informed of such cases by the management.


Place: Hyderabad L. VaidyanathanDate : April 13, 2006 Partner

Membership No.16368

S-282




S. HARIHARAN Director

Ms. LAKSHMI PARTHASARTHY Director



L. VaidyanathanPartnerMembership No. 16368


As at 31.3.2006 As at 31.3.2005Rupees Rupees

SOURCES OF FUNDS: Schedules

SHAREHOLDERS’ FUNDS :Share Capital 1 148,700,000 500,000

Share Application Money – 148,700,000 135,700,060 136,200,060

Reserves & SurplusLOAN FUNDS

Secured Loans 2 400,000,000 400,000,000Unsecured Loans 3 1,059,590 1,059,590

DEFERRED TAX LIABILITY 48,652,84748,652,84748,652,84748,652,84748,652,847 38,229,979

TOTAL 598,412,437 575,489,629

APPLICATION OF FUNDSFIXED ASSETS 4GROSS BLOCK 529,824,482 520,244,998Less: Depreciation 31,968,696 21,541,994

NET BLOCK 497,855,786 498,703,004Capital Work in Progress 2,893,310 2,893,310

500,749,096 501,596,314

INVESTMENTS 5 100,000 100,000CURRENT ASSETS, LOANS & ADVANCES 6 CURRENT ASSETSa) Sundry Debtors 4,014,046 7,970,735b) Cash and Bank Balances 45,414,483 35,161,484c) Loans & Advances 1,881,035 2,035,818

51,309,564 45,168,037

Less: CURRENT LIABILITIES & PROVISIONS 7a) Sundry Creditors 19,317,412 30,597,231b) Provisions 199,205 83,123

19,516,617 30,680,354

NET CURRENT ASSETS 31,792,947 14,487,683PROFIT AND LOSS ACCOUNT 65,770,394 59,305,632

TOTAL 598,412,437 575,489,629

SIGNIFICANT ACCOUNTING POLICIES ANOTES ON ACCOUNTS B

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Sch. 2005-2006 2004-2005No. Rs. Rs.

INCOME

Income from Services 80,485,821 54,824,288

Other Income 8 803,489 930,170

TOTAL 81,289,310 55,754,458

EXPENDITURE

Staff Expenses 9 4,216,928 4,281,070

Sales, Administration and Other Expenses 10 26,591,019 21,228,245

Interest & Brokerage 11 36,007,712 36,003,460

Depreciation 12 10,426,702 9,748,144

TOTAL 77,242,361 71,260,919

Profit / (Loss) for the Year 4,046,949 (15,506,461)

Provision For Taxes – –


Provision for Deferred Tax Liability 10,422,868 12,899,045

Profit after Tax (6,464,762) (28,405,506)

Balance brought forward from previous year (59,305,632) (30,900,126)

Balance Carried to Balance Sheet (65,770,394) (59,305,632)

Earning per Share - Basic (0.44) (568.11)

Earning per Share - Diluted (0.44) (2.09)

SIGNIFICANT ACCOUNTING POLICIES A

NOTES ON ACCOUNTS B








S-284


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 2005-2006 2004-2005Rs. Lakhs Rs. Lakhs

A. Cash Flow from Operating ActivitiesNet Profit Before Tax 40.47 (155.06)Adjustments for:Dividend Received – –Depreciation (including obsolescence) and amortisation 104.27 97.48Unrealised foreign exchange difference - net (gain/loss) – –Interest (net) 347.46 347.96(Profit)/Loss on sale of fixed assets (net) – –(Profit)/Loss on sale of Investments (net) – –Provision for Leave encashment & Gratuity 0.27 0.51Operating Profit before Working Capital Changes 492.47 290.89Adjustments for:(Increase)/Decrease in Loans & Advances 41.11 (14.50)(Increase)/Decrease in Inventories – –(Increase)/Decrease in Miscellaneous Expenditure – –Increase/(Decrease) in trade Payables (112.80) 76.16Cash generated from Operations 420.78 352.55Direct Taxes refund/(paid) (net) – –Net Cash From Operating Activities 420.78 352.55

B. Cash Flow from Investing Activities:Purchase of Fixed Assets (95.79) (126.99)Sale of Fixed Assets (including monies received as advance – –Purchase of Investments – –Sales of Investments – –Loans/Deposits made with Subsidiaries/Associates (net) – –Advance towards Equity Commitment – –Interest Received 12.62 12.07Dividend Received from Subsidiaries – –Dividend Received from other Investments – –Net Cash used in/from Investing Activities (83.18) (114.92)

C. Cash Flow from Financing ActivitiesProceeds from issue of Share Capital 125.00 150.00Proceeds from Long Term Borrowings – –Repayment of Long Term Borrowings – –Repayments/Proceeds from other Borrowings (net) – –Gratuity paid – –Dividends Paid – -Additional Tax on Dividend – –Interest Paid (360.08) (360.03)Net Cash Used in/From Financing Activities (235.08) (210.03)Net Decrease/Increase in cash and Cash Equivalents (A+B+C) 102.53 27.59Cash and Cash Equivalents at the beginning of the year 351.61 324.02Less: Transfers if any – –Cash and Cash Equivalents at the end of the year 454.14 351.61

Notes:1 Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS)3:”Cash Flow Statements”

issued by the Institute of Chartered Accountants of India.2 Purchase of Fixed Assets includeds movement of Capital Workin Progress during the year.3 Cash and Cash equivalents represent cash and bank balances.




Hyderabad, April 13, 2006



Hyderabad, April 13, 2006

S-285


AS AT 31.03.2006 AS AT 31.03.2005Rs. Rs.

SCHEDULE - 1SHARE CAPITALAUTHORISED :1,52,00,000 Equity Shares of Rs10/- each 152,000,000 152,000,000

ISSUED, SUBSCRIBED AND PAID UP :1,48,70,000 Equity Shares of Rs.10/- Each fully paid up. 148,700,000 500,000

SCHEDULE - 2SECURED LOANSTerm Loan fromHDFC Limited 400,000,000 400,000,000(Secured by mortgage of leasehold rights on 69.36 Acres of Leasehold Landon survey no.5/2 to 5/23 of Izzat Nagar Village, Lingampalli Mandal, Ranga ReddyDist., AP and all structures of the Trade Centre both present & future.)

TOTAL 400,000,000 400,000,000

SCHEDULE - 3UNSECURED LOANSUnsecured LoanInterest free loan from M/s Cidex Trade Fairs Pvt Limited repayable at the end of the10th year from 17th April, 2003 being the date of receipt of the loan amount videMemorandum of Understanding dated 23rd May, 2002. 1,059,590 1,059,590

TOTAL 1,059,590 1,059,590


SCHEDULE - 4FIXED ASSETS Rupees

Gross Block Depreciation Net Block Net Block

Descriptions As at Additions Disposal As at As at For the On As at As at As at01-04-2005 during the during the 31-03-06 01-04-2005 Year Disposals 31-03-2006 31-03-06 31-03-2005

year year

Buildings ** 468,497,653 9,572,839 – 478,070,492 16,817,797 7,785,261 – 24,603,058 453,467,434 451,679,856

Plant & Machinery 46,655,895 – – 46,655,895 3,850,923 2,216,155 – 6,067,078 40,588,817 42,804,972

Furnitures& Fixtures 3,209,126 – – 3,209,126 438,380 203,138 – 641,518 2,567,608 2,770,746

Computers 973,362 – – 973,362 308,561 157,782 – 466,343 507,019 664,801

Office Equipments 908,962 6,645 – 915,607 126,333 64,366 – 190,699 724,908 782,629

Total 520,244,998520,244,998520,244,998520,244,998520,244,998 9,579,484 – 529,824,482 21,541,99421,541,99421,541,99421,541,99421,541,994 10,426,702 – 31,968,696 497,855,786 498,703,004

Previous Year 12,699,357 11,793,850 9,748,144 21,541,994 498,703,004

Capital Work In Progess 2,893,310 2,893,310

Note : ** The Building is constructed on lease hold land (90.36 Acres) on a 66 years Lease Agreement entered with National Academy of Construction (NAC). A sum of Rs.100/- per yearfor the period commencing from 01.10.2001 to 30.09.2007 is payable to NAC as Lease Rent and to be paid at a predetermined rate as per lease agreement dated 01.10.2001for balance unexpired period of lease.

S-286



PARTICULARS As at 31.03.2006 As at 31.03.2005Rs. Rs.

SCHEDULE - 5INVESTMENTSLong Term Investments : (At cost)UnquotedAndhra Pradesh Expositions Private Limited 100,000 100,000(10000 shares of Rs.10/- each fully paid up)

TOTAL 100,000 100,000

SCHEDULE - 6

CURRENT ASSETS, LOANS & ADVANCESSUNDRY DEBTORS– Debts outstanding for a period exceeding six months 1,342,725 –– Other Debts 2,671,321 –

4,014,046 7,970,735

4,014,046 7,970,735

4,014,046 7,970,735

CASH AND BANK BALANCESCash on hand – –Bank Balances with scheduled Bankson current accounts 4,375,595 4,817,716on fixed deposits account(incl interest accrued thereon) 41,038,888 45,414,483 30,343,768 35,161,484

45,414,483 35,161,484

LOANS AND ADVANCESAdvances recoverable in cash or in kind or for value to be received. 1,881,035 2,035,818(Unsecured considered good)

1,881,035 2,035,818

TOTAL 51,309,564 45,168,037

SCHEDULE - 7CURRENT LIABILITIES & PROVISIONSA) CURRENT LIABILITIES & PROVISIONS

Sundry Creditorsa) Due to Small Scale industrial undertakings – –b) Due to holding Companies

1) Larsen & Toubro Limited (Ultimate holding Company) 12,381,220 22,314,1022) L&T Infocity Limited (Holding Company) – 1,620,782 23,934,884

c) Others 6,936,192 6,662,34723,934,884

B) PROVISIONSa) Provision for Leave Encashment 110,362 83,123b) Provision for Fringe Benefit Tax 88,843 –

TOTAL 19,516,617 54,615,238

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PARTICULARS 2005-2006 2004-2005Rs. Rs.

SCHEDULE - 8OTHER INCOME

Maintenance Recovery 321,900 372,600Electricity Recovery 433,890 416,570Internet Charges Recovery 47,699 141,000

TOTAL 803,489 930,170

SCHEDULE - 9STAFF EXPENSESSalaries, Wages and Bonus 2,374,230 2,293,439Contribution to and Provision forProvident Fund 76,211 83,312Leave Encashment 27,239 50,505

2,477,680 2,427,256Welfare and other expenses 1,739,248 1,853,814

TOTAL 4,216,928 4,281,070

SCHEDULE - 10SALES, ADMINISTRATION AND OTHER EXPENSESRent Rates & Taxes 2,665,117 100Power and Water charges 4,785,341 4,345,221Repairs & Maintenance - others 6,229 116,422Sundries - Others 727,415 529,792Property Maintenance 5,798,507 5,145,766Advertisement Expenses 3,469,088 6,647,341Telephone, Postage & Telegrams 517,488 578,370Travel & Conveyance 1,897,171 1,682,744Professional & Consultancy Charges 260,666 673,972Printing & Stationary 1,142,073 1,058,966Fashion show expenses 874,640 –Stand construction charges 4,094,501 –Foreign exchanage losses 1,351 –Insurance Charges 351,432 449,551

TOTAL 26,591,019 21,228,245

SCHEDULE - 11INTEREST AND BROKERAGEInterest and Finance Charges on Term Loan 36,000,000 36,000,000Interest on others 7,712 3,460

TOTAL 36,007,712 36,003,460

SCHEDULE - 12DEPRECIATIONDepreciation for the year 10,426,702 9,748,144

TOTAL 10,426,702 9,748,144

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Balance sheet abstract and Company’s general businss profile







N I L N I L



5 9 8 3 1 2 5 9 8 3 1 2Sources of Funds

Paid up Capital (incl. Share Appl. Money) Reserves & Surplus

1 4 8 7 0 0 N I L


4 0 0 0 0 0 1 0 6 0Deferred Tax

4 8 6 5 3


(including CWIP & Pre-operative expenses

5 0 0 7 4 9 1 0 0


5 0 3 9 4 4 7 0 7 0

Accumulated Losses

5 9 3 0 5


8 1 2 8 9 7 7 2 4 3

Profit/Loss before Tax Profit/Loss after Tax4 0 4 6 6 4 6 4

Earning per share (Rs.) (Basic Diluted) Dividend Rate %

– . 4 4 N I L



Product Description P R O V I D I N G I N F R A S T R U C T U R EF O R T R A D E F A I R S



+ –✓

+ –✓

SCHEDULE - 13








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HPL COGENERATION LIMITED


1. FINANCIAL RESULTSRs. in Lacs

Description 2005-2006 2004-2005

Profit before depreciation and tax 13,629.65 9,956.81

Less : Depreciation on Fixed Assets 2,772.46 2,763.82

Profit before tax 10,857.19 7,192.99

Provision for current tax 915.33 564.02

Provision for deferred tax (net) 233.42 (5,735.16)

Provision For Fringe Benefit Tax 1.46 1,150.21 (5,171.14)

Profit after Tax 9,706.98 12,364.13

Add: Balance Brought forward from last year 6,825.70 138.94

Balance available for disposal of which theDirectors appropriate as follows: 16,532.68 12,503.07

General Reserve 970.70 1,236.41

Dividend 9,331.00 3,861.00

Additional Tax on Dividend 1,308.67 579.96

11,610.37 5,677.37

Leaving a balance to be carried forward of 4,922.31 6,825.70

2. DIVIDENDThe Company paid interim dividend as under :

Rs. 41,07,88,550 on 24-09-2005

Rs. 39,14,44,175 on 27-03-2006

The Directors recommend a final dividend of Rs. 2.14 per equity share aggregating to a total dividend of Rs. 84,13,00,000 on 6,12,00,000 Equityshares of Rs 10 each, and Rs. 9,18,00,000 on 6.12,00,000 Preference shares of Rs. 10 each.

3. YEAR IN RETROSPECTThe plant is operating in a stable manner and is meeting the power and steam requirements of Haldia Petrochemicals Limited successfully. The Salesand Other Income for the financial year under review were Rs.17,137.24 Lacs. Profit before Tax and Profit after Tax for the financial year under reviewwas Rs.10,857.19 Lacs and Rs.9,706.98 Lacs respectively.

4. FINANCEThere has not been any borrowings during the year under review. The Company repaid loan installments of Rs. 5021.15 Lacs during the year.

5. CAPITAL EXPENDITUREAs at 31st March, 2006 the gross fixed assets stood at Rs. 52,908.04 Lacs and the net fixed assets at Rs. 35954.27 Lacs. Additions during the yearamounted to Rs. 152.08 Lacs.

6. DEPOSITSDuring the period under review the Company has not accepted any deposits from the public.

7. AUDITORS’ REPORTThe Auditors’ Report to the Shareholders, together with the notes to the accounts referred to in the Auditors’ Report, are self-explanatory andtherefore do not call for any further comments.

8. DISCLOSURE OF PARTICULARSInformation as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 relating to conservation of energy,technology absorption, foreign exchange earnings and outgo are given in Annexure ‘A’ forming part of the report.

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9. PERSONNEL




• that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departurethere from ;

• that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for theyear ended on that date;

• that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

• that the annual accounts have been prepared on a going concern basis.

11. DIRECTORS

Mr. V.K.Magapu resigned as the Director of the Board with effect from September 24, 2005. Mr. Magapu was Director since February 3, 2000.

The Board of Directors, at its meeting held on September 24, 2005,appointed Mr A.K.Chhatwani as a Director in the casual vacancy caused by theresignation of Mr V.K. Magapu

Mr Swapan K. Bhowmik resigned as the Director of the Board with effect from March 27, 2006. Mr Bhowmik was Director since June 20, 2002.

Mr Bani B.Banerjee resigned as the Director of the Board with effect from March 27, 2006. Mr Banerjee was Director since May 14, 2005.

The Board of Directors, at its meeting held on March 27, 2006, appointed Mr S.R.Ghosh and Mr S.P.Bandopadhyay as Directors in the casualvacancy caused by the resignation of Mr Swapan K.Bhowmik and Mr Bani B.Banerjee.

The Directors place on record their appreciation of the valuable services rendered by Mr. V.K.Magapu, Mr Swapan K. Bhowmik and Mr Bani B.Banerjee.

The Company has received a notice from a member under the provisions of Section 257 of the Companies Act, 1956 proposing the candidatures ofMr A.K.Chhatwani, Mr S.R.Ghosh and Mr S.P.Bandopadhyay for the office of Directors.

Mr. K.Venkataramanan and Mr. N.Sivaraman retire by rotation and are eligible for re-appointment.

12. AUDIT COMMITTEE

During the year under review, consequent to the resignations from the Board of Directors of Mr V.K.Magapu, Mr Swapan K.Bhowmik and Mr BaniB.Banerjee, the Audit Committee was re-constituted. Accordingly, Mr A.K.Chhatwani and Mr S.P.Bandopadhyay were appointed as members of theCommittee in place of Mr V.K.Magapu and Mr Bani B.Banerjee. The Audit Committee consists of three non executive directors, namely Mr.A.K.Chhatwani,Mr.N.Sivaraman and Mr.S.P.Bandopadhyay.

The role, terms of reference, the authority and power of Chairman are in conformity with the requirements of Section 292A of the Companies Act,1956.

The Committee met periodically during the year and had discussions with the auditors on internal control systems and internal audit report.

13. AUDITORS

The Auditors, M/s.S.R.Batliboi & Co, Chartered Acccountants, hold office until the conclusion of the ensuing Annual General Meeting and beingeligible are recommended for re-appointment. A Certificate from the auditors has been received to the effect that their re-appointment, if made, wouldbe within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

14. ACKNOWLEDGEMENTS

The Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, vendors, suppliers and customers.The Directors are pleased to place on record their appreciation for the valuable contribution made by the employees of the Company.


Place : Mumbai K. Vankataramanan N. SivaramanDate : May 16, 2006 Director Director

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Annexure – A to the Directors’ ReportAnnexure – A to the Directors’ ReportAnnexure – A to the Directors’ ReportAnnexure – A to the Directors’ ReportAnnexure – A to the Directors’ Report

A. CONSERVATION OF ENERGY

a) Energy Conservation measures taken

1) Energy Audit conducted.

2) Intermediate running of Auxiliary equipment compared to continuous operation..

3) Segregation of lighting load and reduction in voltage level for optimizing power consumption.

b) Additional investments and proposals, if any, being implemented for reduction of conservation of energy :

Not Applicable.

c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of thegoods.

Total energy savings during the year is 148186 KWH.

d) Total energy consumption and energy consumption per unit of production as per Form A of the Annexure in respect of the industriesspecified in the schedule thereto

Not Applicable.

B TECHNOLOGY ABSORPTION

e) There are no particulars to be disclosed under this head

C FOREIGN EXCHANGE EARNINGS AND OUTGO

f) There are no particulars to be disclosed under this head.

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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF HPL COGENERATION LIMITED

1.0 We have audited the attached Balance Sheet of HPL COGENERATION LIMITED, as at 31st March, 2006 and also the Profit and Loss Account andthe cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

2.0 We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3.0 As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A)of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4.0 Without qualifying our opinion, we draw attention to Note no II, 1 of Schedule L to the financial statements regarding claims from Haldia PetrochemicalsLimited, which are under discussion against which the Company does not expect to incur any significant liability. The ultimate outcome of the mattercannot presently be determined and no provision for any liability, that may result, has been made in the financial statements.

5.0 Further to our comments in the Annexure referred to vide paragraph 3.0 above, we report that:–

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of ouraudit;

(ii) Subject to accounting for certain payments on cash basis as referred to vide Accounting Policy I (a) of Schedule L, in our opinion, properbooks of account as required by law have been kept by the company, so far as it appears from our examination of such books;

(iii) The Balance Sheet, Profit and Loss Account and cash flow statement referred to in this report are in agreement with the books of account;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and cash flow statement dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

(v) On the basis of written representations received from the directors, as on 31st March 2006, and taken on record by the Board of Directors, wereport that none of the directors are disqualified as on 31st March 2006 from being appointed as a director in terms of clause (g) of sub-section(1) of section 274 of the Companies Act, 1956.

6.0 In our opinion and to the best of our information and according to the explanations given to us, the said accounts, subject to our observation videparagraph 5 (ii) above, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India.

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2006;

(b) in the case of the Profit and Loss Account, of the profit for the year ended on that date;

(c) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

S. R. BATLIBOI & CO.CHARTERED ACCOUNTANTS

22, Camac StreetBlock ‘C’, 3rd Floor PerKolkata – 700 016. ( RAHUL ROY )

a PartnerDate : May 16, 2006 Membership No. 53956

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Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ Report(As referred to in Paragraph 1.0 of our Report of even date)

(i) (a) The Company maintains proper records showing full particulars, including quantitative details and situation of fixed assets.

b) Fixed assets have been physically verified by the management during the year which in our opinion is reasonable having regard to the size of theCompany and the nature of its fixed assets. As informed, no material discrepancies were noticed on such verification.

(c) There was no substantial disposal of fixed assets during the year.

(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during the year.

(b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of theCompany and the nature of its business.

(c) The Company maintains proper records of inventory and no material discrepancies were noticed on physical verification.

(iii) (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the registermaintained under section 301 of the Companies Act, 1956 and as such clauses (iii) (b) to (iii) (d) of the Companies (Auditor’s Report) Order,2003are not applicable to the Company.

(b) As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the registermaintained under section 301of the Companies Act, 1956 and as such clauses (iii) (f) to (iii) (g) of the Companies (Auditor’s Report) Order, 2003are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the sizeof the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services.

(v) According to the information and explanations provided by the management, we are of the opinion that there have been no transactions that need tobe entered in the register maintained under section 301 of the Companies Act, 1956 and hence clause (v) (b) is not applicable.

(vi) The Company has not accepted any deposits from the public within the meaning of Sections 58A, 58AA or any other relevant provisions of theCompanies Act, 1956.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for themaintenance of cost records under section 209(1) (d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accountsand records have been made and maintained.

(ix) (a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues including Provident Fund, Employees’State Insurance, Income-Tax, Service Tax, Custom Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) According to the information and explanations given to us, except for the cases stated below, there are no undisputed amounts payable inrespect of provident fund, employees’ state insurance, income-tax, service tax, customs duty, cess and other statutory dues which wereoutstanding, at the year end for a period of more than six months from the date they became payable.

Name of the Nature of the dues Amount Period to whichStatute (Rs. in lacs) the amount relates

Research & Cess on foreign remittances 89.87 2001-2002,Development to O&M contractors provided 2002-2003,Cess Act, 1986 but not paid in view of an 2003-2004,

approval letter received by its 2004-2005 &holding company i.e. L&T from 2005-2006RBI

According to the information and explanations given to us, there is no amount payable in respect of sales tax, wealth tax and excise duty for aperiod of more than six months.

(c) According to the records of the Company, the dues outstanding of income-tax, sales tax, wealth tax, service tax, custom duty, excise duty andcess on account of any dispute, are as follows:

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Name of the Nature of dues Amount Period to which Forum where disputestatute (Rs. in lacs) the amount relates is pending

Customs Claims raised by the 2570.50 1999-2000 The Company hasAct, 1962 customs authorities filed an appeal with

considering the plant the Appellate Tribunalas “Captive and the same has notConsumption yet come up for hearing.Power Plant” (Refer Note 1 (i) of

Schedule L to accounts)

Income Tax Order under 234.41 Assessment The Company hasAct, 1961 Section 143 (3) Year 2003-2004 preferred an appeal

of the Act before Income TaxAppellate Tribunal

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately precedingfinancial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management ,we are of the opinion that the Company hasnot defaulted in repayment of dues to a financial institution, bank or debenture holders.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not grantedloans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund/ society. Therefore, the provisions of clause 4 (xiii) of the Companies(Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) As informed and explained to us, the Company has not dealt/traded in securities or debentures during the year. In our opinion and according to theinformation and explanations given to us, proper records have been maintained of the transactions and contracts relating to dealing / tradings inShares and Other investments and timely entries have been made therein. The shares and other investments have been held by the Company, in itsown name

(xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by its associates or subsidiariesor others from bank or financial institutions.

(xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company as at 31st March 2006,we report that no funds raised on short-term basis have been used for long-term investment.

(xviii)The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of theCompanies Act, 1956.

(xix) The Company does not have any outstanding debentures during the year.

(xx) The Company has not raised any money through a public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the informationand explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of ouraudit.

S. R. BATLIBOI & CO.CHARTERED ACCOUNTANTS

22, Camac StreetBlock ‘C’, 3rd Floor Per (RAHUL ROY)Kolkata – 700 016. a PartnerDate : May 16, 2006 Membership No. 53956

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Balance Sheet as at 31st March, 2006Balance Sheet as at 31st March, 2006Balance Sheet as at 31st March, 2006Balance Sheet as at 31st March, 2006Balance Sheet as at 31st March, 2006

As at 31st March 2006 As at 31st March 2005Schedule Rupees Rupees Rupees Rupees

SOURCES OF FUNDS


Share Capital A 1,224,000,000 1,224,000,000

Reserves & Surplus B 820,585,382 913,855,016

LOANS

Secured Loans C 1,556,456,003 2,058,570,669

Deferred Tax Liability(net) 391,707,589 368,365,535

( Refer Note No. 9 on Schedule L )

TOTAL 3,992,748,974 4,564,791,220


FIXED ASSETS D

Gross Block 5,290,804,247 5,275,595,445

Less : Depreciation 1,695,377,525 1,418,131,558

Net Block 3,595,426,722 3,857,463,887

CURRENT ASSETS, LOANS AND ADVANCES E

Inventory 54,515,082 45,681,559

Sundry Debtors 27,691,225 -

Cash and Bank Balances 193,019,965 378,478,737

Loans and Advances 453,515,373 465,106,219

728,741,645 889,266,515

LESS : CURRENT LIABILITIES AND PROVISIONS F

Current Liabilities 132,537,706 156,640,776

Provisions 198,881,687 25,298,406

331,419,393 181,939,182

NET CURRENT ASSETS 397,322,252 707,327,333

TOTAL 3,992,748,974 4,564,791,220

Accounting Policies & Notes to the Accounts L

As per our report attached of even date

S.R. Batliboi & Co. S.M.Shamim Eqbal K.Venkataramanan N.SivaramanChartered Accountants Manager Director Director

Per Rahul Roy P.R. Lilaoonwalaa Partner SecretaryMembership No.53956

Place : Kolkata Place : MumbaiDate : May 16, 2006 Date : May 16, 2006

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Profit and Loss Account for the year ended 31st March, 2006Profit and Loss Account for the year ended 31st March, 2006Profit and Loss Account for the year ended 31st March, 2006Profit and Loss Account for the year ended 31st March, 2006Profit and Loss Account for the year ended 31st March, 20062005-2006 2004-2005


INCOME

Earnings from facilitation charges 1,710,342,317 1,409,327,786 (including TDS Rs.37,331,973

Previous Year Rs.28,196,811)

Other Income G 3,382,259 211,157

1,713,724,576 1,409,538,943

EXPENDITURE

Operating Expenses H 148,713,899 174,083,794

Staff Expenses I 459,668 767,353

Administration & Other Expenses J 48,843,773 53,660,151

Interest K 152,742,037 185,346,719

Depreciation 277,245,967 276,382,182

628,005,344 690,240,199

Profit before Tax 1,085,719,232 719,298,744

Provision for Tax

- Current 91,533,413 56,401,933

- Deferred (Net) 23,342,054 (573,516,185)

- Fringe Benefit Tax 146,124 115,021,591 - (517,114,252)

Profit after tax 970,697,641 1,236,412,996

Add/(Less): Balance brought forward from previous year 682,569,868 13,894,057

Profit available for appropriation 1,653,267,509 1,250,307,053

Less: Transferred to General Reserve 97,069,764 123,641,300

Profit available for distribution 1,556,197,745 1,126,665,753

Preference dividend 91,800,000 91,800,000

Equity dividend 841,300,000 294,300,000

Tax on dividend 130,867,275 57,995,885


Accounting Policies & Notes to the Accounts L

Earning Per Share - Basic & Diluted (Rs.) 14.15 18.48

Face Value of Shares 10.00 10.00





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Cash Flow Statement for the year ended 31st March, 2006Cash Flow Statement for the year ended 31st March, 2006Cash Flow Statement for the year ended 31st March, 2006Cash Flow Statement for the year ended 31st March, 2006Cash Flow Statement for the year ended 31st March, 2006

Rs. Rs.2005-2006 2004-2005

A. Cash Flow from Operating activities

Net Profit before Taxation and extraordinary item 1,085,719,232 719,298,744

Adjustments for:

Depreciation 277,245,967 276,382,182

Interest expense (net) 152,742,037 185,346,719

Provision no longer required (3,162,570) -

Foreign Exchange loss (net) 424,761 -

Loss on Insurance claim - 3,955,399

Operating Profit before Working Capital changes 1,512,969,427 1,184,983,044

Adjustments for:

(Increase)/Decrease in Trade and Other Receivables (26,840,455) 456,838

(Increase)/Decrease in Inventories (8,833,523) (6,276,118)

Increase/(Decrease) in Payables (9,446,898) 21,010,586

Cash generated from operations 1,467,848,551 1,200,174,350

Direct Taxes paid 94,800,931 54,860,020

Net Cash from Operating activities 1,373,047,620 1,145,314,330

B. Cash Flow from Investing Activities

Purchase of Fixed Assets (618,700) (28,635,010)

Realisation against discard of fixed assets - 36,248,019

Puchase of Investments (2,357,164,705) (4,218,181,312)

(including Fixed Deposits when considerd as investments)

Disposal of investments 2,559,040,158 4,273,996,684


Net Cash (used in)/ from Investing activities 248,566,214 91,518,417

C. Cash Flow from Financing Activities

Repayment of Long Term Borrowings (517,232,332) (519,495,667)

Dividend paid (802,232,725) (386,100,000)

Tax on Dividend (91,208,052) (81,243,971)

Interest paid (197,909,744) (234,194,119)

Net Cash (used in)/from Financing Activities (1,608,582,853) (1,221,033,757)

Net(decrease)/Increase in cash & cash equivalents (A+B+C) 13,030,979 15,798,990

Cash & cash equivalents at the beginning of the year 64,000,606 48,201,616

Cash & cash equivalents at the end of the year 77,031,585 64,000,606

Notes:

1. Cash Flow Statement has been prepared under the Indirect Method as set out in the Accounting Standard - 3 issued by the Institute of CharteredAccountants of India.

2. Previous year’s figures have been regrouped / rearranged wherever necessary





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Schedules forming part of the accountsSchedules forming part of the accountsSchedules forming part of the accountsSchedules forming part of the accountsSchedules forming part of the accountsAs at 31st March, 2006 As at 31st March, 2005

Schedule A- Share Capital Rupees Rupees Rupees RupeesAuthorised :63,800,000(previous year: 63,800,000) Equity Shares of Rs. 10 each 638,000,000 638,000,00061,200,000(Previous year: 61,200,000) Preference Shares of Rs. 10 each 612,000,000 612,000,000

1,250,000,000 1,250,000,000

Issued, Subscribed and Paid up :61,200,000 Equity Shares of Rs. 10 each fully paid[Of the above, 31,212,000 ( previous year: 31,212,000) shares are held by Larsen &Toubro Limited (the holding company)] 612,000,000 612,000,00061,200,000(61,200,000) 15% Cumulative Redeemable Preference Shares 612,000,000 612,000,000of Rs. 10 each fully paid.[Of the above, 31,212,000 (previous year: 31,212,000) shares are held by Larsen &Toubro Limited (the holding company)]

1,224,000,000 1,224,000,000

Note:

(1) 15% Cumulative Redeemable Preference Shares are redeemable at par on 11.10.2007.

Schedule B- Reserves & SurplusGeneral ReserveAs per last Balance Sheet 231,285,148 107,643,848Transferred from Profit & Loss Account 97,069,764 328,354,912 123,641,300 231,285,148

Profit & Loss Account Balance 492,230,470 682,569,868

820,585,382 913,855,016

Schedule C- Secured LoansTerm Loans from Banks- Foreign Currency loan 642,456,000 839,904,000- Rupee loan 914,000,003 1,556,456,003 1,218,666,669 2,058,570,669

1,556,456,003 2,058,570,669

Note:

1. The above Term Loans are secured by equitable mortgage of all immovable properties of the Company and by hypothecation of all its movableassets including book debts.

2. Out of the above Rs. 518,818,667 ( previous Rs.514,642,667 ) is due for repayment within 1 year.

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Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedule D - Fixed Assets

GROSS BLOCK DEPRECIATION NET BLOCK

As at ADDI- DEDUC- As at As at ADDI- DEDUC- As at As at As atPARTICULARS 01.04.2005 TIONS TIONS 31.03.2006 01.04.2005 TIONS TIONS 31.03.2006 31.03.2006 31.03.2005

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Leasehold Land 1 1 0 0 1 1

Building

-Freehold 160600032 160600032 27547771 5207086 32754857 127845175 133052261

-Leasehold 19159429 19159429 1701280 312641 2013921 17145508 17458149

Plant, Machinery &Equipments 5094249752 15204744 5109454496 1388388134 271626130 1660014264 3449440232 3705861618

Furniture & Fixtures 1586231 4058 1590289 494373 100110 594483 995806 1091858

Sub Total 5275595445 15208802(a) 0 5290804247 1418131558 277245967 0 1695377525 3595426722 3857463887

Total 5275595445 15208802 0 5290804247 1418131558 277245967 0 1695377525 3595426722 3857463887

Previous Year Total 5241447735 34148009 299 5275595445 1141749379 276382267 85 1418131560 3857463887

Notes :(a) Exchange fluctation capitalised during the year Rs.14,590,102 [previous year (Rs.5,512,999)]

As at 31st March, 2006 As at 31st March, 2005


Schedule E - Current Assets, Loans and Advances

Current Assets:

(a) Inventories:

- Stores & Spare Parts 54,515,082 45,681,559

(b) Sundry Debtors

- Other Debts

- Unsecured, considered good 27,691,225 -

(c) Cash and Bank Balances:

Cash in Hand 839 8540

With scheduled Banks on :

- on Current accounts * (Refer Note No. 5 On Schedule L) 77,030,746 63,992,065

- on Fixed Deposits 115,888,277 314,263,475

Interest accrued on Fixed Deposits 100,103 193,019,965 214,657 378,478,737

(d) Loans and Advances

Unsecured, considered good

- Loans to employees - 40,000

- Balances with Customs 24,337,039 24,337,039

- Advances recoverable in cash or in kind 29,178,334 27,565,344

or for value to be received

- Intercorporate Deposits 400,000,000 453,515,373 413,163,836 465,106,219(includes accrued interest Rs.Nil (previous year Rs.13,163,836))

728,741,645 889,266,515

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Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)As at 31st March, 2006 As at 31st March, 2005

Schedule F - Current Liabilities and Provisions Rupees Rupees Rupees RupeesCurrent Liabilities :- Sundry Creditors 3,844,345 3,862,137- Interest accrued but not due on loans 35,409,509 43,045,890- Other liabilities 93,283,852 95,108,857- Advance received from Customers - 14,623,892

132,537,706 156,640,776Provisions:- Provisions for Taxation 4,156,270 1,065,905

(Net of Income tax receivable Rs.87,377,143 (Rs.55,336,028))- Proposed Equity Dividend 130,867,275 -- Tax on Dividend 63,855,825 24,196,602- Gratuity 1,554 20,859- Leave Encashment 763 198,881,687 15,040 25,298,406

331,419,393 181,939,182

Schedule G - Other Income 2005-2006 2004-2005

Rupees Rupees Rupees RupeesProvision no longer required 3,162,570 -Miscellaneous Income:Miscellaneous Scrap Sale 116,886 211,157Exchange Gain 102,803 -

3,382,259 211,157

Schedule H - Operating Expenses 2005-2006 2004-2005

Rupees Rupees Rupees RupeesStores & SparesOpening Stock 45,681,559 39,405,441Add: Purchase 38,085,092 39,346,144Less: Closing Stock 54,515,082 29,251,569 45,681,559 33,070,026

Expenses for O&M operator 119,462,330 141,013,768

148,713,899 174,083,794

Schedule I- Staff Expenses 2005-2006 2004-2005

Rupees RupeesSalaries 269,524 424,905Contribution to and provision for Provident & other Funds 68,262 32,354Welfare & Other Expenses 121,882 310,094

459,668 767,353

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Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedule J - Administration & Other Expenses 2005-2006 2004-2005

Rupees Rupees Rupees RupeesRent:

Rent Subsidy 251,500 487,125Lease Rental 365,260 616,760 223,971 711,096

Rates & Taxes 1,375,097 1,295,674Travelling & Conveyance 2,472,575 2,685,648Courier Charges 48,258 89,119Telephone 391,760 391,210Gift Articles 38,867 42,570Stationary & Printing 131,465 170,163Insurance 23,851,653 24,427,460Bank Charges 77,718 83,875Repairs & Maintenance

Plant & Machinery 87,948 605,423Buildings 694,054 640,565Others 835,968 1,617,970 1,352,073 2,598,061

Miscellaneous ExpensesAuditor Expenses 429,318 399,200Entertainment Expenses 28,228 19,490Professional Fees 9,665,134 11,052,468Security Charges 901,736 1,134,938Safety Expenses 9,116 37,538Inspection & Licence Fees 498,104 704,134Exchange Loss 527,564 297,553Sundries:Books & Periodicals 8,486 10,618Computer Hire Charges 10,863 60,600Others 6,143,101 18,221,650 7,448,736 21,165,275

48,843,773 53,660,151

Schedule K- Interest 2005-2006 2004-2005


Term Loans 189,699,657 226,101,103Others 573,706 593,961

190,273,363 226,695,064Less:(1) Received on Inter-Corporate deposits, customers & others

(tax deducted at source Rs.78,57,070 Previous year Rs.58,10,177 ) 37,531,326 41,348,345

152,742,037 185,346,719

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Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedule L - Accounting Policies and Notes to the accounts

I Significant Accounting Policies

(a) Basis of Accounting

The Company maintains its accounts on accrual basis, following the historical cost convention, in compliance with the Accounting Standardsspecified to be mandatory by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956, except forInsurance claims and Interest on delayed payments received from customer which are accounted for on cash basis.

(b) Revenue Recognition

In terms of the Power Agreement entered into with Haldia Petrochemicals Limited, facilitation earnings are recognised upon availability of facilitiesfor the generation of electricity and steam.

(c) Fixed Assets

Fixed Assets are stated at the cost of acquisition, inclusive of duties, taxes, incidental expenses, erection/commissioning expenses and interestupto the date the asset is ready for intended use. Fixed assets are net off decapitalisation, if any, during the year valued at best estimates of valueof the assets at the time of decapitalisation.

The carrying amount of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external/internal factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount which represents thegreater of the net selling price of assets and their ‘Value in use’. The estimated future cash flows are discounted to their present value at theweighted average cost of capital.

(d) Depreciation

(i) The classification of Plant & Machinery into continuous and non-continuous process is done as per technical certification and depreciationthereon is provided accordingly.

(ii) Depreciation is provided under straight-line method at the rates prescribed in Schedule XIV of the Companies Act, 1956.

(iii) Depreciation on Fixed Assets added/disposed off during the year is provided on pro-rata basis, with reference to the date of addition/disposal.

(e) Inventories

Inventories of Stores and Spare parts are valued at weighted average cost or net realisable value whichever is lower.

(f) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investmentsare classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investmentbasis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporaryin the value of the investments.

(g) Foreign Currency Transactions

Foreign currency transactions are recorded on the basis of average of the exchange rates in force during the relevant month.

Foreign Currency monetary items (other than those covered by Forward Contracts) as on the Balance Sheet date are revalued in the accounts onthe basis of exchange rates prevailing at the balance sheet date and exchange difference arising there from are charged to the Profit & LossAccount.

In the case of transactions covered by forward contracts, the difference between the contract rate and the exchange rate prevailing on the date oftransaction is charged to Profit & Loss Account, proportionately over the contract period.

Exchange fluctuation on imported fixed assets is adjusted to the cost of fixed assets.

(h) Retirement Benefits

i. Retirement benefits in the form of Provident Fund are charged to the Profit and Loss Account of the year when the contributions to therespective fund is due.

ii. Liability for Leave encashment and Gratuity is provided for on the basis of actuarial valuation.

(i) Research & Development

i. Research costs are expensed as and when incurred.

ii. Developmental expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded asassured. Any expenditure carried forward is amortised over the period of expected future benefits from the related project, not exceeding tenyears.

(j) Contingencies

Material Potential liabilities, whose future outcome cannot be ascertained with reasonable certainty, are treated as contingent and disclosed byway of notes to the accounts.

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(k) Taxes on Income

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions ofthe Income Tax Act 1961, and based on expected outcome of assessments / appeals.

Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the taxrates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty that sufficient future taxable income will beavailable against which such deferred tax assets can be realised.

Deferred Tax Liability on timing differences reversing during the tax holiday period u/s 80IA of the Income Tax Act, 1961 is not recognized.

(l) Borrowing Cost

Borrowing Costs that are not eligible for capitalisation under Accounting Policy I (c) are recognised as an expense in the period in which they areincurred.

(m) Segment Reporting

The Company is engaged in generation of Power & Steam for the consumption of Haldia Petrochemicals Limited which is the only Business andGeographical segment.

(n) Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deductingpreference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weightedaverage number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

(o) Provisions

A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will berequired to settle the obligation, in respect of which a reliable estimate can be made. Provisions made in terms of Accounting Standard-29, are notdiscounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These arereviewed at each balance sheet date and adjusted to reflect the current best estimates.

II Notes forming Part of Accounts

1. Contingent Liability not provided for:

Claims against the Company not acknowledged as debts –

(i) The Company has received demand towards customs duty of Rs.257,049,919 (previous year Rs.257,049,919) along with interest asapplicable. An Appeal has been filed with the Appellate Tribunal and the same has not yet come up for hearing, pending which, the demandhas been treated as a contingent liability. The Company has also recourse to Haldia Petrochemicals Limited in the event of such claimdevolving on the Company.

(ii) The Company has received certain claims from Haldia Petrochemicals Limited (HPL) arising on account of delays in completion of the powerplant. The claims are being discussed between HPL, Larsen & Toubro Limited and the Company for a settlement. Based on contractualdocuments, the Company does not expect to incur any significant liability on account of such claims. The maximum liquidated damages thatcan be claimed as per the Contract is limited to Rs.36.90crores.

2. Leasehold land represents 16.29 acres given on lease by Haldia Petrochemicals Limited for twenty years at lease premium of Re.1.

3. Miscellaneous Expenses shown in Schedule J includes payment to auditors as follows:

2005-2006 2004-2005

Rupees Rupees

Audit Fees 210,856 170,000


Other Services 140,462 148,600

Expenses Reimbursed 20,650 25,500

Total 429,318 399,200

4. Expenditure in foreign currency (considered on payment basis):

2005-2006 2004-2005

Rupees Rupees

Technical Fees (Gross) 31,766,819 46,368,696

Tax Deducted at source 8,773,604 12,194,727

Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)Schedules forming part of the accounts (Contd.)

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5. Balances with scheduled banks on current account are net of book overdrawn balance of Rs. Nil (previous year Rs.41,525,225) in one of the bankaccounts of the Company.

6. Details of Power and Steam generated, consumed and delivered:

Units 2005-2006 2004-2005 Quantity Quantity

(a) Total number of units generated during the year.Steam Tons 1601637 1617668Power Kwhr 538095000 537152000

(b) Total number of units consumed in Generating Stations.Steam Tons 661582 731992Power Kwhr 16591000 20379000

(c) Total number of units delivered to the system.Steam Tons 940055 885677Power Kwhr 520458000 528873000

(d) Total number of units imported from theGridPower Kwhr 6834000 12099900

7. The installed capacity of the Generating stations of the Company (as per certification of technical expert) is 116 MW (Previous year 116 MW). TheCompany has received approval u/s 18A of Electricity Supply Act, 1948 from Government of West Bengal, Department of Power to operate at 116 MW.

8. Managerial Remuneration:

Professional charges for reimbursement of emoluments paid to Manager by Larsen & Toubro Limited – Rs. 1,068,013 (previous year Rs.969,189).

9. The Company is eligible and is availing the tax benefit under section 80IA of the Income Tax Act, 1961.Accordingly, the remaining balance ofdeferred tax liabilities as on 31.03.2006 is Rs.391,707,589 which is expected to reverse after such tax holiday period. The closing balance is onaccount of timing difference between book depreciation and tax depreciation.

10. Sundry Creditors include Rs.Nil (Rs.Nil) due to Small Scale and Ancillary Undertakings. The disclosure is based on the information available withthe Company regarding status of the supplier, under the Industries (Development & Regulation ) Act 1951.

11. Related Party relationships/transactions, warranting disclosures under AS-18 issued by Institute of Chartered Accountants of India are as follows:

Sl. Name of the Related Party Relationship Nature of transactions Transaction Outstanding as No. Amount (Rs.) on 31/03/06

(Rs.)

1 Larsen & Toubro Limited Holding Company with Purchase of spares 1,543,675 944,67851% equity shares (5,723,044) (2,171,565)

Purchase of Fixed Assets Nil Nil(30,78,536) (Nil)

Manpower Deployment 3,363,341 1,123,486(4,406,892) (187,308)

Administrative & Mgt 2,394,914 1,456,332Expenses (2,514,631) (668,864)

Dividend – Equity Shares 429,063,000 -(150,093,000)

Dividend – Preference 46,818,000 -Shares (46,818,000)

Equity Share holding - 312,120,000(312,120,000)

Preference Share holding - 312,120,000(205,120,000)


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2 Haldia Petrochemicals Limited Promoter with 49% equity Earnings from Facilitationshares charges 1,710,342,317 27,691,225

(1,409,838,217) (14,623,892)Cr.Dividend – Equity Shares 412,237,000 -

(144,207,000)Dividend – Preference 44,982,000 -Shares (44,982,000)Equity Share holding - 299,880,000

(299,880,000)Preference Share holding - 299,880,000

(299,880,000) 3 L&T Finance Limited Subsidiary of Holding Company Interest received on Inter 27,373,149 Nil

Corporate Deposits (26,258,134) (13,163,836)Inter Corporate Deposits 400,000,000 400,000,000given (400,000,000) (400,000,000)Inter Corporate Deposits Nil -

(Nil)Lease Rent 365,260 Nil

(316,384) (Nil) 4 Larsen & Toubro Infotech Limited Subsidiary of Holding Company Software Development 302,042 302,042

Expenses (836,345) (750,594) 5 L&T Sargent & Lundy Limited Subsidiary of Holding Company Engineering Services Nil Nil

(395,885) (Nil)

12. Inter-Corporate Deposits including Accrued Interest thereon (Refer Schedule – E) Rs.400,000,000 (Rs.413,163,836 ) held for debt servicingrequirements of the lenders. Bank balances includes Rs.97,871,633 (Rs.314,263,475) in designated accounts for the same purpose.

13. The Company has only one Business Segment viz., generation of power & steam, and only one Geographical Segment viz., India. As such, noseparate segment information has been furnished in the accounts.

14. Foreign currency loan repayable in US Dollars 14,400,000 (in Rs.642,456,000), Interest accrued but not due on such loans amounting to USD280,166.67 (in Rs.12,332,937) and foreign creditors amounting to USD 656474.58 (in Rs.29,288,613) and EURO 98,909.50 (in Rs.5,341,608) , arenot hedged by derivative instruments.

15. Earnings Per Share (EPS)

2005-06 2004-05

Profit as per Profit & Loss Account 970,697,641 1,236,412,996

Less : Preference Dividend including Dividend Tax 104,674,950 105,602,209

Profit attributable to Equity Shareholders 866,022,691 1,130,810,787

Weighted Average Number of Equity Shares 61,200,000 61,200,000

Basic & Diluted Earning Per Share (Rs.) 14.15 18.48

Nominal Value of Shares (Rs.) 10.00 10.00

16. Previous year figures have been regrouped & rearranged wherever necessary.

Sl. Name of the Related Party Relationship Nature of transactions Transaction Outstanding as No. Amount (Rs.) on 31/03/06

(Rs.)


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II. Capital raised during the year (Amount in Rs.)



N I L N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs.)


3 9 9 2 7 4 8 9 7 4 3 9 9 2 7 4 8 9 7 4Sources of Funds


1 2 2 4 0 0 0 0 0 0 8 2 0 5 8 5 3 8 2


1 5 5 6 4 5 6 0 0 3 N I L


3 5 9 5 4 2 6 7 2 2 N I L


3 9 7 3 2 2 2 5 2 N I L

Accumulated Losses

N I L

IV. Performance of Company (Amount in Rs.)Turnover Total Expenditure

(including other income)

1 7 1 3 7 2 4 5 7 6 6 2 8 0 0 5 3 4 4

Profit/(Loss) Before Tax Profit/(Loss) After Tax

1 0 8 5 7 1 9 2 3 2 9 7 0 6 9 7 6 4 1


1 4 - 1 5 1 3 7

V. Generic names of three Principal Products / Services of Company (as per monetary terms)

Item Code No.(ITC Code) N I L

ProductDescription P O W E R & S T E A M






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BHILAI POWER SUPPLY COMPANY LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportYour Directors have pleasure in presenting the Eleventh Annual Report along with the Accounts for the year ended March 31, 2006.FINANCEDuring the year under review, the Company did not carry out any commercial activities and accordingly no Profit and Loss Account has been prepared.SECURITY DEPOSITIn the matter of recovery of the security deposit from Madhya Pradesh State Electricity Board (MPSEB), further to Supreme Court issuing a notice toChattisgarh State Electricity Board (CSEB) to file a counter affidavit, after a series of adjournments, the matter was finally heard on May 2, 2006. TheDivision Bench held that the earlier amount of Rs.27.66 crores (approx.) deposited by MPSEB and invested by the Registrar of the Supreme Court in FixedDeposits should be immediately released and handed over to the Company. With respect to the balance claims, it was held that MPSEB will deposit anapproximate amount of Rs.17.45 crores while CSEB will deposit an amount of Rs.45.10 crores on or before July 15, 2006.The matter is now listed for final directions on July 18, 2006, whereat the exact amount payable till that date will be determined on the basis of checking ofinterest claims, etc. and it is expected that the Court will release the balance deposit amount to the Company.CAPITAL EXPENDITUREDuring the period under review, the Company did not incur any capital expenditure.FIXED DEPOSITSDuring the year under review, the Company did not accept any deposits from the public.AUDITORS’ REPORTThe Auditors’ Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors’ Report are selfexplanatory and therefore do not call for any further comments of Directors.DISCLOSURE OF PARTICULARSAs the Company could not commence commercial operations, there are no particulars to be disclosed as per Companies (Disclosure of Particulars in theReport of Board of Directors) Rules, 1988.PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees)Rules, 1975.DIRECTORS’ RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirms:i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;ii. that the selected accounting policies were applied consistently and the Directors made judgements and estimates that are reasonable and prudent so

as to give a true and fair view of the state of affairs of the Company as at March 31, 2006;iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the

Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;iv. that the annual accounts have been prepared on a going concern basis.DIRECTORSDuring the year under review, Mr. V. K. Magapu and Mr. K. Venkataraman resigned as Directors of the Company and Mr. A. K. Chhatwani and Mr. P. S.Banerjee were appointed as Directors in their respective positions.The Board of Directors wishes to place on record the appreciation of the services rendered by Mr. V. K. Magapu and Mr. K. Venkataraman during theirtenure as Directors of the Company.Mr. P. S. Banerjee retires by rotation and being eligible and in respect of whom the Company has received a notice under Section 257 of the CompaniesAct, 1956, be re-appointed as a Director of the Company.AUDITORSThe Auditors, M/s. Sharp and Tannan retire at the ensuing Annual General Meeting and are eligible for re-appointment.


K. VENKATARAMANAN P. S. BANERJEEPlace : Mumbai DirectorsDate : May 18, 2006

Auditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersWe have audited the attached Balance Sheet of Bhilai Power Supply Company Limited as at March 31, 2006 and the Cash Flow Statement for the yearended on that date, annexed thereto. No Profit and Loss Account has been prepared for the year ended March 31, 2006 for the reason referred to in NoteNo.1 of Schedule E to the accounts. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express anopinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.In accordance with the provisions of section 227 of the Companies Act 1956, we report that :(1) As required by the Companies (Auditor’s Report) Order, 2003 (CARO) issued by the Central Government of India in terms of sub-section (4A) of

Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.(2) Further to our comments in the Annexure referred to above, we report that:

a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of ouraudit;

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b) in our opinion, proper books of account as required by law have been kept by the Company, so far as appears from our examination of thosebooks;

c) the Balance Sheet and Cash Flow statement dealt with by this report are in agreement with the books of account;

d) in our opinion, the Balance Sheet and Cash Flow statement dealt by this report comply with the Accounting Standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956;

e) on the basis of written representations received from the directors as on March 31, 2006 and taken on record by the Board of Directors, wereport that none of the directors is disqualified as on March 31, 2006 from being appointed as a director in terms of clause (g) of sub-section (1)of section 274 of the Companies Act, 1956; and

f) in our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet, read together with thesignificant accounting policies in Schedule D and the notes appearing in Schedule E, give the information required by the Companies Act, 1956in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2006.

ii. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.


By the hand ofPavan K Aggarwal

Place : New Delhi PartnerDate : May 19, 2006 Membership No.: 91466

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ Report(Referred in paragraph (1) of our report of even date)

1. The Company has not yet acquired any fixed assets.

2. As informed to us, the Company has not taken or granted any loan, secured or unsecured, to/from companies, firms or other parties covered in theregister required to be maintained under section 301 of the Companies Act, 1956.

3. To the best of our knowledge and as explained there was no transaction exceeding the value of Rs. 5,00,000/- that need to be entered into theregister required to be maintained under section 301.

4. The Company has not accepted any deposit from the public and hence reporting compliance under the provisions of section 58A and section 58AA ofthe Companies Act 1956 and rules framed thereunder and the directives of Reserve Bank of India does not arise.

5. According to the records produced to us the Company is generally regular in depositing undisputed statutory dues like Income Tax. Since theCompany had not employed any employee during the year the question of P.F./ESI did not arise. Sales tax, custom duty, excise duty cess and otherstatutory dues are not applicable to the Company during the year. According to the information and explanations given to us, no disputed amountspayable in respect of income tax were outstanding at the year end for a period of more than six months from the date they became payable.

6. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the Company has notavailed any credit facilities from any bank/financial institution.

7. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not grantedloans and advances on the basis of security by way of pledge of shares, debentures and other securities.

8. In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any specialstatute applicable to chit fund and nidhi/mutual benefit fund/Societies.

9. To the best of our knowledge and as explained the Company is not dealing/ trading in securities and other investments.

10. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by associates and others, frombank or financial institutions.

11. To the best of our knowledge and as explained the Company has not availed of any term loan during the year.

12. To the best of our knowledge and as explained the Company has not raised any fund for long term or short term during the year.

13. The Company has not made any preferential allotment of shares to parties and companies covered in the register required to be maintained undersection 301 of the Companies Act, 1956.

14. To the best of our knowledge and as explained the Company has not issued any Debentures.

15. To the best of our knowledge and as explained the Company has not raised any money through public issues during the year.

16. Based upon the audit procedures performed by us for expressing our opinion on these financial statements and information and explanations given bythe management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

17. Other clauses of the order are not applicable for the current year.


By the hand ofPavan K Aggarwal

Place : New Delhi PartnerDate : May 19, 2006 Membership No.: 91466

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As at 31-3-06 As at 31-3-05As at 31-3-05As at 31-3-05As at 31-3-05As at 31-3-05SOURCES OF FUNDS Schedules (Rupees) (Rupees)(Rupees)(Rupees)(Rupees)(Rupees)


Share Capital A 5,00,000 5,00,000

LOAN FUNDSUnsecured Loans B 89,96,33,986 86,94,27,078

TOTAL 90,01,33,986 86,99,27,07886,99,27,07886,99,27,07886,99,27,07886,99,27,078


CURRENT ASSETS, LOANS AND ADVANCES :

Bank Balances :

On current account with Standard Chartered Bank 88,172 92,580

On current account with State Bank of India 9,280 9,500

Security Deposit with Madhya Pradesh State Electricity Board 89,96,33,986 86,94,27,078(Including Rs.27,66,00,000 deposited with the Hon’ble Supreme Court)

Interest accrued but not due on Security Deposit 2,81,646 2,43,628

TOTAL 90,00,13,084 86,97,72,786

Less : CURRENT LIABILITIES AND PROVISIONS

Sundry Creditors-Others 506,464 5,15,535

Advances from promoters:

Larsen and Toubro Limited 22,39,770 65,680

Steel Authority of India Limited 11,96,014 11,96,014

Other Liabilities 64,47,613 85,50,400

Interest accrued but not due on loans 2,81,646 2,43,628

TOTAL 1,06,71,507 1,05,71,257

Net Current Assets 88,93,41,577 85,92,01,529

MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

Preliminary expenses and Pre-operative Expenses C 1,07,92,409 1,07,25,549

TOTAL 90,01,33,986 86,99,27,07886,99,27,07886,99,27,07886,99,27,07886,99,27,078

Significant Accounting Policies D




By the hand ofPAVAN K. AGGARWAL K. VENKATARAMANAN P. S. BANERJEEPartner Directors(Membership No. 91466)

Place : New Delhi Place :MumbaiDate : May 19, 2006 Date : May 18, 2006

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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSCHEDULE - A

As at 31-3-2006 As at 31-03-2005As at 31-03-2005As at 31-03-2005As at 31-03-2005As at 31-03-2005(Rupees) (Rupees)(Rupees)(Rupees)(Rupees)(Rupees)

SHARE CAPITALAuthorised100 preference shares of Rs.10/- each 1,000 1,00050,00,000 Equity shares of Rs.10/- each 5,00,00,000 5,00,00,000

Total 5,00,01,000 5,00,01,0005,00,01,0005,00,01,0005,00,01,0005,00,01,000

Issued, Subscribed and Paid up50,000 Equity shares of Rs. 10/- each 5,00,000 5,00,000(99.9% of the above equity shares (same as previous year) areheld by Laresn & Toubro Limited, the holding company)

Total 5,00,000 5,00,0005,00,0005,00,0005,00,0005,00,000

SCHEDULE - BUNSECURED LOANSLarsen & Toubro Limited :i) Principal Amount 52,55,40,000 52,55,40,000ii) Interest accrued & due 32,91,12,287 30,04,15,724

Sub-Total (a) 85,46,52,287 82,59,55,724

Steel Authority of India Limited

i) Principal Amount 2,76,60,000 2,76,60,000ii) Interest accrued & due 1,73,21,699 1,58,11,354

Sub-Total (b) 4,49,81,699 4,34,71,354

TOTAL of (a) + (b) 89,96,33,986 86,94,27,07886,94,27,07886,94,27,07886,94,27,07886,94,27,078

Upto 31-3-2005 2005-2006 As at 31-3-06As at 31-3-06As at 31-3-06As at 31-3-06As at 31-3-06(Rupees) (Rupees) (Rupees)(Rupees)(Rupees)(Rupees)(Rupees)

SCHEDULE - CPRELIMINARY AND PRE-OPERATIVE EXPENSESPRELIMINARY EXPENSESStamp Duty for MOA/AOA 120 Nil 120Registration Charges 1,58,580 Nil 1,58,580Miscellaneous 1,750 Nil 1,750

Total - A 1,60,450 Nil 1,60,450PRE-OPERATIVE EXPENSES(Project Development Expenses)Travelling and Conveyance 1,60,96,369 Nil 1,60,96,369Printing and Stationery 4,63,723 Nil 4,63,723Telephone and Telex 11,80,091 Nil 11,80,091Advertisement and Business Promotion 17,38,247 Nil 17,38,247Entertainment 12,66,158 Nil 12,66,158Professional Fees 20,18,04,023 Nil 20,18,04,023Commitment Charges 2,41,08,700 Nil 2,41,08,700Rent, Rates and Taxes 12,20,227 2,500 12,22,727Repairs and Maintenance 23,36,467 Nil 23,36,467Auditors’ Remuneration 4,55,198 84,723 5,39,921Sundry Expenses 19,50,786 (-)20,363 19,30,423

Total - B 25,26,19,989 66,860 25,26,86,849

SUB-TOTAL (A+B) 25,27,80,439 66,860 25,28,47,29925,28,47,29925,28,47,29925,28,47,29925,28,47,299

Less : Arrangement with Promoters for Reduction of Liabilities :(a) Larsen & Toubro Limited 12,35,96,429 Nil 12,35,96,429(b) PSEG Bhilai Energy Company Limited 11,84,58,461 Nil 11,84,58,461

Total - C 24,20,54,890 Nil 24,20,54,890

TOTAL : (A+B) – C 1,07,25,549 66,860 1,07,92,4091,07,92,4091,07,92,4091,07,92,4091,07,92,409

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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSCHEDULE - DSignificant Accounting Policies1. Method of Accounting

The Company maintains its accounts on accrual basis.2. Foreign Currencies

Actual foreign currency expenditure is booked at the exchange rate prevailing on the date of the transaction. Outstanding foreign currency liabilitiesare translated at exchange rate prevailing at the year end. The exchange variations, if any, arising out of such transactions is adjusted in pre-operativeexpenditure.

SCHEDULE - ENotes forming part of accounts1. As there were no commercial activities during the year, no profit and loss account has been prepared. All the expenditure incurred by the Company

have been carried forward as pre-operative expenses. Legal and incidental expenses incurred during the year in getting the refund of security depositfrom MPSEB have been borne by the holding Company, M/s. Larsen & Toubro Ltd.

2. Auditors’ Remuneration (excluding Service Tax) and expenses charged to the accounts includes:- 2005-06 2004-05

Audit Fee Rs. 20,000 Rs. 20,000Tax Audit Fee Rs 5,000 Rs. 5,000Other Services Rs.35,000 Rs. 52,500Reimbursement of expenses Rs.24,723 Rs. 16,963

3. The Board of Directors of the Company in their meeting held on the 29th June 2000, has not accepted the notice of termination of 25th May 2000 givento them by Steel Authority of India Ltd. The treatment in the accounts for SAIL’s share as a continuing partner for the year ended on 31st March 2006is given accordingly as in past.

4. No confirmation has been received from MPSEB for the Security Deposit including interest thereon kept by the Company with them as on 31st March2006. However the interest on Security Deposit has been computed in the accounts as per SBI norms for a maturity period of six months.The Hon’ble Supreme Court had directed Madhya Pradesh State Electricity Board (MPSEB) to pay a sum of Rs.55.32 crores to the Company alongwith interest at the rate charged by the State Bank of India for fixed deposits in 12 equal monthly instalments commencing from 1st March, 2003.Inspite of serving repeated demand notices on MPSEB, refund of money was not made. The Company filed a petition in District Court at Jabalpur forexecution of the Supreme Court Order. The Hon’ble District Judge, Jabalpur referred the matter to the Hon’ble High Court, Jabalpur. The Hon’ble HighCourt and District Court, Jabalpur pronounced their judgements in favour of the Company for enforcing the Hon’ble Supreme Court’s Order on MPSEBfor refund of the Security Deposit with interest. MPSEB went in appeal to Hon’ble Supreme Court against the High Court Judgement, when theHon’ble Supreme Court directed MPSEB to first deposit half of the principal amount with the Hon’ble Supreme Court in order to consider their plea.Pursuant to this MPSEB has deposited on 29.03.05 half of the principal amount, Rs.27.66 crores with Registry of the Hon’ble Supreme Court, whichshall be kept by Registrar General of the Hon’ble Supreme Court in short term deposit in the bank to earn interest. Interest on such short term depositfrom 29th March, 2005 to 31st March, 2006 has not been accounted for in the accounts.

5. The Company has been continuing the dialogue with Chhattisgarh Government Authorities to explore the possibilities of obtaining a payment securitymechanism for the Bhilai Power Project to achieve the financial closure. The Management based on its business plan, also expects to start study onthe development of other power projects and related activities to achieve positive results in the forthcoming years. In view of the above, these financialstatements are continued to be prepared on a “Going Concern Basis”.

6. Larsen & Toubro Limited, the Holding Company entered into an agreement with PSEG Bhilai Energy Company Limited to acquire their shareholding(45 Equity Shares of Rs.10/- each) in the Company and made an application to Reserve Bank of India for their approval, which is still pending.

7. Disclosure of related parties / related party transactions a) Name of the related party Relationship

Larsen & Toubro Ltd. Holding Companyb) Name of the related parties with whom transactions were carried out during the year and description of relationship

Larsen & Toubro Ltd. Holding Companyc) Disclosure of related party transactions

Transactions/Nature of relationshipTransaction Relationship Value of transaction(Rs./lacs)Interest accrued Holding Company 287.33(408.91)Reduction in liability Holding Company Nil

d) Amount due to related partiesTransaction Relationship Amount Duei) Unsecured loan Holding Company 8546.52(8259.56)ii) Interest accrued but not due on loans Holding Company 2.68(2.31)iii) Account payable Holding Company 22.40(0.66)

Note : Figures in brackets relate to previous year8. Previous year’s figures have been regrouped wherever necessary to conform to figures of the current year.

S-312


Balance Sheet Abstract and Company’s General Business ProfileBalance Sheet Abstract and Company’s General Business ProfileBalance Sheet Abstract and Company’s General Business ProfileBalance Sheet Abstract and Company’s General Business ProfileBalance Sheet Abstract and Company’s General Business ProfileI. Registration Details:

Registration No. 5 5 0 7 0 7 0 4 State Code No. 5 5


II. Capital Raised during the Year (Amount in Rs. Thousands)

Public issue Rights issue


N I L N I L



9 0 0 1 3 4 9 0 0 1 3 4Sources of Funds


5 0 0 N I L


N I L 8 9 9 6 3 4Application of Funds


N I L N I L

Net Current Assets Misc.Expenses

8 8 9 3 4 2 1 0 7 9 2

Accumulated Losses

N I L

IV. Performance of Company (Amount in Rs. Thousands)

Turnover (incl.other income) Total Expenditure

N I L N I L


N I L N I L


Earning Per Share in Rs. Dividend Rate %

N A N A

V. Generic Names of Three Principal Products / Services of the Company (as per monetary terms)

No commercial activities during the year





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INDIA INFRASTRUCTURE DEVELOPERS LIMITED


The Directors have pleasure in presenting their Report and Audited Accounts for the year ended 31st March, 2006.



(Rs.lakhs) (Rs.lakhs)

Gross Income 8815.96 4954.40

Profit before depreciation 6374.53 2364.82


Profit/(Loss) before tax 4064.96 65.93

Less : Provision for taxation

— Current year 1375.00 5.25

— Previous Year 0.01 Nil

Profit/(Loss) after taxation 2689.35 60.68

Add : Deferred tax liability for prior Nil NilYears written back

Add : Debit balance brought forward (1001.99) (1062.67)From previous years

Transfer to Reserve u/s 45 IC (629.96) Nilof RBI Act 1934

Less : Reserve of L & T Power Investment Pvt. Ltd. taken over on amalgamation 4.18 Nil

Profit/ (Loss) carried forward to Balance Sheet 1061.58 (1001.99)

As the accounts reflect the status as the amalgamated entity, figures for the current year are not comparable with those of the previous year

2. AMALGAMATION

During the year under review L&T Power Investments Pvt. Ltd. a wholly owned subsidiary of Larsen & Toubro Ltd., was amalgamated with theCompany. Pursuant to the Scheme of Amalgamation duly approved by the High Court of Judicature at Mumbai, the entire business of thetransferor Company including the assets and liabilities were transferred as a going concern to the Company. The appointed date for amalgamationis April 1, 2005 and the Scheme became effective on 5th June, 2006.

3. DIVIDEND

The Directors do not recommend payment of any dividend for the year.

4. YEAR IN RETROSPECT/ PERFORMANCE OF THE COMPANY

The Company was formed to provide 2 X 45 MW captive cogeneration plant on lease to Indian Petrochemicals Corporation Limited at Gandhar.The lease rentals are received in time. During the year ended 31st March, 2006 the Company registered a total income of Rs.88.16 Crs, profitbefore tax of Rs. 40.65 Crs and profit after tax of Rs 26.89 Crs.

5. DEPOSITS

During the period under review the Company has not accepted any deposits from the public.

6. SUBSIDIARY COMPANIES

As required u/s 212 of the Companies Act, 1956, the Audited Statement of Accounts, the reports of the Board of Directors and Auditors of thesubsidiary Company are annexed.


As regards Auditors’ comment vide para 2(d) of the Auditors’ Report in respect of Accounting for Taxes on Income, the Company has relied onthe interim injunction dated 6th December, 2001 restraining the Institute of Chartered Accountants of India from implementing the AccountingStandard - 22, “Accounting for Taxes on Income” with reference to Non-Banking Finance Companies, issued by the High of Judicature atChennai. A note to this effect is attached to the Notes forming part of the Accounts. (Refer Schedule No. 2, Note No. 5)

There are no other qualifications in the Auditors’ Report to the Shareholders.

The notes to the accounts referred to in the Auditors’ Report are self explanatory and therefore do not call for any further comments of Directors.

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As the Company is engaged in leasing activities, there are no particulars to be disclosed as per the Companies (Disclosure of Particulars in theReport of Board of Directors) Rules, 1988.

9. PERSONNEL

There are no employees covered by the provisions of the Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars ofEmployees) Rules, 1975.

10. DIRECTORS RESPONSIBILITY STATEMENT


I. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no materialdeparture;

II. that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of the Company for the yearended on that date;

III. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions ofthe Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

IV. that the annual accounts have been prepared on a going concern basis.

11. DIRECTORS

During the year, Mr. R. Chandramouli resigned from the Directorship of the Company. The Board places on record its appreciation of theservices rendered by him. Mr. A.K. Chhatwani has joined the Board to fill the casual vacancy caused by the resignation of Mr. R. Chandramouli.

Mr. N. Sivaraman retires by rotation and, being eligible, offers himself for reappointment.

12. AUDIT COMMITTEE

During the year Mr. R. Chandramouli resigned from the Board of Directors and Mr. A.K. Chhatwani was appointed in his place. Due this reasonthe audit committee was reconstituted. At present the Audit Committee consists of three non executive directors :-

Mr. K. Venkatraman – Chairman

Mr. N. Sivaraman

Mr. A.K. Chhatwani

The role, terms of reference, the authority and power of Chairman are in conformity with the requirements of the Companies Act, 1956.

The Committee met periodically during the year and had discussions with the auditors on internal control systems and internal audit report.

13. AUDITORS

The Auditors, M/s.Sharp & Tannan, hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment. Certificate from the auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribedunder Section 224(1B) of the Companies Act, 1956.

14. NON-BANKING FINANCIAL COMPANIES AUDITORS’ REPORT RESERVE BANK DIRECTIONS, 1998

Pursuant to the Non-Banking Financial Companies Auditors’ Report (Reserve bank) Directions, 1998, a report from the statutory auditors to theBoard of Directors has been received by your Company. This report has certified that the Company has complied with all the Directions andPrudential Norms as prescribed under the Reserve Bank of India Act, 1934.


The Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, and the customers.


K. Venkataramanan N. Sivaraman A. K. Chhatwani Director Director Director

Place: MumbaiDate: June 7, 2006

S-315


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTO THE MEMBERS OF INDIA INFRASTRUCTURE DEVELOPERS LIMITED

We have audited the attached Balance Sheet of India Infrastructure Developers Limited as at 31st March, 2006, the Profit and Loss Account and theCash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit providesa reasonable basis for our opinion.

1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227(4A) of theCompanies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.


(a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of ouraudit;



(d) in our opinion, the profit and loss account, balance sheet and cash flow statement dealt with by this report comply with the accountingstandards referred to in Section 211(3C) of the Companies Act, 1956, to the extent applicable, except in respect of Accounting Standard(AS) 22 - Accounting for Taxes on Income (Refer Note 5 of Schedule 12); and

(e) on the basis of written representations received from the directors as on 31st March, 2006, and taken on record by the board of directors,we report that none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of Section 274(1)(g)of the Companies Act, 1956;

in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with thesignificant accounting policies in schedule - 11 and other notes appearing in schedule - 12 thereon, give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generallyaccepted in India:





by the hand of

R. D. KarePartner

(Membership No 08820)


S-316


Annexure to the Auditor’s ReportAnnexure to the Auditor’s ReportAnnexure to the Auditor’s ReportAnnexure to the Auditor’s ReportAnnexure to the Auditor’s Report(Referred to in paragraph 1 of our report of even date)

1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.(b) In respect of owned assets, we are informed that these assets have been physically verified by the management at the year-end. In

respect of leased assets, the Company has formulated a programme of physical verification of fixed assets at regular intervals, which inour opinion, is reasonable and no material discrepancies were noticed on such verification.

(c) We are informed that the Company has not disposed off any fixed assets during the year and accordingly, reporting on the going concerndoes not arise.

2. The Company has no inventories and hence reporting under Clause 4(ii) (a), (b) and (c) of the Order are not applicable.3. We are informed by management that there are no companies, firms or other parties that are required to be listed in the register to be

maintained under section 301 of the Companies Act, 1956. Accordingly, clause 4(iii) (b), (c) and (d) of the Order are not applicable.4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with

the size of the Company and the nature of its business for the purchase of fixed assets and for services. Further, on the basis of our examinationof the books and records of the Company and according to the information and explanations given to us, we have neither came across nor havebeen informed of any continuing failure to correct major weakness in internal control system.

5. We are informed by management that there are no companies, firms or other parties that are required to be listed in the register to bemaintained under section 301 of the Companies Act, 1956. Accordingly, reporting on clause (v) (a) and (b) of the aforesaid Order is notapplicable.

6. The Company has not accepted deposits from the public to which the directives issued by the Reserve Bank of India and the provisions ofSection 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the rules framed thereunder apply.

7. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business.8. We are informed by management that the Company is not required to maintain cost accounts and records under section 209(1)(d) of the

Companies Act, 1956.

9. (a) According to the information and explanations given to us and according to the records of the Company, the Company is regular indepositing undisputed statutory dues, namely, income tax and sales tax with the appropriate authorities. According to the informationand explanations given to us, there were no undisputed amounts payable in respect of income tax and sales tax outstanding at 31 March2006 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues in respect of income tax and sales tax that have not beendeposited with the appropriate authorities on account of any dispute.

10. The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current financial year andin the immediately preceding financial year.

11. According to the information and explanations given us, the Company has not defaulted in repayment of dues to debenture holders. There areno amounts due to a financial institution or a bank.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by wayof pledge of shares, debentures and other securities.

13. The Company is not a chit fund / nidhi / mutual benefit fund /society, accordingly, the provisions of special statute applicable to chit fund are notcomplied with.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and otherinvestments.

15. The Company has not given any guarantee for loans taken by others from bank or financial institutions.16. The Company has not taken any term loan from bank / financial institution during the year.17. The Company has not raised funds on short term basis during the year.18. The Company has not made any preferential allotment of shares during the year to any parties or companies covered in the register maintained

under Section 301 of the Companies Act, 1956.19. The Company has not issued any debentures during the year.20. The Company has not raised any money by public issue during the year.21. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing

practice in India, and according to information and explanations given to us, we have neither come across any instances of fraud, nor have webeen informed of such case by management.


by the hand of

R. D. KarePartner



S-317


Auditors Report to the Board of DirectorsAuditors Report to the Board of DirectorsAuditors Report to the Board of DirectorsAuditors Report to the Board of DirectorsAuditors Report to the Board of DirectorsWe have verified the books of account and other relevant records of India Infrastructure Developer Limited for the year ended 31 March 2006. Inaccordance with paragraph 2 of the Non-Banking Financial Companies Auditors’ Report (Reserve Bank) Directions, 1998 notified by the ReserveBank of India under section 45MA of the Reserve Bank of India Act, 1934 and as required by paragraphs 3 and 4 of the said directions, we report that:

1 the Company, being a Company incorporated after 9 January 1997, had applied for registration to the Reserve Bank of India on 22 November1999 as provided in section 45-IA of the Reserve Bank of India Act, 1934. The Company has since been granted the registration of 26 February2003 and the registration number is N – 13.01660;

2 the board of directors have passed resolutions on 25 October 1999 and on 6 January 2003 stating that the Company which has not acceptedtill date any public deposits as defined under Non-Banking Financial Companies (Reserve Bank) Directions, 1998 shall not accept any publicdeposits without Reserve Bank of India’s prior approval in writing;

3 the Company has not accepted any public deposits till date and during the year; and

4 on our examination of the books of account and on the basis of such checks and tests deemed necessary to form an opinion and on the basisof the information and explanations given to us, we confirm that the Company has complied with the prudential norms, relating to incomerecognition, accounting standards, asset classification and provisioning for bad and doubtful debts, as applicable.


by the hand of

R. D. KarePartner



S-318


Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Schedule

As at 31-03-2005 As at 31-03-2004

Rupees Rupees Rupees RupeesSOURCES OF FUNDS :Shareholders’ Funds :Share Capital 1 560,600,000 350,000,000Reserve & Surplus 2 169,153,757 —Loan FundsSecured Loans

14.25% Secured RedeemableNon-Convertible Debentures 1,006,982,776 1,480,418,950(Due within one year Rs. 545,510,409;previous year Rs. 473,436,167)

Unsecured LoansTerm Loan - (Holding Company) 363,269,439 363,269,439Short Term Loan - (Fellow Subsidiary) 157,360,000 —

1,527,612,215 1,843,688,389

Total 2,257,365,972 2,193,688,389

APPLICATION OF FUNDS :Fixed Assets 3Gross Block 4,408,648,968 4,399,646,238Less : Depreciation 1,453,127,122 1,222,169,649

Net Block 2,955,521,846 3,177,476,589Less : Lease Terminal Adjustment 1,819,312,380 1,377,515,038

1,136,209,466 1,799,961,551INVESTMENTS 4 567,171,636 -Current Assets, Loans and Advances 5

Sundry Debtors 59,259,462 67,389,423Cash and Bank Balances 1,565,915 82,564Loans and Advances 750,897,130 337,578,842

811,722,507 405,050,829

Less: Current Liabilities and Provisions 6Liabilities 120,751,213 107,498,625Provisions 138,113,000 4,025,000

258,864,213 111,523,625

Net Current Assets 552,858,294 293,527,204Miscellaneous Expenditure 7(to the extent not written off or adjusted) 1,126,576 —Profit and Loss Account — 100,199,634

Total 2,257,365,972 2,193,688,389


NOTES FORMING PART OF ACCOUNTS 12


A.N. MANI K. VENKATARAMANANManager

A.K. CHHATWANI DirectorsT. SUKUMAR

Company Secretary N. SIVARAMAN

Place : MumbaiDate : June 7, 2006

}As per our report attached


R.D. KAREPartner(Membership No. 08820)


S-319



Schedule2005-06 2004-05

Rupees Rupees Rupees RupeesINCOME

Sales & Services 30,433,500 —Lease Rentals 460,499,680 423,356,355(Tax deducted at source Rs. 6,074,270;Previous year Rs.2,488,441)Interest / Other Income 8 390,662,999 72,083,174(Tax deducted at source Rs. 6,613,932;Previous year Rs.785,523)

881,596,179 495,439,529

EXPENDITUREOperating Expenses 9 38,717,733 3,478,390Interest & other Finance charges 10 205,049,836 255,479,832Depreciation 230,957,473 229,888,709Preliminary Expenses written off 375,526 —

475,100,568 488,846,931

Profit / (Loss) before taxation 406,495,611 6,592,598

Provision for income tax : Current Year : 137,500,000 525,000

Previous Year 60,777 —

Profit / (Loss) after taxation 268,934,834 6,067,598

Add : Debit balance brought forward from the previous year (100,199,634) — (106,267,232)

Add : Transfer to Reserve u/s 45 IC of RBI Act 1934 (9,208,882) —for earlier Years

Less: Reserve of L & T Power Investment Private Limitedtaken over on Amalgamation 418,557 (108,989,959) — —

Add : Transfer to Reserve u/s 45IC of RBI Act 1934 (53,786,967) —

Balance carried forward to balance sheet 106,157,908 (100,199,634)

Basic / diluted earnings per share 4.80 0.17Nominal value per share 10.00 10.00SIGNIFICANT ACCOUNTING POLICIES 11

NOTES FORMING PART OF ACCOUNTS 12










S-320



Rupees Rupees

A. CASH FLOW FROM OPERATING ACTIVITIES:Profit / (Loss) before taxation and extraordinary item 406,495,611 6,592,598

Add:/(Loss)

Depreciation 230,957,473 229,888,709

Lease Equilisation 441,797,342 385,286,920

Miscellaneous Expenditure written off 375,526 —

Profit on sale of investments (351,176,079) —

Operating Profit before working capital changes 728,449,873 621,768,227

Add : / (Less)

(Increase)/ Decrease in Sundry Debtors 41,192,788 (734,971)

(Increase)/ Decrease in Loans and Advances (269,149,204) (15,625,496)

Increase/ (Decrease) in Trade Payables (33,186,223) (236,369)


Direct Tax paid (139,504,274) —

Net Cash from Operating Activities 327,802,960 605,171,391

B. CASH FLOW FROM INVESTING ACTIVITIES :Purchase of fixed assets (9,002,730) —

Investment Sold 406,500,000 —

Less : investments purchased (408,460,000) —

Net cash (used in)/from Investing Activities (10,962,730) —

C. CASH FLOW FROM FINANCING ACTIVITIES :Increase in share capital — —

Expenses incurred for increase in Authorised capital

Repayment of long term borrowings (473,436,174) (605,223,130)

Proceed from other borrowings (Net) 157,360,000 —

Net cash (used in)/from Financing Activities (316,076,174) (605,223,130)

Net (decrease) / increase in cash and cash equivalents (A+B+C) 764,056 (51,739)

Cash and cash equivalents at beginning of the year 82,564 134,303

Cash and cash equivalents taken over on amalgamation 719,295 —

Cash and cash equivalents at the end of the year 1,565,915 82,564

Notes:1 Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS) 3 Cash Flow Statement , issued

by the Institute of Chartered Accountants of India.2 Cash and cash equivalent represent cash and bank balances.3 Previous year’s figures have been regrouped/reclassified wherever applicable.










S-321



As at As at31-03-2006 31-03-2005

Rupees RupeesSCHEDULE -1Share CapitalAuthorised

35,000,000 Equity shares of Rs. 10 each 350,000,000 350,000,00022,000,000 Equity shares of Rs. 10 each of L & T Power Investments 220,000,000 —Private Limited taken over on amalgamation

570,000,000 350,000,000

Issued and Subscribed35,000,000 Equity shares of Rs.10 each, fully paid 350,000,000 350,000,00021,060,000 Equity shares of Rs. 10 each of L & T Power Investments 210,600,000 —Private Limited taken over on amalgamation(All the shares are held by Larsen & Toubro Limited, holding Company)

560,600,000 350,000,000

SCHEDULE -2Reserves & Surplus

Profit & Loss account 106,157,908 —Reserve U/S 45 IC of RBI Act :Transferred from Profit & Loss A/c for previous years 9,208,882Transferred from Profit & Loss A/c for current year 53,786,967 62,995,849 —

169,153,757 —

FIXED ASSETS Gross Block Depreciation Net Block Lease Net Block after

Terminal Lease Terminal Adjustment

Adjustment

As at Additions Deductions As At Upto For the Deductions 31-03-2006 As at As at As at As at As at

01-04-2005 31-03-2006 31-03-2005 year 31-03-2006 31-03-2005 31-03-2006 31-03-2006 31-03-2005

Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

Owned Assets

Building 833,000 — — 833,000 79,405 13,578 — 92,983 740,017 753,595 — 740,017 753,595

Computer 35,700 — — 35,700 32,380 3,320 — 35,700 0 3,320 — 0 3,320

868,700 — — 868,700 111,785 16,898 — 128,683 740,017 756,915 — 740,017 756,915

Leased Assets

Building 106,133,487 — — 106,133,487 18,885,205 3,544,858 — 22,430,063 83,703,424 87,248,282 46,147,454 37,555,970 51,437,991

Plant and machinery 4,292,644,051 — — 4,292,644,051 1,203,172,659 226,324,486 — 1,429,497,145 2,863,146,906 3,089,471,392 1,773,164,926 1,089,981,980 1,747,766,645

Computer — 9,002,730 — 9,002,730 1,071,231 1,071,231 7,931,499 — — 7,931,499 —

4,398,777,538 9,002,730 — 4,407,780,268 1,222,057,864 230,940,575 — 1,452,998,439 2,954,781,829 3,176,719,674 1,819,312,380 1,135,469,449 1,799,204,636

Total 4,399,646,2384,399,646,2384,399,646,2384,399,646,2384,399,646,238 9,002,730 — 4,408,648,968 1,222,169,6491,222,169,6491,222,169,6491,222,169,6491,222,169,649 230,957,473 — 1,453,127,122 2,955,521,846 3,177,476,5893,177,476,5893,177,476,5893,177,476,5893,177,476,589 1,819,312,380 1,136,209,466 1,799,961,5511,799,961,5511,799,961,5511,799,961,5511,799,961,551

Previous year 4,399,646,238 — — 4,399,646,238 992,280,940 229,888,709 — 1,222,169,649 3,177,476,589 3,407,365,298 1,377,515,038 1,799,961,5511,799,961,5511,799,961,5511,799,961,5511,799,961,551 —

SCHEDULE-3

S-322


As at 31-3-2006 As at 31-3-2005

SCHEDULE - 4 Rupees RupeesINVESTMENTSLong Term Investments at cost: 350,000,000 —

35000 Nos. 5.5% Tax Free SIDBI CG BondsSubsidiary companies:Fully paid equity shares:

Raykal Aluminium Company Private Limited 40,000 shares of Rs. 10/- each 400,000 —Others:

Konaseema EPS Oakwell Power Limited 21,000,000 shares of Rs. 10/- each 210,000,000 —Current Investments at cost:Mutual Funds: 6,771,636 —

Deutsche Insta Cash Plus Fund - Growth Plan 599,011.675 Units of Rs.11.3047each (purchased during the year)(3,958,347.647 units purchased and sold during the year)

567,171,636 —

(Total investment of L & T Power Investment Private Limited taken overon amalgamation)

SCHEDULE - 5CURRENT ASSETS, LOANS AND ADVANCESSundry Debtors, unsecured

Debts outstanding for a period exceeding six monthsConsidered good ————— —Considered doubtful 5,126,656 5,126,656

5,126,656 5,126,656Other debts, considered good 59,259,462 67,389,423

64,386,118 72,516,079Less : Provision for non-performing assets 5,126,656 5,126,656

59,259,462 67,389,423Cash and Bank Balances

Cash on hand — —Balances with Scheduled Banks on current accounts 1,565,915 82,564

1,565,915 82,564Loans and Advances, unsecured

Considered good:Loans including interest accrued thereon 601,383,551 328,564,454Advances recoverable in cash or in kind or for value to be received 149,513,579 9,014,388

750,897,130 337,578,842Considered doubtful:Advances recoverable in cash or in kind or for value to be received — —

750,897,130 337,578,842Less : Provision for non-performing assets — —

750,897,130 337,578,842

811,722,507 405,050,829

SCHEDULE - 6CURRENT LIABILITIES AND PROVISIONSLiabilitiesSundry creditors 109,287,153 94,456,475Unmatured lease rentals 11,464,060 13,042,150

120,751,213 107,498,625ProvisionsProvision for taxation 138,113,000 4,025,000

258,864,213 111,523,625


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SCHEDULE - 7MISCELLANEOUS EXPENDITURE TAKENOVER ON AMALGAMATION(to the extent not written off or adjusted)Filing fees, Stamp duty, Registration charges 1,847,750 —Printing charges 2,200 —Audit fees (including service tax) 5,310 —Bank charges 22,368 1,877,628 — —Less : Preliminary expenses amortised upto 31/03/2005 (375,526) —Less : Preliminary expenses amortised for the year (375,526) —

1,126,576 —

2005-2006 2004-2005


SCHEDULE - 8Interest / Other IncomeInterest Received 39,486,920 72,083,174Profit on Sale of Investment 351,176,079 —

390,662,999 72,083,174

SCHEDULE - 9OPERATING EXPENSESTransport Charges - Local 14,509,610 —Clearing Agent’s Charges 436,197 —Custom Duty Paid 10,901,972 —Ware housing Charges - Import 105,235 —Octori Charges 32,472 —Octroi Charges - Imports 317,755 —Service charges 1,440,000 1,662,024Rent 11,806 12,000Rates and taxes 8,819,743 225,191Legal and professional charges 504,000 1,074,441Auditors remuneration (excluding service tax)– Audit fees 75,000 60,000– Tax audit fees 16,500 12,500– Certification 39,000 37,000

130,500 109,500Travelling and conveyance 11,153 7,685Bank charges 139,445 172,952Miscellaneous expenses 204,509 213,383Insurance Charges 1,153,336 1,214

38,717,733 3,478,390

SCHEDULE - 10INTEREST / OTHER FINANCE CHARGESDebentures 181,143,786 255,456,020Others 23,906,050 23,812

205,049,836 255,479,832

As at 31-03-2005 As at 31-03-2004


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SCHEDULE – 11SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Accounting:

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally accepted accountingprinciples and in compliance with the accounting standards referred to in Section 211(3C) and other requirements of the Companies Act, 1956,to the extent applicable.

2. Revenue Recognition:

Income from lease transactions and bill discounting are accounted on accrual basis.

3. Lease Equalisation:

Lease equalisation adjustment is the difference between capital recovery included in lease rentals and depreciation provided in books.

4. Fixed Assets:

Assets held for own use and leased assets are stated at original cost. Interest on borrowings for acquisition of fixed assets and revenueexpenses incurred are capitalised as part of asset cost in so far as such interest and expense relate to the period prior to its installation.

5. Depreciation:

(a) Owned assets:

Depreciation on assets held for own use has been provided on straight line method at the rates and in the manner specified in theSchedule XIV to the Companies Act, 1956.

Depreciation on additions / deductions is calculated pro rata from / to the month of additions / deductions.

(b) Leased assets:

Leased assets are depreciated over the primary period of lease. Accordingly, statutory depreciation on such assets is provided for onstraight line method at the rates and in the manner specified in the Schedule XIV to the Companies Act, 1956 and the difference is adjustedthrough the lease equalisation and lease adjustment account.

However, with respect to assets where the primary period of lease is over, depreciation is provided for on straight line method at the ratesand in the manner specified in the Schedule XIV to the Companies Act, 1956.

6. Miscellaneous Expenditure ( to the extent not written off ) :

Miscellaneous expenditure ( to the extent not written off ) is amortised over a period of four years.

7. Investments :

i. Long term investments are carried at cost less permanent diminution in value.

ii. Current investments at carried at cost or market value whichever is lower.

SCHEDULE –12NOTES FORMING PART OF ACCOUNTS

1. The Company issued 818 secured redeemable non convertible debentures of Rs. 50 lacs each in March, 1999. The terms of issue are as under:

Tenure : 105 months

Interest : 14.25% p.a. on monthly basis

Redemption : Redemption of debentures is structured on monthly basis, payment starting from 31st January, 2000 as per debenture redemptionschedule. The Company has repaid Rs.3,083,017,224 as per the repayment schedule upto 31st March, 2006.

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Security : The debentures as aforesaid are secured by way of :

a) a first charge on the power plant assets pertaining to the captive co-generation plant set up at Indian PetrochemicalsCorporation Limited (IPCL), Gandhar Petrochemicals Complex; and

b) a first charge on all the monies, including the lease rentals received / to be received from IPCL during the tenure of thedebentures.

2. Lease rentals are net of lease equalisation Rs. 441,797,342; (Previous year Rs. 385,286,920)

3. The Company has entered into certain interest derivative transactions. These derivative transactions, being considered as off-balance sheettransactions, the cash flows arising therefrom are recognised in the books of account as and when the settlements take place in accordance withthe terms of the respective contracts over the tenor thereof. There were no such derivatives outstanding as at 31st March, 2006.

4. Provision for income tax for the year has been made as per provisions of the Income Tax Act, 1961.

5. The High Court of Judicature at Madras has passed an interim injunction dated 6 December 2001 in response to the Miscellaneous Petition no.27682 of 2001 in Writ Petition no. 18827 of 2001 filed by the Association of Leasing and Financial Services Companies, restraining the Instituteof Chartered Accountants of India from applying Accounting Standard 22 (AS-22) – Accounting for Taxes on Income to Non Banking FinancialCompanies. Pending disposal of the Petition, no provision for deferred tax liability is made.

6. Related Party Disclosures:

Related party disclosures in terms of Accounting Standards (AS) 18 Related Party

Disclosures, issued by the Institute of Chartered Accountants of India are as under:

Name of the Company Relationship Nature of Transactions 2005-06 2004-05 (Due to) / (Due to) / fromRupees Rupees from 2004-05

2005-06 RupeesRupees

Larsen & Toubro Ltd. Holding Company - Inter Corporate 2,471,885,000 998,064,022 21,030,000 57,995,000depositsIncome :- Interest on inter 29,299,512 17,334,795 60,455 340,967corporate depositsTerm Loan — — (36,32,69,439) (36,32,69,439)Sale of deferredsales tax liability 112,44,12,503 — — —Expenses:Discounting chargeson sale ofdeferred salestax liability 1,91,45,848 — — —Overheads 50,000 — — —Accounts Payable — — (13,105,908) —

L&T Finance Fellow subsidiary Purchase ofLimited receivables 1,124,414,199 151,577,877 — 4,979

Short Term Loan 30,00,00,000 — (15,73,60,000) —Expenditure :Service charges 1,440,000 1,440,000 — —Interest on credit — 23,812 — —balance Interest on intercorporate deposits 47,55,458 — — —

L&T-Valdel Fellow associate Income:Engineering Lease Rentals 17,75,348 — 4,50,372 —Pvt.Ltd

Note : 1) No amounts pertaining to the related parties have been written off or written back during the year2) Deferred Sales Tax Liability amounting to Rs. 112,44,12,503 was sold to Larsen & Toubro Ltd.

3) Discounting Charges of Rs. 1,91,45,848 on above mentioned Deferred Sales Tax Liability were also paid to Larsen & Toubro Ltd.during the year.

4) The Company has purchased receivables amounting to Rs. 112,44,14,199 from L & T Finance Ltd. during the year.

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7. Segment Reporting:

As the Company’s business activity falls within a single primary business segment namely, financial services, and a single geographical segment,i.e. India, the disclosure requirement of Accounting Standard (AS) 17 - Segment Reporting, issued by the Institute of Chartered Accountants ofIndia, is not applicable.

8. Earnings Per Share:

Calculation in accordance with the Accounting Standard (AS) 20 Earnings Per Share, issued by the Institute of Chartered Accountants of India,are as under:

Net Profit / (Loss) after tax and extra ordinary items Rs. 26,89,34,834

Number of Equity shares outstanding 56,060,000

Basic / Diluted earnings per share Rs. 4.80

Nominal value per Equity share Rs.10

9. Schedule to the Balance Sheet of a Non-Banking Financial Company as required in terms of Paragraph 9BB of Non-Banking Finance CompaniesPrudential Norms (Reserve Bank) Directions, 1998

Particulars (Rupees)

Liabilities Side : Amount AmountOutstanding Overdue

(A) Loans and advances availed by the NBFC inclusive of

interest accrued thereon by not paid:

(a) Debentures : Secured 1,006,982,776 NIL

: Unsecured NIL NIL(other than falling within themeaning of public deposits*)

(b) Deferred Credits NIL NIL

(c) Term Loans (from holding Company) 363,269,439 NIL

(d) Inter-corporate loans and borrowing (from fellow subsidiary) 157,360,000 NIL

(e) Commercial paper NIL NIL

(f) Public Deposits* NIL NIL

(g) Other Loans (Foreign Currency Loan) NIL NIL

(B) Break-up of (A)(f) above (Outstanding public deposits

Inclusive of interest accrued thereon but not paid):

(a) In the form of Unsecured debentures NIL NIL

(b) In the form of partly secured debentures i.e. NIL NIL

debentures where there is a shortfall in the value of security.

(c) Other public deposits NIL NIL

Assets Side: AmountOutstanding

(C) Break-up of Loans and Advances including bills receivables (other than those included in (D) below)

(a) Secured NIL

(b) Unsecured 601,128,108

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(D) Break-up of Leased Assets and stock on hire and Hypothecation loans counting towards EL/HP activities

(i) Lease assets including lease rentals under sundry debtors:

(a) Financial Lease 1,194,728,911

(b) Operating lease NIL

(ii) Stock on hire including hire charges under sundry debtors

(a) Assets on hire NIL

(b) Repossessed Assets NIL

(iii) Hypothecation loans counting towards EL/HP activities

(a) Loans where assets have been repossessed NIL

(b) Loans other than (a) above NIL

(E) Break-up of Investments:

Current Investments:

1. Quoted:

(i) Shares: (a) Equity NIL

(b) Preference NIL

(ii) Debentures and Bonds NIL

(iii) Units of mutual funds 6,771,636

(iv) Government Securities NIL

(v) Others (Please specify) NIL

2. Unquoted:


(b) Preference NIL


(iii) Units of mutual funds NIL



Long Term investments:

1. Quoted:


(b) Preference NIL





2. Unquoted:

(i) Shares: (a) Equity 210,400,000

(b) Preference NIL

(ii) Debentures and Bonds 350,000,000





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(F) Borrower group-wise classification of all leased assets, Stock -on-hire and loans and advances

Category Amount net of provisions

Secured Unsecured Total

1. Related Parties

(a) Subsidiaries NIL 9,500 9,500

(b) Companies in the same group NIL 30, 032,730 30,032,730

(c) Other related parties NIL NIL NIL

2. Other than related parties 1,185,726,181 580,088,608 1,765,814,789

Total 1,185,726,181 610,130,838 1,795,857,019

(G) Investor group-wise classification of all investments (current and longterm) in shares and securities (both quoted and unquoted)

Category Market Value Book Value/Break up or (Net of

fair value or NAV Provisions)1. Related Parties

(a) Subsidiaries 400,000 400,000

(b) Companies in the same group NIL NIL

(c) Other related parties NIL NIL

2. Other than related parties NIL NIL

Total 400,000 400,000

(H) Other information

Particulars Amount

(i) Gross Non-Performing Assets

(a) Related parties NIL

(b) Other than related parties 5,126,656

(ii) Net Non-Performing Assets

(a) Related parties NIL

(b) Other than related parties NIL

(iii) Assets acquired in satisfaction of debt NIL

10. L&T Power Investment Private Limited (the Transferor Company) was a wholly owned Company of Larsen & Toubro Limited, being principallyinvolved in investing and undertaking projects in the power sector. India Infrastructure Developers Limited (the Transferee Company) is principallyinvolved in lease financing.

The Transferor Company was amalgamated with the Transferee Company pursuant to a scheme of amalgamation under sections 391 and 394of the Companies Act, 1956 approved by the High Court of Judicature at Mumbai vide its order dated 26th May, 2006, with effect from 1 April2005.

The amalgamation was accounted for in accordance with the ‘pooling of interests’ method in accordance with Accounting Standard 14 (AS-14)– Accounting for Amalgamations issued by the Institute of Chartered Accountants of India. In accordance with the said scheme all the assets,liabilities and reserves of the Transferor Company have been accounted by the Transferee Company at their book values.

The Transferee Company has issued one equity share of Rs 10 each to the shareholders of the Transferor Company for every one share of Rs10 each held by them in the Transferor Company, as consideration. The aggregate value of shares of the Transferee Company issued was Rs210,600,000 (21,060,000 shares of Rs 10 each).

11. In view of the amalgamation during the current year (see note 10), current year figures are not comparable with the corresponding figures of theprevious year. Previous year figures have been regrouped/reclassified wherever necessary.



S-329




Registration No. 1 1 - 1 0 8 1 7 9 State Code No. 1 1



*Public Issue Rights Issue


N I L N I L



2 2 5 7 3 6 6 2 2 5 7 3 6 6Sources of Funds


5 6 0 6 0 0 1 6 9 1 5 4


1 0 0 6 9 8 3 5 2 0 6 2 9


1 1 3 6 2 0 9 5 6 7 1 7 2


5 5 2 8 5 8 1 1 2 7

Accumulated Losses

N I L


8 8 1 5 9 6 4 7 5 1 0 0

Profit/Loss before Tax Profit/Loss after Tax4 0 6 4 9 6 2 6 8 9 3 5

Please tick Appropriate Box + for Profit, – for Loss


4 . 8 0 N I L


Leasing

Item Code No.: N.A.(ITC Code)

Product Description : Leasing

* Note : Rs. 21,06,00,000 issued for consideration otherwise then in cash pursuant to the scheme of amalgamation approved by the High Court ofJudicature at Mumbai.


+ –+

+ –+










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Name of the Subsidiary Company Raykal Aluminium Company Private Limited

Financial year of the subsidiary Company ended on March 31, 2006

Number of shares of the Subsidiary Company held by India Infrastrucuture Developers Limited 40,000and/or its nominees at the above date - Equity Shares

The net aggregate of profits/ ( losses ) of the Subsidiary Company so far as it concerns the membersof India Infrastruture Developers Limited : Rupees

(i) Dealt with in the accounts of India Infrastructure Developers Limited amounted to :

a ) for the subsidiary’s financial year ended March 31, 2006 NIL

b ) for the previous financial years of the subsidiary since it became subsidiaryof India Infrastructure Developers Limited NIL

(ii) Not dealt with in the accounts of India Infrastructure Developers Limited amounted to :

a) for the subsidiary’s financial year ended March 31, 2006 NIL

b) for the previous financial years of the subsidiary since it became NILsubsidiary of India Infrastructure Developers Limited

Changes in the interest of India Infrastructure Developers Limited between the endof the subsidiary’s financial year and March 31, 2006:

Number of shares acquired NIL

Material changes between the end of the subsidiary’s financial year and March 31, 2006 NA



A.K. CHHATWANI Directors

T. SUKUMAR N. SIVARAMANCompany Secretary


}

S-331

RAYKAL ALUMINIUM COMPANY PRIVATE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportYour Directors present the Annual Report and Balance Sheet for the year ended March 31, 2006.FINANCIAL RESULTSDuring the year under review, the Company did not carry on any business activities and accordingly no Profit and Loss Account has been prepared.CAPITAL EXPENDITUREDuring the period under review, the Company did not incur any capital expenditure.AUDITORS’ REPORTThe notes to the accounts referred to in the Auditors’ Report are self explanatory and therefore do not call for any further comments of Directors.DISCLOSURE OF PARTICULARSThe Company did not carry on business activities and hence there are no particulars to be disclosed as per Companies (Disclosure of Particulars in theReport of Board of Directors) Rules, 1988.PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees)Rules, 1975.DIRECTORS’ RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirms:I. that in the preparation of the annual accounts, the accounting standards have been followed to the extent applicable and there has been no

material departure;II. that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable and prudent

so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006;III. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the

Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;IV. that the annual accounts have been prepared on a going concern basis.DIRECTORSDuring the year under review, Mr. P. S. Banerjee who was appointed as an additional Director on December 3, 2005, shall hold office upto the ensuingAnnual General Meeting and being eligible offers himself for re-appointment.Mr. W. D. Rodrigues resigned as a Director of the Company with effect from January 25, 2006. The Directors record their appreciation of the contributionmade by Mr. W. D. Rodrigues to the Company.Mr. A. J. M. Kalban, Mr. A. M. A. R. Fikree, Dr. A. A. A. Al-Awar, Mr. A K Gurtoo, Mr. E. I. Rugeroni and Mr. M. E. Nagib were appointed as Directorsretiring by rotation on February 13, 2006.Mr. A. K. Chhatwani, Mr. A. J. M. Kalban and Mr. A. M. A. R. Fikree retire by rotation and are eligible for re-appointment.AUDITORSThe Auditors, M/s Sharp & Tannan, hold office until the conclusion of the ensuing Annual General Meeting. The Directors recommend that M/s Sharp &Tannan, Chartered Accountants be appointed as the Statutory Auditors of the Company at the forthcoming Annual General Meeting of the Company tohold office till the conclusion of the next Annual General Meeting of the Company.


Place : Mumbai A.K. CHHATWANI P.S BANERJEEDate : April 24, 2006 Directors

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTo the shareholders of Raykal Aluminium Company Private LimitedWe have audited the attached balance sheet of Raykal Aluminium Private Limited as at March 31, 2006 and also the cash flow statement for the yearended on that date. No profit and loss account has been prepared as the Company has not carried out any activities. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides areasonable basis for our opinion.In accordance with the provisions of section 227 of the Companies Act, 1956, we report that:1 As the Company satisfies all the conditions mentioned in paragraph 2(iv) of the Companies (Auditor’s Report) Order, 2003 issued by the central

government of India in terms of section 227(4A) of the Companies Act, 1956, reporting under the said Order is not required.2 Further to our comments in paragraph 1 above, we report that:


(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination ofthose books;

(c) the balance sheet and cash flow statement dealt with by this report are in agreement with the books of account; and(d) in our opinion, the balance sheet and cash flow statement dealt with by this report comply with the accounting standards referred to in

section 211(3C) of the Companies Act, 1956, to the extent applicable.In our opinion and to the best of our information and according to the explanations given to us, the said balance sheet and cash flow statement readtogether with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state of the Company’s affairs as at 31 March 2006.


by the hand ofR.D. KARE

PartnerMembership No.008820

Place : MumbaiDate : April 24, 2006

S-332




Rupees Rupees RupeesRupeesRupeesRupeesRupees RupeesRupeesRupeesRupeesRupeesSOURCES OF FUNDS:Shareholders’ Funds:Share CapitalAuthorised

1,00,000 Equity Shares of Rs.10 each 1,000,000 1,000,0001,000,0001,000,0001,000,0001,000,000

Issued, Subscribed & Paid up50,000 Equity Shares of Rs.10 each fully paid-up 500,000 500,000(80% of the equity is held by L&T Power InvestmentsPrivate Limited and balance 20% is held byDubai Aluminium Company Limited)Advance against equity commitment ( Pl refer note no.3 ) 441,306 -

Total 941,306 500,000500,000500,000500,000500,000

APPLICATION OF FUNDS:Current Assets, Loans and AdvancesCash and bank balances:

Cash in hand - -Balance with Scheduled bank in Current Account 676,893 27,548

676,893 27,548Loans and Advances

Unsecured and considered goodAdvances recoverable in cash or in kindAdvance to Vimta Labs Limited 355,395Deposit with Larsen & Toubro Limited ( incl.interest accrued ) - 527,041TDS certificate receivable 6714 607

362,109 527,648

1,039,002 555,196Less: Current Liabilities

Larsen & Toubro Limited 479,386 54,269L&T Power Investments Private Limited 9,500 9,500Income tax payable 10,070 9,895TDS payable 19,938 -Provision for expenses 75 -Audit fees payable 5,510 2,204

524,479 75,868

Net Current Assets 514,523 479,328Miscellaneous Expenditure

(to the extent not written off or adjusted)Preliminary & Pre-operative Expenses 426,783 20,672

Total 941,306 500,000500,000500,000500,000500,000

IN TERMS OF OUR REPORT OF EVEN DATE for RAYKAL ALUMINIUM COMPANYATTACHED HEREWITH PRIVATE LIMITED


by the hand ofR.D. KARE A.K. CHHATWANI P.S. BANERJEEPartner Directors

Place : Mumbai Place : MumbaiDate : April 24, 2006 Date : April 24, 2006

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Notes forming part of accountsNotes forming part of accountsNotes forming part of accountsNotes forming part of accountsNotes forming part of accounts1. The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally accepted accounting

principles (“GAAP”) and in compliance with the accounting standards referred to in Sec. 211 (3C) and other requirements of the Companies Act,1956.

2. As the Company has not yet started commercial operations, no Profit & Loss Account has been prepared.

3. The advance amounting to Rs.4,41,306/- is convertible into equity upon the Company (Raykal) achieving financial closure and subject to the termsof the JV agreement with DUBAL

4 Disclosure of related parties / related party transactions:i. List of related parties where control exists:

Holding Company - L&T Power Investments Private Limited

Ultimate Holding Company - Larsen & Toubro Limited

ii. Names of related parties with whom transactions were carried out during the year and description of relationship:Ultimate Holding Company - Larsen & Toubro Limited

iii. Disclosure of related party transactions:Amount (Rupees)

Sr. No. Nature of transaction / relationship 2005-06 2004-05

1. Receiving of services / overheads charged by partiesLarsen & Toubro Limited - Ultimate Holding Company 400,000 47,218

2. Interest receivedLarsen & Toubro Limited - Ultimate Holding Company 29,918 30,000

iv. Amount due to / from related parties:Sr. No. Nature of transaction / relationship

1. Loans and advances recoverableLarsen & Toubro Limited - Ultimate Holding Company - 527,041

2. Accounts PayableLarsen & Toubro Limited - Ultimate Holding Company 479,386 54,269L&T Power Investments Private Limited - Holding Company 9,500 9,500

2005-06 Rupees5 Details of preliminary & pre operative expenses :

Opening balance as at 1.4.2005 20,672Add: Expenses during the period April 2005 - March 2006

ROC fees 2,400Advertisement exp. 10,000Bank charges 960Audit fees 5,510Overheads charged by Larsen & Toubro Limited 400,000Professional Fees 20,279

439,149Less: Income during the year

Interest received / accrued on ICD with Larsen & Toubro Limited 29,918Foreign exchange gain 14,273

Add: Provision for tax on interest accrued 11,153

TOTAL 426,783


SHARP & TANNANChartered Accountantsby the hand of

R.D. KARE A.K. CHHATWANI P.S. BANERJEEPartner Directors


S-334


Notes forming part of accounts (Contd.)Notes forming part of accounts (Contd.)Notes forming part of accounts (Contd.)Notes forming part of accounts (Contd.)Notes forming part of accounts (Contd.)6. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILEI. Registration Details:

Registration No. 1 5 - 0 5 6 7 3 State Code 1 5


II. Capital Raised during the Year (Amount in Rs.Thousands)



N I L N I L




Paid-up Capital Reserves & Surplus

9 4 1 * N I L




N I L N I L

Net Current Assets Miscellaneous Expenditure

5 1 5 4 2 6

Accumulated Losses

N I L

IV. Performance of Company (Amount in Rs.Thousands)

Turnover Total Expenditure

N I L N I L


N I L N I L

Please tick appropriate box + for profit, - for loss

Earning Per Share in Rs. Dividend Rate %

N A N A

V. Generic Names of Three Principal Products / Services of the Company (as per monetary terms)

No activities during the year

* Includes Rs. 441 thousand towards advance against equity commitment (refer note no. 3)


SHARP & TANNANChartered Accountantsby the hand of

R.D. KARE A.K. CHHATWANI P.S. BANERJEEPartner Directors


INTERNATIONAL SEAPORTS PTE LIMITED

S-335

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors present their report together with the audited financial statements of the Company for the financial year ended December 31, 2005.The consolidated financial statements of the Company and its subsidiary are not prepared for the reasons stated in the acCompanying financialstatements.1. DIRECTORS

The Directors of the Company in office at the date of this report are:Thomas Tan Boon YongRamamurthi Shankar Raman (Appointed on 14 February 2005)Venkatapuram Parthasarathy Ravi (Appointed on 20 October 2005)

2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES ANDDEBENTURESNeither at the end of the financial year nor at any time in that year did there subsist any arrangement whose object is to enable the directorsof the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate.

3. DIRECTORS’ INTERESTS IN SHARES AND DEBENTURESThe directors holding office at the end of the financial year had no interests in the share capital of the Company and related corporations asrecorded in the register of directors’ shareholdings kept by the Company under Section 164 of the Singapore Companies Act.

4. DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITSSince the beginning of the financial year, the directors have not received or become entitled to receive a benefit which is required to bedisclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the Company or a related corporation withthe director or with a firm of which he is a member, or with a Company in which he has substantial financial interest.

5. OPTIONS TO TAKE UP UNISSUED SHARESDuring the financial year, no option to take up unissued shares of the Company was granted.

6. OPTION EXERCISEDDuring the financial year, there were no shares of the Company issued by virtue of the exercise of an option to take up unissued shares.

7. UNISSUED SHARES UNDER OPTIONAt the end of the financial year, there were no unissued shares of the Company under option.

8. SUBSIDIARY COMPANIESAs required under Section 212 of the Companies Act, 1956 the Audited Statement of Accounts, the Reports of the Board of Directors andAuditors of International Seaports (India) Private Limited are annexed.

9. AUDITORS’ REPORTThe Auditors’ Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors’ Reportare self-explanatory and therefore do not call for any further comments of Directors.

10. DISCLOSURE OF PARTICULARSAs per the Company, the Company being registered outside India, the disclosures required to be made in accordance withCompanies(Disclosure of Particulars in the Report of Board of Directors) Rules,1988, are not relevant. Hence the same has not beenfurnished.

11. DIRECTORS’ RESPONSIBILITY STATEMENTThe Board of Directors of the Company confirms:i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and there has been no

material departure;ii. that the selected Accounting Policies were applied consistently and the Directors made judgments and estimates that are

reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at December 31, 2005 andthe profits of the Company for the year ended on that date;

iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act,1956 for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; and

iv. that the annual accounts have been prepared on a going concern basis.12. AUDITORS

The auditors, M/s. Rama & Co., Certified Public Accountants, have expressed their willingness to accept re-appointment.

On behalf of the Board

RAMAMURTHI SHANKAR RAMAN VENKATAPURAM PARTHASARATHY RAVIDirector Director

Place : ChennaiDate : June 9, 2006


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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportThe financial statements of INTERNATIONAL SEAPORTS PTE. LIMITED, SINGAPORE for the year ended December 31, 2005, being a Companyregistered in Singapore, are audited by Rama & Co., Chartered Accountants, Singapore and we have been furnished with their audit report dated5TH May 2006 on which we have placed reliance for the purpose of our opinion given below.

We are presented with the Accounts in Indian Rupees prepared on the basis of aforesaid accounts to comply with the requirements of Section 212of the Companies Act, 1956. We give our report hereunder:

We have audited the attached Balance Sheet of INTERNATIONAL SEAPORTS PTE. LIMITED, SINGAPORE as at December 31, 2005 and alsothe Profit & Loss Account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.


1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) ofthe Companies Act, 1956 we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order to theextent applicable to the Company.


a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for thepurposes of our audit;

b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;

c. The said Balance Sheet,Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the booksof account;

d. In our opinion, the said Balance Sheet, Profit and Loss Account and cash flow statement, comply with the accounting standardsreferred to in sub-section (3 C) of section 211 of the Companies Act 1956.

e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the Company isregistered in Singapore, no reporting is required to be made under the above section.

f. In our opinion and to the best of our information and according to the explanations given to us the said accounts read together with thesignificant accounting policies and notes on accounts in Schedule ‘G’ and elsewhere in the accounts give the information required bythe Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generallyaccepted in India.

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at December 31, 2005;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on the date; and



L.VAIDYANATHANPartner


Place : Chennai

Date : June 9, 2006


(i) The Company does not have any assets and hence reporting on maintenance of proper records, physical verification and going concernstatus under clause 4 (i) of the Companies (Auditor’s Report) Order 2003 does not arise.

(ii) The Company does not have any inventory and hence reporting on physical verification and maintenance of proper records under clause4 (ii) of the Companies (Auditor’s Report) Order 2003 does not arise.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate


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with the size of the Company and nature of its business for sale of services. In our opinion, and according to the information andexplanations given to us, there is no continuing failure to correct major weaknesses in internal control system.


(vii) We have not been provided with an internal audit report for the year and hence commenting whether it is commensurate with the size andnature of its business could not be possible.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, theCompany has been generally regular in depositing undisputed statutory dues towards Income-tax and any other statutory duesduring the year with the appropriate authorities. According to the information and explanations given to us, no undisputed amountspayable in respect of Income Tax and other statutory dues were in arrears as at December 31, 2005 for a period of more than sixmonths from the date they become payable.

(b) According to the information and explanations given to us, there are no dues of income tax, which have not been deposited withthe appropriate authorities on account of any dispute.

(x) The Company has accumulated losses at the end of the financial year and has not incurred cash losses in the current financial yearcovered by our audit. However the Company has incurred cash losses in the immediately preceding financial year.

(xi) According to the information and explanations given to us, the Company has not borrowed any amount from banks/ Financial Institutions.The Company has not issued any debentures.


(xiii) The provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company.

(xiv) In our opinion, and as per information obtained from management, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditors’ Report) Order, 2003 are notapplicable to the Company.


(xvi) The Company has not availed any term loans during the year and hence reporting on the purpose for which they were raised does notarise.

(xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we reportthat no funds have been raised on short term basis. Hence reporting on the usage of the same does not arise.



(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us, we have neither come across any instances ofmaterial fraud on or by the Company, noticed or reported during the year ,nor have we been informed of such case by management.

(xxii) The clauses 4.(iii),(v),(viii) and (xviii) of the Companies (Auditor’s report) Order,2003 are not applicable to the Company since it isregistered outside India and hence no reporting has been made.


L.VAIDYANATHANPartner


Place : Chennai

Date : June 9, 2006


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Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005

As at 31.12.2005 As at 31.12.2004

Schedules Rs. Rs. Rs. Rs.

SOURCES OF FUNDS:


Share capital A 78,471,073 78,471,073

Translation Reserve 2,466,194 2,498,616

80,937,267 80,969,689

TOTAL 80,937,267 80,969,689

APPLICATION OF FUNDS:

Investments B 26,343,504 26,343,504

Current assets, loans and advances: C

Sundry debtors — 13,097,034

Cash and bank balances 2,176,110 98,532

2,176,110 13,195,566

Less: Current liabilities and provisions: D 189,158 12,309,713

Net current assets 1,986,952 885,853


TOTAL 80,937,267 80,969,689

SIGNIFICANT ACCOUNTING POLICIES AND

NOTES ON ACCOUNTS G

The schedules referred to above and the notes attached form

an intergral part of the Balance Sheet

As per our attached report of even dateSHARP & TANNANChartered Accountants

L. Vaidyanathan RAMAMURTHI SHANKAR RAMAN VENKATAPURAM PARTHASARATHY RAVIPartner Director DirectorMembership No. 16368

Place : Chennai Place : ChennaiDate : June 9, 2006 Date : June 9, 2006


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Profit and Profit and Profit and Profit and Profit and LLLLLoss oss oss oss oss AAAAAccountccountccountccountccount for the year ended for the year ended for the year ended for the year ended for the year ended December 31, 2005December 31, 2005December 31, 2005December 31, 2005December 31, 2005

2005 2004

Schedules Rs. Rs.

INCOME:

Other income E 1,619,572 —

1,619,572 —

EXPENDITURE:

Sales, administration and other expenses F 382,742 255,819

Bad Debts written off — 62,335,114

382,742 62,590,933

Profit/(Loss) before tax 1,236,830 (62,590,933)

Provision for current year taxes 103,309 —

Profit/(Loss) after tax 1,133,521 (62,590,933)

Add: Balance brought forward from previous year (53,740,332) 8,850,601


Earnings per Share - Basic / Diluted 0.62 (34.39)

SIGNIFICANT ACCOUNTING POLICIES AND

NOTES ON ACCOUNTS G

The schedules refered to above and the notes attached form

an integral part of the Profit and Loss account





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Cash Flow Statement for the year endedCash Flow Statement for the year endedCash Flow Statement for the year endedCash Flow Statement for the year endedCash Flow Statement for the year ended December 31, 2005December 31, 2005December 31, 2005December 31, 2005December 31, 2005

2005 2004Rs Rs

A. Cash Flow from operating activitiesNet profit before tax 1,133,521 (62,590,933)Translation Reserve (32,422) (2,711,316)

Operating profit before working capital changes 1,101,099 (65,302,249)(increase) / decrease in trade and other receivables 13,097,034 65,795,749(increase) / decrease in inventories — —increase / (decrease) in trade payables (12,120,555) (1,420,799)

Cash generated from operations 2,077,578 (927,299)

B. Cash Flow from Investing ActivitiesPurchase of Fixed assets — —Difference in opening balance of fixed assets due to exchange fluctuation — —Difference in opening balance of cumulative depreciation due to exchange fluctuation — —Sale of fixed assets net of depreciation — —Interest received — —Net Cash (used in) / from investing activities — —

C. Cash Flow from Financing activtiesDividends paid — —Interest paid — —

Net cash (used in) / from financing activities — —

Net (decrease) / increase in cash and cash equivalents 2,077,578 (927,299)(A+B+C)Cash and cash equivalents at beginning of the year 98,532 1,025,831

Cash and cash equivalents at end of the year 2,176,110 98,532

Cash and cash equivalents at end of the year 2,077,578 (927,299)





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SCHEDULE A As at 31-12-2005 As at 31-12-2004

Rupees RupeesShare capitalAuthorised :

6300,000 shares of USD 1 each 10,080,000 10,080,000Issued, Subscribed and paidup

1815,000 Equity Shares of USD 1 each 78,471,073 78,471,073( The entire Equity Shares are held by Larsen & Toubro Limited)

78,471,073 78,471,073

SCHEDULE B

Investments - Long Term

Investments in Subsidiary :International Seaports (India) Pvt. Limited 26,343,504 26,343,504

(25,00,580 equity shares of Rs.10/- each)

SCHEDULE C

Current Assets, Loans and Advances:Current Assets:Cash and bank balances:

Balances with non-scheduled banks 2,176,110 98,532(Refet Note No. 6 in Schedule G)

Loans and advances:Unsecured:Considered good:Advances recoverable in cash or in kind — 13,097,034

2,176,110 13,195,567

SCHEDULE D

Current Liabilities and Provisions:Liabilities:

Sundry creditors :Others 85,849 12,309,713Provisions for:

Taxes 103,309 -

189,158 12,309,713

SCHEDULE E

Other Income:Miscellaneous Income 1,619,572 -

1,619,572 -

SCHEDULE F

Administration and Other Expenses:

Rates and taxes 39,022 -

Bank charges 121,207 78,537

Miscellaneous expenses 222,513 177,282

382,742 255,819


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SCHEDULE G

SIGNIFICANT ACCOUNTING POLICIES & NOTES ON ACCOUNTS

I. ACCOUNTING POLICIES :

1. Method of Accounting

The financial statements are prepared under historical cost convention and on accrual basis and are in compliance with the mandatoryaccounting standards referred to in sub section 3C of Section 211 and other provisions of the Indian Companies Act, 1956.

The preparation of accounts under GAAP requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and the disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenuesand expenses during the year. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospec-tively in the current and future periods.


The revenue from services rendered is recognized based on the agreements with each party and when recovery is certain.

3. Investment in subsidiary

Long term investments are stated cost after providing for any diminution in value, if such diminution is of a permanent nature.

4. Foreign Currencies

Accounts are translated in Indian Rupees as follows :

a. Share Capital is retained at the initial contribution amount.

b. Fixed and Current Assets & Current Liabilities are translated at year-end rates.

c. Revenue transactions are translated at the average rates.

d. The resultant difference is accounted as translation reserve in the balance sheet.

5. Taxes on Income

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance of the provisionsof the Income Tax, Singapore and based on expected outcome of assessments/ appeals.

Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using thetax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable incomewill be available, against which such deferred tax assets can be realised.

6. Provisions, Contingent liabilities and contingent assets


a) the Company has a present obligation as a result of a past event.


c) the amount of the obligation can be reliably estimated.

Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that thereimbursement will be received.



b) a possible obligation, unless the probability of outflow of resources is remote.

Contingent Assets are neither recognized, nor disclosed..

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance sheet date.



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II. NOTES ON ACCOUNTS :

1. Information pursuant to Para 4 (C ) of Part II of Schedule VI to the Indian Companies Act, 1956 such as Opening Stock, Closing Stock, licensedcapacity, production, turnover etc. have not been given since the Company is a Service Company and does not have any inventory.


2005 2004Rupees Rupees

Audit fees 66,343 66,647

TOTAL 66,343 66,647

3. Segment Reporting – The Company is in the business of development of ports by providing consultancy services. Hence, operations areunder single segment and disclosure under Accounting Standard 17 – Segment reporting issued by Institute of Chartered Accountants of Indiadoes not arise.

4. Disclosure of Related Parties / related party transactions:

a) Name of the related Party

Subsidiary Company : International Seaports (India) Pvt. Limited

Ultimate Holding Company : Larsen & Toubro Limited

b) Name of the related parties with whom transactions were carried out during the year and description of relationship :

Name of the Party Relationship Nature of Transaction during Closing balancetransaction the year as at 31.12.05 due to

ISPL (India) Pvt. Ltd Subsidiary Company Reimbursement of Expenses Rs. 2,46,93,238/- NIL

c) No amount has been written off or written back during the year.

5. The Company has not taken any lease (Previous Year – Nil)

6. Balances with non-schedules banks :

a. Current Accounts

As at Maximum amount31.12.2005 outstanding at any

time during the year

Bank of America, Singapore 21,76,109 21,76,109

7. Earnings per share (Basic & Diluted):

Particulars 31.12.2005 31.12.2004

a) NumeratorProfit / (Loss) after tax (Amount in Rs.) 1,133,520 (62,590,933)

b) DenominatorWeighted average number of Equity shares 1,815,000 1,815,000

c) Earnings per share (Basic/Diluted) (in Rs.)= Numerator / Denominator 0.62 (34.49)

8. Provision for income tax has been made as per provisions of Singapore Income Tax Act.

9. The Company does not have any contingent liability as at 31.12.2005 (Previous year – Nil)

10. The Company has reviewed the cash flow from its assets based on value in use and satisfied that there is no impairment loss required to beprovided for the year.



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Registration No. 1 9 9 6 0 5 6 5 C State Code No.





N I L N I L




Paid up Capital Translation Reserves

7 8 4 7 1 2 4 6 6


N I L N I LDeferred Tax Asset Deferred Tax Liability

N I L


N I L 2 6 3 4 3


1 9 8 7 N I L


1 6 2 0 3 8 3


1 2 3 7 1 1 3 4


0 . 6 2 N I L



Product Description Not applicable since the Company is engaged in service activity.

12. Figures of the previous year have been re-grouped/re-classified wherever necessary.


+ –+

+ –+




+ ––

+ –+


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Statement pursuant to Section 212 of the Companies Act, 1956 relating toSubsidiary CompaniesName of the subsidiary Company International Seaports (India) Pvt. Ltd.

Financial year of the subsidiary Company Ended on March 31, 2006

Number of shares of the Subsidiary Company held by InternationalSeaports Pte. Limited and/or its nominees at the above date – Equity Shares 25,00,560

The net aggregate of profits/(losses) of the SubsidiaryCompany so far as it concerns the members of RupeesInternational Seaports Pte. Limited.

(i) Dealt with in the accounts of International Seaports Pte. Limitedamounted to :

a) for the subsidiary’s financial year ended March 31, 2006 Nil

b) for the previous financial years of the subsidiary since it becamesubsidiary of International Seaports Pte. Limited Nil

(ii) Not dealt with in the accounts of International Seaports Pte. Limitedamounted to :

a) for the subsidiary’s financial year ended March 31, 2006 (5,945,075)

b) for the previous financial years of the subsidiary since it becamesubsidiary of International Seaports Pte. Limited (29,538,997)

Changes in the interest of International Seaports Pte. Limited between theend of the subsidiary’s financial year and December 31, 2005:

No. of shares acquired Nil

Material changes between the end of the subsidiary’s financial year andDecember 31, 2005 Nil


RAMAMURTHI SHANKAR RAMAN VENKATAPURAM PARTHASARATHY RAVIDirector Director

Place : ChennaiDate : June 9, 2006

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INTERNATIONAL SEAPORTS (INDIA) PRIVATE LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportYour Directors have pleasure in presenting the NINTH Annual Report together with the Profit and Loss Account for the year ended March 31,2006 and the Balance Sheet as on the date.

1. FINANCIAL HIGHLIGHTS

The Financial Position of the Company for the year ended March 31, 2006 as follows:

(Rs.in Lakhs) (Rs.in Lakhs)Particulars 2005–2006 2004–2005

Income 5.13 3.79

Expenditure 63.20 58.60

Profit/(Loss) Before Tax (58.07) (54.81)

Provision for Taxes 1.38 —

Profit/(Loss) After Tax (59.45) (54.81)

Brought forward Loss (295.40) (247.17)

Deferred Tax Liability for previous years — 6.58

Balance Carried to Balance Sheet (354.85) (295.40)

2. OPERATIONS

Your Directors are pleased to report that your Company is looking for opportunities that are available in Container Terminal Developmentin various major ports.

3. DIRECTORS

Mr.A Ramakrishna and Mr. Y M Deosthalee, Directors of the Company retire by rotation at the forthcoming Annual General Meeting andhave expressed their inability to continue as Directors of the Company.

Mr. T.S. Sundaresan and Mr. V.P. Ravi have been inducted as Additional Directors of the Company and will retire in the forthcomingAnnual General Meeting, however, being eligible, they offer themselves for re–appointment.

4. PARTICULARS OF EMPLOYEES

Under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975 asamended, none of the employee was in receipt of remuneration in excess of the prescribed limits.


Pursuant to provisions of sub–section (2AA) of section 217 of the Companies Act,1956 Your Directors confirm that:

i. in the preparation of the Annual Accounts, the applicable accounting standards had been followed along with proper explanationrelating to material departures;

ii. the accounting policies selected had been applied consistently and judgements and estimates made are reasonable and prudent soas to give a true and fair view of the state of affairs of the Company at the end of the financial year on March 31, 2006 and of the lossof the Company for that period;

iii. proper and sufficient care had been taken for the maintenance of adequate accounting records in accordance with the provisions ofthe Companies Act,1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;and

iv. the annual accounts had been prepared on a going concern basis.

6. AUDITORS

M/S Sharp & Tannan, Chartered Accountants, the statutory auditors of the Company retire at the ensuing Annual General Meeting of theCompany and are eligible for re–appointment. A Certificate has been received from them that if appointed, they would be within the limitsprescribed under section 224(1B) of the Companies Act, 1956. The Board of Directors commends their re–appointment.

7. PARTICULARS REGARDING FOREIGN EXCHANGE/ENERGY CONSERVATION

Information regarding Expenditure in foreign Currency and Energy Conservation and Technology adoption are not applicable to theCompany, for the year under review.

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8. ACKNOWLEGEMENTS

Your Directors wish to place on record their sincere appreciation to the Bankers, Financial Institutions and Employees for their supportduring the year and look forward their support in the future as well.

for INTERNATIONAL SEAPORTS (INDIA) PVT. LTD,

Place: Chennai T. S. SUNDARESANDate: June 9, 2006 Director

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportWe have audited the attached Balance Sheet of International Seaports (India) Private Limited as at March 31, 2006, the profit and loss accountand the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of theCompany’s Management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.

In accordance with the provisions of Section 227 of the Companies Act 1956, we report as under.

1. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) ofthe Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said order.


a. We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for thepurposes of our audit;

b. In our opinion, proper books of accounts as required by law have been kept by the Company, so far as it appears from ourexamination of those books;

c. The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books ofaccount;

d. In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with theaccounting standards referred to in sub–section (3C) of section 211 of the Companies Act, 1956;

e. On the basis of the written representations received from the Directors of the Company as on March 31, 2006, and taken on recordby the Board of Directors, we report that none of the Directors are disqualified as on March 31, 2006 from being appointed as aDirector in terms of clause (g) of sub–section (1) of section 274 of the Companies Act, 1956.

f. In our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2006

ii. in the case of the Profit and Loss Account, of the loss for the year ended on that date and

iii. in case of the cash flow statement, of the cash flows for the year ended on that date.


L.VAIDYANATHANPlace: Chennai PartnerDate: June 9, 2006 Membership No. 16368

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportWith reference to the Annexure referred to in paragraph 1 of the report of the Auditor’s to the Members of International Seaports (India) PrivateLimited on the accounts for the year ended March 31, 2006, we report that:

1. a. The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.

b. The Company has physically verified during the year all its fixed assets. No material discrepancies were noticed on such verification.

c. The Company has not disposed any of its Fixed Assets during the year; hence reporting on going concern status does not arise.

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2. As the Company is engaged in the business of port consultancy and management, the clause 4 (ii) (a) (b) and (c) of the Companies(Auditor’s Report) Order 2003 relating to inventory is not applicable.

3. The Company has not granted or taken any loans, secured or unsecured to or from Companies, firms or other parties covered in theregister maintained under section 301 of the Act. Hence reporting under Clause (iii) (a) to (g) does not arise.

4. In our opinion, and according to the information and explanations given to us, there are adequate internal control procedures commensuratewith the size of the Company and nature of its business, for the purchase of fixed assets. In our opinion, and according to the informationand explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

5. a. In our opinion, and according to the information and explanations given to us, there is no transaction that needs to be entered into theregister maintained under Section 301 of the Companies Act, 1956 and hence reporting under clause (b) does not arise.

6. The Company has not accepted deposits from the public within the meaning of Section 58A, 58AA or any other relevant provisions of theCompanies Act, 1956.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

8. Maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 is not applicable to the Company.

9. a. According to the information and explanations given to us and on the basis of our examination of the books of account, the Companyhas been generally regular in depositing undisputed statutory dues including Income tax and other statutory dues during the year withthe appropriate authorities. As at March 31, 2006, there are no undisputed statutory dues payable for a period of more than sixmonths from the date they became payable.

b. According to the information and explanations given to us, there are no disputed statutory liabilities in respect of income tax, servicetax and cess.

10. The accumulated loss of the Company has exceeded 50% of its net–worth as at end of the year. The Company has incurred cash lossesduring the year covered by our audit and in the immediately preceding financial year.

11. The Company has not defaulted in repayment of dues to bank or financial institution or debenture holders, during the year.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security byway of pledge of shares, debentures and other securities.


14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures andother investments.


16. The Company has not accepted any long or short term loan, hence commenting upon the utilisation of the loans does not arise.

17. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we reportthat no funds raised on short term basis have been used for long–term investment .

18. The Company has not made preferential allotment of shares during the year.

19. The Company has not issued debentures. Accordingly, no securities need to be created.


21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us, we have neither come across any instances ofmaterial fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.


L.VAIDYANATHANPlace: Chennai PartnerDate: June 9, 2006 Membership No. 16368

S-349



Rupees Rupees

SOURCES OF FUNDS: SchedulesShareholders’ Funds: Share Capital 1 25,005,800 25,005,800

TOTAL 25,005,800 25,005,800

APPLICATION OF FUNDS:Fixed Assets: 2

Gross Block 466,992 335,310Less : Depreciation 256,010 227,079Net Block 210,982 108,231Deferred Tax Asset 258,110 319,230

Current Assets, Loans and Advances: 3Cash and Bank Balances 3,767,764 338,176Loans and Advances 595,460 7,582,189

4,363,224 7,920,365Less: Current Liabilities and Provisions 4

Liabilities 15,294,188 12,825,653Provisions 16,400 55,370

15,310,588 12,881,023Net Current Assets (10,947,364) (4,960,658)Profit and Loss account 35,484,072 29,538,997

TOTAL 25,005,800 25,005,800

SIGNIFICANT ACCOUNTING POLICIES 8Notes forming part of accounts 9


L.VAIDYANATHAN T. S. SUNDARESAN V.P. RAVI V. P. RAVIPartner Director Director SecretaryMembership No. 16368

Place: Chennai Place: ChennaiDate : June 9, 2006 Date : June 9, 2006

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Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006

2005-2006 2004-2005Rupees Rupees

Schedules

INCOME:Operating & Management Fee — 325,000Miscellaneous Income — —Interest Income 5 513,378 54,023

513,378 379,023

EXPENDITUREStaff Expenses 6 1,092,974 1,135,563Administration & Operating expenses 7 5,198,011 4,575,430Loss on Sale of Fixed Assets — 4,333Depreciation & Obsolescence 28,931 144,248

6,319,916 5,859,574

Profit/(Loss) before Tax (5,806,538) (5,480,551)Provision for Taxes

Fringe Benefit Tax 77,417Current tax — —Deferred tax 61,120 658,429

Profit/(Loss) after Tax (5,945,075) (4,822,122)Add : Loss brought forward from previous year (29,538,997) (24,716,875)Balance carried to Balance sheet (35,484,072) (29,538,997) Earnings per Share – Basic / Diluted (2.38) (1.93)Significant Accounting Policies 8Notes forming part of accounts 9



Place: Chennai Place: ChennaiDate: June 9, 2006 Date: June 9, 2006

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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006 Year Year

2005-2006 2004-2005A. Cash Flow from operating activities

Net Profit / (loss) before tax (5,806,538) (5,480,551)Adjustment for :

Depreciation 28,931 144,248(Profit) / Loss on Sale of fixed Assets — 4,333Interest paid — 2,776,735Interest received (513,378) (2,830,758)

Operating Profit before Working Capital changes (6,290,985) (5,385,993)Adjustments For:

(Increase) / Decrease in Loans and Advances 6,986,729 40,552,070Increase / (Decrease) in trade payables 2,429,565 2,982,807

—Cash generated from operations 3,125,309 38,148,884Direct taxes paid (net of refund) (77,417) —


B. Cash Flow from Investing activities :Purchase of Fixed Assets (131,682) (560)Sale of Fixed Assets — 79,700Interest received 513,378 2,830,758

Net Cash (used in) / from investing activities (B) 381,696 2,909,898

C. Cash Flow from Financing activities :(Repayment) / Proceeds from other borrowings — (38,064,117)Interest Paid — (2,776,735)

Net cash (used in) / from financing activities (C) — (40,840,852)

Net increase in cash and cash equivalents (A+B+C) 3,429,588 217,930Cash and Cash equivalents as at the beginning 338,176 120,246(including cash credit from banks)Cash and Cash equivalents as at the end 3,767,764 338,176

1. Cash flow statement has been prepared under the Indirect Method as set of in the Accounting Standard 3 issued by the Institute ofChartered Accountants of India.

2. Cash and cash equivalents represent cash and bank balances.3. Purchase of fixed assets includes movement of capital work in progress during the year.4. Previous year’s figures have been regrouped/reclassified wherever applicable




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Schedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsAs at As at

31-03-2006 31-03-2005Rupees Rupees

SCHEDULE 1Share Capital

Authorised Capital50,00,000 equity shares of Rs. 10/– each 50,000,000 30,000,000

Issued, Subscribed and Paid up capital25,00,580 equity shares of Rs. 10/– each 25,005,800 25,005,800(The entire Equity Shares are held byInternational Seaports Pte. Ltd., Singapore)

TOTAL 25,005,800 25,005,800

SCHEDULE 2

Fixed Assets Rupees

GROSS BLOCK DEPRECIATION Net Block

Cost as at Additions Deletions Cost as at Upto For the On Upto As at As at01.04.2005 during the during the 31.03.2006 01.04.2005 year Deletions 31.03.2006 31.03.2006 31.03.2005

year year

Furniture & Fittings 94,234 – – 94,234 58,669 6,437 – 65,106 29,128 35,565

Office Equipment 241,076 131,682 – 372,758 168,410 22,494 – 190,904 181,854 72,666

Total 335,310 131,682 – 466,992 227,079 28,931 – 256,010 210,982

Previous Year 1,060,767 560 726,017 335,310 724,815 144,248 641,984 227,079 108,231

As at As at31-03-2006 31-03-2005

Rupees RupeesSCHEDULE 3Current Asets, Loans and Advances Rs. Rs.Current Assets:

Cash & Bank balancesCash on Hand — —Balance with Scheduled banks on current account 3,767,764 338,176

3,767,764 338,176Loans and Advances:Unsecured and Considered good – Advances recoverablein cash or kind or for value to be received

Others 595,460 7,582,189

595,460 7,582,189

4,363,224 7,920,365

SCHEDULE 4Current Liabilities & ProvisionsCurrent Liabilities

Sundry Creditors Due to Small Scale Industries — — Due to Others 15,294,188 12,825,653

15,294,188 12,825,653

Provision forLeave Encashment 16,400 55,370

16,400 55,370

15,310,588 12,881,023

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2005-2006 2004-2005Rupees Rupees

SCHEDULE 5Interest Interest on loan — 2,776,735 Interest - others — — Less : Interest on deposits with Banks 513,378 8,874

(Tax Deducted at Source - Rs.1,06,833/- - Previous year Rs.1,882/-)Interest on loans — 2,776,735Interest on Income Tax Refund — 45,149

(513,378) (54,023)

SCHEDULE 6Staff Expenses Salaries and Allowances 756,075 917,220 Staff Welfare 336,899 218,343

1,092,974 1,135,563

SCHEDULE 7Administration & Operating Expenses Insurance 32,626 17,285 Professional fee 2,411,985 460,641 Rent 141,800 388,000 Lease Rentals 216,488 358,352 Travelling & Conveyance 1,117,069 649,691 Printing & Stationery 92,872 140,046 Telephone & Postage 128,502 282,450 Entertainment 31,602 37,973 Repairs and Maintenance 825,593 2,082,100 Sundries 199,474 158,892

5,198,011 4,575,430

SCHEDULE 8

Significant Accounting Policies

1. Method of Accounting

The financial statements are prepared under historical cost convention and on accrual basis and are in compliance with the mandatoryaccounting standards referred to in sub section 3C of Section 211 and other provisions of the Indian Companies Act, 1956.

The preparation of accounts under GAAP requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and the disclosure of contingent liabilities as at the date of the financial statements and the reported amounts ofrevenues and expenses during the year. Actual results could differ from those estimates. Any revision to accounting estimates isrecognized prospectively in the current and future periods.


The revenue from services rendered is recognized based on the agreements with each party and when recovery is certain.

3. Fixed Assets

Fixed Assets are stated at original cost.


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4. Leases

Lease transactions entered into on or after April 1, 2001

a. Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as financeleases. Such assets are capitalised at the inception of the leases at the fair value or the present value of minimum lease paymentsand a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so asto obtain a constant periodic rate of interest on the outstanding liability for each period.

b. Assets acquired on leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classifiedas operating leases. Lease rentals are charged to the profit and loss account on actual basis.

5. Depreciation

Depreciation has been provided on written down value method at the rates and in the manner specified in Schedule XIV of the IndianCompanies Act, 1956.

6. Prior period and Extra-ordinary items

Income and Expenditure pertaining to prior periods as well as extra-ordinary items, where material, are disclosed separately.

7. Retirement benefits

Provision for leave encashment has been made on actual liability basis.

8. Foreign Currency Transactions

Foreign currency transactions in respect of revenue items are accounted for at the rates prevailing on the date of the transactions.

9. Taxes on Income

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance of theprovisions of the Income Tax, 1961 and based on expected outcome of assessments/ appeals.

Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified usingthe tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxableincome will be available, against which such deferred tax assets can be realised.

10. Provisions, Contingent liabilities and contingent assets


a. the Company has a present obligation as a result of a past event;

b. a probable outflow of resources is expected to settle the obligation; and

c. the amount of the obligation can be reliably estimated.

Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that thereimbursement will be received.

Contingent Liability is disclosed in the case of :

a. a present obligation arising from a past event, when it is not probable that an outflow of resources will be required to settle theobligation.

b. a possible obligation, unless the probability of outflow of resources is remote.

Contingent Assets are neither recognized, nor disclosed..

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

SCHEDULE 9

Notes forming Part of Accounts

1. Information pursuant to Para 4 (C) of Part II of Schedule VI to the Indian Companies Act, 1956 such as Opening Stock, Closing Stock,licensed capacity, production, turnover etc. have not been given since the Company is a Service Company and does not have anyinventory.


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Rs

2005-2006 2004-2005

Audit fees (excluding Service Tax) 1,75,000 1,75,000

TOTAL 1,75,000 1,75,000

3. Expenditure in Foreign currency

2005-2006 2004-2005

Foreign Travel 82,945 NIL

4. Segment Reporting – The Company is in the business of development of ports by providing consultancy services. Hence, operations areunder single segment and disclosure under Accounting Standard 17 – Segment reporting issued by Institute of Chartered Accountants ofIndia does not arise.

5. Disclosure of Related Parties / related party transactions:

a. Name of the related Party

Holding Company : International Seaports Singapore Pte Limited

Ultimate Holding Company : Larsen & Toubro Limited

b. Name of the related parties with whom transactions were carried out during the year and description of relationship :

Name of the Party Relationship Nature of transaction Transaction during Closing balance as atthe year 31.03.06 due to

Larsen & Toubro Ltd. Ultimate Holding Office MaintenanceCompany Expenses 7,68,000/- 1,48,99,229/-

L&T Finance Ltd. Associate Lease Rentals 1,60,362/- Nil

6. a. The Company has taken on non-cancelable operating lease a car and computers.

Minimum Lease payments for the above assets

Rs

31.03.2006 31.03.2005

Payable not later than 1 year 5,07,015 3,06,730

Payable later than 1 year and not later than 5 years 8,59,792 5,11,438

Total Minimum Lease payments 13,66,807 8,18,168

b. The Company has also taken on cancelable operating lease certain premises/flats for its use.

c. Lease rental expenses recognized in the Profit & Loss A/c Rs.2,16,488/-

7. Earnings per share (Basic & Diluted):

Particulars 31.03.2006 31.03.2005

a. Numerator Profit / (Loss) after tax (Amount in Rs.) (59,73,139) (48,22,142)

b. Denominator Weighted average number of Equity shares 25,00,580 25,00,580

c. Earnings per share (Basic/Diluted) (in Rs.) = Numerator / Denominator (2.39) (1.93)

8. The Company has no taxable income either under the conventional method of computation or under Section 115JB of the Indian IncomeTax Act, 1961 (Minimum Alternate Tax). Hence no provision for current tax has been made.

Schedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of Accounts (Contd.)(Contd.)(Contd.)(Contd.)(Contd.)

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9. The Company does not have taxable wealth and hence no provision has been made for wealth tax under the provisions of Wealth TaxAct, 1957.

10. Deferred Tax:

a. The Company has adopted Accounting Standard 22 (AS 22) – “Accounting for Taxes on Income” which is mandatoryw.e.f 1st April 2002. Accordingly Deferred tax assets of Rs.2,45,162/- had been recognized in the accounts for current year ended31.03.2006.

31.03.2006 31.03.2005

DTA DTL DTA DTL

Difference between book value of depreciableassets as per books of account and written downvalue for tax purposes 2,52,589 — 3,36,997 —

Provision for leave encashment debited to Profitand Loss Account 5,520 — 16,445 —

Total 2,58,110 — 3,53,442 —

b. The deferred tax asset on carried forward balance of unabsorbed loss / depreciation amounting to Rs.29,062,496/- had not beenconsidered for computing DTA as on 31.03.2006. The same has not been recognized in the books as a matter of prudence.

11. No provision for gratuity has been made since none of the employees are covered under the provisions of Payment of Gratuity Act.

12. The Employees Provident Fund and Miscellaneous Provisions Act 1952 is not applicable to the Company for the year.

13. The Company does not have any contingent liability as at 31.03.2006 (Previous year – Nil).

14. The Company has reviewed the cash flow from its assets based on value in use and satisfied that there is no impairment loss required tobe provided for the year.

Schedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of AccountsSchedules forming part of Accounts (Contd.)(Contd.)(Contd.)(Contd.)(Contd.)

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Registration No. 3 8 0 8 7 - 9 7 State Code No. 1 8





N I L N I L





2 5 0 0 6 N I L


N I L N I LDeffered Tax Asset Deffered Tax Liability

2 5 8 N I LApplication of Funds


2 1 1 N I L


1 0 9 5 N I L

Accumulative losses

3 5 4 8 4


5 1 3 6 3 2 0


5 8 0 7 5 9 4 5


2 . 3 8 N I L


Item Code No. : N A

Product Description : Not applicable since the Company is engaged in service activity


16. Figures for the previous year have been regrouped/reclassified wherever necessary.

+ –✔

+ –✔

+ –✔

+ –✔




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LARSEN & TOUBRO LLC

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their Annual Report and Audited Accounts for the year ended December 31, 2005.



Rupees Rupees

Gross Profit 1,902,523 996,627

Less:Depreciation on Fixed Assets 889,437 738,516

Profit before taxes 1,013,086 258,111

Provision for current & deferred taxes — —

Profit after taxes 1,013,086 258,111

2. SALES AND OTHER INCOME

Income from Sales and other sources amounted to Rs.47,121,230 for the year ended December 31, 2005 as against Rs.75,694,632 duringthe previous year.

3. DIVIDEND

The Directors do not recommend payment of any dividend for the year.


As at December 31, 2005 the Gross Fixed Assets stood at Rs.4,908,156/- and the Net Fixed Assets at Rs.2,306,785/-. Additions duringthe year amounted to Rs.1,408,849/-.

5. AUDITORS REPORT


The Notes to the Accounts referred to in the Auditors’ Report are self explanatory and therefore do not call for any further comments ofDirectors.


As the Company is engaged in trading activities outside India, there are no particulars to be disclosed as per the Companies (Disclosureof Particulars in the Report of Board of Directors) Rules, 1988.

7. PERSONNEL

There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particularsof Employees) Rules, 1975.



i) that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been nomaterial departure;

ii) that the selected accounting policies were applied consistently and the Directors made judgements and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as at December 31, 2005 and of the profit of theCompany for the year ended on that date;

iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisionsof the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;and



Place : Chennai, A.K.BanerjeeDate : May 2, 2006 Manager

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LARSEN & TOUBRO LLC

Auditors’ reportAuditors’ reportAuditors’ reportAuditors’ reportAuditors’ reportTO THE MEMBERS OF LARSEN & TOUBRO LLC

The financial statements of LARSEN & TOUBRO LLC, USA for the year ended 31st December 2005, being a company registered in Delaware,USA are audited by ABERCROMBIE & ASSOCIATES, PC.USA, and we have been furnished with their audit report dated 15th March 2006, onwhich we have placed reliance for the purpose of giving our opinion.

We are presented with the Accounts in Indian Rupees prepared by the management on the basis of aforesaid accounts to comply with therequirements of section 212 of the Companies Act, 1956. We give our report as under:

We have audited the attached Balance Sheet of LARSEN & TOUBRO LLC, USA as at 31st December, 2005 and also the Profit & Loss Accountand the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of thecompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standard require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.


1. As required by the Companies (Auditor’s Report) order, 2003 issued by the Central Government of India in terms of Section 227(4A) of theCompanies Act, 1956, we enclose in the Annexure, a Statement on the matters specified in paragraphs 4 and 5 of the said Order, to theextent applicable to this Company.

2. Further to our comments in the Annexure referred to in Paragraph (1) above, we report that:


b. In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examinationof those books;

c. The said Balance Sheet, Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books ofaccount;

d. In our opinion, the said Balance Sheet, Profit and Loss Account and cash flow statement, comply with the accounting standards referredto in sub-section(3C) of section 211 of the Companies Act 1956.

e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the company is registeredin Delaware, USA, no reporting is required to be made under the said section.

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with noteselsewhere in the accounts give the information required by the Companies Act 1956, in the manner so required and gives a true and fairview in conformity with the accounting principles generally accepted in India.

(i) in the case of balance sheet, of the state of affairs of the Company as at 31st December, 2005

(ii) in the case of profit and loss account, of the profit for the year ended on the date; and



L.VAIDYANATHANPlace : Chennai PartnerDate : May 2, 2006 Membership No. 16368



(b) The management has physically verified during the year all its fixed assets. No material discrepancies were noticed on suchverification.

(c) The Company has not disposed off any substantial part of its fixed assets so as to affect its going concern status.

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LARSEN & TOUBRO LLC

(ii) (a) As explained to us inventories have been physically verified by the management during the year. In our opinion, the frequency ofsuch verification is reasonable.

(b) The procedure of physical verification of inventories followed by the management are reasonable and adequate in relation tothe size of the company and nature of its business.

(c ) The company has maintained proper records of inventory. The discrepancies noticed on physical verification between the physicalstocks and book records were not material.

(iv) (a) In our opinion, and according to the information and explanations given to us, there are adequate internal control systemscommensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets andfor the sale of goods. In our opinion, and according to the information and explanations given to us, there is no continuing failure tocorrect major weaknesses in aforesaid internal control system.


(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, theCompany has been generally regular in depositing undisputed statutory dues towards income tax and any other statutory duesduring the year with the appropriate authorities. According to the information and explanations given to us, no undisputed amountspayable in respect of Income Tax and other statutory dues were in arrears as at 31st December 2005 for a period of more thansix months from the date they became payable.

(b) According to the information and explanations given to us, there are no dues of Income Tax and other statutory dues, which havenot been deposited with the appropriate authorities on account of any dispute.

(x) The Company has accumulated losses at the end of the financial year. However, the company has earned cash profit during the yearand also in the immediately preceding previous year.

(xi) According to the information and explanations given to us, the company has not borrowed any amount from a bank. The company didnot have any outstanding debentures and has not availed any loan from a financial institution.

(xii) According to the information and explanations given to us, the Company has not granted any loans and advances on the basis ofsecurity by way of pledge of shares, debentures and other securities.

(xiii) The provisions of special statute applicable to chit fund / nidhi / mutual benefit fund / society are not applicable to the Company.

(xiv) In our opinion the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly,the provision of clause 4(xiv) of the Companies (Auditors' Report) order, 2003 are not applicable to the company.

(xv) The Company has not given any guarantee for loans taken by others from banks or Financial Institutions

(xvi) The Company has not availed any term loans during the year and hence reporting on the purpose for which they were raised does notarise.

(xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, wereport that no funds have been raised on short term or long-term basis. Hence reporting on the usage of the same does not arise.

(xix) The Company has not issued any debentures during the year and accordingly, no security or charge need to be created.


(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us, we have neither come across any instances ofmaterial fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

The clauses 4(iii),(v),(vi),(viii) and (xviii) of the Companies (Auditors Report) Order are not applicable to the company since it is registeredoutside India and hence no reporting has been made.



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LARSEN & TOUBRO LLC

Balance sheet as at December 31, 2005Balance sheet as at December 31, 2005Balance sheet as at December 31, 2005Balance sheet as at December 31, 2005Balance sheet as at December 31, 2005As at 31.12.2005 As at 31.12.2004

Rupees Rupees

SOURCES OF FUNDS: SchedulesShareholders’ funds:

Share Capital A 2,438,475 2,438,475Translation Reserve 100,763 283,879

Loan funds:Unsecured Loans (from holding B — 285,576Company including interest accrued thereon)

TOTAL 2,539,238 3,007,930

APPLICATION OF FUNDS:Fixed Assets C

Gross Block 4,908,156 4,165,668Less: Depreciation 2,601,371 2,229,146

Net Block 2,306,785 1,936,522

Current Assets, Loans and advances: DInventories 34,524,473 21,129,513Sundry Debtors 15,298,214 19,756,264Cash and bank balances 6,692,088 7,776,472Loans & advances 1,746,138 250,938

58,260,913 48,913,187

Less: Current Liabilities and provisions: ECurrent Liabilities 59,663,859 50,490,263

Net Current Liabilities (1,402,946) (1,577,076)Profit & Loss account 1,635,399 2,648,485

TOTAL 2,539,238 3,007,931

SIGNIFICANT ACCOUNTING POLICIES 1Notes on Accounts 2


by the hand of

L.VAIDYANATHAN A.K. Banerjee S.S. ChandilyaPartner Manager ManagerMembership No.16368

Place : Chennai, Place : ChennaiDate : May 2, 2006 Date : May 2, 2006

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LARSEN & TOUBRO LLC

Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005

Year Ended Year Ended31.12.2005 31.12.2004

Rupees Rupees

Schedules

INCOME:Sales F 32,508,351 75,694,632Other Income G 14,612,879 2,378,303

47,121,230 78,072,935

EXPENDITURE:Cost of goods sold H 26,427,095 67,015,913Staff Expenses I 8,781,741 1,909,981Sales and administration expenses J 9,966,856 8,035,483Interest 43,016 114,932Depreciation and obsolescence K 889,437 738,516

46,108,145 77,814,825

PROFIT BEFORE TAXES 1,013,086 258,110Provision for Tax — —————

PROFIT AFTER TAXES 1,013,086 258,110

Add: Balances brought forward from previous years (2,648,485) (2,906,595)


Earnings per share 19 5


Notes on Accounts 2


by the hand of

L.VAIDYANATHAN A.K. Banerjee S.S. ChandilyaPartner Manager ManagerMembership No.16368


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LARSEN & TOUBRO LLC

Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005 Year Ended Year Ended

31.12.2005 31.12.2004 Rupees Rupees

Net Profit/(Loss) Before Tax & Extra Ordinary Items 1,013,086 541,990Adjustment for:Depreciation 889,437 738,516Exchange difference on Translation (33,967) (283,879)Interest paid — —Deferred Credit — 97,966Profit/(Loss) on Sales of Fixed Assets(Net) — —Operating Profit before working Capital changes 1,868,556 1,094,593

Adjustment for:(Increase) / Decrease in trade and other receivables 4,458,050 1,681,846(Increase) / Decrease in Inventories (13,394,960) 1,791,783(Increase) / Decrease in Loans & Advances (1,495,200) 18,284Increase / (Decrease) in Trade Payables 9,173,596 2,047,179Cash Generated from operations 610,041 6,633,685Direct Taxes paid (Net of refund) — 0

Net Cash from operating activities (A) 610,041 6,633,685

Cash Flow from investing activitiesPurchase of Fixed Assets (1,408,849) (505,744)(Interest capitalised Rs.NIL;Previous Year Rs.NIL) 0Sale of Fixed Assets — 221,906

Net Cash Flow from investing activities (B) (1,408,849) (283,838)

Issue of Equity shares(Repayment) / proceeds from other borrowings (285,576) (345,710)Interest paid

Net cash from financing activities (C ) (285,576) (345,710)

Net increase in cash and cash equivalants (A+B+C) (1,084,384) 6,004,137

Cash and cash equivalents as at the beginning 7,776,472 1,772,335Cash and cash equivalents as at the end 6,692,088 7,776,472

Notes:

1. Cash flow statement has been prepared under the indirect method as set of in the Accounting Standard 3 issued by the Institute ofChartered Accountants of India

2. Cash and cash equivalents represent Cash and Bank balances.

3. Previous year’s figures have been regrouped / reclassified wherever applicable


by the hand of

L.VAIDYANATHAN A.K.Banerjee S.S. ChandilyaPartner Manager ManagerMembership No.16368


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LARSEN & TOUBRO LLC

Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsAs at As at

31-12-2005 31-12-2004Rupees Rupees

SCHEDULE ASHARE CAPITAL

Authorised52,500 Equity Shares of US $ 1 Each 2,438,475 2,438,475

Issued and Subscribed52,500 Equity Shares of US $ 1 Each fully paid up. 2,438,475 2,438,475(All the Shares are held by Larsen & Toubro Limited, the holding companyand Tractor Engineers Limited its subsidiary company)

SCHEDULE BUNSECURED LOAN

Short Term Loan:Lease Finance – 285,576

SCHEDULE C

Rupees

COST DEPRECIATION Book Book FIXED ASSETS Value Value

Additions Deductions DeductionsAs at during the during the As at Up to For the during As at As at As at

1.1.2005 year year 31.12.2005 1.1.2005 year the year 31.12.2005 31.12.2005 31.12.2004

Plant & Machinery 2660566 1103815 473521 3290860 1450177 494726 285578 1659325 1631535 1291597

Furniture & Fixtures 350985 305034 0 656019 185902 48814 0 234716 421303 175694

Vehicles 961277 0 0 961277 541020 166310 0 707330 253947 469231

Total 3972828 1408849 473521 4908156 2177099 709850 285578 2601371 2306785 1936522

Previous Year 4214734 505744 554810 4165668 1823534 738516 332904 2229146 1936522

As at As at31-12-2005 31-12-2004

Rupees Rupees

SCHEDULE DCURRENT ASSETS, LOANS AND ADVANCESCurrent Assets

Stock–in–trade at lower cost or net realisable value 34,524,473 21,129,513Trading goods

Sundry debtor’s, Unsecured, considered good:Outstanding for more than six months – –Other debts 15,298,214 19,756,264

Cash and Bank balancesBalances with non–schedule banks in current account: 6,692,088 7,776,472– Wood Forest National Bank, USA – maximum amount outstanding at any

time during the year – Rs. 165.98 Lakhs (previous year Rs.174.45 lakhs)– Citi Bank,USA – maximum amount outstanding at any time during the year –

Rs.43.43 Lakhs (previous year Rs. 32.82 Lakhs)Loans and Advances – Unsecured – considered good

Advances recoverable in cash or in kind or for value to be received. 1,746,138 250,938

58,260,913 48,913,187

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LARSEN & TOUBRO LLC

As at As at31-12-2005 31-12-2004

Rupees Rupees

SCHEDULE ECURRENT LIABILITIES AND PROVISIONS

Current LiabilitiesDue to Small Scale Industries – –Due to Holding Company 34,598,174 6,359,296Others 25,065,685 44,130,967

59,663,859 50,490,263

SCHEDULE FSALES

Trading Sales (Industrial Valves) 32,508,351 75,694,632

SCHEDULE GOTHER INCOME

Marketing fees 13,078,459 2,378,303Commission 1,534,420 –

14,612,879 2,378,303

SCHEDULE HCOST OF GOODS SOLD

Opening Stock 21,129,513 22,921,296Add: Purchases 39,822,054 65,224,130Less: Closing Stock 34,524,473 21,129,513

Cost of goods sold 26,427,095 67,015,913

SCHEDULE ISTAFF EXPENSES

Salaries 8,002,676 1,751,588Contribution to Social Security Funds 779,065 158,393

8,781,741 1,909,981

SCHEDULE JSALES & ADMINISTRATION EXPENSES

Rent 2,825,018 3,035,120Rates & Taxes 834,605 340,565Telephone 502,250 187,738Utilities 508,623 321,907Travelling & Conveyance 1,374,029 241,931Insurance 731,933 562,859Forwarding Expenses (Net) 81,429 156,523Professional Fees 1,322,826 734,745Sales Promotion Expense 42,927 744,720Contract Labour 389,444 272,969Commission to Distributors/Representatives 1,516,276 3,836,349Office Supplies 1,353,893 105,046Repair & Maintenance 261,105 170,639Miscellaneous 447,285 426,108

12,191,643 11,137,220Less:

Expenses reimbursed by Holding Company 2,224,787 3,101,737

9,966,856 8,035,483


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LARSEN & TOUBRO LLC

As at As at31-12-2005 31-12-2004

Rupees Rupees

SCHEDULE KDEPRECIATION AND OBSOLESCENCEDepreciation 709,850 738,516Obsolescence 179,587 –

889,437 738,516


SCHEDULE 1


a) Basis of preparation

The accounts have been prepared using historical costs convention and on the basis of going concern, and is made in accordance withthe provision of section 211 (3C) and the other provisions of the companies Act 1956, with revenues recognized and expenses accountedfor on accrual, including for committed obligations.

These financial statements have been prepared in conformity with the Generally Accepted Accounting principles which require managementto make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at thedate of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differfrom those estimates.

b) Fixed Assets

Fixed assets are capitalized at acquisition cost.

c) Depreciation

Depreciation on assets are provided on WDV balance based on the useful life of the assets as determined by the management.

The useful lives of property and equipment for the purpose of computing depreciation are:

Years

Leasehold improvements 39

Machinery and Equipment 5-7

Furniture and Fixtures 5-7

Trucks and Autos 5

The above rates are higher than the rates prescribed under Schedule XIV of the Companies Act, 1956.

d) Inventories

Inventories are stated at the lower cost or net realisable value.

e) Revenue Recognition

Revenues from sales are recognised when the property in the goods are transferred to the buyer and no significant uncertainty existsregarding ultimate collection.

f) Foreign Currency Transactions

The accounts are translated in Indian Rupees as follows:

a) Share capital is retained at the initial contribution amount.

b) Fixed and Current assets & Current liabilities are translated at the rates prevailing on the date of Balance Sheet.

c) Revenue transactions are translated at the average rates.

d) The resultant difference is accounted as translation reserve in the Balance Sheet.

g) Tax on Income

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with theprovisions of US Income Tax Laws and based on expected outcome of assessments / appeals.

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LARSEN & TOUBRO LLC

SIGNIFICANT ACCOUNTING POLICIES (Contd.)

Deferred tax is recognised on timing differences between the accounting income and taxable income for the year and quantified using thetax rates and laws enacted or substantively enacted as on the Balance sheet date.

Deferred tax asset are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxableincome will be available against which such deferred tax asset can be realised.

SCHEDULE 2

NOTES ON ACCOUNTS

1. Auditors’ remuneration and expenses charged to accounts

Rs in lakhs

2005 2004

Audit Fees 3.05 2.81

Taxation matters certification 0.59 3.18

General accounting costs 2.49 –

2. Borrowing costs capitalized during the year Rs. Nil. (Previous year NIL)

3. The Company does not have any dealings with small scale industrial undertakings. Hence furnishing details of overdue outstandings andinterest on delayed payments does not arise.

4. No provision for current tax is made in since Company has carried forward losses for adjustment against current year income.

5. Deferred Tax Asset of Rs. 157675/- representing future tax savings on accumulated losses, calculated based on US tax laws, has notbeen reckoned as a matter of prudence.

6. The company has entered into cancelable operating leases for its office and warehouse premises which are renewable on expiry. Thecompany has no other lease transactions requiring reporting under Accounting Standard on leases (AS 19), the future minimum leasepayments in respect of which, as at December 31, 2005 are as follows:

Particulars Amount (In Rs.)

1. Payable not later than 1 year 4,463,958

2. Payable later than 1 year and not later than 5 years 15,011,252

3. Payable later than 5 years. Nil

Total 19,475,210

The rental expenses in respect of operating leases was Rs. 761,319/-

7. The Company is trading in a single category (Industrial Valves) product. Hence segment reporting is not applicable.

8. Contingent liabilities as at the balance sheet date NIL. (Previous year – NIL)

9. Details of stocks, Purchases and turnover :

Class of Goods Unit Opening Stock Closing Stock Purchases Turnover01.01.2005 31.12.2005 2005 2005

Valves Nos. 832 (1205) 1692 (832) 1931 (3612) 1071 (3985)

Rs. in Lakhs 211.30 (229.21) 345.24 (211.30) 398.22 (652.24) 325.08 (756.95)

Notes: Figures in brackets are for previous year.


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LARSEN & TOUBRO LLC

SCHEDULE 2 (Contd.)

10. Related Parties and Related Party Transactions

Names of parties with whom transactions were carried out during the year and description of relationship

Sl. Names of Parties Nature of Nature of Amount inNo. Relationship Transaction Rupees Lakhs

1. Larsen & Toubro Limited Holding Company Purchase of Goods 304.71

- DO - Holding Company Commission 15.34

- DO - Holding Company Marketing Fee 130.78

- DO - Holding Company Reimbursement of expenses 6.94

2. Larsen & Toubro Infotech Limited Subsidiary of Reimbursement of expenses 15.30Holding Company

3. Audco India Ltd Associate of Charges for repairs and transport 4.06Holding Company

11. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts andclassification of liability that may be necessary if the Company is unable to continue as a going concern.


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LARSEN & TOUBRO LLC

12. Balance sheet abstract and general business profile


Registration No. 5 1 - 0 4 0 5 5 7 7 State Code No. N A

Registered as a Limited Liability Company in the State of Delaware, USA





N I L N I L



2 5 3 9 2 5 3 9Sources of Funds


2 4 3 8 1 0 1

Deferred Tax Secured Loans

N I L N I LUnsecured Loans

N I LApplication of Funds


2 3 0 6 N I L

Net Current Assets Accumulated Losses

(1 4 0 3) 1 6 3 5


3 2 5 0 8 3 1 4 9 5


1 0 1 3 1 0 1 3


1 9


Item Code No. N A(ITC Code)

Product T R A D I N G C O M P A N YDescription




L.VAIDYANATHAN A.K.Banerjee S.S. ChandilyaPartner Manager ManagerMembership No.16368


S-370

L&T OVERSEAS PROJECTS NIGERIA LIMITED


Your Directors are pleased to present the Annual Report and Balance Sheet for the year ended 31st December 2005.

FINANCIAL RESULTS

During the year under review, the Company did not carry on any business activities and accordingly no Profit and Loss Account has been prepared.

CAPITAL EXPENDITURE

During the period under review, the Company did not incur any capital expenditure.

AUDITORS’ REPORT

The Auditors’ Report to the shareholders does not contain any qualifications.


As per the Company, the Company being registered outside India, the disclosures required to be made in accordance with Companies (Disclosureof Particulars in the Report of Board of Directors) Rules, 1988, are not relevant. Hence the same has not been furnished.


There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employ-ees) Rules, 1975.



I. that in the preparation of the annual accounts, the accounting standards have been followed to the extent applicable and there has been nomaterial departure;

II. that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at December 31, 2005;

III. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

IV. that the annual accounts have been prepared on a going concern basis

AUDITORS

PricewaterhouseCoopers Limited, the Auditors of the Company have indicated their willingness and are eligible for re-appointment.


U.DASGUPTA D.S.SHEVDEDirectors


S-371


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportTo the members of L&T Overseas Projects Nigeria Limited

The financial statements of L&T Overseas Projects Nigeria Limited for the year ended 31 December 2005, being a Company registered in Nigeria, areprepared by management and are unaudited by the statutory auditors in Nigeria.

We are presented with the accounts in Indian Rupees prepared on the basis of the aforesaid accounts to comply with the requirements of section 212of the Companies Act, 1956. We give our report as under:

We have audited the attached balance sheet and cash flow statement of L&T Overseas Projects Nigeria Limited as at 31 December 2005. No profitand loss account has been prepared as the Company has not commenced commercial operations. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides areasonable basis for our opinion.

In accordance with the provisions of section 227 of the Companies Act, 1956, we report that:

(1) As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of India under sub-section (4A) of section 227of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate andaccording to the information and explanations given to us, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and5 of the said Order.

(2) Further to our comments in the Annexure referred to above, we report that:


(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination ofthose books;


(d) in our opinion, the balance sheet and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; and

(e) as regards reporting on the disqualification of directors under section 274(1)(g) of the Indian Companies Act, 1956, since the Company isregistered in Nigeria, no reporting is required to be made under the above section.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read together with the significantaccounting policies in schedule 5 and notes appearing thereon, give the information required by the Companies Act, 1956 in the manner so requiredand give a true and fair view in conformity with the accounting principles generally accepted in India in the case of the balance sheet of the state ofaffairs of the Company and the cash flow statement as at 31 December 2005.


by the hand of

R D KarePartner

Membership No. 8820


S-372



1 The Company has no fixed assets and hence reporting under paragraphs 4(i) (a), (b) and (c) is not applicable.

2 The Company has no inventories and hence reporting under paragraphs 4(ii) (a), (b) and (c) is not applicable.

3 There are no loans, secured or unsecured, either granted to or taken from companies, firms or other parties. However, no register is required tobe maintained under section 301 of the Companies Act, 1956 since the Company is incorporated and doing business only in Nigeria.

4 The Company has not commenced commercial operations and accordingly we are unable to comment on the adequacy of the internal controlprocedures.

5 The Company is incorporated in Nigeria and accordingly, maintenance of records under section 301 of the Companies Act, 1956 is not required.

6 The Company has not accepted deposits from the public.

7 The Company has not yet commenced commercial operations and accordingly, has no internal audit system at present.

8 Cost records are not required to be maintained under section 209(1)(d) of the Companies Act, 1956 by the Company as it is incorporated inNigeria.

9 The Company being registered in Nigeria, has no statutory liabilities in India and accordingly reporting for paragraphs 4 (ix) (a) and (b) is notrequired.

10 The Company has no accumulated losses as at 31 December 2005 and it has not incurred any cash losses in the financial year ended on thatdate.

11 According to the information and explanations given by management, the Company has neither borrowed from a bank or financial institution norhas it issued any debentures.

12 The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or other securities.

13 The provisions of any special statute applicable to chit fund/nidhi/mutual benefit fund/societies are not applicable to the Company.

14 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities.

15 According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks orfinancial institutions.

16 The Company has not availed any term loans during the year.

17 According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that nofunds raised on short term basis have been used for long term investments.

18 The Company has not made any preferential allotment of shares to any party during the year.

19 The Company has not issued debentures during the period and accordingly, no security is required to be provided.

20 The Company has not raised any money by public issues during the year.

21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraudon or by the Company, noticed or reported during the year, nor have we been informed of such case by management.


by the hand of

R D KarePartner

Membership No. 8820Place : MumbaiDate : April 29, 2006

S-373


Balance Sheet for the year ended 31st December 2005Balance Sheet for the year ended 31st December 2005Balance Sheet for the year ended 31st December 2005Balance Sheet for the year ended 31st December 2005Balance Sheet for the year ended 31st December 2005

As at 31-12-2005 As at 31-12-2004


SOURCES OF FUNDS:


Share Capital 1 3,344,783 3,344,783

3,344,783 3,344,783


Fixed Assets –

Investments –

Current Assets, Loans and Advances 2

Cash and Bank balances 2,187,731 2,840,274

Advances recoverable in cash or kind 133,347 292,284

2,321,078 3,132,558

Less: Current Liabilities and provisions 3 10,693 329,722


Miscellaneous expenditure 4( to the extent not written-off or adjusted)

Preliminary expenses 1,034,398 541,947

3,344,783 3,344,783

Contingent Liabilities NIL NIL


Notes forming part of accounts

As per our report attached for and on behalf of the Board

SHARP & TANNANChartered AccountantsBy the hand of

R.D. Kare U. Dasgupta D.S. ShevdePartner Director Director

Place : Mumbai Place : Mumbai,Date : April 29, 2006 Date : April 29, 2006

S-374


Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005

Cash Flow Statement for the year ended December 31, 2005 2005 2004

Rupees RupeesA. Cash flow from Operating Activities:

Operating profit before working capital changes

Adjustments for :

(Increase)/ Decrease in trade and other receivables 158,937 (292,284)

(Increase)/ Decrease in inventories

(Increase)/ Decrease in miscellaneous expenditure (492,451) (541,947)

Increase/ (Decrease) in trade payables (319,029) 329,722

Cash generated from operations (652,543) (504,509)Direct taxes refund/(paid)- net

Net Cash from Operating Activities (652,543) (504,509)

B. Cash flow from Investing Activities:

Net Cash (used in)/ from Investing Activities

C. Cash flow from Financing Activities:

Proceeds from issue of share capital 3,344,783

Proceeds from long term borrowings

Repayment of long term borrowings

(Repayments) / Proceeds from other borrowings (net)

Loans (to) / from subsidiaries / associates (net)

Dividends paid

Additional tax on dividend

Interest paid

Net Cash (used in)/ from Financing Activities 3,344,783

Net (decrease) / increase in cash and cash equivalents (A + B + C) (652,543) 2,840,274

Cash and cash equivalents at beginning of the period 2,840,274 –

Cash and cash equivalents at end of the period 2,187,731 2,840,274

Notes

1. Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard (AS) 3 : “Cash Flow Statements” issuedby the Institute of Chartered Accountants of India.

2. Cash and cash equivalents at the end of the year represent cash and bank balances and include unrealised loss of Rs.Nil (previous year Rs.Nil)on account of translation of foreign currency bank balances.

S-375


As at 31-12-2005 As at 31-12-2004Rupees Rupees

SCHEDULE 1:

Share Capital

Authorised, Issued and paid up:

10,000,000 number of shares of Naira 1 each 3,344,783 3,344,783

(10,000,000 shares are held by Larsen & Toubro Limited, the holding Company and its nominees)

SCHEDULE 2:


Cash & Bank balances

Bank balance with non-scheduled bank 2,187,731 2,840,274

(Standard Chartered Bank Nigeria Ltd.)

Advances recoverable in cash or kind

Advances for services 133,061 292,250

Others 286 34

133,347 292,284

SCHEDULE 3 :

Current Liabilities and provisions

Due to Larsen & Toubro Limited 2,755 257,487

Due to others 7,938 72,235

Provisions10,693 329,722

SCHEDULE 4 :

Miscellaneous Expenditure

[Preliminary expenses]

Stamp duties and other incorporation expenses 298,355 298,355

Professional fees 817,522 237,894

Interest and bank charges (net of interest earnings) 5,691 3,198

Audit fees 5,510 2,500

Exchange Gain (92,680) –

1,034,398 541,947


S-376



SCHEDULE 5 :



The accounts have been prepared using historical cost convention and on going concern basis, in accordance with generally accepted account-ing principles in India and in compliance with Accounting Standards referred to in Section 211(3C) and other requirements of the Companies Act,1956.

2. Translation of accounts

The accounts of the Company are maintained in Nigeria Naira. The monetary items are reported using the closing rate. The exchange differencearising on reporting of monetary items at the closing rate is adjusted in the Miscellaneous expenditure.

NOTES FORMING PART OF ACCOUNTS

1. No Profit & Loss Account has been prepared as the Company did not carry out any activity during the year

2. Additional information required to be disclosed under Part II to Schedule VI of the Companies Act, 1956, is not presently applicable to theCompany

3. Disclosures regarding Derivative instruments, as per the Announcement issued by The Institute of Chartered Accountants of India

i. Derivatives outstanding as on 31.12.2005 - Nil

ii. The Company does not have any material Foreign Currency Exposure as on 31.12.2005 that are not hedged by a derivative instru-ment or otherwise

iii. Unhedged foreign currency exposure as on 31.12.2005

Currency Recognised liability

Indian Rupees 5,510

4. Disclosure of related party transactions:As at 31-12-2005 As at 31-12-2004

Rupees RupeesAccounts payable to related parties

Due to Larsen & Toubro Limited [Holding Company] 2,755 257,487

5. Balance with Non-scheduled banks held in Current Account:

Standard Chartered Bank Nigeria Ltd. 2,187,731 2,840,274

[maximum amount outstanding at any time during the year] 2,840,274 3,344,783

S-377




Registration No. N A State Code No. N A





N I L N I L



3 3 5 5 3 3 5 5Sources of Funds


3 3 4 5 N I L


N I L N I L


N I L N I L


2 3 1 0 1 0 3 5

Accumulated Losses

N I L


N I L N I L

Profit/Loss before Tax Profit/Loss after TaxN I L N I L


N I L N I L


T U R N K E Y P R O J E C T S

M A N U F A C T U R I N G

T R A D I N G


+ –+

+ –+ –

As per our report attached for and on behalf of the Board

SHARP & TANNANChartered AccountantsBy the hand of

R.D. Kare U. Dasgupta D.S. ShevdePartner Director Director


S-378

L&T–ECC CONSTRUCTION (M) SDN. BHD.


The Directors have pleasure in submitting their report and the audited financial statements of the Company for the year ended December 31, 2005.

PRINCIPAL ACTIVITIES

The principal activities of the Company consist of engineering and construction. There have been no significant changes in the nature of these activitiesduring the financial year.

RESULTS

INR

Profit for the year after taxation 43,45,042

Accumulated losses brought forward (13,158,605)

(88,13,563)

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year.

BAD AND DOUBTFUL DEBTS

(a) Before the financial statements of the Company were made out, the directors took reasonable steps to ascertain that action had been taken inrelation to writing off of bad debts and the making of allowance for doubtful debts, and that all known bad debts had been written off and adequateallowance had been made for doubtful debts.

(b) At the date of this report, the directors of the Company are not aware of any circumstances that would render the amount written off for bad debts,or the amount of the allowance for doubtful debts, in the Company inadequate to any substantial extent.

CURRENT ASSETS

(a) Before the financial statements of the Company were made out, the directors took reasonable steps to ascertain whether any current assets, otherthan debts, were unlikely to realize in the ordinary course of business their value as shown in the accounting records of the Company and to the extentso ascertained, were written down to an amount they might be expected to realize.

(b) At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financialstatements of the Company misleading.

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing method of valuationof assets or liabilities in the financial statements of the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

(a) At the date of this report, there does not exist:

( i ) any charge on the assets of the Company that has arisen since the end of the financial year and which secures the liabilities of any person, or

( ii ) any contingent liability in respect of the Company that has arisen since the end of the financial year.

(b) No contingent liability or liability of the company has become enforceable or is likely to become enforceable within the period of twelve months after theend of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Company to meet its obligations as andwhen they fall due.

CHANGE OF CIRCUMSTANCES

At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of theCompany, that would render any amount stated in the financial statements misleading.

DIRECTORS OF THE COMPANY

(a) Directors who served since the date of the last report are:-

Mr. Sivajothi A/L Muhtiah Rajendram

Mr. Rajasingam A/L Mayilvaganam

En. Syed Mohsen B. Abdul Rahman Alhabshi

Mr. Salem Nagarajan Babu Govindaraj (Appointed on 30.11.2005)

Mr. Ganguly Joganando (Appointed on 30.11.2005)

Mr. Bhargava Sharat Chandra (Appointed on 30.11.2005)

Mr. Anumolu Ramakrishna (Resigned on 02.06.2005)

Mr. Kodiyalam Vasudevan Rangaswami (Resigned on 30.11.2005)

Mr. Pallipuram Krishnaiyer Venkatakrishnan (Resigned on 30.11.2005)

S-379


(b) According to the Register of Director’s Shareholdings, particulars of interest of directors who held office at the end of the financial year in the share inthe Company are as follows: -

Name Balance at Balance at01.01.2005 31.12.2005

Sivajothi A/L Muhtiah Rajendram 150,001 150,001

Rajasingam A/L Mayilvaganam 150,000 150,000

Syed Mohsen B. Abdul Rahman Alhabshi 225,000 225,000

The other directors do not have any interest in the shares in the Company.

(c) In accordance with the Company’s Articles of Association,En Syed Mohsen B.Abdul Rahman Alhabshi retires from the Board at the Annual GeneralMeeting and, being eligible, offers himself for re-election.

(d) Mr. Salem Nagarajan Babu Govindaraj, Mr. Ganguly Joganando and Mr. Bhargava Sharat Chandra who were appointed to the Board since the lastAnnual General Meeting, now retire in accordance with the Company’s Articles of Association and , being eligible, offer themselves for re-election.

DIRECTORS’ BENEFITS

(a) Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit ( other than thosedisclosed in the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of whichthe director is a member, or with a company in which the director has a substantial financial interest other than those disclosed in the financialstatements.

(b) Neither during nor at the end of the financial year, was the Company a party to any arrangements whose object is to enable the directors to acquirebenefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

STATEMENT BY DIRECTORS

In the opinion of the directors, the financial statements are drawn up in accordance with applicable approved accounting standards so as to give a true andfair view of the state of affairs of the Company as at December 31, 2005 and the results and the cash flow for the year then ended.

AUDITORS REPORT

The Auditors’ Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors Report are selfexplanatory and therefore do not call for any further comments of Directors.


As per the Company, the Company being registered outside India, the disclosures required to be made in accordance with Companies(Disclosure ofParticulars in the Report of Board of Directors) Rules ,1988 ,are not relevant. Hence the same has not been furnished.


There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 , read with the Companies (Particulars of Employees)Rules,1975.

DIRECTORS RESPONSIBILITY STATEMENT

The Board of Directors of the company confirms:

i) that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and there has been no material departure;

ii) that the selected Accounting Policies were applied consistently and the Directors made judgements and estimates that are reasonable and prudent soas to give a true and fair view of the state of affairs of the company as at December 31,2005 and of the profits of the company for the year ended onthat date;

iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act,1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

iv) that the Annual Accounts have been prepared on a going concern basis.

AUDITORS

The auditors, Messrs. Ahmad Abdullah & Goh, Chartered Accountants, have indicated their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors,

J. GANGULY S.N. BABU GOVINDARAJDirector Director


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Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportThe financial statements of L&T-ECC CONSTRUCTION (M) SDN. BHD, MALAYSIA for the year ended December 31, 2005, being a company registeredin Malaysia, are audited by AHMAD ABDULLAH & GOH, Chartered Accountants, KUALALUMPUR, MALAYSIA and we have been furnished with their auditreport dated 3rd March, 2006 on which we have placed reliance for the purpose of our opinion given below.


We have audited the attached Balance Sheet of L&T ECC CONSTRUCTION (M) SDN. BHD, MALAYSIA, as at December 31, 2005 and also the Profit &Loss Account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.


1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of theCompanies Act, 1956 we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extentapplicable to the company.


a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of ouraudit;


c. The said Balance Sheet, Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the said Balance Sheet, Profit and Loss Account and cash flow statement, comply with the accounting standards referred to insub-section (3 C) of section 211 of the Companies Act 1956.

e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the company is registered inMalaysia, no reporting is required to be made under the above section.

f. In our opinion and to the best of our information and according to the explanations given to us the said accounts read together with the significantaccounting policies and notes to accounts in Schedule ‘J’ and elsewhere in the accounts, subject to note no ‘2.j’ in schedule ‘J’ regarding goingconcern assumption, give the information required by the Companies Act 1956, in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India.





L. VAIDYANATHANPartner


Place : ChennaiDate : May 22, 2006

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(c) During the year, the company has not disposed off any part of the assets and hence has not affected the going concern status of the company.

(ii) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of thecompany and the nature of its business.

(c) The company has maintained proper records of inventory.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the sizeof the Company and nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. In our opinion, andaccording to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

(vi) The company has not accepted any deposit from the public during the year.

(vii) The company has not furnished an internal audit report for the year and hence we could not report whether the internal audit system is commensuratewith its size and the nature of its business.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has beengenerally regular in depositing undisputed statutory dues towards Income tax and any other statutory dues during the year with the appropriateauthorities. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax and otherstatutory dues were in arrears as at December 31, 2005 for a period of more than six months from the date they become payable.

(b) According to the information and explanations given to us, there are no dues of income tax and other statutory dues, which have not beendeposited with the appropriate authorities on account of any dispute.

(x) The Company has accumulated losses at the end of the financial year and and it has not incurred cash losses in the current year. It has incurred cashlosses in the immediately preceding previous year.

(xi) According to the information and explanations given to us, the company has not borrowed any amount from banks/Financial Institutions. Thecompany has not issued any debentures.

(xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledgeof shares, debentures and other securities.

(xiii) The provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the company.

(xiv) In our opinion and as per information obtained from management, the Company is not dealing in or trading in shares, securities, debentures and otherinvestments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.

(xv) The company has not given any guarantee for loans taken by others from banks or financial institutions.

(xvi) The company has not availed any term loans during 2005 and hence reporting on the purpose for which they were raised does not arise.

(xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report that no fundshave been raised on short term basis. Hence reporting on the usage of the same does not arise.



(xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on orby the company, noticed or reported during the year ,nor have we been informed of such case by management.

(xxii) The clauses 4.(iii),(v),(viii) and (xviii) of the Companies (Auditor’s report) Order,2003 are not applicable to the company since it is registered outsideIndia and hence no reporting has been made.





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Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005As at 31.12.2005 As at 31.12.2004


SOURCES OF FUNDS:

SHAREHOLDERS’ FUNDS:Share capital A 8,558,020 8,558,020

8,558,020 8,558,020

Translation Reserve 888,134 945,824Unsecured loan B 228,697 -

TOTAL 9,674,851 9,503,844

APPLICATION OF FUNDS:Fixed assets: CGross block 1,842,891 1,763,738


Net block 56,167 396,082

Current assets, loans and advances: DSundry debtorsCash and bank balances 1,041,344 330,967Inventories -Loans and advances 166,284 342,999

1,207,628 673,966Less: Current liabilities and provisions: E

Liabilities 402,507 4,724,809

805,121 (4,050,843)Net current assets


TOTAL 9,674,851 9,503,844

Significant Accounting Policies and notes to accounts JThe Schedules referred to above and the notes attached form an integral part of the Balance Sheet

As per our attached report of even date


L. VAIDYANATHAN J. GANGULY S.N. BABU GOVINDARAJPartner DirectorsMembership No. 16368

Place: Chennai Place: ChennaiDate : May 22, 2006 Date : May 22, 2006

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Profit and Loss Account for the year ended December 31, 2005Profit and Loss Account for the year ended December 31, 2005Profit and Loss Account for the year ended December 31, 2005Profit and Loss Account for the year ended December 31, 2005Profit and Loss Account for the year ended December 31, 2005Jan - Dec 2005 Jan - Dec 2004


INCOME:

Other income F 10,583,844 1,532,497

10,583,844 1,532,497

EXPENDITURE:

Staff expenses G 2,686,732 1,830,962

Sales, administration and other expenses H 3,174,765 2,790,563

Interest and brokerage I 23,264 33,830


6,238,802 5,079,562

Profit before tax 4,345,042 (3,547,065)

Provision for current taxes - -

Provision for deferred tax - -

- -

Profit after tax 4,345,042 (3,547,065)



Earnings per equity share - Basic 5.79 (4.73)

Significant accounting policies and notes to accounts J

The schedules referred to above and the notes attached form an integral part of the Profit and Loss account





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2005 2004

Rs. Rs.

A. Cash Flow from operating activities

Net profit before tax 4,345,042 (3,547,065)

Adjustments for:


Interest (net) 23,264 33,830

(Profit) / Loss on sale of fixed assets

Translation Reserve (57,690) 121,753

Operating profit before working capital changes 4,664,657 (2,967,275)

(increase) / decrease in trade and other receivables 176,715 2,056,627

i ncrease / (decrease) in trade payables (4,322,302) (237,271)

Cash generated from operations 519,070 (1,147,919)


Purchase of Fixed assets (4,768) (101,240)

Difference in opening balance of Fixed Assets due to exchange fluctuation (74,385)

Difference in opening balance of Cumulative depreciation due to exchange fluctuation 65,027

Sale of fixed assets

Interest received 1,936

Net Cash (used in) / from investing activities (14,126) (99,304)

C. Cash Flow from Financing activties

Interest paid (23,264) (35,766)

Increase in unsecured loan 228,697

Net cash (used in) / from financing activities 205,433 (35,766)

Net (decrease) / increase in cash and cash equivalents 710,377 (1,282,989)

(A+B+C)

Cash and cash equivalents at beginning of the year 330,967 1,613,956

Cash and cash equivalents at endof the year 1,041,344 330,967

Actual Cash Balance 1,041,344 330,967





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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsAs at 31.12.2005 As at 31.12.2004

Schedule A Rs. Rs. Rs. Rs.

Share Capital:

Authorised:

Authorised:750000 Equity Shares of RM 1 each 8,558,020 8,558,020

Issued, Subscribed and Paidup750000 Equity shares of RM 1 each 8,558,020 8,558,020

Note: 30% of the above equity shares are held by Larsen & Toubro International 8,558,020 8,558,020

FZE,Sharjah,UAE and the balance 70% by Non Residents

Schedule BUnsecured loanEON SDN BHD-Car purchased on hire purchase 228,697 -

228,697 -

Schedule C


Fixed Assets As at Differences Additions Deduction As at up to Difference For the As at As at As at31-12-2004 transferred 31-3-2005 31-12-2004 transferred Year 31-12-2004 31-12-2005 31-12-2004

to translation to ransactionreserve reserve

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Office Equipment 361,311 15,242 - 376,553 343,245 14,861 18,149 376,255 298 18,066Vehicles 1,183,861 49,942 - 1,233,803 1,233,803 838,563 41,630 302,199 1,182,392 51,411 345,298Computers 218,566 9,201 4,768 - 232,535 185,848 8,536 33,693 228,077 4,458 32,718

Total 1,763,738 74,385 4,768 - 1,842,891 1,367,656 65,027 354,041 1,786,724 56,167 396,082

Previous year 1,662,498 - - - 1,763,738 943,449 - 424,207 1,367,656 396,082

Schedule D

Current Assets, Loans and Advances:

Current Assets:

Cash and bank balances:Cash on hand 11,169 127,758Balances with non-scheduled banks 1,030,175 203,209

(Refer note No.2.b in Schedule J) 1,041,344 330,967

Loans and advances:Unsecured:Considered good:Advances recoverable in cash or in kind 166,284 342,999

342,999166,284

1,207,629 673,967

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As at 31.12.2005 As at 31.12.2004

Schedule E Rs. Rs. Rs. Rs.


AcceptancesSundry creditors :

Due to Holding company 314,371 221,487Others 88,136 4,503,322

402,507 4,724,809

402,507 4,724,809

Jan-Dec 2005 Jan-Dec 2004

Rs. Rs.Schedule F

Other Income:

Service income 6,500,252 1,532,497Unclaimed credit balances written back 4,083,592

10,583,844 1,532,497

Schedule G

Staff Expenses:

Salaries, wages and bonus 2,047,425 1,769,766

Contribution to and provision for:Provident funds and pension fund 61,979 23,555

Welfare and other expenses 577,328 37,641

2,686,732 1,830,962

Schedule H

Sales, Administration and Other Expenses:

Rent 971,906 925,781Rates and taxes 9,355 —Travelling and conveyance 233,973 361,723Power & fuel 59,457 20,086Telephone, postage and telegrams 606,314 366,621Stationery and printing 44,216 193,793Insurance 51,095 70,113Bank charges 15,124 1,078General repairs and maintenance 98,090 113,133Miscellaneous expenses 1,085,235 738,235

3,174,765 2,790,563

Schedule I

Interest & Brokerage:

Others 23,264 35,766Less: Received- Interest on fixed deposit - 1,936

23,264 33,830

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Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE J

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

1. SIGNIFICANT ACCOUNTING POLICIES

a. Basis Of preparation

The accounts have been prepared using historical cost convention and on the basis of going concern, and is made in accordance with theprovisions of Section 211(3C) and the other provisions of the Companies Act, 1956, with revenues recognised and expenses accounted for onaccrual, including for committed obligations.

These financial statements have been prepared in conformity with Generally Accepted Accounting Principles, which require management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date ofthe financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from thoseestimates

b. Fixed assets and depreciation

Fixed assets are stated at cost.

c. Impairment of Assets

As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine

a) the provision for impairment loss, if any, required or

b) the reversal, if any, required of impairment loss recognised in previous periods.

Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.

d. Depreciation

Depreciation is calculated on straight-line at rates ,to write off the cost of the assets over the estimated useful life of the asset concerned.Additions are depreciated proportionately for the year from the month of addition. The principal annual rates used are as follows: -

Motor vehicles 25%

Computers and office equipment 50%

The above rates are higher than the rates specified under Schedule. XIV of the Companies Act 1956 for the respective categories.

Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revised carryingamount of the assets over its remaining useful life.

e. Revenue recognition

Revenue from construction and project related activities is recognised by applying percentage of completion to the contract value. Percentageof completion is determined as a proportion of cost incurred to date to the total estimated cost. Provision is made for losses in the year in whichit is foreseen.

f. Taxation

Provision for current taxes has not been made,as the company has carried forward losses from the previous years.

Deferred tax assets are recognised and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income willbe available against which such deferred tax assets can be realised.

g. Hire purchase

The cost of assets acquired under hire purchase is capitalised as fixed assets and depreciated over their respective estimated useful lives. Therelated financing charges are charged to the income statement over the hire purchase terms.

h. Retirement/Termination benefits

As required by law, companies in Malaysia make contributions to the social security fund and recognized as an expense on actual liability basiseach year. Liability for leave encashment is provided on actual basis.

i. Foreign Currency Translation

Accounts are translated in Indian Rupees as follows:

a) Share capital is retained at the initial contribution amount

b) Fixed and current assets & current liabilities are translated at year-end rates.

c) Revenue transactions are translated at the average rates.

d) The resultant difference is accounted as translation reserve in the balance sheet

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2. NOTES ON ACCOUNTS

a) Disclosure of Related Party and Transactions with related parties

Related party Nature of relationship Amount in Rupees Nature of transaction Amount outstandingin Rupees-Due to

related party

Larsen & ToubroLimited – India Holding company 314,371 Overheads charged 314,371

No amount has been written off or written back during the year.

b) Balances with non-scheduled banks

Current accounts Rs.

As at 31.12.2005 Maximum amountoutstanding at any

time during the year

Bank

Standard Chartered Bank, Kualalampur 751,616 1,373,245

Standard Chartered Bank, Kuantan 272,444 848,286

Bank of Nova Scortia 6,115 6,590

c) Taxation

Provision for current taxes has not been made in view of taxable income for the year is nil as per the provisions of Income Tax Act ofMalaysia,1967.

d) Deferred Taxation

Details of deferred taxation assets relate to the following temporary differences :-

2005 2004Rs. Rs.

Temporary difference between depreciation and corresponding taxation allowances (247,054) (86,285)Unrealised losses (31,767,825) (34,069,167)Unabsorbed capital allowance 741,951

Total difference (32,014,879) (34,897,403)

Deferred taxation assets not recognised in the financial statements (8,487,362) (9,313,774)

The unrealised tax losses and unabsorbed capital allowances are available indefinitely for offset against future taxable profits of the Company.Deferred tax assets have not been recognized in respect of these items as it is not probable that future taxable profits will be available againstwhich the company can utilize these benefits.

e) Borrowing Cost capitalised during the year Rs. Nil

f) There are no transactions with small-scale industries during the year.

g) The company is engaged only in the business of construction activity and hence no reporting has been made as per the requirements underAccounting Standard 17 on Segmental Reporting.

h) The company has not taken any asset on operating / finance lease. Commercial / Residential premises taken on cancelable operating lease arerenewed at the end of the lease period.

i) The company is a service company and accordingly information required under paragraph 4 (c’) of Part II of Schedule VI of the CompaniesAct,1956 has not been furnished.

j) The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts andclassification of liability that may be necessary if the company is unable to continue as a going concern.

k) The company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverable amountis more than the amount carried in the books. Accordingly, no provision required to be made for the impairment in the accounts.

l) Previous periods figures have been regrouped/reclassified wherever necessary to conform to the presentation adopted in the current year.


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m. Balance Sheet Abstract and Company’s General Business Profile


Registration No. 3 9 0 3 5 4 7 - T State Code No. N A

Incorporated in Malaysia


II. Capital Raised during the Year (Amount in Rs.)



N I L N I L



9 6 7 4 8 5 1 9 6 7 4 8 5 1Sources of Funds

Paid up Capital Translation Reserve

8 5 5 8 0 2 0 8 8 8 1 3 4


N I L 2 2 8 6 9 7Application of Funds

Net Fixed Assets and Net Intangible Assets Investments

5 6 1 6 7 N I L


8 0 5 1 2 1 N I L

Misc. Expenditure Accumulated Losses

N I L 8 8 1 3 5 6 3

IV. Performance of Company (Amount in Rs.)

Turnover (incl.other income) Total Expenditure

1 0 5 8 3 8 4 4 6 2 3 8 8 0 2

+ - Profit/Loss Before Tax*@ + - Profit/Loss After Tax *@

+ 4 3 4 5 0 4 2 + 4 3 4 5 0 4 2


Basic Earning Per Share in Rs. Dividend Rate %

- - R s 5 . 7 9 N I L

V. Generic Names of Three Principal Products / Services of Company (as per monetary terms)

Item Code No. N A

(ITC Code)

Product Description Construction and Project Related Activity






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LARSEN & TOUBRO (OMAN) LLC

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ Report1. REVIEW OF OPERATIONS

On behalf of the Board of Directors, it gives us great pleasure to present to you the Annual Report and Audited Accounts of Larsen& Toubro (Oman) LLC (LTO) for the year ended December 31, 2005.

2. OVERVIEW OF THE YEAR

The performance of the Company has witnessed a significant improvement at all levels. I am pleased to inform you that the Companyhas continued to grow and excel in respect of profitability and turnover during 2005. The success of the Company has redefined itssize, structure and shape in a manner that is built to last, grow and prosper for the years ahead.

3. YEAR IN RETROSPECT

LTO has posted total Revenue of INR 3886 Mn as against INR 2367 Mn during the previous year registering a growth of 65%. Withour continuous focus and efforts to improve the efficiency at all levels has attributed healthier operating margins and resultant bottomline. The Profit Before Tax has increased by more than 44% from INR 110 Mn for the previous year to INR 158 Mn for the year endedDecember 31, 2005.

The Company has achieved Return on Equity (ROE) of 42% and ROCE of 48%. I would like to thank all the employees for their effortsin striving to exceed customer’s expectation safely, profitably and for enhancing Shareholder’s value.

Major orders secured and under execution during the financial year 2005 includes the following:

i. Construction of F.16 Airbase facilities at Thumrait for Ministry of Defence for INR 1264 Mn

ii. Construction of Sewage Treatment Plant at Ibri for Ministry of Regional Municipalities and Environment for INR 363 Mn

iii. Construction of Sohar Industrial Area Sub-station for Oman Electricity Transmission Company (OETC) for INR 1700 Mn

iv. Construction of Mabella Sub-station for OETC for INR 540 Mn

v. Civil and Structural works associated with Cement Mill No.4 for Oman Cement Company for INR 288 Mn

vi. Construction of Water Supply Network at Saham & Khaburah for MHEW for INR 1864 Mn

During the year 2005, Company has completed the following projects.

Client Project Description Value(INR in Mn)

Oman National Live Stock Co LLC, Salalah Equipment erection work for AnimalFeed Plant at Salalah 16

Ministry of Housing, Electricity and Water Relay Control Panel and Outdoor Breaker for33 KV at Buraimi and Shinas Sub-station 72

Fujiairah Marine Sercies & Trading Co, UAE Erection of Storage Oil Tanks at Salalah Port 61

Ministry of Housing, Electricity and Water 33 KV Indoor Switchgear Extension and OutdoorBay Extension at Shinas & Khaburah Grid Station 44

Ministry of Housing, Electricity and Water Water Supply to Rass Al Hadd 68

Raysut Cement Company, Salalah Civil Works for Raysut Cement Plant at Salalah 544

Saud Bahwan Group Power Supply arrangement to Saud BahwanCorporate Centre at Wattayah 117

Muscat Golf Course LLC Diversion of Overhead Power Line atGolf Club at Muscat 65

Muscat Electricity Distribution Company Supply of 33 KV & 11 KV Cable Feeders atWadi Kabir Sub-station 67

Ministry of Housing, Electricity and Water Electrical Distribution work and Installation of33 KV Indoor Panels at Sur Industrial Area 14

Muscat Electricity Distribution Company Power supply to X Ray Units & Lab Building inKhoula Hospital at Wattayah 37

Raysut Cement Company Civil, Mechanical and Electrical Installationworks Steel Silo at Muscat Port 13

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4. FINANCE

The Company’s net working capital of INR 196 Mn as of December 31, 2005 represents 5% of the total revenue. The Company’scontinuous focus in optimizing the working capital requirement has resulted in efficient and judicious management of funds. Throughstrict monitoring of cash budget, the cash flow position of the Company as on the Balance Sheet date shows a highly liquid and healthysituation.


As at December 31, 2005, the gross fixed assets stood at INR 246,434,689 and net fixed assets at INR 130,883,824. Additions duringthe year amounted to INR 76,908,784.

6. CURRENT BUSINESS SCENARIO

Steady increase in the oil prices along with the prudent fiscal and monitory policies adopted by the Government, enabled oil and non-oil sectors to grow at faster pace resulting in substantial growth in the economy. GDP of Oman grew by 22% in 2005 as against 14%in 2004. In Oman’s Budget for 2006, in addition to the increased spending proposed in the Oil and Gas Sector, there is enhanced focuson Infrastructure projects, Gas based industries and tourism which is expected to further spur economic growth in the Sultanate.

7. PERSONNEL

On behalf of the Board, I would like to thank the Management Team and all the employees for the outstanding performance throughoutthe year. The dedication, commitment and untiring effort to make the Company reach higher levels of excellence year after year arehighly commendable.

8. AUDITOR’S REPORT

The Auditor’s Report to the Shareholders does not contain any qualifications.


As per the Company, the Company being registered outside India, the disclosures required to be made in accordance withCompanies(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are not relevant. Hence the same has not beenfurnished.

10. PARTICULARS OF EMPLOYEES

There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies(Particulars of Employees) Rules,1975.



i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and there has been nomaterial departure;

ii. that the selected Accounting Policies were applied consistently and the Directors made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at December 31, 2005 andthe profits of the Company for the year ended on that date;

iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act ,1956 for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; and


12. THE YEAR AHEAD

The year 2006 has started on an optimistic note with indications of up trend continuing in Construction Sector. The year aheadpromises to be all the more exciting for the Construction Industry due to the various Industrial and Infrastructure developments takingplace through out Oman. Given the continuing resilience and buoyancy in the domestic and regional economies, we are confident thatthe Company will continue to grow in a prudent and profitable manner by focusing its attention on Oil & Gas Sector, Industrial Projectsand Utilities Sector with overall objective of enhancing Shareholder’s value. The Company shall form its own strategy in the comingmonths so as to ensure implementation of the right structure and resources are mobilized in time to deliver substantial growth goingforward.

13. WORD OF THANKS

On behalf of the Board of Directors, we would like to take this opportunity to thank The Zubair Corporation and Larsen & ToubroLimited, India for the support and guidance for steering the Company to reach higher levels of excellence.


Place : Chennai K.V. RANGASWAMIDate: May 22, 2006 V.B.GADGIL } Directors

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AAAAAuditors’ Reportuditors’ Reportuditors’ Reportuditors’ Reportuditors’ ReportThe financial statements of LARSEN & TOUBRO (OMAN) LLC, Oman for the year ended December 31, 2005, being a Company registeredin Oman, are audited by RSM & Co., Chartered Accountants, Oman and we have been furnished with their audit report dated February 26,2006 on which we have placed reliance for the purpose of our opinion given below.

We are presented with the Accounts in Indian Rupees prepared on the basis of aforesaid accounts to comply with the requirements ofSection 212 of the Companies Act, 1956. We give our report hereunder:

We have audited the attached Balance Sheet of LARSEN & TOUBRO (OMAN) LLC, Oman as at December 31, 2005 and also the Profit& Loss Account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.



1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A)of the Companies Act, 1956 we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Orderto the extent applicable to the Company.



b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;

c. The said Balance Sheet,Profit and Loss Account and cash flow statement dealt with by this report are in agreement with thebooks of account;

d. In our opinion, the said Balance Sheet, Profit and Loss Account and cash flow statement, comply with the accounting standardsreferred to in sub–section (3 C) of section 211 of the Companies Act 1956.

e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the Companyis registered in Oman, no reporting is required to be made under the above section.

f. In our opinion and to the best of our information and according to the explanations given to us the said accounts read togetherwith the significant accounting policies and notes to accounts in Schedule ‘L’ and elsewhere in the accounts give the informationrequired by the Companies Act 1956, in the manner so required and give a true and fair view in conformity with the accountingprinciples generally accepted in India.

i. in the case of the Balance Sheet, of the state of affairs of the Company as at December 31, 2005;

ii. in the case of the Profit and Loss Account, of the profit for the year ended on the date; and

iii. in the case of cash flow statement, of the cash flows for the year ended on that date.


L.VAIDYANATHANPlace: Chennai PartnerDate: May 22, 2006 Membership No. 16368


i. (a) The Company has maintained proper records to show full particulars including quantitative details and situation of fixed assets.

(b) The management has physically verified during the year all its fixed assets. No material discrepancies were noticed on suchverification.

(c) During the year, the Company has not disposed off any part of the assets and hence has not affected the going concern statusof the Company.

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ii. (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verificationis reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to thesize of the Company and the nature of its business.

(c) The Company has maintained proper records of inventory. The discrepancies noticed on physical verification between thephysical stocks and book records were not material.

iv. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensuratewith the size of the Company and nature of its business, for the purchase of inventory and fixed assets and for the sale of goods andservices. In our opinion, and according to the information and explanations given us, there is no continuing failure to correct majorweaknesses in internal control system.

vi. The Company has not accepted any deposit from the public during the year.

vii. The Company has not furnished an internal audit report for the year and hence we could not report whether the internal audit systemis commensurate with its size and the nature of its business.

ix. (a) According to the information and explanations given to us and on the basis of our examination of the books of account, theCompany has been generally regular in depositing undisputed statutory dues towards Income–tax and any other statutory duesduring the year with the appropriate authorities. According to the information and explanations given to us, no undisputed amountspayable in respect of Income Tax and other statutory dues were in arrears as at December 31, 2005 for a period of more thansix months from the date they become payable.

(b) According to the information and explanations given to us, there are no dues of income tax, which have not been deposited withthe appropriate authorities on account of any dispute.

x. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financialyear covered by our audit and the immediately preceding financial year.

xi. According to the information and explanations given to us, the Company has not borrowed any amount from banks/ FinancialInstitutions. The Company has not issued any debentures.

xii. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of securityby way of pledge of shares, debentures and other securities.

xiii. The provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company.

xiv. In our opinion, and as per information obtained from management, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditors’ Report) Order, 2003 are notapplicable to the Company.

xv. The Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi. The Company has not availed any term loans during 2005 and hence reporting on the purpose for which they were raised does notarise.

xvii. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, wereport that no funds have been raised on short term basis. Hence reporting on the usage of the same does not arise.

xix. The Company did not have outstanding debentures. Accordingly, no securities have been created.

xx. The Company has not raised any money by public issue during the year.

xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us, we have neither come across any instancesof material fraud on or by the Company, noticed or reported during the year ,nor have we been informed of such case by management.

xxii. The clauses 4.(iii),(v),(viii) and (xviii) of the Companies (Auditor’s report) Order, 2003 are not applicable to the Company since it isregistered outside India and hence no reporting has been made.


L.VAIDYANATHANPlace: Chennai PartnerDate: May 22, 2006 Membership No. 16368

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Schedules As at 31.12.2005 As at 31.12.20044444

Rs. Rs. Rs. Rs.

SOURCES OF FUNDS:SHAREHOLDERS’ FUNDS:

Share capital A 45,691,693 45,691,693Reserves and surplus B 284,558,871 144,370,936

330,250,564 190,062,629

TOTAL 330,250,564 190,062,629

APPLICATION OF FUNDS:Fixed assets: C

Gross block 246,434,689 167,394,289Less: Depreciation 115,550,865 86,889,765

Net block 130,883,824 80,504,524Current assets, loans and advances: D

Sundry debtors 1,879,863,857 1,074,613,627Cash and bank balances 42,839,935 109,929,383Inventories 267,568,138 132,562,169Loans and advances 221,936,833 107,123,568

2,412,208,763 1,424,228,747Less: Current liabilities and provisions: E 2,216,686,645 1,328,143,126

Net current assets 195,522,118 96,085,621Translation Loss 3,844,621 13,472,484

TOTAL 330,250,564 190,062,629

Significant accounting policies and Notes on accounts L

The schedules referred to above and the notes attached form an intergral part of the Balance Sheet



L. VAIDYANATHAN K.V. RANGASWAMI V.B. GADGILPartner Director DirectorMembership No.16368


Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005

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Schedules As at 31.12.2005 As at 31.12.20044444

Rs. Rs. Rs. Rs.

INCOME:Sales & Service F 3,886,826,147 2,366,516,150Other income G 4,853,113 3,306,339Interest Income H – 289,351

3,891,679,260 2,370,111,840EXPENDITURE:Construction and operating expenses I 3,122,087,386 1,904,614,078Staff expenses J 373,200,467 184,821,487Sales, administration and other expenses K 206,781,494 154,438,852Interest and brokerage H 2,707,239 –Depreciation 28,068,416 16,077,353

3,732,845,002 2,259,951,770

Profit before tax 158,834,258 110,160,070Provision for current year taxes 18,646,324 12,553,087Provision for previous year taxes - 3,041,857

18,646,324 15,594,944

Profit after tax 140,187,935 94,565,126Add: Balance brought forward from previous year 128,488,664 50,372,144

Profit available for appropriation 268,676,599 144,937,270Less: Transferred to: Statutory Reserve - Proposed Dividend - 16,448,606


Earnings per equity share - Basic 384.83 259.59

Significant accounting policies and Notes on accounts L

The schedules refered to above and the notes attached form an integral part of the Profit and Loss account





Profit and Profit and Profit and Profit and Profit and LLLLLoss oss oss oss oss AAAAAccountccountccountccountccount for the year ended December 31, 2005 for the year ended December 31, 2005 for the year ended December 31, 2005 for the year ended December 31, 2005 for the year ended December 31, 2005

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2005 2004

Rs. Rs.A. Cash Flow from operating activities

Net profit before tax 158,834,258 110,160,070Adjustments for:Depreciation 28,068,416 16,077,353Interest (net) 2,707,239 (289,351)Profit on disposal of Property, Plant & Equipment (749,258) (164,045)Tax Paid (18,646,324) (10,127,254)Translation Reserve 9,627,863 (11,740,762)

Operating profit before working capital changes 179,842,195 103,916,011(increase) / decrease in trade and other receivables (920,063,495) (480,548,827)(increase) / decrease in inventories (135,005,968) (64,035,926)increase / (decrease) in trade payables 888,543,519 462,267,975


B. Cash Flow from Investing ActivitiesPurchase of Fixed assets (76,908,784) (63,034,943)Difference in opening balance of fixed assets due to exchange fluctuation (6,407,838)Difference in opening balance of cumulative depreciation due to exchange fluctuation 3,966,681Sale of fixed assets net of depreciation 1,651,482 1,069,336Interest received 133,854 311,814

Net Cash (used in) / from investing activities (77,564,604) (61,653,793)

C. Cash Flow from Financing activtiesDividends paid (16,448,606)Interest paid (2,841,093) (22,463)

Net cash (used in) / from financing activities (2,841,093) (16,471,069)

Net (decrease) / increase in cash and cash equivalents (67,089,447) (56,525,629)(A+B+C)Cash and cash equivalents at beginning of the year 109,929,383 166,455,012

Cash and cash equivalents at end of the year 42,839,936 109,929,383







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As at 31.12.2005 As at 31.12.2004

Rs. Rs. Rs. Rs.SCHEDULE A

Share Capital:Authorised:364286 Equity shares of RO. 1 each 45,691,693 45,691,693

Issued, Subscribed and Paidup364286 Equity shares of RO. 1 each 45,691,693 45,691,693

45,691,693 45,691,693

Note:65% of equity is held by Larsen & Toubro International FZE, Sharjah, UAEand balance 35% is held by Zubair Corporation, Muscat, Oman

SCHEDULE B

Reserves and Surplus:

Statutory ReserveBalance as per last balance sheet 15,882,272 15,882,272Add: Transfer from P&L account – –

15,882,272 15,882,272Profit & Loss Account 268,676,599 128,488,664

284,558,871 144,370,936

SCHEDULE C

Fixed Assets: in Rupees


Particulars As at Exchange Additions Deductions As at Up to Exchange For the Deductions As at As at As at1-1-2005 difference 31-12-2006 1-1-2005 difference year 31-12-2005 31-12-2005 31-12-2004

transferred transferredto to

translation translationreserve reserve

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Building at Site 8,789,639 321,584 9,807,880 45,167 18,873,937 2,513,918 121,768 1,658,379 4,239 4,289,826 14,584,110 6,275,721

Machinery 97,866,689 3,580,621 23,421,924 - 124,869,234 53,573,904 2,156,099 10,910,562 - 66,640,565 58,228,669 44,292,785

Other Equipments 28,029,233 1,025,498 21,614,167 456,349 50,212,549 13,135,402 559,763 4,407,626 44,771 18,058,019 32,154,530 14,893,831

Furniture 2,380,498 87,095 77,696 - 2,545,289 2,024,051 77,880 213,043 - 2,314,974 230,315 356,447

Vehicles 30,328,230 1,393,040 21,987,117 3,774,706 49,933,680 15,642,490 1,051,171 10,878,806 3,324,988 24,247,480 25,686,200 14,685,740

Total 167,394,289 6,407,838 76,908,784 4,276,222 246,434,689 86,889,765 3,966,681 28,068,416 3,373,998 115,550,865 130,883,824 80,504,524

Previous year 105,542,018 63,034,941 1,182,670 167,394,289 71,085,813 16,077,353 273,401 86,889,765 80,504,524

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Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)As at 31.12.2005 As at 31.12.2004

Rs. Rs. Rs. Rs.

SCHEDULE D

Current Assets, Loans and Advances:Current Assets:

Sundry Debtors: Unsecured: Debts outstanding for more than 6 months — —Other Debts: Considered good 1,879,863,857 1,074,613,627

1,879,863,857 1,074,613,627Cash and bank balances:

Cash on hand 649,538 1,412,647Balances with scheduled banks 27,738,000Balances with non-scheduled banks 14,452,397 108,516,736

(Refer note No:2.c in Schedule L) 42,839,935 109,929,383Stores, spares and consumables 97,299,770 89,875,502Work in Progress - Due from customers 150,122,708 14,652,775Construction Materials 20,145,660 28,033,892

267,568,138 132,562,169Loans and advances:Unsecured:Considered good:

Advances recoverable in cash or in kind 175,883,070 104,977,709Due from related party 46,053,763 —Due from Holding Company — 2,145,859

221,936,833 107,123,568

2,412,208,763 1,424,228,748

SCHEDULE E


Sundry creditors :Due to Holding Company 285,497,996 17,738,906Others 1,428,041,866 800,659,938Due to customers 89,225,542 122,616,584Advance from customers 348,801,865 333,734,830

2,151,567,269 1,274,750,258Provisions for:

Taxes 18,646,324 12,553,087Proposed dividend 16,448,606Gratuity 22,947,783 13,667,412Leave encashment 23,525,269 10,723,763

65,119,376 53,392,868

2,216,686,645 1,328,143,126

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2005 2004

Rs. Rs. Rs. Rs.

SCHEDULE F

Sales & Service:

Construction, project related activity 3,886,826,147 2,366,516,150

3,886,826,147 2,366,516,150

SCHEDULE G

Other Income:Recovery of Bad Debts — 2,082,060Profit on sale of fixed assets 749,258 164,045Miscellaneous Income 4,103,856 1,060,234

4,853,113 3,306,339

SCHEDULE H

Interest & Brokerage:On bank overdrafts 2,841,093 22,463Less:interest received - Fixed Deposits 133,854 311,814

2,707,239 (289,351)

SCHEDULE I

Construction & Operating Expenses:Construction materials 1,531,849,932 606,104,939Sub contracts 1,360,712,658 1,210,952,906Stores, spares and tools 160,454,481 67,226,921Direct expenses on jobs 59,384,175 16,311,214Power & fuel 9,686,139 4,018,098

3,122,087,386 1,904,614,078

SCHEDULE J

Staff Expenses:Salaries, wages and bonus 325,718,842 163,344,083Contribution to and provisions for: Provident fund and pension fund 9,011,888 2,800,725Welfare and other expenses 38,469,737 18,676,679

373,200,467 184,821,487

SCHEDULE K

Sales, Administration and Other Expenses:Rent 36,266,080 18,120,564Rates and taxes 975,452 1,986,019Travelling and conveyance 48,678,440 24,418,802Telephone, postage and telegrams 14,415,174 9,487,739Stationery and printing 5,638,687 2,514,484Audit fees 431,053 289,175Insurance 18,969,373 11,109,174Bank charges 11,132,430 9,285,872General repairs and maintenance 6,994,734 4,813,058Miscellaneous expenses 63,280,071 72,413,965

206,781,494 154,438,852

Schedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of AccountsSchedules forming Part of Accounts (Contd.) (Contd.) (Contd.) (Contd.) (Contd.)

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SCHEDULE L

1) SIGNIFICANT ACCOUNTING POLICIES


The accounts have been prepared using historical cost convention and on the basis of going concern, and is made in accordancewith the provisions of Section 211(3C) and the other provisions of the Companies Act, 1956, with revenues recognised andexpenses accounted for on accrual, including for committed obligations.

These financial statements have been prepared in conformity with Generally Accepted Accounting Principles, which requiremanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

b. Fixed Assets and Depreciation

Property, plant and equipment are stated at cost.






d. Depreciation

Depreciation is calculated on a straight–line basis over the estimated useful lives of assets as follows:

i) Buildings at site, Machinery and other Equipment at 15%

ii) Vehicles and Furniture & Fixtures at 33.33 %


Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revisedcarrying amount of the assets over its remaining useful life.

e. Inventories

Inventories are stated at the lower of cost and net realizable value after making due allowance for obsolete and slow moving items.

Stores, spares and consumables Weighted average cost

Tools, scaffolding materials, tackles, etc. Weighted average cost less amortization over estimated useful life.

Construction Materials Weighted Average Cost

Construction WIP At cost till a major portion of the job is completed and thereafter at realisable value.Net realizable value is based on estimated selling price less any further estimatedcosts expected to be incurred on disposal.

f. Retirement/Termination Benefits

Payment is made to the Omani Government Social Security scheme under Royal Decree 72/91 for Omani employees.

Accruals for employees end of service benefits comprising of leave salary and end of service gratuity for non–Omani employeesis in accordance with Company’s rules and is provided based on the actual liability, which would arise if the employment of all staffwere terminated at the year–end.

g. Taxation

Tax on income for the current period is determined on the basis of taxable income and tax credits is computed in accordance withlaw of income tax of companies in Oman.

h. Revenue Recognition

Contract revenue comprising the total value of construction work performed during the year is recognized on a percentage ofcompletion basis. The percentage of completion is determined on the basis of progress of each contract measured by reference


S-401


to proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. No profit isrecognized until a contract has progressed to the point where the ultimate realizable profit can be reasonably determined. Provisionis made for all losses incurred to the accounting date together recorded on the basis of progress bills prepared by the Companyand are considered as revenue to the extent that they are probable of being certified and recovered.

i. Foreign currencies


a. Share capital is retained at the initial contribution amount.

b. Fixed and Current assets & Current liabilities are translated at year–end rates.

c. Revenue transactions are translated at the average rates.

d. The resultant difference is accounted as translation reserve in the balance sheet

2) NOTES ON ACCOUNTS

a) Contract Work In Progress Rupees

Contract costs incurred plus recognised profits 7,131,350,683

Progress billing 6,945,676,020

Advances received 486,430,441

Retentions receivable 285,027,706

b) Disclosure of Related Party and Transactions with related parties

Related party Nature of Amount in Nature of Amount outstanding in Rupeesrelationship Rupees transaction Due from Due to

related party related party

Larsen & Toubro Limited –India Holding Company 115,013,560 Cost of services/ 161,738,088overheads charged

Larsen & Toubro Limited –India Holding Company 22,338,322 Sale of services 27,954,206

Larsen & Toubro Electromech LLC Fellow subsidiary 134,062,397 Receiving of 18,099,557 123,759,909services/Advance


c) Balances with non–scheduled banks

i) Current accounts

Maximumamount

outstandingat any time

As at during theBank 31.12.2005 year

Rupees Rupees

Bank Muscat 13,854,091 13,854,091

Oman Arab Bank 166,656 166,656

Arab Bank PLC–RO– Current Account 86,676 86,676

Oman International Bank 94,864 94,864

ii) Call Deposits

Bank Muscat 250,110 250,110

d) Taxation

Provision for tax has been made by adjusting the net profit as per the Company’s financial statements, for matters as per the pastassessments, and applying the tax rates specified in the Law of Income tax on Companies in Oman. Additional tax liability that mayarise in future on finalisation of pending tax assessments for the tax years 2002 to 2005 is not expected to be material to theCompany’s financial position, and would be paid for and accounted in the financial statements of the year in which the taxassessments are finalized.

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e) Borrowing Cost capitalized during the year Rs. Nil

f) There are no transactions with small scale industries during the year.

g) The Company is engaged only in the business of construction activity and hence no reporting has been made as per therequirements under Accounting Standard 17 on Segmental Reporting.

h) Operating leases:

The Company has taken porta cabin accommodation at Barka farm.

The Company has taken on non–cancellable operating leases the above, the future minimum lease payments in respect of which,as at December 31, 2005 are as follows:

Minimum Lease Payments

Amount in Rupees

i. Payable not later than 1 year 1,755,187

ii. Payable later than 1 year and not later than 5 years 1,404,150

iii. Payable later than 5 years –

Total Minimum Lease Payments 3,159,337

The lease agreements provide for an option to the Company to renew the lease period at the end of the non–cancelable period.There are no exceptional / restrictive covenants in the lease agreements.

i) Auditor’s remuneration and expenses charged to the accounts:

2005 2004

Audit fees 431,053 335,443

Certification work 28,737

Taxation 51,726 52,052

Expenses reimbursed 57,474

j) The Company is a service Company and accordingly information required under paragraph 4 (c’) of Part II of Schedule VI of theCompanies Act,1956 has not been furnished.

k) The Company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that therecoverable amount is more than the amount carried in the books. Accordingly, no provision required to be made for the impairmentin the accounts.

l) Increase in work in progress relating to construction and project related activity is as under.

Work in progress including materials at site as on 31.12.2005

Rupees

At close : 7,131,350,683

Less: At commencement 3,244,524,536

3,886,826,147

m) Previous year’s figures have been reclassified wherever necessary to conform with the presentation adopted in the current year.

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Notes forming part of accountsNotes forming part of accountsNotes forming part of accountsNotes forming part of accountsNotes forming part of accounts

3) Balance sheet abstract and Company’s general business profile


Registration No. 0 0 6 7 State Code No. N A

Incorporated in Sultanate of Oman


II. Capital raised during the year (Rs.)



N I L N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs.)Total Liabilities Total Assets

3 3 0 2 5 0 5 6 4 3 3 0 2 5 0 5 6 4Sources of Funds


4 5 6 9 1 6 9 3 2 8 4 5 5 8 8 7 1

Secured loans Unsecured Loans


Net Fixed Assets and Net Intangible Assets Investments

1 3 0 8 8 3 8 2 4 N I L


1 9 5 5 2 2 1 1 8 N I L

Miscellaneous expenditure Accumulated losses

N I L N I L

IV. Performance of Company (Amount in Rs.)Turnover (including other income) Total Expenditure

3 8 9 1 6 7 9 2 6 0 3 7 3 2 8 4 5 0 0 2

+ - Profit/Loss before Tax*@ + - Profit/Loss after Tax$@

+ 1 5 8 8 3 4 2 5 8 + 1 4 0 1 8 7 9 3 5

(Please tick appropriate box : + for profit; - for loss)


+ R s 3 8 4 . 8 3 N I L

V. Generic Names of three Principal Products/Services of the compay(as per monetary terms)

Item Code No. N A

Product C O N S T R U C T I O N A N D P R O J E C T R E L A T E DDescription A C T I V I T Y





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LARSEN & TOUBRO INTERNATIONAL FZE

Director’s ReportDirector’s ReportDirector’s ReportDirector’s ReportDirector’s Report

REVIEW OF OPERATIONS:

On behalf of the Board of Directors, it gives me great pleasure to present to you the Annual Report and Audited Accounts of Larsen & ToubroInternational FZE (LTIFZE) for the year ended December 31, 2005.

OVERVIEW OF THE YEAR:

In 2005, the Middle East has witnessed significantly high level of activity for the construction industry, resulting in plenty of opportunities for Larsen &Toubro Limited (L&T) and its subsidiary and associate companies in the region. L&T Group of companies have bagged orders amounting to approximatelyINR 15,768 million during the year 2005. This has resulted in huge demand for equipments to execute these projects. As a management policy, it hasbeen decided that the Company would procure strategic equipments and hire it out to L&T Group of companies at competitive rates.

It has also been decided that the Company would act as the investment vehicle for overseas investments by L&T. Towards achieving this, the Companyhas acquired L&T’s stake in the existing overseas JV companies namely Larsen & Toubro (Oman) LLC (LTO), Larsen & Toubro Qatar WLL (LTQ), Larsen& Toubro (Saudi Arabia) LLC (LTSA), Larsen & Toubro ECC Construction (M) SDN.BHD and L&T Overseas Projects Nigeria Limited as well as 65%stake in Larsen & Toubro Electromech LLC (formerly known as Zubair Kilpatrick LLC), a Company registered in Oman. As of date, the process of sharetransfer has been completed for all companies excepting LTQ. The completion of the share transfer process for LTQ is expected in a few days. New jointventures have been proposed in UAE, Saudi Arabia, China, Kuwait and Oman for which the equity investment would be done through the Company.

The Company is also involved in commodity derivatives to hedge the commodity exposures of L&T Group of Companies.

In order to facilitate this action plan, the Board of Directors has approved the increase in authorized share capital from the existing INR 434.6 million toINR 2928 million.

YEAR IN RETROSPECT:

During the year under review, the Company has purchased strategic equipments amounting to INR 30.29 million during the year.

The Company has leased these equipments to ECC Division of L&T and Larsen & Toubro Qatar LLC in 2005.

The Company has entered into transactions that involve derivative financial instruments and these include forward contracts and options for buying andselling of commodities.

The Company has reported an income of INR 564.88 million comprising of income from hiring of plant & machinery and commodity trading operations.The profit for the year was INR 534.34 million.

FINANCE:

During the year 2005, the Company has been availing working capital facilities (both funded and non-funded) by HSBC Bank Middle East Limited,Dubai.

CAPITAL EXPENDITURE:

As at December 31, 2005, the gross fixed assets stood at INR 341.25 million and net fixed assets at INR 311.49 million.

CURRENT BUSINESS SCENARIO & FUTURE OUTLOOK:

The year 2005 has witnessed a spurt in construction activity in the Middle East. Given the tremendous business potential in the Middle East, it isessential for L&T to have requisite resource base comprising of critical equipments, plant & machinery, human resources, etc to respond quickly to thebusiness opportunities. In view of the delays in mobilization of resources from India, it has been proposed to make LTIFZE the resource base forequipment and project staff in the Middle East as a centralized resource base would assist in speedy and world-class execution of projects.

To achieve the above, the Company is planning to purchase critical equipment required for construction projects in the region.

PERSONNEL:

The Directors and Manager of the Company are working in ex-officio capacity and are employees of the parent Company i.e L&T. Currently theCompany has no employees on its rolls.

AUDITORS REPORT:

The Auditor’s Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors Report are selfexplanatory and therefore do not call for any further comments of Directors.


As per the Company, the Company being registered outside India, the disclosures required to be made in accordance with Companies(Disclosure ofParticulars in the Report of Board of Directors) Rules ,1988 ,are not relevant. Hence the same has not been furnished.


There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 , read with the Companies (Particulars ofEmployees) Rules,1975.

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DIRECTORS RESPONSIBILITY STATEMENT:


i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;

ii. that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at December 31, 2005 and losses of the Company for the year endedon that date;

iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act ,1956 for safeguarding the assets of the Company for preventing and detecting fraud and other irregularities;


B.RAMAKRISHNAN V.B.GADGILDirector Director


Auditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersThe financial statements of LARSEN & TOUBRO INTERNATIONAL FZE, SHARJAH, UAE for the year ended December 31, 2005, being a Companyregistered in Sharjah, UAE, are audited by Pannell Kerr Forster, Chartered Accountants, Abu Dhabi, UAE and we have been furnished with their auditreport dated April 19, 2006 on which we have placed reliance for the purpose of our opinion given below.

We are presented with the Accounts in Indian Rupees prepared on the basis of aforesaid accounts to comply with the requirements of Section 212 ofthe Companies Act, 1956. We give our report hereunder:

We have audited the attached Balance Sheet of LARSEN & TOUBRO INTERNATIONAL FZE, SHARJAH, UAE, as at December 31, 2005 and also theProfit & Loss Account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.



1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of Section 227 (4A) of theCompanies Act, 1956 we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order to the extentapplicable to the Company.




c. The said Balance Sheet,Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books ofaccount;

d. In our opinion, the said Balance Sheet, Profit and Loss Account and cash flow statement, comply with the accounting standards referred toin sub-section (3 C) of section 211 of the Companies Act 1956.

e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the Company is registeredin Sharjah, UAE, no reporting is required to be made under the above section.

f. In our opinion and to the best of our information and according to the explanations given to us the said accounts read together with thesignificant accounting policies and notes to accounts in Schedule ‘J’ and elsewhere in the accounts give the information required by theCompanies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally acceptedin India.





L.VAIDYANATHANPlace : Chennai PartnerDate: May 22, 2006 Membership No. 16368

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Annexure to the Auditors’ Report(Referred to in paragraph 1 of our Report of even date)



(c) During the year, the Company has not disposed off any part of the assets and hence has not affected the going concern status of theCompany.

(ii) (a) The inventory has not been physically verified by the management during the year ,as there was no inventory at the end of the year.

(b) The procedures of physical verification of inventories is not applicable as the Company does not have inventory.

(c) The Company need not maintain any records of inventory.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate withthe size of the Company and nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. In ouropinion, and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internalcontrol system.

(vi) The Company has not accepted any deposit from the public during the year.

(vii) The Company has not furnished an internal audit report for the year and hence we could not report whether the internal audit system iscommensurate with its size and the nature of its business.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company hasbeen generally regular in depositing undisputed statutory dues towards Income-tax and any other statutory dues during the year with theappropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of IncomeTax and other statutory dues were in arrears as at December 31, 2005 for a period of more than Six months from the date they becomepayable.


(x) The Company has accumulated losses at the end of the financial year and has not incurred cash losses during the year and in the immediatelypreceding previous year.

(xi) According to the information and explanations given to us, the Company has not borrowed any amount from a bank/ Financial Institution. TheCompany has not issued any debentures.



(xiv) In our opinion, and as per the information obtained from management, the Company is not dealing in or trading in shares, securities, debenturesand other investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditors’ Report) Order, 2003 are not applicable to theCompany.


(xvi) The Company has not availed any term loans during 2005 and hence reporting on the purpose for which they were raised does not arise.

(xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report thatno funds have been raised on short term basis. Hence reporting on the usage of the same does not arise.



(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraudon or by the Company, noticed or reported during the year ,nor have we been informed of such case by management.

(xxii) The clause 4(iii) (v),(viii) and (xviii) of the companies (Auditor’s Report) Order, 2003 are not applicable to the Company since it is registeredoutside India and hence no reporting has been made.


L. VaidyanathanPlace : Chennai PartnerDate: May 22, 2006 Membership No.16368

S-407


Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Schedules As at 31.12.2005 As at 31.12.2004

Rs. Rs. Rs. Rs.SOURCES OF FUNDS:

SHAREHOLDERS’ FUNDS:

Share capital A 435,766,250 101,308,000

435,766,250 101,308,000

Reserves & Surplus B 533,562,477 -

Translation Reserve 24,449,814 -

TOTAL 993,778,541 101,308,000


Fixed assets: C

Gross block 341,248,960 10,828,277


Net block 311,488,114 9,608,572

Investments D 114,144,410 -

Current assets, loans and advances: E

Sundry debtors 43,973,458 830,912


Loans and advances 293,728,409 674,500

663,079,929 96,797,677

Less: Current liabilities and provisions: F

Liabilities 94,933,912 7,081,243

Provisions - -

94,933,912 7,081,243


Profit & Loss Account - 773,369

Translation Loss - 1,209,625

TOTAL 993,778,541 101,308,000

Significant accounting policies and Notes on accounts J

The schedules referred to above and the notes attached form an integral part of the Balance SheetAs per our attached report of even dateSHARP & TANNANChartered Accountants

L. Vaidyanathan B.RAMAKRISHNAN V.B.GADGILPartner Director DirectorMembership No. 16368Place : Chennai Place : ChennaiDate: May 22, 2006 Date: May 22, 2006

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Profit and Profit and Profit and Profit and Profit and LLLLLoss oss oss oss oss AAAAAccount for the year ended ccount for the year ended ccount for the year ended ccount for the year ended ccount for the year ended DDDDDecember 31, 2005ecember 31, 2005ecember 31, 2005ecember 31, 2005ecember 31, 2005

2005 2004

Schedules Rs. Rs. Rs. Rs.INCOME:

Income from operations G 561,908,366 2,033,062

Interest (Net) H 2,972,244

564,880,610 2,033,062EXPENDITURE:

Sales, administration and other expenses I 2,551,125 415,643

Depreciation 27,993,639 833,156

30,544,764 1,248,799

Profit/(Loss) before tax 534,335,846 784,263



- -

Profit/(Loss) after tax 534,335,846 784,263

Add: Balance brought forward from previous year (773,369) (1,557,632)

Balance carried to Balance Sheet 533,562,477 (773,369)

Earnings per equity share : basic 9,374,313 392,132

Earnings per equity share : diluted 9,374,313 392,132

Significant accounting policies and Notes on accounts J

The schedules referred to above and the notes attached form an integral part of the Profit and Loss account




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Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 20052005 2004

Rs. Rs.

A. Cash Flow from operating activitiesNet profit before tax 534,335,846 784,263

Adjustments for:

Depreciation 27,993,639 833,156

Interest (net) 2,972,244


Translation Reserve 25,659,439 (311,725)

Operating profit before working capital changes 590,961,168 1,305,694(increase) / decrease in trade and other receivables (336,196,455) (946,538)

increase / (decrease) in trade payables 87,852,669 7,018,771


B. Cash Flow from Investing ActivitiesPurchase of Fixed assets (330,024,527) (4,323,488)

Increase in fixed assets due to change in opening balance (396,156)

Increase in cumulative depreciation due to change in opening balance 547,502


Increase in investments-acquisition of subsidiaries and investment in associates (114,144,410)

Interest received (5,285,215)


C. Cash Flow from Financing activtiesInterest paid 2,312,971

Issue of Share Capital 334,458,250 86,920,000

Net cash (used in) / from financing activities 336,771,221 86,920,000

Net (decrease) / increase in cash and cash equivalents 230,085,797 89,974,439

(A+B+C)

Cash and cash equivalents at beginning of the year 95,292,265 5,317,826





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As at 31.12.2005 As at 31.12.2004

Schedule A Rs. Rs. Rs. Rs.Share Capital:Authorised:USD 10,000,000 in Equivalent shares of USD 150,000/- each 435,766,250 434,600,000

Issued, Subscribed and Paidup66 nos. Equity shares of USD 150,000 each 431,261,250 14,388,000(64 nos. Equity shares of USD 150,000 each issued during the year)

Share application - Money 4,505,000 86,920,000

435,766,250 101,308,000

Note: All the above equity shares are held by Larsen & Toubro Limited,the holding Company.

Schedule BReserves and Surplus:Profit & Loss Account 533,562,477 -

533,562,477 -

Schedule C

Schedule DInvestments: As at 31.12.2005 As at 31.12.2004

Rs. Rs. Rs.Rs.Rs.Rs.Rs. Rs.Rs.Rs.Rs.Rs.Larsen & Toubro Electromech LLC , Oman(19,500 shares of Omani Riyal 10 each acquired during the year) 30,586,012Larsen & Toubro Oman LLC, Oman (236,786 shares ofOmani Riyal 1 each acquired during the year) 79,044,009Larsen & Toubro Saudi Arabia LLC, Kingdom of Saudi Arabia,(1960 shares of Saudi Riyal 1000 each acquired during the year) 8,830Larsen & Toubro Qatar LL, Qatar (98 shares ofQatari riyal 1000 each acquired during the year) 1,250,697L&T-ECC Construction(M) SDN.BHD. Malaysia(224,998 shares of Malaysian Ringitt 1 Each acquired during the year) 101,363L&T Overseas Projects Nigeria Limited, Nigeria(999998 Shares of 1 Naira each acquired during the year) 3,153,500 114,144,410 -

114,144,410 -

Rs.


Fixed Assets As at Additions As at Upto Exchange For the As at As at As at01.01.2005 Exchange during the 31.12.2005 01.01.2005 difference year 31.12.2005 31.12.2005 31.12.2004

difference year transferred transferred to to

translation translationreserve reserve


Plant & Machinery 8,223,067 1,220,224 314,559,913 324,003,204 1,219,705 509,256 25,864,575 27,593,536 296,409,668 7,003,362Vehicles 2,605,210 -824,068 15,464,614 17,245,756 0 38,246 2,129,064 2,167,310 15,078,446 2,605,210

Total 10,828,277 396,156 330,024,527 341,248,960 1,219,705 547,502 27,993,639 29,760,846 311,488,114 9,608,572Previous year 6,504,789 4,323,488 10,828,277 386,549 833,156 1,219,705 9,608,572

S-411


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)As at 31.12.2005 As at 31.12.2004As at 31.12.2004As at 31.12.2004As at 31.12.2004As at 31.12.2004

Schedule E Rs. Rs. Rs. Rs.Current Assets, Loans and Advances:Current Assets:Sundry Debtors:

Unsecured:Outstanding for more than 6 months - -Other Debts:Considered good 43,973,458 830,912

43,973,458 830,912Cash and bank balances:Cash in hand 25,886Balances with non-scheduled banks - Refer note no 2.b in Schedule J 325,352,176 8,372,265Fixed deposit with non-scheduled banks - 86,920,000

325,378,062 95,292,265Loans and advances:Unsecured:Considered good:Loan to subsidiary Company 163,441,870 -Advances recoverable in cash or in kind 437,006 674,500Margin money for commodity trade 129,849,533 -

293,728,409 674,500

663,079,929 96,797,677

Schedule FCurrent Liabilities and Provisions:Liabilities:Acceptances - -

Sundry creditors :Due to holding Company 15,519,945 -Due to subsidiary Company 442,741 -Others 78,971,226 7,081,243

94,933,912 7,081,243

94,933,912 7,081,243

2005 20042004200420042004

Schedule G Rs. Rs. Rs.Rs.Rs.Rs.Rs. Rs.Rs.Rs.Rs.Rs.Income from operationsNet gains on settlement of forward commodity trades 518,368,571 -Hire charges 43,539,795 2,033,062

561,908,366 2,033,062

Schedule HInterestInterest received on fixed deposit/’margin money deposit 5,285,215 -Less: Interest on short term borrowings 2,312,971 -

2,972,244 -

Schedule ISales, Administration and Other Expenses:Rent 356,350 285,081Bank charges 1,098,633 4,364Other rates & taxes 473,250 65,058Audit fees 23,590 61,140Insurance 6,815 -Telephone 20,003 -Miscellaneous expenses 572,484 -

2,551,125 415,643

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Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE J

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS



The accounts have been prepared using historical cost convention and on the basis of going concern, and is made in accordance with theprovisions of Section 211(3C) and the other provisions of the Companies Act, 1956, with revenues recognised and expenses accounted foron accrual, including for committed obligations, subject to the revenue recognition on forward commodity trades.

These financial statements have been prepared in conformity with Generally Accepted Accounting Principles, which require management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dateof the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ fromthose estimates.

b. Fixed Assets

Fixed assets are capitalised at cost.






d. Depreciation

1. Scaffolding materials

(i ) Steel Items 31.62% on WDV method

(ii ) Wooden Items 48.67% on WDV method

2. Plant & equipment 10% to 50% on SLM method.

3. Vehicles 20% on SLM



e. Investments

Long term investments are stated at cost after providing for any diminution in value, if such diminution is of a permanent nature.

f. Foreign Currency Translation


1. Share capital is retained at the initial contribution amount.

2. Fixed and current assets & current liabilities are translated at year end rate.

3. Revenue transactions are translated at the average rate.

4. The resultant difference is accounted as translation reserve in the balance sheet

g. Revenue Recognition

Revenue from hire charges of equipment accounted based on contract with the customers.

Accrual of option premium and net gains on forward commodity trades are accounted on the settlement date of the transactions.

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a. Disclosure of Related Party and Transactions with related parties

Related party Nature of Amount in Nature of Amount outstanding inof relationship Rs. of transaction Rs.

Due from Due torelated relatedparties parties

Larsen & Toubro Limited –India Holding Company 2,16,83,844 Hire charges of Equipment 22,790,705

Larsen & Toubro Qatar LLC Subsidiary Company 2,18,55,951 Hire charges of Equipment 21,183,753

Larsen & Toubro Limited –India HoldingCompany 8,34,09,996 Purchase of fixed assets 15,519,945

Larsen & Toubro Qatar LLC Subsidiary Company 442,741 Overheads charged 442,741

Larsen & Toubro Qatar LLC Subsidiary Company 1,250,697 Loan 1,250,697

Larsen & Toubro Saudi LLC Associate Company 162,180,000 Loan 162,180,000


b. Balances with non-scheduled banks

Current accounts

As at Maximum amount31.12.2005 outstanding at any

Bank time during the year

Rs. Rs.

AbuDhabi Commercial Bank, Abu Dhabi 1,824,894 5,819,207

HSBC Bank,UAE-USD account 310,630,536 310,630,536

HSBC Bank,UAE-AED account 12,896,746 13,671,402

c. Operating Lease

(i) The Company has entered into non-cancellable operating lease for rent of plot of land situated at Hamriyah Free Zone. The total futurelease payments are as follows:

Rs.

2005 2004

Not later than one year 4,,90,595 3,54,981

Between one and five years 19,62,423 1,774,863

Later than five years 4,90,640 9,46,602

(ii) Contingent rent recognized in Profit and loss account is Rs.Nil (Previous year Nil).

(iii) The Company has not taken any asset on operating/finance lease. Commercial/residential premises taken on cancelable operatinglease are renewed at the end of the lease period.

d. Taxation:

There are no income tax payable in UAE where the Company is registered and hence no provision for current tax / deferred tax has beenmade in these accounts.

e. There are no transactions with small scale industries during the year.


S-414


f. As per accounting Accounting standard 17 on Segmental Reporting the Company is engaged in the business of hiring of plant & equipmentand Forward commodity trading

Segment Segment revenue Segment result Segment assets Segment liabilities

Hire of plant and machinery 43,539,795 12,995,031 844,718,510 94,933,912Option premiaand net gains on settlement 518,368,571 518,368,571 129,849,533 -of forward commodity trades

g. The Company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverable amountis more than the amount carried in the books. Accordingly, no provision required to be made for the impairment in the accounts.

h. The Company is a service Company and accordingly information required under paragraph 4 (c’) of Part II of Schedule VI of the CompaniesAct,1956 has not been furnished.

i. Previous year’s figures have been regrouped/ reclassified wherever necessary to conform to the presentation adopted in the current year.


S-415


j. Balance Sheet Abstract and Company’s General Business Profile


Registration No. 0 0 6 7 State Code N A


Date Month Year

II Capital Raised during the Year (Amount in Rs.)


N I L N I L


N I L 3 3 4 4 5 8 2 5 0III Position of Mobilisation and Deployment of Funds (Amount in Rs.)

Total Liabilities including paid up capital Total assets

9 9 3 7 7 8 5 4 1 9 9 3 7 7 8 5 4 1Sources of Funds Paid-Up Capital Reserves & Surplus

4 3 5 7 6 6 2 5 0 5 3 3 5 6 2 4 7 7Secured Loans Unsecured Loans

N I L N I LApplication of Funds Net Fixed Assets Investments

3 1 1 4 8 1 1 4 1 1 4 1 4 4 4 1 0Net Current Assets Deferred Tax

5 6 8 1 4 6 0 1 7 N I LMisc. Expenditure Accumulated Losses

N I L N I LTranslation Reserve Accumulated Losses

2 4 4 4 9 8 1 4IV Performance of Company (Amount in Rs.)

Turnover including other income Total Expenditure(includes amortization of Misc. Exp.)5 6 4 8 8 0 6 1 0 3 0 5 4 4 7 6 4

+ - Profit before Tax*@ + - Profit after Tax*@

� 5 3 4 3 3 5 8 4 6 � 5 3 4 3 3 5 8 4 6+ - Earning Per Share in Rs. Dividend rate %

� R s . 9 3 7 4 3 1 3 N I LV Generic Names of Three Principal Products/Services of the Company

(as per monetary terms)Item Code No. N . A .(ITC Code)Product Description Hiring of equipments & Commodity tradesItem Code No.(ITC Code)Product DescriptionItem Code No.(ITC Code)Product Description




LARSEN & TOUBRO QATAR LLC

S-416

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportOn behalf of the Board of Directors,it gives us pleasure in presenting the First full year of operation Annual Report and Audited Accounts of Larsen &Toubro Qatar LLC for the period ending December 31, 2005.

Financial Results:The Company has started its operation in the year 2004 and during the year your Company were executing strategically important and national importanceprojects such as, 1. Doha 2006 Asian Games village / Hamad Medical City job worth INR 1819 Mn, in association with a local Company, HBK contractingCo WLL, under a separate CR in 50:50 partnership in the project, 2. A high rise Apartment Hotel namely Al-Jazeera Towers (INR 1192 Mn) funded by QatarIslamic Bank housing the Officials of Doha Asian Games 2006 and 3. Civil work in Ras Laffan ‘B’ CCPP for Siemens as Sub-Contract to L&T India (INR 573Mn) which is the main source for supply of electricity for the Doha Asian Games 2006.

We have reported a turnover of INR 617 Mn and net loss of INR 22 Mn towards loss in operation for year 2005 and the accumulated loss of INR 23 Mn.Loss is on account of overheads of the Area office.

During the year 2005, the Company has secured two major orders such as:

1. Apartment Hotel “Al-Jazeera Towers” for Qatar Islamic Bank - INR 1192 Mn

2. Combined Cycle Power Plant for M/s Siemens through L&T India - INR 573 Mn

Capital ExpenditureAs at December 31, 2005 the gross fixed assets stood at INR 155,78,673/- and the net fixed assets at INR 13,706,626/-

PersonnelThe strength of any organisation lies in its people and pleased to declare that the strong people and the workforce in your organisation are so muchdedicated and committed that they will ensure good performance of the Company in future. Your Company people strength stood at staff –88 and workmen–684.

Auditors Report:The Auditor’s Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors Report are selfexplanatory and therefore do not call for any further comments of Directors.

DISCLOSURE OF PARTICULARSAs per the Company, the Company being registered outside India, the disclosures required to be made in accordance with Companies(Disclosure ofParticulars in the Report of Board of Directors) Rules, 1988, are not relevant. Hence the same has not been furnished.

PARTICULARS OF EMPLOYEESThere are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees)Rules,1975.

Directors Responsibility Statement:The Board of Directors of the Company confirm:i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;ii. that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable and prudent so

as to give a true and fair view of the state of affairs of the Company as at December 31, 2005 and losses of the Company for the year ended on thatdate;

iii. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company for preventing and detecting fraud and other irregularities;


Prospects for the Company:The country in which your Company is registered and operating has adopted sound and balanced economic policy aiming at achievement of sustainableeconomic development by increasing private sector contribution in economic development and encouraging inflows of direct foreign investment. Qatar’sGDP of $ 22.47 Billion has expanded by 27.1% in nominal terms during the year 2005.

The country has proposed an ambitious investment plan of over US $ 100 billion by 2012 to develop the economy under energy, tourism roads, and otherinfrastructure facilities.

Since the government is committed for the comprehensive economic and social development, large potential is available in oil & Gas section, establishingof heavy industries in petrochemicals & steel.

The government is providing a package of incentives for foreign capitals to play a major role in achieving the objectives of the country economicdevelopment plan, particularly for establishing projects in the field of medium and small industries.

The government has proposed to develop a Special Economic Zone also very shortly.

The quality of work exhibited by your Company has been well received by the clients & consultants in the country and lauded by none other than the Emirof the Country and the other prominent personalities in the State of Qatar.

The Company has received the license for setting-up of Ready Mix Concrete Plant and the other process is on to put-up the plant shortly to capitalise theshortage of RMC in the country.

Mr. A M Naik, Chairman & Managing Director of your parent Company, Larsen & Toubro Limited, India, has visited Qatar on the eve of the celebration of60 Years of L&T’s Engineering, Construction and Contracts Division, wherein he expressed the long term commitment of L&T by widening its participationin Qatar’s accelerated development efforts.

Your Company is also very much focussed and targeting some very big jobs in EPC concept and also targets for major share of the construction contractsby taking advantage of the construction boom right now in the country.

K.G.HARIHARAN V.B.GADGILDirectors



S-417

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportThe financial statements of LARSEN & TOUBRO QATAR LLC, QATAR for the year ended December 31, 2005, being a Company registered in QATAR,are audited by DAWOUD & CO., Doha, Qatar and we have been furnished with their audit report dated 23rd March 2006 on which we have placed reliancefor the purpose of our opinion given below.


We have audited the attached Balance Sheet of LARSEN & TOUBRO QATAR LLC, QATAR as at December 31, 2005 and also the Profit & Loss Accountand the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.






c. The said Balance Sheet, Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the said Balance Sheet, Profit and Loss Account and cash flow statement, comply with the accounting standards referred to insub-section (3 C) of section 211 of the Companies Act 1956.

e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the Company is registered inQATAR, no reporting is required to be made under the above section.

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with thesignificant accounting policies and notes to accounts in Schedule ‘N’ and elsewhere in the accounts, subject to note no ‘2.h’ in schedule ‘N’regarding going concern assumption, give the information required by the Companies Act 1956, in the manner so required and give a true andfair view in conformity with the accounting principles generally accepted in India.


(ii) in the case of the Profit and Loss Account, of the Loss for the year ended on the date; and





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Annexure To The Auditors’ Report(Referred to in paragraph 1 of our Report of even date)



(c) During the year, the Company has not disposed off any part of the assets and hence has not affected the going concern status of the Company.

(ii) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of theCompany and the nature of its business.

(c) The Company has maintained proper records of inventory. The discrepancies noticed on physical verification between the physical stocks andbook records were not material.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the sizeof the Company and nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. In our opinion, andaccording to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

(vi) The Company has not accepted any deposit from the public during the year.

(vii) The Company has not furnished an internal audit report for the year and hence we could not report whether the internal audit system is commensuratewith its size and the nature of its business.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has beengenerally regular in depositing undisputed statutory dues towards Income tax and any other statutory dues during the year with the appropriateauthorities. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax and otherstatutory dues were in arrears as at December 31, 2005 for a period of more than six months from the date they become payable


(x) The Company has accumulated losses at the end of the financial year and also incurred cash losses during the year and in the immediately precedingprevious year.

(xi) According to the information and explanations given to us, the Company has not borrowed any amount from banks/Financial Institutions. TheCompany has not issued any debentures.



(xiv) In our opinion and as per the information obtained from management, the Company is not dealing in or trading in shares, securities, debentures andother investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.


(xvi) In our opinion and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposesfor which they were obtained.

(xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report that nofunds have been raised on short term basis. Hence reporting on the usage of the same does not arise.



(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraud on orby the Company, noticed or reported during the year ,nor have we been informed of such case by management.

(xxii) The clause 4(iii) (v),(viii) and (xviii) of the companies (Auditor’s Report) Order, 2003 are not applicable to the Company since it is registered outsideIndia and hence no reporting has been made.




S-419

Balance Sheet as at 31st December, 2005Balance Sheet as at 31st December, 2005Balance Sheet as at 31st December, 2005Balance Sheet as at 31st December, 2005Balance Sheet as at 31st December, 2005As at 31.12.2005 As at 31.12.2004

Rupees Rupees

SOURCES OF FUNDS: SchedulesSHAREHOLDERS’ FUNDS:

Share capital A 2,388,000 2,388,000Translation Reserve 8,148,777 17,015

10,536,777 2,405,015LOAN FUNDS:

Secured Loan B 63,573,962 —Unsecured Loan C 63,107,258 9,337,080

TOTAL 137,217,997 11,742,095

APPLICATION OF FUNDS:Fixed assets: D

Gross block 15,578,673 991,916Less: Depreciation 1,872,047

Net block 13,706,626 991,916

Investments E 1,237,250 1,194,000Current assets, loans and advances: F

Sundry debtors 195,288,606Cash and bank balances 9,826,735 7,376,242Inventories 40,387,539 —Work in progress 627,498,019 —Loans and advances 82,926,196 5,042,191

955,927,095 12,418,433Less: Current liabilities and provisions: G 855,948,887 3,570,848Net current assets 99,978,208 8,847,585

Profit & Loss Account 22,295,913 708,594

TOTAL 137,217,997 11,742,09511,742,09511,742,09511,742,09511,742,095

Significant accounting policies and Notes on accounts N



L. VAIDYANATHAN K. G. Hariharn V. B. GadgilPartner Director DirectorMembership No. 16368



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Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005Profit & Loss Account for the year ended December 31, 2005Year Ended Year Ended31.12.2005 31.12.2004

Rupees Rupees

SOURCES OF FUNDS: SchedulesINCOME:Sales & Service H 616,530,434 —Other income I 28,883,676 6,128,668

645,414,110 6,128,668EXPENDITURE:Construction and operating expenses J 501,640,448 274,697Staff expenses K 77,793,083 3,205,238Sales, administration and other expenses L 85,186,627 3,357,327Interest and brokerage M 509,224 —Depreciation 1,872,047 —

667,001,429 6,837,262

Loss (21,587,319) (708,594)Provision for current taxes — —Provision for deferred tax — —

— —Loss (21,587,319) (708,594)Add: Balance brought forward from previous year (708,594)

(22,295,913) (708,594)Less: Transferred to:

Statutory Reserve — —Proposed Dividend — —

— —

Balance carried to Balance Sheet (22,295,913) (708,594)

Earnings per equity share - Basic (107,936.60) (3,542.97)

Significant accounting policies and Notes on accounts N

The schedules refered to above and the notes attached form an integral part of the Profit and Loss account





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Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Year Ended Year Ended31.12.2005 31.12.2004


Net profit before tax (21,587,319) (708,594)Adjustments for:Depreciation 1,872,047 —Interest (net) 509,224 —(Profit) / Loss on sale of fixed assetsTranslation Reserve 8,131,762 17,015

Operating profit before working capital changes (11,074,286) (691,579)(increase) / decrease in trade and other receivables (900,670,630) (6,236,191)(increase) / decrease in inventories (40,387,539) —increase / (decrease) in trade payables 852,378,039 3,570,848

Cash generated from operations (99,754,416) (3,356,922)

B. Cash Flow from Investing ActivitiesPurchase of Fixed assets (14,588,873) (991,916)Increase in the opening value of fixed assets due to exchange difference (35,929)Sale of fixed assets 38,045 38,045Interest received 1,079,019

Net Cash (used in) / from investing activities (13,507,738) (953,871)

C. Cash Flow from Financing activtiesInterest paid (1,588,243)Increase in investments (43,250)Issue of Share Capital 2,388,000Secured laon 63,573,962Unsecured Loan 53,770,178 9,337,080

Net cash (used in) / from financing activities 115,712,647 11,725,080


(A+B+C)Cash and cash equivalents at beginning of the year 7,376,242Cash and cash equivalents at end of the year 9,826,735 7,376,242






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As at 31.12.2005 As at 31.12.2004Rs. Rs. Rs. Rs.

Schedule A

Share Capital:Authorised:200 Shares of Qatari Riyal 1000 each 2,388,000 2,388,000

Issued, Subscribed & Paid up 2,388,000 2,388,000200 shares of Qatari Riyal 1000 each issued during the year.51% of the above equity held by Al-zajeera International Trading Co. andthe balance 49 % held by L&T International FZE,Sharjah,Oman. 2,388,000 2,388,000

Schedule B

Secured LoansLoans from Banks (Secured by book debts - present & future) 63,573,962 —

63,573,962 —

63,573,962 —

Schedule C

Un-secured LoansLoans from Banks 57,298,740 8,119,200Loans from others 5,808,518 1,217,880

63,107,258 9,337,080

63,107,258 9,337,080

Schedule D

Fixed Assets(in Rs.)


Fixed Assets As at Exchange difference Additions Deletions As at Upto Exchange difference For the As at As at As at1-1-2005 transferred to 31-12-2005 1-1-2005 transferred to Year 31-12-2005 31-12-2005 31-12-2004

translation reserve translation reserve

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Furniture & fixtures 36,716 1,329 2,051,572 38,045 2,051,572 - - 376,248 376,248 1,675,324 36,716

Plant & Machinery - - 5,411,732 - 5,411,732 - - 541,817 541,817 4,869,915 -

Vehicles 955,200 34,600 7,125,569 - 8,115,369 - - 953,982 953,982 7,161,387 955,200

Total 991,916 35,929 14,588,873 38,045 15,578,673 - - 1,872,047 1,872,047 13,706,626 991,916

Previous year - - 991,916 - 991,916 - - - - 991,916


Schedule E

InvestmentsInvestments in Joint Venture (L & T Qatar & HBK Contracting LLC) 1,237,250 1,194,000

1,237,250 1,194,000

1,237,250 1,194,000



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Schedule F


Sundry debtorsConsidered good 195,288,606

Cash and bank balances:Cash on hand 194,916 128,701Balances with scheduled banks 5,475,160 —

Balances with non-scheduled banks (Refer to note no 2.b in Schedule N) 4,156,659 7,247,541

9,826,735 7,376,242 Inventories 40,387,539 — Work in progress 627,498,019 —

Loans and advances:Unsecured:Considered good: Advances recoverable in cash or in kind 82,926,196 5,042,191

82,926,196 5,042,191

955,927,096 12,418,433

Schedule G


Liabilities:AcceptancesSundry creditors :Due to Holding company 30,783,852 1,444,143Small Scale Industrial Undertakings — 1,445,194Others 100,974,040 681,511Due to customers 473,378,722 —Advance from customers 250,812,273 —

855,948,887 3,570,848

855,948,887 3,570,848

2005 2004Rs. Rs.

Schedule H

Sales & Service:Construction, project related activity 616,530,434 —

616,530,434 —

Schedule I

Other Income:Income from L & T Qatar & HBK Contracting LLC 28,652,909 6,128,668Miscellaneous Income 230,767 —

28,883,676 6,128,668



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2005 2004Rs. Rs. Rs. Rs.

Schedule J

Construction & Operating Expenses:Construction materials 53,213,572 17,250Sub contracts 377,482,407 48,323Stores, spares and tools 39,503,233 170,123Repairs to plant and machinery 197,472 –Hire charges 27,261,522 –Power & fuel 3,982,242 39,001

501,640,448 274,697

Schedule K

Staff Expenses:Salaries, wages and bonus 71,334,881 2,596,136Contribution to and provision for: Provident funds and pension fund 2,417,161 106,189Welfare and other expenses 4,041,041 502,913

77,793,083 3,205,238

Schedule L

Sales, Administration and Other Expenses:Rent 23,261,967 975,629Rates and taxes 4,513,404 39,478Travelling and conveyance 15,004,839 774,757Telephone, postage and telegrams 3,774,593 276,495Audit fees 60,781 61,169Stationery and printing 1,447,457 57,009Insurance 1,637,363 –Bank charges 2,790,033 218,999General repairs and maintenance 4,013,580 49,284Miscellaneous expenses 28,682,610 904,507

85,186,627 3,357,327

Schedule M

Interest & Brokerage:On bank overdrafts 1,588,243 —Less:interest received - Fixed Deposits 1,079,019 —

509,224 —



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Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSCHEDULE NSIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

1. SIGNIFICANT ACCOUNTING POLICIESa. Basis Of preparation

The accounts have been prepared using historical cost convention and on the basis of going concern, and is made in accordance with theprovisions of Section 211(3C) and the other provisions of the Companies Act, 1956, with revenues recognised and expenses accounted foron accrual, including for committed obligations.These financial statements have been prepared in conformity with Generally Accepted Accounting Principles, which require management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dateof the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ fromthose estimates

b. Fixed AssetsFixed assets are stated at cost.

c. Impairment of assetsAs at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determinea) the provision for impairment loss, if any, required orb) the reversal, if any, required of impairment loss recognised in previous periods.

Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.d. Depreciation

Fixed assets are depreciated on the straight-line basis at rates designed to write off the cost of the assets over the estimated useful lives ofthe assets concerned. Additions are depreciated proportionately for the year from the month of addition. The principal annual rates used areas follows:-

Machinery and Equipments 15-33%Motor Vehicle 20%

The above rates are higher than the rates specified under Schedule. XIV of the Companies Act 1956 for the respective categories.Depreciation on impaired assets is provided by adjusting the depreciation charge in the remaining periods so as to allocate the revisedcarrying amount of the assets over its remaining useful life.

e. Revenue RecognitionRevenue from construction and project related activities is recognised by applying percentage of completion to the contract value. Percentageof completion is determined as a proportion of cost incurred to date to the total estimated cost. Full provision is made for any loss in the yearin which it is foreseen.

f. TaxationTax on income for the current period is determined on the basis of taxable income and tax credits is computed in accordance with Laws andInstructions of Income Tax ,1993 of the State of Qatar.

g. Foreign Currency TranslationAccounts are translated in Indian Rupees as follows:a. Share capital is retained at the initial contribution amount.b. Fixed and Current assets & Current liabilities are translated at year-end rates.c. Revenue transactions are translated at the average rates.d. The resultant difference is accounted as translation reserve in the balance sheet.

2. NOTES ON ACCOUNTSa) Disclosure of Related Party and transactions with related parties

Related party Nature of Amount in Nature of Amount outstanding inrelation Rupees transaction Rupees

Due from Due torelated party related party

Larsen & Toubro Joint 28,652,909 Receipt of 8,802,749Qatar & HBK Contracting venture servicesCo. WL.L company

Larsen & Toubro Holding company 21,855,951 Hire charges 20,751,381International FZE of Equipment

Larsen & Toubro Limited Holding company 10,032,471 Overheads 10,032,471charged

Larsen & Toubro Holding company 1,261,995 Loan availed 1,261,995International FZE from the parent

company



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b) Balances with non-scheduled banks

Current accounts

As at 31.12.2005 Maximum amountoutstanding at any

time during theyear

Bank Amount in Rupees Amount in Rupees

Arab Bank, Doha, Qatar 2,814,783 241,218,479

HSBC Bank,UAE 374,855 124,368,902

Commercial Bank 558,988 35,988,509

HSBC Bank,Qatar 408,033 81,023,469

c) Taxation

No provision for current taxes has been made in view of taxable loss for the year.

d) There are no transactions with small-scale industries during the year.

e) The Company is engaged only in the business of Construction activity and hence no reporting has been made as per the requirements underAccounting Standard 17 on Segmental Reporting.

f) The Company has not taken any asset on operating / finance lease. Commercial / Residential premises taken on cancelable operating leaseare renewed at the end of the lease period.

g) The Company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverable amountis more than the amount carried in the books. Accordingly, no provision required to be made for the impairment in the accounts.

h) The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts andclassification of liability that may be necessary if the Company is unable to continue as a going concern.

i) The Company is a service Company and accordingly information required under paragraph 4 (c’) of Part II of Schedule VI of the CompaniesAct,1956 has not been furnished.

j) Increase in work in progress relating to construction and project related activity is as underWork in progress including materials at site as on 31.12.2005

Rupees

At close : 616,530,434

Less: At commencement Nil

616,530,434

k) Contract Work in progress

Rupees

Contract costs incurred plus recognised profits 616,530,434


Retentions receivable 33,002,072

l) Contingent liability NIL (Previous Year NIL)

m) Previous year’s figures have been reclassified wherever necessary to conformwith the presentation adopted in the current year.


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n. Balance Sheet Abstract and Company’s General Business ProfileI Registration Details

Registration No. 2 7 4 5 4 State Code N AIncorporated in Malaysia

Balance Sheet Date 3 1 1 2 2 0 0 5II Capital Raised during the Year (Rs.)

Public Issue Rights IssueN I L N I L

Bonus Issue Private PlacementN I L N I L

III Position of Mobilisation and Deployment of funds (Amount in Rs)Total Liabilities Total Assets

1 3 7 2 1 7 9 9 7 1 3 7 2 1 7 9 9 7Sources of Funds Paid-Up Capital Translation Reserve

2 3 8 8 0 0 0 8 1 4 8 7 7 7Secured Loans Unsecured Loans

6 3 5 7 3 9 6 2 6 3 1 0 7 2 5 8Application of Funds Net Fixed Assets and net Intangible Assets Investments

1 3 7 0 6 6 2 6 1 2 3 7 2 5 0Net Current Assets Deferred Tax

9 9 9 7 8 2 0 8 N I LMisc. Expenditure Accumulated Losses

N I L 2 2 2 9 5 9 1 3IV Performance of Company (Amount in Rs.)

Turnover (Including other income) Total Expenditure6 4 5 4 1 4 1 1 0 6 6 7 0 0 1 4 2 9

Profit/Loss Before Tax * @ Profit/Loss After Tax * @+ - + -

- 2 1 5 8 7 3 1 9 - 2 1 5 8 7 3 1 9Please tick Appropriate box + for Profit, - for Loss

Basic Earnings Per Share in Rs. Dividend Rate %- R s. 1 0 7 9 3 6 . 6 0 N I L

V Generic Names of Three Principal Products/Services of the Company

(as per monetary terms)

Item Code No. N . A .

(ITC Code)

Product Description Construction and project related activity

As per our attached report of even dateSHARP & TANNANChartered AccountantsBy the hand of

L. VAIDYANATHAN V.B.GADGIL K.P.RAGHAVANPartner DirectorsMembership No.16368Place: Chennai Place: ChennaiDate : May 22, 2006 Date : May 22, 2006


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LARSEN & TOUBRO ELECTROMECH LLC


REVIEW OF OPERATIONS:

On behalf of the Board of Directors, it gives us great pleasure to present to you the Annual Report and Audited Accounts of Larsen & ToubroElectromech LLC (LTEM) for the year ended December 31, 2005.

OVERVIEW OF THE YEAR:

The Company presently focuses on EPC contracts for Electrical & Instrumentation works in Oil & Gas Sector, facility management and maintenanceof large assets. The Company was engaged in long term facility management contracts with two reputed customers viz., Petroleum DevelopmentOman and Ministry of Defense. The contract with Petroleum Development Oman has been completed during the year.

The Company has also successfully completed the Al Khalata EPC contract for E&I for PDO. The Company has reactivated the business segmentof MEP Works comprising HVAC, Building Electrical, Fire Protection System and Plumbing.

YEAR IN RETROSPECT:

The sales and other income for the financial year under review were INR 82 Crores as against INR 49 Crores for the previous year registers agrowth of 67%. The profit before tax of INR 73,980,526 for the financial year under review as against INR 83,13,898 for the previous yearregistering an impressive growth of 790% over last year.

The Company has achieved Return on Equity (ROE) of 69% and ROCE of 68%. All these improved performance could be achieved by theCompany mainly due to the exemplary dedication and hard work exhibited by our employees.

Highlights of the Financial year 2005 includes the following:

The Company has secured three major orders during the year which are given below :

Sl.No Client Job Value - INR

1 Petroleum Development Oman 132kV Transmission Line 165 Crs

2 F 16 Thumarith Air Base Facilities MEP Works 58 Crs

3 Special Technical Services Engineering Maintenance 58 Crs

During the year 2005, the Company completed the following projects.

Client Project Description Value - INR

Petroleum Development Oman Facility Maintenance of North and South Oman 69 Crs

Petroleum Development Oman Al Khalata Electrical Works 15 Crs

Special Technical Services Engineering Maintenance 29 Crs

FINANCE:

During the year 2005, the Company has worked zealously in controlling the working capital. This has strengthened our position to have financialresilience to create value-enhancing opportunities

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CAPITAL EXPENDITURE:

As at December 31, 2005, the gross fixed assets stood at INR 12,09,11,825 and net fixed assets at INR 1,08,535,528.

CURRENT BUSINESS SCENARIO:

Riding the remunerative oil prices, Oman Government is now focused on active diversification of the economy. Major Investments are envisagedin Industrial and Infrastructure projects with emphasis on tourism. This will offer ample opportunity for the Company to grow.

• Government’s active diversification of the Economy, Privatization, Industrialization etc. leads to large investments & thereby conceiving megavalue projects.

• PDO is committed to invest substantial amounts in different EOR projects on EPC basis to enhance oil production capacity. Opportunities willarise for E&I infrastructural works from EPC contractors.

• Occidental and Lima Petroleum consortium has projected to invest 10 billion US Dollars in Mukhaizna Oil Field by 2010 to raise production to150,000 barrels a day. EPC contracts for different packages will offer ample scope for infrastructural E&I works.

• MEP business segment is expected to flourish driven by extraordinary investments lined up in the next five years in tourism sector. Hotels,resorts and institutional buildings are drawn up all along the coast-line with a total investment surpassing 30 billion US Dollars.

• The concept of outsourcing Operation & Maintenance is being increasingly adopted by the potential Asset Owners.

PERSONNEL:

The strength of any Company lies in its people and I am pleased to say that at LTEM, we have a group whose dedication and enthusiasm willensure good performance of the Company in future.

The Board of Directors wishes to express their appreciation to all the employees for their outstanding contribution to the operations of theCompany during the year.

AUDITORS REPORT:

The Auditors Report to the shareholders does not contain any qualifications. The notes to the accounts referred to in the Auditors Report are selfexplanatory and therefore do not call for any further comments of Directors.

DISCLOSURE OF PARTICULARS:

As per the Company, the Company being registered outside India, the disclosures required to be made in accordance with Companies (Disclosureof Particulars in the Report of Board of Directors) Rules ,1988 ,are not relevant. Hence the same has not been furnished.

PARTICULARS OF EMPLOYEES:

There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 , read with the Companies (Particulars ofEmployees) Rules,1975.

DIRECTORS RESPONSIBILITY STATEMENT:


i) that in the preparation of the annual accounts, the applicable Accounting Standards have been followed and there has been no materialdeparture;

ii) that the selected Accounting Policies were applied consistently and the Directors made judgements and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Company as at December 31,2005 and of the profits of the Companyfor the year ended on that date;

iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of theCompanies Act,1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv) that the Annual Accounts have been prepared on a going concern basis.

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FUTURE OUTLOOK:

The Government’s Budget for 2006 clearly reveals Government’s determination to boost spending. Lot of scope envisaged in Infrastructural andTourism development projects for the year 2006, which happens to be the first year of the current financial year plan. The increased expenditurein these segments is aimed to augment economic growth and LTEM expects to have its market share maintained in the ensuing year.

I also hope to see clear outcomes from the pursuit of our growth ambitions that may re-define the size, structure and shape of the Company in amanner that is build to last, grow and prosper for the years ahead.

K.VENKATARAMAN V.B.GADGILDIRECTOR DIRECTOR


Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ Report

The financial statements of LARSEN & TOUBRO ELECTROMECH LLC , Oman for the year ended December 31, 2005, being a Companyregistered in Oman, are audited by RSM & Co, Chartered Accountants, Oman and we have been furnished with their audit report datedFebruary 15, 2006 on which we have placed reliance for the purpose of our opinion given below.

We are presented with the Accounts in Indian Rupees prepared on the basis of aforesaid accounts to comply with the requirements of Section 212of the Companies Act, 1956. We give our report hereunder:

We have audited the attached Balance Sheet of LARSEN & TOUBRO ELECTROMECH LLC, Oman as at December 31, 2005 and alsothe Profit & Loss Account and the cash flow statement for the year ended on that date annexed thereto. These financial statementsare the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based onour audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that ouraudit provides a reasonable basis for our opinion.




a. We have obtained all the information and explanations, which to the best of Our knowledge and belief were necessary for the purposesof our audit;

b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination ofthose books;

c. The said Balance Sheet,Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books ofaccount;

d. In our opinion, the said Balance Sheet, Profit and Loss Account and cash flow statement, comply with the accounting standards referredto in sub-section (3 C) of section 211 of the Companies Act 1956.

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e. As regards reporting on the disqualification of Directors u/s 274 (1) (g) of the Indian Companies Act, 1956, since the Company isregistered in Oman, no reporting is required to be made under the above section.

f. In our opinion and to the best of our information and according to the explanations given to us the said accounts read together with thesignificant accounting policies and notes to accounts in Schedule ‘K’ and elsewhere in the accounts give the information required by theCompanies Act 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generallyaccepted in India.





Place : Chennai L.VAIDYANATHANDate : May 22, 2006 Partner





(c) During the year, the Company has not disposed off any part of the assets and hence has not affected the going concern status of theCompany.

(ii) (a) The inventory has been physically verified by the management during the year. In our opinion, the frequency of such verification isreasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size ofthe Company and the nature of its business.

(c) The Company has maintained proper records of inventory. The discrepancies noticed on physical verification between the physicalstocks and book records were not material.

(iv) In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensuratewith the size of the Company and nature of its business, for the purchase of inventory and fixed assets and for the sale of goods andservices. In our opinion, and according to the information and explanations given to us, there is no continuing failure to correct majorweaknesses in internal control system.


(vii) The Company has not furnished an internal audit report for the year and hence we could not report whether the internal audit system iscommensurate with its size and the nature of its business.

(ix) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Companyhas been generally regular in depositing undisputed statutory dues towards Income tax and any other statutory dues during the year with

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the appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect ofIncome Tax and other statutory dues were in arrears as at December 31, 2005 for a period of more than six months from the date theybecome payable.

(b) According to the information and explanations given to us, there are no dues of income tax, which have not been deposited with theappropriate authorities on account of any dispute.

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial yearcovered by our audit and the immediately preceding financial year.

(xi) According to the information and explanations given to us, the Company has not borrowed any amount from bank/Financial institution. TheCompany has not issued any debentures.



(xiv) In our opinion, and as per information obtained from management, the Company is not dealing in or trading in shares, securities, debenturesand other investments. Accordingly, the provision of clause 4(xiv) of the Companies (Auditors’ Report) Order, 2003 are not applicable to theCompany.


(xvi) The Company has not availed any term loans during the year and hence reporting on the purpose for which they were raised does not arise.

(xvii)According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, we report thatno funds have been raised on short term basis. Hence reporting on the usage of the same does not arise.



(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with the generally acceptedauditing practices in India, and according to the information and explanations given to us, we have neither come across any instances ofmaterial fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

(xxii)The clause 4(iii) (v),(viii) and (xviii) of the companies (Auditor’s Report) Order, 2003 are not applicable to the Company since it is registeredoutside India and hence no reporting has been made.



Membership No.16368Place : ChennaiDate : May 22, 2006

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Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005Balance Sheet as at December 31, 2005As at 31.12.2005 As at 31.12.2004


SOURCES OF FUNDS:

SHAREHOLDERS’ FUNDS:

Share capital A 35,560,200 35,560,200

Reserves and surplus B 71,340,994 11,853,400

106,901,194 47,413,600

Translation Reserve 246,284

TOTAL 107,147,478 47,413,600


Fixed assets: C

Gross block 120,911,825 105,208,295


Net block 12,376,297 5,952,745

Capital work-in-progress 4,330,640 -

16,706,937 5,952,745Current assets, loans and advances: D

Sundry debtors 473,071,474 91,415,778


Inventories 45,004,560


506,195,775 193,063,081

Less: Current liabilities and provisions: E 415,755,234 168,329,255


Profit & Loss Account — 14,492,932

Translation Loss — 2,234,097

TOTAL 107,147,478 47,413,600

Significant accounting policies and Notes on accounts K



L. Vaidyanathan K.Venkataraman V.B.GadgilPartner Director DirectorMembership No. 16368Place: Chennai Place: ChennaiDate : May 22, 2006 Date : May 22, 2006

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Profit and Loss Account for the Year Ended December 31, 2005Profit and Loss Account for the Year Ended December 31, 2005Profit and Loss Account for the Year Ended December 31, 2005Profit and Loss Account for the Year Ended December 31, 2005Profit and Loss Account for the Year Ended December 31, 20052005 2004


INCOME:

Sales & Service F 826,352,022 489,978,120

Interest Income G 1,561,999 1,609,317

827,914,021 491,587,437

EXPENDITURE:

Contract Costs & Tendering Costs H 597,618,828 456,766,834

Staff Expenses I 150,346,387 17,456,338

Sales, administration and other expenses J 419,650 3,084,225

Depreciation 5,548,630 5,966,142

- -753,933,495 483,273,539

Profit before tax 73,980,526 8,313,898



- -

Profit after tax 73,980,526 8,313,898


Profit/ (Loss) available for appropriation 59,487,594 (14,492,932)Balance carried to Balance Sheet 59,487,594 (14,492,932)

Earnings per equity share - Basic 2,466.02 277.13

Significant accounting policies and Notes on accounts K

The schedules referred to above and the notes attached form an intergral part of the Profit and Loss Account



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Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 2005Cash Flow Statement for the year ended December 31, 20052005 2004

Rs. Rs.

A. Cash Flow from operating activities

Net profit before tax 73,980,526 8,313,898

Adjustments for:

Depreciation 5,548,630 5,966,142

Interest (net) (1,561,999) (1,609,317)


Provision for end of services benefits

(Increase)/Decrease in Deferred Revenue Expenditure — —

(Increase)/Decrease in Translation loss 2,480,381 (1,151,889)

Operating profit before working capital changes 80,447,538 11,518,834

(increase) / decrease in trade and other receivables: 99,510,672

(increase) / decrease in inventories 45,004,560 —

(increase) / decrease in loans and advances 8,547,974 —

(increase) / decrease in sundry debtors (381,655,696) —

increase / (decrease) in trade payables 247,425,979 (94,487,886)

Cash generated from operations (229,645) 16,541,620


Purchase of Fixed assets (11,854,302) (4,995,841)

Addition of capital work in progress (4,330,640) —

Difference in the opening value of fixed assets due to exchange difference (3,849,227) —

Difference in the opening value of cumulative depreciation due to exchange difference 3,731,347 —




C. Cash Flow from Financing activties

Interest paid (44,967) (22,324)

Net cash (used in) / from financing activities (44,967) (22,324)

Net (decrease) / increase in cash and cash equivalents (14,970,468) 13,155,096

(A+B+C)

Cash and cash equivalents at beginning of the year 36,814,482 23,659,386


Actual Cash Balance 21,844,014 36,814,482


L. Vaidyanathan K.Venkataraman V.B.GadgilPartner Director DirectorMembership No. 16368


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SCHEDULE C


Fixed Assets As at Exchange Additions As at Upto Exchange For the As at As at As at

01.01.2005 difference During the 31.12.2005 01.01.2005 difference Year 31.12.2005 31.12.2005 31.12.2004

included in Year included in

the translation the translation

reserve reserve


Tools & Equipment 36,926,914 1,350,941 3,202,515 41,480,370 35,926,888 1,335,275 1,153,153 38,415,316 3,065,054 1,000,026

Motor Vehicles 64,071,768 2,344,153 8,651,787 75,067,708 59,119,049 2,241,939 4,395,477 65,756,465 9,311,243 4,952,719

Furniture & Fixtures 4,209,614 154,133 - 4,363,747 4,209,614 154,133 - 4,363,747 0 0

Total 105,208,296 3,849,227 11,854,302 120,911,825 99,255,551 3,731,347 5,548,630 108,535,528 12,376,297 5,952,745

Previous year 100,212,455 4,995,841 105,208,295 93,289,408 5,966,142 99,255,550 5,952,745


As at 31.12.2005 As at 31.12.2004SCHEDULE A Rs. Rs.

Share Capital:

Authorised:

30,000 Equity shares of RO. 10 each 35,560,200 35,560,200

Issued, Subscribed and Paidup30,000 Equity shares of RO. 10 each 35,560,200 35,560,200

35,560,200 35,560,200

Note : 65 % of the equity held by Larsen & Toubro International FZE,Sharjah, UAE and balance 35% is held by Zubair Corporation, Oman

SCHEDULE B


Statutory Reserve 11,853,400 11,853,400Profit & Loss account 59,487,594 71,340,994 — 11,853,400

71,340,994 11,853,400

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SCHEDULE D Rs. Rs. Rs. Rs.


Current Assets:

Sundry Debtors:

Unsecured:

Debts outstanding for more than 6 months 2,094,641 —

Other Debts:

Considered good 470,976,833 91,415,778

Considered doubtful 673,739 677,942

473,745,213 92,093,720

Less: Bad debts provision 673,739 677,942

473,071,474 91,415,778

Cash and bank balances:

Cash on hand 45,081 8,466

Balances with non-scheduled banks with interest accrued thereon(Refer note no 2.b in schedule K) 21,798,933 36,806,016

21,844,014 36,814,482Inventories:

Work in Progress45,004,560 45,004,560

Loans and advances:

Unsecured:

Considered good:


11,280,287 19,828,261

506,195,776 193,063,082

SCHEDULE E


Liabilities:

Acceptances

Sundry creditors :

Due to Holding Company 26,686,402 —

Mobilisation advance-Others 5,674,404 —

Mobilisation advance-Fellow subsidiary 14,603,160 —

Due to Customer 85,191,062 —

Others 283,600,206 168,329,255

415,755,234 168,329,255

415,755,234 168,329,255

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2005 2004SCHEDULE F Rs. Rs. Rs. Rs.

Sales & Service:

Construction, project related and property development activity 826,352,022 489,978,120

826,352,022 489,978,120

SCHEDULE G

Interest & Brokerage:

On bank overdrafts 44,967 22,324

Less:interest received on loan to Zubair Corporation 1,606,966 1,631,641

(1,561,999) (1,609,317)

SCHEDULE H

Construction & Operating Expenses:

Contract Costs 596,762,157 453,042,838

Raw materials :

Tendering Costs 856,671 1,426,211

Labour levy — 2,297,785

597,618,828 456,766,834

SCHEDULE I

Staff Expenses & Overheads


150,346,387 17,456,338

SCHEDULE J

Sales, Administration and Other Expenses:

P/L on exchange — 14,112

Corporate Charges — 2,313,400

Bank charges 74,463 78,771

Bad and doubtful debts — 677,942

Audit fees 345,187 —

419,650 3,084,225

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SCHEDULE K

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS.



The accounts have been prepared using historical cost convention and on the basis of going concern, and is made in accordance withthe provisions of Section 211(3C) and the other provisions of the Companies Act, 1956, with revenues recognised and expensesaccounted for on accrual, including for committed obligations.

These financial statements have been prepared in conformity with Generally Accepted Accounting Principles, which require managementto make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at thedate of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from those estimates.

b. Fixed Assets

Fixed assets are capitalised at cost.





Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount

d. Depreciation

Depreciation is calculated on a straight-line basis over the estimated useful lives of assets as follows:

i) Plant ,machinery and Equipment 15%

ii) Motor Vehicles 33.33 %

iii) Second hand Motor Vehicles 100%

iv) Furniture & Fixtures 33.33%



e. Inventories

Inventories are stated at the lower of cost and net realizable value after making due allowance for obsolete and slow moving items.

Construction WIP valued at cost till a major portion of the job is completed and thereafter at realisable value. Net realizable value isbased on estimated selling price less any further estimated costs expected to be incurred on disposal.

f. Retirement/Termination Benefits

Payment is made to the Omani Government Social Security scheme under Royal Decree 72/91 for Omani employees.

Accruals for employees end of service benefits comprising of leave salary and end of service gratuity for non-Omani employees is inaccordance with Company’s rules and is based on the liability, which would arise if the employment of all staff were terminated at theyear-end.

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g. Taxation

Tax on income for the current period is determined on the basis of taxable income and tax credits is computed in accordance with lawof income tax for companies in Oman.

h. Revenue Recognition

Contract revenue comprising the total value of construction work performed during the year is recognized on a percentage of completionbasis. The percentage of completion is determined on the basis of progress of each contract measured by reference to proportion thatcontract costs incurred for work performed to date bear to the estimated total contract costs. No profit is recognized until a contract hasprogressed to the point where the ultimate realizable profit can be reasonably determined. Provision is made for all losses incurred to theaccounting date together recorded on the basis of progress bills prepared by the Company and are considered as revenue to theextent that they are probable of being certified and recovered.

i. Foreign currencies


1. Share capital is retained at the initial contribution amount.

2. Fixed and current assets & current liabilities are translated at year end rate.

3. Revenue transactions are translated at the average rate.

4. The resultant difference is accounted as translation reserve in the balance sheet


a. Disclosure of Related Party and Transactions with related parties during the year

Related party Nature of Amount in Nature of Amount outstandingrelationship Rupees transaction in Rupees

Due from Due torelated parties related parties

L&T Oman LLC Fellow subsidiary 130,566,000 Sale of goods 123,759,909

L&T Oman LLC Fellow subsidiary 3,496,397 Overheads charged 3,496,397

Larsen & Toubro Limited Holding Company 23,190,005 Overheads charged 23,190,005

L&T Oman LLC Fellow subsidiary 14,603,160 Advance 14,603,160


b. Balances with non-scheduled banks

i) Current accounts

Bank As at Maximum amount outstanding31.12.2005 at any time during the year

Rupees Rupees

Bank Muscat, Ghala-RO-C/ A 585 585

Bank Muscat, Civil – Current Account 24,173 24,173

Bank Muscat- Salalah- RO- C/A 40,667 40,667

HSBC Bank- RO – Current Account 884,867 884,867

Bank Muscat-RO-Current Account 20,159,358 87,334,902


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ii) Call Deposits

Bank As at Maximum amount outstanding31.12.2005 at any time during the year

Rupees Rupees

Bank Muscat –USD 2,781 5,305

Bank Muscat – Sterling Account 91,494 92,112

HSBC Bank – Sterling Account 128,596 128,596

c. Taxation

Provision for tax on net profit earned by the Company during the current year has not been made in the financial statements in viewof past accumulated losses incurred by the Company. As per the Law of Income Tax on Companies in Oman, losses incurred shall becarried forward for five years after the expiry of the tax year in which it was incurred and shall be deducted in computation of taxableincome of those years. The net accumulated losses of Rs. 52,944,294 for the tax years 2002 and 2003 as per annual return of income,subject to finalisation of tax assessment by the tax authorities in Oman, are available for set off against future taxable income in Oman.

d. Borrowing Cost capitalized during the year Rs. Nil

e. There are no transactions with small scale industries during the year.

f. The Company is engaged only in the business of construction activity and hence no reporting has been made as per the requirementsunder Accounting Standard 17 on Segmental Reporting.

g. The Company has not taken any asset on operating/finance lease. Commercial /Residential premises taken on cancelable operatinglease are renewed at the end of the lease period.

h. The Company is a service Company and accordingly information required under paragraph 4 (c’) of Part II of Schedule VI of theCompanies Act,1956 has not been furnished.

i. The Company has reviewed the future discounted cash flows based on value in use of fixed assets and satisfied that the recoverableamount is more than the amount carried in the books. Accordingly, no provision is required to be made for the impairment in theaccounts.

j. Contract Work In Progress

Rupees

Contract costs incurred plus recognised profits 2,068,779,771


Retentions receivable 915,527

k. Increase in work in progress relating to construction and project related activity is as under.

Work in progress including materials at site on 31.12.2005

Rupees

At close : 2,068,779,771

Less: At commencement 1,242,427,749

826,352,022

l.. Previous year’s figures have been reclassified wherever necessary to confirm with the presentation adopted.


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m. Balance sheet abstract and Company’s general businss profile


Registration No. N . A State Code No. N A


II. Capital raised during the year (Rs.)



N I L N I L



1 0 7 1 4 7 4 7 8 1 0 7 1 4 7 4 7 8Sources of Funds


3 5 5 6 0 2 0 0 7 1 3 4 0 9 9 4


N I L N I L


Net Fixed Assets and net Intangible Assets Investments

1 6 7 0 6 9 3 7 N I L


9 0 4 4 0 5 4 1 N I L

Accumulated Losses Translation Reserve

N I L 2 4 6 2 8 4

IV. Performance of Company (Amount in Rs.)Turnover Total Expenditure

(incl.other income)

8 2 7 9 1 4 0 2 1 7 5 3 9 3 3 4 9 5

+ – Profit/(Loss) before Tax + – Profit/(Loss) after Tax

+ 7 3 9 8 0 5 2 6 + 7 3 9 8 0 5 2 6


2 4 6 6 . 0 2 N I L

V. Generic Names of three Principal Products/Services of Company

Item Code No.(ITC Code) N . A

Product C O N S T R U C T I O N A C T I V I T Y




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TRACTOR ENGINEERS LIMITED


The Directors have pleasure in presenting their Report and Audited Accounts for the year ended March 31, 2006.


2005-06 2004-05Rupees Rupees

Profit Before Depreciation & Tax 94,809,791 90,782,382

Less/(Add): Depreciation and Amortization 8,925,804 9,008,191

Profit Before Tax 85,883,987 81,774,191

Provision for Current tax 29,450,000 29,495,000

Provision for Deferred tax (15,059) (179,933)

Provision for Fringe Benefits Tax 1,856,140 0

(Write back)/Provision of/for prior years (0) (2,916,785)

Profit After Tax 54,592,906 55,375,909

Add: Balance brought forward from previous year 66,411,292 30,657,429

Balance available for disposal which the directors appropriate as follows: 121,004,198 86,033,338

Dividend — 13,600,000

Dividend tax — 1,868,853

General Reserve — 4,153,193

121,004,198 19,622,046


Dividend

The directors do not recommend dividend in view of therequirement of funds for expansion at Talegaon plant. NIL 13,600,000

2. YEAR IN RETROSPECT/ PERFORMANCE OF THE COMPANY

Sales and other income for the financial year under review were Rs. 768,759,766 as against Rs. 640,434,517 for the previous financialyear. The Profit before tax (after interest & depreciation) was Rs. 85,883,987 against Rs. 81,774,191 for the previous financial year. Salesof undercarriage systems and apron conveyors showed good growth in the current year.

In the year under review the Company was successful in indigenising imported undercarriage parts on a number of new HydraulicExcavators launched in the country. These included hydraulic excavators introduced by JCB and TELCON. TENGL track systems werealso used on a number of new applications like Mobile Screens and Portable Crushing Plants.

In order to explore global markets and develop TENGL track system as a global brand, the Company is participating at INTERMATExhibition in France in April 2006.

During the year the Company acquired land on lease at Talegaon MIDC for its future expansion plans. The Company is expected tocommence commercial production at Talegoan from January 1, 2007.

The Company had discontinued its operations at Navi Mumbai Plant. Consequently, the fixed assets located there were retired from activeuse and are being held for sale.


As at March 31, 2006, the gross fixed and intangible assets stood at Rs. 238,691,681 and the net fixed assets at Rs. 108,456,517 (afterexcluding assets at Navi Mumbai plant). Assets at Navi Mumbai plant are being held for disposal and are valued at Rs. 37,798,973 as onMarch 31, 2006. Additions during the year amounted to Rs.7,580,061.

4. DEPOSITS

9 deposits totalling Rs.75,000 due for payment on or before March 31, 2006 remained unclaimed. As on the date of this report, one depositof the above of Rs. 5000 has been claimed and paid.

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5. TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND

During the year, the Company has transferred a sum of Rs. 3,312 being the amount due & payable and remaining unpaid for a period of7 years, as provided in Section 205C of the Companies Act, 1956.




Information as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 relating to conservation ofenergy, technology absorption, foreign exchange earnings and outgo are given in Annexure ‘A’ forming part of this report.

8. PERSONNEL

The Board of Directors wishes to express its appreciation to all the employees of the Company for their contribution to the operations ofthe Company during the year. There are no employees coming within the purview of Section 217(2A) of the Companies Act, 1956 asamended by Companies (Particulars of Employees) Rules, 1975.



i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been nomaterial departure;

ii. that the selected accounting policies were applied consistently and the Directors made judgements and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the profit of theCompany for the year ended on that date;

iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisionsof the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;


10. DIRECTORS

Mr. J.P. Nayak retires by rotation and being eligible offers himself for re-appointment.

11. AUDIT COMMITTEE

The Audit Committee consists of three non-executive and independent directors. The present members of the Committee areMr. J.P.Nayak, Mr. M.S. Krishnamoorthy and Mr. V. J. Shukla. Mr. J.P. Nayak is the Chairman of Audit Committee.

The role, terms of reference, the authority and power of Chairman are in conformity with the requirements of the Companies Act, 1956.

The financial statements have been audited by M/S Sharp & Tannan, Chartered Accountants, and have been discussed with the AuditCommittee.

12. AUDITORS

The Auditors, M/s. Sharp & Tannan, hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment. Certificate from the auditors has been received to the effect that their re-appointment, if made, would be within the limitsprescribed under Section 224(1B) of the Companies Act, 1956.


The Directors acknowledge the invaluable support extended to the Company by the Financial Institutions, Bankers, vendors, suppliers andcustomers. The Directors are pleased to place on record their appreciation for the valuable contribution made by the employees of theCompany.


J. P. NayakM. S. Krishnamoorthy DirectorsV. J. Shukla

Place: MumbaiDate: April 21, 2006

}

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Annexure A to the Directors’ ReportAnnexure A to the Directors’ ReportAnnexure A to the Directors’ ReportAnnexure A to the Directors’ ReportAnnexure A to the Directors’ Report(Additional information given in terms of notification issued by the Department of Company Affairs)

A. CONSERVATION OF ENERGY

a) Energy conservation measures taken:

1. Installation of Medium Frequency Generators with IGBT technology for Link and rim induction hardening has resulted inimproved power efficiency by 2-3% as compared to conventional SCR technology. This has improved energy utilization andhence reduction in energy consumption.

2. change in material specifications to eliminate Toughening operation prior to induction hardening has been proved. This is beingextended to all models of pin.

3. Redesigning of single turn inductor to double turn inductor for pin induction hardening can increase the scanning rate keepingthe same heat input. Trial on one model of pin was successful and this is being extended to all models of pin. This will reduceenergy consumption per pin.

4. Prevention of air leakages has resulted in improved loading time of compressors and thus reduction in energy consumption.

5. Mass campaign and appeal to everyone for energy conservation by putting off lights, fans, etc. before leaving the workplace forlunch / tea. The shop overhead lights, exhaust blowers and fans are put off during lunchtime.

b) Proposals:

i. Technical feasibility of replacing double heat treatment of track pins by a single shot one has been confirmed. Consequently,appropriate modifications to the current in-house facility are being studied. This should result in significant reduction in energyconsumption.

ii. To convert another electrically fired pusher furnace to a PNG fired one.

c) Impact of above:

Measures taken will result in reduction in consumption of energy.

d) Total energy consumption and energy consumption per unit of production as per Form - A in respect of Industries specifiedin the Schedule.

- Not applicable.

B. TECHNOLOGY ABSORPTION

e) Efforts made in technology absorption as per Form B

FORM B(Disclosure of Particulars with respect to Technology Absorption)

RESEARCH AND DEVELOPMENT (R&D)

1. Specific areas in which R&D carried out by the Company

Development of new products/ designs (two new models of u/c, development of products for defence applications viz Inarm suspension, ‘s’louvers, plate portal)/ product testing (acquisition of service load & estimation of life)/ methods/ material / tools, improvement of systems inexisting products/ processes in related manufacturing areas of undercarriage components, oil field equipments and apron conveyors,import substitution for frames required by Indian Railways.

2. Benefits derived as a result of the above R&D

• Improved product service life.

• Reducing manufacturing / delivery time

• Improved product quality.

• Cost reduction / Improved utilisation of material & energy.

3. Future plan of action

• Continuation of the present work in R&D for introduction of new products and processes, improvement in existing products andprocesses in various areas in which the Company is operating.

• Faster introduction of new products and processes.

• Actively associating with the Defence Ministry (indigenisation plans) for parts for Combat Crawler Equipments, Design work forproducts used by various Defence forces.

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4. Expenditure on R&D (Rs.)2005-06 2004-052004-052004-052004-052004-05

i) Capital — —

ii) Recurring 5,356,251 4,340,762

iii) Total 5,356,251 4,340,762

iv) Total R&D Expenditure as a 1% 1%percentage of total turnover

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Efforts, in brief, made towards technology absorption, adaptation and innovation:

• Product and process technology developed through in-house R&D i.e. for design and manufacture of undercarriage for excavatorshas been absorbed and several models upgraded to new designs. The technology of tracks for high speed defence crawler vehicles(Tanks) has been absorbed.

2. Benefits derived as a result of the above efforts e.g. product improvement, cost reduction, product development, import substitution,etc.:

• Improvement in existing processes and product quality, performance, safety and serviceability.

• Import substitution and reduced dependence on technology.

• Introduction of new products with indigenous know-how.

3. Information regarding technology imported during the last five years

The Company has not imported any technology in the last five year

C) FOREIGN EXCHANGE EARNINGS AND OUTGO:

f) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products andservices and export plans:

• Exported first machine set of complete track modules to Pavement Recycling Systems, USA.

• Working to increase our export competitiveness with improved volumes and larger batch production.

g) Total foreign exchange earned and used (Rs.)

2005-2006 2004-20052004-20052004-20052004-20052004-2005

Foreign exchange earned 3076,116 1056,723

Foreign exchange used 65,956,897 113,145,776

Auditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportAuditors’ ReportWe have audited the attached balance sheet of Tractor Engineers Limited, as at 31st March 2006, and also the profit and loss account and thecash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation.We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of India under sub-section (4A) of Section 227of the Companies Act, 1956, and on the basis of such checks of the books of account and records of the Company as we consideredappropriate and according to the information and explanations given to us, we enclose in the Annexure, a statement on the matters specified inparagraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

1) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes ofour audit;

2) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination ofthose books;

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3) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

4) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accountingstandards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

5) On the basis of written representations received from the directors, as on 31st March 2006 and taken on record by the Board of Directors,we report that none of the directors is disqualified as on 31st March 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

6) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with thesignificant accounting policies in Schedule Q and the notes forming part of accounts in Schedule R give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generallyaccepted in India:

(i) in the case of the balance sheet, of the state of affairs of the Company as at 31st March 2006;


(iii) in the case of the cash flow statement, of the cash flows for the year ended on that date.


by the hand ofA B Chopra

PartnerMembership No. 38159

Place : MumbaiDate: April 21, 2006

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAs required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in terms of section (4A) of section 227of the Companies Act, 1956, we report as under:

1. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of all fixed assets.

(b) We are informed that the fixed assets have been physically verified by the management at reasonable intervals during the year andno material discrepancies were noticed on such verification.

(c) During the year, the Company has disposed off certain plant and machinery, furniture and fixtures and vehicles. Based on theinformation and explanation given by the management and on the basis of audit procedures performed by us, we are of the opinionthat the sale of the said fixed assets has not affected the going concern status of the Company.

2. (a) The inventory has been physically verified by the management during the current year. In our opinion, the frequency of suchverification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to thesize of the Company and the nature of its business.

(c) On the basis of our examination of the records of inventory, we are of the opinion that the Company is maintaining proper records ofinventory. No material discrepancies were noticed on physical verification of inventory as compared to book records.

3. (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the registermaintained under section 301 of the Companies Act, 1956. Accordingly the provisions of clause 4(iii) (b) to (d) of the Companies(Auditor’s Report) Order, 2003 are not applicable to the Company.

(b) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the registermaintained under section 301 of the Company Act. Accordingly the provisions of clause 4(iii)(f) and (g) of the Companies (Auditor’sReport) Order, 2003 are not applicable to the Company.

4. In our opinion, and according to the information and explanations given to us, there are adequate internal control procedures commensuratewith the size of the Company and the nature of its business, with regards to purchase of inventory and fixed assets and for the sale ofgoods and services. In our opinion, and according to the information and explanations given to us, no major weakness has been noticedin the internal controls.

5. In our opinion, and according to the information and explanations given to us, there are no contracts or arrangements that need to beentered into a register in pursuance of Section 301 of the Companies Act, 1956. Accordingly the provisions of clause 4(v) of theCompanies (Auditor’s Report) Order, 2003 are not applicable to the Company.

6. In our opinion, and according to the information and explanations given to us, the Company has complied with the provisions of section58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under with regard to deposits acceptedfrom the public. According to the information and explanation given to us, no order has been passed by the Company Law Board orNational Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on the Company.

7. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

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8. According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records underSection 209 (1) (d) of the Companies Act, 1956 for any of the products of the Company.

9. According to the information and explanations given to us and on the basis of our examination of the books of account, the Company hasgenerally been regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Investor Educationand Protection Fund, Employees State Insurance, Income tax, Sales Tax, Wealth Tax, Service tax, Custom Duty, Excise Duty, Cess andany other material statutory dues applicable to it.

10. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, ServiceTax, Sales Tax, Customs Duty, Excise Duty, Cess and other statutory dues were outstanding, as at 31st March 2006 for a period of morethan six months from the date they became payable.

11. According to the information and explanations given to us, there are no amounts in respect of Sales Tax, Wealth Tax, Service Tax,Custom Duty and Excise Duty that have not been deposited with the appropriate authorities on account of any dispute. However, thefollowing disputed dues of income tax and cess have not been deposited by the Company:

Name of the Statute Nature of dues Amount Forum where dispute is (Rs.) pending

Bombay Provincial Cess & Interest 1,208,627 Bombay High CourtMunicipal Corporation thereon(Cess on entry ofGoods) Rules,1996

Income Tax Act,1961 Income tax & Interest for 1,521,913 Income Tax Appellate TribunalAY2002-03

Income Tax Act,1961 Income tax & Interest for 2,661,316 Commissioner of Income TaxAY2003-04 (Appeals)

12. The Company does not have any accumulated losses as at the end of the financial year. The Company has not incurred cash lossesduring the financial year covered by our audit and the immediately preceding financial year.

13. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that theCompany has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

14. According to the information and explanations given by the management, the Company has not granted any loans and advances on thebasis of security by way of pledge of shares, debentures and other securities.

15. In our opinion, the Company is not a chit fund/ nidhi/ mutual benefit fund/ society. Therefore the provisions of clause 4(xiii) of theCompanies (Auditor’s Report) Order, 2003 are not applicable to the Company.

16. Based on our examination of the records and evaluation of the related internal controls, we are of the opinion that proper records havebeen maintained of the transactions and contracts in relation to dealing in shares, securities, debentures and other investments and timelyentries have been made in those records. We also report that the Company has held the shares, securities, debentures and otherinvestments in its own name.

17. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bankor financial institutions.

18. The Company has not taken any term loans.

19. Based on an overall examination of the Balance Sheet and the information and explanations given to us, we are of the opinion that thefunds raised by the Company on short term basis are not used for long term investment.

20. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained underSection 301 of the Companies Act, 1956.

21. The Company has not issued any debentures during the year.

22. The Company has not raised any money by public issue during the year. Accordingly, the provisions of clause 4 (xx) of the Companies(Auditor’s Report) Order, 2003 are not applicable to the Company.

23. According to the information and explanations given by the management, no fraud on or by the Company has been noticed or reportedduring the year.


by the hand ofA B Chopra

PartnerMembership No. 38159

Place : MumbaiDate: April 21, 2006

S-449



Rupees Rupees

SOURCES OF FUNDS: SchedulesShareholders’ Funds:

Share capital A 68,000,000 68,000,000Reserves and surplus B 303,746,517 249,153,611

371,746,517 317,153,611Loan Funds :

Secured loans C 94,040,891 53,238,238Unsecured loans D 75,000 30,075,000

94,115,891 83,313,238Deferred Tax Liabilities (net) 14,170,165 14,185,224

(See Note No. 18 in Schedule R)TOTAL 480,032,573 414,652,073

APPLICATION OF FUNDS :Fixed Assets : E1

Gross block 177,772,545 175,556,597Less : Depreciation and Impairment 128,381,164 124,056,726

Net Block 49,391,381 51,499,871Add:Capital Work-in Progress 628,860 50,020,241 187,500 51,687,371

Fixed Assets held for sale 37,798,973 37,798,973(See Note No. 6 in Schedule R)

Intangible Assets : E2Gross block 3,560,000 2,000,000Less : Amortisation and Impairment 1,854,000 667,000

Net Block 1,706,000 1,333,000Add:Capital Work-in Progress 56,730,276 58,436,276 780,000 2,113,000

Investments F 2,276,975 56,177,386Current assets, Loans and advances : G

Inventories 285,391,698 252,098,824Sundry debtors 193,327,471 136,531,542Cash and bank balances 225,425 124,025Loans and advances 48,740,205 40,200,743

527,684,799 428,955,134Less : Current liabilities and provisions : H

Liabilities 180,461,183 142,133,587Provisions 18,330,655 23,182,149

198,791,838 165,315,736

Net current assets 328,892,961 263,639,398Deferred Revenue Items:

Miscellaneous expenditure I 2,607,147 3,235,945(To the extent not written off or adjusted)

TOTAL 480,032,573 414,652,073

CONTINGENT LIABILITIES JSIGNIFICANT ACCOUNTING POLICIES QNotes forming part of Accounts R


J.P. NAYAKM.S. KRISHNAMOORTHY DirectorsV.J. SHUKLA



A.B. CHOPRA V. JETHMALANIPartner ManagerMembership No.38159


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2005-06 2004-05Rupees Rupees Rupees Rupees

SchedulesINCOME:Sales and Services K 887,016,206 746,133,017Less:Excise duty 123,139,213 763,876,993 107,637,332 638,495,685

Other Income L 4,882,773 1,938,832

768,759,766 640,434,517

EXPENDITURE :Materials, manufacturing and

operating expenses M 531,683,603 434,925,505Staff expenses N 80,710,654 71,352,270Sales, administration and other expenses O 54,852,511 47,915,579Interest & Brokerage P 6,703,207 (4,541,219)Depreciation and obsolescence 7,738,804 8,341,191Amortisation of Intangible Assets 1,187,000 667,000

682,875,779 558,660,326

PROFIT BEFORE TAX 85,883,987 81,774,191Provision for Tax- Current tax - including Wealth Tax 29,450,000 29,495,000

Rs. 36,000 (previous year Rs.36,000 )- Deferred Tax (15,059) (179,933)- Fringe Benefits Tax 1,856,140 -- (Write Back)/Provision of/for tax

pertaining to prior years - (2,916,785)

31,291,081 26,398,282

PROFIT AFTER TAX 54,592,906 55,375,909Add:Balance brought forward from previous year 66,411,292 30,657,429

PROFIT AVAILABLE FOR APPROPRIATION 121,004,198 86,033,338Less : Transferred to General Reserve - 4,153,193

PROFIT AVAILABLE FOR DISTRIBUTION 121,004,198 81,880,145Interim Dividend - 6,800,000Proposed Dividend - 6,800,000Additional tax on dividend - 1,868,853


Basic and Diluted Earnings Per Equity Share (Rs.) R 802.84 814.35

SIGNIFICANT ACCOUNTING POLICIES Q

Notes forming part of Accounts R







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Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 2006Cash Flow Statement for the year ended March 31, 20062005-06 2004-05Rupees Rupees

A CASH FLOW FROM OPERATING ACTIVITIES:Net Profit before tax & extraordinary activities 85,883,987 81,774,191Adjustments for:Depreciation (including obsolescence) and amortisation 8,925,804 9,008,191Interest (Net) 6,703,207 (4,541,219)Provision for diminution in value of Investments - (10,544)Dividend Received - (362,954)(Profit)/Loss on Sale of Fixed Assets (921,671) 70,718(Profit)/Loss on Sale of Investments - (354,876)

Operating profit before working capital changes 100,591,327 85,583,507Adjustments for:(Increase)/Decrease in Trade & other receivables (65,633,609) (39,505,228)(Increase)/Decrease in Inventories (33,292,874) (96,457,248)(Increase)/Decrease in Miscellaneous Expenditure 628,798 (41,679)Increase/(Decrease) in Trade Payables 40,064,463 52,307,446

Cash Generated from Operations 42,358,105 1,886,798Direct taxes paid (Net) (29,842,243) (31,889,918)

Net Cash from Operating Activities 12,515,862 (30,003,120)

B CASH FLOW FROM INVESTING ACTIVITIES:Purchase of fixed assets including CWIP (63,971,697) (15,026,019)Sale of fixed assets 1,311,418 24,359Sale of Investments 53,900,411 20,368,008Dividend Received - 362,954Interest Received 596,831 8,260,468

Net Cash (used in)/from Investing Activities (8,163,037) 13,989,770

C CASH FLOW FROM FINANCING ACTIVITIES:Proceeds from Short Term & other borrowings 10,802,653 38,804,613Dividend Paid (6,800,000) (17,000,000)Additional tax on dividend (954,040) (2,221,688)Interest paid (7,300,038) (3,719,249)

Net Cash (used in)/from Financing Activities (4,251,425) 15,863,676

D Net (decrease)/increase in cash & cash equivalents (A+B+C) 101,400 (149,674)Cash & Cash equivalents at the beginning of the year 124,025 273,699Cash & Cash equivalents at the end of the year 225,425 124,025

Notes :1 Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard - 3 issued by the Institute of

Chartered Accountants of India.2 Purchase of fixed assets includes movements of Capital Work-in-Progress between the beginning and end of the year.3 Cash and cash equivalents represent cash on hand and bank balances on current accounts.4 Previous year’s figures have been regrouped / reclassified wherever necessary.







S-452



As at 31.3.2006 As at 31.3.2005

SCHEDULE A Rupees RupeesShare Capital:Authorised:

70,000 Equity shares of Rs.1,000 each. 70,000,000 70,000,000

Issued & subscribed:68,000 Equity shares of Rs.1,000 each fully paid-up 68,000,000 68,000,000

SCHEDULE B

Reserves & Surplus:General Reserve :As per last Balance Sheet 182,742,319 178,589,126Add : Transferred from:

Profit and Loss Account - 182,742,319 4,153,193 182,742,319


303,746,517 249,153,611

SCHEDULE C

Secured Loans:From Banks:

Cash Credits 94,040,891 53,238,238

94,040,891 53,238,238

SCHEDULE D

Unsecured Loans:Fixed Deposits:

Due for not more than one year 75,000 75,000Other deposits - 75,000 - 75,000

Inter Corporate Deposits - 30,000,000

75,000 30,075,000

SCHEDULE E1 - Tangible Assets Rupees

COST DEPRECIATION Book Book FIXED ASSETS Value Value

As at Additions Deductions As at As at For the On dedu- As at As at As at1.4.2005 31.3.2006 1.4.2005 year ctions 31.3.2006 31.3.2006 31.3.2005

Buildings 20,870,753 - - 20,870,753 11,846,396 520,073 - 12,366,469 8,504,284 9,024,357

Plant & Machinery 145,578,862 5,655,854 3,362,330 147,872,386 106,504,432 6,819,948 3,133,775 110,190,605 37,681,781 39,074,430

Furniture &

Fixtures 8,760,692 364,207 95,493 9,029,406 5,493,716 362,059 31,685 5,824,090 3,205,316 3,266,976

Vehicles 346,290 - 346,290 - 212,182 36,724 248,906 - - 134,108

Total 175,556,597 6,020,061 3,804,113 177,772,545 124,056,726 7,738,804 3,414,366 128,381,164 49,391,381 51,499,871

Previous Year 163,829,698 12,558,519 831,620 175,556,597 116,452,078 8,331,424 726,776 124,056,726

Add:Capital work-in-progress ( including advance of Rs. 400,000 (previous year Rs 187,500 ) 628,860 187,500

50,020,241 51,687,371

Note : Tangible Fixed Assets schedule does not include assets located at Navi Mumbai Plant which are held for sale.

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SCHEDULE E2 - Intangible Assets Rupees

FIXED ASSETS COST AMORTISATION Book BookValue Value

As at Additions Deduc- As at As at For the On dedu- As at as at as at1.4.2005 tions 31.3.2006 1.4.2005 year ctions 31.3.2006 31.3.2006 31.3.2005

Specialised Software 2,000,000 1,560,000 - 3,560,000 667,000 1,187,000 - 1,854,000 1,706,000 1,333,000

Total 2,000,000 1,560,000 - 3,560,000 667,000 1,187,000 - 1,854,000 1,706,000 1,333,000

Previous Year - 2,000,000 - 2,000,000 - 667,000 - 667,000

Add:Capital work-in-progress ( including advance of Rs.Nil (previous year Rs Nil)) 56,730,276 780,000

58,436,276 2,113,000

Note: Possession of Leasehold Land at Talegaon admeasuring 78,576 sqm. was acquired during the year on payment of Rs.56,275,276. The lease is for 95 years & Leasedeed will be executed on fulfillment of certain conditions by the Company.

As at 31.3.2006 As at 31.3.2005

SCHEDULE F Rupees RupeesInvestments:

Long Term

Trade, Unquoted at costNarmada Infrastructure Construction Enterprise Limited(2,822,750 shares of Rs. 10 each ) - 53,900,411

Larsen & Toubro LLC(2,500 shares of USD 1 each) 119,475 119,475

Bonds

NonTrade, Quoted at cost6.75 % Tax Free US 64 2,157,500 2,157,500

(21,575 bonds of Rs. 100 each 2,276,975 56,177,386

Market value as at the year end Rs.2,193,962 (previous year Rs. 2,258,255))

2,276,975 56,177,386

SCHEDULE G

Current Assets, Loans and Advances :

Inventories : At lower of cost and net realisable value

Loose tools 1,358,397 1,246,485

Consumables stores & spare parts 1,116,524 608,130

Raw materials 183,281,071 166,700,828

Finished goods 94,773,541 74,820,351

Work-in-progress 4,862,165 8,723,030

Carried forward 285,391,698 252,098,824

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As at 31.3.2006 As at 31.3.2005

SCHEDULE G (Contd.) Rupees RupeesBrought forward 285,391,698 252,098,824Sundry Debtors :

Unsecured :Debts Outstanding for more than six monthsConsidered good 5,079,178 3,414,049Considered doubtful 1,278,348 -

6,357,526 3,414,049Other debts:Considered good 188,248,293 133,117,493

194,605,819 136,531,542Less: Provision for doubtful debts 1,278,348 193,327,471 - 136,531,542

Cash and bank balancesCash on hand 198,347 85,723Balances with scheduled banks oncurrent accounts 27,078 38,302

225,425 124,025Loans and Advances :

Secured, Considered good :Loans against mortgage of house property 2,634,029 3,533,660Unsecured, Considered good :Advances recoverable in cash or in kind 46,003,405 36,266,094Taxes (net) - 352,445Fringe Benefits Tax (net) 54,227 -Interest accrued on Investments 48,544 48,544

48,740,205 40,200,743

527,684,799 428,955,134

SCHEDULE HCurrent Liabilities and Provisions :Current Liabilities :Sundry Creditors

Due to Small Scale Industrial Undertakings 3,018,646 2,727,632Others 139,960,538 131,760,484

142,979,184 134,488,116Acceptances 37,004,470 6,650,471Interest accrued, but not due on loans - 46,027Pension payable under Voluntary retirement cumpension scheme(Payable within one year Rs. 297,045 477,529 180,461,183 948,973 142,133,587

Previous year Rs.471,444 )Provisions for :

Leave encashment 15,868,000 14,593,000Gratuity 1,296,976 835,109Taxes (net) 1,165,679 -Proposed dividend - 6,800,000Additional tax on dividend - 954,040

18,330,655 23,182,149

198,791,838 165,315,736

S-455


Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)As at 31.3.2006 As at 31.3.2005

Rupees RupeesSCHEDULE IMiscellaneous expenditure(To the extent not written off or adjusted)Voluntary Retirement Pension Scheme 2,607,147 3,235,945

2,607,147 3,235,945

SCHEDULE JContingent LiabilitiesFor Income Tax matter in appeal 272,995 272,995For Cess payable to Navi Mumbai Municipal Corporation, in appeal 1,208,627 1,208,627

2005-2006 2004-2005

SCHEDULE K Rupees RupeesSales & ServiceManufacturing & Trading activity 870,345,912 735,298,717Servicing 16,670,294 10,834,300

887,016,206 746,133,017

SCHEDULE LOther Income:Income from current investments - 362,954Provision for diminution in value of current investments 10,544written backProfit on sale of current investments - 354,876Profit on sale of fixed tangible assets 921,671 -Miscellaneous income 3,961,102 1,210,458

4,882,773 1,938,832

SCHEDULE MMaterials, Manufacturing andOperating expenses :Raw material consumed :

Opening stock 166,700,828 109,368,146Add : Purchases 506,500,739 485,150,482

673,201,567 594,518,628Less : Closing stock 183,281,071 166,700,828

489,920,496 427,817,800Add : Purchase of trading goods 15,503,233 2,464,883Increase in manufacturing and trading stocksClosing stocks :Finished goods 94,773,541 74,820,351Work-in-progress 4,862,165 8,723,030

99,635,706 83,543,381

Less :Opening stocks :Finished goods 74,820,351 31,671,032Work-in-progress 8,723,030 12,883,226

83,543,381 44,554,258

(16,092,325) (38,989,123)

489,331,404 391,293,560Less : Scrap sales 2,529,993 3,124,451

486,801,411 388,169,109Stores, spares and tools 12,900,865 11,417,734Excise duty (3,401,463) 2,341,543Power and fuel 21,151,464 19,033,036Hire Charges - Plant & Machinery and others 1,456,414 1,041,151Repairs to plant and machinery 10,234,851 7,374,503

Repairs to buildings 2,540,061 5,548,429

531,683,603 434,925,505

S-456


Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)Schedules forming Part of Accounts (Contd.)2005-2006 2004-2005

SCHEDULE N Rupees Rupees

Staff Expenses:


Contribution to :

Provident funds and pension fund 4,114,871 3,789,503

Superannuation fund 716,320 828,153

Gratuity funds 1,396,976 879,104

6,228,167 5,496,760

Provision for Leave encashment 1,275,000 1,208,300

Welfare and other expenses 15,113,793 10,781,131

80,710,654 71,352,270

SCHEDULE O

Sales, Administration & Other Expenses :

Rent (including lease rentals Rs. 868,072 2,386,444 1,631,094

previous year Rs.549,473)

Rates and taxes 1,634,831 1,745,227

Travelling and conveyance 8,838,116 8,817,780

Directors’ fees 34,000 42,000

Telephone Postage & Telegram 1,231,335 1,093,809

Advertising and sales promotion 624,817 259,048

Stationery & Printing 929,494 866,657

Insurance 1,337,561 1,324,072

Commission 6,471,324 6,053,455

Bank Charges 1,419,425 1,150,675

General Repairs & maintenance 97,838 169,334

Bad Debts and advances written off 42,168 56,471

Provision for doubtful debts & advances (net) 1,278,348 -

Miscellaneous expenses 18,260,553 14,657,067

Loss on sale of fixed assets (net) - 70,718

Packing and forwarding 10,266,257 9,978,172

54,852,511 47,915,579

SCHEDULE P

Interest & Brokerage

Fixed Deposits & Debentures - 1,738,795

Others 7,300,038 7,300,038 1,980,454 3,719,249

Less:

Interest from others 451,200 8,114,836

(Tax deducted at source Rs. Nil

previous year Rs.15,813 )

Interest on Long term investments 145,631 596,831 145,632 8,260,468

6,703,207 (4,541,219)

S-457



SCHEDULE Q


1. BASIS OF ACCOUNTING

The Company maintains its accounts on accrual basis following the historical cost convention in accordance with generally acceptedaccounting principles [“GAAP”] and in compliance with the Accounting Standards referred to in Section 211(3C) and other requirements ofthe Companies Act, 1956.

The preparation of financial statements in conformity with GAAP requires that the management of the Company makes estimates andassumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and thedisclosures relating to contingent liabilities as of the date of the financial statements. Examples of such estimates include useful lives offixed assets & intangible assets, provision for doubtful debts/advances, future obligations in respect of retirement benefit plans etc. Actualresults could differ from these estimates.

2. FIXED ASSETS

Fixed Assets are stated at original cost net of tax / duty credits availed, if any, less accumulated depreciation / impairment.

Interest on borrowings for fixed assets acquisition and revenue expenses incurred at project site for the period prior to commencement ofcommercial production are capitalised as part of asset cost. Fluctuations in exchange rates are adjusted to the cost of the fixed assets.

3. DEPRECIATION

Depreciation on fixed assets is provided at the rates prescribed from time to time under Schedule XIV of the Companies Act, 1956, on thewritten down value method on all existing assets upto 30th September, 1987 and on straight line method on assets acquired from 1stOctober, 1987 except in the case of vehicles which are depreciated at 14.14% Depreciation on additions/deductions is calculated pro ratafrom/to the month of additions/ deductions.

4. INTANGIBLE ASSETS AND AMORTISATION

Intangible assets are recognised as per the criteria specified in Accounting Standard (AS) 26 ‘Intangible Assets’ issued by the Institute ofChartered Accountants of India and are amortised as follows:

i. The value of leasehold land is amortised over the period of the lease.

ii. Specialised software is amortised over a period of three years.

5. BORROWING COSTS that are attributable to the acquisition, construction or production of qualifying assets are capitalised as part of costof such assets till such time as the assets is ready for its intended use or sale . A qualifying asset is an asset that necessarily requires asubstantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised as expense in the period inwhich they are incurred.

6. INVESTMENTS

i) Long Term investments are carried at cost, after providing for any diminution in value, if such diminution is of a permanent nature.

ii) Current investments are carried at lower of cost or market value.

7. INVENTORIES

Inventories are valued at lower of cost or net realisable value as under after providing for obsolescence:

Loose Tools Weighted average cost method.

Raw material, and stores & spare parts Weighted average cost method.

Work in progress & Finished Goods Weighted average cost method

The cost include costs directly related toproduction and a systematic allocation offixed and variable production overheads.Finished Goods Inventory is inclusive ofexcise duty paid/payable.

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8. FOREIGN CURRENCY transactions are recorded on initial recognition in the reporting currency, using the exchange rate at the date ofthe transaction. At each balance sheet date, foreign currency monetary items are reported using the closing rate. Non-monetary itemswhich are carried at historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.The exchange difference on settlement / conversion are adjusted to:

i) Cost of Fixed Assets, if the foreign currency liability relates to Fixed Assets.

ii) Profit and Loss Account in other cases.

Premium or discount on forward exchange contracts that are intended for hedging purposes are amortised as expense or income over thelife of the contract. Exchange differences on such a contract is recognised in the statement of profit & loss in the reporting period in whichthe exchange rates change.

9. RETIREMENT BENEFITS - Contributions are made to the Provident Funds and Superannuation Fund on actual liability basis and to theGratuity Funds on actuarial valuation basis. Provision for Leave Encashment on retirement is made on actuarial valuation basis.

10. PRIOR PERIOD AND EXTRAORDINARY ITEMS - Income and expenditure pertaining to prior period as well as extraordinary items,where material, are disclosed separately.

11. DEFERRED REVENUE EXPENDITURE

Future pensions under Voluntary Retirement cum Pension scheme are amortised over the period for which such pensions are payable.Lump sum compensation paid under Voluntary Retirement Scheme is amortised over a period of five years.

12. TAXES ON INCOME

Tax on Income for the current period is determined on the basis of taxable income and tax credits computed in accordance with theprovisions of the Income Tax Act, 1961,and based on expected outcome of the assessments /appeals.

Deferred tax is recognised on timing difference between the accounting income and taxable income for the year and quantified using thetax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty that sufficient future taxable incomewill be available against which such deferred tax assets can be realised.

13. PROVISIONS are recognised in the financial statements when the Company has a present obligation as a result of past event and it isprobable that an outflow of economic benefits will be required to settle the obligation. The provisions are determined on the basis of areliable estimate of expected outflows of economic benefits after considering the risks specific to the liability. The accounting policy isrespect of certain material classes of provisions is as follows:

a) Provision for Warranties:

A provision for warranties is recognized when the underlying products and services are sold. The provision is based on historicalinformation on the nature, frequency, and average cost of warranty claims and a weighting of all possible outcomes against theirassociated liabilities. In case of products where the historical information reveals an uncertain pattern, the provision is recognisedwhen the claims are lodged by the customers.

b) Provision for Litigations:

The provision for obligations arising on account of various litigations under Sales tax laws, excise law and service tax law, income-taxlaw, customs law and employment matters is recognised when it is probable that an outflow of economic benefits will be required tosettle the obligation based on management’s judgment in the similar cases and / or advice of independent experts.

SCHEDULE R


1. Of the total shares issued, 67,994 Equity shares (Previous year 67,994 Equity shares) are held by the Holding Company – Larsen &Toubro Limited.

2. Of the total shares issued, 62,000 Equity shares were issued as bonus shares by way of capitalisation of General Reserve of Rs.62,000,000.

3. Pursuant to the Employees Stock Options Scheme established by the Holding Company (i.e, Larsen & Toubro Limited), stock optionshave been granted to the employees of the Company during the year in respect of which, cost of Rs. 24,31,956/-(previous year


S-459


Rs.7,84,476) has been incurred by the holding Company out of which Rs.3,16,661(previous year Rs. NIL) has been recovered by theholding Company during the year based on the vesting period of the options and the balance Rs.21,15,295/- will be recovered in futureperiods.

4. Sundry creditors include interest of Rs.Nil (previous year Rs.Nil) on overdue amounts payable to Small Scale and Ancillary IndustrialUndertakings.

5. Estimated amount of contracts remaining to be executed on capital account (net of advances) is :

Fixed Assets : Rs. 856,000 (previous year Rs. 597,396)

Intangible Assets : Rs. Nil (previous year Rs. 520,000).

6. The Company had discontinued its operations at Navi Mumbai Plant, consequently, fixed assets located at the Navi Mumbai plant havebeen retired from active use and are being held for disposal. Accordingly, the Company, as on 31st March 2006, has valued fixed assetslocated at the Navi Mumbai plant based on estimated net realisable value or net book value, whichever is less.

7. Cash credit facilities from banks are secured by hypothecation of stocks, stores and book-debts.

8. There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at 31st March, 2006.

9. Expenditure on research and development activities, as certified by the Management is Rs. 5,356,251 (previous year Rs. 4,340,762).

10. The Company has taken on operating lease certain assets comprising cars and personal computers costing Rs. 2,526,493 (previous yearRs. 2,031,493). Total minimum future lease payments in this respect are as follows :

2005-06 2004-052004-052004-052004-052004-05

Due :Not later than one year 726,396 548,944Later than one year but not later than five years 1,454,732 1,538,123Later than five years Nil Nil

Total 2,181,128 2,087,067

11. Loans and advances include:

As at 31.3.2006 As at 31.3.2005As at 31.3.2005As at 31.3.2005As at 31.3.2005As at 31.3.2005Rupees RupeesRupeesRupeesRupeesRupees

Due from an Officer of the Company(Maximum amount outstanding at any time during the year Rs.853,541 )(previous year Rs.907,819) Nil 853,541

12. The Company owes a sum which is outstanding for more than 30 days to the following small scale industrial undertakings:

1. Srinivas Engineering 9. Dashmesh Engineering Co

2. Gala Springs Private Limited 10. Ronomats (India)

3. Electoscope Systems 11. Rehal Engineering Works

4. Kohinoor Mech. Elec. & Engg. Works 12. Accurate Equipment Manufacturers Private Limited

5. Vako seals 13. S K Corporation

6. Precitrurn Systems 14. Heattreaters & Engineers

7. Electropunumatic Pvt. Ltd. 15. Star Enterprises

8 Shakti Industries 16. Technogear Works Pvt. Ltd.

The above information and that given in schedule H – current liabilities regarding small scale industrial undertakings has been determinedto the extent such parties have been identified on the basis of information available with the Company. This is relied on by the auditors.

13. The exchange gain (net) arising on foreign currency transactions amounting to Rs. 838,135 has been provided for in the respectiverevenue accounts. (previous year gain (net) Rs. 555,474)

14. Segment Reporting

The Company’s activities fall within a single segment, viz. undercarriage and related products. Accordingly, Segment Reporting is notapplicable.


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15. Disclosure of related parties / related party transactions :I. List of related parties :

Sr. Name of the Related Party RelationshipNo.

1. Larsen & Toubro Limited Holding Company2. L&T Finance Limited Fellow Subsidiary3. L&T Capital Company Limited Fellow Subsidiary4. Larsen & Toubro Infotech Limited Fellow Subsidiary5. L&T Transportation Infrastructure Limited Fellow Subsidiary6. HPL Cogeneration Limited Fellow Subsidiary7. Narmada Infrastructure Construction Enterprise Ltd. Fellow Subsidiary8. L&T Western India Tollbridge Limited Fellow Subsidiary9. India Infrastructure Developers Limited Fellow Subsidiary

10. Larsen & Toubro LLC, USA Fellow Subsidiary11. Larsen & Toubro International FZE, Sharjah Fellow Subsidiary12. L&T Infocity Limited Fellow Subsidiary13. Hyderabad International Trade Exposition Centre Limited Fellow Subsidiary14. Andhra Pradesh Expositions Private Limited Fellow Subsidiary15. L&T-ECC Construction (M) SDN.BHD. Malaysia Fellow Subsidiary16. Bhilai Power Supply Company Limited Fellow Subsidiary17. Larsen & Toubro (Oman) LLC Fellow Subsidiary18. L&T Power Investments Private Limited Fellow Subsidiary19. Raykal Aluminium Company Private Limited Fellow Subsidiary20. Cyberpark Development & Construction Limited Fellow Subsidiary21. L&T-Sargent & Lundy Limited Fellow Subsidiary22. L&T Overseas Projects Nigeria Limited Fellow Subsidiary23. L&T Qatar LLC Fellow Subsidiary24. Zubair Kilpatrick LLC Fellow Subsidiary25. L&T Infocity Lanka Private Limited Fellow Subsidiary26. Larsen & Toubro Infotech GmbH, Germany Fellow Subsidiary27. L&T Infocity Infrastructure Limited Fellow Subsidiary28. L&T Infrastructure Development Projects Limited Fellow Subsidiary29. L&T (Wuxi) Electric Company Limited Fellow Subsidiary30. International Seaports Pte. Ltd. Singapore Fellow Subsidiary31. International Seaports (India) Pvt. Ltd. Fellow Subsidiary32. L&T Panipat Elevated Corridor Pvt. Ltd. Fellow Subsidiary33. L&T Tech Park Ltd. Kochi Fellow Subsidiary34. L&T Kishengiri Thopur Toll Road Pvt. Ltd. Fellow Subsidiary35. L&T Western Andhra Tollways Pvt. Ltd. Fellow Subsidiary36. L&T Wadodara Bharuch Tollway Ltd. Fellow Subsidiary37. L&T Interstate Road Corridor Ltd. Fellow Subsidiary38. Spectrum Infotech Pvt. Ltd. Fellow Subsidiary39. L&T Urban Infrastructure Limited Fellow Subsidiary40. Key Management Personnel and their relatives

Mr. Vishesh P. Jethmalani Chief Executive and ManagerMrs. Shalini V. Jethmalani WifeMs. Khushboo V. Jethmalani DaughterMrs. Asha Jethmalani MotherMr. Parasram Jethmalani FatherMr. Anil P. Jethmalani BrotherMr. Sailesh P. Jethmalani BrotherMr. Deepak D. Upponi Chief Executive and Manager

(Retired during the year)Mrs. Kanchan D. Upponi WifeMr. Abhijit D. Upponi SonMrs. Anuprita V. Honavar DaughterMrs. Lalita D. Upponi MotherMr. Dattatraya N. Upponi FatherMr. Praksh D. Upponi Brother

II. Names of the Related Parties with whom transactions were carried out during the year and description of relationship:Sr. Name of the Related Party RelationshipNo.

1. Larsen & Toubro Limited Holding Company2. L&T Finance Limited Fellow Subsidiary3. Larsen & Toubro Infotech Limited Fellow Subsidiary4. Mr. D. D. Upponi (retired during the year), Mr. Vishesh P. Jethmalani Key Management Personnel (KMP)


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III. Disclosure of related party transactions:

Sr. Nature of transaction Holding Fellow Key TotalNo. Company Subsidiaries Management

Personnel

1. Sale of goods 97,601,421 NIL NIL 97,601,421(95,593,622) (NIL) (NIL) (95,593,622)

2. Rendering of services / Other income 17,030,550 NIL NIL 17,030,550(10,987,300) (NIL) (NIL) (10,987,300)

3. Receiving of services : 15,305,500 NIL 18,340,500(13,931,051) (NIL) (18,190,051)

L&T Finance Limited 200,000(204,000)

Larsen & Toubro Infotech Limited 2,835,000(4,055,000)

4. Leasing or hire purchase arrangements - NIL 702,057 NIL 702,057L&T Finance Limited (NIL) (325,841) (NIL) (325,841)

5. Interest cost on Inter Corporate Deposits / 2,299,042 176,568 NIL 2,475,610Bill discounting (191,781) (NIL) (NIL) (191,781)

6. Finance (including loans and equitycontributions in cash or in kind) –

a) Inter Corporate Deposits 50,000,000 NIL NIL 50,000,000taken from L&T (70,000,000) (NIL) (NIL) (70,000,000)

b) Inter Corporate Deposits 80,000,000 NIL NIL 80,000,000repaid to L&T (40,000,000) (NIL) (NIL) (40,000,000)

7. Interim & Proposed Dividend NIL NIL NIL NIL(payable to holding Co.) (13,600,000) (NIL) (NIL) (13,600,000)

8. Management contracts 7,879,389 NIL NIL 7,879,389(including for deputation of employees) (8,207,043) (NIL) (NIL) (8,207,043)

9. Payment of Salary & Perquisites NIL NIL 1,592,677 1,592,677(NIL) (NIL) (1,440,509) (1,440,509)

10. Amounts due from / (due to) related parties :a) Accounts receivable 35,359,022 NIL NIL 35,359,022

(20,299,108) (NIL) (NIL) (20,299,108)

b) Accounts payable : 30,774,564 NIL 37,426,594(13,799,546) (NIL) (15,467,680)

L & T Finance Limited 2,253,375(1,419)

Larsen & Toubro Infotech Limited 4,398,655(1,666,715)

c) Inter Corporate Deposit taken NIL NIL NIL NIL(30,000,000) (NIL) (NIL) (30,000,000)

d) Dues in respect of Advances given NIL NIL NIL NIL(NIL) (NIL) (853,541) (853,541)

11. Provision for doubtful debts 99,000 NIL NIL 99,000(NIL) (NIL) (NIL) (NIL)

12. Bad Debts written off 13,645 NIL NIL 13,645(11,500) (NIL) (NIL) (11,500)

Note : Figures in bracket relate to previous year

16. Earnings Per Share: 2005-06 2004-051. Basic Earnings Per Share (Rs.) 802.84 814.352. Diluted Earnings Per Share (Rs.) 802.84 814.353. Profit/(Loss) After Tax as per Profit & Loss Account (Rs.) 54,592,906 55,375,9094. Weighted average number of equity shares outstanding 68,000 68,0005. Nominal Value per Equity Share Rs.1,000 Rs.1,000


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17. As required by the Accounting Standard (AS) 28 Impairment of Assets, issued by the Institute of Chartered Accountants of India, theCompany has reviewed potential generation of economic benefits from fixed assets and concluded that the fixed assets employed in thebusiness will generate adequate economic returns over their useful lives. Consequently, no provision of impairment loss is required.

18. The Company has during the year, in accordance with Accounting Standard (AS-22),”Accounting for Taxes on Income” issued by theInstitute of Chartered Accountants of India, recognised in the Profit & Loss Account, the difference of Rs.15,059 between net deferred taxliabilities of Rs. 14,170,165 as at 31st March 2006 and net deferred tax liabilities of Rs 14,185,224as at 31st March 2005.

Deferred Tax Assets and Liabilities are on account of The following timing differences: 2005-06 2004-05Rupees Rupees

Deferred Tax LiabilitiesDepreciation 13,935,541 13,456,151Expenditure claimed on Payment basis for tax purposes 1,740,118 1,562,526Voluntary Retirement Pension Scheme 160,731 267,346

Total 15,836,390 15,286,023

Deferred Tax AssetsProvision for doubtful debts 430,292 -Voluntary Retirement Scheme - 306,426Expenditure on Software 1,235,933 794,373

Total 1,666,225 1,100,799

Deferred Tax Liabilities (Net) 14,170,165 14,185,224

19. Contractual Product Warranties: The Company gives warranties on its products, undertaking to repair or replace the items that fail toperform satisfactorily during the warranty period. A provision of Rs. 2,528,900/- (previous year Rs. 1,480,267/-) (included in SundryCreditors – Others of Schedule H) has been recognised for expected warranty claims on products sold during the year / represents theestimated amount of costs for meeting such obligations of rectification / replacement. As the historical information reveals an uncertainpattern, the provision is recognised when the claims are lodged by the customers. Most of them are expected to be settled in the nextfinancial year. The movement during the year is as below :

Carrying amount at the beginning of the year 1,480,267 520,878Less : Amount used against the opening provision (918,005) (520,878)Additional provision for the current year 1,966,638 1,480,267Carrying amount at the end of the year 2,528,900 1,480,267

20. Schedule J – Contingent Liabilities :a) Income tax matter in appeal : Rs. 272,995/- for AY 2001-02 & 2002-03 (previous year Rs. 272,995/-)b) Cess payable to Navi Mumbai Municipal Corporation for 1998-99, in appeal - Rs. 1208,627/- (previous year Rs. 1208,627/-)

21. The Manager’s salary & perquisites

Salaries 1,218,028 1,064,602Perquisites 259,861 94,683Retirement Benefits 114,788 281,224

1,592,677 1,440,509

22. Auditors’ Remuneration (excluding service tax and education cess) :

Audit fees 175,000 175,000Certification work 13,500 6,500Tax audit fees 40,000 40,000Expenses reimbursed 25,012 17,526

253,512 239,026

23. Details of licensed capacity, installed capacity, production and turnover:

Product Licensed capacity *Installed capacity

(i) Crawler Tractor parts For replacement For replacementneeded for 2,000 needed for 2,000(two thousand) (two thousand)

track type tractors track type tractors(2,000) (2,000)

* As certified by a Director, on which certificate the auditors have placed reliance.


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(ii) Actual production and opening/closing stocks:Production Opening stock Closing stock

Qty. Qty. Value Qty. ValueNos. Nos. Rupees Nos. Rupees

Form of sets 27,041 1879 26,884,974 1,917 30,167,018(30,604) (938) (8,546,980) (1,879) (26,884,974)

Loose parts 21,117 87,648 47,925,272 89,374 49,825,883(61,469) (43,956) (23,073,930) (87,648) (47,925,272)

Trading goods NA — 10,105 — 14,780,640(NA) (—) (50,122) (—) (10,105)

Figures in brackets are in respect of previous year.(iii) Turnover: 2005-06 2004-05

Qty. Value Qty. ValueNos. Rupees Nos. Rupees

(net of excise) (net of excise)Form of sets 27,003 670,358,393 29,663 548,874,715Loose parts — 76,064,306 — 76,036,670Trading goods — 784,000 — 2,750,000

747,206,699 627,661,385

24. Raw materials consumed: 2005-06 2004-05Qty. Value Qty. Value

M.Tons Rupees M.Tons RupeesSpecial steels 6,070 233,760,154 5,812 209,314,668Iron & Steel castings 332 23,800,513 252 14,291,767Bronze castings 25 7,505,289 24 6,484,782Others 224,854,540 197,726,583

489,920,496 427,817,800

25. Purchases: 2005-06 2004-05Qty. Value Qty. Value

Rupees RupeesTrading goods — 15,503,233 — 2,464,883

26. Value of imported and indigenous materials consumed and percentage thereof:Raw Materials Stores & Spare parts% Value % Value

Rupees RupeesImported 21 103,538,045 0 0.00

(23) (96,959,498) (0) (0.00)Indigenous 79 386,382,451 100 12,900,865

(77) (330,858,302) (100) (11,417,734)100 489,920,496 100 12,900,865

(100) (427,817,800) (100) (11,417,734)

Figures in brackets are in respect of previous year.27. Value of imports (on C.I.F. basis): 2005-06 2004-05

Rupees RupeesRaw materials 64,175,353 111,973,089

28. Expenditure in foreign currency:Exhibition 1,265,316 —Other matters 516,228 1,172,687

Total 1,781,544 1,172,687

29. Earnings in foreign exchange: 2005-06 2004-05Rupees Rupees

Export of goods on F.O.B. basis 41,372 1,056,723Service Fees 1,248,552 —Freight outward 310,338 —Reimbursement of expenses 1,475,854 —

3,076,116 1,056,723



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Registration No. 0 8 8 9 3 State Code No. 1 1





N I L N I L


Total Liabilities Total Assets(including Paid-up Capital)

4 8 0 0 3 3 4 8 0 0 3 3Sources of Funds


6 8 0 0 0 3 0 3 7 4 7


9 4 0 4 1 7 5Deferred Tax Liabilities (net)

1 4 1 7 0Application of Funds


1 4 6 2 5 6 2 2 7 7


3 2 8 8 9 3 2 6 0 7

Accumulated Losses

N I L


(incl.other income)

7 6 8 7 6 0 6 8 2 8 7 6


8 5 8 8 4 5 4 5 9 3


8 0 2 8 4 0


Item Code No.(ITC Code) 8 4 . 3 1

Product P A R T S O F E A R T H M O V I N G M A C H I N E R Y

Description M A T E R I A L H A N D L I N G E Q U I P M E N T

O I L F I E L D E Q U I P M E N T








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L&T–SARGENT & LUNDY LIMITED

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportThe Directors have pleasure in presenting their Report and Audited Accounts for the year ended March 31, 2006.

FINANCIAL RESULTS

2005-2006 2004-2005(Rs. Million) (Rs. Million)

Profit / (Loss) before depreciation and tax (30.38) 13.23

Less : Depreciation on Fixed Assets 11.09 5.02

Profit / (Loss) before tax (41.47) 8.21

Provision for Current & Earlier Years Tax 2.20 1.22

Provision for Deferred Tax 2.32 (0.34)

Profit / Loss after tax (45.99) 7.33

Add: Balance brought forward from the previous year 28.99 21.66

Less: Premium on buyback of shares 0.58 NIL

Transfer to Capital Redemption Reserve 2.90 NIL

Leaving a balance to be carried forward (20.48) 28.99

DIVIDEND

The Directors do not propose any dividend for the financial year 2005-2006.


The Sales and other income for the financial year under review, were Rs.125.87 Million (including exports of Rs. 47.31 Million), as against Rs.152.07Million (including exports of Rs. 61.07 Million) for the previous financial year. The loss before tax (after depreciation) was Rs. 41.47 Million against profitof Rs. 8.21 Million for the previous financial year. After making provisions for tax (including deferred tax) of Rs. 4.52 Million, loss after tax was Rs. 45.99Million.

The Company suffered a set back during the year due to delay in finalisation of some major power projects in India and USA which resulted in lowerorder booking and sales. However, the outlook for the next financial year is expected to be better.

CAPITAL EXPENDITURE

As at 31st March 2006 the gross fixed assets stood at Rs. 82.14 Million and the net fixed assets at Rs. 24.26 Million. Additions during the yearamounted to Rs. 15.83 Million.

DEPOSITS

During the year under review the Company has not accepted any deposits from the public.

AUDITORS’ REPORT


The notes to accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further comments of Directors.


Information as per the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 relating to conservation of energy,technology absorption, foreign exchange earnings and outgo are given in Annexure “A” forming part of this Report.

PERSONNEL

There are no employees covered by the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees)Rules, 1975.

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i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;

ii. that the selected accounting policies were applied consistently and the directors made judgements and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at March 31, 2006 and of the loss of the Company for the year endedon that date;



DIRECTORS

There has been no change in the composition of the Board of Directors during the year under review.

AUDIT COMMITTEE

The audit committee consists of all non-executive directors of the Company.

The role, terms of reference, the authority and powers of the Audit Committee are in conformity with the requirements of the Companies Act, 1956.

The committee met periodically during the year and had discussions with the auditors on internal control systems and internal audit report.

AUDITORS

The Auditors, Sharp & Tannan, hold office until conclusion of the ensuing Annual General Meeting and are recommended for re-appointment. Certificatefrom the Auditors has been received to the effect that their re-appointment, if made, would be within the prescribed limits under Section 224 (1B) of theCompanies Act, 1956.

ACKNOWLEDGEMENTS

The Directors acknowledge the invaluable support extended to the Company by the bankers, suppliers and customers.

The Directors are pleased to place on record their appreciation for the valuable contribution made by employees of the Company.


K. VENKATARAMANAN B. RAMACHANDRANDirectors


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Annexure ‘A’ to the Directors’ ReportAnnexure ‘A’ to the Directors’ ReportAnnexure ‘A’ to the Directors’ ReportAnnexure ‘A’ to the Directors’ ReportAnnexure ‘A’ to the Directors’ Report(Additional information given in terms of notification issued by the

Department of Company Affairs)

A. CONSERVATION OF ENERGY:(a) Energy Conservation measures taken: The Company provides

Engineering from an(b) Additional investments & proposals, if any, being Engineering office. It is,

implemented for reduction of consumption of energy : therefore, not a significant(c) Impact of the measures at (a) & (b) above for reduction user of Energy. All

of energy consumption and consequent impact on the computers used in thecost of production of goods: office has built-in energy

saving features.

B. TECHNOLOGY ABSORPTION:FORM B

(Disclosure of particulars with respect to Technology Absorption)Research & Development (R&D)1. Specific areas in which R&D carried out by the Company The Company’s primary2. Benefits derived as a result of the above R&D activity is the provision of3. Future plan of action Engineering services in4. Expenditure on R&D : field of power generating

(a) Capital plants. The services(b) Recurring provided fall in the(c) Total R&D expenditure as a percentage of category of Design and

total turnover Engineering and as suchthe Company’s totaloperations can bedeemed to be R&D.

Technology Absorption, Adaptation & Innovation1. Efforts in brief, made towards technology absorption, We are absorbing

adaptation and innovation technology transferred2. Benefits derived as a result of the above efforts, e.g. from our principals which

product improvement cost-reduction, product improvement will result in innovativeetc. design of power plants.

C. FOREIGN EXCHANGE EARNINGS & OUTGO(1) Activities relating to exports; initiatives taken to increase Efforts are continuing to

exports; development of new export markets for product secure export orders.and services; and export plans

(2) Total Foreign Exchange used and earned:- Foreign Exchange earned Rs.48.22 Million.- Foreign Exchange used Rs. 12.34 Million.

}

}}}

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Auditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersAuditors’ Report to the ShareholdersWe have audited the attached balance sheet and cash flow statement of L&T–Sargent & Lundy Limited as at 31 March 2006 and the profit and lossaccount of the Company for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, ona test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

1. As required by the Companies (Auditor’s Report) Order, 2003, issued by the central government in terms of section 227 (4A) of the CompaniesAct, 1956, we enclose in the Annexure our report on the matters specified in the paragraphs 4 and 5 of the said Order.

2. Further to our above comments and in accordance with the provisions of section 227 of the Companies Act, 1956, we report as under:



(c) the said balance sheet, profit and loss account and cash flow statement are in agreement with the books of account;

(d) in our opinion the said balance sheet, profit and loss account and cash flow statement comply with the mandatory accounting standardsreferred to in section 211(3C) of the Companies Act, 1956 to the extent applicable; and

(e) on the basis of the written representations received from the directors of the Company as at 31 March 2006 and taken on record by theboard of directors, none of the directors is disqualified from being appointed as a director of the Company under section 274(1)(g) of theCompanies Act, 1956.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with thesignificant accounting policies in schedule M and the notes appearing thereon in schedule N give the information required by the CompaniesAct, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in case of the balance sheet, of the state of the Company’s affairs as at 31 March 2006;

(ii) in case of the profit and loss account, of the loss for the year ended on that date; and

(iii) in the case of the cash flow statement, of the cash flows for the year ended on that date.SHARP AND TANNAN


By the hand of

R.D.KAREPlace : Mumbai PartnerDate : April 25, 2006 (Membership No. 8820)

Annexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ ReportAnnexure to the Auditors’ Report(Referred to in paragraph (1) of our Report of even date)

1. (a) The Company is maintaining proper records to show full particulars including quantitative details and situation of fixed assets.

(b) The assets were physically verified by management during the year. In our opinion, the frequency of such verification is reasonable. We wereinformed that no material discrepancies were noticed on such verification.

(c) Fixed assets disposed off during the year are not substantial in relation to the Company and do not affect the going concern status of theCompany.

2. The Company did not purchase any materials/stores during the year; nor did it hold any stocks of materials, stores or finished goods at any timeduring the year/at the year-end and accordingly clauses (iii), (iv), (v), (vi) and (xii) of sub paragraph 4(A) of the aforesaid Order are not applicableto the Company.

3. The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the registermaintained under section 301 of The Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with thesize of the Company and the nature of its business for the purchase of plant and machinery, equipment, other assets and sale of services. Therewere no sales of goods during the period. In our opinion and according to the information and explanations given to us, there is no continuingfailure to correct major weaknesses in internal control system.

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5. (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referredto in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section and;

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts orarrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhsin respect of any party during the year, have been made at prices which are reasonable having regard to the prevailing market prices atthe relevant time.

6. The Company has not accepted any deposits from public and provisions of section 58A, 58AA and any other relevant provisions of the CompaniesAct, 1956 are not applicable.

7. In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

8. The provisions of clause (xvi) of sub paragraph 4(A) of the aforesaid Order regarding maintenance of cost records are not applicable to theCompany.

9. (a) The Company is regular in depositing undisputed statutory dues including provident fund, income tax, service tax, cess and any otherstatutory dues with the appropriate authorities.

(b) According to the information and explanations given to us, there were no undisputed amount payables as on 31 March 2006 in respect ofincome tax, service tax and cess except in respect of income tax demands amounting to Rs. 4.19 lakhs are in appeal with CIT (Appeals)and Rs. 8.09 lakhs with Income Tax Appellate Tribunal.

10. The Company has no accumulated losses as at 31 March 2006 and it has not incurred any cash losses in the financial year ended on that dateor in the immediately preceding financial year.

11. According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted inrepayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by wayof pledge of shares, debentures and other securities.


14. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in securities. The Companyhas invested surplus funds in marketable securities and mutual funds. According to the information and explanations given to us, proper recordshave been maintained of the transactions and contracts and timely entries have been made therein. The investments in marketable securities andmutual funds have been held by the Company in its own name.


16. In our opinion and according to the information and explanations given to us, on an overall basis, the term loans have been applied for thepurposes for which they were obtained.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report thatno funds raised on short term basis have been used for long term investments.

18. The Company has not made preferential allotment of shares during the year.

19. The Company has not issued any debentures.


21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditingpractices in India, and according to the information and explanations given to us, we have neither come across any instances of material fraudon or by the Company, noticed or reported during the year, nor have we been informed of such case by management.

SHARP AND TANNANChartered Accountants

By the hand of

R.D. KAREPlace : Mumbai PartnerDate : April 25, 2006 (Membership No. 8820)

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Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006Balance Sheet as at March 31, 2006As at March 31, 2006 As at March 31, 2005

Schedule Rs. (’000) Rs. (’000) Rs. (’000) Rs. (’000)

SOURCES OF FUNDS

SHAREHOLDERS FUNDS

Share Capital A 55,042 57,938

Reserves and Surplus B 20,896 75,938 46,992 104,930

LOAN FUNDS

Secured Loans C 8,934 2,099

Unsecured Loans D 510 9,444 1,403 3,502

DEFFERED TAX LIABILITY (NET)(Refer Note 15) 520 0

TOTAL 85,902 108,432

APPLICATION OF FUNDSFIXED ASSETS EGross Block 82,144 67,628

Less : Depreciation 57,882 47,888

Net Block 24,262 24,262 19,740 19,740

INVESTMENTS F 5,298 28,109

DEFERRED TAX

Deferred tax assets (Refer Note 15) 0 1,802

CURRENT ASSETS LOANS AND ADVANCES GInventories 7,509 11,380

Sundry Debtors 52,979 52,839

Cash and Bank balances 2,469 2,426

Loans and Advances 82,100 84,497

145,057 151,142

LESS : CURRENT LIABILITIES AND PROVISIONS H

Liabilities 45,435 30,373

Provisions 64,183 62,766

109,618 93,139

NET CURRENT ASSETS 35,439 58,003

DEFERRED REVENUE ITEMS

Miscellaneous Expenditure(to the extend not written-off or adjusted) I 424 778

PROFIT AND LOSS ACCOUNT 20,479 0

TOTAL 85,902 108,432

SIGNIFICANT ACCOUNTING POLICIES N

NOTES FORMING PART OF ACCOUNTS O


K. VENKATARAMANANR.D.KARE P. M. MANOHAR P. K. MUKHERJI B. RAMACHANDRANPartner Secretary Manager Directors(Membership No.8820)


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Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 2006Profit & Loss Account for the year ended March 31, 20062005-2006 2004-2005

Schedule Rs. (’000) Rs. (’000) Rs. (’000) Rs. (’000)

INCOME

Sales (Income from Engineering Services) 124,154 155,133

Increase/(Decrease) In

Work-in-progress (Engineering Services)

Closing Work-in-Progress 7,509 11,380

Less: Opening Work-in-Progress 11,380 (3,871) 18,754 (7,374)

Other Income J 5,592 4,312

125,875 152,071

EXPENDITURE

Operation & Establishment Expenses K 81,765 78,643

Staff Expenses L 74,308 60,184


Interest & Brokerage M 185 13

167,349 143,863

PROFIT BEFORE TAX (41,474) 8,208

Provision for Current Tax 0 950

Provision for Fringe Benefit Tax 2,201 0

Provision for Tax for earlier Years 0 268

Provision for Deferred Tax 2,321 (344)

PROFIT AFTER TAX (45,996) 7,334

Add : Balance brought forward from previous year 28,992 21,658

Less : Premium on Buy Back of shares 579 0

Less : Transferred to Capital Redemption Reserve 2,896 25,517 0 21,658

PROFIT AVAILABLE FOR APPROPRIATION (20,479) 28,992

BALANCE CARRIED TO BALANCE SHEET (20,479) 28,992

Basic and Diluted Earnings Per Share (EPS) - Rs. (8.27) 1.27

Face Value of Share - Rs. 10 10

SIGNIFICANT ACCOUNTING POLICIES N

NOTES FORMING PART OF ACCOUNTS O




S-472



PARTICULARS Rs. (’000) Rs. (’000)

A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit / (Loss) before Tax (41,474) 8,208

Depreciation including obsolescence 11,091 5,023

Amortisation of Miscellaneous Expenditure 354 354

Interest (Net) 185 (208)

(Profit)/Loss on sale of Investment (Net) (3,290) (1,565)

(Profit)/Loss on sale of Fixed Assets (Net) (50) —

Dividend Received from Investment (324) (356)

Operating Profit / (Loss) Before Working Capital Changes (33,508) 11,456

Adjustments for:

(Increase) / Decrease in Trade Receivables (140) (9,067)

(Increase) / Decrease in Other Current Assets 4,598 (6,480)

(Increase) / Decrease in Inventories 3,871 7,374

Increase / (Decrease) in Current Liabilities 15,062 (1,625)

Increase / (Decrease) in Provisions (797) 1,449

Cash Generated from Operations (10,914) 3,107

Direct Taxes Refund/(Paid) - Net (2,188) (1,218)

Net Cash from Operating Activities (13,102) 1,889

B. CASH FLOW FROM INVESTING ACTIVITIES


Sale of Fixed Assets 265 —

Sale of Investment 80,860 104,958

Purchase of Investment (54,759) (89,039)

Dividend Received from Investment 324 356

Interest Received 332 549

Net Cash (used in) / from investing activities 11,195 427

C. CASH FLOW FROM FINANCING ACTIVITIES

Buy-Back of Shares including premium (3,475) —

Proceeds/ (Repayment) of Long Term borrowings (893) (598)

Proceeds/ (Repayment) of Short Term borrowings 6,835 (1,464)

Dividend paid — —

Interest Paid (517) (344)

Net Cash (used in) / from financing activities 1,950 (2,406)

Net increase in cash and cash equivalents (A+B+C) 43 (90)

Cash and Cash Equivalents at the beginning of the period 2,426 2,516

Cash and Cash Equivalents at the end of the period 2,469 2,426




S-473


Schedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsSchedules forming part of accountsAs at March 31, 2006 As at March 31, 2005

Rs. (’000) Rs. (’000)SCHEDULE A

Share Capital

Authorised :

150,00,000 Equity Shares of Rs. 10 each 150,000 150,000

Issued and Subscribed :

57,93,850 ( Previous Year 75,93,750 ) Equity Shares of Rs. 10 each 57,938 75,938fully paid

Less : 2,89,602 ( Previous Year 18,00,000 ) Equity Shares acquired under Buy back Rules 2,896 18,000

55,04,248 ( Previous Year 57,93,850 ) Equity Shares of Rs. 10 each 55,042 57,938

(Out of the above 27,52,129 equity shares are held by Larsen & Toubro Limited,the Holding Company)

SCHEDULE B


Capital Redemption Reserve:

As per last Balance Sheet 18,000 18,000

Add : Transferred from Profit & Loss Account 2,896 0

( on buy back of shares ) 20,896 20,896 18,000 18,000

Profit and Loss Account 0 28992

20,896 46,992

SCHEDULE C

Secured Loans

Loan from Banks

Cash credit 8,934 2,099

8,934 2,099

SCHEDULE D

Unsecured Loans

Short term loans:

From Housing Development Finance Corporation Limited 0 132

Lease Finance 478 678

478 810

Long term loans:

From Housing Development Finance Corporation Limited 0 0

Lease Finance 32 593

32 593

510 1,403

S-474


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE E Rs. (’000)

Cost Additions Sales Cost Depreciation Net Block Net BlockFixed Assets As at During During As at Upto For the Total upto As at As at

01.04.2005 the year the year 31-03-2006 31-03-2005 year Deductions 31.03.2006 31-03-2006 31-03-2005

A. Tangible Assets

Owned Assets:

- Plant and Machinery 39,052 1,144 606 39,590 34,686 2,007 586 36,107 3,483 4,367

- Office Equipments 3,496 60 10 3,546 1,953 226 3 2,176 1,370 1,543

- Furniture & Fixtures 4,153 23 - 4,176 3,526 133 - 3,659 517 626

Leased Assets:

(From L&T FinanceLimited)

- Motor Cars 2,612 - 581 2,031 1,630 345 396 1,579 452 982

- Computers 226 55 114 167 161 51 111 101 66 65

49,539 1,282 1,311 49,510 41,956 2,762 1,096 43,622 5,888 7,583

Previous year 47,405 2,134 - 49,539 39,096 2,861 - 41,957 7,582 8,310

B. Intangible Assets

Owned Assets:

-Computer Software 18,089 14,545 - 32,634 5,931 8,329 - 14,260 18,374 12,158

18,089 14,545 - 32,634 5,931 8,329 - 14,260 18,374 12,158

Previous year 3,826 14,263 - 18,089 3,769 2,162 - 5,931 12,158 57

A+B 67,628 15,827 1,311 82,144 47,887 11,091 1,096 57,882 24,262 19,742

Previous Year 51,232 16,397 - 67,628 42,866 5,023 - 47,888 19,741

As at March 31, 2006 As at March 31, 2005

Rs. (’000) Rs. (’000) Rs. (’000) Rs. (’000)SCHEDULE FInvestments (At cost) :Long Term Investments :Bonds 0 0Mutual funds 0 0 0 0

Current Investments :Mutual funds 5,298 5,298 28,109 28,109

5,298 28,109

NOTE : As at March 31, 2006 As at March 31, 2005Rs. (’000) Rs. (’000)

Quoted InvestmentsBook Value 0 0Market Value 0 0

Unquoted InvestmentsBook Value 5,298 28,109

S-475


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)As at March 31, 2006 As at March 31, 2005

Rs. (’000) Rs. (’000) Rs. (’000) Rs. (’000)

Particulars of investments :

A. Mutual Fund:

1 Kotak Mahindra Mutual Fund “Flexi Debt Fund - Growth” 0 19Nil Units(1,43,508 units of Rs.10 each purchased during the yearand 1,45,401 units redeemed during the year)

2 Kotak Mahindra Mutual Fund “K-Bond Floater - LT Growth” 0 6513Nil Units(6,28,438 units of Rs.10 each purchased during the yearand 12,60,512 units redeemed during the year)

3 Grindlays Dynamic Bond Fund - Growth 0 1350Nil Units(1,13,029 units redeemed during the year)

4 HDFC Floating Rate Fund - Long Term - Growth 0 18164Nil Units(3,83,494 units of Rs.10 each purchased during the year)(20,32,627 units of Rs 10 each redeemed during the year)

5 Franklin Bluechip - Dividend Reinvestment 0 156Nil Units(8,016 units of Rs.10 each redeemed during the year)

6 Franklin Prima Fund - Dividend Reinvestment 0 827Nil Units(29,230 units of Rs.10 each purchased during the yearand 56,484 units of Rs 10 each redeemed during the year)

7 HDFC Equity Fund - Dividend Reinvestment 0 1080Nil Units(43,835 units of Rs.10 each purchased during the year)(1,11,023 units of Rs 10 each redeemed during the year)

8 HDFC Floating Rate Income Fund - ST Plan - Growth 4375 06,78,378 units(11,10,761 units of Rs, 10 each purchased during the year)(4,32,383 units of Rs, 10 each redemeed during the year)

9 Templeton Floating Rate Income Fund STP - Growth 923 073,833 units(7,12,460 units of Rs. 10 each purchased during the year)(6,38,627 units of Rs. 10 each redeemed during the year)

5,298 28,109Less: Provision for diminution in the value 0 0

5,298 28109

5,298 28,109

S-476


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)As at March 31, 2006 As at March 31, 2005

Rs. (‘000) Rs. (‘000) Rs. (‘000) Rs. (‘000)SCHEDULE GCurrent Assets, Loans and Advances:Current Assets:InventoriesWork-in-Progress - Engineering Services,-at estimated realisable value on sale 7,509 11,380-at cost 0 7,509 0 11,380

Sundry DebtorsUnsecured :Debts outstanding for more than six months :

Considered Good 848 5,185Considered Doubtful 333 0

1,181 5,185Others Debts :Considered Good 52,131 47,654

53,312 52,839Less: Provision for doubtful debts 333 0

52,979 52,839Cash and Bank balances:Cash in hand 144 18Balances with scheduled banksOn current accounts 200 365On fixed deposit accounts 2,125 2,043

2,469 2,426Loans and Advances:Secured, Considered GoodLoans to employees against mortgage of house property 1,670 2,198Unsecured, Considered GoodAdvances recoverable in cash or kind 80,430 82,100 82,299 84,497

145,057 151,142

SCHEDULE HCurrent Liabilities and Provisions:Liabilities:Sundry creditors 44,113 29,394Advance from customers 1,322 45,435 979 30,373

Provisions for :Taxation 58,498 56,284Gratuity 0 1,000Leave encashment 5,685 64,183 5,482 62,766

109,618 93,139

SCHEDULE I

Deferred Revenue ItemsMiscellaneous expenditure(to the extend not written-off or adjusted)

Voluntary Retirement Scheme 424 424 778 778

424 778

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2005-2006 2004-2005

Rs. (‘000) Rs. (‘000) Rs. (‘000) Rs. (‘000)

SCHEDULE JOther Income:Income from investment - Dividend 324 356Profit on Sale / Redemption of Investments (Net) 3,290 1,565Profit / (Loss) on sale of fixed assets 50 0Miscellaneous Income 1,928 2,391

5,592 4,312

5,592 4,312

2005-2006 2004-2005

Rs. (‘000) Rs. (‘000)

SCHEDULE KOperation & Establishment ExpensesRent ( Including Lease Rentals Rs. 772 /- ) 15,068 13,311Previous Year Rs.651 /-)Insurance 986 1,228Travelling & conveyance 11,752 16,797Establishment Expenses 14,277 10,466Telecommunication Expenses 3,168 3,440Rates & Taxes (269) 438Power & Fuel 4,085 4,472Printing & Stationery 3,219 3,360Technical Services & Project Expenses 12,168 10,688Repairs & Maintenance 10,507 9,057Directors’ Fees 32 32Bad Debts written off 32 113Other Miscellaneous expenses 6,740 5,241

81,765 78,643

SCHEDULE LStaff Expenses:Salaries & Allowances 64,519 50,406Contribution to and provision for :Provident fund and pension fund 3,255 3,088Superannuation fund 1,794 1,670Gratuity fund 0 1,000Leave Encashment 1,561 709Staff Welfare Expenses 3,179 3,311

74,308 60,184

SCHEDULE MInterest & Brokerage:Interest on Fixed Loans 15 29Interest on Lease Finance 129 232Others 373 83

517 344Less:

Interest on Bank Deposits 105 100Tax deducted at source Rs. 24/-(Previous Year Rs. 21/- )Interest received from employees 227 231

185 13


S-478


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)SCHEDULE NSIGNIFICANT ACCOUNTING POLICIESMethod of AccountingThe Company maintains its accounts on accrual basis under historical cost convention. The financial statements are in compliance with mandatoryaccounting standards issued by the Institute of Chartered Accountants of India and are in accordance with the requirements of the Companies Act, 1956.The preparation of financial statements in conformity with GAAP requires that management of the Company makes estimates and assumptions thataffect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relating tocontingent liabilities as of the date of the financial statements. Examples such estimates include the useful life of fixed assets and intangible assets,provision for doubtful debts/advances, future obligations in respect of retirement benefit plans etc. Actual results could differ from these estimates.Revenue RecognitionRevenue earned from services provided on man hour basis is recognized based on time spent in man-hours or man months and billed to customers asper the terms of specific contracts.Revenue earned from services performed on “fixed price” basis is recognized using the percentage of completion method or delivered milestones billedto customers as per the terms of specific contracts.Retirement BenefitsContributions to Provident and Superannuation Funds are accounted on actual liability basis. Provisions for contributions to Gratuity Fund and provisionfor leave encashment benefit on retirement are made on actuarial valuation basis.Fixed Assets and DepreciationFixed assets are stated at cost less depreciation.Depreciation is provided on the written down value method at the rates as per schedule XIV of the Companies Act, 1956. Depreciation on additions /deductions is calculated pro-rata from / to the month of addition / deductions. Assets acquired on finance lease are capitalized and are amortised overthe period of lease term.Intangible assets and amortizationIntangible assets are recognized as per the criteria specified in Accounting Standard 26 – Intangible Assets issued by the Institute of CharteredAccountants of India.Specialized Software are amortized at 40% of the written down value.InvestmentsInvestments intended to be held for one year or more are classified as long term investments and are carried at cost. Current investments are carriedat lower of cost or market value. The determination of the carrying costs of such investments is done on the basis of specific identification.InventoriesInventories are valued as under:Work-in-Progress (Engineering Services) at the difference in realizable value of completed part and billed part of the job, where the job is for a lumpsumconsideration, if major portion of the job is complete and at cost in other cases.Deferred Revenue ExpenditureThe expenses disclosed under Miscellaneous Expenditure are amortized as follows:Lump sum compensation paid under Voluntary Retirement Scheme launched from the year 2002-03 are amortized over a period of five years.Foreign Currency TransactionsThe reporting currency of the Company is the Indian Rupees.Foreign Currency Transactions are recorded on initial recognition in the reporting currency using the exchange rates prevailing on the transaction date.Monetary items in respect of foreign currency assets and liabilities are converted at year-end rates. The exchange difference on settlement/conversionis taken to Profit & Loss Account.Employees share appreciation scheme (ESAS) and Employee Stock Options Scheme (ESOP)The Company has an Employee Share Appreciation Scheme which is based on the movement in the market price of shares of the holding Company.In respect of ESAS and ESOP granted pursuant to the Company’s schemes, the intrinsic value of the options (excess of market price of the share overthe exercise price of the option) is treated as a discount and accounted as employee compensation cost over the vesting period.Taxes on IncomeTax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of theIncome Tax Act, 1961, and based on expected outcome of assessments/appeals.Deferred Tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using the tax ratesand laws enacted or substantively enacted as on the balance sheet date.Deferred Tax assets are recognized and carried forward to the extend that there is a reasonable certainty that sufficient future taxable income will beavailable against which such deferred tax assets can be realizedProvisions, contingent liabilities and contingent assetsProvisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if (a) the Company has a presentobligation as a result of past event; (b) a probable outflow of resources is expected to settle the obligation; and (c) the amount of the obligation can bereliably estimated. Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that thereimbursement will be received.Contingent liability is disclosed in the case of (a) a present obligation arising from a past event, when it is probable that an outflow of resources will berequired to settle the obligation or (b) a possible obligation, unless the probability of outflow of resources is remote.Contingent assets are neither recognized nor disclosed.Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.

S-479


Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)Schedules forming part of accounts (Contd.)(Rs. ’000)

SCHEDULE O


1. Sales (Income from Engineering Services) is net of estimated future job revision cost as at 31st March, 2006 Rs. 4,050 (Previous Year Rs. 6,266).

2005-06 2004-05Rs. (’000) Rs. (’000)

2. Remuneration (including perquisites) to the Manager and Directors:1. Salaries and allowances 1086 1041

2. Perquisites 597 374

3. Retirement benefits etc. 214 195

4. Director sitting fees 32 32

Remuneration to the Manager is in excess of the limits laid down by Schedule XIII to the Companies Act, 1956 by Rs.183. The excess remuneration issubject to approval by the shareholders in the general meeting.

2005-06 2004-05Rs. (’000) Rs. (’000)

3. Auditors remuneration and expenses charged to the accounts:Audit Fees 45 38

Tax Audit Fees 15 15

Audit of Trusts and Transfer Pricing 29 24

Certification Work 33 50

Reimbursement of expenses 9 3

2005-06 2004-05Rs. (’000) Rs. (’000)

4. Earnings in foreign exchangeEngineering services 47,309 61,070

Reimbursement of Expenses 914 320

2005-06 2004-05Rs. (’000) Rs. (’000)

5. Expenditure in foreign currency

Travelling 2,750 2,939

Software license fees 5,212 5,229

JV Administration Expenditure 4,279 1,269

Other Expenses 101 298

6. Business Profile:

(i) The Company carries on the business of providing Engineering and associated services for thermal, hydro and combined cycle powerprojects.

(ii) With regard to clause 3(ii) of Part II of Schedule VI of the Companies Act, 1956, the Company is of the view that in respect of the activitiesmentioned in (i) above, the Company is not a “manufacturing” or a “trading” Company falling under sub-clause (a) and (b) thereof, but itis a Company falling under sub-clause (c) thereof.

(iii) As the Company is not a “manufacturing” Company, clause 4C of Part II of Schedule VI of the Companies Act, 1956, is not applicable to it.

7. Contingent Liability in respect of Income Tax that may arise for which the Company is in appeal is Rs. 1,227. (Previous Year Rs.1,227). TheCompany is confident of getting a favorable order from Appellate Authority in this regard.

8. Estimated amounts of contracts remaining to be executed on capital account Rs. Nil (Previous Year Rs. Nil).

9. Accounting Standard – 18 Disclosure of related parties / related party transactions:

I. List of related parties:

LARSEN & TOUBRO LIMITED : Holding Company

II. Names of the Related Parties with whom transactions were carried out during the year and description of relationship:

LARSEN & TOUBRO LIMITED : Holding Company

Key Management Personnel & their relatives:

Mr. P. K. MUKHERJI - Manager

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III. Disclosure of related party transactions:

Sr. Nature of transaction / relationship 2005-06 2004-05Rs.(’000) Rs.(’000)

1 Purchase of goods & services (including Commission paid)Name of Holding Company – Larsen & Toubro Limited 12,979 5,741TOTAL 12,979 5,741

2 Sale of goods/power/contract revenue & servicesName of Holding Company – Larsen & Toubro Limited 53,179 79,847TOTAL 53,179 79,847

3 Rent paid, including lease rentals under leasing / hire purchasearrangements including loss-sharing on equipment financeName of Subsidiary of L&T – L&T Finance Limited 1,424 533TOTAL 1,424 533

4 Amounts written offName of Holding Company – Larsen & Toubro Limited 0 108TOTAL 0 108

5 Any Other transaction (Infrastructure Charges)Name of Holding Company – Larsen & Toubro Limited 6,097 7,752TOTAL 6,097 7,752

IV. Amount due to / from related parties

Sr. Particulars / Relationship 2005-06 2004-05No. Rs.(’000) Rs.(’000)

1 Accounts receivable from related partiesName of Holding Company – Larsen & Toubro Limited 25,352 27,444TOTAL 25,352 27,444

2 Accounts payable to related partiesName of Holding Company – Larsen & Toubro Limited 26,975 (*) 7,752TOTAL 26,975 7,752

3 Advances received in capacity of supplier of goods / servicesclassified as “advances from customers” in the Balance SheetName of Holding Company – Larsen & Toubro Limited 0 52TOTAL 0 52

4 Any Other transaction (Deposits with L&T)Name of Holding Company – Larsen & Toubro Limited 0 10,178TOTAL 0 10,178

(*) Note: Includes Rs.2,161 towards employee compensation charged by holding Company.

10. The Company has taken on lease certain assets upto 31.03.2001, the liability for future rentals on account of which is Rs. 286. (Previous YearRs. 616).

11. Assets acquired prior to April 1, 2001 under finance leases have been accounted in accordance with the “Guidance Note on Leases” issued bythe Institute of Chartered Accountants of India. The cost of the assets taken on lease is Rs.2,679, the future lease obligation against which isRs. 586 as at March, 2006.

12. Disclosure in respect of finance lease (LTSL as a lessee) as required by AS – 19

a) Finance lease liabilities – Minimum lease payments:2005-06 2004-05

Sl. Minimum Lease payments Rs.(’000) Rs.(’000)1. Payable not later than 1 year 550 7582. Payable later than 1 year and not later than 5 years 36 7573. Payable later than 5 year Nil Nil

Total Minimum lease payments 586 1,515Less : Future finance charge of finance leases 76 244Present value of finance lease liabilities 510 1,271

b) Present value of finance lease liabilities:2005-06 2004-05

Sl. Present value of finance lease liabilities Rs.(’000) Rs.(’000)1. Payable not later than 1 year 478 6782. Payable later than 1 year and not later than 5 years 32 5933. Payable later than 5 year Nil Nil

Total Present value of finance lease liabilities 510 1,271


S-481


13. Operating leases

The Company has taken on non - cancelable operating leases certain assets the liabilities in respect of which are as follows:

Operating lease liabilities – Future minimum lease payments:

2005-06 2004-05Sl. Minimum Lease payments Rs.(’000) Rs.(’000)

1. Payable not later than 1 year 158 158

2. Payable later than 1 year and not later than 5 years 118 276

3. Payable later than 5 years NIL NIL

14. In accordance with the announcement of the Institute of Chartered Accountants of India –

The Company has option forward contracts for the exposure (receivables) on the Balance Sheet date aggregating to Rs.15,978. The option forwardcontracts are for hedging purpose only.

The Company has payables at the Balance Sheet date aggregating to Rs.12,181 that are not hedged by a derivative instrument or otherwise.

15. Deferred Tax

Major components of Deferred Tax Assets and Deferred Tax Liabilities:As at 31.03.2006 As at 31.03.2005

Rs.(’000) Rs.(’000)Deferred Tax Deferred Tax Deferred Tax Deferred Tax

Assets Liabilities Assets Liabilities1) Difference between book value of depreciable assets as per books of

accounts and written down value for tax purpose — 1845 573 —2) Provision for doubtful debts and advances 221 — 102 —3) Provision for Leave Encashment 1104 — 1126 —4) Other items giving rise to timing differences — — — —

Total 1325 1845 1801Net Deferred tax Asset / (Liability) — (520) 1801Net decrease in Assets debited to Profit & Loss Account 2321

16. Loans and Advances include amount due from officers of the Company Rs.789 (Previous year Rs.787). Maximum amount outstanding at any timeduring the year Rs.819 (Previous Year Rs. 860).

17. Pursuant to the Employees Stock Option Scheme established by the holding Company (i.e. Larsen & Toubro Limited), stock options have beengranted to the employees of the Company during the year in respect of which, cost of Rs.1,65,97,653/- (previous year Rs.20,88,540) has beenincurred by the holding Company out of which Rs.21,61,153 (previous year Rs. NIL) has been recovered by the holding Company during the yearbased on the vesting period of the options and the balance Rs. 1,44,36,500 will be recovered in future years.

18. The Company operates in a single segment i.e. providing Engineering Services. Segmental Reporting of Revenues is on the basis of geographicallocation of the customers, and is as under:

Revenue by location of customers 2005-06 2004-05Rs.(’000) Rs.(’000)

India 74,628 93,973USA 30,073 40,392Rest of the world 19,453 22,032

Total 124,154 156,397Carrying amount of Segment Assets by location of assetsIndia 158,514 179,412USA 10,159 12,121Rest of the world 6,368 8,236

Total 175,041 199,769Cost incurred on acquisition of tangible and intangible fixed assetsIndia 15,827 16,397USA 0 0Rest of the world 0 0

Total 15,827 16,397

19. The exchange difference arising on foreign currency transactions amounting to Rs. 164 (net loss) has been accounted under the respectiverevenue heads.

20. The Cash Credit facilities from Bank are secured by hypothecation of book debts. The charge on these assets also extends to out-standing BankGuarantees upto Rs. 4,372.

21. Sundry Creditors include Rs. NIL payable to small-scale industrial units.


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22. Balance Sheet Abstract and Company’s General Business ProfileI Registration Details

Registration No. 0 8 8 0 9 9 State Code 1 1Balance Sheet Date 3 1 0 3 2 0 0 6

II Capital Raised during the Year : NilPublic Issue Rights Issue

N I L N I LBonus Issue Preferential Issue

N I L N I LIII Position of Mobilisation and Deployment of funds :

Total Liabilities Total Assets8 5 9 0 2 8 5 9 0 2

Sources of Funds Paid-Up Capital Reserves & Surplus5 5 0 4 2 2 0 8 9 6

Secured Loans Unsecured Loans8 9 3 4 5 1 0

Deferred Tax Liability5 2 0

Application of Funds Net Fixed Assets Investments2 4 2 6 2 5 2 9 8

Net Current Assets3 5 4 3 9

Deferred Revenue Items Profit & Loss Account4 2 4 2 0 4 7 9

IV Performance of Company :Turnover (Including other income) Total Expenditure

1 2 5 8 7 5 1 6 7 3 4 9Profit/Loss Before Tax Profit/Loss after Tax( 4 1 4 7 4 ) ( 4 5 9 9 6 )

Earnings Per Share in Rs. Dividend Rate( 8 . 2 7 ) N I L

V Generic Names of Three Principal Products/Services of the Company(as per monetary terms)

Item Code No. Not Applicable(ITC Code)

Product Description Engineeering Services

23. Figures for the previous year have been regrouped / reclassified wherever necessary.


As per our report attached Signatures to Schedules A to OSHARP & TANNANChartered Accountantsby the hand of



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NOTESNOTESNOTESNOTESNOTES

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