Annual Report - Larsen and Tourbo Ltd

LARSEN AND TOUBRO LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Directors' Report

The Directors have pleasure in presenting their Annual Report and Accounts
for the year ended March 31, 2009.

FINANCIAL RESULTS
2008-2009 2007-2008
Rs. crore Rs. crore

Profit before depreciation and tax 4,246.40 3,367.07
Less:Depreciation and amortization 307.30 213.63
3,939.10 3,153.44
Add :Transfer from revaluation reserve 1.31 2.03
Profit before tax and extraordinary items 3,940.41 3,155.47
Less : Provision for tax 1,231.21 982.05
Profit after tax 2,709.20 2,173.42
(before extraordinary items)
Profit on sale / transfer of business 772.46 -
(net of tax)
Profit after tax and extraordinary items 3,481.66 2,173.42
Add : Balance brought forward from
previous year 104.31 78.24
Less: Dividend paid for the previous year 0.33 0.77
(including dividend distribution tax)
Balance available for disposal 3,585.64 2,250.89
which the Directors appropriate as follows:
Debenture redemption reserve 43.34 -
Interim dividend - 56.83
Proposed final dividend 614.97 438.49
Dividend tax 101.83 76.26
General reserve 2,725.00 1,575.00
3,485.14 2,146.58
Balance to be carried forward 100.50 104.31

Dividend

The Directors recommend payment of dividend of Rs. 10.50 per equity share
of Rs. 2/- each on 58,56,87,862 shares 614.97 438.49

YEAR IN RETROSPECT

The gross sales and other income for the financial year under review were
Rs. 35,065 crore as against Rs. 25,863 crore for the previous financial
year registering an increase of 36%. The profit before tax and
extraordinary items (after interest and depreciation charges) of Rs. 3,940
crore and the profit after tax (before extraordinary items) of Rs. 2,709
crore for the financial year under review as against Rs. 3,155 crore and
Rs. 2,173 crore respectively for the previous financial year, improved by
25% in each case respectively.

DIVIDEND

The Directors recommend payment of dividend of Rs. 10.50 per equity share
of Rs. 2/- each. Shares that may be allotted on exercise of options granted
under the Employee Stock Option Schemes before the book closure for payment
of dividend will rank pari passu with the existing shares and be entitled
to receive the dividend.

DEPOSITORY SYSTEM

As the members are aware, the Company's shares are compulsorily tradable in
electronic form. As on March 31, 2009, almost 96% of the Company's total
paid-up capital representing 56,32,91,981 shares are in dematerialized
form. In view of the numerous advantages offered by the depository system,
members holding shares in physical mode are advised to avail of the
facility of dematerialization on either of the depositories.

CAPITAL & FINANCE

During the year under review, the Company allotted 7,68,418 equity shares
upon exercise of stock options by the eligible employees under the Employee
Stock Option Schemes.

The shareholders of the Company approved the issue of bonus shares in the
ratio of 1:1 at the AGM held on August 29, 2008. The Company accordingly
issued 29,25,92,054 bonus shares on October 3, 2008.

During the year under review, the Company tied up foreign currency long
term loans aggregating to USD 100 million to finance ongoing capital
expenditure, investment in overseas subsidiaries and overseas acquisitions.
The loans have tenors of 5, 7 and 10 years. The Company has also issued
secured redeemable non-convertible debentures of Rs. 900 crores, with tenor
of 10 years, and unsecured redeemable non-convertible debentures of Rs. 250
crores with tenor of 3 years.

CAPITAL EXPENDITURE

As at March 31, 2009, the gross fixed and intangible assets, including
leased assets, stood at Rs. 6,670.78 crore and the net fixed and intangible
assets, including leased assets, at Rs. 5,194.60 crore. Additions during
the year amounted to Rs. 1,986.31 crore.

DEPOSITS

85 deposits totalling Rs. 0.08 crore which were due for repayment on or
before March 31, 2009 were not claimed by the depositors on that date. As
on the date of this report, deposits aggregating to Rs. 0.01 crore thereof
have been claimed and paid.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND

During the year, the Company has transferred a sum of Rs. 1,43,88,496 to
Investor Education & Protection Fund, the amount which was due & payable
and remained unclaimed and unpaid for a period of seven years, as provided
in Section 205C(2) of the Companies Act, 1956. Despite the reminder letters
sent to each shareholder, this amount remained unclaimed and hence was
transferred. Cumulatively, the amount transferred to the said fund as on
March 31, 2009 is Rs. 7,30,26,439.

SUBSIDIARY COMPANIES

During the year under review, the Company subscribed to / acquired equity
shares in various subsidiary companies. These subsidiaries are either SPVs
executing projects secured through BOT route, or holding companies making
investments in companies such as power and financial services. The
investment in L&T International FZE is mainly for onward investment in
international ventures. The details of investments are as under:

* 862 equity shares of Dhs. 550,500 each in Larsen & Toubro International
FZE for Rs. 533 crore at par.

* 4,08,00,000 equity shares of Rs. 10 each in L&T Power Limited at par.

* 1,989 equity shares of Rs. 10,000 each in International Seaport Dredging
Limited at par.

* 5,70,00,000 equity shares of 10 each in L&T Power Development Limited at
par.

* 12,40,005 equity shares of Rs. 10 each in L&T-Gulf Private Limited at
par.

* 10,000 equity shares of Rs. 10 each in L&T Seawoods Private Limited at
par.

* 100 equity shares of Rs. 10 each in L&T Chennai - Tada Tollway Limited at
par.

* 50,000 equity shares of Rs. 10 each in L&T Natural Resources Limited at
par.

* 20,50,000 equity shares of Rs. 10 each in L&T Capital Holdings Limited at
par.

* 1,70,00,000 equity shares of Rs. 10 each in L&T Capital Company Limited
at par.

* 40,000 equity shares of Rs. 10 each in Raykal Aluminium Company Private
Limited at par.

* 10,10,000 equity shares of Rs. 10 each in L&T Halol- Shamlaji Tollway
Private Limited at par.

* 10,10,000 equity shares of Rs. 10 each in L&T Rajkot- Vadinar Tollway
Private Limited at par.

* 10,10,000 equity shares of Rs. 10 each in L&T Ahmedabad- Maliya Tollway
Private Limited at par.

* Further contribution of Re. 0.55 per share & premium of Rs. 71.39 per
share on 22,50,000 partly paid-up equity shares in Larsen & Toubro Infotech
Limited. Total paid-up Rs. 3.75 per share, premium Rs. 393.745 per share.

The Company has acquired 50% stake in L&T-Demag Plastics Machinery Limited
from the JV partner M/s Sumitomo (SHI) Demag Plastics Machinery GmbH on
March 31, 2009. Accordingly 30,00,000 shares were acquired for a
consideration of Euro 1. Thus L&T-Demag Plastics Machinery Limited became a
wholly owned subsidiary of the Company w.e.f. March 31, 2009. An
application has been made to the Registrar of Companies to change the name
of the subsidiary to L&T Plastics Machinery Limited. The Company further
subscribed to 1,00,00,000 shares of Rs. 10 each at par.

The Company transferred its entire 100% stake as detailed below to L&T
Capital Holdings Limited (LTCHL).

* 50,00,00,000 equity shares of Rs. 10 each in L&T Infrastructure Finance
Company Limited at par.

* 18,66,91,500 equity shares of Rs. 10 each in L&T Finance Limited for a
consideration of Rs. 490.98 crores.

* 5,60,60,000 equity shares of Rs. 10 each in India Infrastructure
Developers Limited at par. LTCHL will be the umbrella holding company for
investments in financial services business.

The Company has also sold 205 equity shares of Rs. 10 each of L&T Capital
Holdings Limited at par.

The statement pursuant to Section 212 of the Companies Act, 1956,
containing details of subsidiaries of the Company, forms part of this
Annual Report.

In view of the exemption received from Central Government vide letter no.
47/378/2009-CL-III dated May 8, 2009, the Audited Statement of Accounts,
the Reports of the Board of Directors and Auditors of the Subsidiary
companies are not annexed as required under Section 212(8) of the Companies
Act, 1956. Shareholders who wish to have a copy of the full report and
accounts of the subsidiaries will be provided the same on receipt of a
written request from them.

These documents will be put up on the Company's Website viz.
www.larsentoubro.com and will also be available for inspection by any
shareholder at the Registered Office of the Company on any working day
during business hours.

AUDITORS' REPORT

The Auditors' Report to the Shareholders does not contain any
qualification.

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 provided in
Annexure A' forming part of this Report.

OTHER DISCLOSURES

The Company has disclosed in the notes forming part of accounts the
quantitative details in respect of sales, raw materials and components
consumed and inventories as required vide sub-paras 3(i)(a), 3(ii)(a)(1)
and (2) and 3(ii)(b) of Part II of Schedule VI to theCompanies Act, 1956.

The Central Government, vide its order No. 46/44/2009-CL-III dated March
30, 2009, has granted exemption to the Company for thefinancial year ended
on March 31, 2009 in respect of disclosure of the above mentioned
quantitative details where the values of the individual items in each
category are less than 10% of the total value of the category.

The disclosures required to be made under the Securities and Exchange Board
of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, together witha certificate obtained from the Statutory
Auditors, confirming compliance, is provided in Annexure B' forming part
of this Report.

Pursuant to Clause 49 of the Listing Agreement entered into with the Stock
Exchanges, a Report on Corporate Governance and a certificate obtained from
the Statutory Auditors confirming compliance, is provided in Annexure C'
forming part of this Report.

PERSONNEL

The Board of Directors wishes to express their appreciation to all the
employees for their outstanding contribution to the operations of the
Company during the year. The information required under Section 217(2A) of
the Companies Act, 1956 and the Rules made thereunder, is provided in
Annexure forming part of the Report. In terms of Section 219(1)(b)(iv) of
the Act, the Report and Accounts are being sent to the shareholders
excluding the aforesaid Annexure. Any Shareholder interested in obtaining
copy of the same may write to the Company Secretary. None of the employees
listed in the said Annexure is related to any Director of the Company.

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 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, 2009 and of the 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 the provisions of the
Companies 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.

DIRECTORS

Mr. Jagjeet Singh Bindra who was appointed as an Additional Director w.e.f.
January 30, 2009, holds office upto the date of the forthcoming Annual
General Meeting and is eligible for re-appointment. Mr. Thomas Mathew T.
who was appointed on November 20, 2006 in the casual vacancy caused by the
resignation of Mr. A. K. Shukla, holds office upto the date of the
forthcoming Annual General Meeting and is eligible for re-appointment.

Mr. S. N. Talwar, Mr. K. V. Rangaswami, Mr. M. V. Kotwal, Mr. V. K. Magapu
and Mr. R. N. Mukhija retire from the Board by rotation and are eligible
for re-appointment at the forthcoming Annual General Meeting. The Notice
convening the Annual General Meeting includes the proposals for re-
appointment of Directors.

CONSOLIDATED FINANCIAL STATEMENTS

Your Directors have pleasure in attaching the Consolidated Financial
Statements pursuant to Clause 32 of the Listing Agreement entered into with
the Stock Exchanges and prepared in accordance with the Accounting
Standards prescribed by the Institute of Chartered Accountants of India, in
this regard.

The Auditors' Report to the Shareholders does not contain any
qualification.

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.

ACKNOWLEDGEMENT

Your Directors take this opportunity to thank the Financial Institutions,
Banks, Central and State Government authorities, Regulatory authorities,
Stock Exchanges and the stakeholders for their continued co-operation and
support to the Company. Your Directors also wish to record their
appreciation for the continued co-operation and support received from the
Joint Venture partners/Associates.

For and on behalf of the Board

A. M. Naik
Chairman & Managing Director
Mumbai, May 28, 2009

Annexure A' to the Directors' Report

(Additional information given in terms of notification issued by the
Ministry of Corporate Affairs)

[A] CONSERVATION OF ENERGY:

(a) Energy Conservation measures taken:

1. Improving energy effectiveness / efficiency of Equipments and Systems

* Use of Variable frequency drive for various applications such as central
ACs, FDVS, AC plant Air Handling Units, EOT crane motors, etc. to improve
the motor efficiency and enhance energy saving.

* Use of solar powered street lights, installing timers, applying reduced
voltage to street lights during night time, installation of dusk to dawn
solar powered street lights, etc. saving energy.

* Use of Solar power for water heaters, installation of water heating
system for canteen cooking / washing, use of Portable electrical ovens
modified with digital temperature controller, green power generation
through roof installed grid connect solar power plant.

* Use of energy saving devices like human body sensors, presence sensors,
time switches, photo sensing devices,electromizer energy saving devices,
TFT monitor, LCD screens in discussion rooms, zone controlled AC, Low
emission films on glass doors and windows, etc to reduce energy
consumption.

* Procurement of energy efficient Amada CNC Press Brake machine as a
replacement of old machine.

* Procurement of new compressor for packing shop for usage in third shift
to cater to month end urgent packing requirements thus reducing the need to
switch on a higher rated common compressor.

* Saving of diesel by efficient running of powder coating / pre-treatment
plant, provision of AMF panels on generator sets, etc.

* Practising Rain Water harvesting, sewage water treatment plant to recycle
the water for maintenance of the greenery, use of auto sprinkling system
for watering of gardens, use of foam type taps, Water efficient / climate
tolerant plantings,etc.

* Reduction in daily A.C. running time, switching off lights and air
conditioning during lunch breaks.

* Re-sizing of conformal coating chamber
and reducing the size of the chamber exhaust fan.

* Use of Turbo ventilators for non air-conditioned areas to extract heat of
the building.

* Reducing the height of the ceiling, installation of fibre sheet to get
more illumination and improve daylight.

* Replacement of florescent tube lights, incandescent lamps with CFL, &
metal halide lamps in various offices and workshops.

* Stopping air leakages, installing new air solenoid valves in air line to
control air combustion, etc.

* Modification of Coolant piping (reduction in joints, bends, friction) in
Asquith deep hole drilling machine to save energy.

* Installation of Energy Saver in welding machines belonging to
subcontractors, introduction of Fullwave welding machines and Inverter
based welding machines.

* Replacement of Chuck drives with the latest energy efficient drives,
procurement of new high efficiency welding inverters and welding machines.

* Installation of energy efficient AC windows units having screw
compressor, replacement of V belts with flat belts inAC unit compressors,
installation of real time switches in package ACs, etc.

* Modularization of Chilled Water system to take care of different load
centres, use of Zero CFC based refrigerants; double glazing; high
performance CFC free chillers.

* Introduction of VVVF Drives in the place of conventional type starter
panels for all the movements in Gantries, detachment of Cable realer motors
from all gantry cranes & adopted the cable Festoon system.

* Taking various initiatives to reduce the fuel consumption including:

* Modification of Flue gas ducting system to retain more heat inside the
galvanizing furnace chamber.

* Adding special additives with fuel in order to get complete combustion.

* Pre-heating of fuel to improve combustion.

* Frequent cleaning & monitoring of burner valves, nozzle & strainers.

* Use of Soft Starters:

* Soft Starters utilize a powerful micro - controller, which continuously
monitors motor efficiency. Slight changes in demand will be recognized and
Starter will respond immediately by matching the input power exactly as the
load changes - thus saving energy. The heat generated while running of
motor is minimized. This in turn improves the efficiency drastically.

* Usage of energy efficient motors:

* Energy efficient motors increase the power factor higher than those of
standard motors. Energy efficient motors operate without loss in efficiency
at loads between 75% and 100% of the rated capacity.

* Formation of a dedicated team to focus on Climate Change Mitigation,
Carbon Trading and Environmental Management'.

2. Improving energy effectiveness / efficiency of Manufacturing Processes

* Electrode implementation in vacuum sealed packing to eliminate breaking.

* Development of Portable boring cum milling machine for machining of
nozzle cut out.

* Design & Development of 500 MT Tank Rotator with Anti drift Mechanism.

* Design and development of Portable Flame cutting machine for Nozzle
Cutout.

* Implementation of Data Logger for Welding Equipment for capturing the
actual welding parameters.

* Installation of Automatic Temperature Monitoring & Controlling System
during welding. This development has been granted Patent - 1st Indian
patent for L&T, HZMC.

* Design & Development of SAW Station (Plug & Play) with the following
features:

* Heat insulated platform bottom and seat for operator's comfort.

* Flexible arrangement for welding head mounting

* Modular design

* Indigenous development of hydro expansion tooling for expansion of large
dia tubes.

* Development of Button forming process on Hex sheath of DFSA, DBSA,
SSSLSA.

* Clad Restoration of inaccessible areas of Elbow # Pipe joint by using
camera along with FCAW process.

* Development of FCAW O/L process Station for 3.7m long pipe which was
previously done in sections.

* Development of Clad stripping machine in LEMF replacing manual working.

* Development & installation of portable pipe bevelling machine to replace
manual grinding resulted in reducing the cycle time from 120 minutes to 2
minutes.

* Development & commissioning of Spiral weld overlay reducing the cycle
time by 95%.

* Implementation of Square Butt joint in Special project, converting manual
weld to automatic weld, reducing cycle time for WEP preparation & welding
and reduces rework &repair.

* Installation of Virtual Reality Simulator for training Welding Operators.

* Development of wider Stainless Steel ESSC strip to reduce cycle time.

* Implementation of 350 kg wire Pay-off pack for High thickness Circ Seam
Welding in Station reducing change overtime by 90%.

* Use of Automatic CNC based machine for In-Situ squareness & WEP machining
for Sections in axis horizontal condition.

* Implementation of GMAW-P welding in LEMF defence shops.

* Joining of Cupro Nickel Sleeve to AB grade forging by automatic GTAW
Process.

* Introduction of laser based instruments like cross liners and EDM, which
are more efficient than the conventional measurements with plumbs and
tapes.

* Use of In-Situ Hydro of penetrations without welding blanks on
penetration face, usage of man lift to minimize scaffolding requirement
hence reduction in cost & cycle time.

* CNC Retrofitting of Bench lathe in Kansbahal enhancing productivity
resulting in reduction of process time & power consumption.

* Replacement of 5T melting ARC furnace by 4T energy efficient medium
frequency Induction furnace at Foundry in Kansbahal.

* Installation of Variable frequency drives for EOT crane hoists at LTMBU
to improve the motor efficiency and enhance energy saving.

(b) Additional investments and proposals, if any, being implemented for
reduction of consumption of energy:

* Use of energy saving type of lighting arrangements (LED based, metal
halide etc.) in Shop floor and on roads insidefactory, install lighting
energy saver, replacement of HPSV (high pressure sodium vapour) lamps with
metal halide.

* Procurement of additional Inverter based welding machines instead of
rectifiers for shops, new machines with energy efficient motors, etc.

* Exploring use of Solar AC & wind power solutions.

* Usage of Energy Saver Ballast in more nos. of Flood Lights

* Optimizing excess air in plate heating furnace, Vapour absorption Machine
(VAMs), etc.

* Installation of VFD (variable frequency drive) in secondary chilled water
& condenser water pumps in office buildings.

* Study of Waste Heat Recovery of Natural Gas Power Generator for enhancing
energy efficiency.

* Installation of Natural Gas based additional Generating set -III

* CNC Retrofitting of VDF Table borer for enhancing productivity and
reducing machining time resulting in reduction of process time & power
consumption.

* Replacement of conventional central A/C plant with new energy efficient
plant.

(c) Impact of measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:

* The measures taken have resulted in savings in cost of production, power
consumption & processing time.

(d) Total Energy Consumption and Energy Consumption per unit of production
as per Form A in respect of industries specified in the Schedule:

* NOT APPLICABLE

[B] TECHNOLOGY ABSORPTION:

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:

* Cement & Mineral Process

Process Design and related aspects of Cement / Mineral projects; Modelling
of NOx emission; Use of alternative fuels; Comminution characteristics of
blended cement;Modelling and simulation of entrained flow and fixed bed
coal gasifiers.

* Chemical Engineering

Design, analysis and simulation of chemical processes and equipment, with
special emphasis on Oil & Gas applications (3-phase separators, fuel gas
conditioning skids); Capability development for in-house process
engineering of Process Gas Compressor modules; Fertilizer plant revamp,
Ammonia and Methanol plants. Refractory engineering for chemical plant
equipment.

* Material Science & Corrosion Engineering Construction Material for Oil &
Gas, Refineries and Chemical plants process equipment; Root cause analysis
of metallurgical and corrosion related failures; Surface treatment
processes for defence and aerospace components; Composite materials for
functional properties requirement. Nano Technology for strategic
applications.

* Thermal Engineering

Dynamic simulation of captive power plant; CFD analysis of industrial
machinery and systems (such as air preheaters, kiln burners and wind
tunnels); Design and analysis of thermal systems in refineries and process
plants; Capability development in Super Critical Boiler technology.

* Rotating Machinery

Advanced engineering studies for Oil & Gas and Power projects; Performance
testing and commissioning of process gas compressors; Development and
optimization of coal pulverizer system. Analysis of flow-induced and
acoustic vibration in Oil & Gas pipelines; Advancedanalytical techniques
for machinery design.

* Mechanical Engineering

Development of advanced design / analysis capabilities for equipment and
structure in Heavy Lift & Pipe Lay Vessel; Seismic analysis of on-shore
buried pipeline; Design solutions for various products through advanced
Finite Element analysis; Piping analysis and engineering support in
offshore Oil & Gas applications; Experimental stress analysis of critical
products; Capability development in material non-linear analysis and
fatigue analysis using FE techniques.

* Ocean Engineering

Design, analysis and optimization of complex offshore structures;
Transportation analysis for offshore jacket and compressor modules;
Hydrostatic stability analysis of jackup rigs and semi-submersibles;
Studies on design/analysis of FPSO Topsides, Sub-sea Systems and Jack-up
Rigs; Capability development for in-house engineering of PGC modules
(structural design).

* Water Technologies

Design and specifications for brackish water RO plant;

Design and specifications for membrane bio-reactor for treated sewage
recycling; Studies on RO-based desalination technology, Membrane Bio-
reactors, Thermal Desalination systems and Zero-discharge technologies;
Development of laboratory facilities for water / waste water analysis.

* Development of new products / product ranges of Air Circuit Breakers,
Moulded Case Circuit Breakers, Miniature Circuit Breakers, Contactors,
Relays Switch Disconnector Fuses, Change-Over devices, & Motor starters.

* IGBT based Slip Power recovery systems (benefits - energy saving without
affecting Power Quality).

* 1 MW high quality power supply for sea port application (import
substitution - saving Foreign Exchange).

* DCS for Power system

* Highway Traffic Management System

* Medium Voltage Inverters, designed & developed five types of electronic
energy meters for various applications.

* Development of communication modules for remote meter data acquisition on
GPRS, Low Power Radio, development of software for remote acquisition of
meter data.

* Release of 5 new products in the monitoring range namely Comet-P, Galaxy
55, Star 55 with 12 L ECG, Skyline 55 a 16 bed Central Nurses Station, 3
channel ECG M/c Orion' and in Ultrasound Scintilla' colour Doppler.

* FDA approval for 11 products till date. More focus was placed on
developing and aligning our products to drive our thrust towards exports
largely USA.

* Development of indigenous NIBP module to achieve technology independence
& cost effectiveness for our monitoring products.

* Filing of 14 patents by Medical Division in 2008-2009 and focusing on
self reliance in core technologies in monitoring.

The products have been developed with a focus on

* Enhanced safety and user convenience

* Environment friendly features

* Built-in intelligence & Communication capability

* Conformance to latest Indian & International standards

* Weapon Launch Systems (Structures, mechanisms, drives, controls), Air
Defence Guns (Ballistics, mechanisms, drives, optronics), Robotics &
remotely operated systems, Development of steam generator design for
Nuclear power plant, Manufacturing Technology for thin walled Aero
structures, Development of Plasma Arc Welding Technology for Space &
Strategic applications, Development of Airborne Composite Components.

* Composites (Process & Design Technologies), Regenerative heat exchanger
for strategic project.

* Development of welding Simulation Technology.

* Development of Feed-water Heater Design Package for supercritical power
plants.

* Development of Core technologies for Hypersonic Wind Tunnel Systems.

* Development of Angular Motion Simulator

* Design provisions & development of Optical measurement technologies for
achieving machine tool alignment accuracies within 1 arc second.

* Development of Road Miller, a new product for KBL, which is suitable for
undertaking proper repair of city roads and highways with the possibility
of recycling the old pavement material. The first prototype will be tested
during the FY 2009-10.

* Design of Track-mounted and electrically-driven Primary Mobile Crushing
Plant for crushing aggregate and iron ore.

The first prototype will be tested during the FY 2009-10.

* Design of certain Construction equipment and Body for Tipper Trucks along
with the development of prototypes is on the anvil. Besides this,
developmental work is also being carried on an all-electric Plastic
Injection Moulding Machine.

* R&D efforts in respect of development of 30% energy saving platen
insulation system for tyre curing press, mould container, equipment for
handling rubber ply and designs for internal mixer of 240L and 270L
capacities and Web handling equipment for calendar and extruder lines.

* Development of No Cement Concrete, Development of light weight concrete
panels for modular housing, Continued development in self compacting & high
strength concrete above M80, Development of eco friendly, green products
and conservation of natural sources - Reduction of soil brick in housing
construction by Controlled Low strength Materials in the form of blocks and
concrete.

* Development of alternate foundation system for Transmission line towers.

* Continued Development of soil stabilization techniques for airport sub
grades & high speed corridors, Development of low cost kit for compaction
control under vibratory roller, Continued development of performance grade
Asphalt with polymer, Continued development of recycled asphalt pavement
(RAP) for high speed corridors.

* Development of neural network algorithms for optimization of buildings
design & construction.

* Development of RFID's application in logistics handling and stores
management.

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

* Process design and optimisation for cement plants

* Refractory solutions for high-temperature equipment in process plants

* Process simulation and optimization for E&C projects involving refinery,
fertiliser and chemical plants, Successful testing / commissioning of
plants and equipment in various E&C projects, through multi-disciplinary
technology support, Successful simulation of combined cycle power plant
dynamics; optimization of equipment and system design using CFD technique;
design / optimization of various thermal systems, Development of optimized
design for coal pulverizer / separator system for power plant application,
Development of in-house capability for analyzing flow-induced vibration and
acoustic vibration in oil & gas piping systems, Successful diagnosis of
rotating machinery problems in various projects through vibration /
acoustic analyses, Development of in-house capability for seismic analysis
of buried pipeline, Design / analysis of complex structures and piping
systems for offshore Oil & Gas applications, Development of design /
analysis techniques and resources for Deepwater Oil & Gas applications.

* Material evaluation / characterization; selection of alternative
materials; failure analysis support; preservation and corrosion protection
of critical equipment.

* Design solutions for water treatment systems, Establishment of in-house
water testing facilities.

* Development of capability for in-house engineering of Process Gas
Compressor modules.

* Development of in-house expertise in high-end engineering analysis (e.g.,
advanced FEA, CFD, Dynamic Simulation, Acoustic Mapping, Rotor Dynamics,
Non-Linear Analysis etc.) and technologies such as nano materials, advanced
corrosion control methods and water treatment techniques.

* Expansion of product range and export opportunity, Product improvements,
Cost effective products, Acceptance for International Markets, Technology
up gradation, Developing safe, user and environmental friendly products.

* Providing a comprehensive solution for Automatic Meter Reading (AMR).

* Installation of High speed press Bruderer' and Precision grinding
machine Imatec' for manufacture of magnets for contactors.

* Fully automated testing & packing set up for MCB manufacturing.

* Introduction of a system of E-waste disposal through MPCB approved source
to ensure the environmental friendly disposal.

* Installation of automatic silver plating plant (and with strict process
control, has resulted a reduced water consumption & chemical consumption in
silver plating).

* Road Miller and track-mounted electrically-driven mobile crushing plant
has increased our product range. Road Miller has good export potential.

* Creation and implementation of procedure for top-down design of Mobile
Equipment using 3D Modelling using PLM / Windchill, design validation &
analysis of complete Mobile Equipment using ANSYS and Hypermesh and process
for deriving target specifications for a mobile construction / mining
equipment. This initiative offers tremendous business opportunity as and
when it is decided to launch new products.

* Offering a new product line in Rubber Processing Machinery to cater to
high volume growth market and enable entry into new application area of
rubber mixing technology, besides development of in-house knowledge of
rubber web handling.

* Conservation of Natural resources on development of Controlled Low
Strength Material and alternate Pavement blocks, Reduction in natural
aggregate consumption in Pavement Construction by Mechanistic approach
design and alternate pavement construction, Performance grade binder for
critical conditions of traffic loading, Cost effective utilization of
natural materials with substitution of Recycled Asphalt Pavement materials.

* Building up a strong intellectual property base, Winning national /
international awards in recognition of good designs of products, Enhancing
intelligence and communication capability, Ease of manufacturing &
improvement in productivity, Indigenisation & development of products for
Indian defence sector, Savings in Foreign Exchange.

3. Future Plan of Action:

* Process technology for coal gasification

* Alternative fuels for use in cement plants

* Low-NOx Burners for combustion of alternative fuels

* Simulation of Combustion Chamber

* Design / simulation of Hydrogen and Ammonia processes and Auto Thermal
Reformers.

* Study on Gas Processing techniques

* Study of Synfuels Technology

* Applications of Nano Technology, development of nanomaterials and
coatings

* Application of electrochemical noise method for characterization of
stress corrosion cracking (SCC)

* Carbon-fibre from polymeric fibres

* Dynamic Simulation and Performance Analysis ofCombined Cycle Power Plants

* Technology Analysis of Super Critical Boilers

* Thermo-hydraulic design of Once-Through Steam Generator (OTSG)

* Capability development in machinery design and fault diagnosis involving
advanced analytical techniques

* Study of water hammer / surge phenomena in large liquidhandling pipe
networks

* Application of Statistical Energy Analysis (SEA) in machinery noise
control

* Development of in-house expertise in performing advanced engineering
studies for large EPC Projects

* FE analysis of Floating Structures

* Design / analysis of FPSO Topsides

* Design / Analysis of Jack-up Rigs and Semi-submersible Drilling Rigs

* Design and analysis of Jacket & Deck Installation

* Design and Analysis of Sub-sea pipeline installation

* Capability development for Pile Drivability analysis

* Capability development for motion response analysis of offshore vessels

* Design of Membrane Bio Reactors

* Thermal Desalination techniques

* Recycle, Reuse and Zero-discharge Technologies

* Nano coatings to improvise surface properties

* Nano-catalysts

* Development of new / upgraded products in defence equipments

* Toll Management system including Electronic Toll Collection for National
& State Highways

* Integrated Terminal Automation & Tank Farm Management System for
Petroleum Products

* Power Management System

* Launching new range of cost effective Multi-parameter monitors with rich
features viz. Planet 50N, Star 50N and Planet 30 during Q2 of 2009-2010. A
new trolley model premium Grey scale Ultrasound System and colour Doppler
is under development and is expected to be launched during Q3 of 2009-2010.

* Continuing efforts on bringing out new intelligent meter designs.

* Developing communication modules for meter communication over wired as
well as wireless media.

* Developing software for data acquistion and Advanced Metering
Infrastructure (AMI)

* Developing another new model of Surface Miner with higher capacity of
coal mining, thus extending the existing range of Surface Miners.

* Creating & implementing Test protocol and field testing for Mobile
construction / mining Equipment to simulate functional requirement / field
conditions.

* Developing new products and upgrade existing products in rubber mixing,
besides capability development in automated material handling pertaining to
tyre industry.

* Development of thermal efficient building products

* Development of high early strength concrete for faster construction

* Development of deep soil mixing technique

* Development of Laboratory information management system for Construction

* Development of Pavement Management System

* Development of faster construction methods and systems

4. Expenditure on R&D:

Rs. crore
2008-2009 2007-2008

(a) Capital 5.01 6.61
(b) Recurring 75.18 60.64
(c) Total 80.19 67.25
(d) Total R&D expenditure as a 0.24% 0.27%
percentage of total turnover

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

1. Efforts in brief made towards technology absorption, adaptation and
innovation:

* Interaction with external agencies / technology partners for exposure to
the latest products / designs, manufacturing technologies, processes,
analytical techniques and engineering protocols.

* Participating in national / international conferences, seminars and
exhibitions.

* Valuation, adaptation and/or modification of imported designs /
technologies to suit indigenous requirements, alternative materials /
components.

* Parametric studies involving theoretical models duly validated by
experimental studies at in-house laboratories and pilot plants as well as
feedback and operating data during commissioning of various plants and
machinery.

* Review of patents in relevant technology areas.

* Collaborative efforts with educational / research institutions for
technology upgradation.

* Use of state-of-the-art equipment, instrument and software.

* Analyzing feedback from users to improve processes and services.

* Adaptation of previously developed technologies for delivering products
such as Winch & Mooring System for Aerostats, Torpedo Launcher mounts, ASW
Rocket launcher mounts & Anti-Tank Guided Missile launchers.

* Indigenisation of all the boiler components of Shell Coal Gasifiers.

* Development of hydraulic gap setting mechanism for Jaw Crusher, STJ108.

* Development of design of Vibrating Feeder, Grizzly Feeder and Conveyor
for Mobile Crushing Plant.

* Introduction of new products with indigenous technology; also developing
products which are user-friendly, ecofriendly and with enhanced safety
features.

* Technology absorption in rubber mixing through hiring the services of a
Consultant.

* Development of Blanking Tool For Climbing Bracket Head Plate - which
avoids Gas cutting and grinding.

* Development of Compound Tool For Climbing Bracket Main Plate - which
combines 3 different operations in a single tool.

2. Benefits derived as a result of the above efforts, e.g., product
improvement, cost reduction, product development, import substitution,
etc.:

* Successful simulation / optimization of process design and engineering
for various E&C projects (cement, refinery, Oil& Gas, fertilizer and
chemical plants).

* Appropriate refractory design for high-temperature applications.

* Successful selection and characterization of materials for critical
applications and implementation of suitable preservation / corrosion
protection techniques.

* Establishment of in-house capability for dynamic simulation of complex
thermal-fluid systems in Combined Cycle Power Plant.

* Development of upgraded cement kiln and ball mill designs, suitable for
enhanced production capacity and higher operating speeds.

* Development of in-house expertise for seismic analysis of buried
pipelines.

* Effective solutions to design / analysis problems involving complex
structures and piping systems for offshore Oil & Gas applications.

* Development of in-house analysis capabilities and resources for Deepwater
Oil & Gas applications.

* Capability development for design for water treatment systems for various
applications.

* Successful testing / commissioning of plants and equipment in various E&C
projects, through multi-disciplinary technology support.

* Acquisition of in-house expertise in high-end engineering analysis (e.g.,
advanced FEA, CFD, Dynamic Simulation, Acoustic Mapping, Rotor Dynamics,
Non-Linear Analysis etc.) and technologies such as composite materials,
advanced corrosion control methods and water treatment techniques.

* Establishment / upgradation of state-of-the art laboratory facilities for
material characterization, chemical analysis, corrosion control, vibration
and acoustics and experimental stress analysis, in order to provide
comprehensive technology support to business units. This has reduced the
dependence on external agencies and enabled effective execution of
projects.

* Indigenisation (import substitution) & development of products for Indian
defence sector

* Expansion of product range and export opportunities.

* Product improvement.

* Increasing knowhow within the country.

* Improving the effectiveness of the operation of the crusher by increading
the Hydraulic gap setting.

* Development of Vibrating Feeder, Grizzly Feeder and Conveyor have
resulted in product improvement and also cost reduction.

3. Information regarding technology imported during the last 5 years

S. Technology Imported Year of Status
No. Import

a) Sour Water Stripping Process 2005 Absorbed
b) Tail Glass Treatment Process 2005 Absorbed
c) Manufacturing know-how of
Cementing Unit 2007 Absorbed

[C] FOREIGN EXCHANGE EARNINGS AND OUTGO:

Activities relating to exports, initiatives taken to increase exports;
development of new export markets for products and services; and export
plans.

Overview:

The Company has a diversified range of products. Each business division of
the Company has dedicated cells for giving impetus to exports. The Company
has offices abroad and agents in various countries to boost exports. The
Company is intensifying efforts in selected countries and exploring new
markets. The Company is expanding reach of new products through synergy
with existing products and, International Engineering, Procurement and
Construction (EPC) projects. Export of heavy engineering equipment has been
identified as thrust area. The Company regularly participates in
prestigious international exhibitions and conducts market surveys and
direct mail campaigns. The Company has an international presence, with a
global spread of offices and joint ventures with world leaders.

Its large technology base and pool of experienced personnel enable it to
offer integrated services in world markets. Engineering & Construction
Division:

E&C Division continues to focus on GCC countries for procuring EPC
contracts. The division has set up overseas design and engineering centres
in UAE to cater to engineering support on new projects, obtaining stand-
alone engineering/consultancy business and co-ordination/support on EPC
projects awarded in the region. The division is also focusing on electro-
mechanical construction works in all GCC countries and towards achieving
the same, JV companies have been formed in Kuwait, Oman, Saudi Arabia &
Qatar. The division is widening its network of overseas marketing partners
in the GCC as well as other countries in the Middle East & Far East. The
division is looking forward to other opportunities in the MENA region
(Middle East and North Africa) and CIS countries.

The Company's E&C Division has executed and is executing Engineering,
Procurement (EP) and Engineering, Procurement and Construction (EPC)
projects in countries like Oman, Qatar, Saudi Arabia, Kuwait, UAE,
Malaysia, Tanzania, Sri Lanka, etc., and in the field of upstream
hydrocarbon, mid & downstream hydrocarbon, hydrocarbon plant construction &
pipelines and power. E&C Division has actively contributed towards clean
environment through execution of Clean Fuel projects such as Motor Spirit
Quality Upgradation, Diesel Hydro treating, Hydrogen and Sulphur Block
projects.

The global market for construction industry was at boom during the first
half of 2008-09. The Gulf market due to phenomenal oil price hike created
lots of opportunity for the Company during the first half. The inflationary
trend had its own impact by way of unprecedented increase in commodity
prices which hassqueezed the margin since majority of the Company's
contracts were fixed price contracts.

The business environment was very sluggish during the second half of 2008-
09 for the Building & Urban Infrastructure business due to the macro-
economic decline on a scale not seen for decades.

The economic meltdown had a great impact on the property market in Dubai,
which has forced the developers to defer lot of their ambitious plans
resulting in a very depressed market. The Buildings & Urban Infrastructure
business could not secure any order due to the adverse market trend. The
Company had also adopted a cautious approach in selecting the bids to avoid
liquidity risk seen during recession. However the Power Transmission &
Distribution business and Ready Mix Concrete business strengthened its
presence in select Gulf Market.

The Gulf economy is mainly dependant on the movement of oil price. With the
oil price oscillating up and down it is expected that the year ahead is
going to be much more challenging than the previous year. The business
prospects for the Gulf Projects in the Infrastructure, Power Transmission &
Distribution business are expected to be promising. The thrust on
geographical expansion through focus countries (Kuwait, Saudi, South
Africa, Botswana & Libya) is expected to yield good result in the years to
come. There are plans to strengthen our position in the readymix- concrete
business. Expanding the business horizon and geography are some of the
futuristic initiatives taken by the construction division.

Heavy Engineering Division (HED):

HED continues to take a number of initiatives to enhance export growth. In
the last financial year, exports accounted for 50% of total sales in the
Division.

South America in general & Brazil in particular is emerging as a major
market for process plant equipment. HED has booked orders worth Euro 113
million for the supply of Reactors & Coke Drums for North East Refinery
project of Petroleo Brasileiro S.A. - Petrobras, Brazil.

Middle East & North Africa (MENA) continues to be focus market for HED.
Orders for supply of critical equipment to fertilizer projects were
received from Oman, Algeria.

Orders for supply of Ammonia converters for various projects in Iran were
received. With these orders, Iran has been included in HED's list of
important markets for equipment supply. Coal gasification equipment is one
of HED's key products for export. Orders for this equipment have been
received from Shuifu Coal Revamp Project, China and Ninh Binh Fine Coal
Based Urea Project, Vietnam.

China remains to be a major market for HED's products. Apart from coal
gasification equipment, HED has also received order for Methanol Converter
for Sichuan Vinylon Works, Chongqing. HED has been exploring opportunities
for export of Defence, Nuclear Power & Aerospace equipment as well. With
authorization from ASME (American Society of Mechanical Engineers) for the
use of N' & NPT' stamps, the Company is well placed to supply critical
nuclear power equipment to the overseas market.

HED's initiative for boosting of exports includes the following:

* Offering valued added services like site work for Chinese projects

* Participation in international seminars

* Building on the success of Power Plant equipment with overseas customers

* Offering value added services like maintenance-friendly design features
for High Pressure Heat Exchangers at customer's plants.

* Establishment of Representative Offices in major overseas markets.

Electrical & Electronics Business Division:

International Sales of Electrical Standard Products (ESP) has continued to
pursue the two pronged strategy of promoting sales to select overseas
markets and to brand labelling partners.

With the introduction of type tested fixed type Switchboard in the UAE, ESP
has made substantial inroads in the UAE market, securing prestigious
building projects. New products such as Busbar trunking and Wires were
introduced in selected markets. ESP has entered into new brand labelling
arrangements for MCCBs and supplies to commence during 2009-2010. ESP has
completed CCC (China Compulsory Certification) for MCCBs & Controlgear
products as planned. Export sales during 2008-09 were 97.6 Cr (36% growth).
Export as % of ESP sale has increased from 5.4% (in 07-08) to 7.3% (in 08-
09).

The Electrical Systems and Equipment, offering electrical systems up to
Medium Voltage (MV) range, grew significantly in the GCC countries and
North Africa. The Division's JV in Saudi Arabia has executed many
significant projects in the Gulf countries. MV product sales has also
increased substantially over last year and enabled better positioning as
complete electrical solution provider up to 36kV range. Control &
Automation business has exports of engineered control and automation
solutions to Middle East, African countries etc.

It has export of engineering & software services. Also Deemed export of the
supplies & services for the control & automation systems.

Metering business booked an order for trivector meters worth US $ 0.5
million from Bangladesh. It will be executed in 2009-10. It has
participated in tenders worth US $ 0.4 million which are under evaluation.
Also development of meter as per specifications of utilities in certain
select markets is in progress. Manufacturing & Industrial Products
Division:

Kansbahal (KBL) Unit has developed contact with potential customers, local
service providers in the Middle-East and countries like Australia,
Indonesia, where opportunity for exporting Surface Miners is good.

Valves Business Unit already has a sizeable export business. Plans are
afoot to scale up the exports through leveraging alliances and agreements
with major end-users, and diversifying into additional markets such as
South America, Iran etc., also increased focus into Power Sector.

Rubber Machinery Business Unit (LTMBU) has been continuously working on
development of export markets, as most global tyre companies are its major
customers and revenues from exports have always been forming a significant
portion of LTMBU sales.

A few initiatives detailed:

The following initiatives have been taken by the Company

* Expanding Modular Fabrication Facility at Hazira and making operational
its Modular Fabrication Yard at Sohar, Oman to cater to deepwater
opportunities.

* Joint venture with SapuraCrest Petroleum Berhad of Malaysia to form
Offshore International FZC, for construction of own Heavy Lift & Pipelay
Vessels (HLPV) to provide offshore installation services to the Oil & Gas
industry. A 290-man HLPV (LTS 3000), is under construction for the JV at a
shipyard in Batam, Indonesia and is scheduled to enter service in Q1 2010.

* Establishing two joint ventures with Mitsubishi Heavy Industries of Japan
for environment-friendly coal-fired supercritical boilers and supercritical
steam turbine generators.

* Joint Ventures with local companies for undertaking electromechanical
construction activities for Hydrocarbon Construction & Pipelines, for the
Middle East and South East Asian markets.

* Efforts for strategic alliances with Process Licensors / technology
Providers and reputed international EPC players are underway to undertake
high value projects in international markets.

* Widening new geographical areas for augmenting its exports.

* Exploring inorganic growth opportunities for the acquisition of
specialized engineering outfits abroad.

* Membership of global forums like Engineering & Construction Risk
Institute (ECRI) and participating in international seminars.

* Implementation of Project KIRAN to towards operational excellence and
creating a lean high performance organization.

* Implementation of Knowledge Management System 'KnowNet' for capturing
tacit knowledge in the form of learnings & experiences and disseminating
the same across the organization.

* Bringing in high caliber resources in the areas of front-end marketing,
engineering, project management, risk management, contract administration,
etc., to strengthen the overseas operations.

* Customized Talent Management programmes including flagship Capability &
Leadership Development (CALD) programmes for catering to the training and
development needs of employees.

* Setting up a premier world-class centre for excellence in project
management - Project Management Institute (PMI) at L&T Knowledge City -
Vadodara.

Total foreign exchange used and earned:
Rs. crore
2008-2009 2007-2008
Foreign Exchange earned 7,348.23 5,656.59
Foreign Exchange saved /
deemed exports 92.31 124.04
Total 7,440.54 5,780.63
Foreign Exchange used 7,899.42 4,534.37

Annexure B' to the Directors' Report

Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999

(I) Employee Stock Ownership Scheme-1999-2003:

A. PRE RESTRUCTURE:

ESOP SERIES
Particulars SAR-1999 2000 2002-A

(a) Options granted 10,66,000 39,48,800 37,81,100
Stock Appreciation Equity shares Equity shares
Rights (SARs)

(b) The pricing Grant price for the The average The average
formula purpose of market price on market price on
ascertaining the the Stock the Stock
appreciation: Exchange, Exchange,
Average of daily Mumbai, Mumbai,
High Low Averages on the date on the date
of the Company's of grant i.e., of grant i.e.,
Share price on the June 1, April 19,
Stock Exchange, 2000 - Rs.184/- 2002 -Rs.172/-
Mumbai, per share. per share.
during the year 2003 - Rs.206/- 2003 - Rs.206/-
April 1998 - per share. per share.
March 1999.
This worked out to
Rs. 199/- per share.

(c) Options vested 10,60,750 38,64,050 20,67,250

(d) Options 2,66,500 52,415 12,750
exercised

(e) Total number
of shares
arising as a
result of
exercise of
Options
(Equity
shares of
Rs. 10/-
each) 1,04,318 52,415 12,750

(f) Options
lapsed 5250 1,46,025 1,25,300

(g) Variation
of terms of
Options Nil Nil Nil

(h) Money
realised by
exercise of
Options Rs. 10,43,180 Rs. 96,44,360 Rs. 21,93,000

(i) Total Number of
Options in force 7,94,250 37,50,360 36,43,050
SARs

A. PRE RESTRUCTURE:

ESOP SERIES
Particulars 2002-B 2003-A 2003-B

(a) Options granted 37,81,660 67,51,000 57,42,500
Equity shares Equity shares Equity shares

(b) The pricing The average The average of The average of
formula market price on the two weeks the two weeks
the Stock high and low high and low
Exchange, prices of the prices of the
Mumbai, shares on the shares on the
on the date Stock Exchange, Stock Exchange,
of grant i.e., Mumbai, Mumbai,
April 19, preceding the preceding the
2002 - Rs.172/- date of grant date of grant
per share. i.e., May 23, i.e., May 23,


(c) Options vested 20,19,830 Nil Nil

(d) Options 6,250 Nil Nil
exercised

(e) Total number
of shares
arising as a
result of
exercise of
Options
(Equity
shares of
Rs. 10/-
each) 6,250 Nil Nil

(f) Options
lapsed 1,07,375 Nil Nil

(g) Variation
of terms of
Options Nil Nil Nil

(h) Money
realised by
exercise of
Options Rs. 10,75,000 Nil Nil

(i) Total Number of
Options in force 36,68,035 67,51,000 57,42,500

A. PRE RESTRUCTURE:
ESOP SERIES
Particulars SAR-1999 2000 2002-A 2002-B 2003-A 2003-B

(j) Employee-wise
details of
Options granted to -

i) Senior
Managerial
Personnel:

Mr. A.M. Naik 1,25,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000
Mr. J.P. Nayak 60,000 1,00,000 1,00,000 1,20,000 1,20,000 1,20,000
Mr. Y.M.
Deosthalee 60,000 1,00,000 1,00,000 1,20,000 1,20,000 1,20,000
Mr. K.
Venkataramanan 60,000 1,00,000 1,00,000 1,20,000 1,20,000 1,20,000
Mr. R.N. Mukhija 30,000 60,000 85,000 80,000 85,000 85,000
Mr. V. K. Magapu 20,000 35,000 35,000 40,000 22,500 22,500
Mr. K.V.
Rangaswami 16,000 25,000 25,000 27,000 17,500 17,500
Mr. M.V. Kotwal 16,500 27,000 27,000 30,000 17,500 17,500
Mr. A.
Ramakrishna 80,000 1,25,000 1,25,000 90,000 60,000 -
Mr. P.M. Mehta 30,000 60,000 85,000 40,000 - -
Mr. M. Karnani 40,000 42,000 - - - -
5,37,500 8,74,000 8,82,000 8,67,000 7,62,500 7,02,500
ii) Any other
employee who None None None None None None
receives a grant,
in any one year,
of Options
amounting to
5% or more
of Options
granted during
that year.

iii) Identified
employees who None None None None None None
were granted
Options, during
any one year,
equal to or
exceeding 1%
of the issued
capital
(excluding
outstanding
warrants and
conversions)
of the Company
at the time of
grant.

Consequent to the demerger (sanctioned by the High Court of Judicature at
Bombay on April 22, 2004) of Cement Business of the Company and
restructuring of the share capital the outstanding SARs were converted into
equivalent number of Options and the total number of Options in force as
above were readjusted in proportion to the restructured equity capital
i.e., one Option for an equity share of the face value of Rs. 2/- for every
two Options and repriced at Rs. 14/- per Option in respect of ESOP Series
1999, 2000, 2002-A & 2002-B and Rs. 70/- per Option in respect of ESOP
Series 2003-A & 2003-B.

B. POST RESTRUCTURE (PRE BONUS ISSUE -2006)
ESOP SERIES
Particulars SAR-1999 2000 2002-A

(a) (1) Options granted
(outstanding 3,97,125 18,75,180 18,21,525
and adjusted consequent to
restructuring of
share capital)

(2) Options granted during:

(a) 2005-2006

(b) 1.4.2006 to 29.9.2006
(Equity shares of
Rs. 2/- each)

(b) The pricing formula - Rs.14/- -
(Adjusted grant price
per share)

(c) Options vested
(adjusted on restructure) 3,97,125 18,75,180 10,22,050
Add: vested post
restructure - - 7,90,312
Total 3,97,125 18,75,180 18,12,362

(d) Options exercised 3,97,121 18,65,367 18,03,824

(e) Total number of
shares arising as
a result of exercise
of Options
(Equity shares
of Rs.2/- each) 3,97,121 18,65,367 18,03,824

(f) Options lapsed and/or
withdrawn 4 5,613 12,326

(g) Variation of terms of
Options Nil Nil Nil

(h) Money realised by
exercise of
Options Rs.55,59,694 Rs.2,61,15,138 Rs.2,52,53,536

(i) Total Number of
Options in force -
Vested Nil 4,200 5,375
Unvested Nil Nil Nil
Total Nil 4,200 5,375

(j) Employee-wise Please refer to part A (j)
details of
Options granted

ESOP SERIES
Particulars 2002-B 2003-A 2003-B

(a) (1) Options granted
(outstanding 18,34,018 33,75,500 28,71,250
and adjusted consequent to
restructuring of share capital)

(2) Options granted during:

(a) 2005-2006 6,02,670
(b) 1.4.2006 to 29.9.2006 56,460
(Equity shares of
Rs. 2/- each) 35,30,380

(b) The pricing formula - Rs.70/- -
(Adjusted grant price
per share)

(c) Options vested
(adjusted on restructure) 10,02,003 Nil Nil
Add: vested post restructure 8,20,708 20,51,220 19,32,585
Total 18,22,711 20,51,220 19,32,585

(d) Options exercised 18,04,510 20,33,343 19,14,964

(e) Total number of
shares arising as
a result of exercise
of Options
(Equity shares
of Rs.2/- each) 18,04,510 20,33,343 19,14,964

(f) Options lapsed and/or
withdrawn 14,583 6,94,997 3,23,009

(g) Variation of terms of
Options Nil Nil Nil

(h) Money realised by
exercise of
Options Rs. 2,52,63,140 Rs.142334010 Rs.134047480

(i) Total Number of
Options in force -
Vested 14,925 17,389 17,135
Unvested Nil 6,29,771 12,75,272
Total 14,925 6,47,160 12,92,407

(j) Employee-wise Please refer to part A (j)
details of
Options granted

Consequent to the issue of Bonus Shares the total number of Options in
force as above as at the record date for Bonus Issue i.e., September 29,
2006 was readjusted in number in the ratio of Bonus Issue (1:1) and the
above exercise price of Rs. 14/- and Rs. 70/- was readjusted to Rs. 7/- and
Rs. 35/- respectively.

C. POST RESTRUCTURE (POST BONUS ISSUE 2006 - PRE BONUS ISSUE 2008):

ESOP SERIES
Particulars 1999 2000 2002-A 2002-B 2003-A 2003-B

(a) (1) Options
granted
(outstanding
and adjusted
consequent to
Bonus Issue) Nil 8,400 10,750 29,850 12,94,320 25,84,814

(2) Options
granted post
Bonus Issue 7,18,430

(Equity shares of
Rs. 2/- each) 33,03,244

(b) The pricing - Rs.7/- - - Rs. 35/- -
formula
(Adjusted grant
price per share)

(c) Options vested
(adjusted on Bonus
Issue) Nil 8,400 10,750 29,850 34,778 34,270
Add: vested post
Bonus Issue - - - - 12,35,430 19,90,863
Total Nil 8,400 10,750 29,850 12,70,208 20,25,133

(d) Options
exercised Nil Nil Nil Nil 12,52,754 19,38,270

(e) Total number
of shares arising
as a result of
exercise of
Options*
(Equity shares
of Rs. 2/- each) Nil Nil Nil 10,000 12,45,754 18,95,270

(f) Options lapsed Nil Nil Nil Nil 25,840 2,12,861

(g) Variation of
terms of Options Nil Nil Nil Nil Nil Nil

(h) Money realised
by exercise of
Options Nil Nil Nil Rs.70000 Rs.43601390 Rs.66334450

(i) Total Number of
Options in force -
Vested Nil 8,400 10,750 19,850 15,726 81,963
Unvested Nil Nil Nil Nil Nil 10,70,150
Total Nil 8,400 10,750 19,850 15,726 11,52,113

(j) Employee-wise - Please refer to Part A(j) -
details of Options
granted

* During the year 2007-2008, 50,000 shares were allocated to employees who
exercised 7,000 Options under 2003-A Series and 43,000 Options under 2003-B
Series from the shares returned by two former Directors, pursuant to a
Court order.

Consequent to the issue of Bonus Shares 2008 the total number of Options in
force as above as at the record date for Bonus Issue i.e. October 3, 2008
was readjusted in number in the ratio of Bonus Issue (1:1) and the above
exercise price of Rs. 7/- and Rs. 35/- was readjusted to Rs. 3.50 and
Rs.17.50 respectively.

C. POST RESTRUCTURE (POST BONUS ISSUE 2008):

ESOP SERIES
Particulars 1999 2000 2002-A 2002-B 2003-A 2003-B

(a) (1) Options
granted

(outstanding
and adjusted
consequent to
Bonus Issue) Nil 16,800 21,500 39,700 31,452 23,04,226

(2) Options
granted post
Bonus Issue 1,53,800

(Equity shares
of Rs. 2/- each) 24,58,026

(b) The pricing - Rs. 3.50 - - Rs. 17.50 -
formula

(Adjusted grant
price per share)

(c) Options vested
(adjusted on Bonus
Issue) Nil 16,800 21,500 39,700 31,452 1,63,926

Add: vested post
Bonus Issue - - - - - 5,19,650
Total Nil 16,800 21,500 39,700 31,452 6,83,576

(d) Options
exercised Nil Nil Nil Nil Nil 4,47,226

(e) Total number
of shares arising
as a result of
exercise of
Options

(Equity shares
of Rs. 2/- each) Nil Nil Nil Nil Nil 4,47,226

(f) Options
lapsed Nil Nil Nil Nil Nil 50,912

(g) Variation of
terms of Options Nil Nil Nil Nil Nil Nil

(h) Money realised
by exercise of
Options Nil Nil Nil Nil Nil Rs.7826455

(i) Total Number
of Options in force -
Vested Nil 16,800 21,500 39,700 31,452 2,26,326
Unvested Nil Nil Nil Nil Nil 17,33,562
Total Nil 16,800 21,500 39,700 31,452 19,59,888

(j) Employee-wise -Please refer to Part A(j) -
details of
Options granted

Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999

(II) Employee Stock Option Scheme - 2006

A. PRE BONUS ISSUE 2008

ESOP SERIES
Particulars 2006 2006-A

(a) (1) Options 53,35,750 -
granted (Pre Bonus
Issue)

Options
Outstanding and 1,06,71,500 -
adjusted
consequent to
Bonus Issue#

(2) Options granted 6,94,270 29,06,240
Post Bonus Issue
(Equity shares of
Rs. 2/- each)

(b) The pricing The latest available The latest available
formula closing price on closing price on National
National Stock Stock Exchange of
Exchange of India India Limited on June 29,
Limited on August 2007, preceding the
31, 2006, preceding date of grant i.e, July 1,
the date of initial 2007 - Rs. 2,198/- per
grant i.e., September share (Discounted
1, 2006 - Rs.2,404/- grant price per share
per share. - Rs. 1,202/-)

# Consequent to the issue of Bonus Shares the total number of Options in
force as at the record date for Bonus Issue i.e., September 29, 2006 was
readjusted in number in the ratio of Bonus Issue (1:1) i.e. 1,06,71,500
Equity Shares and the above exercise price of Rs. 2,404/- was readjusted to
Rs. 1,202/-.

Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999

(II) Employee Stock Option Scheme - 2006

ESOP SERIES
Particulars 2006 2006-A

(c) Options vested 20,13,200 40,524

(d) Options exercised 12,80,677 25,034

(e) Total number of shares arising
as a result of exercise of Options
(Equity shares of Rs. 2/- each) 12,80,677 25,034

(f) Options lapsed and/or withdrawn 32,72,955 1,80,428

(g) Variation of terms of Options Nil Nil

(h) Money realised by exercise
of Options 153,93,73,754 3,00,90,868

(i) Total Number of Options in force -
Vested 6,97,138 14,844
Unvested 61,15,000 26,85,934
Total 68,12,138 27,00,778

(j) Employee-wise details of
Options granted to:

i) Senior Managerial Personnel None

ii) Any other employee who receives a grant, None
in any one year, of Options amounting to 5%
or more of Options granted during that year

iii) Identified employees who were granted None
Options, during any one year, equal to or
exceeding 1% of the issued capital (excluding
outstanding warrants and conversions) of the
Company at the time of grant

Consequent to the issue of Bonus Shares 2008 the total number of Options in
force as above as at the record date for Bonus issue i.e. October 3, 2008
was readjusted in number in the ratio of Bonus Issue (1:1) and the above
exercise price of Rs. 1202/- was readjusted to Rs. 601/-.

Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999

(II) Employee Stock Option Scheme - 2006

B. POST BONUS ISSUE 2008

ESOP SERIES
Particulars 2006 2006-A

(a) (1) Options granted (outstanding 1,36,24,276 54,01,556
and adjusted consequent to Bonus Issue

(2) Options granted Post Bonus Issue Nil 6,46,295
(Equity shares of Rs. 2/- each) 1,36,24,276 60,47,851

(b) The pricing formula Rs. 601/-
(Adjusted grant price per share)

(c) Options vested 13,94,276 29,688
(Adjusted on Bonus Issue)
Add: Vested post Bonus Issue 40,48,750 2,75,608
Total 54,43,026 3,05,296

(d) Options exercised 37,516 19,012

(e) Total number of shares arising as a
result of exercise of Options (Equity
shares of Rs. 2/- each) 37,516 19,012

(f) Options lapsed and/or withdrawn 2,61,900 1,33,664

(g) Variation of terms of Options Nil Nil

(h) Money realised by exercise of Options 2,25,47,116 1,14,26,212

(i) Total Number of Options in force -

Vested 53,21,810 2,79,136
Unvested 80,03,050 56,16,039
Total 1,33,24,860 58,95,175

(j) Employee-wise details of
Options granted to:

i) Senior Managerial Personnel None

ii) Any other employee who receives a grant, None
in any one year, of Options amounting to 5%
or more of Options granted during that year

iii) Identified employees who were granted None
Options, during any one year, equal to or
exceeding 1% of the issued capital (excluding
outstanding warrants and conversions) of the
Company at the time of grant

Employee Stock Ownership Scheme -1999-2003 and Employee Stock Option Scheme
- 2006

(k) Diluted Earning per Share (EPS) (a) Diluted EPS before extraordinary
pursuant to issue of shares on items Rs. 45.68
exercise of Options calculated in (b) Diluted EPS after extraordinary
accordance with Accounting items Rs. 58.70
Standards (AS) 20

(l) The difference between employee compensation cost using intrinsic value
method and the fair value of the Options and impact of this difference on
profits and on EPS.:

Had fair value method been adopted for expensing the ESOP compensation:

(a) the ESOP compensation charge debited to P&L A/c for the year 2008-2009
would have been higher by Rs. 93.74 crore (excluding Rs. 0.55 crore on
account of grants to employees of subsidiary companies)

(b) Basic EPS before extraordinary items would have decreased from Rs.46.30
per share to Rs. 44.70 per share

(c) Basic EPS after extraordinary items would have decreased from Rs. 59.50
per share to Rs. 57.90 per share.

(d) Diluted EPS before extraordinary items would have decreased from Rs.
45.68 per share to Rs. 44.10 per share.

(e) Diluted EPS after extraordinary items would have decreased from
Rs.58.70 per share to Rs. 57.12 per share.

(m)(i) (a) Weighted average exercise Rs. 508.69 per option
prices of Options granted during the
year where exercise price is less
than market price.

(b) Weighted average exercise prices No such grants during the year
of Options granted during the year
where exercise price equals market
price.

(ii) (a) Weighted average fair values Rs. 670.71 per option
of Options granted during the year
where exercise price is less than
market price.

(b) Weighted average fair values of No such grants during the year
Options granted during the year
where exercise price equals
market price.

(n) Method and significant assumptions
used to estimate the fair value of
Options granted during the year.

(a) Method Black-Scholes Method

(b) Significant Assumptions

(i) Weighted average risk-free
interest rate 8.60%

(ii) Weighted average expected life
of Options 3.75 years

(iii) Weighted average expected
volatility 44.40%

(iv) Weighted average expected Rs. 39.42 per option
dividends

(v) Weighted average market price Rs. 1,018.59 per share

Notes: 1. The weighted average exercise price and fair values of the
options have been computed after considering bonus issue.

Auditors' certificate on employee stock option schemes:

We have examined the books of account and other relevant records and based
on the information and explanations given to us, certify that in our
opinion, the Company has implemented the Employee Stock Option Schemes in
accordance with SEBI (Employee Stock Option Schemes and Employee Stock
Purchase Scheme) Guidelines, 1999 and the resolutions of the Company in
general meetings held on August 26, 1999, August 22, 2003 and August 25,
2006.

SHARP & TANNAN
Chartered Accountants

by the hand of
F.M. Kobla
Partner
Mumbai, May 28, 2009 Membership No. 15882

MANAGEMENT DISCUSSION AND ANALYSIS

Review of the Economic Scenario:

The Indian economy began the year 2008- 2009 on a confident note. Sound
economic fundamentals, encouraging performance by the country's
infrastructure & core sectors and buoyant global economic conditions were
conducive for maintaining the investment momentum. However, the global
financial turmoil emerging from sub-prime crisis in the US, extreme
volatility in the prices of crude oil, steel, cement & other key raw
materials and liquidity constraints led to a slowdown in the domestic
economy .

Consequently, the country's GDP growth for the year 2008-2009 dropped to
6.7% against the growth of around 9% seen during the past few years. Almost
all the sectors of the economy witnessed considerable moderation in the
growth trends. In particular, manufacturing and capital goods sectors were
adversely impacted by the credit squeeze and low demand forcing the
postponement of industrial expansion plans.

The Index of Industrial Production for 2008- 2009 showed a growth of around
2.3% as compared to the growth of 8.5% in the previous year. Similarly, the
construction sector showed a lower growth rate of around 7.2 % as compared
to 10.1 % in the previous year. The adverse impact was also felt in many
government sponsored infrastructure projects owing to credit crunch and
tighter monetary policies adopted to combat inflation.

The economies in the Gulf region, once holding promising business
prospects, were also not spared from the brunt of global economic down-
turn, especially after the crude oil prices decreased sharply during the
last quarter of fiscal 2008-2009. The problem was accentuated due to
contraction in the demand for petroleum products. This heightened the
uncertainty for new capital investments in oil exploration and distribution
in the Gulf countries. These developments posed significant challenges for
the international business of the Engineering and Construction segment.

Business Performance

Countering the adverse business conditions, the Company achieved
satisfactory growth in the order inflow during 2008-2009. The Engineering
and Construction segment was able to garner project orders not only in
traditional sectors such as Hydrocarbon and Infrastructure, but were also
successful in bagging orders in the emerging sectors such as Railways and
Power. The orders came mainly from the domestic market.

The sales growth during the year 2008-2009 was impressive on the back of
healthy performance of the Engineering & Construction segment. The product
businesses, however, saw severe curtailment in the demand for industrial
goods due to economic slowdown and therefore could register only a marginal
growth in revenues for the year as a whole.

The order book as on March 31, 2009 at Rs. 70,319 crore provides a strong
visibility to the Company's sales revenue during 2009-2010 and 2010-2011
even in the face of a continuing economic downturn.

The Company has recorded a healthy increase in the profitability driven by
improved margins of Engineering & Construction segment demonstrating the
Company's superior project execution capabilities and a comprehensive risk
mitigation framework, complemented by a focused organisation structure. The
Company's profitability was protected from input cost volatility due to
efficient contract structuring. The product businesses, however had to bear
the burden of higher input costs without corresponding higher realisation
from the market.

At the Group level, the total income registered a significant increase over
the previous year driven by a satisfactory performance of the parent
company and its flagship subsidiaries.

Strategic Initiatives

The Company is well on its course to meet its strategic plan target as per
'Project Lakshya 2010', despite the challenges being experienced currently
due to economic slowdown. This has been largely due to the effective
business strategies pursued by the various business divisions of the
Company, encompassing capacity augmentation, building up of superior
execution capabilities, technology tie-ups, risk analysis and mitigation.
Moreover, the strategy of bidding for only large projects, and thereby
economising on the critical resources, has yielded better financial results
besides taking the L&T brand to the next higher league.

The foray into high potential businesses such as Railways and Power
equipment has been successful during the year and boosted the order inflow.
The Company's proven EPC capabilities in turnkey power projects are being
strengthened with major investments in the manufacturing facilities for
super critical boilers & turbine generators at Hazira. New fabrication yard
at Sohar, Oman has added to the EPC capability for large projects in
upstream hydrocarbon sector. To augment heavy engineering capability to
cater to the Middle East market, an advanced fabrication facility is being
set up in Oman.

Post signing of nuclear fuel treaty, new vistas of opportunity in the field
of civilian nuclear power are expected to unfold during the coming years.
The Company has been playing a lead role in equipment supplies and
construction in the country's domestic nuclear power programmes. The
Company has recently concluded several tie ups with leading international
groups in the areas of advanced nuclear technology. A state-of-theart heavy
forging facility for nuclear equipment is being set up at Hazira in
Gujarat.

The ship building facilities have been stabilised in Hazira with the first
commercial ship slated for delivery in 2009-2010. A new shipyard being set
up in Kattupalli, Tamil Nadu, will mainly cater to the anticipated business
prospects of construction of naval ships & submarines and repair of
commercial vessels.

During the year 2008-2009, a new business management structure was put in
place by establishing Operating Companies for the various businesses. The
new structure is expected to provide customer focus & specialised resources
for effectively meeting the customer needs. The new structure is also
expected to provide better career growth opportunities for aspiring
managerial personnel.

Evaluation of existing business portfolio is an on-going initiative for the
Company. During the year 2008-2009, the Company divested its Ready Mix
Concrete business augmenting its cash flows and profit.

Year 2008-2009 at a Glance

L&T

* New order inflow at Rs. 5,16,215 million in current year as against Rs.
4,20,190 million in previous year - 23% growth year-on-year

* Order book as at March 31, 2009 Rs. 7,03,191 million as against Rs.
5,26,821 million as at March 31, 2008 - 33% growth year-on-year

* Gross sales at Rs. 3,40,450 million in current year as against Rs.
2,51,875 million in previous year - 35% growth over 2007-2008

* Segment wise composition of gross revenues:

Engineering & Construction segment - 81.9% in current year as against 75.3%
in previous year

Electrical & Electronics segment - 7.9% in current year as against 10.3% in
previous year

Machinery & Industrial Products segment - 7.1% in current year as against
9.3% in previous year

Others - 3.1% in current year as against 5.1% in previous year

* PBDIT at Rs. 44,248 million in current year as against Rs. 33,180 million
in previous year - up by 33%

* PAT at Rs. 34,817 million in current year as against Rs. 21,734 million
in previous year - up by 60%

* Gross debt equity ratio of 0.53:1 (previous year 0.38:1)

L&T Group

* Gross sales at Rs. 4,06,079 million in current year as against Rs.
2,95,611 million in previous year - 37% growth over 2007-2008

* PAT at Rs. 37,891 million in current year as against Rs. 23,246 million
in previous year - up by 63%

Engineering, Construction & Contracts Division

Overview

Engineering, Construction and Contracts Division (ECCD) undertakes
engineering design and construction of infrastructure, buildings, factories
and industrial projects covering civil, mechanical, electrical and
instrumentation engineering disciplines. With many of the country's prized
landmark constructions to its credit, ECCD, India's largest construction
organisation, uses state-of-the-art design tools and project management
techniques. Supported by a track record of over sixty-five years, the
Division also undertakes lumpsum turnkey construction contracts with
single-source responsibility. The Division is ranked 40th amongst all the
construction companies world wide [source: Engineering News Record (ENR)].

Business Environment

The busines conditions have been challenging. Liquidity crunch and high
real interest rates have moderated the private capital investments. Various
measures taken by the Government / RBI are, however, expected to mitigate
the effect. On the positive side, inflation is under control and the
commodity prices have softened. This could help the industry in general to
improve its performance.

For the construction industry, the primary drivers of growth remain healthy
in many areas. Business would grow steadily over time, albeit at a slower
pace. The three important drivers are : (a) infrastructure development; (b)
capacity enhancement; and (c) urbanisation. These growth drivers are
influenced by India's domestic demand and the existing social and physical
'infrastructure deficit'. Construction industry is cyclical by nature. The
Indian construction sector has been growing at nearly 1.5 times the
country's overall growth. Considering the current conditions, construction
sector is expected to grow at a slower rate of 9-11% in 2009-2010 as
against 17.5% in 2007-2008 and 16.3% expected in 2008-2009.

Opportunities & Challenges

The construction market reflects a mixture of optimism and apprehension.
Owing to lowering demand, some sectors like realty, especially in premium
housing and capacity augmentation in manufacturing sectors are expected to
progress slower than in the recent past. However with continuous migration
of people in to urban areas, the housing sector will continue to generate a
lot of opportunities. Mass scale affordable housing is one such opportunity
to be harnessed.

The infrastructure projects will continue to get the focus from both
Government and private sectors, supported by policy initiatives aimed at
infrastructure development. This is corroborated by the Planning
Commission's ambitious investment plan on infrastructure over the next 5
years in various sectors like power, irrigation, roads, railways, ports and
airports. The construction sector, which accounts for almost 60-65% of the
capital spend, would be the biggest beneficiary of these
investments.Transportation Infrastructure (roads, bridges, elevated
corridors, etc) is expected to gain from favourable measures taken by NHAI
like transparent MCA (Model Concession Agreements), increased VGF
(Viability Gap Funding) etc. In addition, the state and district roads are
also being taken up for development. Metros and MRTS (Mass Rapid Transport
System) are emerging as a major area of infrastructure development in major
urban centres. Urban infrastructure like water supply, sanitation, health
care, waste management etc., are expected to provide opportunity in the
year 2009-2010.

The atomic power plant at Tarapur, Unit 4. L&T is working closely with
leading national agencies in helping the country meet its stated target of
generating 20,000 MW of nuclear power by 2020 AD. Increased budgetary
allocation by the Government for APDRP, NHDP, Accelerated irrigation
benefit programme, Jawaharlal Nehru Urban Renewal Mission, Bharat Nirman
Programme etc., augur well for business opportunities in related segments.
The increasing 'demand - supply' gap in the Power sector and Government's
continued focus will drive the growth of the sector which will boost order
inflows for the Power Transmission & Distribution, Bulk Material Handling,
Hydel and Nuclear business units.

On the international front, the GCC countries have seen significant decline
in investment in realty sector. The investment in the Oil sector is likely
to be moderate due to expectations of a drop in demand for oil and the
correction in its prices. Other sectors, however, like power distribution
and infrastructure development in the Gulf region is expected to continue
to be robust.

Buildings & Factories Operating Company (B&F OC)

B&F OC has continued its growth trend during 2008-2009 by bagging large
value turnkey, design & build orders in airports, IT parks, commercial
space, health & leisure structures & residential and factory building
segments. The progress made by B&F OC during the year 2008-2009 towards
'Total Turnkey Solutions' was quite significant. 'Concept to Commissioning'
is the theme driving the growth. This unique capability along with focus on
key account management helps the B&F OC to retain its customers.

Major contracts undertaken by B&F OC including Delhi International Airport
is progressing on expected lines. Sensing the realty slowdown ahead of
time, B&F OC has quickly diversified into Government projects, affordable
housing and new airports outside India / airport modernisation projects in
Tier II cities.

Healthy order book stands testimony to the relentless business development
initiatives, giving the B&F OC visibility on the revenue growth for the
year 2009-2010.

Infrastructure Operating Company (INFRA OC)

INFRA OC continues to maintain its leadership position in construction of
roads, runways, bridges, metros, tunnels, hydel and nuclear power plants.
INFRA OC has reported significant growth in the revenues during 2008-2009
driven primarily by BOT projects. During the year INFRA OC has successfully
completed several projects viz. Runway in Delhi Airport, Road Packages in
Kattumavadi - Ramanathapuram and Krishnagiri - Thopurghat sectors, Panipat
Elevated Corridor and Veligonda Dam.

Order inflow and order book have been satisfactory largely due to the
Government's renewed focus on infrastructure as a tool to revive the
economic growth. Some of the major projects bagged by INFRA OC include
three prestigious Gujarat State Road Packages, Mumbai Monorail, Dam Project
in Bhutan, Irrigation project in Andhra Pradesh etc.

Metallurgical Material Handling and Water Operating Company (MMHW OC)

MMHW OC has sustained its success story during the year 2008-2009. Order
book increased significantly with projects from TATA Steel (Blast furnace
and Sinter plant), SAIL (Sinter plant, Rourkela), Vedanta (Alumina plant,
Hindustan Zinc Limited, Debari, Utkal Alumina) etc. Time and again MMHW OC
has proven its execution capabilities by completing the projects ahead of
time. MMHW OC is concurrently executing six blast furnaces in the country -
a milestone event in Indian Steel plant construction.

The Sector witnessed sharp volatility in the commodity prices and thereby
bringing uncertainty in the capacity built up plans in the near term.
However, with the continued thrust being given for water and infrastructure
development projects by the Central/State Governments, MMHW OC is expected
to improve its performance.

Electrical & Gulf Projects Operating Company (E&GP OC)

Power demand and supply gap drives the business growth of E&GP OC. In
addition, technological developments help transmitting power over long
distance with minimum transmission losses. This has given a fillip to HT
Transmission Line projects in the country. This OC is focusing on
substations, industrial electrification, transmission line projects and
railway construction. E&GP OC has successfully completed projects like
Power Distribution System - KAFCO, Kuwait, DIAL - AGL package - Asia's
longest runway (4430mtr), 400 KV for Jindal at Raipur substation, 220 KV
GIS at Kudankulam for NPCIL etc. Getting repeat orders from clients like
Power Grid testifies its project management capabilities and timely
delivery.

E&GP OC has bagged a number of breakthrough orders like construction of
Balance of Power Plants (BoP), 765 KV substation, Power distribution
package for 2.0 MTPA steel plant etc. With the commissioning of expansion
projects, installed capacity of the Company's factories manufacturing
Transmission Line Tower, has reached 1,00,000 MT per annum.

The Gulf operations have shown significant growth in revenues. L&T Oman,
one of the subsidiaries, has reported impressive growth in the Buildings
and Electrical businesses. Key success factor for E&GP OC continues to be
efficient management of working capital.

Power generation and distribution sector continues to show promise within
India and in the Gulf region as the industrial and domestic demand for
power has been steadily growing.

Significant Initiatives

Operating companies (OC) have been made fully functional within the ECC
Division since July 2008. OCs are working virtually like independent
companies to foster rapid scaling up of the business and bring down the
response time to customers / projects. To tide over the suboptimal
utilisation of resources triggered by current economic scenario, measures
have been taken to focus on better accountability at every level and ensure
good governance. A common forum to exchange the knowledge across OCs is
also under implementation.

The Division envisages that the volatility in the economy may result in
under utilisation of human resources in pockets; consequently focus on
multi-skilling / job rotation will get a renewed attention to minimise the
effect. The Division's initiative to train and retain workmen across India
has been strengthened by additional budgetary allocation for building
centres in all the regions.

Outlook

Overall outlook for ECCD remains good owing to its robust order book and
diversified business portfolio. The Government's commitment to revitalise
the economy through renewed investment in infrastructure, provides immense
scope and opportunities to the Division. Increasing demand for power offers
substantial business opportunities for Bulk Material Handling business.
Government's consistent support to augment water supply and develop water
network across India, provides sizeable opportunities for Water & Effluent
Treatment SBU. Similarly, Gulf region offers many water related projects.
The outlook of Minerals and Metals business seems challenging for the year
2009-2010. Special initiatives are being taken for spreading our wings
beyond construction of blast furnaces / sinter plants i.e towards pellet
plant / compact strip production (CSP) in ferrous sector and copper
smelting / alumina refinery in nonferrous sector. The Division is therefore
hopeful of capitalising on these opportunities to sustain the growth
momentum.

Engineering & Construction (Projects) Division

Overview

Engineering & Construction (Projects) Division [E&C (Projects)] delivers
engineering, procurement & construction (EPC) solutions in the oil & gas,
petrochemicals, power and water sectors. It provides single source
responsibility for execution of lump-sum turnkey projects in multiple
geographies. The expertise and experience of E&C (Projects) Division
arising out of a successful track record in executing projects, encompasses
front-end design, engineering, fabrication, project management,
procurement, construction, installation and commissioning. These integrated
strengths are backed up by flexibility of operation and agility in
response. A well institutionalised risk management structure and high
safety standards are the other key strengths of the division.

E&C (Projects) Division has consolidated its presence in international
markets. As part of its mission to establish itself as a major EPC player
in the Middle East and South East Asia, it has set up offices and built
manufacturing capabilities in select countries. Joint ventures are set up
with renowned local partners in Saudi Arabia, Kuwait, Oman, Qatar and
United Arab Emirates. The offices in Middle East are backed up by a large
engineering resource base in India.

Some of the key inherent strengths that enable the division to offer world
class solutions to its clients include:

* Over 4500 qualified and experienced personnel from various disciplines

* Strong basic engineering capabilities

* Large technology & innovation centers

* State-of-the-art CAD facilities with sophisticated plant design systems

* Conformance to globally recognised management systems standards

* Open yard facilities for modular fabrication with water front in India
and Oman

Business Environment

The global economic meltdown in 2008- 2009 led to the liquidity crisis,
impacting business conditions. Decline in growth rate has resulted in a
sharp contraction in hydrocarbon, chemical & construction industries.

The downturn caused a weak demand situation and resulted in declining
commodity prices and cut down in production. The decline in commodity
prices, however, showed disparate trends. Fall in the price of steel did
not result in proportionate decline in the cost of machinery and other
equipment. Crude oil prices saw a sharp decline from a peak of $140 down to
around $50+ per barrel. This coupled with the credit squeeze forced review
of the project viability and deferment / cancellation of investment
decisions, resulting in slower order inflows during 2008-2009. Bidding for
jobs in an uncertain economic scenario was a challenge by itself. Sharp
swings in the commodity prices and depreciation of rupee further added to
the uncertainties. Some of the prospective clients sought to reduce project
costs through re-bids and protracted pre-award negotiations on price.
Moreover, the contracting basis is tending to change from LSTK to cost
reimbursable model due to volatility in the material and execution costs.
With size of the contracts increasing, the prequalification criteria have
become more stringent and thereby delaying the take-off phase of the
project.

Tough competition from emerging EPC players both in domestic and
international markets is a challenge to tackle in Hydrocarbon Upstream and
Mid & Downstream businesses. The Power busines is also facing formidable
competition from established domestic players and Chinese companies. The
large size of the envisaged power projects has brought about additional
challenges such as accurate cost estimates, adherence to demanding project
schedules and financial closure calendar. Lack of fuel sufficiency and
delays in implementation of reforms have contributed to delays in
finalising the plans for power projects in the country.

The Division created three Operating Companies under its umbrella during
the year, each for Hydrocarbon Upstream, Hydrocarbon Mid & Downstream and
Power businesses to lay closer focus and accelerate growth in the areas.

Hydrocarbon Upstream Operating Company

Hydrocarbon Upstream Operating Company provides turnkey solutions in
upstream hydrocarbon sector encompassing oil & gas production, processing &
transportation. The Company has been successfully executing projects for
the last two decades in India, Gulf, Africa and South East Asia for reputed
clients. The solutions offered are in a wide range of products such as
Process Platforms, Wellhead Platforms, Submarine Pipelines, Platform and
Pipeline replacement, Modules, Marine terminals and Floating systems.

Decline in crude oil prices has affected the viability of expansion plans
and exploration activities of the oil producing companies. Domestic capex
on development of new fields continues to be modest as compared to global
trends. However, there is a renewed thrust in both redevelopment of
existing fields and in deep water exploration activities.

The Company has established a new stateof- the-art fabrication facility for
modular structures, heavy jackets and oil rigs at Sohar in the Sultanate of
Oman. The yard spread over 400,000 sq. m has facilities for heavy
structural fabrication, sophisticated equipment, systems integration and
testing and load-out of ultra-large modules. Significant progress has been
achieved on the capacity expansion plans at its existing modular
fabrication facility at Hazira in Gujarat.

L&T-Valdel is the engineering arm of Hydrocarbon Upstream OC, which
provides complete engineering solutions. It is gearing up to cater to the
growth needs through its centers located at Faridabad, New Delhi & Chennai
and is also currently positioning itself in UAE. The OC has set up a joint
venture with SapuraCrest Petroleum Berhad of Malaysia to add to the
installation dimensions to its offshore capabilities through owning &
operating a Heavy Lift cum Pipelay vessel, the LTS 3000.

In order to focus better on the marketing & business development activities
at the international level, the OC has set up development centers at:

1. Abu Dhabi, primarily catering to opportunities in GCC countries, Iran
and North Africa

2. Mumbai, to address opportunities inSouth East Asia, Australia and West
Africa.

Hydrocarbon Mid & Downstream Operating Company

Mid & Downstream business offers single point EPC solutions in the field of
Hydrocarbon refining, Petrochemical, Fertiliser and Chemicals Sector. The
business has to its credit several complex projects executed successfully
in domestic and international markets. The OC addresses the entire spectrum
of opportunities in this sector which include Green Fuel Projects, Fuel
Upgradation, Olefins, Polyolefins, Aromatics, Hydrogen, Fertiliser, Gas
processing, Reformers, Cracking Furnaces, Cross Country Pipelines, Gas
gathering stations, Crude Oil terminals etc.

During 2008-2009, Mid & Downsteam business has taken a slew of initiatives
to improve its competitive positioning. While the capabilities in the area
of pipeline engineering were strengthened though formation of a joint
venture with Gulf Interstate Engineering USA, the engineering capacities at
Mumbai, Vadodara and Faridabad centers were also strengthened. The
construction capacities were augmented by adding strategic plant &
machinery resources. In the international arena, the OC has set up a full-
fledged business unit at Sharjah to cater to Middle East opportunities.
Other country specific JVs have been formed to focus on specialised
electro-mechanical construction capabilities in the Gulf countries.

Power Operating Company

L&T has taken initiatives in synergising its internal strengths developed
over decades in the areas of project management, engineering, manufacturing
and construction by setting up an organisation focused on opportunities in
coal-based, gas-based and nuclear power projects. This business provides
turnkey solutions for setting up utility power plants, cogeneration &
captive power plants on EPC basis. It also provides power plant engineering
services through L&T-Sargent & Lundy a joint venture between L&T and
Sargent & Lundy, USA. L&T has formed two joint ventures with Mitsubishi
Heavy Industries, Japan for manufacturing Supercritical Boilers and Turbine
Generators. During the year 2008-2009, significant progress has been made
in setting up of these manufacturing facilities at Hazira. Creation of
facilities to manufacture various power auxiliaries such as boiler tubings,
pressure pipes, pulverising mills etc are also underway for comprehensive
offering of power equipment to the customers. The coal sourcing initiatives
are being pursued actively through L&T Natural Resources Limited, a
subsidiary company.

Power business is a major thrust area for L&T from the long term
perspective. The Company is undertaking significant efforts and
investments in this sector to leverage on the business potential.
Technology tie ups, setting up of manufacturing facilities & front end
marketing structure, scaling up manpower resources are the major
initiatives already underway in this regard.

Significant Initiatives

a) Risk Management

The Division has developed a robust risk management framework. It has been
identified as one of the key enablers to achieve the company's strategic
objectives. The E&C (Projects) Risk Management team has been set up to
effectively manage risk that is inherent in the Engineering and
Construction business, namely costing, scheduling, safety, financing, human
capital and contracting risk. It is an active member of the Engineering &
Construction Risk Institute (ECRI) USA, an initiative of World Economic
Forum. The objective of this initiative is to strengthen the competitive
edge and evolve a risk embracing culture.

Increased competition, pressures on cost and deliveries, forex & commodity
price variations, impact of recessionary trends on the award of jobs and
manpower attrition are some of the major risks faced by the division. The
Division has however adopted risk mitigation steps right from pre-bid stage
covering technical, procurement and financial risks. The measures such as
advanced quantitative tools, global sourcing, standard operating
procedures, and operational excellence initiatives have been implemented so
as to protect the profitability of the businesses.

b) HR for Professional Excellence

'Talent Management' has been a prime mover in the company's ambitious
business plans. The HR strategy dovetails personal growth aspirations of
employees with business needs. A variety of HR interventions give the
division a strong competitive edge. A menu of career growth options and
training are offered to young aspiring professionals for achieving
excellence in engineering and project management skills. Setting up of L&T
Project Management Institute at Vadodara complemented by the GLOPAT
programme, mentoring of new joinees, recognition of excellence, strategy
workshops and team building programs are some important initiatives
undertaken during the year.

Outlook

India ranks sixth in the world with refining capacity of 3.4 %. Just over
60% of the potential in the oil sector has been explored so far. In order
to enhance energy security of the country, the Government has increased
thrust on exploration which is expected to lead to substantial investments
resulting in an increased activity in the upstream sector. Improving oil
prices will encourage investments in new refineries creating opportunities
particularly for Midb & Downstream sector in GCC countries. New fertiliser
policy for feedstock conversion projects announced during 2008-2009, is
seen to open up large opportunities in the next couple of years.

The reform process as envisaged in Electricity Act in the year 2007
progressed during 2008-2009. The sharp increase in demand for power has led
to new generation capacities, a significant portion of which is planned
through setting up of Ultra Mega Power Projects based on super critical
technology. India has adopted a blend of thermal, hydel and nuclear sources
with a view to increasing the availability of electricity. Currently India
needs to double its generation capacity in next 7-10 years to meet
potential demand for power.

E&C Division is well geared up to harness the upcoming business
opportunities. Clearly drawn out pre-bid strategies, intense marketing
efforts and enhanced execution capabilities will drive the performance. The
division has also been quick to roll out measures to mitigate the adverse
economic slowdown by taking concrete steps in the areas of cost reduction,
improving productivity of resources and operational excellence. These
initiatives are expected to be the underpinnings of performance in the
coming years. In the backdrop of this outlook E&C Division is optimistic of
a good performance in the year 2009-2010.

Heavy Engineering Division

Heavy Engineering Division's operations are managed through two Operating
Companies viz.:

* Heavy Equipment & Systems Operating Company

* Shipbuilding Operating Company

Heavy Equipment & Systems Operating Company (HES OC)

Overview

Heavy Engineering & Systems Operating Company manufactures and supplies
custom designed and engineered critical equipment and systems to the core
sector industries like Fertilizer, Refinery, Petrochemical, Chemical, Oil &
Gas, Thermal & Nuclear Power, Aerospace and Defence.

HES OC has manufacturing & fabrication facilities at Mumbai in Maharashtra,
Hazira & Baroda in Gujarat and Visakhapatnam in Andhra Pradesh. A Strategic
Systems Complex was commissioned during the year at Talegaon in
Maharashtra. A Precision Manufacturing Facility at Coimbatore in Tamilnadu
has also been recently commissioned.

A Strategic Electronics Centre for Defence Electronics Systems design &
engineering operates from Bangalore in Karnataka. Dedicated engineering
centers support manufacturing at all locations. The Operating Company has
set up three 'Technology Development Centers' at Powai for new product
development in process plant equipment and for defence / nuclear equipment
as well as one focused on electronics systems / sub-systems.

Business Environment

The economic slowdown is mainly impacting potential exports.
Internationally the refining business has been hit by the fall in the crude
oil prices and the general economic slow down. Many planned green field
refineries and expansion projects have been deferred or cancelled in USA,
Canada as well as in the Middle East. With fewer projects on the anvil, the
competition is intense. However, Indian domestic refinery projects are
going ahead based on mandates given by the Supreme Court. No new
petrochemical projects are being planned, due to fall in demand for
petrochemicals.

HES OC, however, continues to see growth opportunities, despite the current
economic conditions. The recently announced fertiliser policy by the
Government is favourable for investment. Fertiliser sector offers good
opportunities both in the domestic market as well as in the international
markets like Middle East & Africa. Coal Gasification business continues to
show promise in countries like China & Vietnam in the short to medium term.
The Operating Company has achieved a breakthrough by entering into the
elite league of manufacturers of Super-Critical Power Plant Equipment.

The single major change in the Defence Business environment during the past
year, was the announcement of the Defence Procurement Procedure (DPP),
2008. The environment is still not very supportive of the private sector
participation in defence production. The decision to award 'Raksha Udyog
Ratna' (RUR) status to select private sector system integrators and
allowing 'level playing field' continues to remain pending for actions.

Offsets offer a potential growth area. However, the Government needs to
resolve certain taxation issues. Supplies to the defence services including
system integration done under offsets in India continue to attract various
local taxes and levies which discourage the foreign defence contractor from
awarding more work as well as value added work in India.

HES OC is proud to be associated with the Chandrayan mission for supply of
critical equipment & systems both for the Launch segment as well as Ground
/ Command control segment. The inking of the Indo-US, Indo-French, Indo-
Russian & Indo-Kazak nuclear deals opens up new opportunities for supply of
critical nuclear power plant equipment.

Significant Initiatives

The Operating Company has launched a number of initiatives aimed at
establishing a leadership position in the global market. The key
initiatives are as follows:

Capacity Augmentation

HES OC has planned substantial capital expenditure in line with its growth
plans. The Strategic Systems Complex for assembly, integration and testing
of weapon systems, sensors and engineering systems has started production
at Talegaon. The advanced composite facility for Defence, Aerospace &
Aviation products has become fully operational during the year at Ranoli
complex, Baroda. A dedicated facility for precision engineered products was
commissioned at Coimbatore during the year under review. The Hazira heavy
fabrication facilities are being upgraded and expanded. Dedicated sub-
contractors are being developed for further capacity augmentation.

HES OC is setting up a heavy fabrication facility through a joint venture
in Oman to cater mainly to the Middle East market. An integrated Special
Steel Melting Shop with a heavy forging facility is proposed to be set up
at Hazira for catering to the requirement of heavy forgings for nuclear
power plants as well as reactors for the hydrocarbon market.

Capability Building

The Operating Company lays special emphasis on continuous development /
adaptation of manufacturing technology, modification of existing products
and development of new products through its Technology Development Centers.
The Technology Development Centers have built partnerships with DRDO /
other national laboratories and academia for joint development work. A
Warship & Submarine Design Centre set up last year is being strengthened
for in-house design and construction of naval vessels. A Virtual Reality
facility has also been commissionedduring the year.

A new initiative has been launched titled 'Enterprise-wide Collaboration
for Alignment with Strategy' (ECAS), which aims to significantly boost the
preparedness of the organisation to meet new challenges. A new Customer
Intimacy Strategy along with promotion of 'Collaborative Culture' across
functions has been adopted with the primary aim of providing best service
to the customer.

Improvement Initiatives

The 'Product Lifecycle Management' (PLM) project went live across the
Operating Company's various locations during the year. The PLM project will
help improve knowledge management, reduce cycle time and improve
collaborative working across functions. Automation of design and drafting
work using knowledge based engineering tools is helping in knowledge
management and cycle time reduction in engineering in a big way.

A number of teams are working on various improvement projects under the
umbrella of the 'Operational Excellence' theme. The Operating Company
relies on the 'Critical Chain Project Management' methodology of the
'Theory of Constraints' for managing planning & execution of projects and
for improving its delivery performance. The Operating Company follows a
structured process for protection of its Intellectual Property Rights.
During 2009-2010, the Operating Company received four patents.

Shipbuilding Operating Company (SHBD OC)

Ship Building Operating Company is in the business of construction/repair
of both commercial & defence vessels. The Operating Company presently has
design, fabrication & shipbuilding facilities at Hazira in Gujarat, which
handles the construction of commercial vessels. Construction of a new
shipyard has been launched at Kattupalli in Tamilnadu. The new shipyard
will primarily focus on construction / refits of naval ships & submarines
and repair of commercial vessels.

Business Environment

The international shipbuilding market is presently going through a
difficult phase marked by low freight rates & the global financial crisis
leading to a global slowdown in commercial ship building. Fleet ownershave
deferred their plans for acquisition of new vessels. Though the major
shipbuilding yards in China & Korea are still booked with orders till 2011,
they have slots freed up due to cancellations in the bulkers segment.

The Government of India has agreed to grant shipbuilding subsidy to all
eligible vessel orders booked prior to August 14, 2007. The Shipbuilders
association of India is working closely with the Government for
continuation of the subsidy scheme to enable them compete with Chinese &
Korean yards.

Significant Initiatives

Augmentation of facilities & resources at Hazira is under way to meet the
present and future growth needs. The Operating Company is focusing on
streamlining its internal systems and processes for strengthening the
operations. Services of internationally acclaimed consultants are being
availed for construction of state-of-the-art facilities at the new ship
yard planned at Kattupalli.

Outlook

There are early signs of a turnaround. The economic situation world over is
likely to improve by end 2009, early 2010. Fertilizer sector is expected to
offer good opportunities with a few green and brown field investments both
in the domestic market as well as in the international market. The division
expects good prospects from domestic refinery projects. Deferred projects
in the Middle East are likely to revive in the third quarter of the current
year. New territories like Iran hold good potential.

With the signing of the Indo-US nuclear deal and India signing the IAEA
safe guard agreement, there are good opportunities for supply of nuclear
power plant equipment in the medium to long term. The new Government is
expected to hasten the decision making process for new defence contracts
and take measures to liberalise the sector.

With the international shipbuilding industry being severely affected by the
financial meltdown, the order pipeline has been thinning. The Indian Navy
is committed to develop indigenous design and globally competitive
construction capabilities for naval vessels. The Operating Company is well
poised to harness this potential demand through the new ship yard under
construction at Kattupalli.

Overall, both the Operating Companies envisage good market opportunities in
the medium term.

Electrical Business Group (EBG)

Overview

The Electrical & Electronics Division (EBG) comprises Electrical and
Automation Operating Company (EAOC) and two standalone business units of
Medical Equipment & Systems (MED) and Petroleum Dispensing Pumps & Systems
(PDP).

Four Strategic Business Units (SBUs) - Electrical Standard Products (ESP),
Electrical Systems & Equipment (ESE), Metering & Protection Systems (MPS)
and Control & Automation (C&A) are under the umbrella of EAOC. ESP and ESE
have the production base in Powai, Mumbai and at Ahmednagar in Maharashtra,
with additional facilities for ESE and a Precision Manufacturing Centre for
tooling solutions at Coimbatore in Tamil Nadu. Control & Automation
business unit operates from its 'Automation Campus' in Navi Mumbai, while
Metering & Protection Systems is based at Mysore in Karnataka.
EAOC has international presence through manufacturing facilities in Wuxi
(China) for Switchgear Standard Products, at Dammam in Saudi Arabia for
switchboard and for Control & Automation in Jebel Ali, UAE. It has
increased its international presence with the acquisition of switchgear
business of TAMCO Corporate Holding of Malaysia last year, winning access
to its manufacturing facilities and markets in Malaysia, Indonesia,
Australia and China.

Business Environment

Owing to the global economic events of Sept-Oct 2008, performance was
adversely impacted either with business slowing down or getting postponed
in several industry sectors like cement, metal etc. The pressures to re-
negotiate contracts were experienced, as most of the customers went through
the phase of falling profits and surplus capacities.

The commercial and residential building projects were the worst hit, as
also the traditionally stronghold sectors like, cement and steel. However,
business segments in power and infrastructure domains, viz. Balance of
Plant (BoP), RAPDRP, Power Plant DCS and BMS/EMS continued to show good
potential. Investments in infrastructure sector such as metro rail,
monorail, ports, airports etc. hold promise. No major expansion is evident
in oil & gas sector. The reduced level of enquiries led to more intense
competition at the market place. Existing playersincreased their
manufacturing capacities putting pressure to book more business causing
price pressure. There is a slowdown in petroleum retail network investments
which will reduce off-take of dispensers. With controlled price regime
still in place, fuel retailing by private oil companies has become
unattractive. For Medical Equipment Systems, the industry has grown and
this growth is expected to continue in the Indian market. Entry of Chinese
manufacturers through the distribution chanels at low prices for monitors
and ultrasound equipment is the major challenge to Medical business.

On the international front, oil & gas projects & power sector outlays
sustain the prospects pipeline.

Significant Initiatives

The Customer Interaction Centre (CIC) went live in the year 2008-2009. This
new initiative helped the businesses to respond faster and free the sales
team from attending general queries. EBG has initiated a division-wide
awareness to focus on the 3 Cs - cost, cash and customer. The highlights of
this initiative are working capital measures taken such as aligning
deliveries with the end users cash flow, and emphasis on outstanding
collections.Initiatives for operational excellence such as 5S, Six Sigma
and Value Engineering continue with upto 75% increase in these projects.

For switchgear products, a new initiative to tap the retail market for the
electrical products was started. The focus is to enlarge reach, presence
and visibility in the retail market through appointment of a large number
of dealers as channel partners under this programme. A new partnership
programme was initiated to provide automation solutions to industrial and
building segment customers.

After the acquisition of TAMCO there is a focus on growth in MV segment.
EAOC is looking for setting up franchisee network for MV products in India.
Also there are plans for a franchisee network for new design LV flat pack
products for Gulf market.

The Control & Automation business has set up a Technology Centre to nurture
the ongoing technologies & look forward tonew upcoming cutting edge
technologies to be used for Automation EPC projects.

New design meters have been introduced

and efforts are underway for providing automatic meter reading (AMR)
solutions. New Product Development Development of new products and
technologies continues to be top priority for the division. It plans to
meet market expectations and keep pace with competition by introducing new
products, with specific focus on cost effective offerings. In the year
2009-2010, ESP will be launching 'right price' product variants in Moulded
Case Circuit Breakers and Contactors. The U-Power range of ACBs will be
upgraded. There will be focus on development of Automation Solutions for
buildings and Energy Management Systems.

The Control and Automation business unit is developing Toll Management
System, which will be a state-of-the-art Toll Management System including
electronic toll collection for national & state highways. A Terminal
Automation System for Integrated Terminal Automation & Tank Farm Management
System for petroleum products are also under development.

MPS is planning to replace the existing designs of tri-vector meter with
new cost effective designs. Also development is on for meters for select
international markets, GPRS modem for data communication, meters with radio
communication facility. R-APDRP initiative may require installation of open
protocol in meters and will also require all meters to be communicable over
various wired and wireless media, which are on the anvil.

Medical Equipment and Systems business unit had launched a new product
range in Patient Monitoring under 55 series, which has been accepted well
in the domestic and USA market. A new set of multi-parameter monitors are
being developed to cater to the cost conscious lower end segments. PDP has
developed a new electronics platform (4GDE) for its dispensing pumps.

Intellectual Property Rights (IPR)

The division has put conscious efforts to generate innovative ideas and
create value for the organization by protecting them through intellectual
property rights. In 2008-2009, EBG has filed 108 patent applications, 33
design registration, 5 trademarks filings and 6 copyrights filings. The IPR
approach also ensures that no product infringes on any competitors'
products unknowingly. The division has been focused on directing its
innovation energy towards improved manufacturing processes & cost control.
It is ensuring continuous alignment of business interests & IPR creation by
way of Gate Processes of approvals according to EBG's Product Development
System (EPDS).

Outlook

The Government's ambitious UMPP projects will be under implementation
during the year 2009-2010. It has also sanctioned Rs. 1477 crore in the
interim budget for R-APDRP initiative. The Government initiative on highway
development programme will open good business opportunities. With the
investments in ports, airports, metro & monorail projects, infrastructure
sector is also expected to grow. Apart from power generation and
infrastructure sector, all other sectors are showing marginal or negative
growth.

A positive outcome of the economic downturn is that customers are moving
from products sourcing to project sourcing thereby bundling the related
products in one package . This trend will enhance the competitive position
of the division, as it will leverage upon the Company's project management
skills.

The Division is hopeful of positive developments leading to improvement in
the demand in the latter half of the financial year 2009-2010.

Machinery & Industrial Products Division

Overview

Machinery and Industrial Products Division (MIPD) comprises Industrial
Products & Machinery Operating Company (IPM OC) and Construction Equipment
Business Sector (CEBS).

Industrial Products & Machinery Operating Company (IPM OC):

In order to address the comprehensive needs of the common customers in
industrial sector, the Division has aggregated its industrial products and
machinery businesses under the IPM Operating Company. IPM OC has two
distinct business streams - Industrial Products and Industrial Machinery.

A. Industrial Products:

Valves Business Unit (VBU):

VBU markets valves and allied products manufactured by the L&T's JVs; viz.
Audco India Limited (AIL), Larsen & Toubro (Jiangsu) Valve Company Limited,
China, and a few Indian & overseas manufacturers. VBU is one of the few
select suppliers of valves for global oil majors.

Besides, the JV manufacturing facilities, VBU also has set up its own
facility 'Fluid Control Products Centre' (FCPC) at Coimbatore, which
provides the technology support for new product development as well as
contract manufacturing of valves in ranges not fully supported by AIL. The
FCPC is also setting up a new plant for manufacture of valves to support
L&T's foray in the Power Sector.

Welding Products Business (WPB):

WPB markets products manufactured by EWAC Alloys Limited, along with
imported inverter based welding machines from Fronius, Austria, and Oxy-
Fuel equipment from Messer, Germany. WPB also sells locally indigenously
developed MIG welding machine and inverter welding machines. To provide
comprehensive solutions to its major clients in the welding technology, WPB
also provides repair & maintenance of critical industrial components.

Industrial Cutting Tools (INP) Business:

INP business provides metal cutting solutions to the Indian manufacturing
industry, covering automobile and machine tool segments through marketing
of industrial cutting tools manufactured by ISCAR Limited, Israel.

B. Industrial Machinery:

Kansbahal Works (KBL):

Machinery for Pulp & Paper, Mining, Mineral Processing and Steel
industries, as well as components for Wind Turbines are manufactured and
marketed by Kansbahal Works. Its Foundry also manufactures large wear and
abrasion resistant castings for power and cement sectors.

LTM Business Unit (LTMBU):

LTMBU manufactures and markets rubber processing machinery for the tyre
industry. Currently, the unit has manufacturing facilities at Manapakkam,
Chennai and at Kancheepuram near to Chennai. LTMBU also markets plastic
injection moulding machines manufactured by L&T-Demag Plastics Machinery
Limited. LTM has been ranked No.11 amongst 'top suppliers of tyre and
rubber machinery around the world' by European Rubber Journal, for the year
2009. L&T-Demag Plastics Machinery's products find applications in diverse
industries like automobiles, electrical goods, packaging, personal care
products, writing instruments and white goods.

Construction Equipment Business Sector (CEBS)

Construction Equipment Business Sector (CEBS) markets and renders support
for Construction & Mining Equipment. The Sector comprises following
business units:

Construction & Mining Business Unit (CMB) which markets equipment
manufactured by L&T-Komatsu Limited, India and the entire range of
equipment available from Komatsu worldwide. It also markets Mining Tipper
Tricks available from Scania.

L&T-Komatsu Limited (LTK)-the 50:50 JV with Komatsu that manufactures
Hydraulic Excavators and Hydraulic Components, all of which are distributed
in India by CMB;

L&T-Case Equipment Private Limited (LTCEPL),the 50:50 JVwith CNH Global
n.v.,which manufactures and markets Backhoe Loaders and Vibratory
Compactors;

Tractor Engineers Limited (TENGL), the 100% wholly-owned subsidiary,which
manufactures and markets Undercarriage Systems for excavators and Material
Handling Systems like apron conveyors etc.

Business Environment

The current economic downturn which started in last year has cast its
influence on the industrial sector in general and on the business sectors
that MIPD operates in particular. The first half of the financial year
witnessed unprecedented rise in commodity prices adversely affecting input
costs of most industries. On the other hand, the sharp fall in economic
activity globally and the fall in price of crude oil, led to a postponement
of investment by the major clients. With surplus capacity among
manufacturers, the competitive intensity has increased particularly in the
global market.

Many projects in cement, steel & paper sectors are on hold or have been
dropped due to the global financial crisis. Also, minor revisions in Wind
Energy Policy in some states like Tamil Nadu has brought down the growth
rate in the sector from 25% last year to 15%. The last quarter of the year
2008-2009 saw a downturn of automobile industry which had a cascading
effect on the performance of tyre industry and tyre machinery
manufacturers.

The performance of the construction equipment industry also reflected these
pains. After a moderate slowdown in growth rates from the past three year
highs of 45-60% to about 22%, the demand fell by 50-65% in the third
quarter of the financial year.

Significant Initiatives:

The Division has set up War Rooms to combat effects of the severe downturn
in the demand for products. Production and procurement plans have been
quickly reviewed and adjusted to fit the volatile demand. Special focus
groups have been constituted to expedite collections, reduce inventories
and conserve cash. Tracking and monitoring measures have been put in place
and reviews are carried out closely at various levels in the sector.

Specific initiatives being undertaken by the respective sectors is given
below:

I. IPM OC

The project for setting up 25000 TPA green field foundry in Coimbatore to
manufacture cast components for wind turbine is progressing as per the plan
and is expected to go into commercial production in the 3rd quarter of
2009-2010.

Additional approvals from major endusers were secured for LTJVCL valves in
China. To strengthen the international marketing network personnel have
been posted in key growing markets such as China and Middle East.

New products have been introduced which will help in building the
competitive advantage and market share.

Most business units in IPM OC have initiated significant steps for close
monitoring to ensure reduction in working capital and in particular,
customer receivables.

II. CMB

New imported models of Hydraulic Excavators, viz. PC800, PC210-8, sourced
from Komatsu, have been introduced in the Indian market to improve product
offerings to the customers.

After-sales support capability is expanded through long term full
maintenance contracts and site support agreements for the products to help
improve machine uptime and capping operating costs thus helping customers
in improving their competitive position.

Outlook

The oil prices over the last few months have stabilized and a number of
projects in the upstream sector particularly in the Middle East are slated
to proceed. However, in the Refining segment, there is a significant
slowdown in international projects, including projects under execution.
With the implementation of the UMPP projects in India, requirement for
industrial valves is expected to boost the demand in the coming year. The
nuclear power program also offers large scope for the valves business.
L&T's strategic alliance with some of the key nuclear power majors will
help in building this market segment.

Due to the capacities built up in the last 23 years, coupled with the
liquidity constraints, demand for machinery for steel and other mineral
process industries is expected to be lower than last year. The outlook for
wind mill castings is however positive as there is a backlog of orders and
the new foundry facility in Coimbatore would be operational in the coming
year.

As per the latest reports from tyre majors like Pirelli, the global demand
for tyres is expected to be lower in the coming year. In view of the
current downturn, the domestic tyre industry is focusing only on two and
three wheeler tyres,truck radial & OTR tyres. The business for the Plastic
Injection Moulding machines will also improve only by the end of the year
2009.

The market demand for construction equipment is expected to remain sluggish
on account of the downturn in the urban infrastructure and general
construction sectors and reduced spending by the Government on various
infrastructure projects. Post parliamentary elections and monsoons, it is
expected that there will be an improvement in infrastructure building
activities by the Government as well as a general improvement in market
confidence.

Gap between coal demand and supply of around 40 million tones continues to
provide a growing opportunity for mining equipment. CMB is well placed to
take advantage of these opportunities. Backhoe Loader and Vibratory
Compactor markets are witnessing slight recovery as compared to substantial
decline in the year 2008-2009. Still it is expected that the market for
Backhoe Loader may remain bearish, though Vibratory Compactor market may
witness marginal growth in view of large planned investments in Road
Sector.

The domestic economic environment is largely dependent on the domestic
policy framework as well as the stability in the financial market.
Considering the good track record of the economy in the recent past, the
Division is quite optimistic of positive developments emerging from the
third quarter of the year 2009-2010.

Technology Services

Overview

Carrying the brand and the legacy of Larsen and Toubro group of companies,
L&T Technology Services has been rated the no. 1 engineering services
provider in the World 2008 Black Book of Outsourcing. The Division
comprises Integrated Engineering Services (IES, earlier to named as e-
Engineering Services) and Embedded Systems (EmSyS) business units. The
Division provides a range of IT enabled engineering services and systems
required in the design and execution of turnkey projects and equipment /
product development.

Integrated Engineering Services (IES)

The IES, headquartered at Vadodara, Gujarat, has established its design
centers spanning the cities of Bangalore, Chennai, Mysore, and Mumbai. It
has about 3000 employees delivering high-quality engineering and design
solutions. The endto-end services basket comprise product design, analysis,
proto-typing & testing, embedded system design, production engineering,
plant engineering, buildings& factories design, asset information
management & sourcing support using cutting-edge CAD/CAM/CAE technology.
IES predominately renders its cutting-edge services to high end verticals
such as Automotive, Aerospace, Marine, Off highway Machinery, Industrial
Products, Consumer Packaged Goods, Pharmaceuticals, Minerals & Metals, Oil
& Gas and Utilities sectors.

Embedded Systems (EmSyS)

EmSyS provides embedded systems for electronics product design and
development. The solutions comprise supply of hardware, application
software and enclosure design for the system largely required in
Automotive, Medical, Semiconductor and Industrial products segment. The
business unit has a dedicated team of more than 1000 professionals
operating from Mysore, Bangalore and Mumbai.

India is poised for a very big leap in the 'Product Development' market.
EmSySwith expertise in 'product development' combined with its experience
in'electronic product manufacturing' is in a very good position to take a
big share of this. It is serving its customers in complete Product
development, consultancy as well as various components of the Life Cycle
such as Re-engineering, Sustenance engineering, VAVE and obsolescence
management.

Business Environment

The evolution of the Engineering Services market has been significant over
the past few years. The current trend in outsourcing space shows a larger
share of IT enabled engineering services ranging from complete product
design, complex turnkey project design, value analysis/cost reduction
projects,design of assembly lines, fixtures etc. In the next two or three
years, the trend is expected to accelerate and accordingly engineering
services industry would need to position itself for delivering the bench
marked services for driving innovation and continuous cost reduction for
its global clients.

Significant initiatives

IES has taken special measures to reorganize its sales reach by increased
focus on India & Europe in addition to emerging regions like Middle East
and Asia Pacific. The business unit has also achieved CMMI Level 5
certification to offer quality deliverables to the customers. IES has taken
important steps to increase resource utilization & reduce operational cost
so as to deliver value to the customers.

EmSyS was the first business unit in the world to achieve SEI CMMI. Level 5
using all the four components. 'Continuous improvement' programs and 'Six-
Sigma' initiatives in EmSyS are giving thrust to its 'Quality Movement'. It
continues to generate and pass on many 'Patentable ideas' to its customers.
EmSyS serves many small as well as Fortune 500 companies.

Outlook

The economic recession, along with the tightening of outsourcing norms, has
dented the growth of all sectors in the current year. However, even in such
a difficult environment, L&T Technology Services has fared better than most
of its peers because of a healthy exposure to diverse sectors and a client
portfolio of industry leaders. Moreover, with the economic slump expected
to ease out by the end of this year, the demand for engineering services
outsourcing would experience a significant upturn.

Financial Performance for 2008-2009:

An analytical review L&T Standalone:

I. GROWTH IN AN EXTREMELY CHALLENGING ENVIRONMENT

The Company has reaffirmed its conviction in the sustained growth potential
of its various businesses by reporting a healthy financial performance for
the year 2008-2009, despite the perilous impact of a global slowdown. While
the Company's product businesses had to bear some adverse impact of the
downturn, its project businesses improved their performance over the
previous year, even in the face of highly demanding circumstances.

The Company secured fresh orders during the year totaling to Rs. 51,621
crore, recording a healthy growth of 23% over the previous year. The growth
in order inflow would have been still higher, but for the deferment of a
few major orders in the Hydrocarbon and Process industries. The share of
order inflow from the Infrastructure & Power sectors increased during the
year reflecting the Company's growing stature in the nation's
infrastructure-building. The flow of orders witnessed during the year 2008-
2009, as reflected in its sizeable order book, is expected to give a fair
amount of confidence to the Company's revenue growth plans in the year that
has just commenced.

Gross sales & services at Rs. 34,045 crore grew by 35% over the previous
year, with a share of 82% from Engineering & Construction businesses.
International revenues increased to 19% establishing the Company's growing
presence in the overseas markets.

Order book of the Company as at March 31, 2009 at Rs.70,319 crore grew by
33%. In the Engineering & Construction Segment, orders over IRS. 300 crore
each under execution, account for 70% of the segment's order book,
signifying a strategic shift in selection of orders towards relatively
larger size projects, to ensure optimum utilisation of the available
resources and the management bandwidth.

Manufacturing, Construction & Operating Expenses

The Company incurred Rs.26,232 crore under Manufacturing, construction &
operating expense category. This translates into 78% of net sales
reflecting a marginal increase by 1 % point, as compared to the previous
year. Major part of the financial year 2008-2009 witnessed increase in
commodity and input prices. While this increase was covered under
contractual escalations for E&C Orders to a large extent, competitive
forces prevented the product businesses from passing on the higher input
costs to the market through higher price realisation. Improved execution
and manufacturing efficiencies helped the businesses partially mitigate the
impact of higher input costs and lower growth in volumes.

Expenses as a % of Total Income - 2008-2009

Mfg. Construction & Operating 75.7%
Staff Expenses 5.8%
Sales & Administration 5.3%
Interest & Depreciation 1.9%
Profit Before Tax 11.3%

Expenses as a % of Total Income - 2007-2008

Mfg. Construction & Operating 75.0%
Staff Expenses 6.0%
Sales& Administration 5.3%
Interest & Depreciation 1.3%
Profit Before Tax 12.4%

Keeping in mind the long term growth ambitions of its businesses, the
Company during the year effected a net addition of 5,416 employees, taking
its manpower strength to 37,357. Staff expenses at Rs.1,998 crore for the
year were higher by 30% over the previous year due to this manpower
addition as also the effect of increase in salaries & wages. However, staff
expenses as a percentage of total income have reduced from 6% in the
previous year to 5.8% in the year 2008-2009.

Sales, administration and other expenses for the year at Rs.1,840 crore
have increased by 36% as compared to the previous year. However, as a
percentage of total income, the expenses have remained at 5.3%. Benefit of
scale of operations, sharing of common resources and tighter control on
elements of fixed costs have enabled the Company contain this category of
expenses.

Sustained Profitability of Core Businesses

The Company's Engineering and Construction Segment has not only sustained
their profitability but has also been able to show some marginal
improvement in the operating margins during the year under review. This
improved performance has, however, been offset by a drop in operating
margins of its product businesses due to lower capacity utilisation and
higher input costs, as compared to the previous year. Overall the Company's
profit before depreciation, interest & tax, excluding other income
(operating PBDIT), at Rs. 3,857 crore has increased by 30% over the
previous year. Operating PBDIT at 11.5% of net sales, however, stands
marginally reduced by 40 basis points as compared to the previous year, due
to reduced profitability of product segments and an exchange loss incurred
on foreign currency loans before the same were hedged.

Other Income

The Company has astutely managed its portfolio of investments so as to
maximise the returns from surplus funds in a highly volatile capital and
money markets. The surplus cash available from the internal accruals,
borrowings and the sale proceeds from divestment of Ready Mix Concrete
(RMC) business, was timely deployed to earn an pre-tax yield of over 14%.

Finance Cost

The relatively higher interest expense for the year at Rs. 350 crore is
attributable to additional average borrowing of Rs. 2,240 crore during the
year to finance the growth needs of the Group, as also increased cost of
borrowing. The Company has drawn up ambitious plans for its emerging
businesses in Financial Services, Property Development, Port & Shipyard and
Power Equipment manufacture through its subsidiary companies and JVs.
Besides, its project & product businesses have also been growing rapidly at
a compounded growth rate of over 30%, requiring higher funds for working
capital and capital expenditure needs.

Interest rates in the domestic financial market hardened due to the global
financial crisis and constrained credit flow to the corporate sector.
However, the average cost of borrowings could be contained at 6.9% for the
year, through higher proportion of foreign currency borrowings. A major
part of such foreign currency borrowings stands hedged against currency and
interest rate risks.

Overall Profitability

Profit before tax excluding extraordinary and exceptional items for the
year 2008-2009 at Rs. 3,940 crore registered a growth of 28% over the like
amount of previous year. In line with the growth in profits, the income tax
provision increased by 29% to Rs. 1,177 crore. However, the effective tax
rate is still lower at 30% of the book profits. Fringe Benefit Tax has
reduced by Rs. 16 crore due to lower market price of the options under the
Employee Stock Options Scheme. Profit after tax (PAT) excluding
extraordinary and exceptional items registered a healthy growth of 29% to
Rs. 2,709 crore, as compared to the previous year.

The Company successfully concluded a deal disposing of its Ready-mix
Concrete business during the year, which generated an extraordinary gain of
Rs. 959 crore net of tax. Further, the Company made an investment in shares
of Satyam Computers & Services Limited (SCSL) through its wholly-owned
subsidiary, L&T Capital Company Limited, as well as on its own Balance
Sheet. Though the Company believes in the long-term value proposition of
this investment, it has made a provision of Rs.186 crore towards the
extraordinary decline in the value of SCSL shares, based on the principle
of 'prudence'. Including the effects of the said extraordinary items, the
Company's PAT rose by 60% to Rs. 3,482 crore. The Earning per Share (EPS)
for the year accordingly has increased by 57% to Rs. 59.50 per share, post-
allotment of Bonus Shares in the ratio of 1:1.

Funds Employed

Working capital in the business segments increased during the year, mainly
due to lower flow of customer advances in case of project orders,
aggravated by poor availability of funds in the system. Gross & net working
capital deployed by the segments marginally increased to 44% & 12% of sales
respectively as at the year end. Net customer receivables at Rs.10,056
crore reflect 108 days of sales (DOS), almost at the previous year's level.
The businesses were successful in settling some of the old disputes with
their customers and collecting the overdue receivables, thereby bringing
down the DOS.

The capital expenditure of the business segments amounted around Rs. 1,900
crore during the year. The major expenditure was incurred as part of the
on-going expansion plans at Hazira, Coimbatore, Ahmednagar & Talegaon,
besides on beefing up the construction plant and machinery for execution of
mega turnkey projects bagged during the year. Higher net working capital
and capital expenditure contributed to the increase in segment funds
employed by Rs. 2,566 crore.

At the Company level, investments in Subsidiary & Associate Companies
increased by Rs. 2,170 crore to build capabilities for the emerging
opportunities in the Financial Services, Power equipment, Property
Development & Medium Voltage Electrical businesses. Considering increase in
other corporate assets, loans, advances and investments of surplus funds,
amounting to a total of Rs.1,128 crore, the net funds employed for the
Company increased by Rs.5,864 crore over the previous year. Excluding the
extraordinary and exceptional items, return on net worth & return on
capital employed stood at 24.7% & 17.6% respectively. EVA for the year at
the Company level continues to be positive at Rs. 733 crore. The relative
reduction in RONW, ROCE and EVA as compared to the previous year, is
attributable to the additional funds deployed in the emerging businesses
and expansion plans of the Group that are yet to see full scale revenue and
profit generation.

Sound Financial Health

Despite the tight liquidity condition prevailing in the market, the
businesses could succeed in generating an operating cash-flow of Rs.1,479
crore through a close monitoring of working capital. The divestment of
Ready Mix Concrete business boosted the Company's cash position by Rs.1,121
crore net of tax. Further, the Company resorted to additional borrowings to
the tune of Rs.2,558 crore during the year, at competitive interest rates
from both domestic and international markets. This helped the Company
continue with its capacity build-up plan, investments on its new business
initiatives and provide the much needed working capital to its growing
businesses.

Liquidity & capital Rs. crore
resources 2008-2009 2007-2008

Cash & cash equivalents
at the beginning of year 964.46 1094.43
Add: Net cash provided /
(used) by
Operating activities 1478.57 1945.24
Investing activities (4429.67) (5241.89)
Sale of RMC business 1121.14 -
Financing activities 1640.79 3166.68
Cash & cash equivalents
at end of the period 775.29 964.46

The gross Debt Equity ratio of the Company stood at a moderate level of
0.53:1, which helped it continue to enjoy its domestic and international
credit rating at'AAA' &'Baa2' with stable outlook, respectively. With the
vigilant treasury team driving the Group's funding plans, the Company is
confident of sustaining its sound financial health in the near to medium
term.

BUSINESS SEGMENT WISE PERFORMANCE REVIEW

Engineering & Construction Segment (E&C)

The segment has performed exceedingly well during the year despite the
challenges of global meltdown and uncertainty. Order inflow at Rs.45,418
crore increased by 28% as compared to the previous year. Prestigious orders
were secured by the segment in the Urban Infrastructure, Power, Roads,
Railways, Metals, Hydrocarbon and

Refineries sectors, many of which were exceeding Rs.1,000 crore in values.
Due to crude oil prices bottoming out during the later part of the year,
the pace of infrastructural development in Gulf slowed down to some extent
and adversely impacted the flow of orders from that region. This led to the
share of international orders reducing to 14.5% of the total segment order
inflow during the year.

Backed by a healthy opening order book and a good order inflow during the
year, gross revenue increased by 47%. The segment's order book as on March
31, 2009 stood at Rs.68,753 crore, giving a good visibility for next year's
revenue growth. Segment EBITDA margin on net revenue at 12.9% improved by
20 basis points, vindicating the segment's superior execution capability
and cost control initiatives besides appropriate risk mitigation strategies
adopted by its various businesses.

Due to paucity of customer advances in some of the fresh orders, the
segment net working capital at Rs.2,935 crore has marginally increased by
1.8% of sales over the previous year. With an additional capital
expenditure of Rs.1,700 crore incurred during the year, the segment's net
funds employed as at the end of the year increased to Rs.6,617 crore from
Rs.4,107 crore as of the previous year-end. As a percentage of segment
revenue, this works out to 23%, higher by 2 percentage point as compared to
previous year.

Electrical & Electronics Segment (E&E)

The segment was deeply impacted by the ill-effects of the downturn that
severely subdued the demand for industrial goods, and could nevertheless
achieve a growth of 4% in sales revenue at Rs.2,778 crore during the year.
The Electrical Standard Products business suffered due to the sluggish
demand in the realty & manufacturing sectors. The controlled petroleum
prices regime sapped the fresh investment in the retail oil dispensation
systems, resulting in negative growth in this business. The State
Electricity Boards deferred the implementation of their plans under

rural schemes, impacting the demand for metering systems. Thus, despite a
healthy sales growth of 23% achieved by the Switchboard and Automation
Systems businesses, overall segment revenue growth remained low as
aforesaid.

The drop in demand of its products also led to lower capacity utilisation
of the segment's enhanced facilities. The under-absorption of overhead
expenses, and higher input prices prevailing over a large part of the year,
saw the segment margin dropping to 13.3% as compared to 16.9% of the
previous year. The segment funds employed at the end of the year increased
by Rs.233 crore to Rs.1,247 crore, due to increase in finished goods
inventories and higher customer receivables.

Machinery & Industrial Products Segment (MIP)

This segment was also impacted by the slowdown in the core industrial and
infrastructure sectors. The significant revenue growth observed in the last
3 years was absent during the year, as the liquidity crisis unfolded in the
second half of the financial year. The negative sentiment led to a sharp
fall in the demand for construction & mining machineries and industrial
goods. Export of industrial valves and machineries too was adversely
impacted as the sentiments in international trade reached an abysmal low.
Owing to the relatively better performance in the first half of the year,
the segment ended up with sales revenue of Rs.2,475 crore for the year as a
whole, which was marginally higher than the previous year.

Though the slump in demand led to a drop in product prices, the segment
EBITDA margin on net revenue could be improved by 110 basis points to 20%,
due to higher rupee realisation on the exports and improved cost
management. The year-end funds employed in the segment at Rs.413 crore
reduced by Rs. 26 crore over the previous year-end, due to lower customer
outstanding and higher initial advances secured on its customers' orders
despite liquidity constraints in the market. Accordingly, the net working
capital decreased to 8% of revenue, as compared to 12.7% for the previous
year.

'Others' Segment

The performance of Ready Mix Concrete (RMC) and Technology Services
businesses comprising e-engineering services and embedded systems is
reported under 'Others' segment. The RMC business was divested on October
23, 2008 and accordingly the financial performance of this business is not
being separately elucidated.

The Technology Services business performed very well during the year and
was not adversely impacted by the global slowdown since the IT development-
related outsourcing continued with their inherent cost advantages. The
business continued to have a large share of its revenues coming from the US
market.

Rs. crore
Technology services performance 2008-2009 2007-2008

Gross revenues * 367 190
EBITDA % on net revenues 24.5% 9.5%
Funds employed as
of net revenues 46% 71%

* Gross revenues include inter segment revenues

Aided by rupee depreciation of over 15%, the gross revenues at Rs. 367
crore grew by 93% as compared to the previous year. Owing to higher
capacity utilisation and better rupee realisation, the EBITDA margins for
the year rose to 24.5%. Funds employed as a percentage of gross revenues
showed marked reduction to 46%, due to better management of customer
receivables.

II. RISK MANAGEMENT

The Company has assiduously built, over the last fewyears, a risk
management culture in the Company, which has since been ingrained in its
various business processes. This has encompassed a disciplined process of
pre-bid risk review of all major tenders for projects, review of the risk
complexion of projects at various stages during the course of execution,
and risk management assurance. An enterprise-wide risk awareness has been
successfully created and integrated into the very process of business
decision making.

The global recession that started during the later part of the year 2008-
2009 has deeply impacted the business sentiment world-over.
Internationally, a number of companies have deferred or cancelled their
investment plans.

In the aforesaid backdrop, the Company has fared reasonably well during the
year, not only in terms of a comfortable growth in sales revenue and
profitability, achieved particularly by its largest business segment
Engineering & Construction, but has also witnessed a reasonable growth in
order inflow in the face of stiff competition. A solid foundation led by an
all pervading risk management framework has helped the Company stand out
even in these trying times.

The presence of the Company in a host of diversified industry segments has,
in itself, an element of risk mitigation against the vagaries of business
downturn in one or the other sectors. The Company's foray into the
manufacture of super critical boilers and turbines, heavy forgings, power
and railway business, has helped it exploit new avenues of business,
thereby greatly de-risking itself from the impact of the downturn.

The Company's dependence on the international market for business, has been
less than 20% of its total turnover. Therefore, the crippling depression
seen in other parts of the world could not leave much of an impact on the
Company's businesses during the year.

The Company has, during the year, created twelve Operating Companies to lay
larger focus on its various businesses, and to provide them with more
autonomy in the conduct of their respective businesses. Besides formation
of an Operating Company Board for each of them, the risk management
function has also been attached to each of the Operating Company, to be
able to closely manage the risks of their businesses.

The Company has become a sponsor of the Engineering & Construction Risk
Institute (ECRI), USA, with an active involvement, being on the Board of
this prestigious institute. It hosted the ECRI 2008 Risk Forum on 'Global
Risk Management Practices for India Infrastructure Projects' in Mumbai,
where eminent risk practitioners from world class E&C Companies like
Bechtel, KBR and Shaw Stone & Webster shared their best practices, covering
various facets of effective project risk management.

Financial Risks

(a) Liquidity and interest rate risks

Despite the prevailing tight credit conditions, the Company has managed to
ensure that funds are available to meet its operational and strategic needs
viz. capital expenditure, working capital and strategic investments. At
current gearing levels and with its relatively comfortable liquidity
position, the Company is confident of managing its liquidity over the
short/ medium term. Further, the Company's short term and long term credit
rating and unutilised bank lines, will enable raising funds at short notice
to meet short term liquidity gaps, if any.

The Company manages liquidity and interest rate risk by accessing funds
across various products, investor classes and maturity profile. Besides
this, the Company has in place, various approved risk management tools to
mitigate interest rate risks.

(b) Foreign exchange and commodity price risks

The Company is exposed to foreign exchange rate risk across projects /
contracts, product businesses, loan liabilities and its foreign currency
denominated assets. The Company is also subject to risk arising out of
change in commodity prices in respect of various inputs like steel, oil and
other base metals. Some portion of the foreign exchange and commodity price
risk is covered by way of pass-through clause in project contracts with
customers. The balance is monitored through an elaborate risk management
protocol, periodically reviewed by the Audit Committee / Board of
Directors. The Company's Treasury Hedge Management desk closely works with
the constituent business groups to price and hedge the aforesaid types of
risk under the aegis of a Board approved hedge management policy.

III. INTERNAL CONTROLS

The Company believes that a robust internal control mechanism is a
necessary concomitant for effective governance. The authority vested in the
various levels of management is exercised within a framework of appropriate
checks & balances. The company is committed to ensure an effective internal
control environment that helps in preventing and detecting errors,
irregularities & frauds, thus ensuring security of Company's assets and
efficiency of operations.

There is a separate cell in the Company which oversees implementation of
internal control in the business processes and information technology
systems. A Corporate Policy on Internal Control is in place which provides
a structured framework for identification, rectification, monitoring and
reporting of Internal Control weaknesses in the Company. It specifies the
responsibilities and tasks enjoined upon employees in all positions. The
various business segments of the company have also, over the years, created
well documented policies, authorisation guidelines and standard operating
procedures specific to their respective businesses.

The effectiveness of internal control is reviewed during internal audits
carried out by the Corporate Audit Services on a regular basis. An
independent review of the Internal Control systems is also carried out by
the Statutory Auditors. Any significant deficiency in internal control
along with the progress in implementation of recommended remedial measures
is regularly presented to and reviewed by the Audit Committee of the Board.

IV. NURTURING HUMAN CAPITAL

The Company has set its vision high to foster a culture of trust, caring
and continuous learning for its growing human capital so as to ensure a
continuous enhancement in shareholder value. Sustained well-being of its
employees, both professional and personal, is the hallmark of its human
resource policies.

Being an engineering conglomerate, the Company needs a large pool of
engineering talent. Every year in line with the growing business needs, the
Company recruits a sizeable number of Graduate Engineer and Diploma
Engineer Trainees from engineering colleges across the country. 'Prayag', a
month-long induction programme, helps these trainees to transition from the
academic to the industrial world to understand how engineering knowledge is
applied in practice.

A wide menu of training programmes is offered to our employees for
development. This year, a number of unique strategic programs like
Corporate Entrepreneurship, Managing & Leading across Borders, Strategy and
Leadership programmes were added with a viewto nurture the knowledge, skill
& behaviour required in the global business scenario.

The Company endeavours to build a leadership pipeline in a systematic and
scientific way, using the most sophisticated human technologies so as to
achieve the targets to be set out under Perspective Plan 2015. Towards this
end, the Company has launched two streams of Leadership Development Program
with the help of Mckinsey & Company, namely

* Emerging Leadership Development Program (e-LDP) and

* Top Leadership Development Program (t-LDP)

The eLearning initiative ATL-Any Time Learning launched a few years ago has
been augmented to include 'Harvard Manage Mentor'- an engaging online
resource consisting of 42 management topics for fostering management
skills. This learning initiative enables learning anywhere, anytime and at
one's own pace. The Company's Management Development Centre at Lonavla is a
symbol of the value and priority that talent growth and development is
accorded in L&T. This prestigious facility is being augmented to triple its
training capability matching the Company's growing size and stature.

V. RAPID STRIDES IN INFORMATION TECHNOLOGY INITIATIVES

The Company is an intense user of Information Technology in all aspects of
its businesses. Having successfully automated most of the transaction
processing requirements, the Company has also recently completed
implementation of niche solutions in other areas to enable new
capabilities.

The year saw the implementation of ERP solutions for a few of the new
businesses, to enable these new businesses to use the information
technology platforms right from inception. The implementation of the
enterprise-wide Human Resources System in the various businesses has made
good progress. Significant improvements are also being made to the IT
infrastructure by enhancing the capacity of networks, computing and
storage. The Company's IT governance and risk management framework ensures
that IT risk management and information security are continuously monitored
and beefed to protect the confidentiality, integrity and availability of
information systems.

The company is also adapting itself to the new technologies

like virtualisation and power saving systems to support 'Green IT'
initiatives. A systematic measurement of the IT costs vis-a-vis the IT
benefits derived ensures that the IT initiatives deliver value to the
businesses. The Company believes that continued investments and value focus
on IT will go a long way in improving every aspect of the Company's
operations and thereby its profitability and growth.

VI. SUSTAINABLE DEVELOPMENT THROUGH ENVIRONMENT MANAGEMENT

The virtue of addressing the importance of 'triple bottomline' is being
felt today like never before. The Company reckons its responsibility and is
committed to playing an instrumental role in this period of economic and
social change. The emphasis now is not just on increasing profits but at
the same time on improving the efficiency of all business decisions and
minimising the environmental and social costs of operating in communities.

The first Sustainability Report published by the Company for the year 2007-
2008 emphasised the strategy to integrate environmental, economic and
social considerations in all aspects of business development. We understand
that the social and environmental challenges are as dynamic as the
financial ones and hence we have taken steps to put in place a robust
organisational structure to address them effectively. The Sustainability
Organisation Structure, headed by the Corporate Management Committee and
functional at all the business divisions and operating locations, ensures
that the commitment to conduct business responsibly trickles down to the
grass-root level across the operations.

The Company has been taking focused steps to enhance the quality of the
community life in its immediate vicinity. It has been diligently working to
build the capabilities and employability of the youth through its
Construction Skills Training Institute and Vocational Training Centres in
partnership with the various state governments and helping women being
self-reliant through professional skills training.

Apart from implementation of the OHSAS 18001:2007 and ISO 14001:2004
management systems, the Company has also started implementing the British
Safety Council's Health & Safety Management System at some of its
manufacturing locations for further strengthening its systems and improving
the working condition of the employees.

GROWING SUBSIDIARIES & ASSOCIATES PORTFOLIO

L&T Group is actively pursuing its diversified business portfolio,
particularly in the emerging businesses, through formation of wholly owned
subsidiary companies and joint ventures with strategic partners. As on
March 31, 2009, the Group has 97 subsidiaries, 22 associate companies & 15
joint ventures within its fold. These entities broadly operate in and focus
on the following sectors:

1. Information Technology Services

2. Financial Services

3. Engineering, Construction & Project Management

4. Infrastructure and Property Development projects

5. Manufacture of electrical and industrial equipment, machinery and
products

6. Shipyard and Port facilities

Within the above classification, L&T has invested in companies incorporated
both in India & abroad. Most of the investments in companies incorporated
overseas are through L&T's wholly owned subsidiary company, L&T
International FZE. Some of the ventures initiated in the emerging sectors
during the last 1-2 years are still in the formative stage and are yet to
contribute to the Group's revenues. During the year, acquisition of the
medium voltage electrical business of TAMCO, Malaysia was consummated and
accordingly the turnover of the acquired entities contributed to the growth
in Group revenues.

Consolidated total income at Rs.41072 crore grew by 37%, when compared to
that of the previous year. Profit after tax (PAT) for the consolidated
Group at Rs.3789 crore increased by 63% over the previous year, which is
marginally higher than the growth achieved by the standalone Company at
60%.

The consolidated gross Debt:Equity ratio as at the end of the year stood at
1.32:1 mainly due to higher borrowings by the major capital intensive
subsidiaries in the financial services and developmental projects
businesses.

A review of each of the operating subsidiary & associate companies is
presented below:

I. INFORMATION TECHNOLOGY SERVICES

A. LARSEN & TOUBRO INFOTECH LIMITED (LTIL):

Subsidiary company

LTIL is a wholly owned subsidiary of L&T engaged in providing IT solutions
and software consultancy globally. The Company offers both onsite and
offsite services in the areas of Application Maintenance & Development,
Enterprise Resource Planning, Data Warehousing, Business Intelligence,
Testing and IT Infrastructure management. It has established its global
footprints in USA, Canada, Denmark, France, Germany, Japan, UK and the
Middle East. Around 26% of the Company's total number of clients is in the
Global / Fortune 500 list. The Company continues to focus on the chosen
verticals viz Manufacturing, Banking Financial Services and Insurance,
Energy and Petrochemicals, Product Engineering Services (comprising of
Communications and Embedded Software).

Operations & Performance

In the backdrop of global economic downturn, the highlights of L&T
Infotech's performance during the year 2008-2009 are as under:

19% growth in total revenues at Rs.1,975 crore during the year 2008-2009
compared to Rs.1,658 crore achieved during the previous year. On
consolidated basis including subsidiaries in Canada, Germany and GDA
Technologies Inc., the total revenue grew to Rs.2,081 crore in 2008-2009
from Rs.1,757 crore in the previous year.

21 % increase in operating profit (PBDIT) which was higher at Rs. 343 crore
as against Rs. 283 crore in 2007-2008.

25% increase in profit after tax at Rs. 265 crore as against Rs. 211 crore
in 2007-2008.

Though USA continues to be the leading destination for Software exports,
its contribution for the year 2008-2009 dropped to 67% vis-a-vis 74% for
the previous year. Europe and Asia Pacific contributed 16% and 9%
respectively, while contribution of Africa/MEA increased to 4%. Onsite
services accounted for 53% of L&T Infotech exports and the balance was
delivered from the offshore development centers.

Outlook

The slowdown in global economic growth is expected to continue into 2009-
2010. This will adversely affect the demand for IT services in the short
term. In the long term, however, the Indian IT sector is well poised for
growth, as its competitive advantage in outsourced services space is
sustainable. Several global megatrends viz. economic, demographic,
business, social and environmental, will create new opportunities for the
industry in:

New verticals: public sector, healthcare, media and utilities (which have
adopted global sourcing only to a limited extent)

New customer segments: small and medium businesses

New geographies: greater outsourcing in BRIC, GCC, Japan and rest of the
world

To take advantage of emerging opportunities L&T Infotech has started
focusing on internal efficiencies and cost reduction. Given the industry's
resilience to withstand various challenges in recent years, the Company is
confident to sustain the growth momentum in the medium term.

B. LARSEN & TOUBRO INFOTECH GmbH

(L & T infotech GmbH):

Subsidiary company

L&T Infotech GmbH provides software services in Banking & Finance,
Insurance, and Communication and Embedded technology businesses in Germany.
During the year 2008-2009, L&T Infotech GmbH recorded total income of Rs.
52.12 crore, registering a growth of 22%. The investment in sales and
marketing organization has contributed to the Company's revenue growth. It
has been able to secure new clients with strong potential as also increase
its presence with existing clients. This is expected to reflect in the
further improved performance in the coming years.

C. LARSEN & TOUBRO INFOTECH CANADA LIMITED (LTI Canada):

Subsidiary company

L&T Infotech Canada (LTI Canada) provides software services in financial,
Insurance and Oil & Gas sectors in Canada. During the year 2008-2009, the
total income of LTI Canada amounted to Rs. 26.23 crore. The Company has
been able to improve its operating performance by targeting on certain
niche areas, which has the potential to develop significantly in the years
ahead.

D. GDA TECHNOLOGIES INC. (GDA):

Subsidiary company

GDA Technologies was acquired in the year 2007 to strengthen IT outsourcing
business in USA. Since then, GDA has been integrating its business
development with L&T Infotech's foray into the outsourcing business. The
Company has been scaling up its revenues largely through the Offshore
Design Centres, besides its conventional segments of Property and Custom
Design & Manufacturing services.

GDA clocked total income of Rs. 60.46 crore for year ended March 31, 2009.
The efforts put in by the team towards integration and leveraging of L&T
Infotech relationship with high potential customers is expected to further
improve the operational performance going forward.

II. FINANCIAL SERVICES

A. L&T CAPITAL HOLDINGS LIMITED (L&TCHL):

Subsidiary company

Considering the emerging opportunities in the fast growing financial sector
of the country, the Company has expanded its financial services range
covering commercial, retail & infrastructure finance and merchant banking
services. In order to consolidate various business interests and create
future value potentials in the sector, the Company has set up a wholly
owned subsidiary for Financial Services; viz. L&T Capital Holdings Limited
and has consolidated all its existing investments held in the Financial
Services Companies under L&TCHL.

B. L&T FINANCE LIMITED (LTF):

Subsidiary company

Overview

L&T Finance Limited, a wholly owned subsidiary of L&T Capital Holdings
Limited is one of the premier diversified non-banking finance companies in
the country, with product offerings in Enterprise Finance catering to
various segments, Commercial Vehicle Finance and Rural Finance. The Company
is, from the current year, actively engaged in microfinance in the rural
sector. It has a robust sourcing, underwriting, receivables, collection and
operational model, commensurate with the size and risk of the respective
underlying asset class.

Operations & Performance

The performance of the Company during 2008-2009 was adversely affected due
to the economic slowdown, which resulted in lower business volumes across
almost all the sectors catered to by the Company. Tight liquidity
conditions witnessed during the financial year also led to increased
interest costs. During the year, the Company added 24 branches to its
network, taking the total to 85, spread across 23 states. The highlights of
financial results for 2008-2009 are given below:

Total assets grew from Rs.4,793 crore on March 31, 2008 to Rs.5,337 crore
on March 31, 2009.

Total income grew to Rs.830 crore in 2008-2009 from Rs.606 crore in 2007-
2008.

Profit after tax for the year was lower at Rs.99 crore as compared to Rs.
115 crore in 2007-2008.

Outlook

The business conditions for non-banking finance companies continue to be
challenging due to lower economic/credit growth and high cost of funds.
Notwithstanding increasing competition, LTF is in a strong position to
deliver a resilient earnings profile, supported by its well-balanced
business platform and strong asset quality. The Company's strategy, as in
the past, would be to focus on strong risk management

& processes, profitable growth and diversification of its product
portfolio.

C. L&T INFRASTRUCTURE FINANCE COMPANY LIMITED (LTIFC):

Subsidiary company

LTIFC, a wholly owned subsidiary of L&T Capital Holdings Limited, is
focused on financing and developing of infrastructure projects, covering
various sectors. The Company intends to leverage L&T's domain knowledge in
the engineering and construction fields to provide infrastructure financing
solutions through a mix of debt, sub-debt, quasi-equity and equity
participation. It also provides active support to clients at project
development stage.

The key success factors for LTIFC are the sheer demand for infrastructure
in the country, the Company's acknowledged expertise in all areas of
infrastructure, its ability to tap financial resources, its strategy to be
a 'one-stop-shop' for infrastructure and a strong synergy between the
Company's professional management, its Board of Directors and key
stakeholders that allows the Company to expeditiously pursue opportunities
for yet more profitable growth.

Operations & Performance

Amidst global slowdown and recessionary concerns, the Company achieved
significant growth during 2008-2009, with gross approvals and disbursements
of Rs.1,913 crore for 39 projects and Rs.1,412 crore for 34 projects,
respectively. The highlights of financial results during 2008-2009 are:

Total assets grew from Rs.1,916 crore as on March 31, 2008 to Rs.2,398
crore as on March 31, 2009.

Total income for the year 2008-2009 was Rs.296 crore as compared to Rs.110
crore in the previous year

Profit after tax increased to Rs.76 crore in 20082009 from Rs. 45 crore in
2007-2008.

Outlook

The business sentiment for infrastructure finance companies continues to be
challenging. With renewed focus by the Government on infrastructure
development, announcement of the fiscal packages to provide economic
stimulus, LTIFC is in a strong position to deliver improved performance on
a sustainable basis.

D. L&T CAPITAL COMPANY LIMITED (LTCCL):

Subsidiary company

LTCCL, a wholly owned subsidiary of L&T, is a SEBI registered Portfolio
Manager with close to Rs.1,450 crore under its fund management. It also
provides service as a Mutual Fund Distributor /Advisor. LTCC holds and
monitors a significant portion of the L&T Group's strategic investments.

Operations & Performance

Mutual fund markets were subdued in 2008-2009. The net asset values of most
funds nose-dived. The adverse capital market conditions had its impact on
LTCCL's income and profits. During the year, the Company's gross income
recorded a decrease of 25% to Rs. 6.38 crore, as compared to Rs. 8.45 crore
in the previous year.

The Company is planning to expand its fund management by offering offshore
advisory services. It is in the process of setting up wholly owned
subsidiaries in Mauritius towards meeting this objective. The new services
are likely to be offered in the second half of 2009-2010.

Outlook

With the domestic stock market looking up, new portfolio management avenues
would be available. The initiative in offshore advisory services is
expected to open up new vistas of regular income streams for the Company,
so as to counter the fluctuations in the domestic market.

III. ENGINEERING & CONSTRUCTION

Domestic Companies

A. L&T-SARGENT & LUNDY LIMITED (LTSL):

Subsidiary company

Overview

L&T - Sargent & Lundy Limited (LTSL), a Joint Venture company between L&T &
Sargent & Lundy LLC Chicago, USA, renders complete power plant engineering
services to its customers in India and abroad. Besides being a major
provider of Integrated Engineering Solutions through 3 D modeling, LTSL has
established itself as a global consultant backed by a competent engineering
talent pool and technology support.

Operations & Performance

Power sector got a boost during the year with many

UMPP's and other mega IPP projects declared for bidding. The economic
environment was encouraging in the Middle East countries also facing a
power deficit As a result, the Company secured healthy orders for
engineering services, from domestic and international markets. The sales
and other income for 2008-2009 at Rs.62.74 crore registered a growth of
50%. Exports accounted for 65% of the total income. Profit after Tax at Rs.
10.43 crore for 2008-2009 rose sharply as compared to the previous year
level of Rs. 3.68 crore.

Outlook

According to Energy Information Administration (EIA), world energy
consumption is projected to expand by 50 percent upto 2030. Within the
country, the implementation of Rural Electrification Scheme and amendments
in the Electricity Act, 2007, are expected to attract more investment in
the power sector. Moreover due to implementation of the 11th plan capacity
addition of 78.7 GW and the 12th plan capacity addition of 82.2 GW, the
power sector promises enormous opportunities for the engineering services.
Given the good opportunities both in India and abroad LTSL sees bright
prospects in the medium to long term.

B. L&T-CHIYODA LIMITED (LTC):

Associate company

Overview

L&T-Chiyoda Limited (LTC) is an internationally reputed design &
engineering Consultancy Company for Hydrocarbon Processing Industry. LTC
was set up in the year 1994 as a joint venture (JV) between Chiyoda
Corporation of Japan and Larsen & Toubro Limited of India with an equal
stake.

LTC offers total engineering solution to hydrocarbon sector and related
industries including Petroleum Refineries, Petrochemical Units, Oil and Gas
Onshore Processing Facilities, LNG/LPG Plants, Fertilizer Plants and
Chemical Plants. Engineering and Consultancy services offered by the
Company include Feasibility Studies, Basic Engineering, Front End Design &
Engineering (FEED), Detailed Engineering, Procurement Assistance,
Construction Supervision, Commissioning Assistance and Project Management
Consultancy, to many global and Indian Oil Companies.

Operations & Performance

The Company has already established its experience in design and
engineering of refinery units. Presently it is involved with L&T in its
Diesel Hydro-treating Project of MRPL-Mangalore, two Hydrogen Generation
Units and LOBS Quality Up-gradation Project of HPCLMahul Refinery. LTC,
being the engineering partner for most of the LNG/GTL Projects of Chiyoda,
is getting an excellent exposure to onshore oil/gas processing plants. The
Company is also in the process of finalising Gas Treatment Project in
Russia with an international EPC contractor.

The Company reported a healthy growth in Order Inflow and Sales revenue at
Rs. 126 crore and Rs.79 crore respectively. Considering the long term
growth aspirations, Oil Companies continued with their capacity
augmentation projects even as the global economy was grappling with the
unprecedented financial crisis. In line with the revenue growth, the Profit
after Tax for 2008-2009 at Rs. 10 crore grew by 34% as compared to the
previous year.

Outlook

Indian energy sector is in the midst of a major capacity augmentation
program, considering the expected surge in the demand for oil and gas
products in the next decade. Refining capacity in the country has been
growing at a rate of 4 to 5% every year. The growth rate is expected to
increase to around 7% by the end of 11th Plan period 2007 to 2012, besides
the plan for setting up 3 grass root refineries in the country. The
Government is also promoting the sector through various initiatives like
the proposed SEZ-type scheme to create Petroleum, Chemicals and
Petrochemicals Investment Regions (PCPIR). Considering that the energy
sector would be the backbone of the Indian growth strategy, the sector is
expected to attract investment outlays which in turn would provide
attractive opportunities to the Company.

C. L&T-VALDEL ENGINEERING LIMITED (LTV)

Subsidiary company

L&T-Valdel Engineering Limited (LTV), established in 2004, became a
subsidiary of L&T in 2007-2008. LTV provides complete engineering solutions
for Upstream Oil & Gas sector and offers design engineering services as
well as project management services globally.

Operations & Performance

The hydrocarbon sector saw spurt in E&P activities following a sharp
increase in crude oil prices during 2008-2009. The committed investments in
the sector enabled the Company to bag fresh engineering orders and register
a healthy revenue growth of 70% over the previous year. Expecting the ramp
up in the sector, the Company had invested in expansion of facilities and
beefed up the talent pool, which enabled it to report higher revenues at
Rs. 72.46 crore. In tandem, the profit after tax for the year 2008-2009
improved significantly to Rs. 15.61 crore. Apart from the higher capacity
utilisation, the rupee depreciation also aided the improvement in the
operating margins during 2008-2009.

Outlook

The crude oil prices declined significantly in the later part of the year
2008-2009. The scenario of continued depressed crude oil prices adversely
impacted the investments in the hydrocarbon sector. Though major E&P
players have not announced cuts in their plans as yet, the companies are
re-tendering the projects to optimize the costs in the current recessionary
scenario. The Company, however, is confident of tiding over the current
economic slowdown with focused marketing efforts in the international
market and capability building in the new lines of business such as Deep
Water Pipeline Systems, Jack-up Rigs, and SemiSubmersibles.

D. L&T-MHI TURBINE GENERATORS PRIVATE LIMITED and L&T-MHI BOILERS PRIVATE
LIMITED

Subsidiary companies

Overview

Leveraging on the strengths of EPC capabilities in the power sector, L&T
has entered into Joint Venture with the leading power plant equipment
manufacturer, Mitsubishi Heavy Industries, Japan (MHI) & Mitsubishi
Electric Corporation, Japan (MELCO) to manufacture & supply Supercritical
Boilers & Steam Turbines & Generators (STG) for large coal based utilities.
L&TMHI Turbine Generators Private Limited (LTMHI Turbine) and L&T-MHI
Boilers Private Limited (LTMHI Boilers) have been formed with L&T holding
the majority share of 51 % each of the equity through its subsidiary L&T
Power Limited. The principal business of the JVs will comprise design,
manufacture, supply, erection & commissioning Supercritical Boilers,
Turbines & Generators and subsequent warranty and service support for the
Indian market.

LTMHI Turbine & Boiler have envisaged manufacturing of equipment in the
capacity range of 500 MW to 1000 MW for sale in India. Equipment will be
manufactured using advanced, fuel efficient & environment friendly
'Supercritical Technology'. The total capacity being installed is 4000 MW
for each of the manufacturing unit.

Project Activities

The Turbine JV Company has already secured order for supply of 2800 MW STG
from Andhra Pradesh Power Development Company Limited. Also it has
undertaken bids for various projects and is expected to bag few more orders
shortly. The JVs are poised to establish a state-of-the-art manufacturing
facility at Hazira, Gujarat State with the Technological Support from MHI
for a period of 20 years. The Turbine Company proposes to commence
operations with the manufacture of 2 Turbines & Generators in the year
2010-2011, increasing the same to 4 from the year 2012-2013.

The implementation of the Steam Turbine & Generator project has been
conceptualised in phases. The phased implementation schedule has been drawn
in consonance with the plan of acquiring of requisite skill for specialised
manufacturing activity and focused indigenisation plan. All major machines
& facilities have been ordered and are slated for commissioning in a phased
manner aligning with the production plan.

E. L&T- RAMBOLL CONSULTING ENGINEERS LIMITED (LTR):

Associate company

Overview

LTR is a joint venture consultancy firm established in the year 1998 by L&T
and RAMBOLLA/s of Denmark. LTR provides engineering and project consultancy
services for Transportation Infrastructure projects relating to Ports &
Harbour, Roads & Highways, Bridges & Flyovers, Airports and Environmental
Engineering.

Operations & Performance

The Company has consolidated its position in the domestic market as
advisors and consultants to developers of projects. This has enabled the
Company to utilise its strengths in the Design & Build segment of
Consultancy business. Backed by order inflow at Rs. 35.88 crore, LTR
registered in 2008-2009 a growth of 23% in total income at Rs. 30.27 crore.
In tandem, profit after tax at Rs. 5.59 crore grew by 53% over the previous
year. The healthy performance was driven

largely by the newjobs for detailed engineering in Ports & Bridges sectors.

Outlook

Infrastructure development is expected to gather momentum during the
balance period of 11th Plan 2007-2012. This is the niche market in which
LTR has a distinguished presence. Further, the Company is rolling out a
major expansion of its International business in Indian Ocean RIM countries
spurred by good market prospects in this sector.

F. INTERNATIONAL SEAPORT DREDGING LTD (ISDL):

Subsidiary company

Overview

International Seaport Dredging Limited (ISDL), a Company promoted by the
Belgian Dredging International NV, was incorporated in March 2004.
Considering the captive business potential, L&T acquired a majority stake
in the Company in May 2006. The business spectrum of ISDL includes
dredging, marine engineering services and land reclamation for ports and
harbours in India and the Middle East countries.

Operations & Performance

Capital dredging continues to be the major growth area of the Company. Due
to the global slowdown and the liquidity crisis, some of the private port
projects were postponed in the year 2008-2009. However with an eye on the
future, ISDL contracted for acquiring two new dredgers, which will increase
the capacity in the coming years.

The fresh orders secured during the year by ISDL include dredging project
orders from Karaikal Port and Kakinada Port and an order from charter hire
in the Middle East region. While dredging contracts were completed at
Gangavaram Port, Sethusamudram and Hazira, the Dhamra Port order is under
execution.

Due to significant variation in the underlying soil conditions, the Company
incurred loss on one of the projects completed during the year. The Company
has taken adequate safety measures to mitigate such operational risks with
regard to orders under execution and also would stringently evaluate the
probable operational risks for new prospects.

Outlook

With 2/3 rd of the Indian shores amenable for port development and the
prospects of significant increase in international & coastal trade, the
port sector is expected to attract fresh investments over the next 5 to 10
years. Capital dredging business is therefore expected to grow
significantly to reach around 150 million cubic meters per annum over the
next 5 years. The Company is gearing up to meet the expected increase in
the demand in the coming years.

G. SPECTRUM INFOTECH PRIVATE LIMITED (SIPL):

Subsidiary company

L&T acquired SIPL in the year 2006 in order to strengthen its capabilities
in defence electronics. SIPL concentrates largely on product development in
embedded solutions, control and signal processing. It has grown from
designing and development of subsystems to a full-fledged production
organisation capable of delivering sub-systems. Under the umbrella of L&T's
Strategic Electronics Center, SIPL is actively exploring the opportunities
for possible tie-ups in various business areas of focus.

Operations & Performance

Sales revenues during the year 2008-2009 were Rs.8.68 crores as compared to
Rs. 7.36 crore in the year 2007-2008. Profit after tax increased to Rs.1.68
crore, registering a marginal improvement over the previous year.

Outlook

The long term outlook for defence electronics business is quite positive.
Public-Private participation during design and development phase is
expected to result in a significant share of business for private industry
in the production phase. Revision of DPP-2006 regarding offsets and greater
Government support for PPP model are also in the offing. In addition,
business opportunities for HAWK & ALH production, LCH development, Jaguar
aircraft Upgrade programs and MMRCA are likely to fructify in the coming
years.

H. L&T SHIPBUILDING LIMITED (LTSB):

Subsidiary company

Overview

L&T Shipbuilding Limited has been formed as a joint venture between L&T and
Tamilnadu Industrial Development Corporation Limited (TIDCO) for setting up
a Shipyard-cum-Minor Port Complex at Kattupalli,

near Chennai. L&T has identified shipbuilding as a major thrust area in the
heavy engineering sector for growth. Indian Navy and Coast Guard have large
requirements of defence vessels and submarines to augment as well as
replace the ageing fleet.

Tamil Nadu has a coastline of about 1000 kilometres, with plain landmass as
hinterland. Due to this vast coastline, the growing hinterland needs a
State-of-the Art port with allied infrastructure for effective handling of
all types of cargo. The Port Complex of LTSB is expected to meet this
requirement and is planned to operate on a commercial basis with a capacity
of 2 million TEUs per annum.

Project Activities

LTSB signed a joint venture agreement with TI DCO in April 2008 to set up a
port and a shipyard at Kattupalli, Tamil Nadu. Following the extensive
discussions with the Government on the various critical requirements of the
project, LTSB has taken possession of 1123 acres of patta land at
Kattupalli on 99 years lease basis. About 27 acres of Poromboke land within
the project area is under alienation from Government and are likely to be
leased out to LTSB by June 2009.

The Shipyard is being organised as a heavy engineering sector specific
Special Economic Zone (SEZ) under the Special Economic Zones Act, 2005. In
February 2009 LTSB received the formal SEZ approval from the Ministry of
Commerce and Industry. LTSB has entered into a Licence agreement in
February 2009 with Tamilnadu Maritime Board (TNMB) for using 76.86 acres of
coastal land at Kattupalli required by the project.

LTSB is in advanced stages of getting necessary approvals from various
Central and State Government authorities. While the financial closure for
the project is in progress, the construction activity is expected to
commence in the second quarter of 2009-2010.

International companies

I. LARSEN & TOUBRO ELECTROMECH LLC (L&T Electromech):

Subsidiary company Overview

Larsen & Toubro Electromech LLC is a joint venture between Larsen &Toubro
Limited, India (L&T) and The Zubair Corporation, Oman (TZC). L&T holds 65%
through L&T International FZE, Sharjah and TZC holds the balance. The
Company is a leading Civil, Mechanical and Electrical & Instrumentation
Construction Company in Oman catering to the Oil and Gas, Refineries,
Petrochemicals, Power and Water sectors.

Operations & Performance

The Company executes projects predominantly in the Hydrocarbon sector which
contributes significantly to the Oman's GDP growth. The global meltdown and
delays in announcement and award of new projects had a negative impact on
the order inflows for the year. The total order inflow during the year 2008
was RO 18.21 mn (INR 237 crore) against RO 42.69 mn (INR 555 crore) in the
year 2007. Backed by healthy opening order book, the Company registered a
growth of 35% in Sales at Rs. 327.87 crore. Profit after tax increased to
RO 1.95 mn (INR 22.10 crore) as against loss of RO 0.46 mn (INR 5 crore) in
the year 2007.

In order to effectively counter the impact of global slowdown, the Company
has initiated various measures on cost optimisation, pre-bid tie-ups with
major EPC players and improved contract management to enhance project
realisation.

Outlook

Gulf countries are expected to counter the challenges of falling oil prices
and receding investor interest. Major investments in petrochemicals are
being delayed on account of gas gap. However, Investment in Enhanced Oil
Recovery (EOR) projects is expected to continue and offer good
opportunities for EPC projects in Marmul and Nimr areas. Major investments
are also planned in Power plants (IWPP & IPP) at Salalah, Barka and AI-
Ghubra areas in the Sultanate. In the backdrop of stable fiscal position of
the Sultanate, the Company expects to achieve the targeted growth in the
medium term.

J. L&T MODULAR FABRICATION YARD LLC, OMAN

(LTM FYL)

Subsidiary company

Overview

L&T Modular Fabrication Yard LLC (LTMFYL) is a wholly owned Subsidiary
formed in Oman, to realise the growing opportunities in the Middle East Oil
& Gas sector for manufacture and servicing of platforms and marine
structures. LTMFYLwill endeavourto build core competencies in high end
equipment like Jack Up Drill Rigs, Floating Production Storage & Offloading
(FPSO)

Vessels, integrated Decks, Skid mounted equipment, in addition to
fabrication of large size Offshore Platforms.

The Fabrication Yard facility at Sohar has become fully operational during
the year. The Yard is expected to be established as a major fabrication
service provider for the region's promising offshore oil & gas industry,
comparable with some of the biggest fabrication yards of this kind in the
region.

Operations & Performance

LTMFYL executed projects in Upstream Oil & Gas for Oil & Natural Gas
Corporation, India, and for Maersk Oil, Qatar and also undertook
refurbishment of Rig FDVII for Lynemouth Drilling Limited; U.K. LTMFYL
recorded Sales worth Rs. 102.92 crore for the year 2008, its first full
financial year. By the end of the year 2008, due to economic meltdown, the
Oil & Gas segment witnessed deferment of orders by clients and pressures
for lowering of prices quoted by the Yard.

Outlook

The Middle East Oil & Gas sector is active with bids for projects involving
fabrication & integration of Modules for FPSO, though slowdown effect is
still pervading the region. While, the refurbishment orders offer
opportunities in the short term, the major projects are expected to reach
implementation phase only in the latter half of the year 2009. With crude
oil prices showing some signs of stability, the sector is expected to
hasten up the projects which are already on the drawing board. The Company
will endeavor to improve its capacity utilisation by harnessing the
opportunities coming its way.

K. LARSEN & TOUBRO ATCO SAUDIA COMPANY LLC (L&T-ATCO):

Subsidiary company

L&T-ATCO is ajointventure between L&T International FZE and Abdulrahman Ali
AI -Turki Group of Companies (ATCO) Dammam, a renowned Saudi conglomerate.
L&T ATCO was incorporated to take advantage of the enormous electro-
mechanical construction opportunities arising in the areas of oil & gas,
petrochemicals, power and water related projects in Saudi Arabia.

L&T-ATCO is focusing business opportunities in the area of strategic
construction equipment & support services, with the core team of engineers
operating from Dammam. Having completed all the statutory registration
process, the Company is now concentrating on pre-qualification with various
customers & is participating in tenders for leading clients.

Outlook

Firm oil prices, availability of liquidity and the Government's social and
economic reforms are positive indicators of the Saudi economic growth.
Large projects in the field of hydrocarbon, power, water and oil & gas are
being envisaged to sustain the long term development of the country.
Specific tie-ups with prominent EPC players who are aware of L&T's
capability in refinery & petrochemical and demonstration of on-ground
resources could open windows of opportunities for projects.

L. OFFSHORE INTERNATIONAL FZC

Offshore International FZC (Offshore FZC) is a Joint Venture between L&T
International FZE and M/s PetroPlus Sdn Bhd, Malaysia, a wholly owned
subsidiary of Sapura Crest Petroleum Bhd, Malaysia, formed for construction
and operation of a Heavy Lift cum Pipe Lay Vessel (HLPV). The Company was
incorporated to provide critical in-house installation facility for
Offshore Platform projects being executed by L&T and thereby mitigate the
risk of dependence on external sub-contractors.

Sapura Crest Petroleum Berhad is a leading company in Malaysia with
diversified activities having expertise in offshore installation services
including subsea pipelaying, platform and relation installations. Through
the joint venture company, Sapura Crest and L&T will be able to tender for
installation and EPC contracts. This offers both companies greater
competitive advantages especially in the Indian and Malaysian markets - two
of the fastest growing oil and gas services markets in the region.

The vessel is in an advanced stage of construction in a renowned shipyard
in Singapore. The twin deck 160metre conventional vessel can accommodate
about 250 staff and is equipped with a crane capable of lifting heavy loads
of up to 3000 ST. The vessel is expected to be available for commercial use
in the year 2010.

M. LARSEN & TOUBRO (OMAN) LLC (LTO):

Subsidiary Company

Larsen & Toubro (Oman) LLC, a joint venture between L&T International FZE
and Zubair Corporation LLC provides engineering, construction and
contracting services in Oman. Continuing its excellent track record of 14
years, LTO reported encouraging financial performance for the year 2008.

Operations & Performance

During the year LTO handed over Palm Garden Township and BaitAl Barakah
projects. The completion of these mega projects enabled LTO to cross RO 100
Million turnover. The year 2008 saw gross income nearly doubling to Rs.
1490.76 crore, with an increase in Net Profit to Rs. 56.79 crore as
compared to Rs. 26.24 crore in the year 2007.

Outlook

With the Government of Oman adopting growth oriented economic policies,
Oman is progressing amidst challenging times. The Company sees emerging
growth potential in Building & Urban Infrastructure and Power Transmission
& Distribution sectors. Whilst its focus on established sectors continues,
LTO has initiated its entry into the Infrastructure segment. It will target
brown-field and green-field airport projects and highway expansion projects
with the active support from L&T, India.

N. LARSEN & TOUBRO SAUDI ARABIA LLC (LTSA):

Subsidiary Company:

LTSA a subsidiary of L&T International FZE is engaged in the business of
providing turnkey solution in Civil, Mechanical and Electrical Engineering
Projects in the Infrastructure, Building, Power Transmission and
Distribution Sectors.

Operations & Performance

During the year 2008, the Company downsized its operations and did not
procure any fresh order. Consequently, revenues recorded during the year
2008 were Rs. 5.10 crore while the losses amounted to Rs. 4.50 crore due to
cost overruns. Due to unfavourable business conditions, the Company has
decided to wait and watch till the global economy recovers.

Outlook

In order to exploit the business potential the Company is in the process of
identifying a strong local partner who will help in promoting the business
of LTSA in the Kingdom of Saudi Arabia.

O. LARSEN & TOUBRO QATAR LLC (LTQ):

Subsidiary company

LTQ, a joint venture between L&T International FZE (49%) and a local
Company AI-Jazeera International Trading Company WLL (51 %) undertakes
Turnkey Engineering and Construction projects in the Building,
Infrastructure, Power and Electrical projects in Qatar.

Operations & Performance

The Company did not submit any tender during the year 2008. Revenues
accordingly declined to Rs.4.14 crore as against Rs.29.97 crore in the year
2007. The loss for the year was contained at Rs.0.88 crore (previous year -
loss of Rs.8.26 crore).

Outlook

In order to tap the major projects the Company has decided to revitalise
its operations by switching partners. The Company is planning to join hands
with a locally strong partner who will help in promoting the business of
LTQ in Qatar. The country has proposed an ambitious investment plan of over
USD 100 billion by the year 2015 in the Energy, Tourism and other
infrastructure projects. With the help of the new partner, it is expected
that the Company shall turn around in the near future.

P. LARSEN & TOUBRO KUWAIT CONSTRUCTION GENERAL CONTRACTING COMPANY WILL
(LTKC):

Subsidiary company

LTKC is a limited liability company jointly held by M/s Bader Almulla and
Brothers Company WLL, a Kuwaiti company & M/s Larsen & Toubro International
FZE, U.A.E. in the shareholding pattern of 51 % and 49% respectively. LTKC
executes construction projects in Oil & Gas and Power sectors in the State
of Kuwait.

Performance

On the strength of its parent's strong credentials and its own pre-
qualification initiatives, LTKC secured orders for fabrication and erection
of tank and pressure vessels during the year totaling to KD 5.65 Million
(Rs.95.27 crores). The execution of these orders has commenced.

Outlook

Kuwait has the fourth largest proven reserves of crude oil in the world and
is among the world's largest oil producers. Kuwait Petroleum Council has
major plans for building its largest refinery. The recent decline in oil
price has somewhat impacted the growth sentiments in the region. However,
no significant slowdown effects have been noticed in Upstream Projects. The
country has taken initiatives to privatise Crude Handling and Refining by
inviting private developers on BOO basis. Kuwait is still short of power
and therefore investment in Power Sector is envisaged to be around 1 to 2
Billion KD in next 3 to 5 years.

Q. LARSEN & TOUBRO READYMIX CONCRETE INDUSTRIES LLC (RMC LLC)

Subsidiary company

RMC LLC was formed in July 2006 as a joint venture between Mr Shukri Saleh
AI Braik, UAE (51 %) and Larsen & Toubro International FZE (49%) as per the
local law. The first plant was operational in January 2007 and second plant
in November 2007. The business was established in a highly competitive
market with many MNCs in the fray for Ready-Mix Concrete business.

Operations & Performance

The year 2008 was the first full year of operations with both the plants
producing at rated capacity. RMC LLC recorded sales revenues at Rs. 132.10
crore and net profit of Rs. 15.18 crore.

Outlook

The Impact of worldwide recession has been acute in Dubai region. New
projects have been hard to come by while there has been a market slowdown
in the progress of many existing projects. The Company is striving hard to
sustain its current performance during the year 2009 inspite of difficult
conditions. Efforts have been initiated in reducing raw material costs and
also explore opportunities in Abu Dhabi market so as to compensate for the
probable shortfall in volumes.

IV. POWER DEVELOPMENT

A. L&T POWER DEVELOPMENT LIMITED (L&T PDL):

Subsidiary company

L&T PDL, incorporated in September 2007, is a wholly owned subsidiary of
Larsen & Toubro Limited (L&T). The Company is formed as a power development
arm of L&T with the objective of developing, investing, operating and
maintaining power generation projects of all types namely thermal, hydel,
nuclear and other renewable form of energy including captive and
cogeneration power plants.

The Company is developing a 99 MW Singoli Bhatwari Hydro Electric Project
through a wholly owned subsidiary L&T Uttaranchal Hydropower Limited (L&T
UHPL). The Company is also pursuing opportunities to develop thermal and
hydro electric projects in India and abroad.

B) L&T UTTARANCHAL HYDROPOWER LIMITED (L&T UHPL):

Subsidiary company

The Company is executing Singoli Bhatwari Hydro Electric Project on Build-
own-operate-transfer (BOOT) basis for a period of 45 years including the
construction period. The project is a run-of-the-river scheme on river
Mandakini in Rudraprayag district of Uttarakhand. The project involves
construction of a 22m high and 57.2m long barrage, 12 km long head race
tunnel, surface powerhouse and 12 km transmission line (132 kV). The
Project is expected to achieve financial closure in the year 2009-2010 with
a total cost estimated at Rs. 1080 crore.

V. INFRASTRUCTURE AND PROPERTY DEVELOPMENT

A. L&T INFRASTRUCTURE DEVELOPMENT PROJECTS LIMITED (L&TIDPL):

Subsidiary company

L&TIDPL has been set up as an Infrastructure development arm of the Group.
L&TIDPL, a holding

company in this segment, works on a 'value creation' model so that the
Special Purpose Vehicle (SPV) floated for each infrastructure project is
nurtured till it reaches a stage of matured operations. The Company has,
over a period of time, built up capabilities in identifying and developing
infrastructure projects, operation & maintenance of these projects and
providing advisory services relating to financing & engineering of the
projects. Considering the potential, private equity Investors have
contributed 21.6% to the capital of the Company.

L&TIDPL portfolio is well diversified with a mix of projects across various
sectors such as roads & bridges, ports, airports and urban infrastructure.
L&T Urban Infrastructure Limited, a subsidiary of L&TIDPL, houses the
property development and urban infrastructure projects.

Operations & Performance

The Financial Year 2008-2009 was eventful with several of its projects
commencing commercial operations. These include Panipat Elevated Corridor
(July 2008), Krishnagiri Thopur Toll Road (February 2009), Western Andhra
Tollways (March 2009) and Bengaluru International Airport (May 2008).

During 2008-2009, the Company divested its stake in Kakinada Seaports
Limited. Including the divestment Income L&TIDPL has reported a total
income of Rs. 38.40 crore and a profit after tax of Rs. 10.83 crore.

As of March 31, 2009, L&TIDPL's portfolio includes:

I. Transportation and Infrastructure

Major SPVs Status (% of Stage
holding)
Roads and Bridges:

Narmada Infrastructure Construction
Enterprise Limited Subsidiary (100%)* Operational

L&T Transportation Infrastructure Limited Subsidiary (100%)* Operational

L&T Western India Tollbridge Limited Subsidiary (100%)* Operational

L&T Panipat Elevated Corridor Limited Subsidiary (100%) Operational

L&T Krishnagiri Thopur Toll Road Limited Subsidiary (100%) Operational

L&T Western Andhra Tollways Limited Subsidiary (100%) Operational

Second Vivekananda Bridge Tollway
Company Private Limited Associate (33%) Operational

L&T Interstate Road Corridor Limited Subsidiary (100%) Construction
completed

L&T Vadodara Bharuch Tollway Limited Subsidiary (100%) Under
implementation
Ports:

International Seaports (Haldia)
Private Limited Associate (22%) Operational

The Dharma Port Company Limited Joint (50%) Under
Venture Implementation
II. Urban Infrastructure:

Major SPVs Status (% of Stage
holding)

L&T Urban Infrastructure Limited Subsidiary (75%) Operational

Cyber Park Development and
Construction Limited Subsidiary (30.47%) Operational

L&T Tech Park Limited Subsidiary (30.47%) Operational

L&T Arun Excello IT SEZ
Private Limited Subsidiary (30.47%) Operational

L&T Infocity Limited Subsidiary (53.17%) Operational

L & T South City Projects Limited Subsidiary (30.47%) Under
Implementation

L&T Phoenix Infoparks Private Limited Subsidiary (30.47%) Under
Implementation

CSJ Infrastructure Private Limited Subsidiary (41.82%) Under
Implementation

L&T Arun Excello Commercial Subsidiary (30.47%) Under
Projects Private Limited Implementation

L&T Infrastructure Development Subsidiary (75.37%) Under
Projects Lanka (Private) Limited Implementation

Outlook

The Public Private Partnership model adopted by the country has yielded
positive results in terms of increasing the pace of infrastructure
development. In order to sustain a much higher level of economic growth
over the next decade, the Government has taken proactive steps in creating
conducive environment for attracting the private participation in the
infrastructure sector. L&T IDPL has appropriately positioned itself to
realize the emerging opportunities in the entire gamut of infrastructure
development sector. With healthy cash generation expected during the coming
year from the operational subsidiaries, the Company is geared up to invest
in new projects.

Financial performance summary of key operational SPVs: roads, bridges,
ports and airports:

A. Projects completed:

Name of subsidiary & Project Total income PAT (Rs. crore)
Project details cost (Rs. crore)
(Rs.crore) 2008-09 2007-08 2008-09 2007-08

1. L&T Panipat
Elevated Corridor Limited:

Widening the existing 4 lane 421.50 25.76 NA (31.05) NA
Road to 6 lane Road on
National Highway No.1 (NH-1).

Concession period is 20 years
including the construction period.

The project was completed
much ahead of the schedule
during the year 2008-2009.

2. Narmada
Infrastructure
Construction
Enterprise Limited:

Second Two-Lane Bridge at 37.75 36.08 16.95 15.17
Zadeshwar across the
Narmada River in Gujarat
on National
Highway 8 (NH-8).

Concession period is
15 years on Build-Own-
Transfer basis.

The bridge is operational
since November 2000.

3. L&T Krishnagiri
Thopur Toll Road Limited:

Widening the existing 525.00 9.41 NA (5.49) NA
2 lanes Road to 4 lanes Road
from the end of proposed
Krishnagiri flyover to
Thumpipadi.

Concession period is 20
years including the
construction period.

The project was completed
and opened to traffic
from February 7, 2009.


4. L&T Western
Andhra Tollways Limited:

Construction, development, 372.83 1.53 NA (1.86) NA
operation and maintenance
of the road from Jadcherla
to proposed Kotakatta
bypass on NH-7 in the
State of Andhra Pradesh.

Concession period is 20
years including the
construction period.

The project was completed
and opened to traffic from
March 14, 2009.


5. L&T Transportation
Infrastructure Limited:

Building a bypass (28 Kms) at 33.68 28.16 8.50 3.22
Coimbatore Section of National
Highway (NH-47) and
construction of additional
Two-Lane bridge at Athupalam
on River Noyyal. Concession
period is 32 years including
the construcion period.

6. L&T Western
India Tollbridge Limited:

Building a two-lane bridge 11.31 10.71 3.01 2.64
across river Watrak including
its approaches.

Concession period was 10 years
up to the end of 2009.
The bridge was constructed and
opened for traffic in March 2001.

7. L&T Interstate
Road Corridor Limited:

Construction, operation and 554.00 0.09 NA (0.06) NA
maintenance of the road on
Palanpur Swaroopgunj section
of NH 14 in the state of
Gujarat and Rajasthan.
The road was constructed as per
the schedule during the year
2008-2009

B. Projects under implementation: Roads and Ports:

THE DHAMRA PORT COMPANY LIMITED (DPCL):

Joint venture:

The Dhamra Port Company Limited (DPCL), a 50:50 joint venture between L&T
IDPL & Tata Steel Limited, has been set up to build a deep water all-
weather port at the existing minor port of Dhamra under Build-OwnOperate-
Share-Transfer (BOOST) model with a concession awarded by the Government of
Orissa for a period of 34 years (including 4 years of construction).

Sheltered between the mainland and Kanika sands island on the eastern
coast, Dhamra Port will be the deepest all weather port of its kind in
India, with a draught of 18.5 meters, which can accommodate super cape -
size vessels up to 1,80,000 DWT. This will be an advantage to the mineral
hinterland of north Orissa, Jharkand, West Bengal and Chattisgarh where a
large number of steel plants and mineral based industries are located. The
highly mechanized and advanced material handling facilities planned at the
port will offer the users loading and discharge rates comparable to

the world's best. The project includes 62.5 km rail connectivity to the
main Howrah- Chennai line at Bhadrak.

The port will eventually have 13 berths to handle over 83 million tons of
cargo per annum. Of these, the first two berths, with a handling capacity
of up to 25 million tons of bulk cargo per annum, will come up in the First
Phase. When fully developed, the port will handle all types of cargo, such
as dry bulk, liquid and container cargo. Apart from Tata Steel who is a co-
promoter of the port, a number of other steel plants, mines and industries
in the region are expected to use the port, which could become eastern
India's major gateway to the world.

The construction of the port is progressing as per the schedule and about
50% work has been completed. As part of the environment management system
developed in consultation with World Conservation Union (IUCN), the company
has undertaken plantation programme along the 62 km rail-road corridor from
Bhadrak to Dharma.

The status of other major projects under execution is summarised below:

Projects under implementation:

Name of subsidiary & Project cost Project status
Project details Rs. crore

1. L&T Vadodara Bharuch
Tollway Limited:

Widening the existing road 1450 As at March 31,2009, 95%
of Vadodara to Bharuch of the project has been
section on NH-8 in the completed and the widened
State of Gujarat to 6 Road would be open for
Lane Road. Concession traffic ahead of the
period is 15 years schedule.
including the construction
period.

2. L&T Ahmedabad -
Maliya Tollway
Private Limited:

Widening the existing 1481 Financial Closure expected
Two-Lane Road covering to be achieved in the
Ahmedabad, Viramgam & first half of the year
Maliya, to Four-Lane 2009, commercial
Road along with the operations expected by
divided Carriageway the end of the year 2011.
facility. Concession
period is 22 years
including the
construction period.

3. L&T Halol - Shamlaji
Tollway Private Limited:

Widening of existing Two-Lane 1302 Financial Closure expected
Road, covering Halol-God to be achieved in the first
hra-Shamlaji section in Gujarat half of the year 2009,
to Four-Lane Road alongwith commercial operations
divided Carriageway facility. expected by the second
Concession period is 20 years half of the year 2011.
including the construction
period.

4. L&T Rajkot - Vadinar
Tollway Private Limited:

Widening the existing Two-Lane 1075 Financial Closure expected
Road, covering Raj kot-Jamnagar to be achieved by first
-Vadinar section in Gujarat, half of the year 2009,
to Four-Lane Road along with commercial operation is
the divided Carriageway facility. expected by the second
Concession period is 20 years half of the year 2011-2012.
including the construction
period.

II. URBAN INFRASTRUCTURE

C. L&T URBAN INFRASTRUCTURE LIMITED (LTUIL):

Subsidiary company

LTUIL, a subsidiary of L&T Infrastructure Development Projects Limited, has
been formed to drive the real estate business of the Group in the fast
growing urban areas. The Company over the period of last three years, has
built a balanced portfolio of premium urban infrastructure and real estate
development projects comprising IT/ITES infrastructure projects, commercial
and hospitality projects, and residential projects.

Operations & Performance

LTUIL has invested in 9 projects, (under IT/ITES sector), of which 6
projects are operational and balance 3 projects are under construction.
Atotal of 50 lakh sq. ft. space has, so far been developed in this sector.
A further space of 50 lakh sq. ft. has been envisaged for development as
and when the demand picks up in the realty sector.

So far LTUIL has invested Rs. 516 crore in the above realty projects. LTUIL
earned Total Income of Rs. 13.50 crore during 2008-2009 and has reported a
higher profit of Rs. 6.01 crore.

Outlook

The realty sector has been impacted by the liquidity crisis during the
second half of the financial year 2008-2009. While the interest rates have
started softening, the buyers are negotiating for reduced property prices.
The 'wait mode' adopted by the customers is forcing the sector to defer /
delay the new projects in the offing. Considering that the industry players
have already invested in the property at a relatively higher cost, there is
little leeway for them to further cutback the rates. Given this uncertain
conditions prevailing in the market, the sector sees a subdued performance
in the near term.

Financial performance summary of key operational SPVs: (Urban
Infrastructure)

A. Projects completed:

Name of Project details A B C D
subsidiary

1. Cyber Park Construction of IT 48.42 17.04 11.14 9.15
Development and park at Electronic City,
Construction Hosur Road, Bangalore.
Limited: Company has taken
land on lease from
Software Technology
Parks of India for
a period of 66 years.

The first phase of
the project, a multi
tenanted facility
with a BUA of 3.00
Lac sq.ft. was
successfully
completed and
sold off.

The second phase
of the project
with BUA of 2.00
Lac sq.ft. has
also been completed
in the year
2008-2009, of
which a
substantial
portion has
been marketed.

2. L&T Tech Company formed to 17.14 17.38 (1.89) 0.90
Park set up an IT SEZ
Limited: within the Infopark,
at Kochi, Kerala,
as a co-developer.

The Company has
acquired land of
7.44 acres on
lease for a
period of 90 years.

The company has
successfully
implemented its
first phase of
the project,
Tejomaya, a multi
tenanted facility,
with a built up
area of 3.86 lakh
sq.ft., a major
part of which has
been sold.

3. L&T Arun The company formed 1.03 0.40 (0.31) (0.44)
Excello IT SEZ for developing a
Private Limited built up area of
3 lakh sft of
office space for
IT/ITES over 29
acres of land
situated at
Vallancheri
Village,
Kancheepuram
District,
Tamil Nadu.
Out of the total
area of 3 lakh
sq.ft. in the
Signature Tower,
73,220 sq.ft.
space has been
booked.

4. L&T Infocity The company focuses on 195.53 194.64 53.42 49.35
Limited: (i) Operating and
maintaining the
multi-tenanted
IT Parks
(ii) Operating the
Built to Suit IT
facilities
(iii) Facility
Management and
(iv) Development
and Sale of
Residential
Units in Mega
Residential
Project
'Serene County'.

5. Hyderabad The modern 9.90 12.19 (0.81) 1.84

International trade exposition
Trade centre developed
Expositions on a 52.79 acre
Limited: plot consists of
three exhibition
halls of 3500
Sq.mtrs. each,
open display area,
a large parking
area and a trade
fair building to
provide office
space for trade
fair organisers,
vendors and
exhibitions
service
providers.


6. L&T Infocity Development of 5.01 4.17 1.78 2.09
Lank Private a Built to Suit
Limited: Project for
HSBC at Colombo,
Srilanka.

A = Total Income (Rs.crore) - 2008-2009
B = Total Income (Rs.crore) - 2007-2008
C = PAT (Rs.crore) - 2008-2009
D = PAT (Rs.crore) - 2007-2008

B. Projects under implementation (Urban Infrastructure):

Name of subsidiary Project details Project status

1. L&T South City Developing a At present, the first
Projects Limited township phase of the project
consisting of is in progress for
residential developing 656
complex, school, residential units
public health with a built up
centre, shopping area of 1.095
complex etc., over mn sq.ft.
83.5 acres of land
situated at
Siruseri Village,
Chenglepet
District.

2. L&T Phoenix Company formed
Infoparks Private to undertake
Limited development of
commercial
properties.

Presently it is
developing two
projects in
Hyderabad; namely;
HITEC City-2 &
Intellicity.

3. CSJ Infrastructure Company formed
Private Limited for development
of Commercial
complexes in
Chandigarh.

4. L&T Arun Excello Commercial
Commercial Projects constructions
Private Limited comprising of
a star hotel, a
shopping mall
and a school on
13 acres of land
in the Estancia
Township at
Vellanchery on
GST Road in
Chennai.

5. L&T Hitech City Company floated by Phase I: Construction
Limited L&T Infocity Limited, of IT Park with a
in partnership with project cost of Rs.43
APIIC, to set up an crore has commenced
IT SEZ at Vijayawada. during the year and
is expected to be
completed in the
first half of the
year 2009-2010.

6. L&T Infrastructure Development, The project is
Development Projects construction, expected to achieve
Lanka (Private) operation and financial closure in
Limited maintenance of the first half of the
a multipurpose year 2009-2010 and
hi-rise tower the construction will
of 51 floors be completed in the
in Colombo, year 2012-2013.
Sri Lanka
The project
entails
development
of a total of
about 1.22
million sq.ft,
of residential
apartments and
commercial
space.

VI. ELECTRICAL & ELECTRONICS

A. L&T ELECTRICALS SAUDI ARABIA COMPANY LIMITED, LLC (LTESA):

Subsidiary company

Overview

L&T Electricals Saudi Arabia Company Limited. (LTESA), a joint venture
between Larsen & Toubro International FZE, U.A.E. and Yusuf Bin Ahmed Kanoo
Group, was formed in September 2006 for manufacturing and marketing
switchgear, control gear, PLC panels, AC/DC Drives and Part Assembled
Switchboards.

Operations & Performance

LTESA through its cost competitive solutions is receiving encouraging
response from major customers and EPC companies in Saudi Arabia. During the
year 2008, the first year of its operations, the Company clocked a turnover
of Rs.30.46 crore for the nine month ended December 2008 with a net profit
of Rs.0.80 crore. The company ended the year with a healthy order book of
Rs.43.16 crore.

Outlook

Saudi Arabia is the largest market in the Middle East. The policy of the
Government is continually inclined towards providing business opportunities
for locally established industries. Major investments in Refinery,
Petrochemicals, Power and Infrastructure projects offer good prospects for
the Company's growth. However, in view of the present change in the
economic situation, the finalisation of major projects may get delayed and
customers may take an advantage of reduced commodity prices. Despite the
above negative signs, LTESA remains a competitive player in high end
offering and system business.

B. LARSEN & TOUBRO (WUXI) ELECTRIC COMPANY LIMITED (LTW):

Subsidiary company

LTW is a 100% subsidiary of L&T International FZE, located at Wuxi in
Jiangsu province of China. The factory was established in the year 2006
with the stateof-the-art manufacturing facilities, quality control and
reliable testing equipment. It was established to support & extend L & T
activities related to brand labelling of U Power design of Air Circuit
Breakers (ACBs) & D-Sine Moulded Case Circuit Breakers (MCCB's) range. The
factory has received ISO 9000 & China Compulsory Certification (CCC) for
both the products range.

Operations & Performance

During the year, the Company recorded sales revenue growth at Rs 30.20
crore and a profit of Rs 1.11 crore. Efforts are on to establish the brand,
first in the Chinese market and later on explore into other South Asian
markets.

Outlook

Although the Chinese economy has slowed down, the continuous investments in
infrastructure in China makes the prospects attractive for the Company's
switchgear products.

C. TAMCO GROUP OF COMPANIES

Overview

In order to gain a strong foothold globally in the low and medium voltage
switchgear range, L&T acquired TAMCO Group of Companies in April 2008. The
TAMCO Group of Companies comprises of 4 companies, operating in Malaysia,
Indonesia, Australia & China.

TAMCO Malaysia is a significant player in South East Asia for Medium
Voltage (MV) switchgear comprising of Vacuum Circuit Breakers (VCB's), Ring
Main Unit (RMG), Gas Insulated Switchgear (GIS), busducts and switchboards.
In addition, it addresses the utility markets in Dubai, Qatar, Abu Dhabi,
South Africa, Ghana, Sudan etc. TAMCO is now transferring its technology to
L&T India to cater to the Indian MV switchgear market.

TAMCO Indonesia & TAMCO China have established manufacturing facility in
Jakarta & Shanghai respectively for catering to Low Voltage (LV)
switchgears market in their respective countries. TAMCO Australia is a
supplier of both LV & MV switchgears in the Australian markets with a
manufacturing unit in Melbourne.

Operations & Performance

Despite the economic slowdown, the Order Book position in both Malaysia&
Australia for utility segment remains healthy. Indonesia & China, though
affected by slowdown, have recently shown signs of revival. During the
financial year under review, TAMCO Group received fresh orders totaling to
Rs.610 crore predominantly from Utility segments. Post acquisition of TAMCO
Group, the group recorded revenue of Rs.424 crore and profit after tax at
Rs. 12 crore for the period May 2008 to December 2008.

Outlook

The demand for Gas Insulated Products in Middle East and India is expected
to increase in the coming years. Though the market is showing some signs of
slow down, the demand for the switchgear products are expected to be stable
in Qatar. New Markets in South Africa, Ghana, Bahrain and Abu Dhabi look
promising. In order to address new markets for MV switchgear, a series of
products launches are planned during the next two years. While Malaysian
plant has already a proven track record, thrust is being given to penetrate
into Thailand, Vietnam & other African countries to achieve sustained
growth.

VII. MACHINERY & INDUSTRIAL PRODUCTS

Domestic companies

A. TRACTOR ENGINEERS LIMITED (TENGL):

Subsidiary company

Tractor Engineers Limited (TENGL) is a wholly owned subsidiary of Larsen &
Toubro Limited principally engaged in manufacture of undercarriage systems
for excavators, crawler tractors, bull dozers etc., and material handling
equipment like apron conveyors, spares for oil field equipment etc.,
Customer profile is largely OEMs in construction and material handling
equipment business.

Operations & Performance

Sales and other income for the financial year under review were Rs. 167.35
crore as against Rs. 173.31 crore for the previous financial year.
Performance for the year was constrained by cancellation / deferment of
orders from customers due to slowdown in construction equipment market.
Lower capacity utilisation of the expanded facilities coupled with higher
steel prices prevailing for major part of the year and higher Interest cost
resulted in the Company reporting a loss of Rs 23.80 crore for the year.

In order to optimise on the cost of operations and reduce the overhead
costs at multiple locations, the Company has decided to utilise the newly
established Talegaon facility for manufacture of entire range of products
from one location.

Outlook

Indian Hydraulic Excavator market saw a significant drop in volumes of
around 26% during the year 2008-2009. The downward trend is expected to
continue during 2009-2010 even as the capital intensive industry looks to
cheaper sources of finance and drop in steel prices.

In the Conveying Equipment segment, the demand has been growing from
Cement, Mining & Bulk Material industries since last 2-3 years. However,
higher competition is expected to impact the Company's traditional product
lines going forward. In order to diversify the product offering, the
Company would strive to expand the business of refurbishment of oilfield
equipment.

B. AUDCO INDIA LIMITED (AIL):

Associate company

AIL is a 50:50 joint venture between L&T and Flowserve Corporation, USA.
AIL is a leading manufacturer of Industrial Valves and has four
manufacturing plants in Tamlinadu. The Company has installed state-of-the-
art machines in all its plants. AIL manufactures valves up to 72' size and
Class 2500 pressure rating. Besides India, the Industrial Valves
manufactured byAIL have significant presence in major global markets such
as China, France, Japan, Italy, Singapore, Malaysia, Middle East countries,
South Africa, South Korea, United Kingdom, United States of America and
Russia.

Operations & Performance

Performance during the year was impacted by the economic downtrend. Many
major projects, particularly in the global markets, were shelved or
postponed. As a result, total income at Rs. 737.71 crore was lower by 14.5%
as compared to the previous year. However, higher rupee realisation on the
exports and improved cost management helped the Company to maintain the
profitability achieved in the previous year.

Outlook

The year 2009-2010 is expected to be a challenging year. On the positive
side, oil & gas projects especially upstream and pipeline projects in the
Middle East are showing the signs of recovery. In the Indian market,
investments in the power and pipelines segments are expected to progress;
albeit with a delayed schedule. Considering the current gap in the
infrastructure needs, the recovery in demand is foreseen during the second
half of 2009-2010.

C. L&T-KOMATSU LIMITED (LTK):

Associate company

Overview

LTK is a 50:50 joint venture between Larsen & Toubro Limited and Komatsu
Asia Pacific Pte. Ltd., Singapore, a wholly owned subsidiary of Komatsu
Limited, Japan. Komatsu is world's largest manufacturer of Hydraulic
Excavators and has manufacturing and marketing facilities worldwide. LTK is
engaged in the manufacture of Hydraulic Excavators and other associated
hydraulic components. Larsen & Toubro Limited markets and provides after
sales support for Hydraulic Excavators manufactured by L&T-Komatsu Limited.

The major user segments for Hydraulic Excavators are general construction,
mining & quarrying, Irrigation, road, granite & marbles etc.

Operations & Performance

Hydraulic Equipment Industry, witnessed contraction during the year 2008-
2009 with market decline of 28% over the previous year. Liquidity crunch
and high cost of funds coupled with tighter credit sanctioning norms have
discouraged new customers. The decline in market was sharper during the
second half of 2008-2009.

Gross sales at Rs. 1211.02 crore dropped by 19% as compared to the previous
year, though the Company was able to retain its market share at about 31 %,
same as last year. The drop in capacity utilisation coupled with higher
input prices for greater part of the year impacted the profitability of the
Company during the year. Profit after tax thus dropped to Rs. 19 crore as
against robust achievement of Rs. 133 crore in the previous year.

Outlook

Difficult year is foreseen for Hydraulic Excavator industry. The market
conditions are expected to be subdued and construction activity may not
pick up significantly in 2009-2010 in the absence of major investments. The
Company will strive to retain its market share in the coming challenging
year so as to maximise the capacity utilisation of the current facilities.

D. L&T-CASE EQUIPMENT PRIVATE LIMITED (LTCEPL):

Associate company

Overview

L&T Case Equipment Private Limited (LTCEPL) is a 50:50 Joint Venture
between L&T & CNH America LLC.

The company is engaged in manufacture & marketing of Construction
(Earthmoving) Equipment comprising Loader Backhoes & Vibratory Compactors.
In a highly competitive Indian market, L&T-Case has a market share of about
10% in Loader Backhoe and 31 % in Vibratory Compactor. The manufacturing
facility is located at Pithampur, Madhya Pradesh.

Operations & Performance

With the encouraging economic policy for investment in infrastructure
sector, the Construction Equipment industry had experienced growth momentum
in the last few years. However, due to the global financial crisis and the
consequent slowdown, the domestic market during the year 2008-2009 declined
by 43% for Loader & by 26% in Vibratory Compactor. Consequently, the total
income of the Company at Rs.336.54 crore declined by 27% as compared to the
previous year. With significant price pressures prevailing in the market,
coupled with higher input costs, the profit after tax reduced to Rs.11.16
crore for the year.

Outlook

During the early part of the year 2009, the Construction Equipment Industry
has witnessed marginal recovery in the demand. While Loader market may
remain subdued due to significant downturn in the realty sector, the
Compactor market may witness marginal growth in view of the large
investments planned in the Roads sector.

E. EWAC ALLOYS LIMITED (EWAC):

Associate company

EWAC formed in April 1962 is a joint venture with equal shareholding
between Larsen & Toubro Limited and Messer Eutectic Castolin Group of
Germany. EWAC is a market leader in the business of maintenance & repairs
welding & welding solutions for conservation of global metal resources. The
principal products and services comprise Maintenance & Repair (M&R)
consumables, specification grade electrodes, fluxcored welding wires, wear
plates/parts, welding and cutting equipment, Tero Cote Lab services etc.
Larsen & Toubro Limited markets EWAC's products in India through strong
network of stockists.

Operations & Performance

Due to adverse business conditions, the manufacturing activity showed
marked reduction, which resulted in sharp drop in demand for industrial
consumables. EWAC, therefore, reported only a marginal growth in the total
income at Rs. 157 crore (previous year: Rs.151 crore). Profit after tax at
Rs. 20 crore was lower by 18% as compared to the previous year, mainly due
to higher material cost during the first half of the year and relatively
lower capacity utilisation during the second half.

In addition to the improved R&D operations, various initiatives for the
cost control measures like product re-engineering were initiated during the
year to reduce material cost. The Company has also taken initiatives to
improve the existing asset utilisation, implement energy conservation
projects and increase employee productivity.

Outlook

With the expected improvement in the economic climate and industrial
production in later half of the financial year 2009-2010, EWAC is
optimistic to perform better in the coming years.

F. L&T-DEMAG PLASTICS MACHINERY LIMITED (L&T-Demag):

Subsidiary company

The Company was a joint venture between L&T and Demag Ergotech GmbH,
Germany. Effective March 31, 2009, L&T has bought entire equity held by
Demag and hence the venture is now a wholly-owned subsidiary of Larsen &
Toubro Limited. The Company is in the business of manufacture of Injection
Moulding Machines for the plastics industry and its products find
applications in diverse industries like automobiles, electrical goods,
packaging, personal care products, writing instruments and white goods.

Operations & Performance

Order inflow and sales declined by 15% & 19% respectively as compared to
the previous year, due to falling demand. Export dipped mainly due to
global recession affecting many geographical locations. Company posted a
loss of Rs. 6.47 crore for 2008-2009.

Introduction of cost-effective 'S-Tech series' was a major step towards
achieving cost leadership. In manufacturing operations, sustained efforts
were taken in areas such as manpower reduction, reduction in energy
consumption and better management of working capital. The Company continues
to enjoy a position of leadership amongst reputed manufacturers of
Injection Moulding machines in the domestic market and is a preferred
choice for many customers. Going by the enthusiastic response for the new
series launched during 2008-2009, the company is working on extending the
range to cover medium tonnage segment as well. Machines developed in-house
for PET application is one more step by the company towards advancing right
technology solution for the industry.

Outlook

The global slowdown had its toll on the industry resulting in sluggish off-
take of machines during the year 2008-2009. However, there are early signs
of revival of demand. With no territorial constraints, the Company expects
to improve the export volumes during the second half of 2009-2010, when the
revival of the global economy is anticipated.

G. VOITH PAPER TECHNOLOGY (INDIA) LIMITED (VPTIL)

Associate company

Voith Paper Technology (India) Limited (VPTIL) is a 50:50 joint venture
formed by L&T and Voith Paper, Germany. VPTIL provides comprehensive
solutions from fiber to paper, covering the entire paper making process
along with extensive life cycle support. The JV Company enjoys
technological leadership and is the 'preferred supplier' in the industry.
Right from its inception, the Company has ushered in several new
technologies with 'Perfect Fit' solutions for the Indian Paper Industry.

Operations & Performance

During the year, 2008-2009, VPTI L executed two major orders for paper
making process line package. The sales revenue during the year was at
Rs.10.60 crore and profit after tax was Rs. 8.60 crore.

Outlook

Even though the Indian Paper Industry is adversely impacted with the drop
in demand and decrease in realisation, the long term prospects remain quite
positive for this sector. Capacity expansion in the industry is anticipated
given the growing paper consumption worldwide. With its experience and
expertise, VPTI L is well positioned to sustain the growth momentum in the
medium term.

International companies

H. LARSEN & TOUBRO (JIANGSU) VALVE COMPANY LIMITED (LTJVCL):

Subsidiary company

LTJVCL, a subsidiary of LTIFZE, was set up in Yancheng City, China, for
manufacture of certain ranges of valves for global markets. The facility is
located in an area of 66,666 Sq Mts., equipped with the best of the plant
and machinery. The manufacturing practices adopted by the Company reinforce
its commitment to customer satisfaction,employee health, safety and
environmental protection.

Operations & Performance

The factory commenced commercial production of valves in the last quarter
of the year 2007 and the products have been well received in the market.
The designs for all valves manufactured by LTJVCL are developed, owned and
managed by L&T. These designs have been addressing the specific needs of
major end users and comply with international emission norms, besides
getting ISO 9001:2000, CE Marking & ATEX Certification for its products.
The valves manufactured by LTJVCL have been approved by major customers
like SHELL, BP, Chevron, Saudi Aramco, Alstom, SASOL, Dow Chemical's etc.

In the financial year 2008, its first full year of operations, LTJVCL
recorded revenue of Rs.28.30 crore. Due to higher initial overhead and
marketing costs, the Company ended the year with a net loss of Rs. 4.20
crore.

Outlook

With the recent accreditation from major customers, the volume of
operations has picked up from the last quarter of the year 2008. Despite
the lack of positive investment climate in the Oil & Gas sector globally, a
significant trend among the end users is being seen to consider higher
sourcing of valves from China. LTJVCL is in a favorable position to
capitalise on this demand and the prospects look bright for achieving
higher sales volumes in the year 2009 and beyond.

I. LARSEN & TOUBRO (QINGDAO) RUBBER MACHINERY COMPANY LIMITED (LT QINGDAO)
CHINA:

Subsidiary company

LT Qingdao is a joint venture between LTIFZE and Qingdao Over World Group
Company (OWG) with

95:05 shareholdings. LT Qingdao develops and supplies Tyre Curing Presses
and other Rubber Processing Machinery in line with the quality of products
being presently supplied by L&T to its global clients.

Operations & Performance

LT Qingdao completed the construction of the new state-of-the-art factory
in October 2008. During the year the Company recorded revenues aggregating
to Rs. 25.80 crore and earned a profit of Rs. 0.24 crore.

Outlook

Some of the International Tyre majors have started operating in China and a
few of them have commenced procuring their machines from China. Tyre Curing
Presses have been supplied to Pirelli by LT Qingdao & Rubber Mixing Mills
have been exported to tyre manufacturing companies in India. The
competitive position of LT QINGDAO is expected to improve with the increase
in capacity utilisation.

J. LARSEN & TOUBRO LLC, HOUSTON, USA (L&T LLC)

Subsidiary company

Larsen & Toubro LLC (L&T LLC), a wholly-owned Subsidiary of the Company, is
based in Houston, USA and represents L&T for stock and sale of industrial
valves in the North American market.

Operations & Performance

L&T LLC has been successful in securing approvals of major end-users while
forging global alliances and agreements with key EPC contractors and Oil
majors. The main thrust in Valves business has been on Oil and Gas segment.
During the year 2008, the sales revenues grew by 36% at Rs.23.90 crore and
the net profit by 54% at Rs. 0.62 crore.

Outlook

The sharp fall in economic activity especially in the USA and the lower
consumption has led to postponement of investments by the major oil
companies. The consequent emphasis on refurbishment and the long-term
agreements with some of the oil majors augur well for the Company's plans
in the current year.

VIII. LARSEN & TOUBRO INTERNATIONAL HE (LTIFZE):

Subsidiary company

LTIFZE, is a wholly owned subsidiary of L&T and is incorporated as a
limited liability company in the Hamriyah Free Zone, Sharjah. The Company
is engaged in providing strategic support to L&T's growth aspirations in
the Middle East, China and Malaysia. Apart from owning strategic equipment
portfolio facilitating L&T group's prequalification for construction
contracts in the Middle East, LTIFZE functions as an investment arm in the
country specific Joint Venture Companies and other strategic entities in
the Middle East, Far East and China.

Operations & Performance

LTIFZE has acquired plant & machinery aggregating to Rs.176 crore as of
December 31 , 2008. The Company has outstanding capital commitment worth Rs
11 crore for strategic plant & machineries required for construction and
hydrocarbon business sector.

Outlook

Considering the business potential in the Middle East, LTIFZE is poised to
play a crucial role to support L&T's operations in the region. The Company
is positioned to act as a strategic investment arm of L&T for making
investment overseas and a resource base for critical plant & equipment to
support international business opportunities.