PROJECT

ON
FINANCIAL MANAGEMENT

PROJECT TOPIC:
L&T
LARSEN & TOUBRO LIMITED

SUBMITTED BY:
RIYA GUPTA
M.Com 3rd Semester
Roll no.-2310012125010
UNIVERSITY OF LUCKNOW
 -INTRODUCTION-
Larsen & Toubro is an Indian multinational engaged in EPC projects, Hi-Tech
Manufacturing and services. Larsen & Toubro Limited (L&T) is an Indian multinational
conglomerate engaged in various sectors, including industrial technology, heavy industry,
engineering, construction, manufacturing, power, information technology, military, and
financial services. The company is headquartered in Mumbai, Maharashtra.
Founded in 1938 in Bombay by Danish engineers Henning Holck-Larsen and Søren
Kristian Toubro, L&T has grown significantly over the years. As of 31 March 2022, the
L&T Group includes 93 subsidiaries, 5 associate companies, 27 joint ventures, and
35 jointly held operations, covering fields such as basic and heavy engineering,
construction, real estate, capital goods manufacturing, information technology, and
financial services. On 1 October 2023, S N Subrahmanyan was appointed as
Chairman and Managing Director of L&T.
Henning Holck-Larsen and Søren Kristian Toubro came to India representing the Danish
dairy equipment manufacturer FL Smidth. In 1938, they founded Larsen & Toubro (L&T)
through an oral agreement, and the company was legally incorporated in 1946.

World War II, which began in 1939, disrupted trade and supply lines. The German
invasion of Denmark in 1940 halted the supply of Danish products. Consequently, Larsen
and Toubro undertook various jobs and service facilities. They capitalized on the wartime
need to repair, refit, and degauss ships, leading to the formation of Hilda Ltd. L&T also
started repairing and fabricating ships and entered the installation field after German
engineers, who were to construct a soda ash plant for the Tata Group, were interned in
India.

In 1946, they incorporated Engineering Construction & Contracts Ltd. (ECC) to focus on
construction projects. ECC remains L&T's construction division. By 1947, L&T
represented manufacturers of equipment for producing hydrogenated oils, biscuits, soaps,
and glass. That year, they signed an agreement with Caterpillar Tractor Company to
market earth-moving equipment. Post-war, surplus Caterpillar equipment was available at
attractive prices, but the partners needed additional equity capital. This led to the
incorporation of L&T Private Limited on 7 February 1946.

By 1947, L&T had established offices in Calcutta, Madras, and New Delhi. In 1948, they
acquired 55 acres of land in Powai, Mumbai. In December 1950, L&T became a public
company with a paid-up capital of ₹20 lakh (equivalent to ₹22 crore or US$2.6
million in 2023) and a sales turnover of ₹1.09 crore (equivalent to ₹120 crore or
US$14 million in 2023).
Importance of Financial Analysis
The financial analysis of companies like Larsen & Toubro (L&T) is crucial for several reasons,
particularly given its stature as a major player in various sectors such as construction,
engineering, manufacturing, technology, and financial services.
Here’s a detailed look at why financial analysis is important for such companies:
1. INVESTMENT DECISIONS

 Investors: Financial analysis helps investors access the profitability, liquidity and
solvency of L&T, guiding their investment decisions.
 Stock Performance: Understanding the financial health of L&T aids in predicting future
stock performance and potential returns.

2. RISK ASSESSMENT

 Creditors: Creditors analyze L&T’s financial statements to evaluate the risk of lending
and determine creditworthiness.
 Debt Management: Financial analysis provides into the company’s debt levels and its
ability to manage and repay debts.

3. STRATEGIC PLANNING

 Management: L&T’s management uses financial analysis for strategic planning, setting
goals, and making informed decisions about expansions, mergers, acquisitions, and other
business activities.
 Operational Efficiency: Analysis helps in identifying areas where the company can
improve efficiency and reduce costs.

4. PERFORMANCE EVALUATION
 Internal evaluation: Regular financial analysis allows L&T to monitor its performance
over time, comparing actual result against budgets and forecasts.
 Benchmarking: It enables L&T to benchmark its performance against industry, peers
and competitors.

5. REGULATORY COMPLIANCE
 Transparency: Financial analysis ensures that L&T complies with regulatory
requirements by maintaining transparency and accuracy in financial reporting.
 Stakeholder Trust: Accurate financial reporting builds trust among stakeholders,
employees, customers and suppliers.
6.CAPITAL ALLOCATION
 Resource Allocation: Financial analysis helps L&T allocate resources efficiently,
ensuring that capital is invested in projects with the highest returns.
 Cost Management: It aids in identifying and managing costs, improving overall
financial health.
7.ECONOMIC IMPACT
 Market influence: As a major conglomerate, L&T’s financial health can have significant
implications for the economy and sectors it operates in.
 Job Creation: Financially stable companies contribute to job creation and economic
growth, making financial analysis vital for broader economic planning.

DATA COLLECTIONS
ANNUAL REPORT
 Revenue

The revenues in the financial year 2023-24 clocked in at ₹2,21,113 crore, while Profit After
Tax reached ₹13,059 crore, registering a 21% and 25% growth respectively.

A combination of improved productivity and reduced capital intensity, including return of

capital to the shareholders during the year in the form of your Company’s first Share
Buyback programme, has resulted in improved return ratios as well.

Company continues to focus on shareholder value creation by divesting non-core assets,

capturing cost efficiencies, and leveraging technology for productivity gains.

 Order Inflow

Company crossed a historic milestone: Annual Group Order Inflow surpassed ₹3 lakh
crore, and registered an impressive 31% growth year-on-year. This was achieved on the
back of major international order wins in Hydrocarbon and infrastructural businesses. A
large, growing and diversified Order Book of 4,75,809 crore as on March 31,2024, with a
growth of 20% over the previous year, provides clear revenue visibility in the medium
term.

 Indian Economy
 The Financial Year 2023-24 remained a mixed bag of opportunities and challenges. On
one hand, domestic activity exhibited resilience on the back of strong domestic demand,
whilst on the other, global geopolitical uncertainty continued to impact inflation, interest
rates, and the supply chain. Amidst global headwinds, the Indian economy has displayed
strength and has grown by 8.2% for FY 2023-24, mainly driven by sustained investment
through an infrastructure-driven policy by the government. Better capacity utilisation in
the manufacturing sector, buoyancy in auto and real estate, healthy corporate balance
sheets, strong credit momentum, higher tax collections, and acceptable levels of inflation
are aptly aiding the growth.

FINANCIAL STATEMENT

By analysing the balance sheet of Larsen & Toubro the liquidity and financial health of the
company has been observed, it can be seen that company performed brilliantly as compared
to the last financial year and showed the difference in the asset of 2858.2 crores. The total
asset position in the financial year 2023-24 was 175282.69crores consisting of 50613.44
crores of 64416.04crores and total liability was 110863.65crores.

INCOME STATEMENT OF FY 2023-24

Statement of Profit and Loss for the year ended
2023-24
Standalon
Consolidated e
Particulars 2023-24 2023-24
INCOME:
Revenue from operations
Other income(net)

5340.60
Total Income 131576.45
 120
Total Expenses 708.13

Profit before exceptional items and tax from 18 983

continuing operations 2767.62 2.70
1 983
Profit before tax from continuing operations 7109.03 2.70
Tax expense:
Total tax expenses 4484.16 1983.73
Net profit after tax from continuing operations 12624.87 7848.97
Share in profit/(loss) after tax of joint
ventures/associates (net) 94.25 94.25
1
Net profit for the year from continuing operations 2530.62 -
Net profit after tax from continuing and 1 784
discontinued operations 2530.62 8.97
BALANCE SHEET:

L&T BALANCE SHEET FOR THE

ASSESSMENT YEAR 2023-2024 (in crores) Larsen & Toubro's balance
Standalon Consolidate
Particulars e d sheet reflected strong financial
ASSETS: health, with total liabilities at
Non Current Assets 50613.44 121547.37 ₹2,267.85 billion and total
Current Assets 124669.25 281079.87 equity and liabilities at
Total Assets 175282.69 339627.24
₹3,303.52 billion. The
EQUITY AND company reported a profit
LIABILITIES: before tax of ₹17.11 billion
Equity 64416.04 102549.66
and a net profit after tax of
Liabilities
Non-current liabilities 12839.60 60476.85
₹12.62 billion.
Current liabilities 98027.05 176600.73

TOTAL EQUITY AND

LIABILITIES 175282.69 339627.24

Cash Flow statement of Larsen & Toubro for the

assissment year 2023-24

in Rs. Cr.
CASH FLOW:
Net Profit/Loss Before
10,868.32
Extraordinary Items And Tax
Net Cas hFlow From
8,293.55
Operating Activities
Net Cas h Us ed In Inves ting In FY 2023-24, Larsen &
6,361.89
Activities
Net Cas h Us ed From
Toubro's cash flow statements
-14,522.06
Financing Activities
Foreign Exchange Gains /
highlighted robust financial
3.34
Los s es
Net Inc/Dec In Cash And
136.72
Cash Equivalents
Cas h And Cas h Equivalents
3,802.49
Begin of Year
Cas h And Cas h Equivalents
3,939.21
End Of Year
management. The company generated substantial operating cash flow driven by its
strong revenue growth and efficient working capital management. Despite
increased capital expenditures to support its various projects, L&T maintained a
healthy liquidity position. The net cash flow from operating activities was positive,
reinforcing the company's ability to generate cash internally to fund its operations
and growth initiatives.

MARKET DATA

Stock Price
In FY 2023-24, Larsen & Toubro's (L&T) stock price saw a substantial increase
of 77%, significantly outperforming the Nifty 50 index's 29% rise. The surge
was driven by robust financial performance, including a record-breaking annual
group order inflow exceeding ₹3 lakh crore and a profit after tax (PAT) of
₹13,059 crore, marking a 25% increase from the previous year. Strategic
initiatives such as the first share buyback program and divestment of non-core
assets further bolstered investor confidence, contributing to the impressive
stock price appreciation.

Market Capitalization
In the fiscal year 2023-24, Larsen & Toubro (L&T) experienced a significant
increase in its market capitalization. By July 2024, L&T's market capitalization
reached approximately ₹5.1 trillion (INR) or $62 billion (USD). This notable
growth was driven by a series of strategic business decisions, including
international order wins in hydrocarbon and infrastructure sectors, and a robust
order book amounting to ₹4.76 trillion (INR) as of March 31, 2024.
 L&T's diversified portfolio and significant international presence have played a
crucial role in this financial success. The company's achievements in leveraging
technology and enhancing operational efficiency also contributed to its market
performance, outperforming the Nifty 50 growth index with a remarkable
growth rate of 77% compared to the index's 29%.

FINANCIAL STATEMENT ANALYSIS

INCOME STATEMENT ANALYSIS

The income statement provides insights into the company's revenue, expenses, and profitability.

1. Revenue: L&T's revenue for FY 2023-24 is likely to show growth, driven by strong
order inflows in the infrastructure and engineering segments. Key projects in urban
infrastructure, transportation, and power are expected to contribute significantly.
2. Profit Margins: Operating expenses, including raw material costs, labor, and overheads,
are expected to rise in line with revenue growth. Efficiency improvements and cost
management initiatives will be crucial in maintaining profitability.Net profit margins may
improve due to higher revenue and effective cost control measures. EBITDA margins are
also anticipated to be robust, reflecting operational efficiency.
3. Cost of Goods Sold (COGS): Larsen & Toubro's Cost of Goods Sold (COGS) is expected to
increase due to higher raw material costs, labour expenses, and project execution activities.
Efficient procurement and cost management strategies will be crucial to maintaining profitability
despite rising input costs in their extensive infrastructure and engineering projects.

BALANCE SHEET ANALYSIS

The balance sheet offers a snapshot of L&T's financial position, highlighting assets, liabilities,
and equity.

 Assets Composition: L&T's total assets are expected to increase, driven by capital
expenditure on new projects and strategic investments. Key assets include property, plant,
and equipment, as well as investments in subsidiaries and joint ventures.
 Liabilities Equity: Total liabilities may rise, reflecting increased borrowings to finance
new projects and working capital needs. However, the debt-to-equity ratio is likely to
remain within manageable levels, indicating a stable financial structure. Shareholders'
equity is expected to grow, supported by retained earnings and possibly new equity
infusions. This growth reflects the company's solid financial performance and investor
confidence.
 Liquidity Ratios: Larsen & Toubro's liquidity ratios, including the current ratio and
quick ratio, are expected to remain stable, indicating strong short-term financial health.
 Effective working capital management will ensure that the company can meet its short-
term liabilities with its current assets. This stability reflects L&T's sound liquidity
practices and ability to maintain operational efficiency despite potential market
fluctuations.

CASH FLOWANALYSIS

The cash flow statement highlights L&T's cash generation and utilization.

 Operating Cash Flow: Strong operating cash flow is anticipated, driven by higher
revenue and efficient working capital management. This positive cash flow indicates the
company's ability to generate sufficient cash from its core operations.
 Investing Cash Flow: Investing activities are likely to show significant outflows due to
capital expenditure on new projects and strategic investments. These investments are
crucial for future growth and competitive positioning.
 Financing Cash Flow: Financing activities may include both inflows from new
borrowings and outflows for debt repayment and dividend payments. Effective
management of financing activities will ensure adequate liquidity and financial stability.

RATIO ANALYSIS
1. Liquidity Ratio:
Current Ratio: The current ratio has been observed 1.27:1 This ratio indicates the company's ability to
pay short-term obligations with its short-term assets. A current ratio of 1 or higher is generally considered
healthy. Calculated by dividing current assets with current liabilities.

 Quick Ratio (Acid-Test Ratio): 1.24:1 is the liquid ratio of the financial year. This ratio
provides a more stringent measure of liquidity by excluding inventory from current
assets. A quick ratio of 1 or higher indicates the company can meet short-term obligations
without relying on inventory sales. Calculated by dividing quick assets or liquid assets
with current liabilities.

2. Profitability Ratios:

Net Profit Margin: This ratio shows the percentage of revenue that remains after all expenses,
including taxes. A higher net profit margin indicates strong profitability after accounting for all
expenses which has been observed at 7.37% for the year.
Return on assets: Return on Assets (ROA) is a financial ratio that measures how efficiently a
company uses its assets to generate profit. Calculated by dividing net income with average total
assets which is observed at 5.30%

Return on equity: ROE indicates how efficiently a company is using its equity capital to
generate profit.
It is a financial ratio that measures a company’s profitability relative to the shareholder’s equity.

3.Efficiency Ratio
Assets turnover Ratio: The Asset Turnover Ratio measures how efficiently a company uses its assets
to generate revenue. High assets turnover ratio generally reflects efficient use of assets and effective
management of resources. The assets turnover for the year is 0.73%.

Inventory Turnover Ratio: Larsen & Toubro's inventory turnover ratio is expected to reflect efficient
inventory management practices. Higher turnover rates will indicate that L&T is effectively converting its
inventory into sales, minimizing holding costs and reducing the risk of obsolescence. This efficiency will
be crucial in managing working capital and supporting overall profitability in a competitive market.

4. Solvency Ratio

Debt to Equity Ratio: This ratio is expected to remain at a manageable level, reflecting a
balanced approach to leveraging. L&T's strategic borrowing for growth projects is likely to be
supported by strong equity, ensuring financial prudence.

Interest Coverage Ratio: L&T's interest coverage ratio is projected to be robust, indicating the
company's ability to comfortably meet its interest obligations. Higher earnings before interest
and taxes (EBIT) will provide ample coverage for interest expenses, underscoring the company's
operational strength and low financial risk.

TREND ANALYSIS

Revenue Growth

Larsen & Toubro (L&T) is projected to see substantial revenue growth in FY 2023-24. This
growth is fueled by robust order inflows and the successful execution of large infrastructure
projects. With key contributions from urban infrastructure, transportation, and power sectors,
L&T's revenue is expected to outpace the industry average, showcasing its leadership in the
infrastructure and engineering sectors.

Profit Margins

Profit margins, including net profit and EBITDA margins, are anticipated to improve. This
improvement is attributed to higher revenues coupled with effective cost management initiatives.
Compared to the industry, L&T's profit margins are expected to be superior, reflecting its
operational efficiency and strong project execution capabilities.

Return on Equity (ROE)

L&T's Return on Equity (ROE) is likely to increase, driven by higher net income and efficient
utilization of shareholders' equity. This upward trend in ROE signifies superior profitability and
efficient capital use. In comparison to industry benchmarks, L&T's ROE is projected to be
higher, indicating better financial performance and investor returns.

Debt to Equity Ratio

The Debt-to-Equity ratio for L&T is expected to remain stable, highlighting balanced financial
leverage. This ratio, likely to be in line with or slightly lower than the industry average, reflects
prudent debt management and a strong equity base, ensuring financial stability and reduced risk.

Interest Coverage Ratio

The Interest Coverage Ratio is projected to improve, signifying L&T’s enhanced ability to meet
interest obligations from its operational earnings. This ratio, expected to be higher than the
industry average, underscores robust earnings and lower financial risk, showcasing L&T's strong
operational strength.

Liquidity Ratios (Current Ratio, Quick Ratio)

L&T's liquidity ratios are anticipated to remain stable, demonstrating strong short-term financial
health. Efficient working capital management will ensure that the company can meet its short-
term liabilities. Compared to industry averages, L&T's liquidity ratios are likely to be
comparable or better, indicating sound liquidity practices.

Inventory Turnover Ratio

The inventory turnover ratio is expected to improve, reflecting efficient inventory management
and faster conversion into sales. This efficiency reduces holding costs and mitigates the risk of
obsolescence. When compared to the industry average, L&T's inventory turnover ratio is likely
to be higher, signifying better inventory efficiency.

SWOT ANALYSIS
Strengths

1. Diverse Portfolio: L&T's wide range of businesses across engineering, construction,

manufacturing, technology, and financial services reduces dependency on a single
revenue stream and mitigates sector-specific risks.
2. Strong Brand and Market Leadership: As a leading player in infrastructure and
industrial projects, L&T enjoys a strong brand reputation and market position, enabling it
to secure large and high-value contracts.
3. Robust Financial Performance: Consistent revenue growth, strong profitability, and
healthy solvency ratios reflect L&T's solid financial health and operational efficiency.
4. Technological Innovation: Investments in advanced technologies and digital
transformation initiatives enhance project execution capabilities and operational
efficiencies.
5. Skilled Workforce: A highly skilled and experienced workforce enables L&T to execute
complex and large-scale projects successfully.

Weaknesses

1. High Debt Levels: Although manageable, L&T's significant debt levels can pose
financial risks, especially in times of economic downturns or increased interest rates.
2. Project Delays and Cost Overruns: Large infrastructure projects are susceptible to
delays and cost overruns due to regulatory, environmental, and logistical challenges,
impacting profitability.
3. Dependence on Government Contracts: A significant portion of L&T's revenue comes
from government contracts, making it vulnerable to changes in government policies and
budget allocations.

Opportunities

1. Infrastructure Development: Government initiatives and increased spending on

infrastructure development, both in India and internationally, provide substantial growth
opportunities for L&T.
2. Urbanization and Smart Cities: Rapid urbanization and the development of smart cities
create demand for advanced infrastructure, technology, and construction solutions, areas
where L&T excels.
3. Renewable Energy Projects: The global shift towards renewable energy sources
presents opportunities for L&T to expand its footprint in the renewable energy sector.
4. Digital Transformation: Leveraging digital technologies and innovations can enhance
project efficiency, reduce costs, and open new business avenues.

Threats

1. Economic Slowdown: Economic uncertainties and slowdowns can lead to reduced

spending on infrastructure and industrial projects, impacting L&T's revenue and
profitability.
2. Regulatory Risks: Changes in government regulations, environmental laws, and
compliance requirements can pose operational and financial challenges for L&T.
 3. Intense Competition: The presence of strong competitors in the infrastructure and
engineering sectors can impact L&T's market share and profitability.
4. Global Trade Dynamics: Fluctuations in global trade policies, tariffs, and geopolitical
tensions can affect L&T's international operations and supply chain.

CONCLUSION AND RECOMMENDATION

Conclusion:
Larsen & Toubro (L&T) is well-positioned as a market leader in the infrastructure and
engineering sectors, with a diverse portfolio, strong brand reputation, and robust financial
performance. The company's strengths include its wide range of businesses, technological
innovation, and a skilled workforce, which enable it to secure high-value contracts and execute
complex projects successfully. Despite these strengths, L&T faces challenges related to high debt
levels, potential project delays, and a significant dependence on government contracts. However,
substantial opportunities exist in infrastructure development, urbanization, renewable energy, and
digital transformation. L&T must also navigate threats such as economic slowdowns, regulatory
risks, intense competition, and global trade dynamics to sustain its growth and market leadership.

Recommendations:
Larsen & Toubro (L&T) should focus on several strategic initiatives to strengthen its market
position and ensure sustainable growth. Reducing debt levels through improved cash flow
management and prioritizing debt repayment will lower financial risk and interest expenses,
enhancing overall financial health. Enhancing project management by implementing advanced
tools will help minimize delays and cost overruns, ensuring timely and cost-efficient project
completion. Diversifying revenue streams by increasing engagement with private sector clients
and exploring international markets will reduce the dependency on government contracts,
mitigating associated risks. Leveraging digital technologies such as automation, AI, and data
analytics will enhance operational efficiency, reduce costs, and drive innovation. Expanding the
renewable energy portfolio by investing in sustainable projects will capitalize on the global shift
towards renewable energy, opening new growth avenues. Strengthening risk management
practices will enable L&T to better handle economic uncertainties, regulatory changes, and
geopolitical tensions. Additionally, fostering innovation and investing in research and
development will drive continuous improvement in construction technologies, materials, and
sustainable practices. By implementing these recommendations, L&T can enhance its financial
health, improve project efficiency, diversify income sources, and maintain long-term market
leadership.

REFERENCES
Larsen & Toubro Annual Report FY 2023-24: The primary source of financial data and
insights into the company's performance, strategies, and outlook for the fiscal year.

Market and Industry Reports: Industry analysis and benchmarks from reputable sources
such as CRISIL, ICRA, and Fitch Ratings to compare L&T's performance against industry
standards.

News Articles and Press Releases: Updates on L&T's projects, order inflows, and strategic
initiatives from financial news websites like Bloomberg, Reuters, and The Economic Times.

Company Filings and Regulatory Disclosures: Official filings and disclosures available on
the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) websites for
accurate and up-to-date financial information.

Research Reports from Financial Institutions: Analysis and forecasts from financial
institutions such as Goldman Sachs, Morgan Stanley, and HSBC providing insights into
L&T’s market position and future prospects.

Government Reports and Infrastructure Plans: Documents and plans released by the
Government of India detailing infrastructure development initiatives and budget allocations
relevant to L&T's business.

Analyst Reviews and Expert Opinions: Perspectives from industry analysts and experts
available on platforms like Bloomberg Terminal, Refinitiv, and Seeking Alpha for a
comprehensive understanding of market expectations and performance metrics.

Historical Financial Data: Past financial performance data retrieved from L&T’s historical
annual reports and financial statements to analyze trends over the years.