INTRODUCTION

As part of a group that has more than 100 companies and 350,000 employees in its
fold and a presence in 80 countries, L&T Quality Management Services L&T inherits
a legacy of trust, an enviable reputation for excellence and ethics, and a wide canvas
for its operations. A division of L&T Sons, the principal promoter company of the
L&T group of companies, i s c l o s e l y a l i g n e d t o t h e n e e d s a n d
r e q u i r e me n t s o f t h e g r o u p . I t s p r i ma r y mi s s i o n i s t o collaborate with
group companies, through long and short-term initiatives and develop training and
assessment programmers, to maximize the companies’ performance potential. Also,
given the increasing international spread of the L&T group, works with the companies
to enhance their global competitiveness. In recent years, the L&T group has
significantly increased its global footprint. This is clearly reflected in the group’s
financials for the year. The total revenue generated in 2008 -09 is estimated
at $70.8 billion (around Rs. 325,334 crore), of which 64.8 percent is from businesses
outside India. Plays a critical role in helping companies adapt to changing
international market conditions. It also assists new companies entering the
group through mergers and acquisitions, by helping them align with the L&T
group’s values and code of ethics. Abides by the same set of values that define
the L&T group of companies: integrity and maturity, unity and understanding,
learning and sharing, and passion for excellence. It ensures that these are adhered to
in every venture that is undertaken, irrespective of the location, scope and nature of
business involved. The mission of is providing value to companies in the L &T group
for continually enhancing their performance excellence and global competitiveness.
The vision of is to expand and accelerate performance excellence by 2013 to ensure
that:

 All group companies adopt the L&T Business Excellence Model (HBEM) and
the Management of Business Ethics (MBE) framework.
 All large companies including one international company are JRD QV award
winners.
 All group companies have the lowest carbon footprint in their relevant business
segments.

1|Page
 SWOT Analysis of L&T

Larsen & Toubro Limited (L&T) is a giant in the field of construction and
manufacturing in India. L&T also has ventured into electronic and electrical
equipment, financial services and information technology. L&T has observed
impressive growth in revenue in the past few years and has many projects in the
pipeline currently.

Strengths in the SWOT Analysis of L & T:

Strong Brand Name in construction and manufacturing in India: L&T has a
strong brand name in India in the field of construction and manufacturing which
enhances its trust on its clients. L&T has handled various large scale projects in India
and has successfully created a trustworthy brand name which is very important
especially in the construction industry.

Competitive advantage: L&T is one of the most respected companies in India for
engineering for its custom made technology-intensive equipment and systems. With
the strong brand name and strong manufacturing facilities, L&T holds a competitive
advantage.

Technical expertise: L&T’s technological capabilities support its design and

manufacturing capabilities and provide an expertise in engineering and project
management. L&T’s Technical expertise provides a competitive advantage to the
company.

Strong financial position: L&T’s financial position has been improving from the
past few years with company’s total assets growing at a CAGR of 18% and its total
capital grew at a CAGR of 12% from FY2011-15. Improving financial conditions
provides a cushion at the time of adverse market conditions.

2|Page
Weaknesses in the SWOT Analysis of L&T :
Dependence on Indian market: Indian market contributes over 65% of its total
revenues and thus makes L&T largely dependent on the Indian market.
Overdependence on a particular market makes the company vulnerable to any
fluctuations in the Indian market.

Increasing debt: L&T’s debts have been increasing steadily for the past few years.
L&T’s debt has increased from INR 98960 million in FY2011 to INR 136090 in
FY2016. Increasing debts impact company’s financial flexibility.

Opportunities in the SWOT Analysis of L&T :

Growth in Indian construction and engineering industry: The Indian construction

and engineering industry grew by 8% year on year. With expected high government
and private spending on infrastructure in the next 10 years on smart cities, metro
projects etc. L&T is well placed to leverage the opportunity created in the industry.

Strong order book position: L&T has won various contracts in the recent past and
secured new orders worth more than $20000 million in the year 2015-16 which
showed a growth of over 7% over the year.

Threats in the SWOT Analysis of L&T:

Extensive environmental regulations: L&T is subject to follow extensive
environmental regulations relating to health, pollution, waste disposal etc. These
regulations increase compliance cost for the company.

Low Oil prices affect the industry: With oil prices decreasing, various drilling
projects have been stopped and expansion plans have been scaled back. This affects
growth opportunity for the company and the industry.

GST impact can be negative: The cost of under construction buildings are expected
to increase with GST and it will have an overall negative impact on the construction
industry.

3|Page
PORTERS 5 FORCES MODEL

4|Page
 Balance Sheet of L&T

Particulars Mar ' 10 Mar ' 09 Mar ' 08

Sources of funds
Owner's fund
Equity share capital 120.44 117.14 58.47
Share application money 25.09 - -
Preference share capital - - -
Reserves & surplus 18,142.82 12,317.96 9,470.71

Loan funds
Secured loans 955.73 1,102.38 308.53
Unsecured loans 5,845.10 5,453.65 3,275.46
Total 25,089.18 18,991.13 13,113.17

Uses of funds
Fixed assets
Gross block 7,235.78 5,575.00 4,188.91
Less : revaluation reserve 23.29 24.59 25.9

Less : accumulated depreciation 1,727.68 1,421.39 1,242.47

Net block 5,484.81 4,129.02 2,920.54
Capital work-in-progress 857.66 1,040.99 699
Investments 13,705.35 8,263.72 6,922.26
Net current assets

Current assets, loans & advances 26,673.49 23,834.71 16,496.48

Less : current liabilities & provisions 21,632.13 18,277.57 13,928.17

Total net current assets 5,041.36 5,557.14 2,568.31

Miscellaneous expenses not written - 0.26 3.06

Total 25,089.18 18,991.13 13,113.17
Notes:

5|Page
Book value of unquoted investments 11,771.54 7,793.04 6,642.82

Market value of quoted investments 2,033.61 1,258.81 1,403.92

Contingent liabilities 1,719.39 1,371.86 1,013.51
Number of equity sharesoutstanding
(Lacs) 6021.95 5856.88 2923.27

Material consumed 10,016.52 9,211.27 7,510.29

Manufacturing expenses 17,247.39 16,115.56 10,998.08
Personnel expenses 2,379.14 1,998.02 1,535.44
Selling expenses 306.22 312.1 320.12
Administrative expenses 1,873.59 2,102.05 1,354.37
Expenses capitalized -36.25 -24.48 -11.42
Cost of sales 31,786.61 29,714.52 21,706.88
Operating profit 5,083.58 4,142.02 3,239.23
Other recurring income 974.59 748.8 477.1
Adjusted PBDIT 6,058.17 4,890.82 3,716.33
Financial expenses 995.37 770 501.83
Depreciation 383.65 284.83 195.94
Other write offs 30.95 21.16 15.66
Adjusted PBT 4,648.20 3,814.83 3,002.90
Tax charges 1,577.02 1,176.19 982.05
Adjusted PAT 3,071.18 2,638.64 2,020.85
Non- recurring items 1,347.08 863.78 139.59
Other non cash adjustments -45.13 -21.09 12.21
Reported net profit 4,373.13 3,481.33 2,172.65
Earnings before appropriation 4,473.63 3,585.64 2,250.89
Equity dividend 752.75 614.97 495.32
Preference dividend - - -
Dividend tax 110.25 101.83 76.26

6|Page
 Retained earnings 3,610.63 2,868.84 1,679.31

RATIO ANALYSIS

Ratio Analysis can be defined as the study and interpretation of relationships

between various financial variables, by investor or lenders. It is a quantitative
investment technique used for comparing a company’s financial performance to the
market in general. A change in these ratios helps to bring about a change in the way
a company works. It helps to identify areas where the management needs change.

1. Liquidity Ratios: These ratios are calculated just to analyse the short term
financial position of the company. An important concern about any company
is its liquidity or to meet its current obligations.
Liquidity exists when the company satisfy its maturing short debts. Liquidity
is important in carrying out a business. Liquidity ratios are of following types:

 Current ratio: It is used to appraise the ability of the company to satisfy

its current debts out of the current assets. Generally, 2 to 1 current ratio is
considered the satisfactory minimum.
Current ratio= current assets/current liabilities

 Quick ratio/Acid test ratio: The quick ratio is the stringent test to liquidity. It
is founded by dividing the most liquid current assets by current liabilities.
Inventory is not included since the length of time needed to convert to cash is
long. Prepaid expenses are also not an element since they are not convertible
in cash. General acceptable ratio is 1 to 1.

7|Page
 Quick ratio=quick assets/current liabilities
Quick assets=current assets-stock-prepaid expenses

 Absolute liquid ratio: Ratios based on cash flow from operations give a more
direct indication of a company’s ability to generate sufficient cash to satisfy
cash to satisfy predicate cash requirements. General acceptable ratio is 0.5 to

Absolute liquid ratio=absolute liquid assets/current liabilities

Absolute liquid assets=quick assets-debtors-bills receivable

2. Efficiency Ratios: These are those ratios that are typically used to analyse
how well a company uses its assets and liabilities internally. These ratios look
at the internal working of the company. In other words efficiency ratios
measure the quality of a business' receivables and how efficiently it uses and
controls its assets, how effectively the firm is paying suppliers, and whether
the business is overtrading or under trading on its equity (using borrowed
funds).
Efficiency ratios are of following types:

 Inventory turnover ratio: This ratio indicates the number of time the stock has
been turned over during the period and evaluates the efficiency with which a
firm is able to manage its inventory. This ratio indicates whether investment
in stock is within proper limit or not. This ratio is a relationship between the
cost of goods sold during a particular period of time and the cost of average
inventory during a particular period. It is expressed in number of times.
Inventory turnover ratio= Cost of goods sold / Average inventory

 Inventory conversion period: It measures the number of days or months a

company required to convert its stock into sales.
Inventory conversion period=365/ Inventory turnover ratio

8|Page
  Debtors turnover ratio: It indicates the velocity of debt collection of a firm. In
simple words it indicates the number of times average debtors (receivable) are
turned over during a year. Trade debtors are expected to be converted into
cash within a short period of time and are included in current assets. Hence,
the liquidity position of concern to pay its short term obligations in time
depends upon the quality of its trade debtors.
Debtors Turnover Ratio = Net Credit Sales /Average Debtors

 Average collection period: The average collection period ratio represents the
average number of days for which a firm has to wait before its debtors are
converted intocash.

Average collection period=365/ Debtors Turnover Ratio

 Creditors turnover ratio: It signifies the credit period enjoyed by the firm in
paying creditors. Accounts payable include both sundry creditors and bills
payable. Same as debtors turnover ratio, creditors turnover ratio can be
calculated in two forms, creditors turnover ratio and average payment period.

Creditors Turnover Ratio = Credit Purchase / Average Trade Creditors

 Average payment period: It gives the average credit period enjoyed from the
creditors. It can be calculated using the following formula:
Average Payment Period =365/ creditors turnover ratio

 Working capital turnover ratio: It indicates the velocity of the utilization of

net working capital. This ratio represents the number of times the working
capital is turned over in the course of year and is calculated as follows:

Working Capital Turnover Ratio = Cost of goods sold / Net Working Capital

9|Page
 3. Solvency ratios: Solvency ratios are measures to assess a company’s
ability to meet its long-term obligations and thereby remain solvent and avoid
bankruptcy. It is a measure of a company's ability to service debts, expressed
as a percentage. A high solvency ratio indicates a healthy company, while a
low ratio indicates the opposite. A low solvency ratio further indicates
likelihood of default. Different industries have different standards as to what
qualifies as an acceptable solvency ratio, but, in general, a ratio of 20% or
higher is considered healthy. Potential lenders may take the solvency ratio into
account when considering making further loans.

 Debt-to-equity ratio: It is a financial ratio indicating the relative proportion of

shareholders' equity and debt used to finance a company's assets. The Debt to
Equity Ratio measures how much money a company should safely be able to
borrow over long periods of time. It does this by comparing the company's
total debt and dividing it by the amount of owner's equity.
Debt to Equity Ratio= debt/shareholder’s equity
Debt=long term loans + debentures

 Funded debt to total capitalisation ratio: It evaluates percentage of debts in the

total funds.
Funded debt to total capitalisation ratio=debt/long term loans + equity

 Proprietary ratio: This ratio indicates the long-term or future solvency position
of the business. It shows the relationship between equity and total assets.
Proprietary ratio=equity/total assets

 Solvency ratio: This ratio shows the relationship between total outsider’s
liabilities and total assets.
Solvency ratio= total outsider’s liabilities/ total assets
Or

10 | P a g e
 Solvency ratio= 1- Proprietary ratio

 Fixed assets to shareholder’s funds: This ratio finds the relationship between
fixed assets and shareholder’s funds. Fixed assets to shareholder’s funds.

Fixed assets to shareholder’s funds= fixed assets/ shareholder’s funds

 Interest coverage ratio: This ratio relates the fixed interest charges to the
income earned by the business. It indicates whether the business has earned
sufficient profits to pay periodically the interest charges.
Interest Coverage Ratio = Net Profit before Interest and Tax / Fixed Interest Charges

4. Profitability ratios: Profitability ratios are used to assess a business'

ability to generate earnings as compared to expenses over a specified time
period. These tutorials define the ratios and walk you through the calculations,
including where on the financial statements the numbers can be found. These
ratios broadly can be categorised in two types:

o General profitability ratios :

 Gross profit ratio: The gross profit ratio indicates how much of each sale
available to meet expenses and profits after merely paying for the goods that
were sold. This interactive tutorial explains the gross profit ratio by walking
you through the steps, including where Sales and Cost of Goods Sold are on
the Income Statement. It lets you use your own numbers -- great for checking
homework answers!

The gross profit ratio= (Gross profit / Net sales) * 100

11 | P a g e
  Operating profit ratio: This ratio shows the relationship between operating
profit and net sales.

Operating profit ratio= (operating profit/ net sales)*100

 Net profit ratio: This ratio finds the relationship between net sales and net
profit.

Net profit ratio= (net profit/ net sales)*100

 Operating Ratio: A ratio that shows the efficiency of a

company's management by comparing operating expense to net sales. The
smaller the ratio, the greater the organization's ability to generate profit if
revenues decrease. When using this ratio, however, investors should be aware
that it doesn't take debt repayment or expansion into account.

Operating ratio= (operating cost/net sales)*100

Operating cost= operating expenses+ cost of goods sold

o Overall profitability ratios:

 Return on investment: It is the ratio of net profit to shareholder’s investment.

It is the relationship between net profit (after interest and tax) and
shareholder’s/proprietor's fund. This ratio establishes the profitability from
the share holders' point of view. The ratio is generally calculated in
percentage.

Return on investment (ROI) = Net Profit / Shareholder’s funds * 100

12 | P a g e
  Return on Equity (ROE): In real sense, ordinary shareholders are the
real owners of the company. They assume the highest risk in the
company. (Preference shareholders have a preference over ordinary
shareholders in the payment of dividend as well as capital. Preference
shareholders get a fixed rate of dividend irrespective of the quantum of profits
of the company). The rate of dividends varies with the availability of profits
in case of ordinary shares only. Thus ordinary shareholders are more
interested in the profitability of a company and the performance of a company
should be judged on the basis of return on equity capital of the company.
Return on equity capital which is the relationship between profits of a
company and its equity.

Return on Equity = (Net profit – preference dividend)/Equity Shareholders

Fund * 100

 Return on Capital employed: The prime objective of making investments in

any business is to obtain satisfactory return on capital invested. Hence, the
return on capital employed is used as a measure of success of a business in
realizing this objective. Return on capital employed establishes the
relationship between the profit and the capital employed. It indicates the
percentage of return on capital employed in the business and it can be used to
show the overall profitability and efficiency of the business.

Return on capital employed = (Adjusted NP/ Capital Employed)*100

Adjusted net profit = PBIT + Non-operating expenses – Non operating income

Capital employed = Current assets + Fixed assets + Investment inside business

13 | P a g e
 RATIO ANALYSIS

1. Liquidity Ratios

 Current Ratio:

Current ratio= current assets/current liabilities

Year 2010 26361.61/21242.86=1.240

Year 2009 22324.39/16718.78=1.335

 Quick Ratio:

Quick ratio=quick assets/current liabilities

Quick assets=current assets-stock-prepaid expenses

Year 2010
15197.91/21242.86=0.7154
Year 2009
12421.26/16718.78=0.7429

 Absolute Liquid Ratio:

Absolute liquid ratio=absolute liquid assets/current liabilities
Absolute liquid assets=quick assets-debtors-bills receivable

Year 2010
13766.04/21242.86=0.648
Year 2009
11645.97/16718.78=0.696

14 | P a g e
 INTERPRETATION ON THE BASIS OF LIQUIDITY RATIOS

In the company L&T info tech the company’s current ratio for both the years
2010 and 2009 is less than the standard ratio of 2:1. In year 2010 it was 1.240
and in 2009 it was 1.335. At the same time current ratio decline in year 2010
as compared to year 2009.

Further in quick ratio test again company’s ratios in both the years are lesser
than the standard generally accepted ratio. In year 2010 and 2009 it was
around 0.7154 and 0.7429 respectively.

Finally in acid test ratio company’ position is again declining as in both the
years ratio is falling.
So in the end we can say that company’s short term financial position is
declining because all its liquidity ratios are below than the standard acceptable
ratios. Moreover in year 2010 its more less as compared 2009. So company
should make proper efforts to solid its position to satisfy short term debts.

2. Efficiency Ratios:

 Inventory Turnover Ratio

Inventory turnover ratio= Cost of goods sold / Average inventory

Year 2010
COGS=28453.55
Average stock= (opening stock + closing stock)/2=1585.265
Inventory turnover ratio=28453.55/1585.265=17.948
Year 2009
COGS=26271.62
Average stock=1744.205
Inventory turnover ratio=26271.62/1744.205=15.062

15 | P a g e
  Inventory Conversion Period
Inventory conversion period=365/ Inventory turnover ratio
Year 2010
Inventory conversion period=365/17.948=20.33=21 days
Year 2009
Inventory conversion period=365/15.062=24.23=25 days

 Debtors Turnover Ratio:

L&T info tech has not made any credit sale. So it is impossible to find
Debtors Turnover ratio.

 Average Collection Period:

Because there is no credit sales so there will be no average collection
period.

 Working Capital Turnover Ratio:

Working Capital Turnover Ratio = Cost of goods sold / Net Working
Capital
Year 2010
COGS=28453.55
Working capital=5118.75
Working Capital Turnover Ratio=28453.55/5118.75=5.558
Year 2009
COGS=26271.62
Working capital=5605.61
Working Capital Turnover Ratio=26271.62/5605.61=4.686

16 | P a g e
 INTERPRETATION ON THE BASIS OF EFFICIENCY RATIOS

L&T info tech has improved its position in converting its inventory to sales.
This ratio in year in 2009 was approximately 25 days which reduced to 21
days in year 2010. Further working capital turnover ratio of the company has
also increased. It indicates that company is efficiently using its working
capital. Which depicts that company is utilizing its assets in a efficient
manner.

3. Solvency Ratios:

 Debt-to-equity Ratio:
Debt to Equity Ratio= debt/shareholder’s equity
Debt=long term loans + debentures

Year 2010
Debt=6035.29
Shareholder’s equity=18311.64
Debt to Equity Ratio=6035.29/18311.64=0.329
Year 2009
Debt=5449.44
Shareholder’s equity=12459.69
Debt to Equity Ratio=5449.44/12459.69=0.437

 Funded Debt To Total Capitalisation Ratio:

Funded debt to total capitalisation ratio=debt/long term loans + equity

Year 2010

Debt=6035.29
Long term loan + equity=6035.29 +18311.64 =24346.93
Funded debt to total capitalisation ratio=6035.29/24346.93=0.237
17 | P a g e
Year 2009
Debt=5449.44
Long term loan + equity=5449.44 + 12459.69=17909.13
Funded debt to total capitalisation ratio=5449.44/17909.13=0.304

 Proprietary Ratio:
Proprietary ratio=equity/total assets

Year 2010
Equity= 18311.64
Total assets=32727.37
Proprietary ratio=18311.64 /32727.37=0.559
Year 2009
Equity=12459.69
Total assets=27518.99
Proprietary ratio=12459.69/27518.99=0.452

 Solvency Ratio:
Solvency ratio= total outsider’s liabilities/ total assets
Or
Solvency ratio= 1- Proprietary ratio
Year 2010
Solvency ratio= 1-0.559=0.441
Year 2009
Solvency ratio= 1-0.452=0.547
 Fixed assets to Shareholder’s Funds:
Fixed assets to shareholder’s funds= fixed assets/ shareholder’s
funds
Year 2010
Fixed assets=6365.76
Shareholder’s funds=18311.64

18 | P a g e
 Fixed assets to shareholder’s
funds=6365.76/18311.64=0.346
Year 2009
Fixed assets=5194.40
Shareholder’s funds=12459.69
Fixed assets to shareholder’s funds=5194.40/12459.69=0.416

 Interest Coverage Ratio:

Interest Coverage Ratio = Net Profit before Interest and Tax / Fixed
Interest Charges
Year 2010
Net Profit before Interest and Tax=1640.87
Fixed Interest Charges=505.31
Interest Coverage Ratio =1640.87/505.31=3.247

Year 2009
Net Profit before Interest and Tax=1231.21
Fixed Interest Charges=415.56
Interest Coverage Ratio =1231.21/415.56=2.962

4. Profitability Ratios:

o General Profitability Ratios:

 Gross Profit Ratio:

Gross profit ratio= (Gross profit / Net sales) * 100

Year 2010

Gross profit=36995.93

Net sales=36675.15
19 | P a g e
 The gross profit ratio= (36995.93/36675.15)*100=100.87

Year 2009

Gross profit=34045.04

Net sales=33646.57

The gross profit ratio= (34045.04/33646.57)*100=101.18

 Operating Profit Ratio:

Operating profit ratio= (operating profit/ net sales)*100

Year 2010

Operating profit = net sales – operating expenses

=36675.15-32295.43=4379.72
Net sales=36675.15
Operating profit ratio= (4379.72/36675.15)*100=11.941

Year 2009

Operating profit=33646.57-30040.84=3605.73

Net sales=33646.57

Operating profit ratio= (3605.73/33646.57)*100=10.716

 Net profit ratio:

Net profit ratio= (net profit/ net sales)*100

Year 2010

Net sales=36675.15

20 | P a g e
 Net profit=4375.52
Net profit ratio= (4375.52/36675.15)*100=11.9304

Year 2009

Net sales=33646.57

Net profit=3481.66

Net profit ratio= (3481.66/33646.57)*100=10.347

 Operating Ratio:

Operating ratio= (operating cost/net sales)*100

Operating cost= operating expenses + cost of goods sold

Year 2010

Operating cost =32295.43 + 28453.55=60748.98

Net sales=36675.15
Operating ratio= (60748.98/36675.15)*100=165.640

Year 2009

Operating cost=30040.84 + 26271.62=56312.46

Net sales=33646.57

Operating ratio = (56312.46/33646.57)*100= 167.364

21 | P a g e
 o Overall Profitability Ratios:

 Return on Investment:

Return on investment (ROI) = Net Profit / Shareholder’s funds * 100

Year 2010

Net profit=4375.52
Shareholder’s funds=18311.64
Return on investment (ROI) = (4375.52/18311.64)*100=23.894
Year 2009
Net profit=3481.66
Shareholder’s funds=12459.69
Return on investment (ROI) = (3481.66/12459.69)*100=27.943

 Return on Equity (ROE):

Return on Equity = (Net profit – preference dividend)/Equity Shareholders
Fund * 100

Year 2010

Net profit= 4375.52

Shareholder’s funds=18311.64
Preference dividend=0.00
Return on Equity = (4375.52-0.00)/ 18311.64*100=23.894
Year 2009
Net profit=3481.66

22 | P a g e
 Shareholder’s funds=12459.69
Preference dividend=0.00
Return on Equity = (3481.66-0.00)/12459.69*100=27.943

 Return on capital employed:

Return on capital employed = (Adjusted NP/ Capital Employed)*100

Capital employed = Current assets + Fixed assets + Investment inside business

Adjusted net profit = PBIT + Non operating expenses – Non operating
income

Year 2010

Adjusted net profit=1640.87 + 921.21 – 2024.96=537.12

Capital employed = 20364.16 + 6223.08 + 16884.92=43472.16
Return on capital employed = (537.12/43472.16)*100= 1.235

Year 2009

Adjusted net profit=1231.21 + 722.86 – 739.78=1214.29

Capital employed = 16505.03 + 5053.78 + 10745.84=23204.65
Return on capital employed = (1214.29/23204.65)*100=5.232

23 | P a g e
 Ratio Analysis

RATIO 2010 2009

Liquidity ratios

Current ratio 1.240 1.335

Quick ratio 0.7154 0.7429

Absolute quick ratio 0.648 0.696

Profitability ratios

Gross profit ratio 100.87 101.18

Operating profit ratio 11.941 10.716

Net profit ratio 11.9304 10.347

Operating ratio 165.640 167.364

Return on investment 23.894 27.943

Return on equity 23.894 27.943

Return on capital employed 1.235 5.232

Turnover ratios or efficiency

ratios
Inventory turnover ratio 17.948 15.062

Inventory conversion period 21 days 25 days

Debtors turnover ratio ---- ----

24 | P a g e
 Average collection period ----- -----

Creditors turnover ratio ----- -----

Average payment period ----- -----

Working capital turnover ratio 5.558 4.686

Solvency ratios

Debt Equity ratio 0.329 0.437

Interest coverage ratio 3.247 2.962

Funded debt to total capitalization 0.237 0.304

Proprietary ratio 0.559 0.452

Solvency ratio 0.441 0.547

Fixed assets to shareholders’ funds 0.346 0.416

25 | P a g e
 INTERPRETATION ON THE BASIS OF RATIO ANALYSIS

Interpretation of the ratios calculated from financial statements is a tool used to draw
comparative and significant conclusions which can be helpful in decision making.

Interpretation of different ratios of L&T info tech signifies various facts about
company.

From the Liquidity ratios of the company it seems that company is not having a lot
many current assets. Company’s Current and Quick ratio are below the standard. But
it’s absolute quick ratio meets the standard in both years. Further if we compare the
current ratio of 2010 and 2009, company’s current assets have further declined. So
Liquidity position of company was not so strong in 2009 and it further deteriorated
in 2010.

Interpretation of Profitability ratios of company shows that profit percentage of the

company increased from 2009 to 2010 but decreased in gross profit ratio. Increase
in the profits percentage is not very high. Gross profit has decreased from 101.18%
to 100.87%. Net profit has increased from 11.93% to 10.71%. Return on investment
and equity have increased from 2009 to 2010. However there is high fall in the return
on capital employed. The profits and total income of the company are also
increasing. This means that expenses of the company might have decreased. But
operating ratio of the company is increasing. It is almost above 85% in both years
which is not favourable for company.

Turnover ratios of the company are showing very good performance of the
company. Inventory turnover ratio of the company has increased from 15.06271 to
17.948. A lower Inventory ratio means less efficient conversion of stocks. Similarly
Inventory conversion period of the company decreased from 25 days in 2009 to 21
days in 2010.

26 | P a g e
Working capital turnover ratio of company has increased. Higher WCTR
indicates efficient utilization of working capital. Whereas declining WCTR means
inefficient management. WCTR of the company has increased to 5.558 from 4.686
times.

Even the solvency ratios of the company show an improving performance of the
company from 2009 to 2010. Interest coverage ratio of the company has increased
to 3.247 from 2.962.So this much increase in Interest coverage ratio means less and
less risk for long-term creditors. Company’s long term debt is decreasing as
compared to the total capital. Even, its total liabilities has not increased much as
compared to its total assets. As performance of the company is improving so
investors can invest money in this company with more assurance. The solvency has
increased from 2009 to 2010.

So, overall analysis of the financial statements of L&T info tech using ratio analysis
indicates that performance of the company is good and is Improving. It’s Liquidity,
solvency, efficiency and profitability all are improving relatively.

27 | P a g e
 1. Comparative Statement:

A statement which compares financial data from different periods of time. The
comparative statement lines up a section of the income statement, balance
sheet or cash flow statement with its corresponding section from a previous
period. It can also be used to compare financial data from different companies
over time, thus revealing the trend in the financials.

Comparative
balance sheet
Rs.
Rs. Crore Rs. Crore Crore
absolute
Particulars Mar ' 10 Mar ' 09 %age change
change
Sources of funds
Owner's fund
Equity share capital 120.44 117.14 3.3 2.817142
Share application money 25.09 - 25.09
Preference share capital - -
Reserves & surplus 18,142.82 12,317.96 5824.86 47.28754

Loan funds
Secured loans 955.73 1,102.38 -146.65 -13.303
Unsecured loans 5,845.10 5,453.65 391.45 7.177762
Total 25,089.18 18,991.13 6098.05 32.10999

Uses of funds
Fixed assets
Gross block 7,235.78 5,575.00 1660.78 29.78978
Less : revaluation reserve 23.29 24.59 -1.3 -5.2867
Less : accumulated depreciation 1,727.68 1,421.39 306.29 21.54862
Net block 5,484.81 4,129.02 1355.79 32.83564
Capital work-in-progress 857.66 1,040.99 -183.33 -17.6111
28 | P a g e
 Investments 13,705.35 8,263.72 5441.63 65.84964

Net current assets

Current assets, loans & advances 26,673.49 23,834.71 2838.78 11.91028
Less : current liabilities & provisions 21,632.13 18,277.57 3354.56 18.35342
Total net current assets 5,041.36 5,557.14 -515.78 -9.28139
Miscellaneous expenses not written - 0.26 -0.26 -100
Total 25,089.18 18,991.13 6098.05 32.10999

Notes:
Book value of unquoted investments 11,771.54 7,793.04 3978.5 51.05196
Market value of quoted investments 2,033.61 1,258.81 774.8 61.55019
Contingent liabilities 1,719.39 1,371.86 347.53 25.33276
Number of equity shares outstanding
(Lacs) 6021.95 5856.88 165.07 2.818395

INTERPRETATION ON THE BASIS OF COPARATIVE BALANCE SHEET

From the comparative balance sheet of the company the net worth of the company
is decreasing over the given period. We find that both sources of funds and loans
increased in year as compared to year 2009 means total debts of the company is
increasing over the period. Investments are also increasing over the same period.
Current assets of the firm increased by approximately 12%. Total assets increased
by approximately 33%. So we can say that position of the company is satisfactory.
The overall profitability of the concern is going good and the company seems to be
financially strong.

29 | P a g e
 References

30 | P a g e
  https://www.researchandmarkets.com/reports/2517190/larsen_and_to
ubro_ltd_lt_financial_and

 http://money.rediff.com/companies/larsen-and-toubro-
ltd/17010013/balance-sheet

 http://www.larsentoubro.com/corporate/about-lt-group/overview

 https://studymoose.com/fundamaental-analysis-of-lt-essay

31 | P a g e