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Company Information

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LARSEN & TOUBRO LTD.

20 May 2022 | 12:00

Industry >> Construction & Engineering

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ISIN No INE018A01030 52Week High 2079 Book Value (Rs.) 598.90 Face Value 2.00
Bookclosure 05/08/2021 52Week Low 1402 EPS 61.70 P/E 26.10
Market Cap. 226242.43 Cr. P/BV 2.69 Div Yield (%) 0.87 Market Lot 1.00
Security Type Other

NOTES TO ACCOUNTS

You can view the entire text of Notes to accounts of the company for the latest year
Year End :2021-03 

a) Cost of freehold land includes R 1.14 crore (previous year: R 1.14 crore) for which conveyance is yet to be completed.

b) Cost of buildings includes ownership accommodations:

(i) A. in various co-operative societies, shop-owners' associations and non-trading corporations : R 68.26 crore, including 2615

shares of R 50 each, 75 shares of R 100 each. (previous year: in various co-operative societies, shop-owners' associations and non-trading corporations: R 68 26 crore, including 2615 shares of R 50 each, 75 shares of R 100 each).

B. in various apartments : R 8.82 crore. (previous year: R 9.42 crore).

C. in various co-operative societies : R 0.36 crore (previous year: R 0.36 crore) for which share certificates are yet to be issued.

D. in proposed co-operative societies R 30.59 crore. (previous year: R 30.59 crore).

(ii) ownership accommodations of R 0.15 crore in respect of which the deed of conveyance is yet to be executed. (previous year: R 0.29 crore).

(iii) ownership accommodations of R 11.75 crore representing undivided share in properties at various locations. (previous year:

R 11.75 crore).

c) Additions during the year and capital work-in-progress include R 27.75 crore (previous year: R 23.10 crore) being borrowing cost capitalised in accordance with Ind AS 23 "Borrowing Costs". Asset class wise break-up of borrowing costs capitalised during the year is as follows:

d) The rate used to determine the amount of borrowing costs eligible for capitalisation is 5.83% (previous year: 6.24%).

e) Depreciation for the year includes R 6.95 crore (previous year: R 430 crore) on account of obsolescence.

f) Owned assets given on operating lease have been presented separately under respective class of assets as "Leased out" pursuant to Ind AS 116 "Leases".

g) Cost as at April 1, 2020 of individual assets has been reclassified wherever necessary.

h) Out of its leasehold land at Hazira, the Company has given certain portion of land for the use to its joint venture company and the lease deed is under execution.

a. Pursuant to amalgamation of L&T Realty Limited with L&T Constructure Equipment Limited, L&T Construction Equipment Limited issued 4,71,60,700 equity shares of R 10 each and 64,83,00,000, 12% non-cumulative redeemable preference shares of R 10 each to Larsen & Toubro Limited as a consideration towards the transfer of all assets and liabilities by L&T Realty Limited. The cost of acquisition of shares issued was deemed to be the cost at which Larsen & Toubro Limited acquired shares of L&T Realty Limited. Accordingly, the value of investment in L&T Construction Equipment Limited was increased by R 47.16 crore towards equity shares and R 648.30 crore towards preference shares w.e.f. April 1, 2018 and correspondingly investment in equity and preference shares of L&T Realty Limited stood cancelled.

b. Pursuant to the approval of the Registrar of Companies, L&T Construction Equipment Limited is renamed as L&T Realty Developers Limited and L&T Construction Machinery Limited is renamed as L&T Construction Equipment Limited.

c. Pursuant to demerger of Manufacturing business of L&T Construction Equipment Limited, L&T Construction Machinery Limited issued 19,91,32,091 equity shares of R 10 each to Larsen & Toubro Limited as a consideration towards transfer of certain assets and liabilities by L&T Construction Equipment Limited. The cost of acquisition of these shares issued was derived based on book value of assets transferred to the total value of assets of L&T Construction Equipment Limited as at appointed date. Accordingly, the value of investment in L&T Construction Machinery Limited was increased by R 22.26 crore and reduced in L&T Construction Equipment Limited w.e.f. April 1, 2018.

(f) The aggregate number of equity shares allotted as fully paid up by way of bonus shares in immediately preceding five years ended March 31,2021 are 46,67,64,755 (period of five years ended March 31, 2020: 46,67,64,755 shares).

Equity share capital (contd.)

(g) The aggregate number of equity shares issued pursuant to contract, without payment being received in cash in immediately preceding five years ended on March 31, 2021 - Nil (period of five years ended March 31, 2020: Nil).

(h) Stock option schemes i. Terms:

A. The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options are vested equally over a period of 4 years [5 years in the case of series 2006(A)], subject to the discretion of the management and fulfillment of certain conditions.

B. Options can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of issue of equity shares. Management has discretion to modify the exercise period.

B. Expense on Employee Stock Option Schemes debited to the Statement of Profit and Loss during 2020-21 is R 42.05 crore (previous year: R 49.44 crore) net of recoveries of R 0.40 crore (previous year: R 0.46 crore) from its group companies towards the stock options granted to deputed employees, pursuant to the employee stock option schemes (refer Note 40). The entire amount pertains to equity-settled employee share-based payment plans. [expense related to discontinued operations R 2.14 crore (previous year: R 233 crore)]

vi. During the year, the Company has recovered R 4.82 crore (previous year: R 5.54 crore) from its subsidiary companies towards the stock options granted to their employees, pursuant to the employee stock option schemes.

vii. Weighted average fair values of options granted during the year is R 834.24 (previous year: R 804.63) per option

(i) Capital Management

The Company continues its policy of a conservative capital structure which has ensured that it retains the highest credit rating even amidst an adverse economic environment. Low gearing levels also enable the Company to navigate business stresses on one hand and raise growth capital on the other. This policy also provides flexibility of fund raising options for future, which is especially important in times of global economic volatility. The gross debt equity ratio is 0.39:1 as at March 31,2021 (as at March 31, 2020 0.49:1).

During the year ended March 31, 2021, the Company paid the final dividend of R 8 per equity share for the year ended March 31, 2020 amounting to R 1 123.23 crore

During the year ended March 31, 2021, the Company paid special dividend of R 18 per equity share amounting to R 2527.66 crore.

The Board of Directors, at their meeting held on May 14, 2021 recommended a final dividend of R 18 per equity share for the year ended March 31, 2021, subject to approval of shareholders. On approval, the dividend outgo is expected to be R 2528.20 crore based on number of shares outstanding as at March 31, 2021.

[1] Capital reserve: It represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transactions in earlier years.

[2] Capital reserve on business combination: It arises on transfer of business between entities under common control. It represents the difference, between the amount recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor [refer Note 1(ii)(ab)].

[3] Debenture redemption reserve (DRR): The Ministry of Corporate Affairs vide notification dated August 16, 2019, amended the Companies (Share capital and Debenture) Rules, 2014 by which the Company is no longer required to create DRR towards the debentures issued. Earlier to this amendment, the Company was required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis and the amounts credited to the DRR was not to be utilised by the Company except to redeem debentures. The above amount represents the DRR created out of profits of the Company prior to the said notification.

[4] General reserve: The Company created a General reserve in earlier years pursuant to the provisions of the Companies Act,1956 where in certain percentage of profits were required to be transferred to General reserve before declaring dividends. As per the Companies Act 2013, the requirements to transfer profits to General reserve is not mandatory. General reserve is a free reserve available to the Company.

1. The Company does not expect any reimbursements in respect of the above contingent liabilities except in respect of matters at (j)

2. It is not practicable to estimate the timing of cash outflows, if any, in respect of matters at (a) to (d) above pending resolution of the arbitration/appellate proceedings. Further, the liability mentioned in (a) to (d) above includes interest except in cases where the Company has determined that the possibility of such levy is remote.

3. In respect of matters at (e), the cash outflows, if any, could generally occur up to ten years, being the period over which the validity of the guarantees extends except in a few cases where the cash outflows, if any, could occur any time during the subsistence of the borrowing to which the guarantees relate.

4. In respect of matters at (f), the cash outflows, if any, could generally occur up to ten years, being the period over which the validity of the guarantees extends.

5. In respect of matters at (g) to (i), the cash outflows, if any, could generally occur up to completion of projects undertaken by the respective joint operations.

6. In respect of matters at (j), the cash outflows, if any, is fully reimbursable by the third parties under an agreement entered in to with them.

Disclosure pursuant to Ind AS 103 "Business Combinations":

During the previous year, L&T Shipbuilding Limited (LTSB), a wholly owned subsidiary, was merged with the Company under a scheme of amalgamation approved by National Company Law Tribunal, Chennai on March 10, 2020 and National Company Law Tribunal, Mumbai on April 24, 2020. The merger was effective from the appointed date April 1, 2019. LTSB had a registered office in Chennai, India and was engaged in the business of Shipbuilding and Ship related activities.

No fresh shares were issued to effect the merger as LTSB was a wholly owned subsidiary of the Company. Further the merger was accounted using pooling of interest method, involving the following:

i. The assets and liabilities of LTSB were reflected at their carrying amounts. No adjustment was made to reflect the fair values, or recognise any new asset or liability.

ii. The balance of the Retained earnings appearing in the financial statements of the LTSB was aggregated with the corresponding balance appearing in the financial statements of the Company.

iii. The excess of amount of investment by the Company in LTSB over the share capital of LTSB was treated as Capital reserve in Company's financial statements and the same was presented separately from other capital reserves [refer Note 18].

iv. Restating the financials of the Company from April 1, 2018.

(d) The Company's reportable segments are organised based on the nature of products and services offered by these segments.

(e) Basis of identifying operating segments, reportable segments, segment profit and definition of each reportable segment:

(i) Basis of identifying Operating segments:

Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Company's other components); (b) whose operating results are regularly reviewed by the Company's executive management to make decisions about resource allocation and performance assessment; and (c) for which discrete financial information is available.

The Company has five reportable segments as described under "Segment composition" below. The nature of products and services offered by these businesses are different and are managed separately given the different sets of technology and competency requirements.

ii) Reportable segments

An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.

iii) Segment profit

Performance of a segment is measured based on segment profit (before interest and tax), as included in the internal management reports that are reviewed by the corporate executive management.

iv) Segment composition

• Infrastructure segment comprises engineering and construction of building and factories, transportation infrastructure, heavy civil infrastructure, power transmission & distribution, water & effluent treatment and metallurgical & material handling systems.

• Power segment comprises turnkey solutions for Coal-based and Gas-based thermal power plants including power generation equipment with associated systems and/or balance-of-plant packages.

• Heavy Engineering segment comprises manufacture and supply of custom designed, engineered critical equipment & systems to core sector industries like Fertiliser, Refinery, Petrochemical, Chemical, Oil & Gas and Thermal & Nuclear Power.

• Defence engineering segment comprises (a) design, development, serial production and through life-support of equipment, systems and platforms for Defence and Aerospace sectors and (b) design, construction, and repair/refit of defence vessels.

• Electrical & Automation segment (disclosed as discontinued operation) comprises manufacture and sale of low and medium voltage switchgear components, custom-built low and medium voltage switchboards, electronic energy meters/ protection (relays) systems and control & automation products [upto the date of transfer].

• Others segment includes realty, smart world & communication projects (including military communications), hydrocarbon, marketing and servicing of construction & mining machinery and parts thereof and manufacture and sale of rubber processing machinery.

(e) Cost to obtain the contract:

i. Amortisation in Statement of Profit and Loss: Nil (previous year: Nil)

ii. Recognised as contract assets at March 31, 2021: Nil (previous year: Nil)

a) For gratuity plan the attrition rate varies from 1% to 11% (previous year: 1% to 11%) for various age groups.

b) For company pension plan, the attrition rate varies from 0% to 2% (previous year: 0% to 2%) for various age groups.

c) For post-retirement medical benefit plan, the attrition rate varies from 1% to 11% (previous year: 1% to 11%) for various age groups.

v) The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

vi) The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long-term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss.

vii) The obligation of the Company under the post-retirement medical benefit plan is limited to the overall ceiling limits. At present, healthcare cost, as indicated in the principal actuarial assumption given supra, has been assumed to increase at 5.00% p.a.

h) Characteristics of defined benefit plans and associated risks:

1 Gratuity plan:

The Company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable to vested employees at retirement, death while in employment or on termination of employment. The benefit vests after five years of continuous service. The Company's scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972.

The defined benefit plan for gratuity of the Company is administered by separate gratuity funds that are legally separate from the Company. The trustees nominated by the Company are responsible for the administration of the plan. There are no minimum funding requirements of these plans. The funding of these plans are based on gratuity fund's actuarial measurement framework set out in the funding policies of the plan. These actuarial measurements are similar compared to the assumptions set out in (g) supra. Employees do not contribute to any of these plans.

Unfunded gratuity represents a small part of gratuity plan which is not material. Further, the unfunded portion includes amounts payable in respect of the Company's foreign operations which result in gratuity payable to employees engaged as per local laws of the country of operation.

2 Post-retirement medical care plan:

The post-retirement medical benefit plan provides for reimbursement of health care costs to certain categories of employees post their retirement. The reimbursement is subject to an overall ceiling sanctioned based on cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.

3 Company's pension plan:

In addition to contribution to state-managed pension plan (EPS scheme), the Company operates a post retirement pension scheme, which is discretionary in nature for certain cadres of employees. The quantum of pension depends on the cadre of the employee at the time of retirement. The plan is unfunded. Employees do not contribute to the plan.

4 Trust managed provident fund plan:

The Company manages provident fund plan through a provident fund trust for its employees which is permitted under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. The plan mandates contribution by employer at a fixed percentage of employee's salary. Employees also contribute to the plan at a fixed percentage of their salary as a minimum contribution and additional sums at their discretion. The plan guarantees interest at the rate notified by

Disclosure pursuant to mu ms 19 employee Deneius \luiilu.j

Employees' Provident Fund Organisation. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering oi service.

The interest payment obligation of trust-managed provident fund is assumed to be adequately covered by the interest income on long-term investments of the fund. Any shortfall in the interest income over the interest obligation is recognised immediately in the Statement of Profit and Loss as actuarial loss. Any loss/gain arising out of the investment risk and actuarial risk associated with the plan is also recognized as expense or income in the period in which such loss/ gain occurs.

All the above defined benefit plans expose the Company to general actuarial risks such as interest rate risk and market (investment) risk.

i) The Codes on Wages, 2019 and the Code on Social Security, 2020 have been enacted, however, the effective date from which changes are applicable are yet to be notified. The impact of the same would be given in the financial statements in the period in which the Codes become effective and the Rules/Schemes thereunder are notified.

NOTE [46]

Disclosure pursuant to Ind MS 20 "Accounting for Government Grants and Disclosure of Government Assistance"

The Company's exports qualify for various export benefits offered in the form of duty credit scrips under foreign trade policy framed by Department General of Foreign Trade India (DGFT). Income accounted towards such export incentives and duty drawback amounts to R 212.52 crore (previous year: R 11968 crore).

b) Nature of provisions:

i. Product warranties: The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31,2021 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of 1 to 3 years from the date of Balance Sheet.

ii. Expected tax liability in respect of indirect taxes represents mainly the differential sales tax liability on account of non-collection of declaration forms.

iii. Provision for litigation-related obligations represents liabilities that are expected to materialise in respect of matters in appeal.

iv. Contractual rectification cost represents the estimated cost the Company is likely to incur during defect liability period as per the contract obligations in respect of completed construction contracts accounted under Ind AS 115 "Revenue from Contracts with customers".

c) Disclosure in respect of contingent liabilities is given as part of Note 29 to the Balance Sheet.

(a) Foreign exchange rate and interest rate risk:

The Company regularly reviews its foreign currency and interest rate related exposures - both hedged and open exposures. The Company primarily follows cash flow hedge accounting for Highly Probable Forecasted Exposures (HPFE), hence, the movement in mark to market (MTM) of the hedge contracts undertaken for such exposures is likely to be offset by contra movements in the underlying exposures values. However, till the point of time that the HPFE becomes an on-balance sheet exposure, the changes in MTM of the hedge contracts will impact the Balance Sheet of the Company. Further, given the effective horizons of the Company's risk management activities which coincide with the durations of the projects under execution, which could extend across 3-4 years and given the business uncertainties associated with the timing and estimation of the project exposures, the recognition of the gains and losses related to these instruments may not always coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may affect the Company's financial condition and operating results. The Company monitors the potential risk arising out of the market factors like exchange rates, interest rates, price of traded investment products etc. on a regular basis. For on-balance sheet exposures, the Company monitors the risks on net unhedged exposures.

(i) Foreign exchange rate risk:

In general, the Company is a net receiver of foreign currency. Accordingly, changes in exchange rates, and in particular a strengthening of the Indian Rupee, may adversely affect the Company's net sales and gross margins expressed in Indian Rupees. There is a risk that the Company may have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates.

The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. In addition, the Company has entered, and may enter in future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances. The Company's practice is to hedge a portion of its material net foreign exchange exposures with tenors in line with the project/business life cycle. The Company may also choose not to hedge certain foreign exchange exposures.

To provide a meaningful assessment of the foreign currency risk associated with the Company's foreign currency derivative positions against off-balance sheet exposures and unhedged portion of on-balance sheet financial assets and liabilities, the Company uses a multi-currency correlated value-at-risk ("VAR") model. The VAR model uses a Monte Carlo simulation to generate thousands of random market price paths for foreign currencies against Indian rupee taking into account the correlations between them. The VAR is the expected loss in value of the exposures due to overnight movement in spot exchange rates, at 95% confidence interval. The VAR model is not intended to represent actual losses but is used as a risk estimation tool. The model assumes normal market conditions and is a historical best fit model. Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by

Disclosure pursuant to Ind AS 107 "Financial Instruments: Disclosures": Market risk management (contd.)

increases in the fair value of the underlying exposures for on-balance sheet exposures. The overnight VAR for the Company at 95% confidence level is R 32.90 crore as at March 31, 2021 and R 28.78 crore as at March 31, 2020.

Actual future gains and losses associated with the Company's investment portfolio and derivative positions may differ materially from the sensitivity analysis performed as at March 31, 2021 due to the inherent limitations associated with predicting the timing and amount of changes in foreign currency exchanges rates and the Company's actual exposures and position.

(ii) Interest rate risk:

The Company's exposure to changes in interest rates relates primarily to the Company's outstanding floating rate debt. While most of the Company's outstanding debt in local currency is on fixed rate basis and hence not subject to interest rate risk, a major portion of foreign currency debt is linked to international interest rate benchmarks like LIBOR. The Company also hedges a portion of these risks by way of derivatives instruments like Interest rate swaps and currency swaps.

L&T has an ECB loan book of USD 250 mn as on date which has a floating interest rate linked to 1 month USD Libor. With the transition of Libor into another benchmark (SOFR), there will be a spread adjustment that will have to be applied to these loans. Out of the USD 250 mn worth of outstanding ECB, USD 100 mn worth of ECB will mature in October 2021, and hence will be repaid before the transition to SOFR. USD 150 mn ECB will mature beyond 2021 and hence will require a credit adjustment.

The Corporate Treasury team constantly tracks the developments related to this proposed transition and has also had interactions with the counterparty lenders to prepare for the transition.

Based on the most widely expected methodology to transition from LIBOR to SOFR, the median historical spread between the two benchmarks is likely to be used as a spread adjustment. In the case mentioned above, both the bank and the Company are likely to agree on a neutral spread adjustment which does not impact the counterparties financially.

(b) Liquidity Risk Management:

The Company manages liquidity risk by maintaining sufficient cash and marketable securities and by having access to funding through adequate committed credit lines. Given the need to fund diverse businesses, the Company maintains flexibility by need based drawing from committed credit lines. Management regularly monitors the position of cash and cash equivalents. The maturity profiles of financial assets and financial liabilities including debt financing plans and liquidity ratios are considered while reviewing the liquidity position.

The Company's investment policy and strategy are focused on preservation of capital and supporting the Company's liquidity requirements. The Company uses a combination of internal and external tools to execute its investment strategy and achieve its

Disclosure pursuant to Ind AS 107 "Financial Instruments: Disclosures": Market risk management (contd.)

investment objectives. The Company typically invests in money market funds, large debt funds, Government of India securities, equity funds and other highly-rated securities under a exposure limit framework. The investment policy focuses on minimising the potential risk of principal loss. To provide a meaningful assessment of the price risk associated with the Company's investment portfolio, the Company performed a sensitivity analysis to determine the impact of change in prices of the securities on the value of the investment portfolio assuming a 0.5% movement in the fair market value of debt funds and debt securities and a 5% movement in the NAV of the equity funds as below:

(c) Credit Risk Management:

The Company's customer profile includes public sector enterprises, state owned companies and large private corporates. Accordingly, the Company's customer credit risk is low. The Company's average project execution cycle is around 24 to 36 months. General payment terms include mobilisation advance, monthly progress payments with a credit period ranging from 45 to 90 days and certain retention money to be released at the end of the project. In some cases, retentions are substituted with bank/ corporate guarantees. The Company has a detailed review mechanism of overdue customer receivables at various levels within the organisation to ensure proper attention and focus for realisation.

(d) Commodity price risk management :

The Company bids for and executes EPC projects on turnkey basis. EPC projects entail procurement of various equipment and materials which may have direct or indirect linkages to commodity prices like steel (both long and flat steel), copper, aluminium, zinc, lead, nickel etc. Accordingly, the Company is exposed to the price risk on these commodities. To mitigate the risk of commodity prices, the Company relies on contractual provisions like pass through of prices, price variation provisions etc., and further uses financial derivatives where available (refer Note 53 (h)(ii)). There is certain residual risk carried by the Company that cannot be hedged against.

The table given in the Risk Management section of Management Discussion and Analysis lists out the commodity exposure for the year (only for projects that been awarded and are under execution).

The Company is also exposed to contingent risk on account of commodity price movements that may not be fully offset by contractual provisions in the projects that it has bid for but which are not awarded yet. Commodity prices are volatile and have witnessed 60% to 75% movement for the year. This may impact the margin on projects where the Company has submitted bids on a firm price basis. However, for projects where the Company is eligible for an adjustment, based on price variation clause, there may not be a major impact. The actual impact will depend on the exact project wins and the relative contractual provisions therein.

(i) Financial assets measured at amortised cost:

The carrying amounts of trade receivables, loans, advances and cash and other bank balances are considered to be the same as their fair values due to their short-term nature. The carrying amounts of long-term loans given with floating rate of interest are

Exceptional items for the year ended March 31, 2021 includes the following:

(i) Impairment towards funded exposure of R 1467.38 crore offset by interest income of R 78.58 crore and provision towards constructive obligation to fund future losses R 14.85 crore in the heavy forgings joint venture.

(ii) Impairment of investments in the power development business R 1415.00 crore.

The impairment is recognised considering the existing business operations and the outlook for the future performance. The present value of estimated future cash flows of the business (value-in-use) is considered as a recoverable amount (discount rates used 11.90% to 12.75%). For power development business, in addition to value-in-use, part of the recoverable value is based on the fair value determined based on benchmark multiple method.

Exceptional items for the year ended March 31, 2020 represents gain of R 626.99 crore on sale of the Company's stake in a subsidiary company.

i. The amount required to be spent by the Company on CSR related activities during the year 2020-21 is R 145.56 crore (previous year: R 144.80 crore).

ii. The amount carried forward by the Company to offset against CSR obligation of the succeeding years is R 57.74 crore under Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended vide Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021. This comprises R 4.51 crore of excess spent during the year 2020-21 and R 53.23 crore 1 contributed to PM CARES fund during the year 2019-20.

Contribution to political parties during the year 2020-21 is Nil (previous year: The Company purchased Electoral Bonds for R 35.00 crore and issued the same to political parties as Company's political contribution).

NOTE [63]

(a) For better understanding of the Company's performance, line items have been added to show Profit after tax from continuing operations separately from exceptional items. This is in line with guidance available in Schedule III to Companies Act, 2013.

(b) Figures for the previous year have been regrouped/reclassified to conform to the figures of the current year.

1

The Company contributed R 53.23 crore to PM CARES fund during the year 2019-20 and accounted the same as donation in the financial statements. The management believes, the excess amount contributed by the Company to PM CARES fund over and above the CSR liability is allowed to be offset against the future CSR obligation of the Company under Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended vide Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021. Accordingly, for the year 2019-20 the Company has regrouped the amount of contribution to PM CARES fund from donation to CSR expense.