L&T - Comparison of operating assets and operating performance

(basis: Stand Alone financial statements)

ADJUSTED BALANCE SHEET 2019 2018 2017 2016

Net working Capital:

Accounts Receivable 28217 22917 19920 19188
+ Inventory 3220 2500 1763 1955
+ Other current assets including tax assets 44091 40500 33264 33482
- Accounts payable 45938 38035 24032 22216
- Other current liabilities including tax liabilities 24296 22315 19436 19576 8879280375
=Ending net working capital 5294 5567 11479 12833

Net Long Term Assets

Long term tangible assets 6572 6272 6523 7130
+Long term intangible assets 229 193 125 139
+Other long term assets 3347 3093 2223 1787
-Deferred taxes 842 401 285 156
-Other long term liabilities (deferred revenue + Provisions) 498 474 475 378
=Ending net long term assets 8808 8683 8111 8522

Total Assets
Ending net working capital 5294 5567 11479 12833
+ Ending net long term assets 8808 8683 8111 8522
= Ending net assets 14102 14250 19590 21355

Total Net Capital

Short term debt ( Borrowings + current maturities of LT) 7799 5066 3447 5612
+ long term debt (Borrowings) 2392 5495 7134 8312
- Cash 2733 3184 2202 2076
= Ending Net debt 7458 7377 8379 11848
+ Ending preferred stock 0 0 0 0
+ Minority interest 0 0 0 0
+ Ending common shareholders'Equity 52551 49174 46013 42135
=Ending Total Net capital 60009 56551 54392 53983
ADJUSTED INCOME STATEMENT

Total Income (net of excise duty) 89757 76075 67695 65519

NOPAT** 7410 6081 6083 5756
- Net interest expense after taxes* 732 694 629 756
= Net Income 6678 5387 5454 5000
- Preferred dividends 0 0 0 0
= Net income available to common s/h 6678 5387 5454 5000

*Computation of interest expense after taxes

Interest expense 1641 1432 1318 1477
- Interest income 631 497 539 531
=Net interest expense (Income) 1010 935 779 946
x (1-tax/pre-tax income) 0.72 0.74 0.81 0.80
= Net interest expense after taxes 732 694 629 756

**Computation of NOPAT
Net income 6678 5387 5454 5000
+ Net interest exp after taxes 732 694 629 756
= NOPAT 7410 6081 6083 5756
- Unusual gains net of unusual losses 475 431 894 560
= NOPAT excluding unusual items 6935 5650 5189 5196
 ANALYSIS 1: KEY PROFITABILITY RATIOS

2019 2018 2017 2016

Total Income 89757 76075 67695 65519
% change over previous year 17.98% 12.38% 3.32%
Cost of sales/Sales
Gross Margin
Other operating Exp/sales
EBITDA margin 12.8% 12.2% 12.4% 12.5%
EBIT margin 11.6% 10.9% 10.6% 10.9%
EBT Margin (Exclu unusual items) 9.7% 9.0% 8.7% 8.4%
Net Income Margin (inclu. Unusual gain/loss) 7.44% 7.08% 8.06% 7.63%
Return on Equity (Modified Du Pont) 58.61% 47.66% 35.34% 32.74%
Conventional ROE (PAT/Equity) 12.71% 10.95% 10.95% 11.85%
Return on Capital Employed (EBIT/Net capital employed) 11.6% 13.6% 15.3% 15.8%

ANALYSIS 2: DECOMPOSING PROFITABILITY - DU PONT ANALYSIS

2019 2018 2017 2016

NOPAT/Sales 8.26% 7.99% 8.99% 8.79%
x Sales/Net Operating Assets 6.36 5.34 3.46 3.07
= Operating ROA 52.54% 42.67% 31.05% 26.95%

Cost of borrowing = 9.81% 9.40% 7.50% 6.38%

(Net interest exp after taxes/Net debt

Spread (Operating ROA - Cost of borrowing) 42.73% 33.27% 23.55% 20.57%

Financial leverage (Net debt/Equity) 0.14 0.15 0.18 0.28

Financial leverage Gain = Spread * Fin Leverage 6.06% 4.99% 4.29% 5.78%

Modified ROE= (Operating ROA + Finan Lev. Gain) 58.61% 47.66% 35.34% 32.74%
Conventional ROE (PAT/Equity) 12.71% 10.95% 10.95% 11.85%
 ANALYSIS 3: COMMON SIZE ANALYSIS OF INCOME STATEMENT
2019 2018 2017 2016
Total Income 89757 76075 67695 65519

Major Expenses:
Raw materials, construction materials & purchase of stock-
in-trade, changes in inventories 41.69% 40.31% 40.46% 42.04%
Stores, spares & tools 2.61% 2.38% 2.14% 2.06%
Other mfg,construction and operating expenses,
subcontract charges 33.58% 34.18% 33.37% 31.71%
Employee expenses 6.78% 7.38% 7.60% 7.59%
Sales, admin and other expenses 2.58% 3.52% 4.05% 4.34%
Finance costs net of interest income 1.88% 1.23% 1.15% 1.44%
Depreciation, Amortisation, impairment & obsolescence 1.19% 1.38% 1.79% 1.52%

Profit before exceptional items and taxes 9.74% 8.98% 8.66% 8.69%

ANALYSIS 4: EVALUATING INVESTMENT MANAGEMENT

2019 2018 2017 2016

Working Capital Management: (365 DAYS BASIS)
Operating W.C./revenue from operations % 6% 7% 17% 20%
Accounts Receivable Turnover 3 3 3 3
Inventory Turnover 13 13 16 15
Accounts Payable Turnover (on total income basis) 2 2 3 3
Days'receivables 115 110 107 107
Days inventory 29 27 22 25
Days Payables 179 175 124 119

Long-term Asset Management:

Net long-term assets turnover 10.19 8.76 8.35 7.69
Property, Plant and Equipment turnover 13.66 12.13 10.38 9.19
 ANALYSIS 5: EVALUATING FINANCIAL MANAGEMENT

2019 2018 2017 2016

Short-term liquidity:
Current ratio 1.11 1.15 1.31 1.36
Quick ratio 1.07 1.10 1.27 1.31
Cash ratio (Cash balance/(Payables + Other CL)) 0.04 0.05 0.05 0.05

Debt and Long-term solvency:

Total Liabilities-to-equity (Exclu deferred tax) 1.54 1.45 1.18 1.33
Debt-to-equity 0.20 0.22 0.24 0.34
Net debt-to-equity 0.14 0.15 0.18 0.28
Interest coverage (EBIT/Net interest exp) 6.33 5.77 5.45 4.86