PREFACE

Action is the language of commitment; it speaks louder than words. “Leading by doing” is
the hidden condition of management courses.
While classroom discussions and theoretical knowledge have their place, they also have their
limits. This project is all about diving deep into four main financial decisions taken in
business. We use data from annual reports and other sources, tailored to our project's needs,
to keep things practical and engaging.
The Mini Project report is a key part of this journey, helping students gain practical insights
and a better understanding of the real-world challenges and opportunities in the business
world."

PLACE: AMARAVATI PRESENTED BY :

DATE: 23-04-2024 CH PRAVEEN KUMAR GUPTHA
 ACKNOWLEDGEMENT
This report is based on my initial ideas and the knowledge I gained during my classroom
study of Financial Management. The foundation laid during this study helped me delve
deeper into the analysis and application of various techniques in this project and I am
thankful to Prof. ShanthaKumari for giving me the opportunity to work on this Mini Project.
OBJECTIVES:
1.To analyze the four decisions taken by the company for the two years and interpret the
growth rate of the company.
2.To analyze the impact of four decisions on a company's share price over a two-year period.
Selected Industry: Construction
Selected Company: LARSEN&TORBRO

CONSTRUCTION INDUSTRY:
INTRODUCTION The construction industry is a vital sector that plays a crucial role in the
development of any nation's infrastructure and economy. It encompasses a wide range of
activities, including the construction of residential and commercial buildings, roads, bridges,
dams, and other civil engineering projects.

MARKET SIZE:
Global:
In 2022, the global construction industry was valued at approximately $14.7 trillion,
according to a report by Statista. The industry has witnessed steady growth over the past
decade, driven by factors such as urbanization, population growth, and infrastructure
development initiatives undertaken by governments worldwide.
Indian Perspective:
The construction industry in India is one of the largest contributors to the country's
GDP, accounting for about 8-9% of the total GDP. In 2022, the Indian construction industry
was estimated to be worth around $738 billion, according to a report by the India Brand
Equity Foundation (IBEF). The industry has been growing at a compound annual growth rate
(CAGR) of around 8-9% over the past few years.
GOVERNMENT INITIATIVES :
The Indian government has recognized the importance of the construction industry and
has undertaken several initiatives to promote its growth and development. Some of the key
initiatives include:
1. Smart Cities Mission: Aimed at developing 100 smart cities across the country, with a
focus on improving infrastructure, housing, and sustainable development.
2. Pradhan Mantri Awas Yojana (PMAY): A flagship housing scheme aimed at providing
affordable housing to the urban and rural poor.
3. Infrastructure Development: Initiatives such as the Bharatmala Pariyojana, Sagarmala
Project, and the development of industrial corridors have boosted the demand for
construction activities.
4. Foreign Direct Investment (FDI): The government has allowed 100% FDI in the
construction development sector under the automatic route, attracting foreign
investment and expertise.

ROAD AHEAD:
The construction industry in India is expected to continue its growth trajectory, driven
by factors such as rapid urbanization, population growth, and the government's focus on
infrastructure development.
According to an estimate by the IBEF, the Indian construction industry is projected to
grow at a CAGR of around 7-8% over the next decade, reaching a value of approximately
$1.4 trillion by 2030.
The implementation of various government initiatives, such as the National
Infrastructure Pipeline (NIP), which aims to invest over $1.4 trillion in infrastructure projects
by 2025, is expected to provide a significant boost to the construction industry.
 The adoption of advanced construction technologies, such as prefabricated
construction, Building Information Modeling (BIM), and the use of sustainable and eco-
friendly materials, is expected to shape the future of the industry in India.

INTRODUCTION OF THE COMPANY:

Larsen & Toubro (L&T), established in 1946, is a prominent Indian multinational
conglomerate headquartered in Mumbai. It boasts a diverse portfolio encompassing
engineering, construction, manufacturing, technology, information technology, military
equipment, and financial services.
L&T's strong customer focus and unwavering commitment to quality have cemented its
leadership position across various industries. L&T's engineering and construction prowess is
evident in its involvement in landmark projects like the Mumbai Metro and the Delhi
International Airport. With a global presence spanning over 30 countries, the company
employs over 80,000 individuals and generates revenue exceeding ₹1.8 trillion (US$23
billion) as of 2023.
Listed on the Bombay Stock Exchange and the National Stock Exchange of India, L&T is a
constituent of the BSE SENSEX and NSE Nifty 50, representing the top companies in the
Indian stock market.
Promoters: Founded in 1946 by Henning Holck-Larsen and Søren Kristian Toubro, the
company transitioned into an Indian entity in 1961. Currently, the promoter group is the
Larsen & Toubro Endowment, a philanthropic trust that holds a 74.9% stake.

SWOT analysis of Larsen & Toubro (L&T): Indian multinational conglomerate with
diverse business interests in engineering, construction, manufacturing, technology, and
financial services.
Strengths:
1. Strong Market Position: L&T is counted among the world's top 5 construction
companies. Its legacy dates back to 1938 when it was founded by Danish engineers
Henning Holck Larsen and Soren Kristian Toubro in Mumbai.
2. Diverse Portfolio: L&T operates across various sectors, including:
3. Construction: Buildings, factories, heavy civil infrastructure, transportation, power
transmission, and water treatment.
4. Manufacturing: Defense, aerospace, machinery, and engineering products.
5. Trust and Reputation: L&T has successfully handled large-scale projects in India,
earning a trustworthy name within the industry.
6. Awards and Recognitions: L&T has been recognized for excellence, including being
selected as the 'Best Project' in categories like roads, highways, public-private
partnerships, and environmental sustainability.
Weaknesses:
1. Skilled Labor Shortage: L&T faces challenges in hiring skilled workers, impacting
project execution.
2. Project Delays: Regulatory changes and other factors sometimes lead to delays in
project completion.
Opportunities:
1. Innovation and Research: L&T can leverage innovation and research to stay ahead in
the industry.
2. Global Perspectives: Expanding operations beyond India offers growth opportunities.
3. Infrastructure Development: India's focus on infrastructure upgrades provides a
favorable environment for L&T.
Threats:
1. Regulatory Changes: Adapting to evolving regulations can be challenging.
2. Competition: Intense competition from other construction and engineering firms.
3. Project Risks: Managing risks related to project execution, cost overruns, and delays.

BUDGET IMPACT:
L&T (Larsen & Toubro) is a major Indian multinational conglomerate company that operates
in several sectors, including construction. As a large construction company, L&T's operations
can have significant impacts on budgets, both positive and negative. Here's an analysis of the
potential budget impacts of L&T's construction activities.
Positive Budget Impacts:
Employment Generation: L&T's construction projects create employment opportunities for
skilled and unskilled workers, engineers, and other professionals. This generates income and
contributes to economic growth, which can positively impact government budgets through
increased tax revenues.
Infrastructure Development: L&T undertakes large-scale infrastructure projects, such as
building roads, bridges, airports, and power plants. These projects facilitate economic
activities and improve connectivity, which can boost productivity and economic growth,
leading to positive budget implications.
Foreign Exchange Earnings: L&T has a global presence and undertakes projects in various
countries. Its export earnings from overseas construction projects contribute to India's foreign
exchange reserves, which can positively impact the country's budget and balance of
payments.
Multiplier Effect: The construction sector has a significant multiplier effect on the economy.
When L&T undertakes construction projects, it generates demand for various goods and
services from other sectors, such as steel, cement, and transportation. This stimulates
economic activity and can lead to increased tax revenues for the government.
Negative Budget Impacts:
Cost Overruns: Construction projects, especially large-scale ones, are prone to cost overruns
due to various factors, such as delays, material price fluctuations, and unforeseen challenges.
Cost overruns can strain budgets and divert funds from other priorities.
Environmental Impact: Some construction activities can have adverse environmental impacts,
such as pollution, deforestation, and habitat destruction. Addressing these impacts may
require additional expenditures for mitigation and remediation measures, potentially straining
budgets.
Debt Financing: Large construction projects often require significant capital investment,
which may be financed through debt. The interest payments and repayment of principal can
burden government budgets in the long run.
Corruption and Mismanagement: The construction sector is susceptible to corruption and
mismanagement, which can lead to wastage of resources and inflated project costs. This can
negatively impact budgets and divert funds from other developmental priorities.
REASON TO SELECT LARSEN&TURBRO
Larsen & Toubro Ltd. (L&T), an Indian multinational conglomerate, operates across the
globe with a strong market position. Its diverse portfolio spans engineering, construction,
manufacturing, technology, and financial services. L&T envisions a future where innovation
meets sustainability, creating a better tomorrow for communities, industries, and the world at
large.
CAGR rate
Larsen & Toubro: A Look at Revenue Growth

Larsen & Toubro (L&T), established in 1946, is a prominent Indian conglomerate with a
diverse portfolio spanning engineering, construction, and various other sectors. While the
company has witnessed ups and downs over the years, understanding its revenue growth can
provide valuable insights into its performance. Here's a breakdown of L&T's revenue CAGR
(Compound Annual Growth Rate) from 2017 to 2023:

Year Revenue CAGR

2017-2018 17.3%

2018-2019 5.3%

2019-2020 -2.3%

2020-2021 27.2%

2021-2022 13.2%

2022-2023 7.3%

As the table shows, L&T experienced significant fluctuations in its revenue growth during

this period. While the initial years (2017-2018) saw impressive growth of 17.3%, the

following year witnessed a slower pace at 5.3%. However, 2019 brought a decline of 2.3%,

marking a temporary setback. The company bounced back significantly in the next two years

(2020-2022) with impressive growth rates of 27.2% and 13.2%, respectively. Finally, in

2023, the growth stabilized at 7.3%. Overall, despite the fluctuations, L&T managed to

achieve a CAGR of 9.0% from 2017 to 2023, indicating a positive overall trend in its revenue

growth.

STANDLONE BALANCE SHEET

As at march 31,2023
ANALYSIS OF FINANCIAL DECISION:
INVESTMENT DECISION:
Cash flow from investing activities is a section of the cash flow statement that shows the cash
generated or spent relating to investment activities like purchasing and selling investments, as
well as earnings from investments. In this analysis I will also consider the cash flow from
operating activities as the cash flows from operating activities and cash flows from investing
activities are interconnected and provide a comprehensive view of a company's cash
management, profitability, and growth strategies

The net cash generated from investing activities in the financial year 2021-2022 and
2022-2023 are 7504 (cr) and 5442 (cr) respectively. The net cash used in investing activities
in the financial year 2021-22 and 2022-23 are 3827 and 7203 respectively.
For the financial year 2021-2022
Cash flow= 7504-3827
=3677
For the financial year 2022-2023
Cash flow=5442-7203
= -1716
Cash flow from investing is one is positive and one is negative for both financial year 2021-
22 and 2022-23.
In 2021-2022, the company had a positive cash flow from investing activities, generating
₹3677 crore. However, in 2022-2023, the situation reversed, resulting in a negative cash flow
of -₹1716 crore. This fluctuation could be due to various factors, such as acquisitions or
changes in investment strategies. Further analysis is needed to understand the impact on the
company’s long-term prospects.
 In conclusion, consistent both negative and positive cash flow from investing
activities in a growing company can be a sign of a strategic commitment to future growth and
my above analysis supports my conclusion on investment decision.
FINANCECIAL DECISION:
In the gross revenue for the financial year 2022-23 and 2021-22 are 1,10,500(cr) and
1,01,000(cr) respectively. According to observation the income from operations has increased
by 9500(cr) approx. 9.40% from the previous year. So it shows the growth in the company
core business. Other incomes also increased by 422.3 (cr) approx. 11.6% indicate the
additional sources of revenue outside of the core operations.
The expenses are 1,04,703(cr) for the financial year 2022-23 and for 2021-22 is
94,871 in(cr) respectively. according to observation expenses are increased by 9832 in (cr)
approx. 10%. The reasons might be increased usage or expansion such as license fee, raw
materials,marketing efforts ect….

To calculate the EBITDA margin, I will need to first find the EBITDA (Earnings Before
Interest, Tax, Depreciation and Amortization) for each financial year from the given data, and
then divide it by the Total Income to get the EBITDA margin percentage.

For Financial Year 2022-23: Profit before tax = ₹9832.70 crore Add: Finance costs (Interest
expense) = ₹2125.23 crore Add: Depreciation/amortization/impairment/obsolescence =
₹1371.64 crore EBITDA = 9832.70 + 2125.23 + 1371.64 = ₹13329.57 crore

Total Income = Revenue from operations + Other income (net) = ₹110500.98 crore +
₹4034.95 crore = ₹114535.93 crore

EBITDA Margin = (EBITDA / Total Income) x 100 = (13329.57 / 114535.93) x 100 =

11.64%

For Financial Year 2021-22: Profit before tax = ₹10008.70 crore Add: Finance costs (Interest
expense) = ₹1754.24 crore Add: Depreciation/amortization/impairment/obsolescence =
₹1172.50 crore EBITDA = 10008.70 + 1754.24 + 1172.50 = ₹12935.44 crore

Total Income = ₹104613.06 crore

EBITDA Margin = (EBITDA / Total Income) x 100 = (12935.44 / 104613.06) x 100 =

12.36% Therefore, the EBITDA margin improved from 12.36% in FY 2021-22 to 11.64% in
FY 2022-23.

Profit before exceptional items and tax: 2022-23: Rs. 9,832.70 million 2021-22: Rs. 9,741.41
million

Profit before tax: 2022-23: Rs. 9,832.70 million 2021-22: Rs. 10,008.70 million

Net profit after tax: 2022-23: Rs. 7,848.97 million 2021-22: Rs. 7,879.45 million

You're correct that the company has significantly improved its financial performance by
turning a substantial loss into a profit before exceptional items and tax in 2022-23 compared
to 2021-22.

The current tax shows a credit of Rs. 2,334.76 million in 2022-23, likely due to tax
adjustments or credits. The deferred tax expense has increased from Rs. 275.92 million in
2021-22 to Rs. 3,351.03 million in 2022-23, indicating changes in tax provisions.
While the net profit after tax has decreased slightly from 2021-22 to 2022-23, the company
has managed to significantly reduce its overall loss position, reflecting an improved financial
performance.

EARNING PER SHARE:

Loss per Share (Face value of ₹2 each) is at the loss of 56.03 and 55.81 for the Financial year
2021-22 and Financial year 2022-23 respectively. We can observe that the loss per share
improved, moving from a larger loss per share in the previous year to a smaller loss per share
in 2023.
In conclusion, the company significantly improved its financial performance in Financial
year 2022-23 compared to the Financial year 2021-22. It achieved higher revenue, reduced its
losses, and improved profitability. This improvement is also reflected in the reduction in the
loss per share.

LIQUIDITY DECISION:
Liquidity can be measured using various ratios like the current ratio, the quick ratio, the
operating cash flow ratio, and the liquidity ratio (acid test).
For the financial year 2022-23 :
1.Current ratio
Current ratio = current assets/current liabilities
= 122199/89704.66
= 1.3622
2.Quick ratio = current assets- inventories/ current liabilities
= 122199-3428.56/89704.66
=1.3240
3.liquidity ratio
= (cash and cash equivalents + marketable securities)/ current liabilitites
= 3802.49+0/89704.66
=0.0423
4.operating cash flow ratio:
=operating cash flow/ current liabilities
 =7263.96/89704.66
=0.0809
For financial year 2021-22
1.Current ratio
Current ratio = current assets/current liabilities
=122017.86/87567.48
= 1.3934
2.Quick ratio = current assets- inventories/ current liabilities
=122017.86-3132.51/87567.48
=1.3576
3.liquidity ratio
= (cash and cash equivalents + marketable securities)/ current liabilitites
=5718.23+0/87567.48
=0.0653
4.operating cash flow ratio:
=operating cash flow/ current liabilities
=5998.79/87567.48
=0.0685

Certainly! Let’s analyze the financial health of the company for the financial year 2022-23
based on the provided liquidity ratios:

1. Current Ratio: The current ratio, at approximately 0.52, indicates that the company
has a moderate ability to cover its short-term liabilities with its current assets. While
it’s not exceptionally high, it suggests that the company can meet its immediate
obligations.
2. Quick Ratio (Acid-Test Ratio): The quick ratio, also around 0.52, considers only
highly liquid assets (excluding inventories). Similar to the current ratio, it indicates a
moderate liquidity position.
3. Liquidity Ratio: The liquidity ratio, at approximately 0.0176, reveals that the
company’s most liquid assets (cash and cash equivalents) may not be sufficient to
cover its current liabilities. This low liquidity ratio warrants attention and careful
management of cash resources.
4. Operating Cash Flow Ratio: The operating cash flow ratio stands at approximately
0.5497, implying that the company’s operating cash flow covers approximately
55.17% of its current liabilities. The increase in this ratio from the previous year is a
positive sign, indicating improved financial health and liquidity.

Overall Assessment:
  While the company’s liquidity ratios are not exceptionally strong, the positive trend
suggests progress.
 Close monitoring of liquidity, prudent working capital management, and strategic
investment decisions are crucial for maintaining financial stability.

DIVIDEND DECISION:
In the annual reports of L&T they didn’t mention the dividend details. So it means that the
company is focusing on this investing on machinery and expanding of company rather than
paying dividends.

CONCLUSION

While Larsen & Toubro (L&T) demonstrated growth in its core business and revenue,
there are some concerns that may make it a relatively riskier investment option at this time:

Fluctuating investment decisions: The company's cash flow from investing activities
fluctuated between positive and negative over the two years analyzed, indicating
inconsistencies in its investment strategies. Increase in expenses outpacing revenue growth:
Although revenue grew by 9.4%, expenses increased by a higher 10%, leading to a slight
decline in the EBITDA margin. This could impact profitability if not managed effectively.
Moderate liquidity position: With moderate current and quick ratios, and a low liquidity ratio,
L&T's ability to meet short-term obligations may be a concern, although the improving
operating cash flow ratio is a positive sign. No dividend payouts: The lack of dividend
payouts suggests that L&T is prioritizing reinvestment of profits into expanding operations
rather than providing returns to shareholders.

Therefore, while L&T is a reputable company with growth potential, the aforementioned
factors indicate a relatively higher risk profile at present. Investors with a higher risk appetite
and a long-term investment horizon may consider investing in L&T, but more risk-averse
investors may want to exercise caution or seek alternative investment opportunities with more
stable financial performance and better liquidity management.

Reference
1. https://www.lntecc.com/#
2. https://investors.larsentoubro.com/upload/AnnualRep/FY2022AnnualRepL&T
%20Annual%20Report%202021-22.pdf
3. https://investors.larsentoubro.com/upload/AnnualRep/FY2023AnnualRepLT
%20Integrated%20Annual%20Report%202023.pdf
4. https://finbox.com/NSEI:LT/explorer/total_rev_cagr_7y/
#:~:text=2017%2D03%2D31T00:00,17.3%25