We have audited the accompanying standalone financial statements of Larsen & Toubro Limited (the "Company"), which comprise theBalance Sheet as at March 31,2026, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of CashFlows and the Statement of Changes in Equity for the year then ended, and notes to the Standalone financial statements, including materialaccounting policies and other explanatory information which includes 33 joint operations accounted on proportionate basis.
In our opinion and to the best of our information and according to the explanations given to us, and based on the consideration of reports ofthe other auditors on separate audited financial statements of joint operations referred to in the 'Other Matters' section below, the aforesaidstandalone financial statements give the information required by the Companies Act, 2013 (the "Act") in the manner so required and give atrue and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with Companies (IndianAccounting Standards) Rules, 2015, as amended ("Ind AS") and other accounting principles generally accepted in India, of the state of affairsof the Company as at March 31,2026, and its profit (including other comprehensive income), its cash flows and changes in equity for theyear ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing ("SA"s) specified undersection 143(10) of the Act. Our responsibilities under those Standards are further described in the "Auditor's Responsibility for the Auditof the Standalone Financial Statements" section of our report. We are independent of the Company in accordance with the Code of Ethicsissued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit ofthe standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence obtained by us andwith the consideration of report of the other auditors referred to in the 'Other Matters' section below is sufficient and appropriate to providea basis for our audit opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financialstatements for the year ended March 31, 2026. These matters were addressed in the context of our audit of the standalone financialstatements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determinedthe matters described below to be the key audit matters to be communicated in our report.
Revenue recognition
- accounting for construction contracts
Key audit matter
Revenues are recognised under Ind AS 115, "Revenue from Contracts with Customers" basis the nature and type of
Description
contracts (i.e., products, projects and services) involved. The Company recognizes revenue on the basis of stage ofcompletion in proportion of the contract costs incurred at balance sheet date, relative to the total estimated costsof the contract to completion. The recognition of revenue is therefore dependent on estimates in relation to totalestimated costs of each such contract.
Cost estimates need to take into account specific risks of uncertainties or disputed claims against the Company,arising within each contract. Moreover, significant judgements are involved in determining the expected losses ononerous contracts, when such losses become probable based on the expected total contract cost. Such estimates arereviewed by the Company's Management on a regular basis throughout the life of the contract and adjusted whereappropriate.
The revenue on contracts may also include variable consideration (change orders and claims). Variable considerationis recognized when recovery is based on the customer's acceptance, or when such consideration is highly probablebased on the Company's contractual rights and /or a legal assessment.
Revenue and profits for the year may deviate significantly on account of changes in the above judgements andestimates. Therefore, considering the judgements and complexities involved in the estimation process and due tothe significance of the amounts to the standalone financial statements, this is a key audit matter.
Refer to Note No. [1](ii)(e) and 31 to the Standalone Financial Statements.
How the Key
Our procedures in respect of recognition of construction contract revenue and related cost included the following:
Audit Matters was
(a) Tested the design, implementation and operating effectiveness of key internal financial controls, including
addressed in our audit
those related to estimation of construction contract costs, contract revenue and review and approval thereof.
(b) Assessed the appropriateness of the revenue recognition accounting policies in accordance with Ind AS 115"Revenue from Contracts with Customers".
(c) For selected sample of contracts with customers, performed the following procedures:
i) Obtained and read customer contracts, customer communications, and price or scope variation orders forthe project.
ii) Tested the calculation of percentage of completion as per input method adopted by the Managementincluding the testing of costs incurred and recorded against the contracts.
iii) Verified relevant supporting documents and performed cut off procedures for construction contractrelated costs incurred through the reporting period.
iv) For variable consideration (variation/claims) recognized we evaluated and verified management'sassessment of contractual terms, client communications and legal assessment, wherever considerednecessary.
v) Evaluated the reasonableness of key assumptions included in the estimated total construction contractcosts by performing retrospective review of Management's forecasting process by reviewing past trendsof estimated costs to actual costs over time, discussed variances with project teams and substantivelytested where relevant, the elements of the committed cost to executed purchase orders and underlyingagreements.
vi) Discussed progress to date with project teams to determine whether the remaining costs to completeappear sufficient for the residual risks identified for those projects.
vii) Performed analytical procedures and conducted inquiries about any unusual trends of revenuerecognition, checked exceptions for contracts with low or negative margins, loss making contracts/onerous contracts, contracts with significant changes in cost estimates and significant overdue netreceivable positions for contracts, etc.
viii) Assessed the adequacy of presentation and related disclosures in the standalone financial statements arein line with the Indian accounting standards and Schedule III.
Impairment of Trade Receivables and Contract Assets
Key audit matterdescription
Impairment of financial assets and contract assets is accounted through allowance for Expected Credit Losses (ECL)under Ind AS 109. The assumptions used for estimating the expected credit loss in respect of these balances is anarea which is influenced by Management's judgment.
The calculation of the impairment allowance under ECL method is highly judgemental as it requires Managementto assess the estimated credit losses in respect of trade receivables based on credit risk profile of customers, projectstatus, past collection experience, ongoing litigations and disputes, if any, economic and market conditions andapplicable forward looking estimates and recoverability of contract assets ('unbilled revenue') relating to claims/variations by reference to contractual terms, expert's assessment and legal advice.
Considering such assessment, management uses a provision matrix to recognise impairment for expected creditlosses in respect of trade receivables and contract assets.
Given the relative significance of these balances to the standalone financial statements, Management judgementand uncertainties involved as well as the nature and extent of audit procedures performed to assess therecoverability of trade receivables and contract assets, we determined this to be a key audit matter.
Refer to Note Nos. [1](ii)(e), [1](ii)(m), 11, 16 and 41(c) to the Standalone Financial Statements.
How the KeyAudit Matters wasaddressed in our audit
Our procedures in respect of recoverability of trade receivables and contract assets included the following:
Evaluated the design and tested the operating effectiveness of key internal financial controls over Management'sassessment of recoverability of trade receivables and contract assets.
For selected samples of contracts
a) Obtained an understanding from Management the related contractual terms, collection experience, basis ofManagement's assessment of collectability, and expected realisation plan.
b) Performed test of details over key contract terms, correspondence with customers and subsequent settlements/collections, where relevant.
c) Tested the ageing of trade receivables and contract assets at the year end.
Assessed the information used by the Management to determine the expected credit losses by considering creditrisk profile of the customer, contractual terms, project status, past collection experience, uncertainties and delays inrecoveries, subsequent realisation, correspondence with the customers, ongoing litigations and disputes, if any.Reviewed the key assumptions and data sources used by Management in the provision matrix model to calculate theprobability of default and estimate the expected credit losses in respect of trade receivables and contract assets.
For aged contract asset balances, held discussions with management on timing and expectation of recoverability,historical payment records, status of certified dues and other relevant correspondence with customers to challengeadequacy of impairment allowance considered.
Assessed the adequacy of presentation and related disclosures in the financial statements are in line with theaccounting standards and Schedule III.
Information Other than the Standalone Financial Statements and Auditor's Report Thereon ('other information')
• The Company's Management and Board of Directors are responsible for the other information. The other information comprises theinformation included in the Management Discussion and Analysis, Board's Report including annexures to Board's Report, BusinessResponsibility & Sustainability Report, Corporate Governance and Shareholder's Information, but does not include the standalonefinancial statements and our auditor's report thereon.
• Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assuranceconclusion thereon.
• In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so,consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtainedduring the course of our audit or otherwise appears to be materially misstated.
• If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are requiredto report that fact. We have nothing to report in this regard.
Responsibilities of Management and Board of Directors for the Standalone Financial Statements
The Company's Management and Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to thepreparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, cash flowsand changes in equity of the Company in accordance with the accounting principles generally accepted in India, including Ind AS specifiedunder section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisionsof the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementationand maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of theaccounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and arefree from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, Management and Board of Directors are responsible for assessing the Company's abilityto continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accountingunless the Board of Directors either intend to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Company's management and Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibility for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expectedto influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. Wealso:
• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for ouropinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in thecircumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company hasadequate internal controls with reference to standalone financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures madeby the Management and Board of Directors.
• Conclude on the appropriateness of Management and Board of Director's use of the going concern basis of accounting and, based onthe audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events orconditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whetherthe standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial statements of the Company and its joint operations to express anopinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the audit of thefinancial statements of such joint operations included in the standalone financial statements of which we are the independent auditors.For the other joint operations included in the standalone financial statements, which have been audited by the other auditors, such
other auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solelyresponsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal controls that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regardingindependence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on ourindependence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the auditof the standalone financial statements of current period and are therefore, the key audit matters. We describe these matters in our auditor'sreport unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that amatter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweighthe public interest benefits of such communication.
Other Matters
• We did not audit the financial information of 33 joint operations included in the standalone financial statements of the Company whosefinancial statements/financial information reflect total assets of X 5,048.28 crore as at March 31, 2026 and total revenue of X 2043.32crore and net cash outflows of X (61.97) crore for the year ended on that date, as considered in the standalone financial statements.
The financial information of these joint operations have been audited by the other auditors whose reports have been furnished to us,and our opinion in so far as it relates to the amounts and disclosures included in respect of these joint operations, is based solely on thereport of such other auditors.
• The standalone audited financial statements for the year ended March 31, 2025, included in the accompanying standalone financialstatements were audited jointly with predecessor joint auditor, for which report dated May 8, 2025 expressed an unmodified opinion onthose standalone audited financial statements.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. As required by Section 143(3) of the Act, based on our audit and on the consideration of the reports of the other auditors on theseparate financial information of the joint operations, referred to in the 'Other Matters' section above, we report, to the extentapplicable that:
a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessaryfor the purposes of our audit of the aforesaid standalone financial statements.
b) In our opinion, proper books of account as required by law have been kept by the Company and its joint operations which arecompanies incorporated in India so far as it appears from our examination of those books and the reports of the other auditors.
c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Cash Flows and theStatement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account maintained for thepurpose of preparation of the standalone financial statements.
d) In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act.
e) On the basis of the written representations received from the directors as on March 31,2026 taken on record by the Company'sBoard of Directors, none of the directors is disqualified as on March 31, 2026 from being appointed as a director in terms of Section164(2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Companyand the operating effectiveness of such controls, refer to our separate Report in "Annexure A".
g) In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by theCompany to its directors during the year is in accordance with the provisions of section 197 of the Act read with Schedule V of theAct and the rules thereunder.
h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit andAuditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements -Refer Note 29 to the standalone financial statements;
ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeablelosses, if any, on long-term contracts, including derivative contracts; - Refer Note 50 to the standalone financial statements;
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund bythe Company during the year ended March 31, 2026;
iv. (a) The Management has represented that, to the best of its knowledge and belief, no funds have been advanced or loaned
or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or inany other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recordedin writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entitiesidentified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee,security or the like on behalf of the Ultimate Beneficiaries;
(b) The Management has represented, that, to the best of its knowledge and belief, no funds have been received by theCompany from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding,whether recorded in writing or otherwise, that the Company shall, directly or indirectly, lend or invest in other personsor entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provideany guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(c) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances,and according to the information and explanations provided to us by the Management in this regard nothing has cometo our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) contain anymaterial misstatement;
v. (a) The final dividend proposed in the previous year, declared and paid by the Company during the year is in accordance with
section 123 of the Act, as applicable.
(b) The Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of themembers at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act, tothe extent it applies to payment of dividend. (Refer Note 17 to the standalone financial statements).
vi. Based on our examination, which included test checks, the Company has used accounting softwares for maintaining its booksof account for the financial year ended March 31,2026 which have the feature of recording audit trail (edit log) facility andthe same has operated throughout the year for all relevant transactions recorded in the software systems. Further, during thecourse of our audit, we did not come across any instance of the audit trail feature being tampered with and the audit trail hasbeen preserved by the Company as per the statutory requirements for record retention.
2. As required by the Companies (Auditor's Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of
sub-section (11) of in terms of Section 143(11) of the Act, we give in "Annexure B" a statement on the matters specified in paragraphs3 and 4 of the Order to the extent applicable.
For M S K A & Associates LLP (Formerly known as M S K A & Associates)
Chartered Accountants
ICAI Firm Registration Number - 105047W/W101187
Vishal Vilas Divadkar
Partner
Membership No. 118247
UDIN: 26118247ZEXBSH7995
Place: Mumbai
Date: May 5, 2026