CHRIST (DEEMED TO BE UNIVERSITY)

DELHI NCR

CIA 1A
CORPORATE LAW AND GOVERNANCE
SUBMITTED BY :-

ARYAN PANDEY (21211043)

SUBMITTED TO :-

DR. VARSHA GOYAL

 COMPANY :-

LARSEN & TOUBRO

INTRODUCTION :-
Larsen & Toubro began as a company founded in Bombay in 1946 by two Danish engineers,
Henning Holck-Larsen and Søren Kristian Toubro. The company started as a representative of a
Danish manufacturer of dairy products and related equipment. However, with the onset of World
War II in 1939 and the resulting blockage of trade lines, the partners set up small workshops to
take orders and provide service facilities. The German invasion of Denmark in 1940 stopped
shipments of Danish products. The wartime need to repair, modify and demagnetize ships
presented opportunities for L&T and led to the formation of a new company, Hilda Ltd, to carry
out these tasks. L&T also began repairing and building ships, marking the expansion of the
company. The sudden detention in British India of the German engineers tasked with building
the Tatas soda plant (due to World War II suspicion) gave L&T an opportunity to enter the
installation business.
 In 1946 ECC (Engineering Construction & Contracts) was founded by the partners. The
company was then focused on construction projects (now ECC is his L&T construction division).
L&T has started several overseas cooperation. By 1947 the company represented a British
manufacturer of equipment for producing products such as hydrogenated oils, biscuits, soaps and
glass. In 1947, the company signed a contract with the Caterpillar Tractor Company of the
United States for the sale of earthmoving equipment. By the end of the war, much of the war's
surplus Caterpillar equipment was available at attractive prices, but the funding needed was
beyond the capabilities of the partners. This prompted them to raise additional shares and on 7
February 1946 Larsen & Toubro Private Limited was incorporated.

After India's independence in 1947, the company opened offices in Kolkata (now Calcutta),
Madras (now Chennai) and New Delhi. In 1948, in Powai, Mumbai he acquired 55 acres of
uncultivated swamp and jungle. In December 1950, L&T became a public company with a paid-
up capital of Rs. Turnover for the year he was £1.09m (equivalent to £102m or US$13m for him
in 2020). In 1956, much of the company's Mumbai office moved to ICI House on the Ballard
Estate. This building was later purchased by the company and renamed his current headquarters,
his L&T House.

NATURE AND FEATURES :-

Larsen & Toubro is an Indian multinational company engaged in EPC projects, high tech
manufacturing and services. We operate in over 50 countries around the world. With a strong
customer-centric approach and relentless pursuit of excellence, L&T has earned and maintained
leadership positions in key businesses over his 80-plus years.

We operate in key sectors of the economy and our integrated capabilities range from design to
delivery.

Every aspect of L&T's business is characterized by professionalism and high standards of

corporate governance. Sustainability is built into our long-term growth strategy.

AREA OF SHAREHOLDER’S RIGHTS :-

1. Voting rights on material issues: - In L&T voting rights include the election of directors and
proposals for fundamental changes affecting the company, such as mergers and liquidations.
 Voting takes place at the Association's Annual General Meeting. If shareholders are unable to
attend, they may attend and vote by mail on their behalf.

2. Partial Ownership of the Company : - As previously discussed corporate liquidations where

bondholders and preferred shareholders are paid first in L&T. However, when business is
booming, ordinary shareholders own a portion of what is valuable. Ordinary shareholders are
entitled to receive a portion of the company's assets. These assets generate profits, and those
profits are reinvested in additional assets, allowing shareholders to benefit from an increase in
the value of their shares as the stock price rises.

3. Right to Transfer Ownership : -The right to transfer ownership in case of L&T means that
shareholders can trade their shares on the stock exchange. Transfer rights may seem mundane,
but the liquidity provided by exchanges is important. Liquidity—the degree to which an asset or
security can be bought and sold quickly in the market without affecting the price of the asset—is
one of the key factors that distinguish stocks from investments such as real estate. If an investor
owns real estate, it can take months for that investment to turn into cash. Stocks are so liquid that
investors can move their money elsewhere almost instantly.

SHAREHOLDER’S DEMOCRACY:-
Shareholder democracy means that the corporation is under the control of the shareholders. In
doing so, each shareholder has the same opportunity to elect and establish a board of directors
that directs and directs the affairs of the company.

The big issue of shareholder participation in corporate governance often exists. It overlooks the
procedural context of disclosure and information flow. Informed participation is just as important
as the participation itself. Furthermore, the difference in passive participation is that
simple ratification mode and active participation in agenda setting essential aspects of the overall
problem of shareholder participation in corporate governance. one way thereby increasing
shareholder participation in company affairs proxy. It is important that this is not the case, at
least from the point of view of corporate democracy. Obstacles to Shareholders' Participation in
Corporate Governance in the Proxy Voting Process Certainly, shareholders are becoming more
involved in corporate governance. This is just one of several steps needed to properly manage
abuses of the Directorate General. Possible arguments for giving major shareholders a greater
role in the company decision-making process. Shareholder involvement in corporate governance
could also increase and generate a second potential profit. Some directors made some shockingly
bad decisions to dissent, at least from the economic point of view of shareholders.

Decentralized power structures argue that they are more sustainable in the long run, devaluing
board members' powers and increasing shareholder participation. Democratic governance is freer
and fairer, facilitating decisions that benefit a wider audience rather than concentrating wealth in
 the hands of a few. Increased shareholder rights make shareholders more accountable for their
decisions, make the company more inclusive, encourage better decision-making, and foster
entrepreneurship. Self-regulatory systems perform better than external regulatory systems if
there is a shared understanding of organizational growth and direction. That sense of ownership
is rewarded with a blame game that follows failure. A more democratic corporate governance
structure would share responsibility for successes and failures equally among all shareholders.

SWOT ANALYSIS:-
Strengths:-

The strength of an organization is what sets it apart from other organizations. It can be a
competitive advantage that sets you apart from your peers. Larsen & Toubro's strengths are:

Subsidiaries and joint ventures: - As reported in 2020, Larsen & Toubro has 118 subsidiaries, 6
affiliates, 25 joint ventures and 35 joint ventures covering basic and heavy industry, construction,
real estate, manufacturing of capital goods, Information technology and financial services are
thriving.

Technology cluster: - L&T offers services using emerging technologies, embedded intelligence
and engineering through L&T Technology Services, L&T InfoTech and L&T Smart World
Communication across Smart Cities in India to deliver intelligent engineering solutions.

International Market: - L&T has focused on global markets since his 2010, enabling the Middle
East in particular to offer a full range of activities for the Gulf States and North Africa,
accounting for about one-third of both orders and sales.

Sustainable approach: -As mentioned in the introduction above, L&T is also committed to heavy
industry while maintaining a greener portfolio. The company constantly seeks to ensure a holistic
approach to its environmental impact by reducing its CO2 emissions and water consumption.
The company also carries out several CSR initiatives to present a positive side of the company.

Excellent return on investment: -Larsen & Toubro has had moderate success in undertaking new
projects and has generated an excellent return on investment by generating new revenue streams.

Actual Material Suppliers: -We have a strong base of reliable raw material suppliers that can
easily navigate through supply chain bottlenecks.

Excellent Workforce: -Larsen & Toubro invests significant resources in employee training and
development, resulting in employees who are not only highly competent, but also motivated to
add value.
 Government projects: -The conglomerate is a public company and receives most of its projects
and Indian government backing, so the profitability of the organization is never compromised.

Weaknesses: -

Weaknesses are negative factors that can prevent an organization from achieving its goals. Some
of these are bad branding, high debt, inadequate supply chains and lack of capital. So here are
some weaknesses of Larsen & Toubro.

Depending on the domestic operation: -As Larsen & Toubro operates only in India, its revenue
has always been dependent on its domestic business and its main dependence on revenue is
solely from its domestic business. 80% of revenue in 2011 was from India. Conglomerates also
need to tap into international markets.

Growing Debt: -L&T's debt is growing rapidly, impacting the company's financial flexibility.
L&T is reported to have $11,419.3 million in debt in his 2013 fiscal year.

Reduced investment in new technology: -As the company embarks on its next expansion phase,
it needs to invest in new technology that will help it reach its goals. Investing in technology
today does not align with what companies think.

Investment in R&D: -Investments in R&D are below the fast-growing players in the industry.
Larsen & Toubro spends more than the industry average on research and development, but
cannot keep up with the industry leaders when it comes to innovation.

Occupational safety: -Company employees work in hazardous environments. B. Locations where

there is a high risk to life, such as construction sites, real estate projects, and road construction.
This is a point of increased responsibility for L&T in terms of ensuring the safety of their work,
which can also go awry when unforeseen events occur in their work.

Opportunities: -

Opportunity is a kind of competitive advantage derived from various external factors. For
example, if a country cuts its tariffs, automakers can benefit from exporting their products to new
markets. Here are the possibilities for Larsen & Toubro:

New technology: -Thanks to new technology, Larsen & Toubro can now use the difference in
new markets. This allows you to strengthen your existing customers through superior service
while attracting new ones through a variety of value-based offers.
 New Market: -The adoption of new technical standards and government free trade agreements
has given Larsen & Toubro the opportunity to enter new and developing markets.

Stable free cash flow: -Stable free cash flow provides an opportunity to strengthen cohesive
product segments. With extra cash in the bank, the company can push new technology and new
product segments.

Mergers and Acquisitions: -The Company has a strong financial position and should use this
advantage to expand his M&A activities both domestically and internationally. This approach
opens up new revenue streams for the company.

Threats: -

The threats being faced by Larsen and Toubro are: -

Land acquisition: -When the government introduced the Land Acquisition Bill, the value of land
would be four times the market value in rural areas and double the market value in urban areas.

High competition: -Larsen & Toubro's stable profitability has strengthened many of the
industry's competitors over the past two years. This is one of the biggest threats to Larsen &
Toubro, putting pressure not only on profitability but also on overall sales.

Increased payment level: -Rising wages especially moves such as $15 an hour and rising prices
in China could put serious pressure on Larsen & Toubro's profitability.

Competitor advance technology: -New technologies developed by competitors and market

disruptors can pose serious threats to the industry in the medium to long term. This is because
new technology developed by our competitors will allow us to produce more, and more
production will be able to supply when needed. New technologies also help reduce production
costs.

Surrounding body pressure: -The Company tracks heavy construction and equipment lying on
land, increasing pressure from environmental activists and leading to multiple environmental
exploitation lawsuits against L&T.

RECOMMENDATIONS FOR IMPROVEMENT OF CORPORATES IN

INDIA: -
 Increase diversity: - Corporate boards suffer from a severe lack of diversity. In 2008, the
composition of boards of Fortune 100 companies was approximately 71% white men and 29%
women and minorities. Only 16% of Fortune 500 company directors are women. While this lack
of diversity is pervasive, there are numerous studies showing that board diversity improves
organizational performance. A recent study by Credit Suisse of companies around the world
concluded that greater gender diversity leads to better financial performance. Firms with at least
one woman on the board have 4% better net profit growth than those without women. US
companies are world leaders with one or two female or minority board members. European
companies are world leaders when it comes to having three or more female or minority members.
Diversity is a fundamental issue. The SEC requires companies to disclose their diversity policies,
and such disclosure should lead to a greater emphasis on diversity.

Appoint effective officers: -The nominating committee should spend sufficient time identifying
board members with the skills and industry knowledge to assist the board. This does not mean
that she is the only eligible board member. There needs to be a balance between board members
who know the organization well, board members who have helpful expertise, and board
members who offer a fresh perspective. It is important that board members have a good
understanding of the skills they have and the skills they need. Board candidates should also be
evaluated for their interpersonal skills, as board interactions and relationships are important to
the board's overall performance.

Ensuring timely information: -Timely information leads to better decisions. Management must
provide timely information to ensure proper oversight and direction of the Board. However,
board members should not be overwhelmed with information. A balance must be struck between
necessary and irrelevant information. Communication between senior management and the board
is essential to ensure that the board is properly informed. When directors request information,
executives must respond promptly to the request.

Prioritize risk management: -All boards should have effective risk oversight and control systems
in place. “Risk” is not limited to compliance risk. This is a broader term that includes all risks to
your business. Financial risks, global warming, cyber security and other risks beyond compliance
with legal and regulatory requirements; Effective risk management leads to better decision-
making and accurate cost-benefit or risk-to-return determinations.