The Members of
L&T Technology Services Limited
Report on the Audit of the Standalone
Financial Statements
Opinion
We have audited the accompanying standalone financial statements of L&T Technology Services Limited (“the Company"), which comprise the Balance Sheet as at March 31, 2025, and the Statement of Profit and Loss, including Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and notes to the standalone financial statements, including material accounting policy information and other explanatory information (hereinafter referred to as the “standalone financial statements").
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (“the Act') in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015, as amended (“Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2025, and profit (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the 'Auditor's Responsibilities for the Audit of the Standalone Financial Statements' section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI") together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the standalone financial statements for the year ended March 31, 2025. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
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Sr.
No
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Key Audit Matters
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How the Key Audit Matters was addressed in our audit
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1
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Revenue recognition - fixed price contracts
Refer Note 2(e) to material accounting policies, Note 23 and Note 44 to the standalone financial statements.
The Company engages in fixed price contracts with its customers wherein revenue from such contracts is recognized over time. The Company uses input method to recognise revenue, as it represents efforts expended towards satisfying a performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation.
This involves computation of actual cost incurred and estimation of total cost on each contract to measure progress towards completion.
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Our audit procedures in respect of this area included among others, the following
1. Obtained an understanding of the systems, processes and controls implemented by the Company with respect to recognition of actual cost incurred on each contract, estimation of future cost to completion, measurement of unbilled revenue, unearned revenue and the total contract revenue on its completion.
2. Involved Information technology ('IT') specialists to assess the design and operating effectiveness of the key IT controls relating to revenue recognition and in particular:
- Assessed the IT environment in which the business systems operate and tested system controls over computation of revenue recognised.
- Tested the IT controls over appropriateness of cost and revenue reports generated by the system.
- Assessed the appropriateness of actual cost incurred on contracts including the testing the IT general controls and specific IT application controls over information systems used for capturing these costs and
- Tested the controls pertaining to allocation of resources and budgeting systems which prevent the unauthorized recording/ changes to costs incurred on sample basis.
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Sr.
No
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Key Audit Matters
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How the Key Audit Matters was addressed in our audit
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Amount of revenue recognition in respect of fixed price contracts has been identified as a Key Audit Matter considering that:
- these contracts involve identification of actual cost incurred on each contract;
- these contracts require estimation of future cost for completion of each contract; and
- at the period end a significant amount of contract assets (unbilled revenue) or contract liabilities (unearned revenue) related to each contract is to be identified.
For the year ended March 31, 2025, revenue from fixed price contracts amounts to H38,770 Million.
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3. Verified on test check basis whether the revenue recognized is in
accordance with the applicable Indian Accounting Standard, including:
- Verification of the underlying agreements and other forms of supporting documentation to ensure that each party's rights and obligations regarding the goods or services to be transferred and payment terms are identified and contracts have commercial substance.
- Inspection of the underlying agreements and other forms of supporting documentation to identify performance obligations within a contract.
- Inspection of the underlying agreements and other forms of supporting documentation to ensure that transaction price has been properly determined and allocated to relevant performance obligations on an appropriate basis.
- Verification of the Company's computation of revenue to be recognized over a period of time on a sample basis, where we performed the following:
i. Verified management's process relating to the estimation of contract costs required to complete the respective projects and assessed that the estimates of costs to complete were reviewed and approved by appropriate designated management personnel and are appropriate.
ii. Verified the reasonableness of management's estimation of cost projections by comparing actual cost incurred with management initial/updated estimation of total cost for that project.
iii. Recomputed the amount of revenue recognised on these contracts and compared the same with the actual revenue recorded and
iv. Assessed the appropriateness of work in progress (contract assets and contract liabilities) as at the balance sheet date by evaluating the underlying documentation to identify possible delays in achieving milestones which require changes in estimated costs to complete the remaining performance obligations.
- Assessed the adequacy and appropriateness of disclosures made in standalone financial statements in compliance with applicable Indian Accounting Standards and applicable financial reporting framework
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2
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Derivative financial instruments and hedge accounting
Refer Note 2(m)(iii) to material accounting policies, Note 7, Note 14, Note 18, Note 20, and Note 36 to the standalone financial statements.
The Company enters into derivative financial instruments like forward and option contracts to manage its exposure of foreign currency risk of highly probable forecasted transactions which arise during the normal course of its business.
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Our audit procedures in respect of this area included among others, the following
1. Obtained understanding of the Company's overall hedge accounting strategy, forwards and options valuation methodologies and hedge accounting process from initiation to settlement of derivative financial instruments including assessment of the design and implementation of controls and tested the operating effectiveness of these controls.
2. Assessed whether the Company's accounting policy for hedge accounting is in accordance with the applicable Indian Accounting Standards.
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Sr. Key Audit Matters No
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How the Key Audit Matters was addressed in our audit
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Derivative financial assets and derivative financial liabilities measured at fair value amounted to H1,177 Million and H362 Million respectively as at March 31, 2025. The net movement of cashflow hedge reserve (net of taxes) recorded in other comprehensive income for the year ended March 31, 2025, amounted to H219 Million.
In order to apply hedge accounting, management is required to demonstrate that the underlying contract is considered to be a highly probable forecasted transaction, that the hedges are effective and maintain adequate hedge documentation. A degree of subjectivity is also required to assess when hedge accounting is to be considered as ineffective. Fair value movements of the forward and option contracts are driven by movements in financial markets. These transactions may have a significant financial effect and have extensive accounting and reporting obligations and accordingly, this is considered as a Key Audit Matter.
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3.
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6.
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Verified the assertion relating to existence of the derivative contracts outstanding as at March 31, 2025 by obtaining independent balance confirmations from the respective counterparties, verification on a sample basis the underlying agreements and other forms of supporting documentation and verification of supporting documentation for subsequent realisation or settlement after the end of the reporting year.
Verified the assertion relating to completeness of derivative transactions by requesting confirmation from counterparties who are frequently used but with whom the accounting records indicate there are presently no derivatives, reading other information, such as minutes of meetings of the board of directors or other relevant committees, inspecting documentation in paper or electronic form for activity subsequent to the end of the reporting period.
Verified management's hedge documentation and underlying hedge contracts, on a sample basis.
Verified management's expectation at the inception of the hedge that the hedging relationship will be highly effective and its periodic assessment of the ongoing effectiveness of the hedging relationship in accordance with the applicable Indian Accounting Standards.
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7.
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Verified that the amounts reclassified from cash flow hedge reserve to the Statement of Profit and Loss as a reclassification adjustment being in the period in which the cash flows of the hedged items affect Profit or Loss.
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8.
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Re-performed the year-end fair valuations of derivative financial instruments on a sample basis and compared these valuations with those recorded by the Company.
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9.
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Assessed the adequacy and appropriateness of disclosures made in standalone financial statements in compliance with applicable Indian Accounting Standards and applicable financial reporting framework.
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Information Other than the Standalone Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information included in the Director's report and Management discussion and analysis but does not include the standalone financial 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 assurance conclusion 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 obtained in the 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 required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, the Management and Board of Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities 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 material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance 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 expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
We give in ''Annexure A" a detailed description of Auditor's responsibilities for Audit of the Standalone Financial Statements.
Report on Other Legal and Regulatory Requirements
1. 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 section 143 of the Act, we give in “Annexure B" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.
2. As required by Section 143(3) of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
(c) The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account.
(d) I n our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act.
(e) On the basis of the written representations received from the directors as on March 31, 2025 taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2025 from being appointed as a director in terms of Section 164 (2) of the Act.
(f) With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure C".
(g) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 31 to the standalone financial statements;
ii. Provision has been made in the standalone financial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. - Refer Note 22 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 by the Company.
iv. 1) 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 in any other person(s) or entity(ies), including foreign entities (“Intermediaries"), with
the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified 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.
2) The Management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities (Funding Parties), with the understanding, whether recorded in writing or otherwise, as on the date of this audit report, that the Company shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
3) 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 come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) as provided under (1) and (2) above, contain any material mis-statement.
v. The final dividend paid by the Company during the year in respect of the same declared for the previous year is in accordance with section 123 of the Companies Act 2013 to the extent it applies to payment of dividend.
The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with section 123 of the Companies Act 2013.
The Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend. (Refer Note 16.9(c) to the Standalone financial statements)
vi. Based on our examination, which included test checks, the Company has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit, we did not come across any instance of audit trail feature being tampered with. Additionally, the audit trail has been preserved by the Company as per the statutory requirements for record retention.
3. In our opinion, according to information, explanations given to us, the remuneration paid by the Company to its directors is within the limits laid prescribed under Section 197 read with Schedule V of the Act and the rules thereunder.
For M S K A & Associates
Chartered Accountants ICAI Firm Registration No. 105047W
SIDDHARTH IYER
Partner
Place: Mumbai Membership No. 116084
Date: April 24, 2025 UDIN: 25116084BMNYAU4635
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