Nature of Security :

The Debentures are secured by way of first/second charges, having pari passu right, as the case may be, on the company's specified immovable properties and specified lease/term loan receivables.

Secured redeemable non convertible debentures public issue :

The Company has utilised fund raised through public issue for the purpose of onward lending, financing, refinancing the existing indebtedness of the Company (payment of interest and/or repayment/prepayment of principal of borrowings) and general corporate purpose. Total unutilised balance amount of Nil is in current account (includes ? 0.11 crore unutilised from amount raised in previous year).

Nature of Security :

The Debentures are secured by way of first/second charges, having pari passu right, as the case may be, on the company's specified immovable properties and specified lease/term loan receivables.

Secured redeemable non convertible debentures public issue :

The Company has utilised fund raised through public issue for the purpose of onward lending, financing, refinancing the existing indebtedness of the Company (payment of interest and/or repayment/prepayment of principal of borrowings) and general corporate purpose. Total unutilised balance amount of ? 0.11 crore is in current account (includes ? 0.13 crore unutilised from amount raised in previous year).

(c) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of ? 10 per share. Members of the Company holding equity shares capital therein have a right to vote, on every resolution placed before the Company and right to receive dividend. The voting rights on a poll is in proportion to the share of the paid up equity capital of the Company held by the shareholders. The Company declares dividends in Indian rupees. The final dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(h) Capital Management

- The objective of the Company's Capital Management is to maximise shareholder value, safeguard business continuity and support the growth of its Group. The Group determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through loans and operating cash flows generated. The debt equity ratio is 3.30 as at March 31,2024 (as at March 31, 2023 was 3.90).

- During the year ended March 31,2024, the Company has paid the final dividend of ? 2.00 per equity share for the year ended March 31, 2023 amounting to ? 496.61 crore. (PY 2022-23 - ? 123.75 crore).

The Compnay has proposed a final dividend of ? 2.50 per share in the Board meeting subject to approval

from shareholders.

(I) Employee Stock Option Scheme

- The Company has formulated Employee Stock Option Schemes 2010 (ESOP Scheme-2010) and 2013 (ESOP Scheme 2013). The grant of options to the employees under the stock option schemes is on the basis of their performance and other eligibility criteria. The options allotted under the scheme 2010 are vested over a period of four years in the ratio of 15%, 20%, 30% and 35% respectively from the end of 12 months from the date of grant, subject to the discretion of the management and fulfillment of certain conditions. The options granted under the scheme 2013 are vested in a graded manner over a period of four years with 0%, 33%, 33% and 34% of grants vesting each year, commencing from the end of 24 months from the date of grant or w.e.f. July 10, 2019 vested in a graded manner over a period of four years with 25%, 25%, 25% and 25% of grants vesting each year, commencing from the end of 12 months from the date of grant.

- Options allotted under scheme 2010 can be exercised anytime within a period of 7 years from the date of grant and would be settled by way of equity. The option granted under scheme 2013 can be exercised anytime within a period of 8 years from the date of grant. Management has discretion to modify the exercise period.

- The option granted under scheme 2010 is at exercise price of ? 44.20. The option granted under scheme 2013 can be exercised either at market price which was the last closing price on National stock exchange preceding the date of grant or w.e.f. July 10,2019 ? 10 respectively.

- During the year ended March 31, 2024 4,98,750 and 87,70,443 options were allotted under the scheme 2010 and 2013 respectively.

- During the year, the Company has debited to the Statement of Profit and Loss ? 38.01 crore (previous year ? 25.74 crore) {net of recovery from its subsidiary companies during the year ? -0.16 (Previous year ? -0.09 crore)} towards the stock options granted to their employees, pursuant to the employee stock option schemes.

- Weighted average fair values of options granted during the year is ? 118.74 (Previous year: ? 69.48) per options.

Notes:

1. Debenture Redemption Reserve: The Ministry of Corporate Affairs vide notification dated August 16, 2019, amended the Companies (Share capital and Debenture) Rules, 2014 by which the Company is no longer required to create DRR towards the debentures issued. Earlier to this amendment, the Company was required to maintain a DRR of 25% of the value of debentures issued, either by a public issue or on a private placement basis and the amounts credited to the DRR was not to be utilised by the Company except to redeem debentures. The above amount represents the DRR created out of profits of the Company prior to the said notification.

2. Securities Premium: The amount received in excess of face value of the equity shares is recognised in Securities Premium. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

3. Capital Reserve: It represents the gains of capital nature which mainly include the excess of value of net assets acquired over consideration paid by the Company for business amalgamation transactions.

4. General Reserve: The Companies (Transfer of Profits to Reserves) Rules, 1975 read with Section 205(2A) of the Companies Act, 1956, prohibited declaration of dividend for any financial year out of profits of the company for that year except after the transfer of a specified percentage of the profits not exceeding 10%, to its reserves. Amounts were transferred to General Reserve to comply with these provisions. The Companies Act, 2013, does not mandate such a transfer.General reserve is a free reserve available to the Company.

5. Reserve u/s 45 IC of Reserve Bank of India Act, 1934: The Company created a reserve pursuant to section 45 IC the Reserve Bank of India Act, 1934 by transferring amount not less than twenty per cent of its net profit every year as disclosed in the Statement of Profit and Loss and before any dividend is declared.

6. Reserve u/s 29C of National Housing Bank, 1987: During the financial year 2020-21, upon amalgamation of the erstwhile L&T Housing Finance Limited (the "Transferor Companies") with L&T Finance Limited (the "Transferee Company"), the statutory reserves (i.e. Reserve under section 29C of National Housing Bank, 1987) of the Transferor Companies is also transfer to the Transferee Company.

7. Reserve u/s 36(1)(viii) of Income Tax Act, 1961: In respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty percent of the profits derived from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction under this clause) is carried to such reserve account.

8. Amalgamation Adjustment Account: Upon amalgamation of the erstwhile L&T Finance Limited and the erstwhile L&T Fincorp Limited (the "Transferor Companies") with Family Credit Limited (the "Transferee Company" which was renamed as L&T Finance Limited") the statutory reserves (i.e. Debenture Redemption Reserve, Reserve under section 45 IC of the Reserve Bank of India Act, 1934 and Reserve under section 36(1)(viii) of the Income tax Act, 1961) of the Transferor Companies as on April 01, 2016 (the Appointed Date") with a corresponding debit to Amalgamation Adjustment Account. As the corresponding statutory reserve unwind, the Amalgamation Adjustment Account is also reversed.

9. Retained Earnings: Retained earnings represent the amount of accumulated earnings of the Company.

10. Employee Stock Option Outstanding Account: The reserve is used to recognise the fair value of the options issued to employees of the Company and subsidiary companies under Company's employee stock option scheme.

11. Impairment Reserve: As per the RBI circular RBI/2019-20/170 dated March 13, 2020, where the guidelines require NBFCs to hold impairment allowances as required by Ind AS. In parallel NBFCs are required to compute provisions as per extant prudential norms on Income Recognition, Asset Classification and Provisioning (IRACP). A comparison, as prescribed, between provisions required under IRACP and

impairment allowances made under Ind AS 109 is required to be disclosed by NBFCs in the notes to their financial statements to provide a benchmark to their Boards, RBI supervisors and other stakeholders, on the adequacy of provisioning for credit losses. Where impairment allowance under Ind AS 109 is lower than the provisioning required under IRACP (including standard asset provisioning), NBFCs are required to appropriate the difference from their net profit or loss after tax to a separate 'Impairment Reserve'. The balance in the 'Impairment Reserve' shall not be reckoned for regulatory capital. Further, no withdrawals shall be permitted from this reserve without prior permission from the Department of Supervision, RBI. The said reserve was created in LTICL and the company previously, which has been now carried forward to amalgamated Company (refer note 55).

34 Disclosure pursuant to Ind AS 19 “Employee Benefits"

(i) Defined Contribution Plan:

The Company's state governed provident fund scheme are defined contribution plan for its employees and for a certain categories of employees made to a trust viz. the Larsen & Toubro Officers & Supervisory Staff Provident Fund constituted by the ultimate parent company, which is permitted under The employee's Provident Funds and Miscellaneous Provisions Act, 1952. The Contribution by the employer and employee together with interest accumulated there on are payable to the employee at the time of separation from company or retirement whichever is earlier. The benefit vets immediately on rendering of services by the employee. In addition to the above, information relating to the scheme operated by the trust constituted by the holding company is given in the note (iii) below.

The Company has recognised charges of ? 56.67 crore (previous year: ? 47.14 crore) for provident fund contribution, is included in "Note 30 Employee Benefits Expenses" in the Statement of Profit and Loss.

The Company operates gratuity plan through a trust wherein every employee is entitled to the benefit equivalent to fifteen days last salary drawn for each completed year of service. The same is payable on termination of service or retirement whichever is earlier. The benefit vests after five years of continuous service. The Company's scheme is more favorable as compared to the obligation under Payment of Gratuity Act, 1972. These benefit plans expose the Company to actuarial risks, such as longevity risk, interest rate risk and investment risk.

(A) Discount rate:

The discount rate based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

(B) Salary escalation rate:

The estimates of future salary increase considered takes into account the inflation, seniority, promotion and other relevant factors.

(g) Attrition Rate:

The attrition rate varies from 6% to 44% (previous year: 6% to 31%) for various age groups.

(h) Mortality:

Published rates under the Indian Assured Lives Mortality (2012-14) Ult table.

In respect of the contribution by the employer and employee to the provident fund trust constituted by the ultimate parent company, in terms of the guidance note issued by the Institution of Actuarial of India for the measurement of provident fund liabilities, the actuary engaged by the Company has provide the following information in this regards:

(A) Discount rate:

The discount rate is based on the prevailing market yields of Indian government securities as at the valuation date for the estimated term of the obligations.

(B) Average historic yield on the investment portfolio:

The average rate of return earned on the investment portfolio of provident fund in the previous three years.

(C) Expected investment return:

Expected investment return is determined by adding the yield spread to the discount rate for a term of the obligation, where yield spread is the difference between the average historic yield on the investment portfolio & discount rate for the remaining term to maturity of the investment portfolio.

(D) Guaranteed rate of return:

The Regional Provident Fund Commissioner has not yet declared the interest rate for its own subscribers for the current financial year 2023-24.

However, in view of the fall in equity values as at March 31, 2024 and fall in the returns on fixed income instruments, we are of the view that going forward the future guaranteed rate is unlikely to be in excess of 8.25% p.a. (previous year: 8.15% p.a.).

iv) Interest expense on lease liabilities for F.Y. 2023-24 is ? 4.43 crore and for F.Y. 2022-23 is ? 2.82 crore.

v) Expense relating to leases for which underlying asset is of low value for F.Y. 2023-24 is ? 5.39 crore and for F.Y. 2022-23 is ? 7.03 crore

vi) Expense related to short-term leases for F.Y. 2023-24 is ? 83.21 crore and for F.Y. 2022-23 is ? 56.45 crore

vii) Expense related to variable lease payments for F.Y. 2023-24 is Nil and F.Y. 2022-23 is Nil

viii) Income from sub-leasing of right of use assets for F.Y. 2023-24 is ? 0.87 crore and for F.Y. 2022-23 is ? 2.09 crore

ix) There are no gains or losses arising from sale and leaseback transactions ? Nil for F.Y. 2023-24 and F.Y. 2022-23.

b) Finance Lease : Not Applicable

II) Company as Lessor a) Finance Lease

i) The Company has given on finance leases certain items of plant and equipment. The leases have a primary period that is fixed and noncancellable and a secondary period. There are no exceptional/restrictive covenants in the lease agreement. There are no significant risks associated with rights that the Company retains in underlying assets.

iii) Lease income recognised in Profit & Loss account (Other than variable lease payment) for F.Y. 2023-24 is Nil crore and for F.Y. 2022-23 is ? 0.07 crore

iv) Lease income relating to variable lease payments not depending on index/rate : Nil

36 Corporate Social Responsibility (CSR)

Amount required to be spent by the Company on Corporate Social Responsibility (CSR) related activities during the year is ? 1.23 crore (previous year: ? 17.46 crore).

(a) The amount recognised as expense in the Statement of Profit and Loss on CSR related activities is ? 1.23 crore (previous year: ? 17.46 crore) (Refer note no. 32 of financial statements), which comprises of:

(c) Reason for shortfall during the financial year 2022-23

New project(s) / program(s) of on-going nature were identified and launched during the financial year on account of which the entire mandated CSR spend amount could not be consumed within the FY under review. The unspent amount against the said project(s) / program(s) has since been transferred into the "Unspent CSR Account" to be utilized for these project(s) / program(s) within the next three financial years.

(d) Nature of CSR activities during the financial year 2022-23

The payment for the CSR activities are done for Digital Financial Literacy and Entrepreneurship Development, Tree Plantation and Capacity Building of Water User Groups, creating awareness on Road Safety and Healthcare.

(e) Nature of CSR activities during the financial year 2023-24

The payment for the CSR activities are done for Digital Financial Literacy and Entrepreneurship Development, Tree Plantation, Capacity Building of Water User Groups, creating awareness on Road Safety and Healthcare.

(f) Excess during the financial year 2023-24

The Company has spent excess amount towards new project(s) / program(s) and the excess spent amount shall be set off against the required 2% CSR expenditure in the next three financial years.

Note: *In respect of disputes, the company is of view of succeeding in appeals and does not expect any significant liabilities to materialise.

# Figures reported above are excluding GST

46 During the previous year, Due to data migration issues, the first installment principal repayment on nonconvertible security (INE691I07240) amounting to ? 71.43 crore was credited to bondholders account on October 19, 2022, instead of the due date of October 18, 2022, along with the applicable additional interest for 1 day. This delay was promptly resolved to ensure that future payments are not affected and appropriate disclosures were made to stock exchange & rating agencies. Credit reports further confirmed that this was a one-off event due to a technical issue and did not reflect any liquidity stress or financial inability of the

Company to service its debt on time. The Company had sufficient liquidity available in the form of cash and liquid investments of ? 7,511 crore as on September 30, 2022 (around ? 4,500 crore as on October 18, 2022), in addition to unutilised bank lines & credit line from Larsen & Toubro Limited and the incident did not indicate any change in the Company's inherent credit quality.

47 Exceptional items in the year ended March 31, 2023 of the aforesaid results includes:

(i) Gain of ? 283 crore on the reduction of 3,12,00,000 (Three Crore Twelve Lakh) fully paid-up equity shares of face value of ? 10 each of the wholly owned subsidiary company, L&T Investment Management Limited ("LTIM")

(ii) Gain of ? 2,575.09 crore on the divestment of its entire stake in the subsidiary company, LTIM and

(iii) The one-time fair valuation loss of ? 2,687.17 crore on reclassification consequent to change in business model and fair valuation of the wholesale loan asset portfolio as part of Lakshya 2026 strategy.

48 Risk Management Basis

Great importance is attached to the identification, measurement and control of risks. All employees of the Company are responsible for the management of risk, with the ultimate accountability residing with the Board of Directors. The Board of Directors and its Risk Management Committee ensure that Management takes into consideration all the relevant risk factors which could lead to unexpected fluctuations in results or to a loss of capital employed. Recommendations for risk control measures are derived from the evaluation of the risk factors. Certain risks are also recognized as opportunities. The aim in such cases is to achieve an appropriate balance between the possible losses which might result and the potential gains. Risks which primarily represent loss potential are minimized. This helps in aligning the risk appetite to the Company's strategy to deliver sustainable, long term returns to its investors.

The risks are reviewed periodically every quarter.

Types of risk

As a lending non-banking financial company, the most important risks it is faced with are the following:

• Credit risk

• Market risk

• Capital risk Credit risk

Credit risk is the risk of suffering financial loss, should any of the Company's customers or counterparties fail to fulfill their contractual obligations to the Company.

Credit risk arises mainly from retail and wholesale loans and advances and loan commitments arising from such lending activities; but could also arise from credit enhancement provided, such as financial guarantees and letters of credit. The Company is also exposed to other credit risks arising from investments in debt securities and exposures arising from its trading activities ("Trading Exposures") as well as settlement balances with market counterparties.

Credit risk is the single largest risk for the Company's business. Management therefore carefully manages its exposure to credit risk. A centralised risk management function oversees the risk management framework and an overview of credit risk of portfolio is periodically presented to the Risk Management Committee.

Credit-worthiness is assessed prior to signing any contracts, based on underwriting process including employing market information. Management endeavours to improve its underwriting standards to reduce the credit risk the Company is exposed to from time to time.

Loans and advances (including loan commitments and guarantees)

The estimation of credit exposure for risk management purposes is complex, as the exposure varies with changes in market conditions, expected cash flows and the passage of time. Wholesale and retail portfolios are managed separately to reflect the differing nature of the business strategy. As the Company is completely exiting the wholesale business by way of sell down, the wholesale portfolio is classified as Fair Value through Profit and Loss Account ("FVTPL") and valued accordingly as per Ind AS 109. As regards the retail portfolio, the same is classified as amortized cost as per Ind AS 109 and assessed accordingly. The assessment of credit risk of the retail portfolio entails estimations as to the likelihood of defaults occurring and of the associated loss ratios. The Company measures credit risk for each class of loan assets using inputs such as -Probability of Default ("PD") and Loss Given Default ("LGD"). PD and LGD are ascertained as per Ind AS 109.

Retail Business (Rural and Urban Finance)

The Company has deployed standardised credit decision rules, as approved by the designated officials for the specific product. The rules are regularly monitored to ensure that the learnings from the portfolio performance and changes in the economic environment have been factored into the credit decision rules.

Trading Exposures

For debt securities in the trading portfolio, external rating agency credit grades and internal rating are used for evaluating the credit risk.

Expected Credit Loss ('ECL')

As required by the extant guidelines (notification dated March 30, 2016 issued by the Ministry of Corporate Affairs) the Company adopted IND AS (with effect from April 1, 2017) and has been preparing IND AS based financial statements for accounting period beginning from April 1,2018 onwards.

As per RBI notification on acceptance of IND AS for regulatory reporting, the Company computes provision as per IND AS 109 as well as per extant prudential norms on Income Recognition, Asset Classification and Provisioning (IRACP). Where impairment allowance in aggregate for the Company under Ind AS 109 is lower than the provisioning required under IRACP (including standard asset provisioning) for the Company, the difference is appropriated from net profit or loss after tax to a separate 'Impairment Reserve'. Any withdrawals from this reserve shall be done only with prior permission from the RBI.

ECL allowances recognised in the financial statements also reflect the effect of a range of possible economic outcomes, calculated on a probability weighted basis, based on certain economic scenarios. The recognition and measurement of ECL involves use of significant judgment and estimation. Forward looking economic forecasts are used in developing the ECL estimates. Multi variable regression framework is used to establish a linkage between company's default rates and various macroeconomic variables like unemployment rate, GDP, inflation, domestic credit investment, farm reservoir levels amongst others. Three scenarios sufficient to calculate unbiased ECL are used - representing the "most likely outcome" (the "Central" scenario) and two "less likely outcome" scenarios (the "Upside" and "Downside" scenarios).Probability weights have been assigned to each scenario based on Company's outlook of the economic forecasts.

Management oversees the estimation of ECL including:

i. setting requirements in policy, including key assumptions and the application of key judgements;

ii. the design and execution of models; and

iii. review of ECL results.

As required by Ind AS 109, a 'three-stage' model for impairment based on changes in credit quality since initial recognition was built as summarised below:

• A loan asset that is not credit-impaired, on initial recognition, is classified in 'Stage 1' and has its credit risk continuously monitored by Management.

• If a significant increase in credit risk ('SICR') since initial recognition is identified, the loan asset is moved to 'Stage 2' but is not yet deemed to be credit-impaired. (See note 1.8 for a description of how the Company determines when a significant increase in credit risk has occurred).

• If the financial instrument is credit-impaired, the financial instrument is then moved to 'Stage 3'. (See note 1.8 for a description of how the Company defines credit-impaired and default).

The following are additional considerations for each type of portfolio held by the Company:

Retail Business- (Rural and Urban Finance)

Retail lending credit quality is determined on a collective basis based on a 12-month point in time ("PIT") probability weighted PD for all loan asset that are not credit-impaired and for assets with SICR, lifetime probability weighted PIT PD is used. PD for credit impaired asset is 1 as the DPD is 90 .

A centralised impairment model summarises the historical payment behavior of the borrowers within a retail portfolio which data is used to build the PD estimates. For estimating PD, information on days-past-due and month-on-book (vintage) (for certain products) form key differentiating characteristics. The weighted average is determined (using count of customers as the weight) from quarterly snapshots.

LGD is computed based on actual history of loss (on settlement/repossession and disposal of security/ enforcement action) from the same historical quarterly snapshots. The loss divided by the principal outstanding at the time of default is the loss ratio for a credit impaired loan asset in a specific snapshot. The weighted average of loss ratios (using the principal outstanding in respect of such credit impaired loan assets in the corresponding snapshot as the weight) is used to determine the LGD ratio for credit impaired loan assets.

The PD and LGD ratio are used to arrive at the ECL for all stages of loan assets.

Exposure at Default (EAD)

EAD is the amortised cost as at the period end, after considering repayments of principal and interest received in advance, if any.

(i) Retail loans, other than unsecured loans aggregating ? 42,732.48 crore as of March 31,2024, are generally secured by a charge on the asset financed (farm equipment loans, two-wheeler loans, Home loans and loans against property) (as of March 31,2023: ? 34,109.08 crore). If the customer fails to pay, the Company would, as applicable, liquidate collateral and/or set off accounts. For most products, the Company obtains direct debit instructions from the customer. It is a criminal offence in India to issue a bad cheque.

(ii) Wholesale loan assets are secured with current assets as well as immovable property and property, plant and equipment in some cases. However, collateral securing each individual loan may not be adequate in relation to the value of the loan. If the customer fails to pay, the Company would, as applicable, liquidate collateral and/or set off accounts. For most products, the Company obtains direct debit instructions from the customer. It is a criminal offence in India to issue a bad cheque

Of the unmitigated on balance sheet exposure, a significant portion relates to cash held with banks, settlement balances, and debt securities issued by governments all of which are considered to be lower risk.

Besides growth in the loan assets portfolio, increases in trading portfolio assets and financial assets at fair value through the Statement of Profit and Loss have also contributed to the increase in the Company's net exposure to credit risk. Investments in debt instruments are predominantly investment grade.

Where collateral has been obtained in the event of default, the Company does not, ordinarily, use such assets for its own operations and they are usually sold and off set against the outstanding loan assets.

The Company has invoked pledge of equity shares and Non-Convertible debentures ("NCD") (Refer Note 40), pledged with the Company as collateral by the borrowers and those shares are being held by the Company as bailee.

Concentration of exposure

Concentrations of credit risk arise when a number of counterparties or exposures have comparable economic characteristics, or such counterparties are engaged in similar activities or operate in the same geographical areas or industry sectors so that their collective ability to meet contractual obligations is uniformly affected by changes in economic, political or other conditions. The Company has established a diversified borrower base and as at March 31, 2024. The Company has put in place a framework of Risk Limits, which are monitored on a quarterly basis to ensure that the overall portfolio is steered within the approved limits to minimize concentration risk. The Risk Limits cover risk of concentration to a particular geography, industry, Company/ borrower or revenue counterparty of the borrowers etc. as are relevant to the respective product.

Market Risk Management

Liquidity Risk:

The risk that the Company is unable to service its contractual or contingent liabilities or that it does not have the adequate amount of funding and liquidity to support its committed disbursements.

Liquidity risk management in the Company is managed as per the guidelines of Board-approved Asset-Liability Management ('ALM') Policy. The ALM Policy provides the governance framework for the identification, measurement, monitoring and reporting of liquidity risk arising out of Company's lending and borrowing activities. The liquidity risk is measured in terms of structural liquidity gaps across various time-buckets and also by setting up limits on relevant liquidity stock ratios. Actual liquidity gaps against the Gap Limits are reported every month to the Asset Liability Management Committee ('ALCO'). Given the current market scenario, the Company has been maintaining positive cumulative liquidity gaps for all the time-buckets upto 1 year as a prudent risk management practice.

The Company also periodically undertakes liquidity stress testing under various liquidity stress scenarios. It maintains liquidity buffer for survival period of 30 days in the forms of High Quality Liquid Assets under 1-in-10 liquidity stress scenario, wherein hair-cut of 40% on undrawn bank lines and collection shortfall of 15% is assumed. To effectively manage the fallout of the COVID-19 pandemic related RBI measures on its funding and liquidity, the Company has been continuously maintaining higher level of liquidity buffer as a

safeguard against any likely disruption in the funding and market liquidity. Further the Company has defined a few Early Warning Indicators (EWI) and its thresholds as part of its Contingency Funding Plan (CFP) to help signal towards a potential evolving liquidity crisis and so as to enable appropriate steps to be taken in a timely manner. These EWIs are monitored on a regular basis.

Further, Reserve Bank of India has issued final guidelines on Liquidity Risk Management Framework for NonBanking Financial Companies and Core Investment Companies on November 04, 2019. As per the said guidelines, NBFC are required to publicly disclose the below information related to liquidity risk on a quarterly basis. Accordingly, the disclosure on liquidity risk as at March 31, 2024 is as under:

• A "Significant counterparty" is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the NBFC-NDSI's, NBFC-Ds total liabilities and 10% for other non-deposit taking NBFCs.

• Total Liabilities has been computed as Total Assets less Equity share capital less Reserve & Surplus and computed basis extant regulatory ALM guidelines.

• Commercial Paper for stock ratio is the Gross outstanding (i.e. Maturity amount).

• Other Short-term Liabilities has been computed as Total Short-term Liabilities less Commercial paper less Non-convertible debentures (Original maturity of less than one year), basis extant regulatory ALM guidelines.

(vi) Institutional set-up for Liquidity Risk Management

The Board of Directors of the Company has an overall responsibility and oversight for the management of all the risks, including liquidity risk, to which the Company is exposed to in the course of conducting its business. The Board approves the governance structure, policies, strategy and the risk limits for the management of liquidity risk. The Board of Directors approves the constitution of the Risk Management Committee (RMC) for the effective supervision, evaluation, monitoring and review of various aspects and types of risks, including liquidity risk, faced by the Company. The meetings of RMC are held at quarterly interval. Further, the Board of Directors also approves constitution of Asset Liability Committee (ALCO), which functions as the strategic decision-making body for the asset-liability management of the Company from risk-return perspective and within the risk appetite and guard-rails/ limits approved by the Board. The main objective of ALCO is to assist the Board and RMC in effective discharge of the responsibilities of asset-liability management, market risk management, liquidity and interest rate risk management and also to ensure adherence to risk tolerance/limits set up by the Board. ALCO provides guidance and directions in terms of interest rate, liquidity, funding sources, and investment of surplus funds. ALCO meetings are held once in a month or more frequently as warranted from time to time. The minutes of ALCO meetings are placed before the RMC and the Board of Directors in its next meeting for its perusal/approval/ratification.

(vii) Disclosure on Liquidity Coverage Ratio

RBI has issued final guidelines on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies on November 04, 2019. As per the said guidelines, LCR

requirement shall be binding on all non-deposit taking systemically important NBFCs with asset size of ? 10,000 crore and above from December 1, 2020, with the minimum LCR to be 50%, progressively increasing, till it reaches the required level of 100%, by December 1, 2024, as per the time-line given below:

1 Unweighted values calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows). Averages are calculated basis simple average of daily observations for the quarterly LCR.

2 Weighted values calculated after the application of respective haircuts (for HQLA) and stress factors on inflow and outflow

3 Unsecured wholesale funding includes cash outflow on account of CP, ICD & unsecured Debenture repayments

4 Secured wholesale funding includes all other borrowing repayments

5 Other cash inflows amongst others includes liquidity maintained in the form of Liquid Mutual funds, Fixed deposit placed with banks as well as available undrawn funding lines

6 All of the HQLA, cash inflows and outflows are in rupee terms and there is no currency mismatch.

7 The above LCR ratios are prepared on the baisis of RBI guidelines prescribed for liquidity risk management framework and same has been reported by management on quartely basis and same is relied upon by auditors.

Foreign Exchange Rate Risk:

In the normal course of its business, the Company does not deal in foreign exchange in a significant way. Any significant foreign exchange exposure on account of foreign exchange borrowings is fully hedged to safeguard against exchange rate risk.

Interest Rate Risk:

Interest rate risk is the risk where changes in market interest rates affect the Company's financial position due to change in its Net Interest Income (NII). To mitigate interest rate risk, ALM Policy of the Company stipulates Interest Rate Sensitive Gaps for all the time-buckets. Interest Rate Sensitivity Statement is prepared every month and placed before ALCO. The Statement captures the Rate Sensitive Gaps i.e. the mismatch between the Rate Sensitive Assets and Liabilities, in various time buckets.

Security Prices:

The Company manages investment portfolios comprising government securities, corporate bonds and debentures. To safeguard against the credit risk and interest rate risk in the investment portfolios, risk limits in the form of portfolio size limits, concentration limits and stop loss limit are stipulated. To provide early warning indicators, alarm limits have also been put in place. Reporting periodicity and escalation matrix upon the breach of alarm limits as well as risk limits have been clearly defined. The Company does not invest in Equity stocks and therefore is not exposure to equity price risk on this account.

49.9 Capital management (i) Risk management

As an NBFC, the RBI requires us to maintain a minimum capital to risk weighted assets ratio ("CRAR") consisting of Tier I and Tier II capital of 15% of our aggregate risk weighted assets out of which Tier I Capital should be at least 9% of risk weighted assets. Further, the total of our Tier II capital cannot exceed 100% of our Tier I capital at any point of time. The capital management process of the Company ensures to maintain a healthy CRAR at all the times. Refer note 51.1 for the Company's Capital ratios.

The Company's objectives when managing capital are to

(a) safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

(b) Maintain an optimal capital structure to reduce the cost of capital.

(c) The Company's assessment of capital requirement is aligned to its planned growth which forms part of an annual operating plan which is approved by the Board and also a long range strategy. These growth plans are aligned to assessment of risks - which include credit, liquidity and market.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

51 The following additional information is disclosed in the terms of Master Direction - Non-Banking Financial Company - Systematically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 issued by Reserve Bank of India vide circular no. RBI/ DNBR/2016-17/45 Master Direction DNBR. PD. 008/03.10.119/2016-17 dated September 01, 2016 as amended (the “RBI Master Directions").

The disclosures as required by the RBI Master Directions has been prepared as per Indian Accounting Standards as mentioned in RBI circular RBI/2019-20/170 DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020.

During the current financial year, L&T Finance Limited ("LTF"), L&T Infra Credit Limited (formerly known as L&T Infra Debt Limited) ("ICL") and L&T Mutual Fund Trustee Limited ("LTMFTL") merged with the company i.e. L&T Finance Holdings Limited which under the scheme is renamed as L&T Finance Limited ("the Company") (refer note 55). The Figures for the current financial year under the disclosure as required in RBI Master Directions represents the figures of the amalgamated Company from the appointed date April 01, 2023. The Figures for the previous financial year are same as disclosed in the previous year audited financial Statement of the Company, hence figures for the current year ended March 31, 2024 are not comparable with figures for the previous year ended March 31, 2023.

II) Exchange Traded Interest Rate (IR) Derivatives: The Company has not traded in exchanged traded Interest Rate Derivative during the financial year ended March 31, 2024 (Previous year : Nil).

III) Disclosures on Risk Exposure in Derivatives Qualitative Disclosure

The Company has a Treasury Risk Management Policy approved by the Assets Liability Committee and the Board. This policy provides the framework for managing various risks including interest rate risk and currency risk. The policy provides for use of derivative instruments in managing the risks.

The Company has sourced External Commercial Borrowing in foreign currency. The same has been hedged as required by RBI.

II) Details of securitisation transactions undertaken by applicable NBFCs

There are no securitisation transactions during the year (previous year : Nil), hence relevant disclosure is not applicable.

III) Details of Assignment transactions undertaken by applicable NBFCs

There are no assignment transactions during the year (previous year : Nil), hence relevant disclosure is not applicable.

IV) Details of non-performing financial assets purchased/sold from/to NBFCs: During the current and previous year, no non-performing financial assets has been purchased/sold from/to other NBFCs.

Footnotes:

1. As defined in point xxvii of paragraph 3 of Chapter-II of these Directions.

2. Provisioning norms shall be applicable as prescribed in Indian Accounting Standards by MCA.

3. All Indian Accounting Standards issued by MCA are applicable including for valuation of investments and other assets as also assets acquired in satisfaction of debt.

52 The following additional information is disclosed in the terms of Master Direction - Non-Banking Financial Company - Systematically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 issued by Reserve Bank of India vide circular no. RBI/2021-22/112 DOR.CRE.REC.No.60/03.10.001/2021-22 dated October 22, 2021 as amended (the “RBI Master Directions")

The disclosures as required by the RBI Master Directions has been prepared as per Indian Accounting Standards as mentioned in RBI circular RBI/2019-20/170 DOR (NBFC).CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020.

During the current financial year, L&T Finance Limited ("LTF"), L&T Infra Credit Limited (formerly known as L&T Infra Debt Limited) ("ICL") and L&T Mutual Fund Trustee Limited ("LTMFTL") merged with the company i.e. L&T Finance Holdings Limited which under the scheme is renamed as L&T Finance Limited ("the Company")

(refer note 55). The Figures for the current financial year under the disclosure as required in RBI Master Directions represents the figures of the amalgamated Company from the appointed date April 01,2023. The Figures for the previous financial year are same as disclosed in the previous year audited financial Statement of the Company, hence figures for the current year ended March 31, 2024 are not comparable with figures for the previous year ended March 31, 2023.

8. Corporate Governance

1) Breach of Covenant

During the year ended March 31, 2024 , there is no instance of breach of covenant of loan availed or debt securities issued (applicable if any) by the company.

2) Divergence in Asset Classification and Provisioning

a) the additional provisioning requirements assessed by RBI exceeds 5 percent of the reported profits before tax and impairment loss on financial instruments for financial year 2023-24 : Nil

b) t he additional Gross NPAs identified by RBI exceeds 5 percent of the reported Gross NPAs for financial year 2023-24 : Nil

53 The accounting software used by the Company to maintain its Books of account have a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software as also in data base maintained with respect thereto.

54 The following additional information (other than what is already disclosed elsewhere) is disclosed in terms of amendments dated March 24, 2021 in Schedule III to the Companies Act 2013 with effect from 1st day of April, 2021:-

(a) There is no proceeding initiated or pending against the company during the year for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.

(b) The company is not declared wilful defaulter by any bank or financial Institution or any other lenders.

(c) Being a systemically important non-banking financial company registered with the Reserve Bank of India as per Reserve Bank of India Act, 1934 (2 of 1934), the provisions prescribed under clause (87) of section 2 of the companies Act 2013 read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable to the company.

(d) There is no scheme of arrangements has been approved during the year by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013 other than disclosed under note 55.

(e) There is no transaction that has not been recorded in the books of accounts and surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.

(f) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(g) The Company has obtained borrowings from banks or financial institutions on the basis of security of current assets and quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts.

(h) The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall :

(i) 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

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

(i) The Company has not received any funds from any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Company shall :

(i) 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

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

(j) There are no creation or satisfaction of charges as at March 31, 2024 pending with ROC beyond the statutory period.

(k) The Company has utilised all the borrowings for the purpose for which they have been borrowed.

55 Amalgamation of erstwhile L&T Finance Limited (“LTF”), L&T Infra Credit Limited (formerly known as L&T Infra Debt Limited) (“ICL”) and L&T Mutual Fund Trustee Limited (“LTMFTL”) with the Company

1 During the financial year under report, erstwhile L&T Finance Limited (""LTF""), L&T Infra Credit Limited (formerly known as L&T Infra Debt Limited) (""ICL"") and L&T Mutual Fund Trustee Limited (""LTMFTL"") merged with the Company i.e. L&T Finance Holdings Limited which under the scheme is renamed as L&T Finance Limited (""the Company""). LTF and ICL were registered with the Reserve Bank of India (""RBI"") as non-deposit taking Systemically Important (NBFC-ND-SI) companies. LTMFTL was a registered company providing trusteeship services to a mutual fund, however with the disinvestment of stake in the mutual fund business, it no longer acts as trustee company for any mutual fund. In order to consolidate the business of lending entities for creation of a single larger unified entity, it was proposed that LTF, ICL and LTMFTL be amalgamated with the Company. Amalgamation will lead to consolidation and help synergise integration of the businesses of transferor companies and the transferee company to enable better operational management, greater focus and simplification of group corporate structure.

The Board of Directors of the Company had, in its meeting dated January 13, 2023, approved the proposed amalgamation of the LTF, ICL and LTMFTL with itself, with appointed date of April 1, 2023, by way of merger by absorption pursuant to a scheme of arrangement (the Scheme) under the provisions of Sections 230 - 232 read with Section 52 and other relevant provisions of the Companies Act, 2013 (including the rules thereunder).

The Reserve Bank of India vide its letter dated March 24, 2023, BSE Limited and National Stock Exchange of India Limited vide their respective letters dated April 26, 2023 had conveyed that they have no objection to the proposed amalgamation. Pursuant to the sanction granted by the Hon'ble NCLT benches at Mumbai and Kolkata vide orders dated October 13, 2023 and October 17, 2023 respectively, the Scheme has become effective from December 04, 2023 taking effect from Appointed date being April 01, 2023 in accordance with the terms of the Scheme.

The financial information in the financial statements in respect of previous financial year has been restated as if the business combination had occurred from the beginning of the previous year in the financial statements, irrespective of the actual date of the combination.

2 The amalgamation was accounted as a common control business combination in accordance with the accounting prescribed under "pooling of interest" method in Appendix C of the Indian Accounting Standard (Ind AS) 103 - "Business Combinations" and as per the specific provisions of the Scheme. Accordingly, the Scheme has been given effect to in these financial statements and all assets, liabilities and reserves and income and expenditure of the Transferor companies stand transferred at carrying value and vested in the Transferee Company. The inter-corporate investments / deposits / loans and advances or any receivables and payables between and amongst the Amalgamated Company and the Amalgamating companies will stand eliminated by set-off against each other and be cancelled.

3 No shares were issued to give effect of the said amalgamation since the wholly owned subsidiary companies merged with the parent/Holding Company. The difference between the equity share capital of the transferor companies and the carrying value of investments in the said transferor companies in the books of the transferee Company is recognised as capital reserve (refer statement of changes in equity). Pursuant to the scheme, the company has adjusted the debit balance of capital reserve (including capital reserve arising on account of amalgamation) and debit balance of amalgamation adjustment reserve account in the books of the Company post amalgamations against the Securities Premium Account of the Company, as per the terms of the Approved scheme.

4 As per the approved scheme of amalgamation, the amalgamating companies carried their respective business for and on behalf of the Company from the appointed date till the effective date.

56 There are no amounts due and outstanding to be credited to Investor Education & Protection Fund as at March

31, 2024.

57 Previous year figures have been regrouped/reclassified whenever necessary, to make them comparable with the current year figures.

58 The above financial statements have been reviewed by the Audit Committee and subsequently approved by the Board of Directors at its meeting held on April 27, 2024.