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The Year 2004-05 has been a landmark year, with the company having crossed USD 1 Billion in revenue during the course
of the year. The Company has consolidated its position as the market leader in the various product segments it operates in.
Further it has taken several initiatives in opening new markets, partnering with global leaders to offer additional products,
and increasing its sales and support reach in the ICT space.
As the adoption of IT and Communication becomes more prevalent in business and daily use, the company with these new
initiatives is poised to harness the same.
HCL Infosystems is one of the very few organizations that cater to the IT products, infrastructure & services needs of
customers over the entire spectrum of users ranging from Large Enterprises, Government, Banking, Financial services,
Education & Research, SME, SoHo & Home. The Company has built a large & loyal customer base in each of the above
segments across the country.
During the last year the PC & Server range saw volumes grow. The Company retained its leadership position in the
Commercial PC segment for the fifth year in a row. It increased its market share to 14.2 %, with the IDC rating it as the
largest selling PC brand of the country. The year saw introduction of several new models both in PCs and Servers. The
Company maintained its track record of launching new technology products in India at the same time as they were released
worldwide.
Some of the new innovative products launched in the commercial space were the 6 in 1 PC, a product that provides six
users simultaneously an independent secure computing experience on one PC. The company released a secure PC for the
ITES segment, a product specifically designed to reduce the incidence of data theft in an ITES environment. On the server
front the company released rack server products typically required by high density users, in addition to the launch of a
number of programs towards adoption of servers by enterprises in the mid market segment. Some of them are the ISV
Partner programs, the program for certification of servers by leading software vendors etc.
The Company augmented its support network, which now has 2000+ trained engineers and a direct presence at 300+
locations. The Company has improved processes to ensure faster and accurate deliveries to customers across the country,
to meet up with the growing numbers.
The year saw the Company acquire a large number of new customers. The Company continues to bag large prestigious
orders from our existing clients like the State Bank of India, Canara Bank, ACC, Department of Posts, Sun Pharmaceuticals,
Seimens, Hindustan Aeronautics Ltd, HDFC Standard Life Insurance etc.
The initiatives on the System Integration front saw the Company successfully commission and handover the country’s
largest internet backbone network to M/s. BSNL Limited. Another major project executed and handed over was the School
computerization project from the “Department of School Education”, Government of Punjab. HCL did a turnkey job of
supplying, installing and commissioning computers and related infrastructure in 1287 schools across rural and urban
Punjab. The Company has won several prestigious projects on solutions around Oracle, SAP, Broad Vision, Filenet, among
others. The Company today is addressing a number of opportunities in the system integration space by leveraging its
understanding of multiple technologies and the domain knowledge of various customer businesses.
In the consumer PC segment, the Company emerged as the most preferred PC brand, increasing its market share from
4.9% in 2003 to 12.8% in 2004. The Company broke the PC price barrier by launching EzeeBee Pride at Rs. 12990/-,
making branded PCs more affordable than ever before. The company launched another first in the Indian Market, a PC on
EMI scheme @ Rs. 499/-. Taking a leadership role it worked with the banking and finance industry in bringing out such a
scheme, to address the latent potential among the middle-income group consumers. Other initiatives include launch of
HCL-BSNL Broadband PC, Govt. Aided PC Purchase Program (GAPP). In a strategic tie up with leading technology partners
the Company launched for state governments, a low cost HCL Ezeebee with Operating system for Rs. 18000/-.
In addition to this, the Company also introduced digital cameras, MP3 players and inkjet printers for its Home/SoHo users.
As lifestyle are getting more digital, these products will increasingly find acceptance amongst the customers. HCL Ezeebee,
the value PC launched last year, notched up good volumes this year, indicating high acceptance at the customer level.
Going forward, the Company is targeting newer segments like retail and rural to capitalize on the emerging opportunities.
Continuing its innovative strategy, the Company launched RP2 system for the semi urban & rural areas, a solution for
providing uninterrupted power for four to six hours for a computer user in areas with power shortage.
On the whole, the Company will endeavor to continue to offer leading-edge technology and provide best value for money
products & services to its customers.
The year saw your Company rapidly increase its customer base by offering new products and solutions.
On the Imaging front, the Company was ranked No. 1 in India for the Toshiba A3 Multi Functional products it takes to
4
market. The Company also maintained its leadership position in digital projectors, for the Infocus & Toshiba range of
multimedia projectors that it markets. The Company cornered a market share of 35% of the total market with these two
products.
The Company introduced new products like Konica Minolta printers, LCD TVs and Audio Visual System Integration (AVSI)
solutions. The introduction of AVSI solutions met with encouraging response from customers. The Company bagged major
orders from HDFC, Deccan Aviation, Tamil Nadu Police, Reliance Petro, Lafarge, Ranbaxy, Chennai Police, Essar, DHL,
Hutch, Bharti Infotel, Aviva & ONGC.
In corporate networking and managed networks segment, the Company continued to add more customers for its range of
solutions and services. The Company services prestigious clients from different business verticals across the country. The
Company has invested in infrastructure and services that ensures a consistent level of service delivery to each of its
customers, thereby keeping up its commitment of maximizing customer satisfaction. During the course of the year the
Company launched a complete End-to-End enterprise IP telephony and Global IP VPN services for its customers in India in
partnership with Virtela. The Company added some prestigious customers like Royal Airways, Millennium Care, Balmer &
Lawrie, Suzlon to name a few.
On the telecom front, the Company consolidated its position as a trusted provider of communication equipments for
Enterprise connectivity. In Telecom Services business, the Company in partnership with Ericsson launched a slew of
products for Business Conferencing, Broadband and Mini Link Radio. The Company emerged as a major player in video
conferencing business in the country.
The Company formally handed over the largest EPABX installation in the country at IIT Kharagpur, which consists of 14000
lines providing traditional telephony, IP telephony & ADSL broadband connectivity to the entire campus. On the Telecom
System Integration space the Company executed orders for integrated voice & data solution (Police Dial 100) for the Police
Force – a solution that helps the Police force to deploy its resources in a timely and more efficient manner and in turn
enable it to serve the citizens better.
The Company ramped up its sales & distribution network and support infrastructure to service the growth in customer
demand for GSM telephones. The Company leveraged its distribution network strength to introduce a slew of new handset
models at various price points based on different technologies. All this contributed to the increase in market share of Nokia
GSM phones.
5
FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED 30TH JUNE, 2005
FINANCIAL PERFORMANCE
1. Gross Revenue:
Revenue grew by 76% from Rs. 4412 crores in the previous year to Rs. 7784
crores in the current year.
Revenue for the Parent Company grew by 29% from Rs. 1522 crores in the
previous year to Rs. 1967 crores in the current year.
2. Other Income:
Other income for the current year is Rs. 51 crores as against Rs. 29 crores in
the previous year. It includes income from investment in Mutual Funds Rs.
11 crores (Previous Year Rs. 12 crores), interest income Rs. 12 crores (Previous
Year Rs. 9 crores) and gains from foreign exchange fluctuation Rs. 14 crores (Previous Year Rs. 4 crores).
3. Gross Margins:
Gross margins for the current year are at Rs. 603 crores as against Rs. 445 crores in the previous year.
Gross margins for the Parent Company are at Rs. 332 crores as against Rs. 282 crores in the previous year.
4. Personnel Costs:
Staff Costs Staff cost for the current year increased to Rs. 145 crores from Rs. 108 crores in
the previous year. Manpower increased from 3287 as at June 2004 to 3879 as at
June 2005. Staff cost is 1.9% of sales for the current year as against 2.5% in the
previous year.
Staff cost for the Parent Company for the current year is Rs. 102 crores as against
Rs. 78 crores in the previous year.
Expenses amounted to Rs. 190 crores, as against Rs. 127 crores in the previous year. The expenses as a % to sales
declined to 2.4% from 3.0%.
Expenses for the Parent Company amounted to Rs. 105 crores, as against Rs. 80 crores in the previous year.
Operating profit excluding ‘Other income’ grew by 28% from Rs. 209 crores in the previous year to Rs. 268 crores.
7. Finance Charges:
Finance charges for the year is Rs. 8 crores as against Rs. 9 crores in the previous year.
PBT grew by 40% from Rs. 212 crores in the previous year to Rs. 296 crores in the current year.
PBT for Parent Company grew by 16% from Rs. 128 crores in the previous
year to Rs. 149 crores in the current year.
Profit after tax grew by 30% from Rs. 175 crores in the previous year to Rs.
228 crores. The profits for the current year are after a provision for Rs. 65
crores for current tax expense, Rs. 2 crores for deferred tax expense and Rs. 1
crore for Fringe Benefit Tax applicable from April 05.
Profit after tax for the Parent Company grew by 10% from Rs. 121 crores in
the previous year to Rs. 133 crores.
6
FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED 30TH JUNE, 2005
Consolidated Basic EPS grew from Rs. 10.9 in the previous year to Rs. 13.7 in
the current year. Diluted EPS grew from Rs. 10.2 in the previous year to
Rs. 12.9 in the current year.
Basic EPS of the Parent Company grew from Rs. 7.5 in the previous year to
Rs. 8.0 in the current year. Diluted EPS grew from Rs. 7.0 in the previous year
to Rs. 7.5 in the current year.
7
FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED 30TH JUNE, 2005
FINANCIAL CONDITIONS
1. Net Worth/Shareholders Funds: Net Worth as on 30th June 2005 is Rs. 555 crores. Share capital as at 30th June, 2005
is Rs. 33.4 crores divided into 16.7 crores shares of Rs. 2/- each. Reserves & surplus as at 30th June 2005 is Rs. 521
crores after appropriating Rs 117.3 crores for three quarterly interim and final dividends.
Net worth of the Parent Company is Rs. 435 crores. The book value per Rs. 2/- share of the Parent Company increased
from Rs. 24 as on 30th June 2004 to Rs. 26 as on 30th June 2005.
During the year, the Company allotted 5.46 lakh shares of Rs. 10/- each (sub divided into 27.32 lakh shares of
Rs. 2/- each) under the Employee Stock Options realizing Rs. 21.5 crores. The increase in share capital on account of
ESOP is Rs. 0.5 crores and increase in reserves is Rs. 21.0 crores.
3. Fixed Assets: Net block as on 30th June 2005 is Rs. 76 crores. During the
current year, the Company made capital expenditure of Rs. 27 crores mainly
for acquisition of Land in Uttaranchal, expanding customer support network,
one time license fee to DOT for Internet Business and additions to Plant &
Machinery. The Company retired various assets with a Gross block of Rs. 25
crores and a net book value of Rs. 0.1 crores.
Net block of Parent Company as on 30th June 2005 is Rs. 53 crores.
4. Inventories: Inventories increased from Rs. 280 crores as on 30th June 2004 to Rs. 349 crores as on 30th June 2005.
The inventory turn over on sales grew from 15.7 times in the previous year to 22.3 times in the current year.
Inventories of Parent Company increased from Rs. 161 crores as on 30th June 2004 to Rs. 188 crores as on 30th
June 2005. The inventory turn over on sales grew from 9.4 times in the previous year to 10.5 in the current year.
5. Debtors: Debtors increased from Rs. 416 crores as on 30th June 2004 to Rs. 532 crores as on 30th June 2005.
Debtors as number of days of sale stands reduced to 25 days as on 30th June 2005 from 34 days as on 30th June
2004.
Debtors of Parent Company increased from Rs. 295 crores as on 30th June 2004 to Rs. 370 crores as on 30th June
2005. Debtors as number of days of sale stands reduced to 69 days as on 30th June 2005 from 71 days as on 30th
June 2004.
6. Liquid Assets (Investment in Mutual Funds and Fixed Deposits with Banks): Liquid Assets as on 30th June 2005 are
at Rs. 253 crores as against Rs. 254 crores as on 30th June 2004. These exclude cash in hand & balances with bank
in collection and disbursement accounts.
7. Other Current Assets including Loans and Advances: Other current assets increased from Rs. 70 crores as on 30th June
2004 to Rs. 154 crores as on 30th June 2005.
Other current assets of the Parent Company increased from Rs. 40 crores as on 30th June 2004 to Rs. 111 crores as
on 30th June 2005. Lease rent recoverable as on 30th June 2005 is Rs. 60 crores.
8. Current Liabilities & Provisions: Current liabilities and provisions increased from Rs. 697 crores as on 30th June 2004
to Rs. 863 crores as on 30th June 2005.
Current liabilities and provisions of the Parent Company increased from Rs. 398 crores as on 30th June 2004 to Rs.
468 crores as on 30th June 2005.
9. Cash Flow: The cash generation from operating activities in the current year is Rs. 127 crores.
The cash generation of Parent Company from operating activities in the current year is Rs. 27 crores.
The consolidated financial results include the results of the company’s 100% subsidiary, HCL Infinet Ltd.
8
FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED 30TH JUNE, 2005
SEGMENT PERFORMANCE
The Company recognises Computer Systems and related products & services, Office Automation & Telecommunication,
and Internet & related services as its’ three primary segments.
Segment revenue grew by 29% from Rs. 1522 crores in the previous year to Rs.
1967 crores in the current year. Segment results (PBIT) grew by 12% from Rs. 123
crores in the previous year to Rs. 138 crores in the current year. Capital Employed
in the segment is Rs. 359 crores as on 30th June 2005 as against Rs. 205 crores
as on 30th June 2004. The capital employed as at 30th June 2005 includes Rs. 73
crores of Cash and Bank balances (PY Rs. 35 crores). Return on Capital Employed
is 38%.
Revenue of the segment for the current year grew by 101% from Rs. 2877 crores in
the previous year to Rs. 5779 crores. PBIT grew by 76% from Rs. 83 crores in the
previous year to Rs. 146 crores in the current year. Capital Employed in the segment
is Rs. 56 crores as on 30th June 2005 as against Rs. 65 crores as on 30th June
2004. The Return on Capital Employed for the current year is 261% as against
128% in the previous year.
The segment provides Virtual Private Network, Internet Access services, other connectivity services and related hardware.
Revenue of the segment showed a marginal drop of 2% from Rs. 44 crores in the previous year to Rs. 43 crores in the
current year. Despite revenue drop, segment registered a profit of Rs. 2 crores as against a loss of Rs. 2 crores in the
previous year. This has been achieved through increase in the capacity utilization of leased lines and other cost reductions.
Rs. crores FY 03 FY 04 FY 05
Revenue 32 44 43
PBIT -13 -2 2
9
CORPORATE INFORMATION
Whole-time Directors
J.V. Ramamurthy (appointed from 11-08-05)
Ravi Thumboochetty (retired as whole-time Director from 10-08-05)
Directors
R.P. Khosla
S. Bhattacharya
D.S. Puri
E.A. Kshirsagar
Anita Ramachandran
T.S. Purushothaman (retired as whole-time Director from 20-07-05 and
appointed as Director from 21-07-05)
10
FIVE YEAR FINANCIAL OVERVIEW
Basic Earning Per Share (Rs.)* 8.0 7.5 3.9 2.9 3.7
Operating Margin (%) 8% 9% 7% 5% 8%
Profit before Tax/ Revenue (%) 7% 8% 4% 4% 7%
Return on Net worth(%) # 30% 30% 19% 14% 23%
Return on Capital Employed(%)# 25% 26% 14% 10% 17%
Equity Dividend (%) 310** 210 100 25 70
Sources of Funds
Equity Funds 3344 3289 3191 3191 3191
Reserves and Surplus 40191 36552 29454 29493 26431
Loan Funds 8132 7137 11787 12597 11241
Deferred Tax Liabilities (Net) 681 308 563 1004 0
Application of Funds
Net Block 5329 4925 4954 5552 5171
Investments 12277 28060 21289 13668 8501
Current Assets 81533 54091 45042 55985 51401
Current Liabilities 46791 39790 26290 28920 24210
Net Current Assets 34742 14301 18752 27065 27191
11
DIRECTORS’ REPORT
To the Members,
Your Directors have pleasure in presenting their Nineteenth Annual Report together with the Audited Accounts for the
financial year ended 30th June, 2005.
Financial Highlights
(Rs. in Crores)
Particulars Consolidated Parent Company
2004-05 2003-04 2004-05 2003-04
Net Sales and other income 7794.93 4335.36 1959.57 1437.60
Profit before Interest, Depreciation and Tax 319.01 238.35 156.34 145.23
Finance Charges 7.76 8.83 0.96 6.56
Depreciation 15.24 18.01 6.51 10.19
Profit before Tax 296.01 211.51 148.87 128.48
Provision for Taxation: Current 65.94 20.99 12.37 10.14
Deferred 2.36 15.41 3.74 (2.55)
Net Profit after Tax 227.71 175.11 132.77 120.90
Profit available for appropriation 490.80 352.42 371.61 328.16
Appropriations
Interim Dividend (includes tax on dividend) 79.13 51.15 79.14 51.15
Proposed Dividend (includes tax on dividend) 38.16 26.08 38.16 26.08
Transfer to General Reserve 13.28 12.09 13.28 12.09
Balance of Profit carried forward to next year 360.23 263.10 241.03 238.84
Performance
The consolidated revenue of the Company was Rs. 7784 crores as against Rs. 4412 crores in the previous year. The
consolidated profit before tax was Rs. 296 crores as against Rs. 212 crores in the previous year.
The gross revenue and profit before tax of the Parent Company were Rs. 1967 crores and Rs. 149 crores respectively.
The gross revenue and profit before tax for the previous year were Rs.1522 crores and Rs.128 crores respectively.
Your Directors are pleased to recommend final Dividend @ 100% on the fully paid-up equity shares of Rs.2/- each for the
financial year ended on 30th June, 2005. During the first nine months, three interim (quarterly) dividends of 70% each
were declared taking the total dividend for the year 2004-05 to 310 %.
Infoprocessing Business:
Your Company, in its true leadership style, stood up and took on the challenges and opportunities and performed like never
before. It consolidated its position as India’s leading IT infrastructure hardware and services vendor.
The latest annual IDC Report placed your Company at Number one in the Desktop PC segment for the year 2004, thus
making it the most preferred PC brand in the country. Your Company led the market with a market share of 13.7 %, up from
9.2% in the year 2003, thus maintaining its leadership position for the fifth year in a row.
On the consumer PC front, the Company launched several new models including the announcement of a new PC ‘EzeeBee
Pride’ at a very affordable price of Rs. 12,990. Your Company initiated a number of large consumer contact programs to
scale up the volumes during festive seasons.
The Company in a first of its kind program in the country, launched PCs on an installment scheme of just Rs. 499 a month,
bringing a computer within the reach of a larger section of the middle income consumers in our country. The Company also
announced the launch of the Six in One PC, a product that offers upto six users to a system. This new desktop solution
allows users to efficiently utilize the power of the PC to be shared by multiple users.
On the System Integration front, the Company successfully completed the rollout and commissioning of the country’s
largest Internet backbone network for Bharat Sanchar Nigam Limited (BSNL).
During the course of the year, the Company strengthened its product offering, its sales & services network towards tapping
the growing ICT market.
Imaging & Communications Business (HCL Infinet)
The year has seen your Company launch several new products and services in the field of Imaging and Communications.
Among the many products launched are the Toshiba LCD TV’s, Ericsson range of solutions for Business conferencing,
Broadband and Mini Link Radio. It launched complete end-to-end solutions for IP telephony and Global IP VPN services.
HCL continued to lead in the various product categories that we take to market. IDC Survey 2005 has rated HCL – Toshiba
12
DIRECTORS’ REPORT
as No. 1 in the sales of A3 MultiFunction Devices for the year 2004-2005. The Company also maintained lead position in
Infocus & Toshiba Multimedia projectors in India with a total market share of 35% (Source: PMA Feb 2005)
In the GSM handset distribution business, the Company leveraged its distribution network strength to introduce a slew of
new handset models at various price points. It upgraded and strengthened its support network for phones, all this contributing
to the increase in market share of Nokia GSM phones.
Quality Initiatives
During the year 2004-05 under review significant milestones were achieved on the quality initiatives front.
Annual Customer Satisfaction Survey for all our business divisions was conducted. Apart from getting the highest response
rate in the surveys over the last 5 years, we also got the highest Customer Satisfaction levels. Customer loyalty has
improved, with more than 76% customers rating ‘Very Likely’ to continue to purchase products from the Company. Similarly
in other areas like product quality, delivery of machines and support the customers have given the Company the highest
ratings over the last 5 years.
Your Company is continuing to send Machine Uptime Status Reports to our Key Customers. The support reach across the
country of the Company has increased to more than 260 locations and your Company continues to be ranked No. 1 in PCs.
Employee Stock Option Plan
Employees Stock Option Plan 2000
Pursuant to the approval of the shareholders at the Extra-Ordinary General Meeting held on 25th February, 2000 for grant
of options to the employees of the Company and its subsidiaries (the ESOP 2000), the Board of Directors had approved the
grant of 30,18,000 options including the options that had lapsed out of each grant.
Employees Stock Based Compensation Plan 2005
The shareholders of the Company have approved the Employees Stock Based Compensation Plan 2005 through a Postal
Ballot for grant of 33,35,487 options to the employees of the Company and its subsidiary. The Board of Directors has
granted 31,96,840 options (each option confers on the employee a right for five equity shares of Rs. 2/- each) at an
exercise price of Rs. 228.80 being the market price as specified in the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 on the date of grant.
Credit Ratings
The credit rating by ICRA continued at ‘A1+’ rating indicating highest safety to the Company’s Commercial Paper program
of Rs. 75 crores.
Fixed Deposits
As on June 30, 2005, 79 depositors whose deposits amounting to Rs.10,15,000/- had become due for repayment did not
claim their deposits. During the year net fixed deposits repaid amounted to Rs. 61,000/-.
There has been no delay in making the payment of Fixed Deposits on maturity and in fulfilment of the terms and conditions
of the Company’s scheme.
De-listing of Equity Shares
As approved by the shareholders the Company had made applications to the stock exchanges at Delhi, Chennai and Kolkata
for de-listing the equity shares of the Company from these stock exchanges. The equity shares of the Company were de-
listed from the Delhi Stock Exchange Association Limited and The Madras Stock Exchange Ltd. The application is under
process with the Calcutta Stock exchange Association Ltd, Kolkata.
The shares of the Company will continue to be listed at The Bombay Stock Exchange Limited and National Stock Exchange
of India Limited.
Directors
In accordance with the Articles of Association of the Company, Mr. R.P. Khosla, Mr. D.S. Puri and Mr. E.A. Kshirsagar,
Directors will retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-
appointment.
Mr.T.S.Purushothaman and Mr.Ravi Thumboochetty , retired as wholetime directors. Mr. Purushothaman and Mr. J.V.
Ramamurthy were co-opted as additional directors with effect from July 21, 2005 and August 11, 2005 respectively.
Mr. Purushothaman will hold office as non executive director and Mr. J.V. Ramamurthy will hold office as wholetime
director designated as Head of Operations with effect from the dates of their appointments. Mr. Purushothaman and Mr.
Ramamurthy will hold office till the conclusion of the forthcoming Annual General Meeting. The Company has received
notices under Section 257 of the Companies Act, 1956 from some members signifying their intentions to propose the
appointment of Mr. Purushothaman and Mr. Ramamurthy as Directors of the Company.
13
DIRECTORS’ REPORT
Your Directors while welcoming Mr. Ramamurthy on the Board place on record their sincere appreciation for the contributions
of the outgoing directors during their association with the Company.
Directors’ Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm:
a. that in the preparation of the annual accounts, the applicable accounting standards had been followed along with
proper explanation relating to material departures, if any
b. that appropriate accounting policies have been selected and applied consistently, and that the judgements and
estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as
at June 30, 2005 and of the profit of the Company for the said period;
c. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with
the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and
detecting fraud and other irregularities;
d. that the annual accounts have been prepared on a going concern basis.
Personnel
Industrial Relations during the period under review continued to be peaceful and harmonious. No man-day was lost due to
any Industrial dispute.
Your Company successfully participated in DMA Watson Wyatt Award for Excellence in Innovative HR Practices in 2004 &
was placed amongst the Top 10 companies.
Your Company also successfully participated in DQ Best Employer Survey 2004 and was ranked 11th.
Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies
(Particulars of Employees) Rules, 1975 forms part of this report. However as per the provisions of Section 219(1)(b)(iv) of
the Companies Act, 1956, the report and the accounts are being sent to all the members excluding the statement of
particulars under Section 217(2A). Any member interested in obtaining a copy of the statement may write to the Company.
Additional information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and
Outgo.
The additional information required in accordance with sub-section (1)(e) of Section 217 of the Companies Act, 1956,
read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules,1988, is appended to and
forms part of this report.
Particulars of subsidiary company
The Company has obtained permission from the Ministry of Company Affairs, Government of India, vide their letter No: 47/
41/2005-CL-III dated March 15, 2005 for not annexing the accounts of HCL Infinet Limited, the wholly owned subsidiary
of the Company.
The detailed annual accounts of the subsidiary are available at the Registered Office of the Company on any working day
to the shareholders requiring such information.
Acknowledgement
Your Directors wish to place on record their appreciation for the continued co-operation the Company received from various
departments of the Central and State Government, Bankers, Financial Institutions, Dealers, Partners and Suppliers and
also acknowledge the contribution made by the employees.
The Board also wish to place on record its gratitude to the valued Customers, Members and Investing public for their
continued support and confidence reposed in the Company.
AJAI CHOWDHRY
August 18, 2005 Chairman and Chief Executive Officer.
14
INFORMATION RELATING TO CONSERVATION OF ENERGY, R&D, TECHNOLOGY ABSORPTION AND INNOVATION, AND
FOREIGN EXCHANGE EARNINGS / OUTGO FORMING PART OF THE DIRECTORS’ REPORT IN TERMS OF SECTION 217
(1) (e) OF THE COMPANIES ACT, 1956.
A. Conservation of energy
The entire product range including Personal Computers, Servers & Peripherals are designed keeping in view the optimum
energy conservation. Several environment friendly measures have been adopted by the Company such as
1. Use of recycled materials in packaging.
2. Rain water harvesting.
3. Use of solar pasteurizing system for water purification instead of electrical heating.
4. Conservation of electrical energy by using natural day light with glare control measures in the factory thus avoiding
usage of tube lights and bulbs in the day time in the operations area.
5. Use of displacement ventilation, eliminating Air-conditioning in the operations area.
6. Automatic power shutdown of machines in the Reliability testing area once the testing is completed thus eliminating
excess electricity consumption for the testing of computers.
B. Research & Development
1. Specific areas in which R&D is carried out by the company:
company:
The Company has introduced a variety of winning solutions during the year
• To address the High Performance Computing market, the R&D function has enhanced HCL HPC Cluster Suit
with support for both 32 and 64 bit architectures on various platforms. The function has ported many industry
standard and open source software on this suit and bagged many orders from prestigious corporate, research
and academic institutions
• Introduced 6 in 1 PC which attaches 6 users to a single Desktop CPU cutting down the cost of PC / user.
• Introduced RP2, 6 to 8 hrs power backup solution for PC
• Developed Platform Independent Disaster Recovery software supporting both Windows and Linux, HCL Max
Value restoration s/w supporting backup of data on same Hard disk on a tape drive, CD writer, remote Hard Disk
or even in hidden partition in the same disk in Windows
The Peripherals Division of the Company has many models in the existing product range and a variety of new
products too.
In the CRT Monitors, the Peripherals Division of the Company released several models in 15”/17”/19” range and
some models were customized for OEMs also. In the 19” series, a Real Flat model HCM 985RFM was introduced.
Many of the models were certified at Semko, Sweden for MPR II compliance. In the TFT LCD Monitors range, the
Peripherals Division of the Company released LCD TV Display models to address both home and office environment.
In Plasma, 42” Plasma display was released to address various verticals.
In Thin Client range, the Peripherals Division of the Company released models in WINBee 3000/4000/5000 series
based on various embedded OS viz. WinCE, Linux, and WinXPe with a host of user preferred features. WINBee
4000 and WINBee 5000 were customized to suit Core Banking Requirements and largely address the Banking and
Insurance sector.
HCS 1600 is a 16 Port Console server which can be used for securely monitoring and managing multiple networking
devices and system console through serial ports. The system administrator can securely access the serial console
port of remote systems such as servers, Ras, routers, power management devices (UPS and power switches),
telecom equipments, network switches, firewalls and other serial accessible devices using LAN.
Various switches were introduced to cover the broader spectrum of networking requirements.
2. Benefits derived as a result of the above R&D:
The Company added more innovative features to its running Management S/W products for Servers and Desktops in
both Windows and Linux.
• Device Lock : Software lock for restricting access to USB Storage device, floppy drive, CD drive and logical drives.
When USB storage is locked user can use other USB devices
• HCL ‘s own IPMI solution for Server Management S/W in both Windows and Linux on various platforms
• Platform independent browser based software for receiving In band and Out of band alerts from Mother Board
• HCL SMART: Hard disk Monitoring tool supporting SATA, Proactive backup based on Pre failure alert to CD and
15
remote tape drive in Windows and Linux
• HCL Migration: aids the user to capture and restore the User, System and network setting and data from the old
machine to new machine
• HCL software Deployment is a software which will help to install software which has Microsoft software installer
setup remotely to a client machine from the administrator
• HCL Flash BIOS update (Remote): Flash the BIOS from on top of OS (Windows) from the administrator to the
remote client machine
• Monitor Information including serial no
For a Fortune100 Company in the USA, R&D of the Peripherals Division of the Company designed and developed two
serial communications cables with built-in embedded electronics for connecting Blood glucose Meters to the COMM /
USB ports of PCs. Both these products are manufactured as per the FDA prescribed Quality Systems Regulations and
are being exported to the USA.
The Peripherals Division of the Company also undertook many high-speed multi-layer PCB designs for various customers
and also augmented its EMI /EMC service setup to address wide spectrum of clients.
The following new products were introduced by CNC :
1. IP 41 rack for Tele-com applications.
2. Customised Projector rack for digital cinema theater.
3. Kiosk for E-Governance applications.
These solutions have contributed immensely to retain the leadership in PC sales, improved the figure in server sales, as
well as Laptops.
3. Expenditure on R & D :
(Rs./ Lacs )
Capital 7.31
Revenue 76.29
Total 83.60
C. Technology absorption, adaptation and innovation
The Company introduced a series of new products for its Server, Desktop, Workstation, Notebook, POS range of systems
under various brands like Infiniti Global Line, Infiniti Xcel Line, NetManager, Infiniti Challenger, Infiniti Pro, Infiniti
Orbital, Beanstalk, Busybee, EzeeBee, Infiniti Powerlite and BeePOS.
NEBS certified Ruggedised Servers are launched for Telecom applications. 8 way to 32 way Servers based on Intel
Itanium processors have been launched and the servers have the capability to run multiple Operating Systems together.
Launched servers with capabilities to handle any kind of memory errors by employing latest technologies – Memory
Sparing, Memory Mirroring, RAID memory and hot pluggability. New 4 way server based on Opteron processor is
introduced. Received certification from SAP for our servers confirming their superiority in terms of performance &
quality.
New range of Servers & Desktops launched based on latest technology processors having dual core. Introduced range of
systems based on 800FSB processors and supporting EM64T technology. Added 64 bit Operating System support for
Servers & Desktops with EM64T & AMD64 technology based processors. Range of systems supporting high speed PCI
Express bus technology and latest DDR2 memory technology are also launched.
New Sempron processor based Desktop range of products are introduced. Microsoft Windows XP Starter Edition operating
system, an unique offer, is added into product port folio. Systems supporting multiple Indian languages are launched.
In the arena of home entertainment, products are launched including Windows XP Media Center Edition 2005 operating
system. Many products & accessories added through various initiatives in the area of Digital Office, Digital Home &
Ergonomics.
Innovative products like desktops using low power, multiple users using same PC and rural power solution – RP2
systems using car battery for delivering 8 hours of power back up are introduced.
New range of Notebooks supporting Centrino Mobile Technology are also introduced.
D. Foreign exchange earnings / outgo
During the period under review, the Company’s earnings in foreign currency were Rs. 4700.88 Lacs (Previous Year Rs.
4227.36 lacs). The expenditure in foreign currency including imports during the year amounted to Rs. 99950.95 Lacs
(Previous year Rs. 67858.69 lacs).
16
The details of the options granted under the HCL Infosystems Ltd., Employee Stock Option Schemes as on 30th June,
2005 are given below:-
Pricing Formula The members of the Company at the Extra Subject to the approval of the members of
Ordinary General Meeting held on February the Company, the options would be granted
25, 2000 approved the exercise price as the at the market price on the date of grant or
price which will be not less than 85% of the such price as the Board of Directors may
fair market value of the shares on the date on determine in accordance with the
which the Board of Directors of the Company Regulations and Guidelines prescribed by
approved the Grant of such options to the the Securities and Exchange Board of India
employees or such price as the Board of or other relevant authority from time to time.
Directors may determine in accordance with For this purpose, the market price as
the regulations and guidelines prescribed by specified in the amended provisions of SEBI
SEBI. The members of the Company at the (Employee Stock Option Scheme and
Annual General Meeting held on October 21, Employee Stock Purchase Scheme)
2004, approved the amendment to the pricing Guidelines, 1999 and the regulations/
formula that the options granted but not yet guidelines prescribed by SEBI or any
exercised by the employees or options that relevant authority from time to time to the
would be granted in future, would be at the extent applicable.
market price on the date of grant. For this
purpose the market price as specified in the
amended provisions of SEBI (Employee Stock
Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999 and the
regulations / guidelines prescribed by the
Securities and Exchange Board of India or any
relevant authority, from time to time to the
extent applicable.
Options vested (i) For the options granted on Not yet vested
10-8-2000, 4,01,506 options
had been vested.
(ii) For the options granted on
28-1-2004, 3,65,152 options
had been vested.
Options exercised Out of the options granted in August, 2000 Not applicable
and January 2004, 12,97,026 and 2,29,869
options respectively were exercised.
17
Options lapsed The details of options lapsed are as under : Not applicable
Variance of terms of The market price has been defined to mean No variation made.
options the market price as specified in the amended
provisions of SEBI (Employee Stock Option
Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999 and the regulations/
guidelines prescribed by SEBI or any relevant
authority, from time to time to the extent
applicable.
Total number of Date of Options Grant price Date of Options Grant price
options in force Grant in force (Rs.) Grant in force (Rs.)
10/8/2000 84,894 289.00 13/8/2005 31,96,840 228.80
28/1/2004 9,87,304 538.15
25/8/2004 1,71,758 603.95
18/1/2005 2,72,950 809.85
15/2/2005 8,400 809.30
15/3/2005 57,416 834.40
15/4/2005 23,384 789.85
14/5/2005 17,400 770.15
15/6/2005 18,400 756.15
18
(iii) Identified NIL NIL
employees who were
granted options during
any one year equal to
or exceeding 1% of the
issued capital
(excluding outstanding
warrants and
conversions) of the
Company at the time of
grant.
Significant Assumptions
Dividend yield % 3.80% to 3.91%
Expected life 24 to 54 months
Risk free interest rates 6.02% to 6.69%
Volatility 47.68% to 68.28%
19
AUDITORS’ CERTIFICATE
We have examined the books and records of the HCL Infosystems Limited Stock Option Scheme 2000 and Employee Stock
based Compensation Plan 2005 (“The Scheme”) as produced before us and based on such books and records and
according to the information and explanations given to us, we hereby certify that HCL Infosystems Limited (“The Company”)
has implemented The Scheme in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines ,1999 and in conformity with the resolutions passed by the shareholders in the Extra-Ordinary General
Meeting of The Company held on February 25,2000 and through postal ballot, the results whereof declared on June
13, 2005.
V. Nijhawan
Membership Number F-87228
Partner
For and on behalf of
Place: New Delhi Price Waterhouse
Date: August 18, 2005 Chartered Accountants
20
REPORT ON CORPORATE GOVERNANCE
Some of the items discussed at the Board meetings are listed below :
1. Annual Business Plan.
2. Investments.
3. Review of operations of subsidiary.
4. Status of independence of directors.
5. Sub-division of the equity shares of the Company.
6. Delisting of the equity shares of the Company from The Delhi Stock Exchange Association Ltd.
7. Quarterly/ half yearly / annual financial results and dividend.
8. Employee Stock Option Scheme and matters related thereto.
The Committee met 3 times during the financial year 2004-2005 on the following dates: 25/8/2004, 18/01/2005,
& 19/4/2005 and all the members attended all three meetings.
a) Details of remuneration to all the directors for the period from 1/7/2004 to 30/6/2005:
(Rs./Lacs)
Name of Director Salary & Perquisites Performance Commission Sitting
Allowances linked bonus Fees
2003-2004 FICCI Auditorium, 1, Tansen Marg, New Delhi-110 001 21-10-2004 Thursday 10.00 A.M.
2002-2003 FICCI Auditorium, 1, Tansen Marg, New Delhi-110 001 25-11-2003 Tuesday 10.00 A.M.
2001-2002 FICCI Auditorium, 1, Tansen Marg, New Delhi-110 001 18-12-2002 Wednesday 10.00 A.M.
8. POSTAL BALLOT :
During the year, the ordinary/special resolutions contained in the notice dated April 19, 2005, were passed by the
members of the Company through Postal Ballot pursuant to Section 192A of the Companies Act, 1956 read with the
Companies (Passing of the Resolutions by Postal Ballot) Rules, 2001.
Mr. R.K. Pandey, Former Executive Director of the Delhi Stock Exchange Association Limited was appointed as Scrutinizer
for conducting the postal ballot process.
22
REPORT ON CORPORATE GOVERNANCE
As per the Report dated June 11,2005, submitted by Mr. R.K. Pandey, scrutinizer appointed for the Postal Ballot conducted
by the Company vide Notice dated April 19, 2005, the results of the postal ballot are as follows:-
All the five resolutions mentioned in the Postal Ballot Notice dated April 19, 2005 were duly approved with requisite
majority by the shareholders of the Company.
9. DISCLOSURES
RELATED PARTY TRANSACTIONS :
Related Party transactions are defined as transactions of the Company of material nature, with Promoters, the Directors
or the Management, their subsidiaries or relatives etc. that may have potential conflict with the interest of the Company
at large.
There are no material transactions during the year 2004-2005 that are prejudicial to the interest of the Company.
NON COMPLIANCE BY THE COMPANY, PENALTIES, STRICTURES :
The Company has complied with the requirements of the Stock Exchange/ SEBI/ any Statutory Authority on all matters
related to capital markets during the last three years. There are no penalties or strictures imposed on the Company by
Stock Exchange or SEBI or any statutory authorities relating to the above.
10. MEANS OF COMMUNICATION
a) At present quarterly results are sent to each household of shareholders.
b) The quarterly/half yearly and annual results are published in English and Hindi Newspapers and displayed on the
website of the Company – ‘www.hclinfosystems.in’ alongwith official news releases and presentations.
c) The Management Discussion and Analysis forms a part of the Annual Report.
23
REPORT ON CORPORATE GOVERNANCE
24
REPORT ON CORPORATE GOVERNANCE
A. Promoters’ holding
1. Promoters
- Indian Promoters 20,441,222 61.13%
- Foreign Promoters Nil
2. Persons acting in concert Nil
Sub Total 20,441,222 61.13%
B. Non-Promoters’ holding
3. Institutional Investors
a. Mutual Funds and UTI 2,172,129 6.50%
b. Banks, Financial Institutions, Insurance Companies (Central/
State Government Institutions/Non-government institutions) 1,134,049 3.39%
c. FIIs 6,283,337 18.79%
Sub Total 9,589,515 28.68%
4. Others
a. Private Corporate Bodies 395,838 1.18%
b. Indian Public 2,918,104 8.73%
c. NRI/OCBs 91,675 0.27%
d. Any other Nil Nil
Sub Total 3,405,617 10.19%
Grand Total 33,436,354 100.00%
25
AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF
CORPORATE GOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENT
26
AUDITORS’ REPORT
To
The Members of HCL Infosystems Limited
th
1. We have audited the attached Balance Sheet of HCL Infosystems Ltd, as at 30 June 2005, and the related Profit and
Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under
reference to this report. These financial statements are the responsibility of the company’s management. Our responsibility
is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report)
(Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of
‘The Companies Act, 1956’ of India (the ‘Act’) and on the basis of such checks of the books and records of the
company as we considered appropriate and according to the information and explanations given to us, we further
report that:
(i) (a) The company is maintaining proper records showing full particulars including quantitative details and
situation of fixed assets.
(b) The fixed assets are physically verified by the management in a cycle of one to three years, which in our
opinion, is reasonable having regard to the size of the company and the nature of its assets. Pursuant to the
programme, a portion of the fixed assets has been physically verified by the management during the year
and no material discrepancies between the book records and the physical inventory have been noticed.
(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed
assets has not been disposed of by the company during the year.
(ii) (a) The inventory, excluding stocks with third parties, has been physically verified by the management during
the year. In respect of inventory lying with third parties, these have substantially been confirmed by them.
In our opinion, the frequency of verification is reasonable.
(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable
and adequate in relation to the size of the company and the nature of its business.
(c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper
records of inventory. The discrepancies noticed on physical verification of inventory as compared to book
records were not material.
(iii) The company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other
parties covered in the register maintained under Section 301 of the Act.
(iv) In our opinion, there are adequate internal control procedures commensurate with the size of the company and
the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services.
Further, on the basis of our examination of the books and records of the company, and according to the
information and explanations given to us, we have neither come across nor have been informed of any continuing
failure to correct major weaknesses in the aforesaid internal control procedures.
(v) In our opinion and according to the information and explanations given to us, there are no transactions that
need to be entered into the register in pursuance of Section 301 of the Act. Accordingly clause (v) (b) of the
Companies (Auditor’s Report) Order, 2003 is not applicable to the Company for the current year.
(vi) In our opinion and according to the information and explanations given to us, the company has complied with
the directives issued by Reserve Bank of India and the provisions of Sections 58A and 58AA of the Act and the
Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. According
to the information and explanations given to us, no Order under the aforesaid Sections has been passed by the
Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other
Tribunal on the company.
(vii) In our opinion, the company has an internal audit system commensurate with its size and nature of its business.
27
AUDITORS’ REPORT
(viii) We have broadly reviewed the books of account maintained by the company in respect of products where,
pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been
prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie,
the prescribed accounts and records have been made and maintained. We have not, however, made a detailed
examination of the records with a view to determine whether they are accurate or complete.
(ix) (a) According to the information and explanations given to us and the records of the company examined by us,
in our opinion, the company is generally regular in depositing the undisputed statutory dues including
provident fund, investor education and protection fund, employees’ state insurance, income-tax, sales-tax,
wealth tax, service tax, customs duty, excise duty, professional tax, cess and other material statutory dues
as applicable with the appropriate authorities.
(b) According to the information and explanations given to us and the records of the company examined by us,
the particulars of dues of sales-tax and excise duty as at June 30, 2005 which have not been deposited on
account of a dispute have been stated below.
(x) The company has no accumulated losses as at June 30, 2005 and it has not incurred any cash losses in the
financial year ended on that date or in the immediately preceding financial year.
(xi) According to the records of the company examined by us and the information and explanation given to us, the
28
AUDITORS’ REPORT
company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at
the balance sheet date.
(xii) The company has not granted any loans and advances on the basis of security by way of pledge of shares,
debentures and other securities.
(xiii) The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/societies are not
applicable to the company.
(xiv) In our opinion, the company is not a dealer or trader in shares, securities, debentures and other investments.
(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the
guarantees given by the company, for loans taken by others from banks or financial institutions during the year,
are not prejudicial to the interest of the company.
(xvi) In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans
have been applied for the purposes for which they were obtained.
(xvii) On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the
information and explanations given to us, there are no funds raised on a short-term basis which have been used
for long-term investment.
(xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register
maintained under Section 301 of the Act during the year.
(xix) The company has not issued any debentures which have remained outstanding at the year-end.
(xx) The company has not raised any money by public issues during the year.
(xxi) During the course of our examination of the books and records of the company, carried out in accordance with
the generally accepted auditing practices in India, and according to the information and explanations given to
us, we have neither come across any instance of fraud on or by the company, noticed or reported during the year,
nor have we been informed of such case by the management.
4. Further to our comments in paragraph 3 above, we report that:
(a) We have 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 appears
from our examination of those books;
(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement
with the books of account;
(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report
comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;
(e) On the basis of written representations received from the directors, as on June 30,2005 and taken on record by
the Board of Directors, none of the directors is disqualified as on June 30,2005 from being appointed as a
director in terms of clause (g) of sub-section (1) of Section 274 of the Act;
(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial
statements together with the notes thereon and attached thereto give in the prescribed manner the information
required by the Act and give a true and fair view in conformity with the accounting principles generally accepted
in India:
(i) in the case of the Balance Sheet, of the state of affairs of the company as at June 30,2005;
(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and
(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
V. NIJHAWAN
Partner
Membership Number F-87228
For and on behalf of
Place: New Delhi Price Waterhouse
Date: August 18, 2005 Chartered Accountants
29
BALANCE SHEET AS AT 30TH JUNE, 2005
2005 2004
Schedule Rs./Lacs Rs./ Lacs
Sources of Funds:
Shareholders’ Funds :
Capital 1 3343.65 3289.00
Loan Funds:
Secured Loans 3 5521.35 6903.70
Unsecured Loans 4 2610.39 233.45
Deferred Tax Liabilities (Net) 21(5) 681.41 307.73
52348.23 47285.45
Application of Funds:
Fixed Assets: 5
Gross Block 9526.41 10947.48
Less: Depreciation 4288.84 6035.17
Net Block 5237.57 4912.31
Capital Work-In-Progress 91.21 12.62
(Including Capital Advances) 5328.78 4924.93
81532.88 54090.69
Less:Current Liabilities
& Provisions 12
52348.23 47285.45
This is the Balance Sheet referred to The schedules referred to above form an integral part of
in our report of even date the Balance Sheet
For and on behalf of the Board of Directors
V.NIJHAWAN AJAI CHOWDHRY S. BHATTACHARYA
Partner Chairman and Director
Membership Number F-87228 Chief Executive Officer
For and on behalf of
Price Waterhouse
Chartered Accountants
Place : New Delhi K.R. RADHAKRISHNAN
Dated : 18th August, 2005 Company Secretary
30
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE, 2005
2005 2004
Schedule Rs./Lacs Rs./Lacs
Income
Business Income 13 196737.57 152203.09
Less : Excise Duty 3928.37 192809.20 10534.39 141668.70
Other Income 14 3148.07 2091.65
195957.27 143760.35
Expenditure
181070.24 130911.98
Appropriations:
Interim Dividend 6974.52 4534.01
Proposed Final Dividend 3346.94 2306.82
Tax on Interim Dividend 938.82 580.92
Tax on Proposed Final Dividend 469.41 301.47
Transfer to General Reserve 1327.66 1208.96
Balance Carried Over 24103.38 23883.98
37160.73 32816.16
Earning per equity share
Basic ( of Rs.2/- each) (in Rs.) 21 (22) 8.01 7.50
Diluted (of Rs.2/- each) (in Rs.) 21 (22) 7.51 7.01
Significant Accounting Policies 20
Notes to Accounts 21
This is the Profit and Loss Account The schedules referred to above form an integral part of
referred to in our report of even date the Profit and Loss Account
For and on behalf of the Board of Directors
V.NIJHAWAN AJAI CHOWDHRY S. BHATTACHARYA
Partner Chairman and Director
Membership Number F-87228 Chief Executive Officer
For and on behalf of
Price Waterhouse
Chartered Accountants
Place : New Delhi K.R. RADHAKRISHNAN
Dated : 18th August, 2005 Company Secretary
31
CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE, 2005
2005 2004
Rs./Lacs Rs./Lacs
1. Cash Flow from Operating Activities
Adjustments for:
Adjustments for:
Net cash from / (used in) Investing activities (B) 15661.29 (2169.16)
32
CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE, 2005
2005 2004
Rs./Lacs Rs./Lacs
Note -
The above Cash Flow Statement has been prepared under the indirect method set out in AS-3 issued by Institute of
Chartered Accountants of India.
This is the Cash Flow Statement For and on behalf of the Board of Directors
referred to in our report of even date
33
SCHEDULES TO THE BALANCE SHEET AS AT 30TH JUNE, 2005
2005 2004
Rs./Lacs Rs./Lacs
1- Capital
(Schedule-21, Note 19)
Authorised:
40,00,00,000 Equity Shares of Rs.2/- each
(2004 - 8,00,00,000 Equity shares of Rs.10/- each) 8000.00 8000.00
5,00,000 (2004-5,00,000) Preference Shares of Rs. 100/- each 500.00 500.00
8500.00 8500.00
1. The shareholders of the Company through postal ballot, results whereof declared on June 13, 2005 authorised the sub
division of Equity shares, in accordance with the provisions of Section 94 of the Companies Act, 1956. Accordingly,
each Equity share was sub-divided from face value of Rs. 10/- each into 5 Equity shares of face value of Rs. 2/- each.
2. The Company had fixed July 15, 2005 as the Record Date for determining the shareholders entitled to the sub-division
of the shares. The credit of Equity Share of Rs.2/- each has been given to respective beneficiary accounts of the
shareholders, holding shares in electronic form, by the depositories. For the Equity Shares held in physical form
new share certificate of face value of Rs. 2/- each is to be issued on receipt of the old share certificate of face value of
Rs. 10/- each. The Equity shares of the face value of Rs. 2/- each of the Company are being traded on stock exchange
since July 16, 2005.
3. Paid up share capital includes :
a) 5,04,47,295 Equity Shares of Rs. 2/- each (2004 - 1,00,89,459 Equity Shares of Rs. 10/- each) issued pursuant
to contract without payment being received in cash.
b) 5,31,82,765 Equity Shares of Rs. 2/- each (2004- 1,06,36,553 Equity Shares of Rs. 10/- each) bonus shares
issued from Share Premium Account.
c) 76,34,475 Equity Shares of Rs. 2/- each (2004- 9,80,414 Equity Shares of Rs. 10/- each) issued pursuant to the
exercise of options granted under ESOP Scheme 2000.
4. Out of the total paid up share capital, 8,30,19,205 Equity Shares of Rs. 2/- each (2004 - 1,66,03,841 Equity Shares
of Rs. 10/- each) are held by HCL Corporation Limited. During the year ended June 30, 2005, 27,32,405 equity shares
of Rs. 2/- each fully paid up were issued pursuant to the exercise of options granted under ESOP Scheme 2000.
Consequently, HCL Corporation Limited’s shareholding percentage reduced from 50.48% as on June 30, 2004 to
49.66% as on June 30, 2005.
34
SCHEDULES TO THE BALANCE SHEET AS AT 30TH JUNE, 2005
2005 2004
Rs./Lacs Rs./Lacs
3- Secured Loans
Loans and Advances from Banks:
Cash Credits 530.07 -
Foreign Currency loan
External Commercial Borrowings 554.61 1589.15
Others 436.67 2287.36
Term Loan
Foreign currency - 875.60
Others 4000.00 2151.59
5521.35 6903.70
a) Cash Credits along with non-fund based facilities and Foreign Currency Loans from Bank are secured by way of
hypothecation of stock-in-trade, book debts as first charge and by way of second charge on all the immovable and
movable assets of the Company. The charge ranks pari-passu amongst Bankers.
b) Term loan in Indian rupees from a Bank is secured by way of hypothecation of all movable assets subject to prior charge
in favour of Company’s bankers on book debts and stock in trade for working capital facilities.
c) Amount payable within one year from the Balance Sheet date is Rs.4991.28 Lacs (2004-Rs.6903.70 Lacs)
2005 2004
Rs./Lacs Rs./Lacs
4- Unsecured Loans
(Schedule-21, Note 20)
Public Deposits 10.15 10.76
Interest accrued and due 1.91 2.02
Short Term Loans and Advances:
- From Banks -Commercial Paper 2500.00 -
Other Loans and Advances:
- From a Financial Institution 59.72 146.74
Deferred Lease Obligations 38.61 73.93
2610.39 233.45
Notes:-
1) Amount payable within one year Rs.2593.39 Lacs (2004-Rs.63.94 Lacs)
2) Public Deposits include unclaimed matured deposits.
35
SCHEDULES TO THE BALANCE SHEET AS AT 30TH JUNE, 2005
5- Fixed Assets
(Schedule -21, Notes 1 & 8) Rs./Lacs
Tangible :
Land - Leasehold 398.96 252.41 - 651.37 20.30 9.87 - 30.17 621.20 378.66
Buildings 3626.22 146.79 0.60 3772.41 827.27 97.37 0.60 924.04 2848.37 2798.95
Plant & Machinery and 2476.91 252.27 1000.64 1728.54 1740.99 207.11 989.09 959.01 769.53 735.92
Air Conditioners
Furniture, Fixtures & 2966.77 384.81 530.09 2821.49 2420.88 315.49 512.54 2223.83 597.66 545.89
Office Equipment
Vehicles 218.32 34.10 20.25 232.17 145.19 25.46 18.86 151.79 80.38 73.13
Intangible :
TOTAL 10947.48 1070.38 2491.45 9526.41 6035.17 655.30 2401.63 4288.84 5237.57 4912.31
Previous Year 10056.27 1097.45 206.24 10947.48 5207.47 1023.56 195.86 6035.17
Notes :
1. Land - Freehold and Building at Ambattur amounting to Rs. 57.33 lacs (2004-Rs.101.01 lacs) and building at
Mumbai amounting to Rs.43.54 lacs (2004-Rs.43.54 lacs) are pending registration in the name of the Company .
2. Addition to Plant and Machinery includes Rs.Nil (2004- Rs.1.82 ) representing restatement of assets during the year
due to exchange rate fluctuation.
6- Investments
(Schedule -21, Notes 15)
Opening Purchased / Redemption Closing Face As at As at
Units Reinvested Units Units Value (Rs) 30.06.2005 30.06.2004
Units Rs.in Lacs Rs.in Lacs
Growth Options
36
SCHEDULES TO THE BALANCE SHEET AS AT 30TH JUNE, 2005
1950.68 6150.68
12277.44 28059.88
Note :- Net asset value of Unquouted (Others) Current Investments in Mutual Funds as on 30th Jun ’05 - Rs.10692.50 Lacs(2004- Rs.22367.08 Lacs)
37
SCHEDULES TO THE BALANCE SHEET AS AT 30TH JUNE, 2005
2005 2004
Rs./Lacs Rs./Lacs
7- Inventories
[Schedule-21, Note 8(c)]
Raw materials and Components ( Including in Transit ) 7793.60 6126.95
Stores and Spares 2987.10 2621.56
Finished Goods ( Including in Transit ) 7245.30 6506.15
Work-in-Progress 783.81 871.23
18809.81 16125.89
36992.01 29454.44
14582.65 4463.47
7942.35 1450.88
38
SCHEDULES TO THE BALANCE SHEET AS AT 30TH JUNE, 2005
2005 2004
Rs./Lacs Rs./Lacs
3206.06 2596.01
Current Liabilities:
Acceptances 19554.80 16838.51
Sundry Creditors
- Due to Subsidiary 41.83 188.75
- Due to SSI undertakings 130.36 146.87
- Others 11129.87 11302.06 12223.94 12559.56
41724.28 35902.18
Provisions:
46790.87 39790.05
* There is no amount due and outstanding to be credited to Investor Education and Protection Fund as at 30th June,
2005.These amounts shall be credited and paid to the fund as and when due.
39
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
13- Business Income
[Schedule-21, Note 8 (c)]
Sales and Related Income 184733.31 142148.56
Services 12004.26 10054.53
196737.57 152203.09
14- Other Income
Interest :
- Refund from Income Tax Authority 149.91 328.73
- Others 5.75 0.15
Dividend from (Others) Current Investments 12.17 268.11
Miscellaneous Income 242.77 253.54
Insurance Claims 21.10 1.71
Provisions/Liabilities no longer required written back 643.81 41.21
Profit on Sale of Fixed Assets (Net) 14.47 5.24
Profit on disposal of (Others) Current Investments (Net) 831.41 777.55
Profit on Foreign Exchange Fluctuation (Net) 1226.68 415.41
3148.07 2091.65
15- Cost of Sales and Services
[Schedule-21, Notes 8(b) & (c), 9,10 & 18]
Raw Materials & Components Consumed 97971.31 57775.14
Purchase of Finished Goods & Services 51822.22 50750.02
Stores and Spares Consumed 1227.05 1546.34
Power and Fuel 122.26 112.57
Labour and Processing Charges 280.01 381.73
Royalty 8880.07 6277.37
160302.92 116843.17
Closing Stock
- Finished Goods (Including in Transit) 7245.30 6506.15
- Work-in-progress 783.81 871.23
8029.11 7377.38
Opening Stock
- Finished Goods (Including in Transit) 6506.15 3546.86
- Work-in-Progress 871.23 487.68
7377.38 4034.54
(651.73) (3342.84)
159651.19 113500.33
16- Personnel
Salaries, Wages, Allowances, Bonus & Gratuity 9494.44 7161.42
Contribution to Provident Fund & Other Funds 387.07 281.26
Staff Welfare Expenses 531.03 548.89
Prior period expenses ( Allowances ) 62.00 -
10474.54 7991.57
Less : Operating Cost recovered 312.12 192.21
10162.42 7799.36
40
SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
17- Administration, Selling, Distribution and Others
Rent 504.81 495.31
Rates and Taxes 310.19 328.99
Printing and Stationery 230.45 219.05
Communication 540.23 472.29
Travelling and Conveyance 1345.52 1127.17
Packing, Freight & Forwarding 2411.15 1715.81
Legal and Professional 692.44 403.95
Training and Conference 144.27 137.01
Office Electricity and Water 281.95 261.91
Miscellaneous 1171.07 793.22
Insurance 298.79 242.20
Advertisement, Publicity & Entertainment
(Net of Reimbursements) 1057.71 472.61
Hire Charges 174.87 125.23
Commission on Sales 358.11 261.53
Bank Charges 678.65 587.61
Provision for Doubtful Debts 49.85 25.00
Fixed Assets Written Off 4.73 0.01
10254.79 7668.90
Less : Operating Cost recovered 228.04 193.14
10026.75 7475.76
504.74 477.24
Less : Operating Cost recovered 21.57 15.76
483.17 461.48
Interest paid :
- On Fixed Loans 225.46 512.67
- On Public Deposits - 0.07
- On Others 487.10 712.56 314.86 827.60
95.99 656.07
41
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
1. BASIS OF ACCOUNTING
The financial statements are prepared on mercantile basis under the historical cost convention in accordance with the
Generally Accepted Accounting Principles in India and comply with the mandatory Accounting Standards issued by
the Institute of Chartered Accountants of India.
2. FIXED ASSETS
Fixed Assets including in-house capitalisation and Capital Work-in-Progress are stated at cost except those which are
revalued from time to time on the basis of current replacement cost / value to the Company, net of depreciation.
Assets taken on finance lease on or after 1.4.2001 are stated at fair value of the assets or present value of minimum
lease payments whichever is lower.
3. DEPRECIATION
(i) Depreciation has been calculated under Straight Line Method on:
a) Buildings capitalised prior to 1.5.1986 at the rates computed in the respective years of acquisition of those
assets as per Section 205(2)(b) of the Companies Act, 1956.
b) Assets acquired on or after 1.5.1986 and before 16.12.93 on a prorata basis at the rates specified in
Schedule XIV of the Companies (Amendment) Act, 1988. These assets are subject to annual technical
evaluation for their economic useful life and additional depreciation is charged if there is any reduction in
economic useful life as re-evaluated.
c) Assets acquired on and after 16.12.1993 on a prorata basis based on economic useful life determined by
way of periodical technical evaluation. Economic useful lives which are not exceeding those stipulated in
Schedule XIV of the Companies Act, 1956 are as under:
(d) The assets taken on finance lease on or after April 1, 2001 over their expected useful lives.
(ii) Leasehold land, premises and improvements are amortised over the primary lease period.
(iii) Intangible Assets are amortised over a period of 1-3 years.
4. INVESTMENTS
Long-term investments are stated at cost of acquisition inclusive of expenditure incidental to acquisition. Any decline
in the value of the said investment, other than a temporary decline, is recognised and charged to Profit and Loss
Account.
Income from investments (Dividend Option) is recognised in the accounts in the year in which it is accrued.
5. INVENTORIES
Raw Materials and components held for use in the production of inventories are valued at cost if the finished goods in
which they will be incorporated are expected to be sold at or above cost. If there is a decline in the price of materials
/ components and it is estimated that the cost of finished goods will exceed the net realisable value, the materials/
components are written down to net realisable value measured on the basis of their replacement cost.
42
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Stores and Spares are valued at lower of cost and net realisable value. Adequate adjustments are made to the carrying
value for obsolescence.
Work in progress and Finished Goods are valued at lower of cost and net realisable value. Cost of Finished Goods and
Work in Progress includes direct labour and proportionate overhead expenses. Cost is determined on the basis of
weighted average.
Foreign currency monetary assets and liabilities are restated at the exchange rates prevailing at the year end and the
overall net gain/loss including those arising out of fluctuations in exchange rates on settlement during the period is
adjusted to the Profit and Loss Account, except in cases of liabilities relating to acquisition of fixed assets which are
adjusted in the cost of respective assets.
Foreign currency monetary assets and liabilities covered by forward contracts are stated at the forward contract rates
and the difference between the forward rate and the exchange rate at the inception of the forward contract is recognised
in the Profit and Loss Account over the life of the contract, except in cases of liabilities relating to acquisition of fixed
assets which are adjusted in the cost of respective assets.
8. REVENUE RECOGNITION
a) Sales, net of discount, are inclusive of excise duty and the related revenue is recognised (after providing for
expenses to be incurred connected to such sale) on transfer of all significant risks and rewards of ownership to the
customer and when no significant uncertainty exists regarding realisation of the consideration.
(b) Service income includes income
i) From maintenance of products and facilities under maintenance agreements and extended warranty, which
is recognised upon creation of contractual obligations rateably over the period of contract, where no significant
uncertainty exists regarding realisation of the consideration.
ii) From software services
(a) The revenue from time and material contracts is recognised based on the time spent as per the terms of
contracts.
(b) In case of fixed priced contracts revenue is recognised on percentage of completion basis. Foreseeable
losses, if any, on contract completion are recognised immediately.
9. GOVERNMENT GRANTS
Revenue grants, where reasonable certainty exists that the ultimate collection will be made are recognized on a
systematic basis in profit and loss statement over the periods necessary to match them with the related cost which
they are intended to compensate.
10. LEASES
a) Lease transactions entered into prior to April 1, 2001:
i) Assets leased out are stated at cost and amortised over the primary lease period.
ii) Lease rentals in respect to the assets taken/given on lease are recognised in the Profit and Loss Account on
accrual basis.
43
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences
between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using the enacted or substantially enacted tax rates as on the balance
sheet date. Deferred tax asset is recognized and carried forward when it is reasonably certain that sufficient taxable
profits will be available in future against which deferred tax assets can be realised.
44
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
1. Land and Buildings and certain Plant and Machinery were revalued by registered valuers’ after considering depreciation
upto that date on the governing principle of current replacement cost/value to the Company. The amounts added/
reduced on aforesaid revaluation were as under:
Rs./Lacs
Land 444.39
Buildings 643.81
Plant & Machinery (100.78)
Total 987.42
Less : Goodwill 570.00
Transferred to Revaluation Reserve 417.42
Less:
- Expenditure incurred on acquisition of business in 1992 86.31
- Loss on sale of Land 15.16
315.95
2. Estimated value of contracts remaining to be executed on capital account and not provided for (net of advances) are
Rs. 58.50 lacs (2004 - Rs. 7.38 lacs)
3. Contingent Liabilities:
* Against the above, the Company has deposited a sum of Rs. 110.61 Lacs (2004 - Rs. 2.49 Lacs)
b) Corporate Guarantee of Rs. 27450.00 lacs (2004 - Rs. 6950.00 lacs) was given to Banks for working capital
facilities sanctioned to the 100% subsidiary, against which total amount utilised is Rs. 19729.54 lacs (2004-
Rs. 3739.35 lacs).
c) Non fund based facilities amounting to Rs. 13.83 lacs (2004 - Rs. 20.30 lacs) related to the demerged business.
4 The company has the following warranty provision in the books of accounts:
Rs./lacs
The warranty provision has been recognised for expected warranty claims for the first year of warranty on products sold
during the year. Due to the very nature of such costs, it is not possible to estimate the timing / uncertainties relating
to the outflows of economic benefits.
From the current year the cost for warranty to be provided beyond one year will be accounted for as and when the
related warranty revenue amounting to Rs. 3364.09 lacs is recognised.
5. Taxation:
a) Provision for taxation has been computed by applying the Income Tax Act, 1961 to the profit for the financial year
ended 30th June, 2005, although the actual tax liability of the Company has to be computed each year by
reference to the taxable profit for each fiscal year ended 31st March.
b) The significant components and classification of deferred tax asset and liability on account of timing differences
are as follows:
45
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
6. There are no Small Scale Industrial Undertakings to whom the Company owes money where the dues are outstanding
for more than 30 days from the mutually agreed due dates as at the Balance Sheet date.
2005 2004
Rs./Lacs Rs./Lacs
Capital 7.31 85.66
Revenue 76.29 40.63
• Sales, Purchases, Opening and Closing stocks have been given in terms of values and/or, where ascertainable, in
numbers.
• Bought out Computers and certain peripherals have been included in the stock/sales of systems.
• Sales value are net of capitalisation of the Company’s products at cost-Rs.305.94 Lacs (2004 - Rs. 64.34 Lacs)
Note: Installed capacity being a technical matter has been certified by the management.
Nos. Value
Rs./Lacs
46
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
9. Value of imported and indigenous raw materials and components consumed during the year (excluding value of
consumption of stores and spares which is not readily ascertainable) classified on the basis of ratio between purchase
of imported and indigenous raw materials and components during the year:
2005 2004
Rs./Lacs % of Consumption Rs./Lacs % of Consumption
Note: Separate quantitative numbers of raw materials & components (including for resale) are not readily ascertainable.
47
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
15. Details of Investments purchased, reinvested and sold on various dates within the financial year are as follows.
Growth Options
Prudential ICICI Income Plan 10 2894610.337 560
HDFC Income Fund 10 6406525.756 1000
HDFC Liquid Fund 10 17289221.196 2250
HDFC High Interest Fund 10 841318.851 100
Kotak Bond 10 2933824.670 500
Kotak Liquid 10 3900528.601 512
Reliance Short Term Fund 10 6710187.280 753
Principal Cash Management Fund 10 3937128.576 500
Grindlays Dynamic Bond Fund 10 1025754.118 103
Prudential ICICI Liquid Fund 10 621372.740 100
Reliance Treasury Plan 10 947591.853 150
Grindlays Cash Fund 10 11843382.220 1425
Dividend Options
Templeton India TMA 1000 38161.301 577
DSP Merrill Lynch Floating Rate Fund 10 2219012.640 222
Grindlays Floating Rate Plan 10 9102157.441 919
Grindlays Cash Fund 10 945036.667 100
Templeton Floating Rate Income Fund 10 3295619.544 336
Reliance Liquid Fund 10 899914.894 100
*Represents total of transactions on account of renewals and reinvestments.
48
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
(I) Computation of net profit under Section 349 of the Companies Act, 1956.
2005 2004
Rs./Lacs Rs./Lacs
17. Unaccrued forward exchange cover as on 30th June, 2005 of Rs. 0.30 lacs (2004- Rs. 7.78lacs) has been included in
prepaid expenses.
18. Duty drawback recognised during the year of Rs. 576.27 lacs (2004 – Rs. 121.78 lacs) has been adjusted against
cost of sales and services.
19. Employee Stock Option Plan (ESOP)
a) ESOP 2000
Pursuant to the approval of the shareholders at the Extra-Ordinary General Meeting held on 25th February, 2000
for grant of options to the employees of the Company and its subsidiaries (the ESOP 2000), the Board of Directors
had approved the grant of following options including the grant of options that had lapsed out of each grant.
Subsequent to the sub-division of shares, the above grant of options confer a right to get five (5) equity shares of
Rs. 2/- each.
30,18,000 Options granted at the exercise price of Rs. 289 2005 2004
Options outstanding at the beginning of the year 401,506 2,108,500
Less: Exercised during the year 316,612 980,414
Lapsed during the year – 726,580
Options outstanding at the end of the year 84,894 401,506
49
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
50
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
B) Operating Lease:
(i) The Company has taken various residential/commercial premises under cancellable operating leases. These leases
are normally renewable on expiry.
(ii) The rental expense in respect of operating leases is Rs. 504.81 Lacs (2004 - Rs. 495.31 Lacs)
a) Holding Company:
Subsidiary:
c) Other related parties with whom transactions have taken place during the year and/or balances exist:
Fellow Subsidiaries:
[Refer note 21(a)]
i) Directors:
Mr. Ajai Chowdhry
Mr. T.S. Purushothaman*
Mr. Ravi Thumboochetty**
Mr. J. V. Ramamurthy***
* Ceased to be whole time director w.e.f. 20th July 05
** Ceased to be whole time director w.e.f. 10th August 05
*** Appointed as whole time director w.e.f. 11th August 05
Note: All transactions with related parties have been entered into in the normal course of business.
51
SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Related Party Transactions for 12 months ended 30th June 2005 and Balances as on that date
(Rs./Lacs)
A. Transactions *Holding Company 100% Subsidiary Fellow Subsidiaries Associates Key Management Total
[See note 21(a)] [See note 21(c)] & Others Personnel
June 05 June 04 June 05 June 04 June 05 June 04 June 05 June 04 June 05 June 04 June 05 June 04
Sales & Related Income 15.57 0.13 243.63 234.84 3933.09 2916.01 40.21 128.25 4232.50 3279.23
Services 31.30 63.15 298.54 89.25 5.51 5.22 335.35 157.62
Other Income 98.93 108.39 98.93 108.39
Purchase of Goods 203.52 2673.66 7.21 40.44 210.73 2714.10
Purchase of Services 76.60 24.60 877.63 386.92 954.23 411.52
Donations Given 48.00 48.00
Impairment/Debts written off 3.74 2.17 3.74 2.17
Assets Purchased 8.20 15.60 8.20 15.60
Assets Sold 2.85 2.85
Remuneration 650.40 485.15 650.40 485.15
Reimbursements towards expenditure
a) Received 3.46 4.04 571.28 346.46 57.79 80.63 0.66 632.53 431.79
b) Made 2.43 5.47 5.85 0.66 8.56 3.09 19.88
B. Amount due to / from related parties Holding Company 100% Subsidiary FellowSubsidiaries Associate Key Management Total
[See note 21(a) [See note 21(c) & Others Personnel
Jun-05 Jun-04 Jun-05 Jun-04 Jun-05 Jun-04 Jun-05 Jun-04 Jun-05 Jun-04 Jun-05 Jun-04
* HCL Corporation Ltd. has ceased to be the holding company since 10th February 2005.
The earnings considered in ascertaining the Company’s EPS represent profit for the year after tax. Basic EPS is
computed and disclosed using the weighted average number of equity shares outstanding during the year. Diluted
earnings per share is computed and disclosed using the weighted average number of equity and dilutive equivalent
shares outstanding during the year, except when results would be anti dilutive.
Calculation of EPS:
*Consequent to the approval of the shareholders through postal ballot, results whereof declared on June 13, 2005,
each equity share of face value of Rs. 10/- were sub-divided into five equity shares of face value of Rs. 2/- each. 15th
July 2005 was fixed as record date for this purpose. The previous year weighted average number of equity shares and
diluted number of equity shares have been adjusted accordingly.
23. The Company is significantly operating in a single segment, hence segment reporting is not applicable.
52
24. Additional disclosure as per Clause 32 of the Listing Agreement
Disclosure of amounts at the year end and the maximum amount of loans/advances/investments outstanding during
the year ended 30th June, 2005.
a. Name Nil
b. Balance outstanding at the year end Nil
c. Maximum amount outstanding during the year ended 30th June, 2005 Nil
C. Loans and Advances in the nature of loans where no interest or interest below Section 372 A of Companies Act
is charged - Nil.
Loans given to employees under various schemes of the Company have been considered to be out of purview of
disclosure requirement.
D. Loans and Advances in the nature of loans to firms/Companies in which directors are interested-
Nil.
25. Previous year’s figures have been regrouped/recasted, where necessary, to conform to current year’s
presentation.
53
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
Registration Details
0 2 3 9 5 5 5 5
Sources of Funds 5 2 3 4 8 2 3 5 2 3 4 8 2 3
Generic Name of Three Principal Products/ Services of Company (as per monetary terms.)
54
AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
To,
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are prepared,
in all material respects, in accordance with an identified financial reporting framework and are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
3. We report that the consolidated financial statements have been prepared by HCL Infosystems Limited’s Management
in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements, issued by the
Institute of Chartered Accountants of India.
4. In our opinion and to the best of our information and according to the explanations given to us, the consolidated
financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:
(a) in the case of the consolidated balance sheet, of the consolidated state of affairs of HCL Infosystems Limited
and its subsidiary as at 30th June 2005;
(b) in the case of the consolidated profit and loss account, of the consolidated results of operations of HCL Infosystems
Limited and its subsidiary for the year ended on that date; and
(c) in the case of the consolidated cash flow statement, of the consolidated cash flows of HCL Infosystems Limited
and its subsidiary for the year ended on that date.
V. NIJHAWAN
Partner
Membership Number F-87228
For and on behalf of
Place: New Delhi Price Waterhouse
Date: 18th August, 2005 Chartered Accountants
55
CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE
2005 2004
Schedule Rs./Lacs Rs./Lacs
Sources of Funds:
Shareholders’ Funds :
This is the Balance Sheet referred to The schedules referred to above form an integral part of
in our report of even date the Balance Sheet
For and on behalf of the Board of Directors
V. NIJHAWAN AJAI CHOWDHRY S. BHATTACHARYA
Partner Chairman and Director
Membership Number F-87228 Chief Executive Officer
For and on behalf of
Price Waterhouse
Chartered Accountants
Place : New Delhi K.R. RADHAKRISHNAN
Dated : 18th August, 2005 Company Secretary
56
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
2005 2004
Schedule Rs./Lacs Rs./Lacs
Income
Business Income 13 778360.81 441178.35
Less : Excise Duty 3928.37 774432.44 10534.39 430643.96
Other Income 14 5060.27 2892.22
779492.71 433536.18
Expenditure
Cost of Sales and Services 15 714092.73 386123.75
Personnel 16 14522.93 10861.64
Administration, Selling, Distribution and Others 17 18118.43 11826.23
Repairs and Maintenance 18 857.60 889.10
Finance Charges 19 776.13 882.68
Depreciation 1528.83 1806.03
Less : Transfer to Revaluation Reserve 4.58 1524.25 4.58 1801.45
749892.07 412384.85
Profit before Tax 29600.64 21151.33
Tax Expense 21 ( 4 )
-Current [Wealth tax Rs. 2.00 lacs (2004-Rs. 2.00 lacs)] 6510.59 2099.00
- Fringe Benefit 83.90 –
-Deferred 235.55 6830.04 1540.87 3639.87
This is the Profit and Loss Account The schedules referred to above form an integral part of
referred to in our report of even date the Profit and Loss Account
For and on behalf of the Board of Directors
V. NIJHAWAN AJAI CHOWDHRY S. BHATTACHARYA
Partner Chairman and Director
Membership Number F-87228 Chief Executive Officer
For and on behalf of
Price Waterhouse
Chartered Accountants
Place : New Delhi K.R. RADHAKRISHNAN
Dated :18th August, 2005 Company Secretary
57
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
Adjustments for:
Depreciation 1524.25 1801.45
(Profit)/Loss on sale of Fixed Assets (Net) (15.81) (3.71)
(Profit)/Loss on disposal of Investments (Net) (850.53) (795.58)
Interest on borrowings 776.13 882.68
Interest and Dividend income (688.10) (1321.14)
Unrealised (Gain) / Loss on Foreign Exchange
Fluctuation (Net) (55.41) 240.80
Prior period expenses (62.00) -
Provision for Doubtful Debts 144.23 148.01
Liabilities no longer required written back (839.71) (70.72)
Diminution in the value of Current Investments 0.53 -
Fixed Assets written off 4.73 (61.69) 0.01 881.80
Operating profit before Working Capital Changes 29538.96 22033.13
Adjustments for:
58
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
Note -
The above Cash Flow Statement has been prepared under the indirect method set out in AS-3 issued by Institute of
Chartered Accountants of India.
This is the Cash Flow Statement For and on behalf of the Board of Directors
referred to in our report of even date
59
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
1- Capital
(Schedule-21, Note 5)
Authorised:
40,00,00,000 Equity Shares of Rs. 2/- each (2004 - 8,00,00,000
Equity shares of Rs. 10/- each) 8000.00 8000.00
5,00,000 (2004 - 5,00,000) Preference Shares of Rs. 100/- each 500.00 500.00
8500.00 8500.00
Notes:-
1 The shareholders of the Company through postal ballot, results whereof declared on June 13, 2005 authorised the sub division of
Equity shares, in accordance with the provisions of Section 94 of the Companies Act, 1956. Accordingly, each Equity share was sub-
divided from face value of Rs. 10/- each into 5 Equity shares of face value of Rs. 2/- each.
2 The Company had fixed July 15, 2005 as the Record Date for determining the shareholders entitled to the sub-division of the shares.
The credit of Equity Share of Rs. 2/- each has been given to respective beneficiary accounts of the shareholders, holding shares in
electronic form, by the depositories. For the Equity Shares held in physical form new share certificate of face value of Rs. 2/- each is
to be issued on receipt of the old share certificate of face value of Rs. 10/- each. The Equity shares of the face value of Rs. 2/- each
of the Company are being traded on stock exchange since July 16, 2005.
3 Paid up share capital includes :
a) 5,04,47,295 Equity Shares of Rs. 2/- each (2004 - 1,00,89,459 Equity Shares of Rs. 10/- each) issued pursuant to contract
without payment being received in cash.
b) 5,31,82,765 Equity Shares of Rs. 2/- each (2004 - 1,06,36,553 Equity Shares of Rs. 10/- each) Bonus shares issued from
Share Premium Account.
c) 76,34,475 Equity Shares of Rs. 2/- each (2004 - 9,80,414 Equity Shares of Rs. 10/- each) issued pursuant to the exercise of
options granted under ESOP Scheme 2000.
4 Out of the total paid up share capital, 8,30,19,205 Equity Shares of Rs. 2/- each (2004 - 1,66,03,841 Equity Shares of Rs. 10/-
each) are held by HCL Corporation Limited. During the year ended June 30, 2005, 27,32,405 equity shares of Rs. 2/- each fully paid
up were issued pursuant to the exercise of options granted under ESOP Scheme 2000. Consequently, HCL Corporation Limited’s
shareholding percentage reduced from 50.48% as on June 30, 2004 to 49.66% as on June 30, 2005.
60
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
3- Secured Loans
Loans and Advances from Banks:
- Cash Credits 530.07 –
- Foreign Currency Loan
External Commercial Borrowings 554.61 1589.15
Others 436.67 2287.36
- Term Loan
Foreign currency Loan – 875.60
Others 4000.00 2151.59
5521.35 6903.70
a) Cash Credits along with non-fund based facilities, Foreign Currency Loans and Foreign Currency Term Loan from Banks
by the Parent are secured by way of hypothecation of stock-in-trade, book debts as first charge and by way of second
charge on all the immovable and movable assets of the Parent Company. The charge ranks pari-passu amongst Bankers.
b) Term loan in Indian rupees from a Bank taken by the Parent Company is secured by equitable mortgage on all the
immovable assets of the Parent Company and hypothecation of all movable assets subject to equitable mortgage of
specific assets under term loan from another bank and prior charge in favour of Company’s bankers on book debts and
stock in trade for working capital facilities. Term loan from another Bank by the Parent is secured by equitable mortgage
on specific assets.
c) Amount payable within one year from the Balance Sheet date is Rs. 4991.28 Lacs (2004 - Rs. 6903.70 Lacs)
2005 2004
Rs./Lacs Rs./Lacs
4- Unsecured Loans
(Schedule-21, Notes 6)
Public Deposits 10.15 10.76
Interest accrued and due 1.91 2.02
Short Term Loans and Advances:
- From Banks -Commercial Paper 2500.00 –
Other Loans and Advances:
- From a Financial Institution 59.72 146.74
Deferred Lease Obligations 38.61 138.97
2610.39 298.49
Notes:-
1) Amount payable within one year is Rs. 2593.39 Lacs (2004 - Rs. 128.29 Lacs )
2) Public Deposits include unclaimed matured deposits.
61
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE
5- Fixed Assets
(Schedule - 21, Note 2) Rs./Lacs
Tangible:
Land - Leasehold 398.96 252.41 — 651.37 20.30 9.87 — 30.17 621.20 378.66
Land - Freehold 379.76 — 59.33 320.43 — — — — 320.43 379.76
Buildings 3673.56 146.79 0.60 3819.75 828.52 98.22 0.60 926.14 2893.61 2845.04
Plant & Machinery and 5756.54 723.06 1004.18 5475.42 3809.57 897.16 989.09 3717.64 1757.78 1946.97
Air Conditioners
Furniture, Fixtures & 3504.15 519.52 536.14 3487.53 2685.12 449.60 515.47 2619.25 868.28 819.03
Office Equipment
Vehicles 223.75 34.10 20.25 237.60 147.47 26.76 18.86 155.37 82.23 76.28
Intangible :
Acquired Software 1103.66 — 880.54 223.12 1103.66 — 880.54 223.12 — —
License Fees — 1000.00 — 1000.00 — 47.22 — 47.22 952.78 —
TOTAL 15040.38 2675.88 2501.04 15215.22 8594.64 1528.83 2404.56 7718.91 7496.31 6445.74
Previous Year 13470.19 1801.17 230.98 15040.38 6988.40 1806.03 199.79 8594.64
Notes :
1. Land - Freehold and Building at Ambattur amounting to Rs. 57.33 lacs (2004-Rs. 101.01 lacs) and Building at Mumbai amounting to Rs. 90.88 lacs (2004 - Rs. 90.88 lacs) are pending
registration in the name of the Group .
2. Addition to Plant and Machinery includes Rs. 0.69 Lacs (2004 - Rs. 2.88 Lacs ) and Capital Work-In-Progress Rs. Nil (2004 - Rs. 0.73 Lacs ) representing restatement of assets during the
year due to exchange rate fluctuation.
6- Investments
Opening Purchase Redemption Closing Face 2005 2004
Units /Reinvest Units Units Value (Rs) Rs. in Lacs Rs. in Lacs
Unquoted (Others) Current :
Growth Options
Birla Cash Fund 1300465 – 1300465 – 10.00 – 225.00
Birla Floating Rate Fund - Long Term – 4183930 – 4183930 10.00 450.00 –
Deutsche Floating Rate Fund 5008219 – 5008219 – 10.00 – 516.30
Deutsche Premier Bond Fund 884877 – 884877 – 10.00 – 98.12
DSP Merrill Lynch Bond Fund 983628 2234443 3218070 – 10.00 – 200.00
DSP Merrill Lynch Liquidity Fund 3934839 18229669 22164508 – 10.00 – 603.49
DSP Merrill Lynch Short Term Fund 5879080 – 5879080 – 10.00 – 634.00
DSP Merrill Lynch Floating Rate Fund 3079868 4601806 - 7681674 10.00 825.00 325.00
Grindlays Cash Fund 7137082 87874020 87032835 7978267 10.00 1000.00 850.00
Grindlays Dynamic Bond Fund 20141503 – 20141503 – 10.00 – 2138.32
Grindlays Floating Rate Fund - Long Term 2358869 20633398 11057342 11934925 10.00 1205.44 250.00
Grindlays Floating Rate Fund - Short Term – 446030 – 446030 10.00 50.00 –
Grindlays Super Saver Income Fund - IP 6095319 – 6095319 – 10.00 – 879.02
Grindlays Super Saver Income
Fund - Short Term 6214319 – 6214319 – 10.00 – 750.00
Grindlays Super Saver Medium Term Fund 6394887 – 6394887 – 10.00 – 650.00
HDFC Floating Rate Fund - Short Term 5596545 9170592 10177229 4589908 10.00 503.75 600.00
HDFC Institutional Plan -
Cash Management Fund 4179122 – 4179122 – 10.00 – 547.44
HSBC Cash Fund - Institutional 5777355 53955907 56633174 3100088 10.00 350.00 625.00
HSBC Income Fund - Short Term – 4526398 – 4526398 10.00 515.00
JM Floating Rate Fund - Long Term – 994085 – 994085 10.00 100.00 –
Kotak Dynamic Income Plan 4572838 – 4572838 – 10.00 – 464.98
Prudential ICICI Blended Plan – 5000000 – 5000000 10.00 500.00 –
Prudential ICICI Flexible Income Plan 16310812 – 16310812 – 10.00 – 1842.76
62 (Contd.)
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE
Prudential ICICI Floating Rate Plan 11786732 20165206 21832903 10119035 10.00 1064.65 1250.00
Prudential ICICI Income Plan 1565051 4756179 6321230 – 10.00 – 281.53
Prudential ICICI Liquid Plan 12653943 68558284 74281698 6930529 10.00 1148.65 1972.07
Prudential ICICI Short Term Plan – 13197876 8716523 4481353 10.00 565.00 –
Prudential ICICI Very Cautious Plan 500000 – 500000 – 10.00 – 50.00
Reliance Fixed Maturity Plan 5020650 12618165 15121776 2517039 10.00 251.70 502.06
Reliance Floating Rate Fund – 992349 - 992349 10.00 100.00 –
Tata Floating Rate Fund Short Term 4898503 – 4898503 – 10.00 – 500.00
Tata Dynamic Bond Fund 947320 – 947320 – 10.00 – 99.51
Templeton Floating Rate Income
Fund - Long Term 22517971 3029189 15184992 10362168 10.00 1197.57 2591.97
Templeton India Income Builder 2350428 2169717 4520145 – 10.00 – 411.37
Templeton India Short Term – 40932 – 40932 10.00 500.00
Templeton Treasury Management A/c 7897 – 7897 – 1000.00 – 125.38
Dividend Options – –
Templeton India Liquid Fund 5753271 – 5753271 – 10.00 – 575.33
Prudential ICICI Fixed Maturity Plan 8500000 4079883 12579883 – 10.00 – 850.00
JM Fixed Maturity Plan 5005536 – 5005536 – 10.00 – 500.55
Principal Cash Management Liquid Fund – 72041998 62034479 10007519 10.00 1000.85 –
ABN AMRO Cash Fund – 40097536 30052069 10045467 10.00 1004.55 –
Grindlays Cash Fund – 29220100 14389345 14830755 10.00 1512.23
Templeton Mutual Fund Collection A/c – 50083 – 50083 1000.00 501.27 –
14345.66 21909.20
Note :- Net asset value of Unqouted (Others) Current Investment in Mutual Funds as on 30th Jun ’05 is Rs. 14712.00 Lacs (2004 -
Rs. 22367.08 Lacs)
63 (Contd.)
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
7- Inventories
34939.32 28042.02
53239.10 41643.22
25077.39 14523.22
Note:- Fixed Deposit includes Rs. 6.86 Lacs (2004-Rs.6.86 Lacs) under lien as margin money on bank guarantee.
64
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
4567.25 2520.78
Current Liabilities:
Acceptances 24179.69 20670.00
Sundry Creditors :
- Due to SSI Undertakings 130.36 146.87
- Others 40878.63 41008.99 33759.56 33906.43
Sundry Deposits 271.26 286.05
Interest accrued but not due :
- On Secured Loans 4.03 182.32
- On Unsecured Loans 1.26 0.88
Investor Education and Protection Fund :
- Unclaimed Dividend* 146.38 99.15
Advances from Customers 1247.30 1556.32
Other Liabilities 4286.72 3205.40
Unaccrued Revenue 9658.20 5363.87
80803.83 65270.42
Provisions:
Proposed Final Dividend 3346.94 2306.82
Tax on Proposed Final Dividend 469.41 301.47
Provision for Tax [Net of Advances Rs. 10020.84 Lacs
(2004 - Rs. 4523.09 Lacs )] 340.23 360.88
For Warranty Liability 296.78 661.52
For Gratuity and other Employee Benefits 1004.78 818.90
5458.14 4449.59
86261.97 69720.01
* There is no amount due and outstanding to be credited to Investor Education and Protection Fund as at 30th June,2005.
These amounts shall be credited and paid to the fund as and when due.
65
SCHEDULES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
13- Business Income
Sales and Related Income 754652.42 422285.60
Services 23708.39 18892.75
778360.81 441178.35
718826.88 386236.51
(Increase)/Decrease in stocks of
Finished Goods & Work-In-Progress :
Closing Stock
- Finished Goods (Including in Transit) 22060.79 17239.22
- Work-In-Progress 783.81 871.23
22844.60 18110.45
Opening stock
- Finished Goods (Including in Transit) 17239.22 17510.01
- Work-In-Progress 871.23 487.68
18110.45 17997.69
(4734.15) (112.76)
714092.73 386123.75
66
SCHEDULES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
2005 2004
Rs./Lacs Rs./Lacs
16- Personnel
Salaries, Wages, Allowances, Bonus & Gratuity 13232.05 9843.98
Contribution to Provident Fund & Other Funds 540.71 376.52
Staff Welfare Expenses 688.17 668.47
Prior Period Expenses 62.00 –
14522.93 10888.97
Less : Operating Cost recovered – 27.33
14522.93 10861.64
Interest paid :
- On Fixed Loans 225.46 512.67
- On Public Deposits – 0.07
- On Others 550.67 369.94
67
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
2. FIXED ASSETS
Fixed Assets including in-house capitalisation and Capital Work-in-Progress are stated at cost except those which are
revalued from time to time on the basis of current replacement cost / value to the Company, net of depreciation.
Assets taken on finance lease on or after 1.4.2001 are stated at fair value of the assets or present value of minimum
lease payments whichever is lower.
3. DEPRECIATION
Depreciation has been calculated under Straight Line Method on:
(i) a) Buildings capitalised prior to 1.5.1986 at the rates computed in the respective years of acquisition of those
assets as per Section 205(2)(b) of the Companies Act, 1956.
b) Assets acquired on or after 1.5.1986 and before 16.12.93 on a prorata basis at the rates specified in
Schedule XIV of the Companies (Amendment) Act, 1988. These assets are subject to annual technical
evaluation for their economic useful life and additional depreciation is charged if there is any reduction in
economic useful life as re-evaluated.
c) Assets acquired on and after 16.12.1993 on a prorata basis based on economic useful life determined by
way of periodical technical evaluation. Economic useful lives which are not exceeding those stipulated in
Schedule XIV of the Companies Act, 1956 are as under:
(d) The assets taken on finance lease on or after 1st April, 2001 over their expected useful lives.
(ii) Leasehold land, premises and improvements are amortised over the primary lease period.
(iii) Intangible Assets are amortised over a period of 1-3 years.
(iv) The one-time licence fee capitalised is amortised equally over the balance period of license from the date of
payment of license fee.
4. INVESTMENTS
68
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
5. INVENTORIES
Raw Materials and components held for use in the production of inventories are valued at cost if the finished goods in
which they will be incorporated are expected to be sold at or above cost. If there is a decline in the price of materials/
components and it is estimated that the cost of finished goods will exceed the net realisable value, the materials/
components are written down to net realisable value measured on the basis of their replacement cost.
Work in Progress and Finished Goods are valued at lower of cost and net realisable value. Cost of Finished Goods and
Work in Progress includes direct labour and proportionate overhead expenses. Cost is determined on the basis of
weighted average.
Stores and Spares are valued at lower of cost and net realisable value. Adequate adjustments are made to the carrying
value for obsolescence.
6. FOREIGN CURRENCY
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transactions.
Foreign currency monetary assets and liabilities are restated at the exchange rates prevailing at the year end and the
overall net gain/loss including those arising out of fluctuations in exchange rates on settlement during the period is
adjusted to the Profit and Loss Account, except in cases of liabilities relating to acquisition of fixed assets which are
adjusted in the cost of respective assets.
Foreign currency monetary assets and liabilities covered by forward contracts are stated at the forward contract rates
and the difference between the forward rate and the exchange rate at the inception of the forward contract is recognised
in the Profit and Loss Account over the life of the contract, except in cases of liabilities relating to acquisition of fixed
assets which are adjusted in the cost of respective assets.
c) The Group has no further obligations beyond the yearly provisions and contributions.
8. REVENUE RECOGNITION
a) Sales, net of discount, are inclusive of excise duty and the related revenue is recognised (after providing for
expenses to be incurred connected to such sales) on transfer of all significant risks and rewards to the customer
and when no significant uncertainty exists regarding realisation of the consideration.
(b) Service income includes income
i) From maintenance of products and facilities under maintenance agreements, and extended warranty, which
is recognised upon creation of contractual obligations rateably over the period of contract, where no significant
uncertainty exists regarding realisation of the consideration.
ii) From software services
(a) The revenue from time and material contracts is recognised based on the time spent as per the terms of
contracts.
(b) In case of fixed priced contracts revenue is recognised on percentage of completion basis. Foreseeable
losses, if any, on contract completion are recognised immediately.
iii) Internet Access services: Revenue is recognised on the basis of actual usage of hours by the customer or over
the period of the validity of the pack based on the customer agreements.
iv) Virtual private networks: Revenue is recognised on proportionate basis over the period of contract with the
customer. One time charges recovered from the customers are recognised as revenue at the commencement
of service.
69
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
v) Technical help desk: The Group is engaged in providing technical and administrative help desk support to its
various customers through the Web. Revenue for the same has been recognised based on fulfilling obligations
as contracted in the respective agreements.
9. GOVERNMENT GRANTS
Revenue grants where reasonable certainty exists that the ultimate collection will be made are recognized on a
systematic basis in profit and loss statement over the periods necessary to match them with the related cost which
they are intended to compensate.
11. LEASES
a) Lease transactions entered into prior to April 1, 2001 by the parent and it’s Indian subsidiary:
i) Assets leased out are stated at cost and amortised over the primary lease period.
ii) Lease rentals in respect to the assets taken/given on lease are recognised in the Profit and Loss Account on
accrual basis.
b) Other lease transactions
i) Assets taken under leases where the Company has substantially all the risks and rewards of ownership are
classified as Finance leases. Such assets are capitalised at the inception of the lease at the lower of fair value
or the present value of minimum lease payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic
rate of interest on outstanding liability for each period.
ii) Assets taken on leases where significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Lease rentals are charged to the Profit and Loss Account on straight
line basis over the lease term.
iii) Profit on sale and leaseback transactions is recognised over the period of the lease
iv) Assets given under finance lease are recognised as receivables at an amount equal to the net investment in
the lease. Inventories given on finance lease are recognised as deemed sale at fair value. Lease income is
recognised over the period of the lease so as to yield a constant rate of return on the net investment in the
lease.
v) Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over
the lease term.
vi) Initial direct costs relating to the finance lease transactions are included as part of the amount capitalised as
an asset under the lease.
70
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
c) Assets and liabilities which arise as a result of operating activities of the segment are recognised in that segment.
Fixed Assets which are exclusively used by the segment or allocated on a reasonable basis are also included.
d) Unallocated assets and liabilities are those which are not attributable or allocable to any of the segments and
includes liquid assets like Investments, Bank Deposits and Non-attributable Cash and Bank balances.
e) Segment revenue resulting from transactions with other business segments is accounted on the basis of transfer
price which is at par with the prevailing market price.
71
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
1. The Consolidated Financial Statements have been prepared in accordance with the Accounting Standard (AS) 21 -
“Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India.
The subsidiary (which along with HCL Infosystems Ltd., the parent, constitute the Group), considered in preparation
of Consolidated Financial Statements is as under: -
30,18,000 Options granted at the exercise price of Rs. 289 2005 2004
Options outstanding at the beginning of the year 401506 2108500
Less:Exercised during the year 316612 980414
Lapsed during the year – 726580
Options outstanding at the end of the year 84894 401506
16,06,100 Options granted at the exercise price of Rs. 538.15 2005 2004
Options outstanding at the beginning of the year 1438524 –
Add: Granted during the year – 1511484
Less: Exercised during the year 229869 –
Lapsed during the year 221351 72960
Options outstanding at the end of the year 987304 1438524
72
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Date of grant Options granted Grant Price Options lapsed out of the grant
25/8/2004 2,26,118 Rs. 603.95 54,360
18/1/2005 2,91,860 Rs. 809.85 18,910
15/2/2005 23,920 Rs. 809.30 15,520
15/3/2005 60,216 Rs. 834.40 2,800
15/4/2005 23,384 Rs. 789.85 –
14/5/2005 17,400 Rs. 770.15 –
15/6/2005 20,960 Rs. 756.15 2,560
(b) Employees Stock Based Compensation Plan 2005
The shareholders of the Company have approved the Employees Stock Based Compensation Plan 2005 through
a Postal Ballot for grant of 3,335,487 options to the employees of the Company and its subsidiary. The Board of
Directors has granted 3,196,840 options (2004 – NIL) (each option confers on the employee a right for five
equity shares of Rs. 2/- each) at an exercise price of Rs. 228.80 being the market price as specified in the SEBI
(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 on the date of grant.
6. Leases:
(a) Finance Leases:
(i) Assets acquired under sale and leaseback arrangements comprise mainly computers and office equipment.
There are no exceptional/ restrictive covenants in the lease agreements.
(ii) The minimum lease rentals and its present value as at 30th June, 2005 in respect of assets acquired under
finance leases are as follows:
Total minimum Interest included in Present value of
lease payments minimum lease minimum lease
outstanding payments payments
Rs./Lacs Rs./Lacs Rs./Lacs
Not later than one year 40.28 2.54 37.74
(111.40) (11.73) (99.67)
0.88 0.01 0.87
Later than one year and not later than five years (41.87) (2.57) (39.30)
Total 41.16 2.55 38.61
(153.27) (14.30) (138.97)
Note: Previous year’s figures are given in brackets.
(iii) The Group has given on finance lease certain assets/inventories. These comprise computers and office
equipment. These leases have a primary period, which are fixed and non-cancellable. There are no exceptional/
restrictive covenants in the lease agreements.
(iv) The gross investment in the assets given on finance lease as at 30th June, 2005 and its present value as at
that date are as follows:
Total minimum Interest included in Present value of
lease payments minimum lease minimum lease
receivable payments payments
receivable receivable
Rs./Lacs Rs./Lacs Rs./Lacs
Not later than one year 2649.42 680.84 1968.58
(1208.07) (382.54) (825.53)
6865.71 1042.27 5823.45
Later than one year and not later than five years (1893.44) (457.97) (1435.47)
Total 9515.13 1723.11 7792.03
(3101.51) (840.51) (2261.00)
[includes minimum sub lease receivable Rs. 76.93 lacs (2004 - Rs. 184.86 lacs)]
Note: Previous year’s figures are given in brackets.
73
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
b) Operating Lease:
(i) Cancellable Operating leases
(a) The Group has taken various residential/ commercial premises under cancellable operating leases. These
leases are normally renewable on expiry.
(b) The rental expense in respect of operating leases is Rs. 890.40 lacs. (2004 - Rs. 796.37 lacs).
(ii) Non cancellable leases
a) The future minimum lease payments under non cancellable operating leases are:
Rs./Lacs
Not later than one year 23.14
(18.00)
Later than one year and not later than five years 92.16
–
Total 115.30
(18.00)
b) Lease Payments recognised in the Profit & Loss Account for the year ended 30th June, 2005.
Minimum Lease Payments 18.38
(18.00)
Contingent Rents –
Note: Previous year’s figures are given in brackets.
74
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Sales & Related Income 54.03 5.67 4352.54 3183.75 42.35 189.06 4448.92 3378.48
Services 1.00 945.21 881.85 6.35 5.87 952.56 887.72
Other Income 98.93 108.39 98.93 108.39
Demerger/Transfer of Business
Interest Income
Purchase of Goods 29.88 84.03 29.88 84.03
Purchase of Services 982.51 510.45 982.51 510.45
Donations Given 48.00 48.00
Impairment/Debts written off 3.74 2.17 3.74 2.17
Assets Purchased
Assets Sold
Remuneration 650.40 485.15 650.40 485.15
Reimbursements towards expenditure
a) Received 3.46 4.04 63.90 83.02 0.66 67.36 87.72
b) Made 2.43 5.47 0.84 16.54 3.27 22.01
Accounts Receivables 53.55 0.01 493.21 448.00 1.47 1.08 548.23 449.09
Loans & Advances & Other Recoverables 0.09 62.80 91.62 62.80 91.71
Creditors 138.17 90.82 138.17 90.82
Other Payables 0.04 57.36 81.04 4.43 8.00 8.00 65.40 93.47
8. Segment Reporting
a) The operations of Product & Related Services consists of sale of Computer Hardware & system integration products
and providing a comprehensive range of IT services, including system maintenance and facility management in
different industries.
b) Internet & Related Services include Internet related products & services consist of Internet Access services, Virtual
Private Network, other connectivity services and sale of related hardware.
c) The businesses of Office Automation, Telecom products and services consist of sale of telecommunication products,
office equipment products and related comprehensive maintenance services.
Secondary segmental reporting is based on the geographical location of the customers. Details of secondary segments
are not disclosed as more than 90% of the Company’s revenues, results and assets relate to the domestic market.
75
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Consolidated Segment wise performance for the year ended 30th June, 2005 Rs./Lacs
Primary Segments Product & Related Services Internet & Inter- Total
Computer Office Automation & Related segment
Systems Telecommunication Services Elimination
(i) Revenue
External Revenue 196469.94 577697.56 4193.31 778360.81
(151907.71) (284950.66) (4319.98) (441178.35)
Intersegment Revenue 267.63 231.94 129.90 -629.47 –
(295.38) (2726.6) (95.94) (-3117.92) –
Total Gross Revenue 196737.57 577929.50 4323.21 -629.47 778360.81
(152203.09) (287677.26) (4415.92) (-3117.92) (441178.35)
Less: Excise Duty 3928.37 3928.37
(10534.39) (10534.39)
Total Net Revenue 192809.20 577929.50 4323.21 -629.47 774432.44
(141668.7) (287677.26) (4415.92) (-3117.92) (430643.96)
(ii) Results 13782.60 14627.55 155.65 28565.80
(12298.98) (8325.34) (-194.87) (20429.45)
Less: Unallocable Expenditure 910.28
(746.17)
Operating Profit 27655.52
(19683.28)
Add: Other Income (Excluding gains on Exchange Rate Fluctuations and Other Operational Income) 1652.88
(1778.15)
Less: Interest (Net of interest income Rs. 1068.37 Lacs, Previous Year Rs. 572.57 Lacs) -292.24
(310.11)
Profit Before Tax 29600.64
(21151.32)
Less: Tax Expense
- Current 6510.59
(2099.00)
- Deferred 235.55
(1540.87)
- Fringe Benefit Tax 83.90
Profit After Tax 22770.60
(17511.45)
(iii) Segment Assets 78327.90 43725.30 2299.75 124352.95
(56897.41) (34893.33) (1723.2) (93513.94)
Unallocated Corporate Assets
a) Liquid Assets 25300.71
(25408.33)
b) Deferred Tax Assets 760.31
(591.24)
c) Others 929.37
(765.35)
Total Assets 151343.34
(120278.86)
(iv) Segment Liabilities 42467.52 38113.25 1334.34 81915.11
(36417.27) (28396.78) (1459.35) (66273.4)
Unallocated Corporate Liabilities
a) Current Liabilities 4346.86
(3446.61)
b) Deferred Tax Liabilities 1495.08
(1090.47)
c) Loan Funds 8131.74
(7202.19)
(78012.67)
76
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
*Consequent to the sub division of equity shares having a face value of Rs. 10 each to equity shares having a face
value of Rs. 2 each on 15th July 2005, the previous year weighted average number of equity shares and diluted
number of equity shares have been adjusted.
10. Previous year’s figures have been regrouped/recasted, where necessary, to conform to current year’s presentation.
77
Financial Summary of HCL Infinet Limited, a wholly owned subsidiary as at 30th June, 2005
78