To the Members,
The Directors have pleasure in presenting their Thirty First Annual Report, together with the Audited Accounts for the financial year ended 31st March, 2017.
_ (RS, in Crores)
2015-16 (9 Months)
2015-16 (9 Months)
Net Sales and other income
Profit before exceptional items Interest, Depreciation and Tax
Depreciation and Amortization
Profit before Tax
Provision for Taxation: Current
Deferred Tax Expenses / (Credit)
Net Profit after Tax (Before Minority Interest)
Net Profit after Tax (After Minority Interest)
In pursuance to the requirement of Section 2(41) of the Companies Act, 2013, the Company last year had changed its previous financial year to end on 31st March, 2016 i.e. from 1st July, 2015 to 31st March, 2016 (9 months). Hence, the figures for the current financial year (12 months) are not comparable with the figures of the previous year (9 months).
The consolidated net revenue of the Company for the year ended 31st March 2017 was Rs, 3,883.21 Crores as against Rs, 3,792.38 Crores during the previous year (9 months) ended 31st March, 2016. The consolidated loss before tax for the year ended, 31st March, 2017 was Rs, 292.67 Crores as against Rs, 219.08 Crores during the previous year (9 months) ended 31st March, 2016. The net revenue on standalone basis for the year ended, 31st March, 2017 was Rs, 2,312.97 Crores as against Rs, 2,572.43 Crores during the previous year (9 months) ended 31st March, 2016. The loss before tax for the year ended, 31st March, 2017 was Rs, 376.76 Crores as against Rs, 182.07 during the previous year (9 months) ended 31st March, 2016.
Your Board of Directors do not recommend any dividend for the year under review.
A detailed analysis and insight into the financial performance and operations of your Company for the year ended 31st March, 2017 is appearing in the Management Discussion and Analysis, forming part of the Annual Report. There has been no changes in the nature of business of the Company.
After closure of the financial year, the Board of Directors has given its approval for sale of DigiSchool Business undertaking of HCL Learning Limited, a wholly owned subsidiary, on a going concern basis.
Transfer to reserves
In view of losses, no amount is transferred to the general reserve.
Awards & Recognition
Your Company was felicitated with the CMO Asia Award for Brand Excellence in the ''''Telecom Service Category'''' for the second consecutive year. Your company was recognized for providing excellent end-to-end support services for various product categories across locations in India.
HCL Services won "Best Use of Lean Six Sigma: Field Services in IT" award at World Quality Congress Conference for significantly improving Customer Experience for a leading multi-national OEM. The lean Six Sigma project undertaken by HCL Services helped augment client relationship and loyalty, leading to increased business & profitability for the OEM. The Customer Experience compliance (CE) improved from 89% in Q4 FY16 to 92% in Q1 FY17, with Enterprise CE achieving a remarkable 100% CE in the same period.
Employee Stock Option Plan
Employee Stock Option Scheme 2000
Pursuant to the approval of the Shareholders at an Extraordinary General Meeting held on 25th February, 2000 for grant of options to the employees of the Company and its subsidiaries (the Scheme 2000), the Board of Directors had approved the grant of 31,90,200 options including the options that had lapsed out of each grant. Each option confers on the employee a right for five equity shares of ''''2/- each.
During the year under review, no shares were allotted under ESOP scheme 2000.
Employee Stock Based Compensation Plan 2005
Pursuant to the approval of Shareholders of the Company through a Postal Ballot, the result whereof was declared on 13th June, 2005, the Board of Directors had granted 33,35,487 options including the options that had lapsed out of each grant under the Employee Stock Based Compensation Plan 2005 (the Plan 2005). Each option confers on the employee a right for five equity shares of '''' 2/- each at the market price as specified in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, on the date of grant.
During the year under review, no shares were allotted under ESOP Plan 2005.
The credit rating by ICRA continued at ''''A1'''', indicating the very strong degree of safety regarding timely payment of financial obligations to the Company''''s Commercial Paper program of Rs, 300 crores.
The current long term rating assigned by India Rating to the Company is ''''A-'''', indicating adequate degree of safety regarding timely servicing of financial obligations.
Your Company has not accepted/renewed any deposits from the public during the year and there were no fixed deposits outstanding either at the beginning or at the end of the year.
The equity shares of your Company are listed at the BSE Limited, Mumbai (BSE) and National Stock Exchange of India Limited, Mumbai (NSE).
Stock Exchange where HCL Infosystems Ltd.'''' shares are listed
Scrip Symbol / Code
National Stock Exchange of India Ltd. (NSE)
BSE Ltd. (BSE)
The Company has paid the listing fee for the year 2017-2018 to BSE and NSE.
Directors and Key Managerial Personnel (KMP)
During the period under review, Mr. Sanjeev Sharma, the Independent Director, has resigned from the directorship of the Company w.e.f. 13th March, 2017. Dr. Pradeep Kumar Khosla, the another Independent Director, resigned from the directorship of the Company after closure of the financial year. The Board places on record its appreciation for the contributions made by the above Directors during their respective tenure as director with the Company.
In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Dilip Kumar Srivastava, retires from office by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. A brief resume, details of expertise and other directorships/committee memberships held by Mr. Srivastava, form part of the Notice convening the Thirty First Annual General Meeting.
The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013.
In terms of the provision of Section 149, 152(6) and other applicable provisions of the Companies Act, 2013, an Independent Director shall hold office up to a term of five consecutive years on the Board of the Company and shall not be liable to retire by rotation.
Committees of Board
Currently, the Board has 6 (Six) Committees: Accounts and Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility (CSR) Committee, Finance Committee and Technology Committee. A detailed note on Committees is provided in the Corporate Governance Report.
Board and Committees Evaluation
Pursuant to the provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a formal annual performance evaluation has been done by the Board of its own performance, the Directors individually as well as the evaluation of its Committees.
The Company had appointed an external agency to assist Nomination & Remuneration Committee (NRC) in drafting the questionnaires for the purpose of evaluation of the Board & the Individual Directors and the Board Committees. The structured questionnaires were circulated to all the Directors, requesting them to fill and return the duly filled questionnaires to the Company giving their views for evaluation of the self & the peers.
The feedback of the evaluation was shared by the Board Chairman with each Board members, the entire Board and the Board Committees and a roadmap was framed for taking the corrective actions on.
Independent Directors of the Company in their separate meeting held on 24th March, 2017 reviewed the performance of the Non-Independent Directors and the Board as a whole. They also reviewed the performance of the Chairperson of the Company.
Criteria/Policy on Appointment and Remuneration
The Board has, on the recommendation of the Nomination & Remuneration Committee (NRC) framed a criteria for appointment of Directors, Key Managerial Personnel/Senior Management. The Board has also adopted a remuneration policy for Directors, Key Managerial Personnel/ Senior
Management and other employees. The criteria/policy on appointment and remuneration are stated in the Corporate Governance Report.
During the financial year 2016-17, 8 (Eight) Board Meetings were held and the gap between two meetings did not exceed one hundred and twenty days. The details of Board Meetings held are stated in the Corporate Governance Report.
Corporate Social Responsibility (CSR)
A report on Corporate Social Responsibility (CSR) is attached as Annexure to this Report. The policy on CSR had been revised by the Board in its meeting held on 24th March, 2017 which can be accessed on the website of the Company.
Corporate Governance Report and Management Discussion and Analysis Statement
The Corporate Governance Report and the Management Discussion and Analysis Statement are attached and are to be read with the Directors'''' Report.
Insider Trading Regulations
As per the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company had adopted the ''''Code of Conduct for Internal Procedures and to Regulate, Monitor and Report Trading By Insiders'''' and the ''''Code of Fair Disclosure'''' w.e.f. 15th May, 2015.
Directors'''' Responsibility Statement
Pursuant to the requirement of Section 134(3)(c) of the Companies Act, 2013, and based on the representations received from the operating management, the Directors hereby confirm that:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis;
(e) the directors had laid down internal financial controls to be followed by the company and that such internal Financial controls are adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Particulars of Employees and related disclosures
The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:.
(a) The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year:
Ratio to median remuneration
Dr. Nikhil Sinha
Mr. V.N. Koura
Dr. Pradeep Kumar Khosla
Ms. Sangeeta Talwar
Mr. Kaushik Dutta
Mr. Dhirendra Singh
Mr. Pawan Kumar Danwar
Mr. Dilip Kumar Srivastava
Mr. Sanjeev Sharma*
Ms. Ritu Arora**
Ratio to median remuneration
Mr. Premkumar Seshadri
1. No sitting fees is paid to Executive Director and Non Independent Director.
(b) The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary in the financial year:
Mr. Premkumar Seshadri, Executive Vice Chairman & Managing Director is not paid any remuneration by the Company.
No remuneration, other than the sitting fees was paid to Non-Executive and Independent Directors, which continued to be paid @ ? 75,000/- per Board/ Board Committee meeting, as was paid during the year 2015-16.
*Mr. Sanjeev Sharma resigned from Directorship of the Company w.e.f. 13th March, 2017.
**Ms. Ritu Arora started getting the sitting fees for the Board/ Committee meeting held on and after 31st January, 2017.
The percentage increase in the remuneration of the Chief Financial Officer and Company Secretary were
30.13 % and 16.90 % respectively.
(c) The percentage increase in the median remuneration of employees in the financial year:
The percentage increase in the median remuneration of the employees in the financial year was 4.1%.
(d) The number of permanent employees on the rolls of Company:
The number of permanent employees on rolls of the Company at the end of the financial year were 3413.
(e) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
- The Average Annual increase was around 4.1%
- Not Applicable for managerial remuneration, as no remuneration is paid by the Company to the Managing Director by the Company
(f) Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms remuneration is as per the remuneration policy of the Company.
Annual Report is being sent to the members of the Company excluding the information under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Any member interested in obtaining the said information may write to the Company Secretary at the registered office of the Company.
Particulars of Loans, Guarantees or Investments
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.
Related Party Transactions
All the related party transactions were in the ordinary course of business and at arm''''s length. The Audit Committee has approved all related party transactions under the provisions of Section 188 and other applicable sections of the Companies Act, 2013 read with relevant rules for the financial year 2016-17. The Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.
Policy on dealing with related party transactions is available on the website of the Company. https://www.hclinfosystems. com/investors/
Internal Control Systems
Your Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed.
Vigil Mechanism/Whistle Blower Policy
Pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013 and Regulation 22 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Vigil Mechanism/ Whistle Blower Policy for Directors and employee to report concerns about unethical behavior, actual or suspected fraud or violation of the Company''''s code of conduct or ethics policy. The said Policy is posted on the website of the Company and can be accessed at https://www.hclinfosystems.com/ investors/
Policy against Sexual Harassment
The organization endeavors to ensure a safe, protected and congenial work environment where employees shall deliver their best without any inhibition, threat or fear. Hence, the prevention of sexual harassment at workplace policy has been evolved.
The Company has put in place a ''''Policy on Prevention and Redressal of Sexual Harassment at Workplace'''' under the name of "With You". As per the policy, any employee may report his/her complaint to the supervisor or HR representative or member of the Committee or to the With You email-id "firstname.lastname@example.org", in writing as mentioned.
The Committee would then investigate and submit its report within 45 working days. We affirm that adequate access was provided to any complainant who wished to register a complaint under the policy, during the year.
Risk Management Policy
The Board of the Company has adopted a risk management policy for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.
The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.
Auditors & Auditors'''' Report
Pursuant to the provisions of section 139 of the Companies Act, 2013, an audit firm can act as auditors for a maximum tenure of two terms of 5 consecutive years. For the purpose of reckoning this limit, existing tenure of the auditors needs to be counted. However, companies have been given a transition period of 3 years from April 1, 2014 to comply with this provision. M/s Price Waterhouse, Chartered Accountants, existing auditor''''s firm has completed two terms of five consecutive years with the Company.
M/s Price Waterhouse, Chartered Accountants, who are the statutory auditors of the Company, hold office until the conclusion of forthcoming Thirty First (31st) Annual General Meeting. It is proposed to appoint M/s BSR & Associates LLP, Chartered Accountants (FRN - 116231W/W-100024) as statutory auditors of the Company from the conclusion of forthcoming Thirty First (31st) Annual General Meeting till the conclusion of Thirty Sixth (36th) AGM to be held in the year 2022. They have confirmed their eligibility to the effect that their appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for appointment. It is also proposed to authorize the Board of Directors to fix their remuneration.
The Auditors'''' Report does not contain any qualification, reservation or adverse remark.
Pursuant to the requirements of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M/s VKC & Associates, Practicing Company Secretaries Registration no. P2017UP060600 as the Secretarial Auditor for the year ended on 31st March, 2017. The Secretarial Audit report issued by VKC & Associates, Practicing Company Secretaries is attached separately to this report. The report does not contain any qualification, reservation or adverse remark.
Additional information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3) (m) of the Companies Act,
2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is attached as Annexure to this Report.
Consolidated Financial Statement
In accordance with the Companies Act, 2013 ("the Act") and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with AS - 23 on Accounting for Investments in Subsidiaries/Associates/JVs and AS - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report.
Subsidiaries, Joint Ventures and Associate Companies
A list of Subsidiaries/Associates/JVs is given in the Extract of Annual Return attached to this report.
Policy for determining material subsidiaries of the Company is available on the website of the Company at https://www. hclinfosystems.com/investors/
On sale of the entire stake held by the Company in Nokia HCL Mobile Internet Services Limited, the JV with Nokia, stands cancelled during the year.
HCL Info systems South Africa Pty Limited, a step down wholly owned subsidiary of your Company has been deregistered during the year.
Extract of Annual Return
The details forming part of the extract of the Annual Return in form MGT 9 is attached herewith as "Annexure to this Report".
Significant and Material Orders Passed by the Regulators or Courts
There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.
The Directors place on record their appreciation for the continued co-operation extended by all stakeholders including various departments of the Central and State Government, Shareholders, Investors, Bankers, Financial Institutions, Customers, Dealers and Suppliers.
The Board also places on record its gratitude and appreciation of the committed services of the executives and employees of the Company.
On behalf of the Board of Directors
Premkumar Seshadri Dhirendra Singh
(Executive Vice Chairman & (Director) Managing Director)
Date: 30th May, 2017