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HCL Infosystems Ltd.

BSE: 500179 Sector: Consumer
NSE: HCL-INSYS ISIN Code: INE236A01020
BSE 14:15 | 27 Jan 7.99 0.12
(1.52%)
OPEN

8.23

HIGH

8.23

LOW

7.75

NSE 14:08 | 27 Jan 7.90 0.10
(1.28%)
OPEN

7.70

HIGH

8.00

LOW

7.65

OPEN 8.23
PREVIOUS CLOSE 7.87
VOLUME 22965
52-Week high 24.65
52-Week low 5.94
P/E
Mkt Cap.(Rs cr) 263
Buy Price 7.97
Buy Qty 1586.00
Sell Price 8.05
Sell Qty 586.00
OPEN 8.23
CLOSE 7.87
VOLUME 22965
52-Week high 24.65
52-Week low 5.94
P/E
Mkt Cap.(Rs cr) 263
Buy Price 7.97
Buy Qty 1586.00
Sell Price 8.05
Sell Qty 586.00

HCL Infosystems Ltd. (HCL-INSYS) - Director Report

Company director report

Dear Shareholders

Your Board of Directors is pleased to present the Thirty Third (33rd) Annual Report on the Business and Operations of the Company together with the Audited Accounts for the financial year ended March 31 2019.

Financial Highlights

The summary of the financial performance of the Company for the Financial Year ended March 31 2019 as compared to the previous year is as below:

(Rs. in Crores)

ParticularsConsolidatedStandalone
2018-192017-182018-192017-18
Continuing operations
Net Sales and other income4442.403695.363641.523003.02
Profit before exceptional items Interest depreciation and tax5.22(3.51)38.6740.24
Finance charges123.04141.13103.37112.69
Depreciation and amortization21.6327.458.384.44
Exceptional items-(31.42)(133.23)(553.62)
Loss before tax(139.45)(203.51)(206.32)(630.50)
Provision for taxation: current5.361.95--
Deferred tax expenses / (credit)2.853.13-1.07
Net loss after tax(147.66)(208.59)(206.32)(631.57)
Discontinued operations
Loss before tax3.05(505.33)--
Profit from disposal of discontinued operations9.59-
Tax expense / (credit)0.1899.84--
Net loss after tax12.46(605.17)--
Net loss after tax(135.20)(813.76)(206.32)(631.57)

Performance

The consolidated net revenue (from continuing operations) of the Company for the financial year ended March 31 2019 was Rs. 4442.40 Crores as against Rs. 3695.36 Crores during the previous financial year ended March 31 2018. The consolidated loss before tax (from continuing operations) for the financial year ended March 31 2019 was Rs. 139.45 Crores as against a loss of Rs. 203.51 Crores during the previous financial year ended March 31 2018.

The net revenue on standalone basis for the financial year ended March 31 2019 was Rs. 3641.52 Crores as against Rs. 3003.02 Crores during the previous financial year ended March 31 2018. The loss before tax for the financial year ended March 31 2019 was Rs. 206.32 Crores as against a loss of Rs. 630.50 Crores during the previous financial year ended March 31 2018.

Recommendation of Dividend

Your Board of Directors do not recommend any dividend for the financial year 2018-19.

Operations

A detailed analysis and insight into the financial performance and operations of your Company for the year ended March 31 2019 is appearing in the Management Discussion and Analysis forming part of the Annual Report.

During the year under review the Company has sold/wound down the following mentioned entities: a. HCL Touch Inc. US the erstwhile step down wholly owned subsidiary of the Company ceased to be a step down subsidiary on its winding up w.e.f April 4 2018. b. QDigi Services Limited (formerly known as HCL Computing Products Limited) a wholly owned subsidiary has ceased to be a subsidiary of the Company w.e.f April 11 2018 on its sale to an independent buyer namely Quess Corp Limited. c. HCL Services Limited a wholly owned subsidiary has ceased to be the subsidiary of the Company w.e.f June 15 2018 on its sale to M/s Karvy Data Management Services Limited an independent buyer namely Karvy Data Management Services Limited. d. Gibraltar Technologies LLC Dubai (formerly known as HCL Infosystems LLC Dubai) Gibraltar Technologies LLC Abu Dhabi (formerly known as HCL Infosystems LLC Abu Dhabi) and Gibraltar Technologies WLL (formerly known as HCL Infosystems Qatar WLL) were sold to an independent buyer w.e.f. November 27 2018.

There is no change in the authorized share capital of the Company.

Transfer to Reserves

No amount is proposed to be transferred to the general reserve of the Company.

Employee Stock Option Plan

Employee Stock Option Scheme 2000

Pursuant to the approval of the Shareholders at an Extra- Ordinary General Meeting held on February 25 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 3190200 options including the options that had lapsed out of each grant. Each option confers on the employee a right for five equity shares of Rs.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 June 13 2005 the Board of Directors had granted 3335487 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 Rs.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.

Credit Rating

The short term 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 continued at is `A-` indicating adequate degree of safety regarding timely servicing of financial obligations.

Fixed Deposits

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.

Listing

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 InfosystemsScrip Symbol
Ltd. 'shares are listed/ Code
National Stock Exchange of India Ltd. (NSE)HCL-INSYS
BSE Ltd. (BSE)500179

The Company has paid the listing fee for the year 2019-2020 to BSE and NSE.

Directors and Key Managerial Personnel (KMP)

The Board of Directors of the Company has optimum combination of executive and non-executive directors including independent directors and woman directors in compliance with the provisions of the Companies Act 2013 (`the Act') and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. During the year under review Mr. Rangarajan Raghavan was appointed as Managing Director of the Company w.e.f. April 1 2018.

Mr. V N Koura Non-executive and Non Independent Director vide his letter dated May 25 2018 expressed his unwillingness to be reappointed as the Director of the Company and hence was not reappointed at the previous Annual General Meeting held on September 27 2018. Mr. Dhirendra Singh Independent and Non-Executive Director also resigned from the directorship of the Company w.e.f March 31 2019. The Board places on record its appreciation for their contribution made throughout their tenure with the Company.

Dr. Nikhil Sinha has been designated as an Independent & Non-Executive Director w.e.f. April 1 2019.

Mr. Kaushik Dutta and Mrs. Sangeeta Talwar were reappointed as Independent Directors for the second term of 5 years w.e.f April 1 2019.

In accordance with the provisions of the Companies Act 2013 and the Articles of Association of the Company Mr. Pawan Kumar Danwar 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 membership held by the above Director form part of the Notice convening the thirty third Annual General Meeting.

In terms of the provisions of Section 149 152(6) and other applicable provisions of the Companies Act 2013 an Independent Director shall hold office upto 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 5 (Five) Committees: Accounts and Audit Committee Nomination & Remuneration Committee Stakeholders Relationship Committee Corporate Social Responsibility (CSR) Committee and Finance Committee. A detailed note on Committees is provided in the Corporate Governance Report.

Annual Evaluation of the Board its Committees and Individual Directors

Pursuant to the provisions of the Companies Act 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board of Directors conducted a formal annual performance evaluation of its own performance the Committees of the Board and each individual Director.

The Company had appointed an external agency to initiate the online board evaluation of the Board Committees and Individual Directors including Independent Directors as per the assessment criteria and norms designed by the Company's Human Resource Department. The report content and quality was reviewed by an Independent HR consultant who shared the results with the Board Chairman - Dr. Nikhil Sinha. Independent Directors in their separate meeting have reviewed the performance of 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 Policy are stated in the Corporate Governance Report.

Board Meetings

During the financial year 2018-19 5 (Five) 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.

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 Board 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. May 15 2015 which were amended in line with Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations 2018 effective from April 1 2019.

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 judgements 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 safe guarding 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.

Statement on Declaration given by Independent Directors

All Independent Directors have given declarations to the effect that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act 2013.

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:

Non-Executive DirectorsRatio to median remunerationRemuneration
(Rs.)
Dr. Nikhil Sinha--
Ms. SangeetaTalwar--
Mr. Kaushik Dutta--
Mr. Dhirendra Singh*--
Mr. Pawan Kumar Danwar--
Mr. Dilip Kumar Srivastava--
Ms. Ritu Arora--
Executive Director
Mr. Rangarajan Raghavan**20.5614405018

Note:

*Mr. Dhirendra Singh resigned from directorship of the Company w.e.f. March 31 2019.

**Mr. Rangarajan Raghavan was appointed as the Managing Director of the Company w.e.f April 1 2019.

(b) The percentage increase in remuneration of each Director Chief Executive Officer Chief Financial Officer Company Secretary in the financial year:

No remuneration other than the sitting fees were paid to Non-Executive and Independent Directors which continued to be paid @ Rs. 75000/- per Board / Committee meeting as was paid during the year 2017-18.

(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 2018-19 was 11% as compared to 4% in financial year 2017-18. The increase in percentage is due to transfer of the lower salaried employees of HCL Services Limited wholly owned subsidiary of the Company on account of its sale to Karvy Data Management Services Limited.

(d) The number of permanent employees on the rolls of Company:

The number of permanent employees on the rolls of the Company at the end of the financial year was 1207.

(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 6.2%

- The average annual increase in the managerial remuneration has been around 18% in the financial year under review which is explained as under: The erstwhile MD & CFO had resigned. On their resignations these positions were filled by internal candidates. Their salaries were revised during the Annual Appraisal Process incorporating the elevated roles & responsibilities. Also no salary was paid by the Company to the preceding MD.

(f) Afirmation that the remuneration is as per the remuneration policy of the Company:

The Company afirms 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 of the Companies Act 2013 and other applicable sections of the Companies Act 2013 read with relevant rules for the financial year 2018-19. 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. The Company has employed an external firm of Chartered Accountants to review and evaluate the basis of such agreements and its fairness.

Policy on dealing with related party transactions is available on the website of the Company. https://www.hclinfosystems. com/investors/

Internal Control Systems

The Company has put in place controls commensurate with the size and nature of Operations. These have been designed to provide reasonable assurance with regards to recording and providing reliable financial and operational information complying with applicable statutes safeguarding assets from unauthorized use or losses executing transactions with proper authorization and ensuring compliance of corporate policies.

The company has an internal audit function designed to review the adequacy of internal control checks in the system which covers all significant areas of the Company's Operations such as Accounting and Finance Procurement Business Operations Statutory compliances IT Processes Safeguarding of Assets and their protection against unauthorized use among others. The Internal Audit function performs the internal audit of the Company's activities based on Internal audit plan which is reviewed each year and approved by the Board Audit Committee. The Audit Committee reviews the reports submitted by internal auditors. Suggestions for improvements are considered and the Audit Committee follows up on corrective action. Disciplinary action is taken wherever required for non-compliance to Corporate policies and controls.

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 Obligation 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. No person has been denied access to the Chairman of the Audit Committee. The said Policy is posted on the website of the Company and can be assessed at http://www. hclinfosystems.com/investors/.

Policy against Sexual Harassment

The organization endeavors to ensure a safe protected and congenial work environment where employees deliver their best without any inhibition threat or fear. Hence the prevention of sexual harassment at workplace policy has been implanted.

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 `withyou@hcl.com' in writing as mentioned.

The Committee would then investigate and submit its report within 90 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 including aligning the internal audit functions to areas of key risks. 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 Statutory Auditors

As per Section 139 of the Act read with the Companies (Audit and Auditors) Rules 2014 the Members of the Company in its 31st Annual General Meeting held on September 14 2017 approved the appointment of M/s BSR & Associates LLP Chartered Accountants (FRN - 116231W/W-100024) as the Statutory Auditors of the Company for an initial term of 5 years i.e. from the conclusion of 31st Annual General Meeting till the conclusion of 36th Annual General Meeting of the Company. The Report given by M/s BSR & Associates LLP Chartered Accountants on the financial statements of the Company for the financial year 2018-19 is part of the Annual Report.

There was no qualification reservation or adverse remark or disclaimer in their Report. During the year under review the Auditors have not reported any matter under Section 143 (12) of the Act therefore no detail is required to be disclosed under Section 134 (3) of the Act.

Secretarial Audit

The Secretarial Audit as per Section 204 of the Companies Act 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 and the Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 was carried out by M/s. V K C & Associates Practicing Company Secretaries for the financial year 2018-19. The Secretarial Audit Report given by the Secretarial Auditors is annexed and forms an integral part of this Board's Report. The Secretarial Auditor during the audit has suggested the following measures to be implemented with respect to secretarial matters: - to intimate the stock exchanges the date of investor presentation/call and also to upload the investor presentation with the stock exchanges within 24 hours of the presentation.

Currently the Company has a process of hosting this information on Company's offcial website.

During the year under review the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act therefore no detail is required to be disclosed under Section 134 (3) of the Act. In terms of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Accounts &Audit Committee recommended and the Board of Directors appointed M/s. V K C & Associates Practicing Company Secretaries as the Secretarial Auditors of the Company in relation to the financial year 2019-20. The Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed thereunder.

Compliance with Secretarial Standard

The Company is in Compliance with the applicable Secretarial Standard as issued and amended by The Institute of Company Secretaries of India (ICSI) from tome to time.

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

The following mentioned entities sold/wound down to be the wholly owned subsidiaries/ step down subsidiaries of the Company: a. HCL Touch Inc. US the erstwhile step down wholly owned subsidiary of the Company ceased to be a step down subsidiary on its winding up w.e.f April 4 2018. b. QDigi Services Limited (formerly known as HCL Computing Products Limited) a wholly owned subsidiary has ceased to be a subsidiary of the Company w.e.f April 11 2018 on its sale to an independent buyer namely Quess Corp Limited. c. HCL Services Limited a wholly owned subsidiary has ceased to be the subsidiary of the Company w.e.f June 15 2018 on its sale to M/s Karvy Data Management Services Limited an independent buyer namely Karvy Data Management Services Limited. d. Gibraltar Technologies LLC Dubai (formerly known as HCL Infosystems LLC Dubai) Gibraltar Technologies LLC Abu Dhabi (formerly known as HCL Infosystems LLC Abu Dhabi) and Gibraltar Technologies WLL (formerly known as HCL Infosystems Qatar WLL) were sold to an independent buyer w.e.f. November 27 2018.

Policy for determining material subsidiaries of the Company is available on the website of the Company at https://www. hclinfosystems.com/investors/.

Annual Return

The Annual Return filed with the Ministry of Corporate Affairs (MCA) has been uploaded on the website of the Company i.e. https://www.hclinfosystems.com/investors/.

Investor Education and Protection Fund (IEPF)

Pursuant to the applicable provisions of the Companies Act 2013 read with the IEPF Authority (Accounting Audit Transfer and Refund) Rules 2016 (`the Rules') all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF established by the Central Government after the completion of seven years. Further according to the Rules the shares in respect of which dividend has not been paid or claimed by the shareholders for seven consecutive years or more have also been transferred to the demat account created by the IEPF Authority. Accordingly the Company has transferred the unclaimed and unpaid dividends along with the corresponding shares that become due to transfer during the FY 2018-19.

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.

Acknowledgements

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
Place: NoidaNikhil Sinha
Date: May 30 2019(Chairman)