To the Members
Your Directors have pleasure in presenting their Thirty First Annual Report togetherwith the Audited Accounts for the financial year ended 31st March 2017.
|Particulars ||Consolidated ||Standalone |
| ||2016-17 ||2015-16 ||2016-17 ||2015-16 |
| || ||(9 Months) || ||(9 Months) |
|Net Sales and other income ||3883.21 ||3792.38 ||2312.97 ||2572.43 |
|Profit before exceptional items Interest Depreciation and Tax ||(2.19) ||5.81 ||52.83 ||62.55 |
|Finance Charges ||190.29 ||125.69 ||104.60 ||81.49 |
|Depreciation and Amortization ||39.19 ||31.98 ||4.80 ||4.12 |
|Exceptional Items ||(61.00) ||(67.22) ||(320.19) ||(159.01) |
|Profit before Tax ||(292.67) ||(219.08) ||(376.76) ||(182.07) |
|Provision for Taxation: Current ||11.31 ||8.89 ||6.31 ||8.41 |
|Deferred Tax Expenses / (Credit) ||(56.31) ||(13.67) ||(20.68) ||(3.17) |
|Net Profit after Tax (Before Minority Interest) ||(247.67) ||(214.30) ||(362.39) ||(187.31) |
|Net Profit after Tax (After Minority Interest) ||(247.67) ||(214.30) ||(362.39) ||(187.31) |
In pursuance to the requirement of Section 2(41) of the Companies Act 2013 theCompany last year had changed its previous financial year to end on 31st March2016 i.e. from 1st July 2015 to 31st March 2016 (9 months). Hencethe figures for the current financial year (12 months) are not comparable with the figuresof the previous year (9 months).
The consolidated net revenue of the Company for the year ended 31st March2017 was Rs 3883.21 Crores as against Rs 3792.38 Crores during the previous year (9months) ended 31st March 2016. The consolidated loss before tax for the yearended 31st March 2017 was Rs 292.67 Crores as against Rs 219.08 Crores duringthe previous year (9 months) ended 31st March 2016. The net revenue onstandalone basis for the year ended 31st March 2017 was Rs 2312.97 Crores asagainst Rs 2572.43 Crores during the previous year (9 months) ended 31stMarch 2016. The loss before tax for the year ended 31st March 2017 was Rs376.76 Crores as against Rs 182.07 during the previous year (9 months) ended 31stMarch 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 yourCompany for the year ended 31st March 2017 is appearing in the ManagementDiscussion and Analysis forming part of the Annual Report. There has been no changes inthe nature of business of the Company.
After closure of the financial year the Board of Directors has given its approval forsale of DigiSchool Business undertaking of HCL Learning Limited a wholly ownedsubsidiary 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 theTelecom Service Category for the second consecutive year. Your company wasrecognized for providing excellent end-to-end support services for various productcategories across locations in India.
HCL Services won "Best Use of Lean Six Sigma: Field Services in IT" award atWorld Quality Congress Conference for significantly improving Customer Experience for aleading multi-national OEM. The lean Six Sigma project undertaken by HCL Services helpedaugment client relationship and loyalty leading to increased business & profitabilityfor 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 Extra- Ordinary General Meeting heldon 25th February 2000 for grant of options to the employees of the Company andits subsidiaries (the Scheme 2000) the Board of Directors had approved the grant of3190200 options including the options that had lapsed out of each grant. Each optionconfers on the employee a right for 3ve equity shares of Rs2/- 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 theresult whereof was declared on 13th June 2005 the Board of Directors hadgranted 3335487 options including the options that had lapsed out of each grant underthe Employee Stock Based Compensation Plan 2005 (the Plan 2005). Each option confers onthe employee a right for 3ve equity shares of Rs 2/- each at the market price as specifiedin the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines1999 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 strongdegree of safety regarding timely payment of financial obligations to the CompanysCommercial 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 andthere were no 3xed 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) andNational Stock Exchange of India Limited Mumbai (NSE).
Stock Exchange where HCL Infosystems Scrip 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 2017-2018 to BSE and NSE.
Directors and Key Managerial Personnel (KMP)
During the period under review Mr. Sanjeev Sharma the Independent Director hasresigned from the directorship of the Company w.e.f. 13th March 2017. Dr.Pradeep Kumar Khosla the another Independent Director resigned from the directorship ofthe Company after closure of the financial year. The Board places on record itsappreciation for the contributions made by the above Directors during their respectivetenure as director with the Company.
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. Dilip Kumar Srivastava retires from office by rotation atthe ensuing Annual General Meeting and being eligible has offered himself forre-appointment. A brief resume details of expertise and other directorships/committeememberships held by Mr. Srivastava form part of the Notice convening the Thirty FirstAnnual General Meeting.
The Company has received declarations from all the Independent Directors con3rming thatthey meet the criteria of independence as prescribed under Section 149(6) of the CompaniesAct 2013.
In terms of the provision of Section 149 152(6) and other applicable provisions of theCompanies Act 2013 an Independent Director shall hold office up to a term of 3veconsecutive years on the Board of the Company and shall not be liable to retire byrotation.
Committees of Board
Currently the Board has 6 (Six) Committees: Accounts and Audit Committee Nomination& Remuneration Committee Stakeholders Relationship Committee Corporate SocialResponsibility (CSR) Committee Finance Committee and Technology Committee. A detailednote 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 Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 a formalannual performance evaluation has been done by the Board of its own performance theDirectors individually as well as the evaluation of its Committees.
The Company had appointed an external agency to assist Nomination & RemunerationCommittee (NRC) in drafting the questionnaires for the purpose of evaluation of the Board& the Individual Directors and the Board Committees. The structured questionnaireswere circulated to all the Directors requesting them to 3ll and return the duly 3lledquestionnaires to the Company giving their views for evaluation of the self & thepeers.
The feedback of the evaluation was shared by the Board Chairman with each Boardmembers the entire Board and the Board Committees and a roadmap was framed for taking thecorrective actions on.
Independent Directors of the Company in their separate meeting held on 24thMarch 2017 reviewed the performance of the Non-Independent Directors and the Board as awhole. 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 KeyManagerial Personnel/Senior Management. The Board has also adopted a remuneration policyfor Directors Key Managerial Personnel/ Senior
Management and other employees. The criteria/policy on appointment and remuneration arestated in the Corporate Governance Report.
During the financial year 2016-17 8 (Eight) Board Meetings were held and the gapbetween two meetings did not exceed one hundred and twenty days. The details of BoardMeetings held are stated in the Corporate Governance Report.
Corporate Social Responsibility (CSR)
A report on Corporate Social Responsibility (CSR) is attached as Annexure to thisReport. The policy on CSR had been revised by the Board in its meeting held on 24thMarch 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 Statementare attached and are to be read with the Directors Report.
Insider Trading Regulations
As per the requirements under the SEBI (Prohibition of Insider Trading) Regulations2015 the Company had adopted the Code of Conduct for Internal Procedures and toRegulate Monitor and Report Trading By Insiders and the Code of FairDisclosure w.e.f. 15th May 2015.
Directors Responsibility Statement
Pursuant to the requirement of Section 134(3)(c) of the Companies Act 2013 and basedon the representations received from the operating management the Directors hereby con3rmthat: (a) in the preparation of the annual accounts the applicable accounting standardshad been followed along with proper explanation relating to material departures; (b) thedirectors had selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of a3airs of the company at the end of the financial year and of the profitand loss of the company for that period; (c) the directors had taken proper and su3cientcare for the maintenance of adequate accounting records in accordance with the provisionsof this Act for safeguarding the assets of the company and for preventing and detectingfraud and other irregularities; (d) the directors had prepared the annual accounts on agoing concern basis; (e) the directors had laid down internal financial controls to befollowed by the company and that such internal Financial controls are adequate and wereoperating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisionsof 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 theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow:.
(a) The ratio of the remuneration of each Director to the median remuneration of theemployees of the Company for the financial year:
|Non-Executive Directors ||Ratio to median remuneration ||Remuneration |
| || ||(Rs) |
|Dr. Nikhil Sinha ||- ||- |
|Mr. V.N. Koura ||- ||- |
|Dr. Pradeep Kumar Khosla ||0.95 ||225000 |
|Ms. Sangeeta Talwar ||8.26 ||1950000 |
|Mr. Kaushik Dutta ||6.35 ||1500000 |
|Mr. Dhirendra Singh ||7.63 ||1800000 |
|Mr. Pawan Kumar Danwar ||- ||- |
|Mr. Dilip Kumar Srivastava ||- ||- |
|Mr. Sanjeev Sharma* ||1.59 ||375000 |
|Ms. Ritu Arora** ||0.95 ||225000 |
|Executive Directors ||Ratio to median remuneration ||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 OfficerChief Financial Officer Company Secretary in the financial year:
Mr. Premkumar Seshadri Executive Vice Chairman & Managing Director is not paid anyremuneration by the Company.
No remuneration other than the sitting fees was paid to Non-Executive and IndependentDirectors which continued to be paid @ Rs 75000/- per Board/ Board Committee meeting aswas paid during the year 2015-16.
*Mr. Sanjeev Sharma resigned from Directorship of the Company w.e.f. 13thMarch 2017.
**Ms. Ritu Arora started getting the sitting fees for the Board/ Committee meeting heldon and after 31st January 2017.
The percentage increase in the remuneration of the Chief Financial Officer and CompanySecretary were 30.13 % and 16.90 % respectively.
(c) The percentage increase in the median remuneration of employees in the financialyear:
The percentage increase in the median remuneration of the employees in the financialyear 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 financialyear were 3413.
(e) Average percentile increase already made in the salaries of employees other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justi3cation thereof and point out if thereare 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 Companyto the Managing Director by the Company
(f) A3rmation that the remuneration is as per the remuneration policy of the Company:
The Company a3rms remuneration is as per the remuneration policy of the Company.
Annual Report is being sent to the members of the Company excluding the informationunder Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014. Any member interested in obtaining the said information may writeto 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 Section186 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 atarms length. The Audit Committee has approved all related party transactions underthe provisions of Section 188 and other applicable sections of the Companies Act 2013read with relevant rules for the financial year 2016-17. The Company had not entered intoany contract / arrangement / transaction with related parties which could be consideredmaterial in accordance with the policy of the Company on materiality of related partytransactions.
Policy on dealing with related party transactions is available on the website of theCompany. https://www.hclinfosystems. com/investors/
Internal Control Systems
Your Company has in place adequate internal financial controls with reference tofinancial statements. During the year such controls were tested and no reportablematerial 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 andRegulation 22 of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 a Vigil Mechanism/ Whistle Blower Policy forDirectors and employee to report concerns about unethical behavior actual or suspectedfraud or violation of the Companys code of conduct or ethics policy. The said Policyis posted on the website of the Company and can be assessed athttps://www.hclinfosystems.com/ investors/
Policy against Sexual Harassment
The organization endeavors to ensure a safe protected and congenial work environmentwhere employees shall deliver their best without any inhibition threat or fear. Hencethe prevention of sexual harassment at workplace policy has been evolved.
The Company has put in place a Policy on Prevention and Redressal of SexualHarassment at Workplace under the name of "With You". As per the policyany employee may report his/her complaint to the supervisor or HR representative or memberof the Committee or to the With You email-id "firstname.lastname@example.org" in writing asmentioned.
The Committee would then investigate and submit its report within 45 working days. Wea3rm that adequate access was provided to any complainant who wished to register acomplaint under the policy during the year.
Risk Management Policy
The Board of the Company has adopted a risk management policy for reviewing the riskmanagement plan and ensuring its effectiveness. The audit committee has additionaloversight in the area of financial risks and controls. Major risks identi3ed by thebusinesses and functions are systematically addressed through mitigating actions on acontinuing basis.
The development and implementation of risk management policy has been covered in themanagement discussion and analysis which forms part of this report.
Auditors & Auditors Report Statutory Auditors
Pursuant to the provisions of section 139 of the Companies Act 2013 an audit 3rm canact as auditors for a maximum tenure of two terms of 5 consecutive years. For the purposeof reckoning this limit existing tenure of the auditors needs to be counted. Howevercompanies have been given a transition period of 3 years from April 1 2014 to comply withthis provision. M/s Price Waterhouse Chartered Accountants existing auditors 3rmhas completed two terms of 3ve consecutive years with the Company.
M/s Price Waterhouse Chartered Accountants who are the statutory auditors of theCompany hold office until the conclusion of forthcoming Thirty First (31st)Annual General Meeting. It is proposed to appoint M/s BSR & Associates LLP CharteredAccountants (FRN 116231W/W-100024) as statutory auditors of the Company from theconclusion of forthcoming Thirty First (31st) Annual General Meeting till theconclusion of Thirty Sixth (36th) AGM to be held in the year 2022. They havecon3rmed their eligibility to the effect that their appointment if made would be withinthe prescribed limits under the Act and that they are not disquali3ed for appointment. Itis also proposed to authorize the Board of Directors to 3x their remuneration.
The Auditors Report does not contain any quali3cation reservation or adverseremark.
Pursuant to the requirements of the Companies Act 2013 and the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the Company had appointed M/s VKC& Associates Practicing Company Secretaries Registration no. P2017UP060600 as theSecretarial Auditor for the year ended on 31st March 2017. The SecretarialAudit report issued by VKC & Associates Practicing Company Secretaries is attachedseparately to this report. The report does not contain any quali3cationreservation or adverse remark.
Additional information relating to Conservation of Energy Technology Absorption andForeign Exchange Earnings and Outgo
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3) (m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 is attached as Annexure to thisReport.
Consolidated Financial Statement
In accordance with the Companies Act 2013 ("the Act") and AccountingStandard (AS) - 21 on Consolidated Financial Statements read with AS - 23 on Accountingfor Investments in Subsidiaries/Associates/JVs and AS - 27 on Financial Reporting ofInterests in Joint Ventures the audited consolidated financial statement is provided inthe Annual Report.
Subsidiaries Joint Ventures and Associate Companies
A list of Subsidiaries/Associates/JVs is given in the Extract of Annual Return attachedto this report.
Policy for determining material subsidiaries of the Company is available on the websiteof the Company at https://www. hclinfosystems.com/investors/ On sale of the entire stakeheld by the Company in Nokia HCL Mobile Internet Services Limited the JV with Nokiastands cancelled during the year.
HCL Infosystems South Africa Pty Limited a step down wholly owned subsidiary of yourCompany 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 attachedherewith 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 wouldimpact the going concern status of the Company and its future operations.
The Directors place on record their appreciation for the continued co-operationextended by all stakeholders including various departments of the Central and StateGovernment Shareholders Investors Bankers Financial Institutions Customers Dealersand Suppliers.
The Board also places on record its gratitude and appreciation of the committedservices of the executives and employees of the Company.
| ||On behalf of the Board of Directors |
|Sd/- ||Sd/- |
|Premkumar Seshadri ||Dhirendra Singh |
|(Executive Vice Chairman & ||(Director) |
|Managing Director) || |
|Place: Noida || |
|Date: 30th May 2017 || |