HCL Infosystems

The Directors have pleasure in presenting their Twenty Second Annual
 Report together with the Audited Accounts for the financial year ended
 30th June, 2008.
 
 Financial Highlights
 
 Particulars                                             Consolidated
                                                2007-08       2006-07
 
 Net Sales and other income                    12489.36      11721.79
 
 Profit before Interest, Depreciation and Tax    488.48        454.02
 
 Finance Charges                                  39.73         10.50
 
 Depreciation                                     18.62         14.81
 
 Profit before Tax                               430.13        428.71
 
 Provision for Taxation: Current                 131.50        105.90
 
 Fringe Benefit                                    4.11          4.15
 
 Deferred                                       (-)5.63          2.71
 
 Net Profit after Tax                            300.15        315.95
 
 Profit available for appropriation              903.72        791.64 
 
 Appropriations
 
 Interim Dividend                                102.61        101.39
 
 Proposed Dividend                                34.23         33.91
 
 Tax on Dividend (including Interim Dividend)     23.27         20.98
 
 Transfer to General Reserve                      30.47         31.79
 
 Balance of Profit carried forward to next year  713.14        603.57
 
                 Rs. in Crores)
        Parent Company
 2007-08              2006-07
 
 12451.38            11682.85
 
   490.58              453.09
 
    39.76               10.55
 
    16.35               12.55
 
   434.47              429.99
 
   131.50              105.90
 
     3.85                4.03
 
  (-)5.63                2.21
 
   304.75              317.85
 
   893.38              777.10
 
   102.61              101.39
 
    34.23               33.91
 
    23.26               20.98
 
    30.47               31.79
 
   702.81              589.03
 
 
 Scheme of Amalgamation
 
 During the year under review, a Scheme of Amalgamation u/s 391/394 of
 the Companies Act 1956, (the Scheme) for amalgamation of Stelmac
 Engineering Private Limited (Stelmac), the wholly owned subsidiary with
 the Company was approved by the Honble High Court of Delhi vide its
 order dated December 07, 2007, which came into effect from January 30,
 2008 from the appointed date i.e. April 1, 2007.
 
 Accordingly, the results of Company on standalone basis for the year
 ended June 30, 2008 include the results of Stelmac for the 15 month
 period from April 1, 2007 to June 30, 2008, the impact of which is not
 material. Please also refer to Note 23 on Scheme of Amalgamation
 given in Notes to Accounts in this report.
 
 Performance
 
 The consolidated net revenue of the Company was Rs. 12489.36 crores as
 against Rs. 11721.79 crores in the previous year. The consolidated
 profit before tax was Rs. 430.13 crores as against Rs. 428.71 crores in
 the previous year.
 
 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, 2008. During the first nine months, three interim
 (quarterly) dividends of 100% each were declared taking the total
 dividend for the year 2007-08 to 400%.
 
 Operations
 
 A review of operations of the businesses of your Company for the year
 ended June 30, 2008 is provided in the Management Discussion and
 Analysis Report forming part of the Annual Report.
 
 Awards & Recognition
 
 This year your Companys Founder Chairman & CEO, Mr. Ajai Chowdhry was
 honoured with Dataquest IT Person of the Year 2007 in recognition of
 over three decade of his service to the Indian IT industry. He also
 received the CEO of the year 2008 award by IT People Awards for
 excellence in IT.
 
 The year that went by witnessed numerous recognitions for your company.
 HCL received three Channels Choice 2007 awards for Relationship
 Management, After Sales Support & Commercial Terms from DQ Channels,
 based on an IDC channel satisfaction survey. HCL Infosystems won
 Brand-of-Excellence Award at VARIndia Forum 2007. HCL bagged IMM Top
 Organization Award 2007 for Excellence at 34th World Marketing
 Congress. HCL also won Indias Most Preferred Personal Computer Brand
 by CNBC AWAAZ Consumer Awards 2007 and was also awarded Amity
 Corporate Excellence Award 2007 for its distinct vision, innovation,
 competitiveness and sustenance.
 
 HCL bagged several awards and accolades from leading industry players
 for its technological innovation and quality of service and delivery
 across its range of products and solutions. HCL won global award in
 Innovation Excellence on Intel Architecture from Intel Corporation.
 HCL was awarded the best iPod distribution partner for Apple for the
 2nd year in succession. HCL has received the Excellence award, as the
 winner of Nokia Formula for Success contest in November 2007.
 
 HCL received a number of accolades from the retail industry - Images
 Retail Forum 2007- Most Admired Retailer, Var India 2007 - No.l Retail
 Company, Franchise India 2007 - Best in Specialty Retailing, Asia
 Retail Congress - 2008 Retailer of Year -Consumer Durable, FAI &
 Franchisee Plus 2008- Supportive Franchisor and FAI & Franchisee Plus
 2008- Franchisee Innovativeness.
 
 The company was also felicitated by its partners as it won recognition
 from Toshiba as its most trusted partner. HCL won Toshiba Color Copier
 Champion Award 2007 for improving overall customer approach and better
 technical capability.  HCL also won No.l award in sales and marketing
 from Toshiba Corporation for seventh consecutive year in a row. HCL has
 been awarded Ericssons Premium Partner status for its enterprise
 products and also HCL has been awarded the Platinum partner
 Certification for Video Conferencing Products from Tandberg. The
 company also won Best Emerging Channel award for Audio System
 Integration from Polycom.
 
 HCL also won awards in Environment Management and Quality
 categories at the Elcina-Dun & Bradstreet Awards for Excellence in
 Electronics, 2006-07.
 
 Employee Stock Option Plan
 
 Employee Stock Option Scheme 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 Board of Directors
 had approved the grant of 30,18,000 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.
 
 Employee Stock Based Compensation Plan 2005
 
 The shareholders of the Company have approved the Employee 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 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 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.
 
 Credit Ratings
 
 The credit rating by ICRA continued at A1+ rating indicating highest
 safety to the Companys Commercial Paper program, which was enhanced
 from Rs. 75 crores to Rs. 325 crores.
 
 During the year under review, Fitch has assigned AA-(ind), long term
 credit rating to the Company, indicating stable outlook.
 
 Fixed Deposits
 
 As on June 30, 2008, 6 depositors whose deposits including interest
 amounting to Rs. 0.87 Lacs had become due for repayment did not claim
 their deposits. During the year, fixed deposits amounting to Rs. 0.64
 Lacs, including interest of Rs. 0.04 Lacs, have been repaid to the
 depositors. Deposits amounting to Rs. 5.63 Lacs, including interest of
 Rs. 0.76 Lacs, have been transferred to Investor Education and
 Protection Fund pursuant to the provisions of Section 205A of the
 Companies Act, 1956.
 
 Listing
 
 The shares of the Company are listed at The Bombay Stock Exchange
 Limited, Mumbai and National Stock Exchange of India Limited, Mumbai.
 
 Directors
 
 In accordance with the Articles of Association of the Company, Mr. D.S.
 Puri, Mr. E.A. Kshirsagar and Mr. V.N. Koura, Directors retire by
 rotation and being eligible, offer themselves for re-appointment.
 
 Corporate Governance Report and Management Discussion and Analysis
 Statement
 
 A report on Corporate Governance is attached to this Report alongwith
 the Management Discussion and Analysis statement.
 
 Directors Responsibility Statement
 
 Pursuant to the requirement of Section 217(2AA) of the Companies Act,
 1956, 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, if any;
 
 b.  appropriate accounting policies have been selected and applied
 consistently, and that the judgments 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, 2008 and of the profit of the Company for
 the said period;
 
 c.  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; and
 
 d.  the annual accounts have been prepared on a going concern basis.
 
 Auditors & Auditors Report
 
 M/s Price Waterhouse, Chartered Accountants, who are the statutory
 auditors of the Company hold office, in accordance with the provisions
 of the Companies Act, 1956, upto the conclusion of the forthcoming
 Annual General Meeting and are eligible for re-appointment. The
 proposed re-appointment, if made will be in accordance with the limits
 prescribed under Section 224(1B) of the Companies Act, 1956.
 
 Personnel
 
 Your company has built one of the most comprehensive and highly skilled
 multi technology ICT organisations in the country today. Through its
 various employee engagement initiatives, your Company continue to build
 a strong relationship between manager and staff to create the ideal
 work environment.
 
 HR initiatives have been aligned to support growth of the business
 through strong processes and practices that empower and engage people.
 
 Your company was ranked amongst Top 3 in the Best Employer Study 2007
 conducted by IDC-Dataquest and obtained the highest employees
 satisfaction scores. Your company was ranked amongst Top 13 in the
 Best Companies to Work For Study 2007, conducted by BT, Mercer & TNS.
 
 Industrial Relations during the period under review continued to be
 peaceful and harmonious. No man-day was lost due to any Industrial
 Dispute.
 
 The information as are required to be provided in terms of section
 217(2A) of the Companies Act, 1956 read with the Companies (Particulars
 of Employees) Rules, 1975 have been set out in the annexure to the
 Directors report. However, in terms of the provisions of section
 219(l)(b)(iv) of the said Act, the Annual Report is being sent to the
 members of the Company excluding the said information. Any member
 interested in obtaining the said information may write to the Company
 Secretary at the registered office of 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
 (l)(e) of Section 217 of the Companies Act, 1956, read with the Company
 (Disclosure of Particulars in the Report of the Board of Directors)
 Rules, 1988, is appended to and forms part of this report.
 
 Particulars of subsidiaries
 
 On the Scheme of Amalgamation for merger of Stelmac Engineering Private
 Limited (Stelmac), the wholly owned subsidiary of the Company, becoming
 effective, Stelmac has been dissolved without winding up.
 
 A wholly owned subsidiary in the name and style of HCL Security Limited
 has been incorporated on March 19, 2008, to pursue the business of
 providing security and surveillance solutions. HCL Security will close
 its first financial year on June 30, 2009.
 
 On acquisition of the entire share capital of Natural Technologies
 Private Limited (NTPL), a company engaged in the business of banking
 software solutions, NTPL has become a wholly owned subsidiary of the
 Company with effect from May 5, 2008. A Scheme of Amalgamation for
 merging NTPL with the Company has been filed with the Honble High
 Courts of Delhi and Rajasthan.
 
 The Company has obtained permission from Ministry of Corporate Affairs,
 Government of India vide their letters of even number 47/112/2008-CL-l
 11, dated 26.03.2008 and 17.07.2008 for not annexing the accounts of
 the wholly owned subsidiaries, namely HCL Infinet Limited and NTPL,
 respectively.
 
 The detailed annual accounts of the subsidiaries of the Company are
 available on any working day at the Registered Office of the Company to
 the shareholders of the Company requiring such information.
 
 Acknowledgement
 
 The 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 and Suppliers and also acknowledge the contribution made by the
 Employees.
 
 The Board also wishes to place on record its gratitude to the valued
 Customers, Members and Investing Public for the continued support and
 confidence reposed in the Company.
 
                               On behalf of the Board of Directors
 
                                                Sd/-
 
                                           AJAI CHOWDHRY
 September 02, 2008             Chairman and Chief Executive Officer