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HCL Technologies
BSE: 532281|NSE: HCLTECH|ISIN: INE860A01027|SECTOR: Computers - Software
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« Jun 12
Notes to Accounts Year End : Jun '13
Company Overview
 
 HCL Technologies Limited (hereinafter referred to as ''HCL'' or the
 ''Company'') is primarily engaged in providing a range of software
 services, business process outsourcing and infrastructure services. The
 Company was incorporated in India in November 1991. The Company
 leverages an extensive offshore infrastructure and its global network
 of offices in various countries and professionals to deliver solutions
 across select verticals including Financial Services, Manufacturing
 (Automotive, Aerospace, Hi-tech and Semi conductor), Telecom, Retail
 and Consumer packaged goods services , Media publishing and
 entertainment, Public services, Energy and utility, Healthcare, Travel,
 Transport and Logistics.
 
 1.1 Related party transactions
 
 a) Related parties where control exists
 
 Direct Subsidiaries
 
 HCL Comnet Systems & Services Limited
 
 HCL Comnet Limited
 
 HCL Bermuda Limited
 
 HCL Technologies (Shanghai) Limited
 
 HCL Eagle Limited
 
 Step down Subsidiaries
 
 HCL Great Britain Limited
 
 HCL (Netherlands) BV
 
 HCL Belgium NV
 
 HCL GmbH
 
 HCL Singapore Pte. Limited
 
 HCL Sweden AB
 
 HCL Italy SLR
 
 HCL Australia Services Pty. Limited
 
 HCL (New Zealand) Limited
 
 HCL Hong Kong SAR Limited
 
 HCL Japan Limited
 
 HCL America Inc.
 
 HCL Holdings GmbH
 
 HCL Global Processing Services Limited
 
 HCL BPO Services (NI) Limited
 
 HCL (Malaysia) Sdn. Bhd.
 
 HCL Technologies Solutions Limited (formerly known as HCL EAI Services
 Limited)
 
 HCL Poland sp. z o.o
 
 HCL EAS Limited
 
 HCL Insurance BPO Services Limited
 
 HCL Expense Management Services Inc.
 
 Axon Group Limited
 
 Bywater Limited
 
 Axon Solutions Schweiz Gmbh
 
 Axon Solutions Pty. Limited
 
 Axon Solutions Inc.
 
 Axon Acquisition Company, Inc.
 
 Axon Solutions Limited
 
 Axon Solutions Sdn. Bhd.
 
 Axon Solutions Singapore Pte. Limited
 
 Axon Solutions (Shanghai) Co. Limited
 
 HCL Axon (Proprietary) Limited
 
 JSPC- I Solutions Sdn. Bhd.
 
 JSP Consulting Sdn. Bhd.
 
 Axon Solution (Canada) Inc.*
 
 HCL Argentina s.a.
 
 HCL Mexico S. de R.L.
 
 HCL Technologies Romania s.r.l.
 
 HCL Hungary Limited
 
 HCL Latin America Holding LLC
 
 HCL (Brazil) Technologia da informacao Ltda.
 
 HCL Technologies Denmark Apps
 
 HCL Technologies Norway AS
 
 PT. HCL Technologies Indonesia Limited
 
 HCL Technologies Philippines Inc.
 
 HCL Technologies South Africa (Proprietary) Limited
 
 HCL Arabia LLC
 
 HCL Technologies France
 
 Filial Espanola De HCL Technologies S.L. (Spain)
 
 Anzospan Investments Pty Limited
 
 HCL Investments (UK) Limited
 
 HCL America Solutions Inc. (Formerly known as HCL
 
 Technologies Product Design Services inc.)
 
 * HCL Technologies Canada Inc. and Axon Solution
 
 (Canada) Inc. amalgamated w.e.f. 1 July 2012 and formed a new entity
 Axon Solutions (Canada) Inc.
 
 Employee benefit trusts
 
 HCL Technologies Limited Employees Trust Axon Group Plc Employee
 Benefit Trust No. 3 Axon Group Plc Employee Benefit Trust No. 4 HCL
 South Africa Share Ownership Trust (incorporated w.e.f 22 February
 2013)
 
 b) Related parties with whom transactions have taken place during the
 year
 
 Direct Subsidiaries
 
 HCL Comnet Systems & Services Limited
 
 HCL Comnet Limited
 
 HCL Bermuda Limited
 
 HCL Technologies (Shanghai) Limited
 
 HCL Eagle Limited
 
 Step down subsidiaries HCL Great Britain Limited HCL (Netherlands) BV
 HCL Belgium NV HCL GmbH
 
 HCL Singapore Pte. Limited HCL Sweden AB HCL Italy SLR
 
 HCL Australia Services Pty. Limited
 
 HCL (New Zealand) Limited
 
 HCL Hong Kong SAR Limited
 
 HCL Japan Limited
 
 HCL America Inc.
 
 HCL (Malaysia) Sdn. Bhd.
 
 HCL Technologies Solutions Limited (formerly known as HCL EAI Services
 Limited)
 
 HCL Poland sp. z o.o
 
 HCL EAS Limited
 
 HCL Insurance BPO Services Limited
 
 Axon Solutions (Canada) Inc.
 
 Axon Solutions Pty. Limited
 
 Axon Solutions Inc.
 
 Axon Solutions Limited
 
 Axon Solutions Sdn. Bhd.
 
 Axon Solutions (Shanghai) Co. Limited
 
 HCL Axon (Proprietary) Limited
 
 HCL Argentina s.a.
 
 HCL Mexico S. de R.L.
 
 HCL Hungary Limited
 
 HCL (Brazil) Technologia da informacao Ltda.
 
 HCL Technologies Denmark Apps
 
 HCL Technologies Norway AS
 
 PT. HCL Technologies Indonesia Limited
 
 HCL Technologies Philippines Inc.
 
 HCL Technologies South Africa (Proprietary) Limited
 
 HCL Arabia LLC
 
 HCL Technologies France
 
 Filial Espanola De HCL Technologies S.L. (Spain)
 
 HCL Holdings Gmbh
 
 HCL Technologies Romania s.r.l.
 
 HCL America Solutions Inc. (Formerly known as HCL
 
 Technologies Product Design Services inc.)
 
 Jointly controlled entities
 
 NEC HCL System Technologies Limited, India (up to 26 April, 2013)
 
 Associates
 
 Statestreet HCL Services (India) Private Limited
 
 Significant influence
 
 Vama Sundari Investments (Delhi) Private Limited
 
 (Slocum investments (Delhi) Private Limited merged with Vama Sundari
 Investments (Delhi) Private Limited w.e.f 22 March 2013)
 
 HCL Corporation Private Limited
 
 HCL Infosystems Limited
 
 HCL Holding Private Limited
 
 HCL Insys Pte Ltd., Singapore
 
 Digilife Distribution and Marketing Services Limited
 
 c) Key Management Personnel
 
 Shiv Nadar, Chairman and Chief Strategy Officer Vineet Nayar,
 Vice-Chairman and Joint Managing Director
 
 1.2 Commitments and Contingent liabilities
 
 a)
 
 i) Capital and other commitments 
 
 Capital commitments 
 
 Estimated amount of unexecuted capital
 contracts (net of advances)            1,139.47    528.43
 
 ii) Contingent Liabilities
 
 Others                                     5.29      4.29
 
 Total                                  1,144.76    532.72
 
 The amounts shown in the items above represent best possible estimates
 arrived at on the basis of available information. The uncertainties and
 possible reimbursements are dependent on the outcome of the different
 legal processes which have been invoked by the Company or the claimants
 as the case may be and therefore cannot be predicted accurately. The
 Company engages reputed professional advisors to protect its interest
 and has been advised that it has strong legal positions against such
 disputes.
 
 b) Guarantees have been given by the Company on behalf of various
 subsidiaries against credit facilities, financial assistance and office
 premises taken on lease amounting to Rs. 1,852.21 crores (Previous year Rs.
 3,087.56 crores).  These guarantees have been given in the normal
 course of the Company''s operations and are not expected to result in
 any loss to the Company on the basis of the beneficiaries fulfilling
 their ordinary commercial obligations.
 
 c) Bank guarantees of Rs. 45.94 crores (Previous year Rs. 14.25 crores).
 These guarantees have been given in the normal course of the Company''s
 operations and are not expected to result in any loss to the Company,
 on the basis of the Company fulfilling its ordinary commercial
 obligations.
 
 d) During the year ended 30 June 2013, the Company has negotiated
 extended interest bearing credit terms with certain vendors and issued
 Rs. 430.33 crores of letters of credit in this respect for extended
 payment terms up to 360 days. The interest rate on these arrangements
 ranges from 1.2% to 10.0%.
 
 The Company also has letters of credit amounting to Rs. 0.29 crores
 outstanding for year ended 30 June 2013 in other normal course of
 business.
 
 e) The Company has a comprehensive system of maintenance of information
 and documents as required by the transfer pricing legislation under
 sections 92-92F of the Income Tax Act, 1961. Since the law requires
 existence of such information and documentation to be contemporaneous
 in nature, the Company appoints independent consultants for conducting
 a Transfer Pricing Study to determine whether the transactions with
 associated enterprises are undertaken, during the financial year, on an
 arms length basis. Adjustments, if any, arising from the transfer
 pricing study in the respective jurisdictions are accounted for as and
 when the study is completed for the current financial year. However the
 management is of the opinion that its international transactions are at
 arms'' length so that the aforesaid legislation will not have any impact
 on the financial statements.
 
 1.3 Derivative Financial Instruments
 
 The Company is exposed to foreign currency fluctuations on foreign
 currency assets / liabilities, forecast cash flows denominated in
 foreign currency. The use of derivatives to hedge foreign currency
 forecast cash flows is governed by the Company''s strategy, which
 provide principles on the use of such forward contracts and currency
 options consistent with the Company''s Risk Management Policy. The
 counter parties in these derivative instruments are banks and the
 Company considers the risks of non-performance by the counterparty as
 non-material. A majority of the forward foreign exchange/option
 contracts mature within one to twelve months and the forecast
 transactions are expected to occur during the same period. The Company
 does not use forward contracts and currency options for speculative
 purposes.
 
 1.4 Joint Venture
 
 The Company has an interest in the following jointly controlled
 entities:
 
 NEC HCL System Technologies Ltd.
 
 In June, 2005 ,the Company entered into a Joint Venture Agreement with
 NEC Corporation ,Japan (NEC) and NEC System Technologies limited
 (NECST), Japan, a subsidiary of NEC, whereby the Company holds a 49%
 stake in established joint venture entity, NEC HCL System Technologies
 Limited(NECH) and NEC and NECST holds a 51% stake.
 
 In March, 2013 Company entered into an agreement with NEC for the sale
 of its 49% stake in equity affiliate NECH at gross consideration of Rs.
 66.32 crores (USD 12 million).The sale was completed during the year on
 26 April, 2013. The Company has recorded a gain of Rs. 55.54 crores in
 the statement of profit and loss during the year.
 
 1.5 In accordance with the terms of a Scheme of arrangement under
 Sections 391 to 394 of the Companies Act, 1956, approved by the Hon''ble
 High Court of Delhi vide its order dated 12 April 2013, the IT enabled
 services division of HCL Comnet Systems & Services Limited, a
 subsidiary, has been demerged and transferred to the Company on going
 concern basis with effect from 1 April 2012, the appointed date.
 
 The consideration for transfer as per the above mentioned scheme has
 been settled by issue of 10,125 equity shares of Rs. 2 each in the ratio
 of 227 equity shares of the Company of Rs. 2 each for every 100 equity
 shares of Rs. 10/- each held by outside shareholders of HCL Comnet
 Systems & Services Limited.
 
 In view of the above, the net profit of the transferred division for
 the period 1 April 2012 to 30 June 2012 have been reflected in the
 statement of profit of loss of the Company after profit after tax and a
 sum of Rs. 119.54 crores being the excess of net assets of the
 transferred division over the consideration paid, has been included in
 the balance sheet of the Company as on 30 June 2013 as Capital Reserve
 and the results of the operation of the transferred division for the
 current year have been included in the statement of profit and loss for
 the year ended on that date.
 
 1.6 The current year''s figures in statement of profit and loss
 includes results of operations of transferred division for the period
 from 1 July, 2012 to 30 June, 2013 and the net profit of the
 transferred division for the period 1 April 2012 to 30 June 2012 have
 been reflected in the statement of profit of loss of the Company after
 profit after tax (refer note 2.36 above). Therefore, corresponding
 figures of previous year are not comparable with those of current year.
 
 1.7 Previous year figures have been rearranged to conform to the
 current year''s classification.
Source : Dion Global Solutions Limited
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