SENSEX NIFTY India | Notes to Account > Computers - Software > Notes to Account from HCL Technologies - BSE: 532281, NSE: HCLTECH
HCL Technologies
BSE: 532281|NSE: HCLTECH|ISIN: INE860A01027|SECTOR: Computers - Software
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« Jun 13
Notes to Accounts Year End : Jun '14
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 services and IT infrastructure
 services. The Company was incorporated in India in November 1991. The
 Company leverages its extensive offshore infrastructure and global
 network of offices and professionals located in various countries to
 deliver solutions across select verticals including financial services,
 manufacturing (automotive, aerospace, hi-tech and semi conductors),
 telecom, retail and consumer packaged goods services , media,
 publishing and entertainment, public services, energy and utility,
 healthcare and travel, transport and logistics.
 1. Note:-
 1.  These debentures have a maturity period of five years reedemable at
 par and are secured against computers, softwares, plant and machinery,
 receivables from subsidiaries and specified land and building of the
 2.  Secured by hypothecation of gross block of vehicles of Rs. 76.02
 crores (Previous year Rs. 68.80 crores) at interest rates ranging from
 8%.  to 11%. The lons are repayble over a period of 3 to 5 years on a
 monthly basis.
 3.  Obligations under finance lease are secured by vehicles taken on
 lease at interest rates ranging from 8% to 11%.
 1.  Net of advance income tax of Rs. 3,590.29 crores (Previous year Rs.
 2,192.12 crores).
 2.  Net of advance wealth tax of Rs. 6.60 crores (Previous year Rs.
 5.31 crores).
 2.Segment Reporting
 Identification of segments
 The Company''s operating businesses are organized and managed according
 to the nature of products and services provided, with each segment
 representing a strategic business unit that offers different products
 and services.
 (i) Business segments
 The operations of the Company predominately relate to providing a range
 of IT and Business Process Outsourcing services (BPO) targeted at
 Global 2000 companies spread across USA, Europe & Rest of the World. IT
 Services include software services & IT infrastructure management
 services. Within software services, the Company provides application
 development & maintenance, enterprise application, next generation SAAS
 (Software As A Service) application services and engineering and R&D
 services to several global customers. IT Infrastructure management
 services involve managing customers'' IT assets effectively. The
 Company''s ''Enterprise of the Future''( EOF) framework helps customers
 not just run IT effectively but also migrate to next generation IT. EOF
 involves services around cloud, next generation data centres, business
 productivity services, integrated service management layer and an
 integrated application development & operations services. Business
 process outsourcing services include the traditional contact centre &
 help desk services and next generation services around platform BPO &
 BPAAS (Business Process As A Service) delivered through a strong global
 delivery model. The Company''s trademarked EFAAS( Enterprise Function As
 A Service) helps customers reduce business cost rather than just the
 process cost as was the case in traditional BPO.
 The Chairman of the Company, who is the Chief Strategy Officer,
 evaluates the Company''s performance and allocates resources based on an
 analysis of various performance indicators by types of services
 provided by the Company and geographic segmentation of customers.
 Accordingly, revenue from service segments comprises the primary basis
 of segmental information set out in these financial statements.
 Secondary segmental reporting is performed on the basis of the
 geographical location of customers and assets.
 (ii) Geographic segments
 Segment revenue from customers by geographical areas are stated based
 on geographical location of the customer and segment assets by
 geographical location of the assets.
 The principal geographical segments are classified as America, Europe,
 India and Others. Europe comprises business operations conducted by the
 Company in the United Kingdom, Sweden, Germany, Italy, Belgium,
 Netherlands, Northern Ireland, Finland, Poland and Switzerland. Since
 services provided by the Company within these European entities are
 subject to similar risks and returns, their operating results have been
 reported as one segment, namely Europe. India has been identified as a
 separate segment. All other customers, mainly in Japan, Australia, New
 Zealand, Singapore, Malaysia, Israel, South Korea, China, Czech
 Republic, Macau, UAE, Portugal, Russia and Hong Kong are included in
 (iii) Segment accounting policies
 The accounting principles consistently used in the preparation of the
 financial statements and consistently applied to record revenue and
 expenditure in individual segments are as set out in note 1 to the
 financial statements on significant accounting policies. The accounting
 policies in relation to segment accounting are as under:
 a) Segment assets and liabilities
 Segment assets consist mainly of allocable fixed assets, trade
 receivables, loans and advances and unbilled receivables.  Segment
 assets do not include unallocated corporate assets, treasury assets,
 net deferred tax assets, advance taxes and Minimum Alternate Tax.
 Segment liabilities include trade payables, and other liabilities.
 Segment liabilities do not include provision for taxes, borrowings and
 other unallocated corporate liabilities.
 b) Segment revenue and expenses
 Segment revenue is directly attributable to the segment and segment
 expenses have been allocated to various segments on the basis of
 specific identification. However, segment revenue does not include
 other income. Segment expenses do not include premium amortized on
 bonds, diminution allowance in respect of current and trade
 investments, other than temporary diminution in the value of long term
 investments, charge taken for stock options issued to employees,
 corporate expenses and finance cost.
 3. Commitments and Contingent liabilities
                                                 As at        As at
                                            30 June 2014   30 June 2013
 i) Capital and other commitments 
 Capital commitments
 Estimated amount of unexecuted 
 capital contracts (net of advances)              743.03       1,139.47
                                                  743.03       1,139.47
 ii)  Contingent Liabilities
 Others                                             1.42           5.29
 Total                                              1.42           5.29
 The amounts shown in the item above represent best possible estimates
 arrived at on the basis of available information. The possible outflows
 on account of contingent liabilities 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. 1780.39 crores (Previous year
 Rs. 1,852.21 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. 44.89 crores (Previous year Rs. 45.94
 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
 d) The Company has negotiated extended interest bearing credit terms
 with certain vendors and has outstanding letters of credit of Rs.
 949.88 crores (Previous year Rs. 430.33 crores) in this respect for
 extended payment terms up to 360 days. Interest rate on these
 arrangements ranges from 1.5%p.a. to 10.0%.p.a.
 The Company also has letters of credit amounting to Rs. 2.44 crores
 (Previous year Rs. 0.29 crores) outstanding as at 30 June 2014 in the
 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 annually for
 conducting transfer pricing study to determine whether transactions
 with associated enterprises undertaken during the financial year, are
 on an arms length basis. Adjustments, if any, arising from the
 transfer pricing study in the respective jurisdictions shall be
 accounted for as and when the study is completed for the current
 financial year. 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.
 4. Derivative Financial Instruments
 The Company is exposed to foreign currency fluctuations on foreign
 currency assets / liabilities and 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
 provides 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
 5. During the previous year, in accordance with 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 a 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 has been reflected in the
 statement of profit of loss for the previous year ended 30 June, 2013
 of the Company after profit after tax. 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. The results of the
 operations of the transferred division for the period 1 July, 2012 to
 30 June, 2013 have been included in the statement of profit and loss
 for the previous year ended 30 June, 2013.
Source : Dion Global Solutions Limited
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