HCL Technologies

1.  Segment reporting
 
 (i) Business Segments
 
 The operations of the Company predominately relate to providing IT
 services, delivered to customers located globally.  Further, the
 Company is also engaged in the business of rendering business
 processing outsourcing services, which are in the nature of customer
 contact centers and technical help desks. The Chairman of the Company,
 who is the Chief Strategy Officer, evaluates the Companys performance
 and allocates resources based on an analysis of various performance
 indicators by types of service 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.
 
 Revenue in relation to service segments is categorized based on items
 that are individually identifiable to that segment, while expenditure
 is categorized in relation to the associated turnover of the segment.
 Assets and liabilities are also identified to service segments.
 
 (ii) Geographic Segments
 
 Geographic segmentation is based on the location of the respective
 client. The principal geographical segments have been classified as
 America, Europe and others. Europe comprises business operations
 conducted by the Company in the United Kingdom, Sweden, Germany, Italy,
 Belgium, Netherlands, Finland, Switzerland and Poland. 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. All other customers, mainly in Japan,
 Australia, New Zealand, Singapore, Malaysia, Israel, South Korea,
 India, China and Hong Kong are included in others.
 
 (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 this
 schedule on significant accounting policies. The accounting policies in
 relation to segment accounting are as under:
 
 a) Segment assets and liabilities
 
 All segment assets and liabilities have been allocated to the various
 segments on the basis of specific identification.  Segment assets
 consist principally of fixed assets, sundry debtors, loans and
 advances, cash and bank balances, and unbilled receivables. Segment
 assets do not include unallocated corporate and treasury assets and net
 deferred tax assets and advance taxes.
 
 Segment liabilities include sundry creditors, other liabilities,
 unsecured loan and secured loan. Segment liabilities do not include
 share capital, reserves and provision for taxes.
 
 2.  Related party transactions
 
 a) Related parties where control exists
 
 Subsidiaries
 
 HCL America Inc., United States of America
 
 HCL Great Britain Limited, United Kingdom
 
 HCL (Netherlands) BV, Netherlands
 
 HCL GmbH, Germany
 
 HCL Belgium NV, Belgium
 
 HCL Sweden AB, Sweden
 
 HCL Italy SLR, Italy
 
 HCL Australia Services Pty. Limited, Australia
 
 HCL (New Zealand) Limited, New Zealand
 
 HCL Hong Kong SAR Limited, Hong Kong
 
 HCL Japan Limited, Japan
 
 HCL Comnet Systems and Services Limited, India
 
 HCL Comnet Limited, India
 
 HCL Bermuda Limited, Bermuda
 
 HCL Holdings GmbH, Austria
 
 HCL Enterprise Solutions Limited, Mauritius
 
 Intelicent India Limited, India
 
 DSI Financial Solutions Pte. Limited, Singapore
 
 HCL BPO Services (Nl) Limited, Northern Ireland
 
 HCL Jones Technologies (Bermuda) Limited, Bermuda
 
 HCL Jones Technologies LLC, United States of America
 
 HCL Singapore Pte. Limited, Singapore
 
 HCL Poland Sp.z.o.o., Poland
 
 HCL (Malaysia) Sdn. Bhd., Malaysia
 
 HCL EAI Services Inc., United States of America
 
 Aalayance (UK) Limited, United Kingdom
 
 HCL EAI Services Limited, India
 
 HCL Technoparks Limited, India
 
 HCL Technologies (Shanghai) Limited, Shanghai
 
 Capital Stream Inc. , United States of America*
 
 * w.e.f. 15th Feb 2008
 
 Others
 
 HCL Technologies Limited Employees Trust
 
 b) Related parties with whom transactions have taken place during the
 year
 
 Subsidiaries
 
 HCL America Inc., United States of America
 
 HCL Great Britain Limited, United Kingdom
 
 HCL (Netherlands) BV, Netherlands
 
 HCL GmbH, Germany
 
 HCL Belgium NV, Belgium
 
 HCL Sweden AB, Sweden
 
 HCL Australia Services Pty. Limited, Australia
 
 HCL (New Zealand) Limited, New Zealand
 
 HCL Hong Kong SAR Limited, Hong Kong
 
 HCL Comnet Systems and Services Limited, India
 
 HCL Comnet Limited, India
 
 HCL Bermuda Limited, Bermuda
 
 Intelicent India Limited, India
 
 HCL Jones Technologies (Bermuda) Limited, Bermuda
 
 HCL Singapore Pte. Limited, Singapore
 
 HCL (Malaysia) Sdn. Bhd., Malaysia
 
 HCL EAI Services Limited, India
 
 HCL Technoparks Limited, India
 
 HCL BPO Services (Nl) Limited, Northern Ireland
 
 HCL Technologies (Shanghai) Limited, Shanghai
 
 HCL Poland Sp.z.o.o., Poland
 
 HCL EAI Services Inc., United States of America
 
 Jointly controlled entities
 
 NEC HCL System Technologies Limited
 
 Others (Significant influence)
 
 HCL Corporation Limited*
 
 HCL Infosystems Limited**
 
 HCL Peripherals Limited**
 
 HCL Technologies Limited Employees Trust
 
 * Holding Company till 27 March 2007 ** Fellow subsidiary till 27 March
 2007
 
 c) Key Management Personnel
 
 Shiv Nadar, Chairman and Chief Strategy Officer
 
 ii) Contingent Liabilities
 
 a) 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. 138.52 crores (previous year
 Rs. 175.97 crores).  These guarantees have been given in the normal
 course of the Companys operations and are not expected to result in
 any loss to the Company on the basis of the beneficiaries fulfilling
 their ordinary commercial obligations.
 
 b) Bank guarantees of Rs. 20.21 crores (previous year Rs. 7.29 crores).
 These guarantees have been given in the normal course of the Companys
 operations and are not expected to result in any loss to the Company,
 on the basis of the Company fulfilling its ordinary commercial
 obligations.
 
 c) Income Tax demands (excluding interest) of Rs. 31.04 crores
 (previous year Rs. 31.04 crores)
 
 The amounts shown in the item (c) 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.
 
 3. Employee Benefit Plans
 
 The Company has calculated the various benefits provided to employees
 as under
 
 A. Defined Contribution Plans and State Plans
 
 Superannuation Fund
 
 Employers contribution to Employees State Insurance
 
 Employers contribution to Employees Pension Scheme.
 
 4. 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 associate 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 shall
 be 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.