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. 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
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. Net of advance wealth tax of Rs. 6.60 crores (Previous year Rs.
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
(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
Estimated amount of unexecuted
capital contracts (net of advances) 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
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.