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HCL Infosystems

BSE: 500179|NSE: HCL-INSYS|ISIN: INE236A01020|SECTOR: Computers - Hardware
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Directors Report Year End : Mar '18    Mar 17

Dear Shareholders,

The Board of Directors has pleasure in presenting their Thirty Second (32nd) Annual Report on the Business and Operations of the Company, together with the Audited Accounts for the financial year ended 31st March, 2018.

Financial Highlights

The summary of the financial performance of the Company for the Financial Year ended 31st March, 2018 as compared to the previous year is as below:

(Rs. in Crores)

Particulars

Consolidated

Standalone

2017-18

2016-17

2017-18

2016-17

Continuing operations

Net sales and other income

3,742.03

3,371.19

3,003.02

2,313.42

Profit before exceptional items interest, depreciation and tax

(3.26)

61.58

40.24

52.83

Finance charges

139.47

152.50

112.69

104.60

Depreciation and amortization

27.48

31.08

4.44

4.80

Exceptional items

(31.42)

(11.00)

(553.62)

(320.19)

Loss before tax

(201.63)

(133.00)

(630.50)

(376.76)

Provision for taxation: current

2.44

11.31

-

6.31

Deferred tax expenses / (credit)

3.13

(20.63)

1.07

(20.68)

Net loss after tax

(207.20)

(123.68)

(631.57)

(362.39)

Discontinued operations

Loss before tax

(507.21)

(159.67)

Tax expense / (credit)

99.35

(35.68)

Net loss after tax

(606.56)

(123.99)

Net loss after tax

(813.76)

(247.67)

(631.57)

(362.39)

Performance

The consolidated net revenue (from continuing operations) of the Company for the year ended 31st March 2018 was Rs. 3,742.03 Crores as against Rs. 3,371.19 Crores during the previous year ended 31st March, 2017. The consolidated loss before tax (from continuing operations) for the year ended, 31st March, 2018 was Rs. 201.63 Crores as against a loss of Rs. 133.00 Crores during the previous year ended 31st March, 2017.

The net revenue on standalone basis for the year ended, 31st March, 2018 was Rs. 3,003.02 Crores as against Rs. 2,313.42 Crores during the previous year ended 31st March, 2017. The loss before tax for the year ended, 31st March, 2018 was Rs. 630.50 Crores as against a loss of Rs. 376.76 Crores during the previous year ended 31st March, 2017.

Rights Issue

During the financial year under review, the Company had allotted 106,190,299 Equity Shares with a face value of Rs. 2/- each at a premium of Rs. 45/- per Equity Share for an amount aggregating to Rs. 499,09,44,053/- on a rights basis on December 8, 2017. The said fully paid up equity shares were admitted to dealings on the BSE Limited and National Stock Exchange of India Limited with effect from December 14, 2017, pursuant to their trading approvals, vide their respective circulars dated December 13, 2017.

As per Regulation 16 of SEBI ICDR Regulations and Regulation 32 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the Monitoring Agency i.e. Axis Bank, has confirmed in its report dated January 30, 2018 that the proceeds of the Rights Issue has been utilized as per the objects stated in the Letter of Offer dated October 31, 2017 and there has been no deviation in the utilization of proceeds from the objects stated in the offer letter of Rights Issue.

Recommendation of Dividend

Your Board of Directors do not recommend any dividend for the financial year 2017-18.

Operations

A detailed analysis and insight into the financial performance and operations of your Company for the year ended 31st March, 2018 is appearing in the Management Discussion and Analysis, forming part of the Annual Report.

There is no change in the authorized share capital of the Company.

Transfer to reserves

No amount is proposed to be transferred to the general reserve of the Company.

Employee Stock Option Plan

Employee Stock Option Scheme 2000 Pursuant to the approval of the Shareholders at an ExtraOrdinary General Meeting held on 25th February, 2000 for grant of options to the employees of the Company and its subsidiaries (the Scheme 2000), the Board of Directors had approved the grant of 31,90,200 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.

During the year under review, no shares were allotted under ESOP scheme 2000.

Employee Stock Based Compensation Plan 2005 Pursuant to the approval of Shareholders of the Company through a Postal Ballot, the result whereof was declared on 13th June, 2005, the Board of Directors had granted 33,35,487 options including the options that had lapsed out of each grant under the Employee Stock Based Compensation Plan 2005 (the Plan 2005). 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.

During the year under review the Company had allotted 1,00,000 Equity Shares of Rs. 2/- each under ESOP Plan 2005. Credit Rating

The credit rating by ICRA continued at ‘A1’, indicating the very strong degree of safety regarding timely payment of financial obligations to the company’s Commercial Paper program of Rs. 300 crores.

The current long term rating assigned by India Rating to the company is ‘A-’, indicating adequate degree of safety regarding timely servicing of financial obligations.

Fixed Deposits

Your Company has not accepted/renewed any deposits from the public during the year and there were no fixed deposits outstanding either at the beginning or at the end of the year.

Listing

The equity shares of your Company are listed at The BSE Limited, Mumbai (BSE) and National Stock Exchange of India Limited, Mumbai (NSE).

Stock Exchange where HCL Infosystems

Scrip Symbol /

Ltd. shares are listed

Code

National Stock Exchange of India Ltd. (NSE)

HCL-INSYS

BSE Ltd. (BSE)

500179

The Company has paid the listing fee for the year 2018-2019 to BSE and NSE.

Directors and Key Managerial Personnel (KMP)

The Board of Directors of the Company has optimum combination of executive and non-executive directors including independent directors and woman directors in compliance with the provisions of the Companies Act, 2013 (“the Act”) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the year under review, Mr. Pradeep Kumar Khosla, Independent Director, had resigned from the Directorship of the Company w.e.f 12th June, 2017. Further, Mr. Premkumar Seshadri ceased to be Managing Director of the Company w.e.f. close ofbusiness hours of 31st March, 2018 and Mr. Raghavan Rangarajan was appointed as Managing Director of the Company w.e.f. 1st April, 2018. The Board places on record their appreciation for the contributions made by them during their tenure with the Company.

Mr. V N Koura, the Non-executive and Non Independent Director liable to retire from office by rotation at the ensuing Annual General Meeting has vide his letter dated 25th May, 2018 expressed his unwillingness to be reappointed as Director of the Company due to his other professional commitments and hence will not be reappointed at the forthcoming AGM.

The Company has received declarations from all the Independent directors confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013.

In terms of the provision of Section 149, 152(6) and other applicable provisions of the Companies Act, 2013, an Independent director shall hold office up to a term of five consecutive years on the Board of the Company and shall not be liable to retire by rotation.

Committees of Board

Currently, the Board has 6 (Six) Committees: Accounts and Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility (CSR) Committee, Finance Committee and Technology Committee. A detailed note on Committees is provided in the Corporate Governance Report.

Board and Committees Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015, a formal annual performance evaluation has been done by the Board of its own performance, the Directors individually as well as the evaluation of its Committees.

The Company had appointed an external agency to assist NRC in drafting the questionnaires for the purpose of evaluation of the Board & the Individual directors and the Board Committees. The structured questionnaires were circulated to all the Directors, requesting them to fill and return the duly filled questionnaires to the Company giving their views for evaluation of the self & the peers.

The feedback of the evaluation was shared by the Board Chairman with each Board members, the entire Board and the Board Committees and a roadmap was framed for taking the corrective actions.

Independent Directors of the Company in their separate meeting held on 29th March, 2018 reviewed the performance of the non-independent directors and the Board as a whole. They also reviewed the performance of the Chairperson of the Company.

Criteria/Policy on Appointment and Remuneration

The Board has, on the recommendation of the Nomination & Remuneration Committee (NRC) framed a criteria for appointment of Directors, Key Managerial Personnel/Senior Management. The Board has also adopted a remuneration policy for Directors, Key Managerial Personnel/ Senior Management and other employees. The criteria/policy on appointment and remuneration Policy are stated in the Corporate Governance Report.

Board Meetings

During the financial year 2017-18, 13 (Thirteen) Board Meetings were held and the gap between two meetings did not exceed one hundred and twenty days. The details of Board Meetings held are stated in the Corporate Governance Report. Corporate Social Responsibility (CSR)

A report on Corporate Social Responsibility (CSR) is attached as Annexure to this Report.

Corporate Governance Report and Management Discussion and Analysis Statement

The Corporate Governance Report and the Management Discussion and Analysis Statement are attached and are to be read with the Board Report.

Insider Trading Regulations

As per the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015, the Company had adopted the ‘Code of Conduct for Internal Procedures and to Regulate, Monitor and Report Trading by Insiders’ and the ‘Code of Fair Disclosure’ w.e.f. 15th May, 2015.

Directors’ Responsibility Statement Pursuant to the requirement of Section 134(3)(c) of the Companies Act, 2013, 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;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safe guarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the company and that such internal Financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Statement on Declaration given by Independent Directors

All independent directors have given declarations to the effect that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013. Particulars of Employees and related disclosures

The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:.

(a) The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

Non-Executive Directors

Ratio to median remuneration

Remuneration (Rs.)

Dr. Nikhil Sinha*

7,50,000

Mr. V.N. Koura

-

-

Dr. Pradeep Kumar Khosla**

75,000

Ms. Sangeeta Talwar

23,25,000

Mr. Kaushik Dutta

21,75,000

Mr. Dhirendra Singh

22,50,000

Mr. Pawan Kumar Danwar

-

-

Mr. Dilip Kumar Srivastava

-

-

Ms. Ritu Arora

9,75,000

Executive Directors

Ratio to median remuneration

Remuneration

Mr. Premkumar Seshadri***

-

-

Note:

1. No sitting fees is paid to Executive Director and NonIndependent Director, other than Dr. Nikhil Sinha.

2. * Dr. Nikhil Sinha was paid sitting fees for Board/ Committees meetings held on and after 26th July, 2017

3. ** Dr. Pradeep Kumar Khosla resigned from Directorship of the Company w.e.f. 12th June, 2017

4. *** Mr. Premkumar Seshadri resigned from the position of Managing Director of the Company w.e.f the closing hours of 31st March, 2018.

(b) The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary in the financial year:

Mr. Premkumar Seshadri, Executive Vice Chairman & Managing Director was not paid any remuneration by the Company.

No remuneration, other than the sitting fees were paid to Non-Executive and Independent Directors, which continued to be paid @ Rs. 75,000/- per Board / Committee meeting, as was paid during the year 2016-17.

(c) The percentage increase in the median remuneration of employees in the financial year:

The percentage increase in the median remuneration of the employees in the financial year was 4.0%

(d) The number of permanent employees on the rolls of Company:

The number of permanent employees on rolls of the Company at the end of the financial year were 2277.

(e) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

- The Average Annual increase was around 4.0%

- Not Applicable for managerial remuneration, as no remuneration is paid by the Company to the Managing Director by the Company

(f) Affirmation that the remuneration is as per the remuneration policy of the Company:

The Company affirms remuneration is as per the remuneration policy of the Company.

Annual Report is being sent to the members of the Company excluding the information under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Any member interested in obtaining the said information may write to the Company Secretary at the registered office of the Company.

Particulars of Loans, Guarantees or Investments

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Related Party Transactions

All the related party transactions were in the ordinary course of business and at arm’s length. The Audit Committee has approved all related party transactions under the provisions of Section 188 of the Companies Act, 2013 and other applicable sections of the Companies Act, 2013 read with relevant rules for the financial year 2017-18. The Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

Policy on dealing with related party transactions is available on the website of the Company. https://www.hclinfosystems. com/investors/

Internal Control Systems

Your Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed.

Policy on Directors’ Appointment and Remuneration

In terms of Section 178(3) of the Companies Act, 2013, upon recommendation of the Nomination and Remuneration Committee, the Board has adopted the Nomination and Remuneration Policy of the Company. Directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other prescribed matters, are governed by such policy. In terms of Section 178(4) of the Act, such policy is attached hereto as Annexure - 1 which forms part of this report. Annual Evaluation of Performance of the Board, its Committees and Individual Directors The evaluation of performance of the Board, its Committees and individual directors for the financial year 2017-18 was carried out in accordance with the policy for evaluation of the performance of the Board of Directors of the Company. The Company had appointed an external agency to conduct the online board evaluation of the Board, Committees and individual Directors including Independent Directors, as per the assessment from designed inhouse by the Company. The report content and quality was reviewed by Independent HR consultant and shared the results with the Board Chairman Dr. Nikhil Sinha. Independent Directors in their separate meeting have reviewed the performance of Non-Independent Directors and the Board as a whole. They also reviewed the performance of chairperson of the Company. The Board was satisfied with the evaluation results.

Vigil Mechanism/Whistle Blower Policy

Pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013 and Regulation 22 of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015, a Vigil Mechanism/ Whistle Blower Policy for Directors and employee to report concerns about unethical behavior, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. The said Policy is posted on the website of the Company and can be assessed at https://www.hclinfosystems.com/ investors/

Policy against Sexual Harassment

The organization endeavors to ensure a safe, protected and congenial work environment where employees shall deliver their best without any inhibition, threat or fear. Hence the prevention of sexual harassment at workplace policy has been evolved.

The Company has put in place a ‘Policy on Prevention and Redressal of Sexual Harassment at Workplace under the name of “With You”. As per the policy, any employee may report his/her complaint to the supervisor or HR representative or member of the Committee or to the With You email id “withyou@hcl.com“, in writing as mentioned.

The Ethics Committee [Committee constituted under the prevention of Sexual Harassment at the workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”)] would then investigate and submit its report within 45 working days. We affirm that adequate access was provided to any complainant who wished to register a complaint under the policy, during the year.

Risk Management Policy

The Board of the Company has adopted a risk management policy for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report.

Auditors & Auditors’ Report

Statutory Auditors

As per Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, the Members of the Company in its 31st Annual General Meeting held on 14th September, 2017 approved the appointment of M/s BSR & Associates LLP, Chartered Accountants (FRN - 116231W/W-100024), as the Statutory Auditors of the Company for an initial term of 5 years i.e. from the conclusion of 31st Annual General Meeting till the conclusion of 36th Annual General Meeting of the Company.

The Report given by M/s BSR & Associates LLP, Chartered Accountants on the financial statements of the Company for the financial year 2017-18 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3) of the Act.

Secretarial Audit

The Secretarial Audit was carried out by M/s. V K C & Associates, Practicing Company Secretaries for the financial year 2017-18. The Report given by the Secretarial Auditors is annexed and forms an integral part of this Board’s Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3) of the Act. In terms of Section 204 of the Act, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Audit Committee recommended and the Board of Directors appointed M/s. V K C & Associates, Practicing Company Secretaries as the Secretarial Auditors of the Company in relation to the financial year 2018-19. The Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed thereunder.

Additional information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is attached as Annexure to this Report.

Consolidated Financial Statement

In accordance with the Companies Act, 2013 (“the Act”) and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with AS - 23 on Accounting for Investments in Subsidiaries/Associates/JVs and AS - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report.

Subsidiaries, Joint Ventures and Associate Companies

A list of Subsidiaries/Associates/JVs is given in the Extract of Annual Return attached to this report.

Policy for determining material subsidiaries of the Company is available on the website of the Company at https://www. hclinfosystems.com/investors/ HCL Touch Inc., US, the erstwhile step down wholly owned subsidiary of your Company ceased to be the step down subsidiary on its winding up w.e.f 4th April, 2018. Also, QDigi Services Limited (formerly known as HCL Computing Products Limited), a wholly owned subsidiary has ceased to be the subsidiary of your Company w.e.f 11th April, 2018 on its sale to an Independent buyer.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is attached herewith as “Annexure to this Report”.

Investor Education and Protection Fund (IEPF)

Pursuant to the applicable provisions of the Companies Act, 2013, read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘the Rules’), all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF established by the Central Government, after the completion of seven years. Further, according to the Rules, the shares in respect of which dividend has not been paid or claimed by the shareholders for seven consecutive years or more have also been transferred to the demat account created by the IEPF Authority. Accordingly, the Company has transferred the unclaimed and unpaid dividends along with the corresponding Shares that become due to transfer during the FY 2017-18.

Significant and Material Orders Passed by the Regulators or Courts

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Acknowledgements

The Directors place on record their appreciation for the continued co-operation extended by all stakeholders including various departments of the Central and State Government, Shareholders, Investors, Bankers, Financial Institutions, Customers, Dealers and Suppliers.

The Board also places on record its gratitude and appreciation of the committed services of the executives and employees of the Company.

On behalf of the Board of Directors

Sd/-

Place : Noida Nikhil Sinha

Date : 29th May, 2018 (Chairman)

Source : Dion Global Solutions Limited
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