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Notes to Accounts of HCL Infosystems Ltd.

Jun 30, 2015

1. Rights attached to Equity Shares:

The Company has only one class of equity share having a face value of Rs. 2/- each. Each holder of equity shares is entitled to one vote per share held. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in ensuing General Meeting, except in case of interim dividend.

In the event of liquidation of the Company, the holders of equity Shares will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by Shareholders.

2. Shares reserved for issue under options:

For detail of shares reserved for issue under Employee Stock Option Plan of the Company, refer Note 41.

(iii) Shareholders holding more than 5% of the aggregate shares in the Company

3. (i) Secured Term Loan from Banks amounting to Rs. NIL (2014 - Rs. 26.67 Crores), out of which Rs. NIL (2014 - Rs. 26.67 Crores) is shown under current maturity of long term debt, secured by way of first charge on movable and immovable fixed assets of the Company. The loan is repayable in 6 half yearly installments from the date of the loan which carries interest @ 11.25 % per annum.

(ii) Secured Term Loan from Banks amounting to Rs. 143.48 Crores (2014 - Rs. 300.00 Crores), out of which Rs. 143.48 Crores (2014 - Rs. 156.56 Crores ) is shown under current maturity of long term debt, is secured by way of subservient charge on current assets of the Company. It also carries a lien on Mutual Funds of Rs. 99.86 Crores . The loan is repayable in 23 monthly equal instalments starting from July 2014 and carries interest @ 11.25 % per annum.

(iii) Secured Long Term Loan from Banks amounting to Rs. 5.73 Crores (2014 - Rs. 29.15 Crores), out of which Rs. 5.73 Crores (2014 - Rs. 23.34 Crores ) is shown under current maturity of long term debt, and Secured Short Term Loan amounting to Rs. 75.00 Crores (2014 - Rs. Nil ), is secured by way of subservient charge on current assets of the Company. It also carries a lien on Mutual Funds of Rs. 49.98 Crores . The long term loan is repayable in 8 quarterly equal instalments starting from the date of disbursement and carries interest @ 11.67 % per annum and Short Term Loan of Rs. 75.00 Crores is repayble one year from the date of disbursement and carries interest @ 11.50 % per annum.

(iv) Secured Term Loan from Banks amounting to Rs. 99.91 Crores (2014 - Rs. NIL), out of which Rs. 19.92 Crores (2014 - Rs.NIL ) is shown under current maturity of long term debt, is secured by way of Hypothecation over the receivable from a particular project. The loan is repayable in 1 half yearly and 14 quarterly equal instalments starting from the date of disbursement and carries interest @ 11.25 % per annum.

4. (i) Unsecured Term loans from Others amounting to Rs. 2.36 Crores (2014 - Rs. 11.36 Crores), out of which Rs. 2.36 Crores (2014 - Rs. 9.00 Crores) is shown under current maturity of long term debt, are repayable in 19 equal quarterly installments from the date of the loans which are interest free.

(ii) Unsecured Term loans from Others amounting to Rs. 142.05 Crores (2014 - Rs. 164.85 Crores), out of which Rs. 73.32 Crores (2014 - Rs. 55.12 Crores) is shown under current maturity of long term debt, is repayable in 11 to 12 equal quarterly instalments from the date of the disbursement which carries interest @ 11.80% to 12.25% per annum.

(iii) Unsecured Term loans from Others amounting to Rs. 41.70 Crores (2014 - Rs. 17.58 Crores), out of which Rs. 26.07 Crores (2014 - Rs. 10.87 Crores) is shown under current maturity of long term debt, is repayable in 2 quarterly, 2 half yearly and balance 16 quarterly instalments from the date of the disbursement which carries interest @ 13% per annum.

5. Long term borrowings, Short term borrowings and Current maturities of long term debts is net of the loan amounting to Rs. 46.46 Crores (2014 - Rs. 112.89 Crores), Rs. 26.13 Crores (2014 - Rs. 28.65 Crores) and Rs. 68.94 Crores (2014 - Rs. 145.81 Crores) respectivley that the Company has transferred to its subsidaries pursuant to the scheme of arrangement (Refer Note 51).The Company is in the process of transferring the loan agreements to the respective subsidary companies.

6. (i) Secured Loan from Banks amounting to Rs. 139.90 Crores (2014 - Rs. Nil )is secured by way of (1) hypothecation of stock-in-trade, book debts as first charge of the Company and its demerged subsidiaries, persuant to the scheme of arrangement and (2) by way of second charge on all the immovable and movable assets of the Company, along with non-fund based facilities from Banks. The charge ranks pari-passu amongst Bankers and carries interest @ 11.30 % per annum on loan amounting to Rs. 99.90 Crores and 10.40% per annum on loan amounting to Rs. 40.00 Crores.

(ii) Secured Loan from Banks amounting to Rs. 75.00 Crores (2014 - Rs. Nil ), is secured by way of subservient charge on current assets of the Company. It also carries a lien on Mutual Funds.Also refer Note 4 (iii).

(iii) Secured Loan from Banks amounting to Rs. 61.08 Crores (2014 - Rs. 196.43) are secured by way of first charge over stock-in-trade and book debts of the company and its demerged subsidiaries and by way of second charge over movable and immovable fixed assets of the Company, pursuant to court approved scheme of arrangement. The charge ranks pari-passu amongst Bankers.

7. Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for amount to Rs. 6.85 Crores (2014 - Rs. Nil). For Commitments on account of lease Refer Note 42.

8. a) Contingent Liabilities

Claims against the Company not acknowledged as debts:

Sales Tax* 142.35 41.53

Excise* 96.72 14.05

Income Tax* 5.39 2.95

Industrial Disputes, Civil Suits and Consumer Disputes 2.70 12.10

*Includes sum of Rs. 20.83 Crores (2014 - Rs. 12.49 Crores) deposited by the Company against the above.

The amounts shown in item (a) represents the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the out come of the different legal processes which have been initiated by the Company or the claimants as the case may be and therefore cannot be predicted accurately.It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

9. b) Corporate Guarantees :

(i) Corporate Guarantee of Rs. 624.52 Crores (2014 - Rs. 534.37 Crores) was given to Banks and Financial Institutions for working capital facilities sanctioned to subsidiaries of which the total amount utilised as at June 30, 2015 is Rs. 164.80 Crores (2014 - Rs. 218.85 Crores).

(ii) Corporate Guarantee of Rs. 20.80 Crores (2014 - Rs. 58.80 Crores) was given by the Company, on behalf of its subsidiaries, to third parties for assigning credit limit to the subsidiaries.

10. c) Other Litigations :

(i) During the year, the Company has been named in a supplementary charge sheet filed with the Court with respect to a Contract awarded to the Company in 2009 by the UP State Government, amounting to Rs. 4.94 Crores, for the supply of computer hardware and related services under the National Rural Health Mission and summons have been issued by the Court. The Matter is currently pending adjudication before the Supreme Court through Special Leave Petition filed by the Company. The Management is of the view that the Company has not been engaged in any wrong doing.

(ii) The Company has certain sales tax and other related litigation amounting to Rs. 5.62 crores (2014 - Rs. 5.93 crores) against which provision have been made. Provision amounting to Rs. 0.31 Crores was utilised during the year.

11. As per provisions of Section 135 of the Companies Act, 2013, the Company has to provide at least 2%of average net profits of the preceeding three financial years towards Corporate Social Responsibility ("CSR"). Accordingly, a CSR Committee has been formed for carrying out CSR activities as per Schedule VII of the Companies Act, 2013. The Company was not required to spend/contribute to CSR Activity during the year as per Section 135 of the Companies Act, 2013 as average net profit for the last three financial year is negative.

12. Employee Stock Option Plan (ESOP):

The Company has established Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005, for a total grant of 31,90,200 and 33,35,487 options have been set aside respectively for the employees of the Company and its subsidiaries. These options vest on a graded basis over a period of 42 and 60 months respectively from the date of grant and are to be exercised with in a maximum period of 5 years from the date of vesting.

The Board of Directors/Committee approves the grant of options, including the grant of options that lapse out of each grant.

Each option of Rs. 10/- confers on the employee a right to five equity shares of Rs. 2/- each.

Exercise price is market price as specified in the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India ("SEBI").

1. Volatility: Based on historical volatility in the share price movement of the Company.

2. Risk Free Rate: Being the interest rate applicable for maturity equal to the expected life of options based on yield curve for Government Securities.

3. Time to Maturity: Vesting period and volatility of the underlying equity shares have been considered for estimation.

4. Dividend Yield: Based on historical dividend payouts.

42. Leases:

a) Cancelable Operating Leases As Lessee:

(i) The Company has taken various residential/commercial premises under cancelable operating leases. These leases are for a period of eleven months to three years and are normally renewable on expiry.

13. Earnings / (Loss) per share (EPS)

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The earnings considered in ascertaining the company's EPS represent profit/(loss) for the year after tax. Diluted EPS is computed and disclosed using the weighted average number of equity and dilutive equivalent shares outstanding during the year except when results would be anti- dilutive.

14. Segment Reporting

The Company recognises the following segments as its primary Segments :

(i) Hardware Products & Solution business comprise of :

(a) Sale of IT products & solutions to enterprise and government customers

(b) Sale of HCL branded products to enterprise and government customers including sale to consumer through channel partners.

(ii) Distribution segment comprises of distribution of :

(a) Consumer Products including telecommunication, digital lifestyle products and consumer electronic & home appliances

(b) Enterprise products including IT products, Enterprise software and Office Automation products.

Details of secondary segments are not disclosed as more than 90% of the Company's revenues, results and assets relate to the domestic market.

(c) Defined Benefits

(i) Gratuity

(ii) Provident Fund#

The Company contributes to the employee provident fund trust "Hindustan Computers Limited Employees Provident Fund Trust" which is managed by the Company. The Company's Provident Fund Trust is exempted under Section 17 of Employees' Provident Fund Act, 1952. Conditions for grant of exemptions stipulate that the employer shall make good deficiency, if any, in the interest rate declared by the trust vis-a-vis statutory rate. As per guidance note on AS - 15, Employee Benefits (Revised 2005), provident funds set up by employers, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan.

The Trust includes employees of the Company as well as of its wholly owned Indian subsidiaries and of HCL Corporation Private Limited, a related party. In view of the same, it is a multi employer defined benefit plan. The Trust has been investing the Provident fund contributions of the employees of all the six companies in a composite manner and the same cannot be separately identified entity wise.

In view of the same an actuarial valuation, in accordance with the AS-15 (Revised), was carried out at composite level. As per actuarial certificate there is no shortfall in the earning of fund against statutorily required "interest rate guarantee" and accordingly, the ''liability on account of interest rate guarantee'' is nil.

In accordance with Accounting Standard 15 (revised 2005), an actuarial valuation was carried out in the respect of the aforesaid defined benefit plan based on the following assumptions:

15. The Company remits the dividends to its non resident shareholders in Indian Rupees.

16. Pursuant to the approval of the shareholders and in terms of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Company has:

(a) On receipt of 25% subscription money, allotted 2,10,59,515 warrants priced at Rs. 152.90 per warrant to certain promoters on a preferential basis on October 7, 2009. Subsequently, 1,64,38,848 warrants have been converted into equal number of equity shares of Rs. 2/- each on October 29, 2009 and 46,20,667 on April 5, 2011 on receipt of the balance 75% subscription money.

(b) Raised Rs. 472.67 Crores by allotment of 3,05,55,713 equity shares of Rs. 2/- each at a price of Rs. 154.69 per equity share including a premium of Rs. 152.69 per equity share through Qualified Institutional Placement on October 21,2009.

17. Disclosure of related parties and related party transactions:

a) Company having substantial interest:

HCL Corporation Private Limited

b) List of parties where control exists/existed:

Subsidiaries:

Digilife Distribution and Marketing Services Limited

RMA Software Park Private Limited (up to September 24,2014)

HCL Insys Pte. Limited, Singapore HCL Computing Products Limited HCL Infosystems MEA FZE, Dubai

HCL Infosystems LLC, Dubai (49% Shareholding of HCL Infosystems MEA FZE)

HCL Infosystems South Africa Pty. Limited

HCL Infotech Limited

HCL Learning Limited

HCL Services Limited

Joint Venture :

Nokia HCL Mobile Internet Services Limited

c) Others (Enterprises over which, individual having indirect significant influence over the company, has significant influence) and with whom transactions have taken place during the year and/or where balances exist:

HCL Technologies Limited HCL Comnet Limited

HCL Comnet Systems and Services Limited

HCL Avitas Private Ltd

HCL Talent Care Privatet Limited

SSN College of Engineering

SSN Trust

RMA Software Park Private Limited (with effect from September 25, 2014)

Vama Sundari Investments (Pondi) Pvt Limited

d) Key Management Personnel:

Mr. Premkumar Seshadri* (Executive Vice Chairman & Managing Director with effect from January 1,2015)

Mr. Harshavardhan Madhav Chitale (Resigned as director with effect from December 31,2014.)

Mr. SG Murali (Group CFO with effect from April 1,2015)

Mr. Sandeep Kanwar (Resigned as CFO with effect from March 31,2015)

Mr. J.V. Ramamurthy (Resigned as director with effect from March 21,2014)

Mr Sushil Jain (Company Secretary)

*Remuneration has been paid by HCL Corporation Private Limited

18. The Hon'ble High Court of Delhi sanctioned a Composite Scheme of Arrangement (the "Scheme") applicable from 1st January, 2013 between the Company and its wholly owned subsidiaries namely HCL Infotech Limited (formerly known as HCL System Integration Limited), HCL Services Limited (formerly known as HCL Care Limited) and HCL Learning Limited (collectively the "Transferee Companies") and HCL Infocom Ltd and their respective shareholders and creditors under the provisions of section 391 to 394 of the Companies Act, 1956, vide its order dated September 18, 2013 received on October 30, 2013. The Scheme became effective from November 1,2013 on filing a certified copy of the High Court order with the office of the Registrar of the Companies, NCT of Delhi & Haryana and is applicable from January 1,2013 (the "Appointed date"). According to the Scheme, as on 1st January, 2013, the Hardware Solutions Business, Services Business and Learning Business (collectively the "Transferred Undertakings") of the Company stand transferred to HCL Infotech Limited , HCL Services Limited and HCL Learning Limited (collectively the "Transferee Companies") respectively, the wholly owned subsidiaries. Also with effect from the appointed date, HCL Infocom Limited has been merged with the Company.

As detailed in the scheme, the Company transferred net assets as on 1st January, 2013 having book value of Rs. 1,118.13 Crores for Hardware Solution Business to HCL Infotech Limited for Nil Consideration, net assets having book value of Rs. 79.31 Crores for Services business to HCL Services Ltd for a consideration of Rs. 61.00 Crores and net assets having book value of Rs. 111.84 Crores of Learning business to HCL Learning Limited at a consideration of Rs. 113.00 Crores. On such transfers, Rs. 1,135.28 Crores, being the difference of the net assets transferred and the consideration received was debited to Business Restructuring Reserve, on merger of HCL Infocom Ltd Rs. 959.48 Crores, being the difference between fair value of net assets and the Company's investment in HCL Infocom Limited, was credited to capital reserve, and the Business restructuring reserve so arising was adjusted from capital reserve Rs. 959.48 Crores and from Securities Premium account Rs. 175.80 Crores.

The Fair values as at December 31, 2012 of the transferred undertakings and assets/liabilities recorded by the transferee companies as at appointed date,were determined by the independent valuer appointed by the Company.

In accordance with the Scheme, the Company continued to carry on the business and activities in relation to the Transferred Undertakings on account of and in trust for the respective Transferee Companies from January 1, 2013 (the "Appointed date") till November 1,2013 (the "Effective date").

The Company transferred the profit/(loss) attributable to the Transferred Undertakings, for the period from appointed date and up to June 30, 2013, amounting to Rs. 49.79 Crores by adjusting through the Surplus in the Statement of Profit and Loss. Subsequent to the effective date, the Company is in the process of entering into novation agreements with the relevant third parties, including customers and vendors, pertaining to HCL Infotech Limited. These financial statements have been prepared with the assumption that such novation will be granted by respective parties. The Management expects it to be concluded with in a reasonable period of time and does not anticipate any material impact on financial results of the Company.

19. Previous year's figures have also been regrouped/recasted, where neccessary, to conform to the current year's presentation.






Jun 30, 2014

(i) Rights attached to Equity Shares:

The Company has only one class of equity share having a face value of Rs. 2/- each. Each holder of equity shares is entitled to one vote per share held. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in ensuing General Meeting, except in case of interim dividend.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by Shareholders.

(ii) Shares reserved for issue under options:

For detail of shares reserved for issue under Employee Stock Option Plan of the Company, refer Note 44.

(iii) Shareholders holding more than 5% of the aggregate shares in the Company

1. (i) Secured Term Loan from Banks amounting to Rs. 26.67 Crores (2013 - Rs. 53.34 Crores), out of which Rs. 26.67 Crores (2013 - Rs. 26.67 Crores) is shown under current maturity of long term debt, is secured by way of first charge on movable and immovable fixed assets of the Company. The loan is repayable in 6 half yearly instalments from the date of the loan which carries interest @ 11.25 % per annum.

(ii) Secured Term Loan from Banks amounting to Rs. 300.00 Crores (2013 - Rs. 300.00 Crores), out of which Rs. 156.56 Crores (2013 - Rs. Nil ) is shown under current maturity of long term debt, is secured by way of subservient charge on current assets of the Company. It also carries a lien on Mutual Funds of Rs. 99.83 Crores . The loan is repayable in 23 monthly equal instalments starting from July 2014 and carries interest @ 11.50 % per annum.

(iii) Secured Term Loan from Others amounting to '' Nil (2013 - Rs. 0.11 Crores), out of which '' Nil (2013 - Rs. 0.11 Crores) is shown under current maturity of long term debt, is secured by way of first charge on specified assets of the Company as per the contract terms. The loans are repayable in 20 equal quarterly instalments from the date of the loans which carries interest @ 7.8 % to 8.5 % per annum.

(iv) Secured Term Loan from Banks amounting to Rs. 29.15 Crores (2013 - '' Nil), out of which Rs. 23.34 Crores (2013 - '' Nil ) is shown under current maturity of long term debt, is secured by way of subservient charge on current assets of the Company. It also carries a lien on Mutual Funds of Rs. 50.00 Crores . The loan is repayable in 8 quarterly equal instalments starting from the date of disbursement and carries interest @ 11.90 % per annum.

2. (i) Unsecured Term loans from Others amounting to Rs. 11.36 Crores (2013 - '' Nil), out of which Rs. 9.00 Crores (2013 - '' Nil) is shown under current maturity of long term debt, are repayable in 19 equal quarterly instalments from the date of the loans which are interest free.

(ii) Unsecured Term loans from Others amounting to Rs. 164.85 Crores (2013 - '' Nil), out of which Rs. 55.12 Crores (2013

- '' Nil) is shown under current maturity of long term debt, is repayable in 11 to 12 equal quarterly instalments from the date of the disbursement which carries interest @ 11.80 % to 12.25 % per annum.

(iii) Unsecured Term loans from Others amounting to Rs. 17.58 Crores (2013 - '' Nil), out of which Rs. 10.87 Crores (2013

- '' Nil) is shown under current maturity of long term debt, is repayable in 1 quarterly , 1 half yearly and balance 16 monthly instalments from the date of the disbursement which carries interest @ 13.00 % per annum.

(iv) Unsecured Term loans from Others amounting to '' Nil (2013 - Rs. 22.73 Crores) and '' Nil (2013 - Rs. 9.44 Crores), out of which '' Nil (2013 - Rs. 11.98 Crores) is shown under current maturity of long term debt, are repayable in 8 to 19 equal quarterly instalments from the date of the loans and in 3 equal yearly instalments from the date of the loan and balance payable in 4th year respectively which are interest free.

(v) Unsecured Loan under receivable buyout facility amounting to '' Nil (2013 - Rs. 89.34 Crores), out of which '' Nil (2013 - Rs. 15.57 Crores) is shown under current maturity of long term debt, are repayable in 14 to 20 equal quarterly instalments from the date of the disbursement.

(vi) Unsecured Term loans from Others amounting to '' Nil (2013 - Rs. 69.70 Crores), out of which '' Nil (2013 - Rs. 21.54 Crores) is shown under current maturity of long term debt, is repayable in 11 to 12 equal quarterly instalments from the date of the disbursement which carries interest @ 11.80 % to 12.25 % per annum.

3. Long term borrowings, Short term borrowings and Current maturities of long term debts is net of the loan amounting to Rs. 112.89 Crores, Rs. 28.65 Crores and Rs. 145.81 Crores respectively that the company has transferred to its subsidiaries pursuant to the scheme of arrangement (Refer Note 57). The company is in the process of transferring the loan agreements to the respective subsidiary company.

Secured Loan from Banks amounting to Rs. 196.43 Crores (2013 - Rs. 175.33 Crores) are secured by way of hypothecation of stock-in-trade, book debts as first charge and by way of second charge on all the immovable and movable assets of the Company and its demerged subsidiaries, pursuant to court approved scheme of arrangement. The charge ranks pari-passu amongst Bankers.

* There are no amount due and outstanding to be credited to Investor Education and Protection Fund under Section 205C of the Companies Act, 1956 as at June 30, 2014. These shall be credited and paid to the Fund as and when due.

1. Land (included under ''Own Assets'') and Building at Ambattur amounting to Rs. 0.57 Crores (2013 - Rs. 0.57 Crores) are pending registration in the name of the Company.

2. Software comprise cost of acquiring licences and SAP implementation charges.

3. Intellectual Property Rights comprise of designing and implementing education content.

4. Technical know how comprise of development cost of new technology/products.

@ As per the Scheme of arrangement referred in note no 57, investment in HCL Infotech Limited, HCL Services Limited and HCL Learning Limited were recorded at their respective fair value as determined by an independent valuer as on December 31, 2012. A provision of Rs. 210.00 Crores has been made for diminution in the value of investment in HCL Infotech Limited as on June 30, 2014, which has been shown as an exceptional item (refer note 58).

5. Land and Buildings and certain Plant and Machinery were revalued by external registered valuers after considering depreciation upto that date on the governing principle of current replacement cost/value. The amounts added/reduced on aforesaid revaluation in 1992, 2005, 2006 and 2007 were as under:

6. Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for amount to '' Nil (2013 - Rs. 0.37 Crores). For Commitments on account of lease Refer Note 45.

7. Contingent Liabilities (Refer Note 57):

a) Claims against the Company not acknowledged as debts:

Excise* 14.05 11.13

Income Tax* 2.95 2.95

Octroi* - 4.98

Industrial Disputes, Civil Suits and Consumer Disputes 12.10 16.39

* Includes sum of Rs. 12.49 Crores (2013 - Rs. 22.58 Crores) deposited by the Company against the above.

The amounts shown in item (a) represents the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the out come of the different legal processes which have been initiated by the Company or the claimants as the case may be and therefore cannot be predicted accurately.It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

b) Corporate Guarantee of Rs. 534.37 Crores (2013 - Rs. 453.98 Crores) was given to Banks and Financial Institutions for working capital facilities sanctioned to subsidiaries of which the total amount utilised as at June 30, 2014 is Rs. 218.85 Crores (2013 - Rs. 288.84 Crores).

The warranty provision has been recognised for expected warranty claims for the first year of warranty on products sold during the year. Due to the very nature of such costs, Outflows of economic benefits against this provision is expected to happen within one year.

8. Taxation:

a) Provision for taxation has been computed by applying the Income Tax Act, 1961 to the loss for the financial year ended June 30, 2014, although the actual tax liability of the Company has to be computed each year by reference to the taxable profit for each fiscal year ended March 31.

b) Deferred Tax:

Major components of Deferred tax arising on account of timing difference along with their movement as at June 30, 2014 are:

# Except trade discount, no other discount has been adjusted.

* Does not include any class of goods which in value individually accounts for 10% or more of the total value of sales/stock. Note: Previous year''s figures are given in brackets.

9. Employee Stock Option Plan (ESOP):

The Company has established Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005, for a total grant of 31,90,200 and 33,35,487 options respectively to the employees of the Company and its subsidiaries. These options vest on a graded basis over a period of 42 and 60 months respectively from the date of grant and are to be exercised with in a maximum period of 5 years from the date of vesting.

The Board of Directors/Committee approves the grant of options, including the grant of options that lapse out of each grant.

Each option of Rs. 10/- confers on the employee a right to five equity shares of Rs. 2/- each.

Exercise price is market price as specified in the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India (“SEBI")."

Details of Grants made under Employee Stock Option Scheme 2000

Assumptions

The fair value of each stock option granted under Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005 as on the date of grant has been computed using Black-Scholes Option Pricing Formula and the model inputs are given as under:

Notes:

1. Volatility: Based on historical volatility in the share price movement of the Company.

2. Risk Free Rate: Being the interest rate applicable for maturity equal to the expected life of options based on yield curve for Government Securities.

3. Time to Maturity: Vesting period and volatility of the underlying equity shares have been considered for estimation.

4. Dividend Yield: Based on historical dividend payouts.

The impact on the profit/(loss) of the Company for the year ended June 30, 2014 and the basic and diluted earnings per share had the Company followed the fair value method of accounting for stock options is set out below:

10. Leases:

a) Finance Leases:

As Lessor:

(i) The Company has given on finance lease certain assets/inventories which comprise of computers, radio terminals and office equipments, etc. These leases have a primary period, which is fixed and non-cancelable. There are no exceptional/restrictive covenants in the lease agreements.

b) Sale and Leaseback and further sub-lease on finance lease basis

(i) The Company has entered into transaction of sale and leaseback on finance lease basis and further sub-lease on finance lease basis for certain assets/inventories which comprise of computer systems and other related products. These leases have a primary period, which is fixed and non-cancelable. There are no exceptional/ restrictive covenants in these lease agreements.

(ii) Details of mimimum lease payments and mimimum sub-lease receivables as at June 30, 2014 and its present value as at that date are as follows:

d) Cancelable Operating Leases As Lessee:

(i) The Company has taken various residential/commercial premises under cancelable operating leases. These leases are for a period of eleven months to three years and are normally renewable on expiry.

(ii) The rental expense in respect of operating leases is Rs. 12.19 Crores (2013 - Rs. 28.65 Crores) which is disclosed as Rent expense under ''Other expenses''

As Lessor:

The gross block, accumulated depreciation and depreciation expense in respect of building and office automation products i.e. photocopying machines given on operating lease are as below:

11. Earnings / (Loss) per share (EPS)

The earnings considered in ascertaining the Company''s EPS represent profit/(loss) for the year after tax. Basic EPS is computed and disclosed using the weighted average number of equity shares outstanding during the year. Diluted EPS is computed and disclosed using the weighted average number of equity and dilutive equivalent shares outstanding during the year except when results would be anti-dilutive.

Calculation of EPS:

12. Segment Reporting

The Company recognises the following segments as its primary Segments :

a) Hardware Products and Solutions business comprises of Hardware Solutions business and Computing products manufacturing facility & Channel business. Hardware Solutions business includes sale of hardware solutions & products sold directly to enterprises, government and providing System Integration solutions in different Industry verticals. Computing products manufacturing facility and Channel business includes manufacturing of computer hardware systems and sale of hardware products through channel partners.

b) The Services business provides IT infrastructure managed services, break-fix services, cloud services, enterprise application services, software development & support services, office automation maintenance services, managed print services and telecom & consumer electronics support services.

c) Learning business includes training services and educational content and related Hardware offerings for private schools, colleges and other education institutes and vocational training.

d) The businesses of distribution segment consist of distribution of telecommunication, office automation products and other digital lifestyle products.

During the current year, the Company transferred Hardware Solutions Business, Services business and Learning Business (collectively the "Transferred Undertakings") of the Company to separate wholly owned subsidiaries namely HCL Infotech Limited, HCL Services Limited and HCL Learning Limited, respectively.

The Segment disclosures for the year have been prepared after considering the effect of the above and do not include disclosure of transferred undertakings. Therefore these are not comparable with the previous year.(Refer Note 57)

Details of secondary segments are not disclosed as more than 90% of the Company''s revenues, results and assets relate to the domestic market.

Note: Previous year''s figures are given in brackets.

Segment Results include Rs. 5.33 crores (2013 - Rs. 11.22 crores) of certain Operating other income which is included in ''Other income'' in the Statement of Profit and Loss.

13. The Company has calculated the various benefits provided to employees as under:

(a) Defined Contribution

(i) Superannuation Fund

(b) State Plans

(i) Employee State Insurance

(ii) Employee''s Pension Scheme 1995

(c) Defined Benefit

(i) Gratuity

(ii) Provident Fund#

The Company contributes to the employee provident fund trust"Hindustan Computers Limited Employees Provident Fund Trust" which is managed by the Company. The Company''s Provident Fund Trust is exempted under Section 17 of Employees'' Provident Fund Act, 1952. Conditions for grant of exemptions stipulate that the employer shall make good deficiency, if any, in the interest rate declared by the trust vis-a-vis statutory rate. As per guidance note on AS - 15, Employee Benefits (Revised 2005), provident funds set up by employers, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan.

The Trust includes employees of the Company as well as some of the employees of the related parties. In view of the same, it is a multi employer defined benefit plan.

The Trust has been investing the Provident fund contributions of the employees of all the six companies in a composite manner and the same cannot be separately identified entity wise.

In view of the same an actuarial valuation, in accordance with the AS-15 (Revised), was carried out at composite level. As per actuarial certificate there is no shortfall in the earning of fund against statutorily required"interest rate guarantee" and accordingly, the "liability on account of interest rate guarantee'''' is nil.

In accordance with Accounting Standard 15 (revised 2005), an actuarial valuation was carried out in the respect of the aforesaid defined benefit plan based on the following assumptions:

The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

* Included in Salaries, Wages, Bonus and Gratuity for Gratuity and Contribution to Provident and Other Funds for Provident Fund under Employee benefits expense (Refer Note 26).

@ The Company''s contribution to Provident Fund for the year is Rs. 1.58 Crores (2013 - Rs. 7.63 Crores) and the remaining relates to other related companies as mentioned above.

# In the absence of the relevant information from the Actuary, the above details do not include the composition of Plan assets.

14. The Company remits the dividends to its non resident shareholders in Indian Rupees.

15. Pursuant to the approval of the shareholders and in terms of Securities and Exchange Board of India (Issue of Capital and

Disclosure Requirements) Regulations, 2009, the Company has:

(a) On receipt of 25% subscription money, allotted 2,10,59,515 warrants priced at Rs. 152.90 per warrant to certain promoters on a preferential basis on October 7, 2009. Subsequently, 1,64,38,848 warrants have been converted into equal number of equity shares of Rs. 2/- each on October 29, 2009 and 46,20,667 on April 5, 2011 on receipt of the balance 75% subscription money.

(b) Raised Rs. 472.67 Crores by allotment of 3,05,55,713 equity shares of Rs. 2/- each at a price of Rs. 154.69 per equity share including a premium of Rs. 152.69 per equity share through Qualified Institutional Placement on October 21, 2009.

16. a) Loss of Rs. 0.21 Crores (2013 - Loss of Rs. 0.45 Crores) on sale of fixed assets has been adjusted against the Profit on sale of fixed assets.

b) Advertisement, Publicity and Entertainment expenses, wherever on sharing basis, are shown at amounts borne by the Company.

Notes:

1. * Deposits under sales tax are adjustable against demand of other assessment years.

2. ** Including balances under Central Sales Tax Act,1956 with relevant rules of respective states.

3. # Excludes interest for which there is no demand on the Company.

54. Disclosure of related parties and related party transactions:

a) Company having substantial interest:

HCL Corporation Private Limited

b) List of parties where control exists/existed:

Subsidiaries:

Digilife Distribution and Marketing Services Limited RMA Software Park Private Limited HCL Infocom Limited (Refer Note 57)

HCL Insys Pte. Limited, Singapore HCL Investments Pte. Limited, Singapore HCL Touch Inc., USA HCL Computing Products Limited Pimpri Chinchwad eServices Limited (85% Shareholding of HCL Infosystems Limited) HCL Infosystems MEA FZE, Dubai HCL Infosystems LLC, Dubai (49% Shareholding of HCL Infosystems MEA FZE) HCL Infosystems South Africa Pty. Limited HCL Infotech Limited (formerly known as HCL System Integration Limited)

HCL Learning Limited

HCL Services Limited (formerly known as HCL Care Limited)

Joint Venture:

Nokia HCL Mobile Internet Services Limited

c) Other related parties with whom transactions have taken place during the year and/or where balances exist:

HCL Technologies Limited HCL Comnet Limited

HCL Comnet Systems and Services Limited

Shiv Nadar School

HCL BPO Services (NI) Limited

SSN Trust

Shiv Nadar Foundation

d) Key Management Personnel:

Mr. Harshavardhan Madhav Chitale

Mr. J. V. Ramamurthy (Resigned as director with effect from March 21, 2014)

Mr. Sandeep Kanwar Mr. Sushil Jain

Note: Parties with whom transactions are more than 10% of the total value have been disclosed separately.

e) Summary of Related Party disclosures

Note: All transactions with related parties have been entered into in the normal course of business.

* The Remuneration is subject to Shareholders'' approval via a special resolution in the ensuing Annual General Meeting.

@ Out of the total remuneration of Rs. 2.09 Crores, the Company has filed an application for obtaining approval of Central Government for payment of the remuneration of Rs. 0.52 Crores on existing terms and this remuneration is subject to approval from Central Government.

# Does not include employee stock compensation expense accounted as per intrinsic value method and retirement benefits on account of Gratuity and Leave Encashment as these benefits are determined actuarially for the Company as a whole and separate figures applicable to individual employees are not readily available.

* Ceased to exist pursuant to the scheme of arrangement (Refer Note 57).

# The company has started to charge interest at the rate of 11.77% per annum with effect from April 1, 2014

17. a) Derivative Instruments outstanding at the Balance Sheet date (Refer Note 59) :

b) As on June 30, 2014 the foreign currency exposure that is not hedged by a derivative instrument or otherwise in respect of :

c) Mark-to-Market losses provided for as on June 30, 2014 of '' Nil (2013 - Rs. 0.44 Crores).

d) The unaccrued forward exchange cover has been included under ''Other current assets'' and ''Other non current assets'' as ''Unamortised Premium on Forwards Contracts''

e) Pursuant to notification u/s 211(3C) of the Companies Act, 1956 issued by the Ministry of Corporate Affairs on December 29, 2011, the Company has opted to accumulate the exchange difference arising on translation of foreign currency items having a term of 12 months or more and amortise such exchange difference over the period of the item. Accordingly, a gain/(loss) stands deferred as at June 30, 2014.

18. The Hon''ble High Court of Delhi sanctioned a Composite Scheme of Arrangement (the"Scheme") applicable from 1st January, 2013 between the Company and its wholly owned subsidiaries namely HCL Infotech Limited (formerly known as HCL System Integration Limited), HCL Services Limited (formerly known as HCL Care Limited) and HCL Learning Limited (collectively the"Transferee Companies") and HCL Infocom Ltd and their respective shareholders and creditors under the provisions of section 391 to 394 of the Companies Act, 1956, vide its order dated September 18, 2013 received on October 30, 2013. The Scheme became effective from November 1, 2013 on filing a certified copy of the High Court order with the office of the Registrar of the Companies, NCT of Delhi & Haryana and is applicable from January 1, 2013 (the"Appointed date"). According to the Scheme, as on 1st January, 2013, the Hardware Solutions Business, Services Business and Learning Business (collectively the"Transferred Undertakings") of the Company stand transferred to HCL Infotech Limited , HCL Services Limited and HCL Learning Limited (collectively the"Transferee Companies") respectively, the wholly owned subsidiaries. Also with effect from the appointed date, HCL Infocom Limited has been merged with the Company.

As detailed in the scheme, the Company has transferred net assets as on 1st January, 2013 having book value of Rs. 1,118.13 Crores for Hardware Solution Business to HCL Infotech Limited for Nil Consideration, net assets having book value of Rs. 79.31 Crores for Services business to HCL Services Ltd for a consideration of Rs. 61.00 Crores and net assets having book value of Rs. 111.84 Crores of Learning business to HCL Learning Limited at a consideration of Rs. 113.00 Crores. On such transfers, Rs. 1,135.28 Crores, being the difference of the net assets transferred and the consideration received has been debited to Business Restructuring Reserve, on merger of HCL Infocom Ltd Rs. 959.48 crores, being the difference between fair value of net assets and the Company''s investment in HCL Infocom Limited, has been credited to capital reserve, and the Business restructuring reserve so arising has been adjusted from capital reserve Rs. 959.48 Crores and from Securities Premium account Rs. 175.80 Crores. The Fair values as at December 31, 2012 of the transferred undertakings and assets/liabilities recorded by the transferee companies as at appointed date, have been determined by the independent valuer appointed by the Company.

The standalone financial statements of the Company for the year ended June 30, 2014 has been prepared after considering the accounting treatment specified under the scheme.

In accordance with the Scheme, the Company continued to carry on the business and activities in relation to the Transferred Undertakings on account of and in trust for the respective Transferee Companies from January 1, 2013 (the "Appointed date") till November 1, 2013 (the "Effective date"). The Company has transferred the profit/(loss) attributable to the Transferred Undertakings, for the period from appointed date and up to June 30, 2013, amounting to Rs. 49.79 Crores by adjusting through the Surplus in the Statement of Profit and Loss. Subsequent to the effective date, the Company is in the process of entering into novation agreements with the relevant third parties, including customers and vendors, pertaining to the Transferee Companies. These financial statements do not include results/ assets and liabilities pertaining to the transactions subsequent to the effective date executed by the Company on trust and benefit of HCL Infotech Limited pending entering into novation agreements with the respective parties. The revenues, costs, trade receivables, inventory and trade payables do not include revenues, costs, trade receivables, inventory and trade payables pertaining to the transactions subsequent to the effective date executed by the Company on trust and benefit of HCL Infotech Limited pending entering into novation agreements with the respective parties. Such revenues, costs, trade receivables, Inventory and trade payable amount to Rs. 102.92 Crores, Rs. 62.20 Crores, Rs. 393.01 Crores, Rs. 29.25 Crores and Rs. 393.01 Crores respectively which are reflected in the respective subsidiary financial statements. Previous year numbers include following assets, liabilities, revenue, expenses and cash flow related to"Transferred Undertakings" and therefore are not comparable with current year numbers.:

The details of carrying amounts of assets and liabilities attributable to the "Transferred Undertakings" included in June 2013 are as below :

The Revenue and expenses in respect of ordinary activities attributable to the transferred undertakings for the year ended June 2013 are as below:

19. Forward contracts and investments in subsidiaries have been transferred to its subsidiaries pursuant to Scheme of Arrangement (Refer Note 57). The Company is in the process of transferring the forward contracts and investments to the respective subsidiary Company.

20. Previous year''s figures have also been regrouped/recasted, where necessary, to conform to the current year''s presentation.


Jun 30, 2013

1- Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for amount to Rs. 0.37 Crores (2012 - Rs. 3.50 Crores). For Commitments on account of lease Refer Note 45).

2- Contingent Liabilities:

a) Claims against the Company not acknowledged as debts:

2013 2012 Rs./Crores Rs./Crores

Sales Tax* 72.99 44.89

Excise* 11.13 9.63

Income Tax* 2.95 3.68

Octroi* 4.98 4.98

Industrial Disputes, Civil Suits and Consumer Disputes 16.39 16.68

* Includes sum of Rs. 22.58 Crores (2012 - Rs. 18.70 Crores) deposited by the Company against the above.

The amounts shown in item (a) represents the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the out come of the different legal processes which have been initiated by the Company or the claimants as the case may be and therefore cannot be predicted accurately.

b)(i) Corporate Guarantee of Rs. 453.98 Crores (2012 - Rs. 207.05 Crores) was given to Banks for working capital facilities sanctioned to subsidiaries of which the total amount utilised as at June 30, 2013 is Rs. 288.84 Crores (2012 - Rs. 62.59 Crores).

(ii) Corporate Guarantee of Rs. Nil (2012 - Rs. 72.87 Crores) was given to Banks for working capital facilities sanctioned to a joint venture of a subsidiary company of which the total amount utilised as at June 30, 2013 is Rs. Nil (2012 - Rs. 72.87 Crores).

3. Taxation:

a) Provision for taxation has been computed by applying the Income Tax Act, 1961 to the loss for the financial year ended June 30, 2013, although the actual tax liability of the Company has to be computed each year by reference to the taxable profit for each fiscal year ended March 31.

b) Deferred Tax:

Major components of Deferred tax arising on account of timing difference along with their movement as at June 30, 2013 are:

4- Employee Stock Option Plan (ESOP):

The Company has established Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005, for a total grant of 31,90,200 and 33,35,487 options respectively to the employees of the Company and its subsidiaries. These options vest on a graded basis over a period of 42 and 60 months respectively from the date of grant and are to be exercised with in a maximum period of 5 years from the date of vesting.

The Board of Directors/Committee approves the grant of options, including the grant of options that lapse out of each grant. Each option of Rs. 10/- confers on the employee a right to five equity shares of Rs. 2/- each.

Exercise price is market price as specified in the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India ("SEBI").

5- Earnings per share (EPS)

The earnings considered in ascertaining the Company''s EPS represent profit/(loss) for the year after tax. Basic EPS is computed and disclosed using the weighted average number of equity shares outstanding during the year. Diluted EPS is computed and disclosed using the weighted average number of equity and dilutive equivalent shares outstanding during the year except when results would be anti-dilutive.

6- Segment Reporting

In the previous year, the Company was reporting "Computer Systems and Other Related Products and Services" and ''Telecommunication and Office Automation" as its primary segments.

During the current year, considering the existing internal reporting structure, the Company has reviewed existing segment reporting and has reorganized its primary business segments as "Hardware Products and Solutions business" (comprising of Hardware Solutions business, Computing products manufacturing facility and Channel business), "Services business",

"Learning business" and "Distribution business". Consequent to which Segment Disclosures for the current year and corresponding numbers for the previous year, have been presented based on the revised Segments.

The nature and the business of primary Segments are as below:

a) Hardware Products and Solutions business comprises of Hardware Solutions business and Computing products manufacturing facility & Channel business. Hardware Solutions business includes sale of office automation products, hardware solutions & products sold directly to enterprises, government and providing Sytem Integration solutions in different Industry verticals. Computing products manufacturing facility and Channel business includes manufacturing of computer hardware systems and sale of hardware products through channel partners.

b) The Services business provides IT infrastructure managed services, break-fix services, cloud services, enterprise application services, software development & support services, office automation maintenance services, managed print services and telecom & consumer electronics support services.

c) Learning business includes training services and educational content and related Hardware offerings for private schools, colleges and other education institutes and vocational training.

d) The businesses of distribution segment consist of distribution of telecommunication and other digital lifestyle products.

There is no change in the secondary segment reporting, which continues to be based upon geographical location of the customers. Details of secondary segments are not disclosed as more than 90% of the Company''s revenues, results and assets relate to the domestic market.

7- The Company remits the dividends to its non resident shareholders in Indian Rupees.

8- Pursuant to the approval of the shareholders and in terms of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Company has:

(a) On receipt of 25% subscription money, allotted 2,10,59,515 warrants priced at Rs. 152.90 per warrant to certain promoters on a preferential basis on October 7, 2009. Subsequently, 1,64,38,848 warrants have been converted into equal number of equity shares of Rs. 2/- each on October 29, 2009 and 46,20,667 on April 5, 2011 on receipt of the balance 75% subscription money.

(b) Raised Rs. 472.67 Crores by allotment of 3,05,55,713 equity shares of Rs. 2/- each at a price of Rs. 154.69 per equity share including a premium of Rs. 152.69 per equity share through Qualified Institutional Placement on October 21, 2009.

The funds raised through above issues have been utilised as under:

9- (a) Loss of Rs. 0.45 crores (2012 - Profit of Rs. 0.99 Crores) on sale of fixed assets has been adjusted against the Profit/Loss on sale of fixed assets.

b) Advertisement, Publicity and Entertainment expenses, wherever on sharing basis, are shown at amounts borne by the Company.

10- Disclosure of related parties and related party transactions:

a) Company having substantial interest:

HCL Corporation Private Limited

b) List of parties where control exists/existed:

Subsidiaries:

HCL Infocom Limited

Digilife Distribution and Marketing Services Limited

RMA Software Park Private Limited

HCL Insys Pte. Limited, Singapore

HCL Investments Pte. Limited, Singapore

HCL Touch Inc., USA

HCL Computing Products Limited

Pimpri Chinchwad eServices Limited (85% Shareholding of HCL Infosystems Limited)

HCL Infosystems MEA FZCO, Dubai (100% Shareholding of HCL Insys Pte. Limited)

HCL Infosystems LLC, Dubai (49% Shareholding of HCL Infosystems MEA FZCO)

HCL Infosystems MEA LLC, Abu Dhabi (49% Shareholding of HCL Infosystems MEA FZCO)

HCL Infosystems Qatar, WLL (49% Shareholding of HCL Infosystems MEA FZCO)

HCL Infosystems South Africa Pty. Limited (100% Shareholding of HCL Investments Pte. Limited)

HCL System Integration Limited (100% Shareholding of HCL Infocom Limited)

HCL Learning Limited (100% Shareholding of HCL Infocom Limited)

HCL Care Limited (100% Shareholding of HCL Infocom Limited)

c) Other related parties with whom transactions have taken place during the year and/or where balances exist:

HCL Technologies Limited

HCL Comnet Systems and Services Limited

HCL BPO Services (NI) Limited

SSN College of Engineering

SSN Trust

d) Key Management Personnel

Mr. Ajai Chowdhry (Resigned as Whole Time Director with effect from March 31, 2012)

Mr. Harsh Chitale Mr. J.V. Ramamurthy Mr. Sandeep Kanwar

11- The Board of Directors had at its meeting held on January 14, 2013, approved a business restructuring plan consisting of a Composite Scheme of Arrangement (the Scheme) under the provisions of Section 391 and 394 of the Companies Act, 1956. The Scheme inter-alia envisages transfer of the Hardware Solutions Business, Services business and Learning Business (collectively the "Transferred Undertakings") of the Company to separate wholly owned subsidiaries namely HCL System Integration Limited, HCL Care Limited and HCL Learning Limited, respectively. The Scheme also envisages merger of HCL Infocom Limited, a wholly owned subsidiary with the Company. January 1, 2013 has been fixed as the Appointed Date. The Equity Shareholders, Secured and Unsecured Creditors of the Company have at their respective meeting, convened as per the directions of the Hon''ble High Court of Delhi accorded their approval to the Scheme. The final petition has also been filed with Hon''ble High Court of Delhi for its sanction.The Scheme is subject to requisite sanction of the Hon''ble High Court of Judicature at Delhi and other regulatory authorities. The Company continues to carry on business and activities in relation to the transferred undertakings on account of and in trust for the respective transferee companies until all the requisite approval and formalities are completed.

Detail of carrying amount of assets and liabilities, revenue and expenses and net cash flow attributable to the Transferred Undertakings are summarised as follows:

The "Services business" and "Learning Business" are separate business segments whereas Hardware Solutions business represents part of the "Hardware Products and Solutions business" segment.

12. Previous year''s figures have also been regrouped/recasted, where neccessary, to conform to the current year''s presentation.


Jun 30, 2012

(i) Rights attached to Equity Shares:

The Company has only one class of equity share having a face value of Rs. 2/- each. Each holder of equity shares is entitled to one vote per share held. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in ensuing General Meeting, except in case of interim dividend.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by Shareholders.

(ii) Shares reserved for issue under options:

For detail of shares reserved for issue under Employee Stock Option Plan of the Company, refer Note 44.

(iii) Shareholders holding more than 5% of the aggregate shares in the Company.

Notes:

1. The Company issued 800 Rated Taxable Secured Redeemable Non-Convertible Debentures of face value of Rs. 10 lakhs each, aggregating to Rs. 80.00 Crores, at a coupon rate of 12.75% per annum payable annually on private placement basis to Life Insurance Corporation of India on December 19, 2008. These Debentures were redeemable at par at the end of 5th year from the date of allotment, with a call option exercisable by the issuer, only at the end of 3 years from the date of allotment and secured by way of first mortgage and charge on identified immovable and movable assets of the Company. During the year, on December 19, 2011 the Company has exercised it's call option and accordingly has repaid these debentures.

2. Secured Term Loan from Others amounting to Rs. 6.19 Crores (2011 - Rs. 11.82 Crores), out of which Rs. 6.08 Crores (2011 - Rs. 5.63 Crores) is shown under current maturity of long term debt, is secured by way of first charge on specified assets of the Company as per the contract terms. The loans are repayable in 20 equal quarterly installments from the date of the loans which carries interest @ 7.8 to 8.5 % p.a.

3. Secured Term Loan from Banks amounting to Rs. 80.00 Crores (2011 - Rs. Nil), out of which Rs. 26.67 Crores (2011 - Rs. Nil) is shown under current maturity of long term debt, is secured by way of first charge on movable and immovable fixed assets of the Company. The loan is repayable in 6 half yearly installments from the date of the loan which carries interest @ 11.25 % p.a.

4. Unsecured Term loans from Others amounting to Rs. 31.26 Crores (2011 - Rs. 44.47 Crores) and Rs. 0.07 Crores (2011 - Rs. 0.21 Crores), out of which Rs. 10.15 Crores (2011- Rs. 14.23 Crores) is shown under current maturity of long term debt, are repayable in 8 to 19 equal quarterly installments from the date of the loans and in 3 equal yearly installments from the date of the loan and balance payable in 4th year respectively which are interest free.

Notes:

1. Land (included under 'Own Assets') and Building at Ambattur amounting to Rs. 0.57 Crores (2011 - Rs. 0.57 Crores) are pending registration in the name of the Company.

2. Software comprise cost of acquiring licences and SAP implementation charges.

3. Intellectual Property Rights comprise of designing and implementing education content.

1- Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for amount to Rs. 3.50 Crores (2011 - Rs. 3.69 Crores).

2-Contingent Liabilities:

a) Claims against the Company not acknowledged as debts:

Sales Tax* 44.89 44.58

Excise* 9.63 9.32

Income Tax* 3.95 3.95

Octroi* 5.08 -

Industrial Disputes, Civil Suits and Consumer Disputes 16.68 8.60

* Includes sum of Rs. 18.70 Crores (2011 - Rs. 9.12 Crores) deposited by the Company against the above.

The amounts shown in item (a) represents the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the out come of the different legal processes which have been initiated by the Company or the claimants as the case may be and therefore cannot be predicted accurately.

b)(i) Corporate Guarantee of Rs. 44.85 Crores (2011 - Rs. 35.88 Crores) was given to a Bank for working capital facilities sanctioned to a 100% subsidiary, HCL Insys Pte. Limited, Singapore against which the total amount utilised as at June 30, 2012 is Rs. 44.85 Crores (2011 - Rs. 9.85 Crores).

(ii) Corporate Guarantee of Rs. 20.00 Crores (2011 - Rs. 20.00 Crores) has been given to a Bank for working capital facilities sanctioned to a 100% subsidiary, Digilife Distribution and Marketing Services Limited against which the total amount utilised as at June 30, 2012 is Rs. 1.07 Crores (2011 - Rs. 8.58 Crores).

(iii) Corporate Guarantee of Rs. Nil (2011 - Rs. 6.50 Crores) was given to a Bank for working capital facilities and Rs. Nil (2011 - Rs. 6.10 Crores) was given to a non-banking finance company for operating lease sanctioned to a 100% subsidiary, HCL Infinet Limited (ceased to be a subsidiary with effect from October 31, 2011) against which the total amount utilised as at June 30, 2012 is Rs. Nil (2011 - Rs. 4.79 Crores) and Rs. Nil (2011 - Rs. 6.07 Crores) respectively.

(iv) Corporate Guarantee of Rs. 142.40 Crores (2011 - Rs. 73.11 Crores) was given to Banks for working capital facilities sanctioned to HCL Infosystems MEA FZCO, Dubai (subsidiary of HCL Insys Pte. Limited, a subsidiary company) against which the total amount utilised as at June 30, 2012 is Rs. 16.67 Crores (2011 - Rs. 35.33 Crores).

(v) Corporate Guarantee of Rs. 72.87 Crores (2011 - Rs. 132.93 Crores) was given to Banks for working capital facilities sanctioned to Techmart Telecom Distribution FZCO, Dubai (joint venture of HCL Investments Pte. Limited, a subsidiary company) against which the total amount utilised as at June 30, 2012 is Rs. 72.87 Crores (2011 - Rs. 110.78 Crores).

3. Taxation:

a) Provision for taxation has been computed by applying the Income Tax Act, 1961 to the profit for the financial year ended June 30, 2012, although the actual tax liability of the Company has to be computed each year by reference to the taxable profit for each fiscal year ended March 31.

b) Deferred Tax:

Major components of Deferred tax arising on account of timing difference along with their movement as at June 30, 2012 are:

4-Employee Stock Option Plan (ESOP):

The Company has established Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005, for a total grant of 31,90,200 and 33,35,487 options respectively to the employees of the Company and its subsidiaries. These options vest on a graded basis over a period of 42 and 60 months respectively from the date of grant and are to be exercised with in a maximum period of 5 years from the date of vesting.

The Board of Directors/Committee approves the grant of options, including the grant of options that lapse out of each grant. Each option of Rs. 10/- confers on the employee a right to five equity shares of Rs. 2/- each.

Exercise price is market price as specified in the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India ("SEBI").

Assumptions

The fair value of each stock option granted under Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005 as on the date of grant has been computed using Black-Scholes Option Pricing Formula and the model inputs are given as under:

Notes:

1. Volatility: Based on historical volatility in the share price movement of the Company.

2. Risk Free Rate: Being the interest rate applicable for maturity equal to the expected life of options based on yield curve for Government Securities.

3. Time to Maturity: Vesting period and volatility of the underlying equity shares have been considered for estimation.

4. Dividend Yield: Based on historical dividend payouts.

The impact on the profit of the Company for the year ended June 30, 2012 and the basic and diluted earnings per share had the Company followed the fair value method of accounting for stock options is set out below:

5- Leases:

a) Finance Leases: As Lessor:

(i) The Company has given on finance lease certain assets/inventories which comprise of computers, radio terminals and office equipments, etc. These leases have a primary period, which is fixed and non-cancelable. There are no exceptional/restrictive covenants in the lease agreements.

b) Sale and Leaseback and further sub-lease on finance lease basis

(i) The Company has entered into transaction of sale and leaseback on finance lease basis and further sub-lease on finance lease basis for certain assets/inventories which comprise of computer systems and other related products. These leases have a primary period, which is fixed and non-cancelable. There are no exceptional/restrictive covenants in these lease agreements.

d) Cancelable Operating Leases As Lessee:

(i) The Company has taken various residential/commercial premises under cancelable operating leases. These leases are normally renewable on expiry.

(ii) The rental expense in respect of operating leases is Rs. 25.53 Crores (2011 - Rs. 24.94 Crores) which is disclosed as Rent expense under 'Other expenses'.

(ii) Minimum lease payments in respect of assets taken on lease recognised as an expense in the Statement of Profit and Loss for the year ended June 30, 2012 are Rs. 2.23 Crores (2011 - Rs. 2.47 Crores) which is included in Purchase of Services under 'Other direct expenses'.

6- Earnings per share (EPS)

The earnings considered in ascertaining the Company's EPS represent profit for the year after tax. Basic EPS is computed and disclosed using the weighted average number of equity shares outstanding during the year. Diluted EPS is computed and disclosed using the weighted average number of equity and dilutive equivalent shares outstanding during the year except when results would be anti-dilutive.

7- Segment Reporting

The Company recognises the following segments as its primary segments.

a) The operations of Computer Systems and Other Related Products and Services consists of manufacturing of computer hardware systems, providing comprehensive Systems Integration, Roll out and Infrastructure management solutions in different Industry verticals, providing IT services including maintenance and facility management and ICT training.

b) The businesses of Telecommunication and Office Automation comprise of distribution of telecommunication and other digital lifestyle products, office automation products and related comprehensive maintenance and allied services and Homeland Security and Surveillance.

Secondary segmental reporting is based on the geographical location of the customers. Details of secondary segments are not disclosed as more than 90% of the Company's revenues, results and assets relate to the domestic market.

Note: Previous year's figures are given in brackets.

Segment Results include Rs. 17.01 Crores (2011- Rs. 17.17 Crores) of certain Operating other income which is included in 'Other income' in the Statement of Profit and Loss.

8- The Company remits the dividends to its non resident shareholders in Indian Rupees.

9- Pursuant to the approval of the shareholders and in terms of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Company has

(a) On receipt of 25% subscription money, allotted 2,10,59,515 warrants priced at Rs. 152.90 per warrant to certain promoters on a preferential basis on October 7, 2009. Subsequently, 1,64,38,848 warrants have been converted into equal number of equity shares of Rs. 2/- each on October 29, 2009 and 46,20,667 on April 5, 2011 on receipt of the balance 75% subscription money.

(b) Raised Rs. 472.67 Crores by allotment of 3,05,55,713 equity shares of Rs. 2/- each at a price of Rs. 154.69 per equity share including a premium of Rs. 152.69 per equity share through Qualified Institutional Placement on October 21, 2009.

10- (a) Subsequent to the year end, the Shareholders of the Company by way of postal ballot have given their approval under Section 293(1)(a) of the Companies Act, 1956 for transfer of the Company's Computing Products Manufacturing and Channel Business as a going concern on slump sale basis, effective on such date as the Board deems fit for the Company, to a wholly owned subsidiary/group/affiliate/other entity either at book value or for such lump sum consideration being not less than the book values.

(b) The Company through its wholly owned subsidiary, HCL Insys Pte. Limited, Singapore has on August 7, 2012 acquired the remaining 40% equity stake with effect from January 1, 2012 in HCL Infosystems MEA FZCO. Consequently, HCL Infosystems MEA FZCO, with effect from January 1, 2012, has become a wholly owned subsidiary of HCL Insys Pte. Limited, Singapore.

(c) On June 29, 2012, the Company has acquired content for the K-12 education segment from 'Attano Media and Education Private Limited' at a negotiated consideration.

(d) HCL Touch Inc., USA, was Incorporated as a wholly owned subsidiary on August 29, 2011.

(e) Pursuant to Share Purchase Agreement (SPA) dated January 11, 2011, read with addendum to SPA dated August 26, 2011, the Company with effect from October 31, 2011 has sold its entire equity stake in HCL Infinet Limited, the wholly owned subsidiary.

This transaction has resulted into a loss of Rs. 11.37 Crores, out of which Rs. 7.86 Crores had already been provided against loans/ investment till June 30, 2011 and the balance loss of Rs. 3.51 Crores has been accounted for in the current year.

(f) During the year, the Company has with effect from August 1, 2011, transferred its Digital Entertainment business as a going concern basis to Digilife Distribution and Marketing Services Limited, the wholly owned subsidiary for a consideration of Rs. 35 Crores, and acquired the Security and Surveillance business of Digilife Distribution and Marketing Services Limited as a going concern on slump sale basis for a consideration of Rs. 6 Crores.

(g) Techmart Telecom Distribution FZCO, Dubai, in which a subsidiary of the Company has 20% stake, is being dissolved.

11- Disclosure of related parties and related party transactions:

a) Company having substantial interest:

HCL Corporation Private Limited (Formerly known as 'Guddu Investments (Pondi) Private Limited')

b) List of parties where control exists/existed:

Wholly owned Subsidiaries:

HCL Infinet Limited *

HCL Infocom Limited

Digilife Distribution and Marketing Services Limited

RMA Software Park Private Limited

HCL Insys Pte. Limited, Singapore

HCL Investments Pte. Limited, Singapore

HCL Touch Inc., USA

Others Subsidiaries:

Pimpri Chinchwad eServices Limited (85% Shareholding of HCL Infosystems Limited)

HCL Infosystems MEA FZCO, Dubai (100% Shareholding of HCL Insys Pte. Limited) **

HCL Infosystems LLC, Dubai (49% Shareholding of HCL Infosystems MEA FZCO)

HCL Infosystems MEA LLC, Abu Dhabi (49% Shareholding of HCL Infosystems MEA FZCO)

HCL Infosystems Qatar, WLL (49% Shareholding of HCL Infosystems mEa FZCO)

HCL Infosystems South Africa Pty. Limited (100% Shareholding of HCL Investments Pte. Limited)

* HCL Infinet Limited ceased to be a subsidiary with effect from October 31, 2011

** 60% Shareholding till December 31, 2011

c) Other related parties with whom transactions have taken place during the year and/or where balances exist:

HCL Technologies Limited

HCL Comnet Systems and Services Limited

HCL BPO Services (NI) Limited

SSN College of Engineering

SSN Trust

d) Key Management Personnel

Mr. Ajai Chowdhry (Resigned as Whole Time Director with effect from March 31, 2012)

Mr. Harsh Chitale

Mr. J.V. Ramamurthy

Mr. Sandeep Kanwar

e) Summary of Related Party disclosures

Note: All transactions with related parties have been entered into in the normal course of business.

12. a) Loss of Rs. 0.99 crores (2011 - Profit of Rs. 0.16 Crores) on sale of fixed assets has been adjusted against the Profit/Loss on sale of fixed assets.

b) Advertisement, Publicity and Entertainment expense, wherever on sharing basis, are shown at amounts borne by the Company.

b) As on June 30, 2012, the foreign currency exposure that is not hedged by a derivative instrument or otherwise in respect of Trade Payable are Rs. 209.29 Crores (2011 - Rs. 316.77 Crores) and in respect of Trade Receivables are Rs. 38.80 Crores (2011 - Rs. 13.05 Crores).

c) Mark-to-Market losses provided for as on June 30, 2012 of Rs. 0.27 Crores (2011 - Rs. Nil)

d) The unaccrued forward exchange cover as on June 30, 2012 of Rs. 7.06 Crores (2011 - Rs. 1.50 Crores) has been included under 'Other current assets' as 'Unamortised Premium on Forwards Contracts'

e) Pursuant to notification u/s 211(3C) of the Companies Act, 1956 issued by the Ministry of Corporate Affairs on December 29, 2011, the Company has opted to accumulate the exchange difference arising on translation of foreign currency items having a term of 12 months or more and amortise such exchange difference over the period of the item. Accordingly, a loss of Rs. 11.47 Crores (2011 - Rs. Nil) stands deferred as at June 30, 2012.

13- The financial statements for the year ended June 30, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended June 30, 2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.

 
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