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Contents

Who we are What we offer Our manufacturing facilities Our vision, mission and quality assurance Our service support network 08 10 12 13 14 14 16 18 30 32 34 35 36 38 40 55 61 71 84 124 151

System integration

Our geographic network Milestones Integrating systems for the future Integrating the future through people power Integrating ourselves with a greener tomorrow Awards and accolades Financial highlights Our management team Chairman's message

Information & communication technology Digital lifestyle

Management Discussion and Analysis Report on Corporate Social Responsibility Director's Report Report on Corporate Governance Annual Accounts Parent Consolidated Accounts Financials of Subsidiaries

HCL Infosystems Annual Report 2008-09 | 01

The future lies in the seamless integration of systems and technologies with business processes

An integration that facilitates operations, simplifies complexities, improves productivity and enhances the value delivered to your customers

HCL Infosystems Annual Report 2008-09 | 02

+
HCL Infosystems Annual Report 2008-09 | 03

The World Bank has projected 8% growth for India in 2010, which will make it the fastest-growing economy and overtaking Chinas expected 7.7% growth.
*Source:World Bank 2009

HCL Infosystems Annual Report 2008-09 | 04

The Indian economy is one of the fastest growing economies in the world:

Indias economy has grown by more than 9% for three consecutive years,and has seen a decade of 7%+ growth,thereby enabling the reduction of poverty by 10%.
*Source:Indian Economy Overview,EconomyWatch January 2009

During this period of stable growth, the performance of the Indian service sector has been particularly significant.The growth rate of the service sector was 11.18% in 2007 and now contributes 53% of GDP.
*Source:Indian Economy Overview,EconomyWatch January 2009

According to IMF Outlook 2009, global growth is expected to rebound to 3% in 2010, led by the twin propellers of China and India,with 8% and 6.5% projected growth respectively.
*Source:IMF Outlook 2009

In theWorlds Fastest Growing ICT Market

} Indian IT CAGR 16.4% (IDC/Gartner) ~ 50%


growth expected in next 3 years

} Steep Growth Sectors:


Telecom Fastest growing market 45% growth in Broad Band Penetration, the second fastest growing market in the world. Mobile tele-density of 42.25% & over a billion population.
*Source:TRAI

Indian service sector

53% 9% 8%

53%
growth

9%
growth

Indian economy

Security - Indian security market is estimated to be at around US$ 1Bn for 2009 and the major sectors will be airports, mass transports and maritime.The market is estimated to be US$ 9.7Bn by 2016
*Source:Frost & Sullivan

India in 2010 :

8%
growth

Growth In Core Sectors - Power, Infrastructure, Health & Education Education Sector - Prime Minister has termed 11th five year plan as India's educational plan Govt. to put 31K Cr in National Skill Development

HCL Infosystems Annual Report 2008-09 | 05

Integrated ICT Systems that seamlessly bridge business process with customers and citizen requirements are among the key drivers for sustaining these growth plans and HCL is among the best positioned Indian companies to address the growing demand for SI in the ICT infrastructure development sector.

HCL Infosystems Annual Report 2008-09 | 06

HCLs core strengths make it a leader in the ICT market...


} HCL is among the largest ICT companies in India with an India Facing focus and over three decades of trusted relationship with our customers } Stands for quality and innovation, a specialist ICT technology player } A pioneer who has played a leading role in moulding the IT industry of India as we see it today } A range of technology solutions, domain expertise and products catering to business needs across the sectors of Telecom, BFSI, Power, e-Governance Infrastructure, Health, Education, Media & Entertainment, and Retail over the last 3 years } HCL has executed many large SI rollout projects in India including the single largest rollout of ERP licences in the enterprise segment, one of the largest VOIP networks for the defence sector and the National Internet Backbone Infrastructure for Broadband Services The HCLs Best Assured stamp of Quality that ensures that the best is delivered to our customers Sustainable Growth through an integrated environmentally friendly program HCL ecoSafe One of India's largest distribution and retail network, to market a range of IT & Digital Lifestyle products A network that reaches out to 93,000 retail outlets over 11,000 plus towns An unmatched service and support infrastructure that reaches out to all corners of India World Class Support Services. Ranked No. 1 Company in IT services as per DQ CSA 2009

} } } } } }

HCL Infosystems Annual Report 2008-09 | 07

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Who we are

Incorporated in 1976, HCL Infosystems Ltd is among the largest India facing ICT companies and the pioneers of modern computing in India today. HCL is engaged in developing and implementing solutions for diverse market segments across a range of technologies.

HCL Infosystems Annual Report 2008-09 | 08

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

Part of the $5 billion HCL Enterprise, HCL Infosystems Ltd. is a leading ICT Hardware and System Integration Company, operating in the diverse areas of ICT Products & Solutions, Systems Integration, Office Automation, Digital Lifestyle Products,Managed ISP Services, Homeland Security and Managed Network Solutions.

With a clear vision to bring technology solutions that make a difference to the lives of the people, HCL has evolved from being an IT products manufacturing company in India to becoming a leading multi-faceted technology ICT Products, services and System Integration Company.

Endorsed with ISO 9001-2000 certification for ICT Services & System Integration and ISO 14001 for manufacturing, HCL is fast emerging as the preferred next generation partner for companies looking to build the intelligent infrastructure of tomorrow.

HCL Infosystems Annual Report 2008-09 | 09

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

What we offer
HCL provides a wide range of product and services for a diverse spectrum of customers. HCLs portfolio of products and services encompasses the following:

1 In the Enterprise Segment


System Integration
Our SI practice drives the technology-enabled business transformation programs of our clients, primarily public & private sector corporations in various sectors and central, state or municipal government agencies and entities.We offer turnkey SI services that integrate best-in-class products and solutions to meet the business needs of enterprise across diverse sectors including:Telecom, e-Governance, BFSI & BFSI Co-Op, Power, Railways, Health, Security, Media & Entertainment,Airports/Ports, Defence, Education, and Retail.

ICT and Networking, Infrastructure Consultancy & Facilities Management Service


We design, roll out and implement large & complex corporate IT infrastructures. We offer a range of flexible services to Operate & Manage the complete ICT & Automation Infrastructure of our clients leveraging our unmatched service network

ICT Products
We offer an entire range of IT products which include PCs, Notebooks, Servers, Imaging, Printing, Voice & video solutions, Networking Products,TV and FM Radio Broadcasting solutions, Communication & Security solutions

IT Audit, Security Compliance & Risk Management


We assist customers in evaluating processes and technology to secure their infrastructure, security and risk minimizing to meet their requirements.

2 In the Consumer and Retail Segment


Computing and Lifestyle Products
We offer a wide range of IT products which include Desktops, , Laptops, Computer Peripherals & accessories and , Digital lifestyle products. We distribute a broad range of digital lifestyle products, that include Nokia GSM cellular phones and accessories, iPods, memory devices, digital cameras, and provide the related customer support services.

Digital lifestyle products


We distribute a broad range of digital lifestyle products that include Nokia GSM cellular phones and its accessories, iPods, memory devices, digital cameras, and provide the related customer support services.

HCL Infosystems Annual Report 2008-09 | 10

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

ERP Consulting & Services


Through strategic associations with Oracle, SAP, Microsoft and other Software & ERP companies, we offer state-of-the-art IT consulting services to align the IT strategy to the business strategy.

VPN & Managed Network Services


We are a licensed Class "A" ISP, ITSP and NLD service provider. Our ISP/NLD operations are carried out through a state-of-art IP/MPLS network infrastructure that reaches out, across the country.We provide Data,Voice and Video services, Internet bandwidth services, and offer a complete range of managed network services to Enterprises across India.

Strategic Outsourcing Services


We offer a one stop shop for strategic outsourcing of information systems leading to an overall advantage for the customer in reduction of deployment time, access to a pool of technical expertise and a lowering the cost of total ownership.

Security Products and Solutions


HCL Security Ltd, a subsidiary of HCL Infosystems Ltd offers end to end solutions in the Security & Surveillance domain leveraging on World Class technology alliances.The company has high level expertise in providing seamlessly integrated Global technology solutions to ensure the safety & security of your infrastructure.

3 In the Education Segment


HCL CDC
HCL Career Development Centres is the training arm of HCL Infosystems.We bring with us a legacy of excellence that spans more than three decades.We seek to address the increasing demand for skilled professionals in the ICT arena by offering a real world practical training to students on enterprise-wide ICT deployment and integration assignments, transforming them into industry-ready professionals.

Education Institutions
We offer a range of technology solutions for the Digital class room & the Digital campus.We are proactively engaged in developing state of art customised solutions including content for institutions and schools through our Digicampus & Digischool suite of products.

Our distribution and retail network


We have a significant distribution and retail network in India for digital lifestyle, office automation and other ICT products. Our distribution network includes more than 700 re-distribution stockists, 750 micro-distribution partners and 93,000 dealers. Our distribution and retail operations cover customers in more than 11,000 towns in India.We also have significant warehousing capacity with facilities in 28 cities in India.We manage our distribution and retail network by implementing a three-tier distribution model for enhanced reach: (i) we use our extensive network of re-distributors and dealers to reach towns and villages in India with a population of over 5,000 (ii) we sell products through organised retailers in larger towns and (iii) we sell products through 65 HCL Digilife stores located in large cities across India.We believe that our various distribution channels enable us to comprehensively cover the various segments of the Indian market, including markets that are comparatively under-penetrated.

HCL Infosystems Annual Report 2008-09 | 11

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

Our vision
Together we create the enterprises of tomorrow.

Our quality assurance


We shall deliver defect-free products, services and solutions to meet the requirements of our external and internal customers, the first time, every time.

Our mission
To provide world-class information technology solutions and services to enable our customers to serve their customers better.

HCL Infosystems Annual Report 2008-09 | 13

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Our service support network


Focusing on the Indian market through 505 service locations reaching out to 4000 towns, HCL offers a wide spectrum of services through a Direct Support Service infrastructure the widest in the country.
With a state of art Network Operations Centers, for delivery of managed network services and the setting up of the Remote Infrastructure Management center, HCL offers a range of high availability software & hardware services including operations & facility management. We provide 24/7 customer care support for our personal computer customers through our 'HCL Touch' service.These services are accessible over, phone, mail, chat & SMS for the convenience of our customers.

Our geographic network


} } } } } } } } } } }
Service locations catering to 4,000 towns and cities 505 HCL Touch points owned and manned by HCL Network of Regional Response centres & contact centers 3600+ direct service engineers on field 33+ Years of experience in delivering ICT services Network of Test & Repair centres backed by logistics chain that reaches to all corners of India Certified Test & Repair centres with component level repair capability 200 seat training centre with state-of-the-art labs Support base of over 3 million assets in 75000+ sites Established Escalation & Management Process ISO 9001-2008 for ICT Services & System Integration delivery

HCL Infosystems Annual Report 2008-09 | 14

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

HCL Infosystems Annual Report 2008-09 | 15

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Milestones

} Hindustan Computers Limited is born } First 4-bit microprocessor based scientific computer made by HCL Labs

} HCL successfully ships inhouse designed Micro Computer at the same time as Apple

} Indigenously develops an RDBMS, a networking OS and client server architecture in the same period as global IT peers

} HCL launched countrys first Desktop Enterprise PC brand - BusyBee

1976 2004

1978 1983 2005


} IDC rates HCL Infosystems as a number one Desktop PC company in India } HCL Infosystems announces landmark initiative to increase PC penetration and creating computing for masses in India by launching sub 10K PC

1985 2006
} HCL Infosystems ties up with Apple for iPod distribution } HCL completes 30 years in India } HCL Infosystems maintains its commercial Desktop PC leadership for the fifth consecutive year } HCL Infosystems showcases computer solutions for the rural markets in India } HCL unveils Indias first segment specific range of notebooks branded HCL Leaptops } HCL commences production in its ISO 14001 & ISO 9001:2000 certified manufacturing facility in Rudrapur, Uttarakhand } HCL becomes the market leader in India for Thin Clients

} HCL Infinet managed Nokia Care Centres to receive ISO 9001: 2000 certification } HCL Infosystems maintains No. 1 position in the Desktop PC segment for year 2003 } IDC India Dataquest Customer Satisfaction Audit 2004 rates HCL Infosystems as number one in the desktop PC category } HCL Labs brings out HPC solutions for Indian market

HCL Infosystems Annual Report 2008-09 | 16

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

HCL Front Line division setup to address the emerging market for home computers

} HCL launches HCL BeanStalk - Indias first Multi-Media Home computer

} HCL Infinet launched with the announcement of the national ISP/NLD policy

} HCL Infosystems becomes the first company to cross the 100k unit milestone in the Indian Desktop PC market } HCL launches Indias first Window XP enabled Beanstalk Media Centre PC

1993 2007

1995 2008

2000

2003 2009
} Largest selling enterprise desktop brand for the seventh consecutive year } Recognized as best employer in Indian IT industry 2009 by DQ-IDC survey 2009 } HCL ranks No.1 Company in IT services as per DQ CSA 2009 } HCL wins prestigious Dun and Bradstreet Rolta Corporate Award for being leaders in the Computer Hardware and Peripherals category

} HCL Infosystems wins CNBC Awaaz consumer award for personal computers } HCL announces HCL ecoSafe program to spearhead its environment protection initiatives, launches a new range of eco-friendly Desktop & Laptops } HCL launches Best Assured Campaign } HCL Launches its innovative offering Data Center in a Box and wins Intel innovation excellence award for the same

} HCL awarded as one of the best 3 companies to work for in India by Business Today } HCL unveils the future of personal computing unveils next generation, ultra portable, sub Rs.14000/- laptops for the first time in India } HCL Digilife chain becomes the most awarded retail chain in 2007-08 } HCL Security Ltd. a 100% subsidiary to provide System Integration solutions for security & surveillance } Launch of HCL Touch - a pioneering initiative in the Indian ICT sector for customer care services.

HCL Infosystems Annual Report 2008-09 | 17

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating systems for the future


Airports / Ports Health Telecom

E-Gov

BFSI Retail

Media & Entertainment

Presence

BFSI Coop

Power Defense Security Railways

Education

The fast-pace of growth in the Indian economy has transformed the way systems and technologies are deployed. It is seen across verticals and sectors, that organisations are looking for efficiencies of operations through the use of technology. The more complex systems and technologies become, the more urgent is the need to ensure their flawless integration to deliver exceptional value to the users. To address this growing demand HCL has reoriented its operations to focus increasingly on system integration solutions to our customers. Our System Integration capabilities span across a diverse range of services ranging from Consultancy, Solution Design, Selection of technology components,Project roll outs and Operation & Maintenance services. We have also developed a range of Hardware & Software products, Processes & Project management methodologies for various customer verticals including Banking, Financial Services and Insurance (BFSI) to e-Governance,Power,Telecom,Railways,Defence,Security, Education,Infrastructure,Healthcare,Retail,and Media & Entertainment. We have built a model that leverages our strengths with that of leading technology partners including - Microsoft,Oracle,SAP,IBM,HP,Symantec,Cisco,Sun,CA and Hitachi - to roll out solutions that incorporate the best of breed technology to meet the requirement of the customers' business.

HCL Infosystems Annual Report 2008-09 | 18

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

A glance at the complete range of HCL's SI solutions across verticals:

1. Telecom
TheTelecom industry is today laying the backbone of a ubiquitous network with the potential of connecting every device on the planet. It requires diverse technologies to be brought together, interconnected on one network, offering an anytime anywhere services that is changing the way the world lives. At HCL the solutions we provide to our clients include: operation support services ("OSS"); business support systems ("BSS"); next generation networks ("NGN"); security; embedded solutions; switching, signaling, transmission and access solutions; network design and mobility solutions. HCL'sTelecom SI practice works on the cutting edge of the technology, we have deployed projects based onWiMax, 3G,IPTV,MPLS ,and broadband services technology. The solutions we have deployed have enabled high speed wireless access to urban and rural customers, MPLS backbone for the defence sector and convergent billing solution for telecom service providers.

Unified Billing Solution for transparent accounting


Sector:Telecom Customer: One of the leading telecom service providers in India. Business Situation The customer provided a comprehensive range of telecom services including Wireline, CDMA Mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN,VSAT & VoIP services. In the existing system interconnect calls were monitored by the Points of Interconnect (POI), it also was used to detect call violations, and for claiming the prescribed higher rates from the operators.This system was not efficient, resulting in delayed revenue realisation & leakage of revenue. HCLs solution HCL implemented Inter Operator Billing and Accounting System (IOBAS), which is a Call Data Record (CDR) based computerised billing platform that transformed its MCU based billing to a CDR based billing system. From an infrastructure perspective it connected SSAs and exchanges across the country with four data centers.All of these were clustered on a network to achieve a high availability configuration. From an application perspective it is an end to end integrated system providing order booking, customer handling, provisioning, installation, billing, payment collection & IVRS services. From an Infrastructure maintenance perspective the hardware, software and network was monitored and maintained to deliver the defined SLA's. Key Benefits
? ? ? ?

? ?

System consolidation resulting in reduction of O&M cost Online mediation of CDR's eliminating the need for bill data transportation and fraud on this account Proper accounting of payments & receivables for better financial management Supports different tariffs, different billing cycles and different discounting schemes for different category of subscribers Enabled Pre-paid and Post Paid billing integration Host of online services, online query and prompt customer response

HCL Infosystems Annual Report 2008-09 | 19

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating systems for the future

2. BFSI
Our portfolio of solutions to the Banking, Financial Services and Insurance ("BFSI") sector includes infrastructure components software products and professional services. HCL is the preferred partner to many of the major banks and insurance companiesWe provide a range of solutions including MIS BI & Data Warehousing, Compliance Solutions, Mobile Banking, ATM & Self-Service Solutions, MICR and Cheque Transaction, Core Insurance Applications Payment hub & Financial Inclusion Solutions. These solutions are based on a flexible component based architecture.

3. BFSI Coop
The Regional rural Banks and Coop Banks in India have contributed in a major way to the rural development of the country.Turnkey solutions help a Coop Bank to lower the total cost of operations and deliver prompt & efficient services to their customers. The Cooperative Banking vertical is a focus area for HCL within its BFSI practice.We have a a host of offerings including:
? ? ? ? ?

HCL BancMate Core Banking Solutions (CBS) HO records collaboration Documentation Solutions Audit & Credit trail solutions Financial Inclusion

? ? ? ?

Bilingual software application Inter-bank Reconciliation Retail Lending Solutions MIS reporting solutions

HCL Infosystems Annual Report 2008-09 | 20

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

Banking made easy


Sector: Banking (BFSI) Organization: A leading State Cooperative Bank which is amongst the fastest growing banks in India having more than INR 2400 Crores of deposits; it has 173 branches and extension counters spread throughout the state. Business Situation: The bank was faced with the prospect of increased competition from new private and public sector banks.It also faced the challenge of linking all of its branch operations into a cohesive entity to better serve its customers. HCLs solution: The bank chose BancMate CBS from HCL to run its branch banking operations on the Microsoft Windows Server 2003 and Microsoft SQL Server 2005 database. HCL BancMate CBS is an innovative solution focused on the Indian Banking Industry. It is a web based bi-lingual Core Banking Solution that communicates with users and account holders in their local language and meets all requirements of the mandatory Official Language Act. It incorporates security features with access rights defined for every user. BancMate CBS is platform and database independent, and is built on 3 tier web architecture with scalable technology and robust functionality. Key Benefits: 1. Easy to Implement The implementation process is simple,fast and user friendly.This made it one of the fastest software roll outs for the bank. 2. User Friendly The entire retail banking process is covered in just two screens in BancMate.This made it very easy for the bank employees to adopt and use the new technology. 3. Easy toTroubleshoot The ease at which configuration could be done meant that the bank was able to get the infrastructure up and running very fast,even in its far flung remote branches. 4. BilingualApplication Software BancMate gave the bank the ability to maintain the database in Hindi and English,as required.The multilingual solution has helped the bank maintain better relationships with its retail and rural customers.By providing bank statements in the local language,the bank was able to communicate with customers in their preffered language thus removing communication gaps.

HCL Infosystems Annual Report 2008-09 | 21

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating systems for the future

4. e-Governance
HCL's e-Governance practise provides technology solutions to government departments across the country.The HCL e-Governance's vertical is working in accordance with the National e-Governance Plan's (NeGP) vision to make all Government services accessible to the common man in his locality. HCL offerings in e-Governance projects spans across State and Central Government MMPs (Mission Mode Projects) and include:
? ? ? ?

Municipal CorporationAutomation Property Registration State-WideArea Networks. Police ForceAutomation Solutions.

? ? ? ?

Electronic District Solutions State Data Centers Electronic Procurement. Smart Card Projects like NREGA,RSBY,UID program etc

Empowering the nation: e-effort to empower the common man


Sector: e-Governance Customer:A District in Uttar Pradesh NREGA challenges: 1. No method to stop/check multiple enrollment of same person in the system 2. Difficult to monitor employment levels 3. Impossible to keep check on proxy workers 4. Ensure that payment reaches to rightful beneficiaries 5. Authentic manual maintenance of muster roll at each jobsite 6. Coordination between poorly connected jobsites, Gram Panchayat and block offices by the programming officer Solution that HCL provided: To overcome these challenges HCL Infosystems offered a complete solution including e-Job card (smart card) to the workers at worksite & the financial inclusion solution

framework to ensure that payment reaches the right beneficiaries. HCL has also developed a special kit called HCL Finmate for deployment in rural environments. HCL's e-Job card contains:? ? ? ?

Demographic & Biometric details of all the family members willing to do unskilled work Attendance record of the worker Online tracker for number of days worked Records of wages - Accrued and Disbursed

The solution captures the attendance of each worker through handheld terminals (HHT) at the worksite only. Linked via GSM or internet connectivity, the data is transferred to the gram Panchayat or Block office.The HHT can be further used for dispersal of wages through financial inclusion solution. Result: The implementation of the e-Job card reduced the multiple & duplicate enrollments significantly.With the help of HHT's it became easy to capture regular attendance at the worksite and helped in monitoring of proxy workers.Through the automated financial inclusion solution, it was ensured that the money reached its intended beneficiaries.

HCL Infosystems Annual Report 2008-09 | 22

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

5. Defence
Realizing the growing importance and need for SI solutions in the defence sector of the country, HCL has ventured into this vital segment with some key offerings.HCL's solution offerings include :
? ? ? ? ? ?

Fully integrated Command & Control Centers Security and Surveillance Defence offsets manufacturing End to End Data Centre Operations Data,Voice,Video IP Network Development and integration of battlefield management and tactical communication networks

6. Homeland Security
Going ahead with HCL's tradition of bringing global best practices and customized technology solutions for Indian market. Our Technology solution include Security & Surveillance, emergency response systems, baggage screening, explosives detection, fire safety, command & control centers, vehicle tracking systems and more.Our solutions offer :
? ? ?

A proactive approach for ensuring Public Safety and Security in the State Enablement of intelligent surveillance systems that continuously monitor sensitive zones & high footfall areas Connectivity and communication between authorities, districts/zones and command & control centres

HCL Infosystems Annual Report 2008-09 | 23

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating systems for the future

7. Power
Integrated Energy Management is the need of the hour if India is to meet its energy demands in the growth trajectory that it has laid for itself. HCL's focus in this sector encompasses specialised solutions in the areas of:
? ? ? ? ?

Field Automation ERP Solution Advanced Metering Infrastructure Integrated Energy management Substation setup/Distribution automation

Powered to grow
Sector: Power Customer: Large State Electricity Board. Business Challenge: 1. To automate all the processes at Sub Division level 2. To reduce the technical & commercial losses 3. To provide better consumer management services 4. To bring transactional effectiveness & transparency in the overall system 5. To develop authentic MIS for top management for strategic decisions Solution that HCL provided: HCL implemented the complete IT package for the state electricity board including computerised billing & energy accounting which involved computerisation of Sub Division offices at the circle level, along with setting up of the Data Centre & customer care centres.The IT package consisted of nine different modules:1. 3. 5. 7. Pre Billing Post Billing Store Management Customer care cum call centre 2. 4. 6. 8. 9. Billing Legal & vigilance Activities Web based MIS Energy Accounting/Auditing Electrical Network Management Billing requirements of the client were handled by the Billing Module, the Electrical Network Management & Energy Accounting through the ENMS (Electrical Network Management Module) Package and all other modules by the Subdivision automation system software. ENMS package running at the Sub Division Servers, have been integrated with the GIS software at a data base level. Web based MIS application was developed for Division, Circle, CE Offices and Head Office for integrated MIS generation & monitoring purposes. HCL has also provided the infrastructure with respect to the IT hardware and system software as required. HCL also provided the user training to the client employees. Result: The solution improved processes, reduced T&D losses, provided better consumer satisfaction through the centralised call centre that handled the various complaints and grievances of consumers. Consumer facilities were provided on the clients website to view his/her bill accounts, make payments or lodge a complaint. Further, the top management of the electricity board can now generate & view relevant operational & MIS reports.

HCL Infosystems Annual Report 2008-09 | 24

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

8. Infrastructure

World class infrastructure is the key to a globally competitive economy.We offer a range of technology solutions for automating infrastructure projects for Airports, Highways, Ports and MRTS (Mass Rapid Transport System). Airport segment
? ?

Highway segment
? ?

MRTS segment
? ?

Ports segment
?

FIDS/EPOS CUTE/CUSS solutions ? Baggage Handling and Screening ? Cargo management solutions ATC/ATM solutions ? ATS Automation systems ? Energy Management Solutions

Toll Collection System Highway Traffic Management Systems ? Intelligent Traffic System (ITS) ? Integrated check-post solutions

Automatic Fare Collection Automatic Ticket Vending Machines ? Communication System of Metro Rail with focus on following sub system ? CCTV Surveillance ? Clock System ? EPABX ? Data Transmission Systems ? Passenger Information System ? IT and Network Integration ? Automated car parking and parking management

Vessel traffic management system ? Port management information system ? Cargo/Container scanner ? Integrated port security system

HCL Infosystems Annual Report 2008-09 | 25

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating systems for the future

9. Railways
The Indian Railways, the world's largest railway network, has entered an era of modernisation by adopting the latest in technology. HCL has been associated with Indian railways for over three decades and has developed a range of customised products & solutions for this sector.HCL offerings include:
? ? ? ? ? ? ?

e-Procurement solutions Security & Surveillance solutions Networking connectivity solutions Digital Signage LED displays IT Infrastructure data centres,thin clients AutomaticTicketVending Machines (ATVMs) Energy management solutions

HCL pioneers the implementation of the automatic ticket vending machines (ATVM) across the country, making tickets easily available to the passengers without the need to wait in long queues.

HCL Infosystems Annual Report 2008-09 | 26

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

10. Media & Entertainment


HCL caters to all aspects of Media & Entertainment segment with its innovative technology solutions. HCL has deployed several end to end solutions including:
?

? ? ? ?

TV Broadcasting & TV Channel infrastructure including the complete work flow, from acquisition, post - production automation to archiving and transmission solutions FM Radio Broadcasting Commercial FM Radio Stations and Community Radio Stations SatelliteTV systems Digital Head-ends systems for MSOs for the implementation of ConditionalAccess Systems

Media Asset Management & Archiving


Sector: Media & Entertainment Customer: National Broadcaster in India with Pan India presence. Business Challenge: 1. Managing media assets on magnetic tapes 2. To enable easy retrieval of content by authorised team members 3. To search, restore, and browse archived assets from a single interface Solution that HCL provided: HCL integrated & implemented an enterprise-class turnkey Media Asset Management (MAM) solution. First-of-its-kind project in India, the media assets are collected and stored in a digital format with the highest resolution and fidelity representation, enabling broadcaster to incorporate multiple formats, metadata models and workflows including news, sports, programs,VOD, archives in SD and HD under one unified corporate system.This powerful solution empowered users to search and browse from a web-based interface, and then instantly view the rich media whether it is video, audio or stills & use it for broadcasting. Our solution framework supports a wide variety of formats and wrappers, and its backoffice engine makes media management (trascoding, multisite exchanges, transfers to different storage devices, including tape libraries) seamless & easy. Result:
? ? ? ? ?

Drastically optimised the way assets are shared and used Gain time on media exchange between production systems Real contextual metadata available for a better asset referencing Improved interoperability with broadcast, production and business systems Prevented loss of metadata due to subsystem interoperability

HCL Infosystems Annual Report 2008-09 | 27

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating systems for the future

11. Healthcare
A reliable, swift, real time health data collection system backed by proper infrastructure is the key to address quality healthcare delivery systems. Facilitating hospital modernization is a major thrust area of HCL SI business,which focuses on:
? ? ? ? ? ? ?

Hospital Management Information Systems PictureArchival and Communication System (PACS) Laboratory Information Systems (LIS) Radiology Information System (RIS) Medical Records Maintenance Solution Telemedicine Solutions Remote ICU monitoring system

Towards a healthy nation


Sector: Healthcare Customer:A prominent hospital Business Challenge: 1. Challenge of linking different departments (core services, support services & back office) into a cohesive entity 2. Need of streamlining all operations to single interface 3. Integrating new medical services into the system 4. Need of Decision Support System for hospital staff Solution that HCL provided: HCL provided a turnkey end-to-end solution that included implementation of HMIS (Hospital Management Information System); Supply, Installation & Configuration of Servers, Storage Back-up Solutions and Networking Solutions.The workflow

enabled solution from HCL was platform-independent, which made the entire integration process very simple. The HCL HMIS Stack includes:
? ? ? ? ?

ASTM - Interfaces for Lab Equipments DICOM - Viewer for DICOM images HL7 - Capable of messaging and communication with HL7 compliant systems ICD - 10 - Smart Controls for ICD coding of diagnosis details in Clinical Informatics BCH - Smart Controls for BCH coding of diagnosis details

Result: This browser-based, scalable & modular technology solution, with its GUI based interface, enabled the hospital to meet the requirement of connectivity and also ensured effective management of the hospital's operations through central management of business rules. It helps the hospital to reduce the costs of administrative and clinical transactions, and at the same time, provide better healthcare service to their patients.

HCL Infosystems Annual Report 2008-09 | 28

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

12. Education
HCL Infosystems is a leading System Integrator providing end to end turnkey advanced education solutions to the schools, institutions and universities across the country in the Govt and the private sector. As part of HCL E2 (Education Everywhere) initiative, we have designed HCL DigiSchool and HCL DigiCampus for schools and colleges. HCL's DigiSchool solutions are designed and customised as per Indian school curriculum including all K12 boards. HCL's DigiSchool will offer students an opportunity to learn according to the curriculum and improve their IT competency. The key feature that this solution offers is the digital multimedia asset library, covering all major aspects in K12 category. HCL's DigiSchool also offers the school management software that fits the unique needs of the departments of the school thus improving the overall functioning and efficiency of the system. HCL DigiCampus offers a wide range of solutions keeping in mind the requirements of large campus and universities. Key offerings include campus infrastructure solution, university resource planning, online distance learning/ e-learning programme andTele education.

13. Retail
HCL Retail Infrastructure and point of sale (POS) Solutions provide end-to-end business IT enablement in a complete customised form. We believe each business has unique needs and thus we consult, plan and design the Retail IT solution with our customers before we manufacture it at our state of the art, ISO 9001 and ISO14001 certified plant at Pondicherry. Key SolutionAreas of our SI retail are:? ? ?

Retail Stores Frond End Solution Retail Store Back end solution Ware HouseAutomation Solution

? ? ? ? ? ? ?

LogisticsAutomation Solution Connectivity Solution CRM Solution Call Centre and Process Outsourcing Solution Automatic Milk Co-operativeAutomation Solution Mobility Solution Rural Products and Solution

Outsourcing

HCL deploys its integrated e-Gov solution built on the SOA platform in a hosted model in one of the leading progressive Municipal Corporations.This will integrate all the Citizen Centric services to be delivered from one window across a spread of 200 Sq Km. Transaction based model for an urban local body, automating their complete citizen interactions while managing costs. HCL built the complete infrastructure including Datacenters, deployed applications and staffed the Citizen Services Counters for the next 10 years.

HCL Infosystems Annual Report 2008-09 | 29

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating the future through people power


At HCL, Human Resource is considered amongst the Companys most precious asset, which is why we have laid special emphasis on every aspect that helps in constant growth of our 5921 employees

HCLs HR is directly aligned to its organizational and business strategy. Innovative practices, policies, systems and processes enable us to engage our people at all times and ensure their empowerment through a wide range of internal People Development Processes. Performance-linked incentives and regular training programmes ensure a low attrition rate among our employees, the majority of whom are spread across the length and breadth of the country including those based in remote locations. An intellectually-stimulating environment, with Fun@Work as its nucleus and designed to enable our people to `Grow, Learn and Own at every step of their evolution is a key driver of the Companys growth.

HCLs People Power is driven by a variety of stimulating factors, which include:


? ? ? ? ?

Opportunity to work on different technologies with multi location exposure & latest technology 80% of the top Management have joined straight from the campus Opportunities to move from technical to functional to general management roles Housing & asset building schemes for employees Involvement of employees in all decision-making concerning their welfare

As pioneers for ESOPs since 1980s, HCL has evolved a system of profit-sharing with the employees that act as one of the biggest incentives to their performance, which is also regularly recognised and rewarded. A learning organisation that encourages entrepreneurship and demands performance management of the highest level, sums up the HR philosophy of HCL which continuously strives to innovate new principles and programmes to improve its HR culture.

HCL Infosystems Annual Report 2008-09 | 30

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

The Company introduced several new programmes aimed at HR development:


?

Ajai-Ke-Saath - Coffee Connects, where employees meet the Chairman & Co-Founder for coffee and new ideas are brewed over hot coffee Applause - From post-its to team dinners, everyday personal recognitions provide a surge in enthusiasm through peer recognition Alumni Connect - An Internet platform where alumni can register themselves and participate in events to stay connected with HCL

New process of performance management with weights for KRA and also separate measurement of enablers New Career Development Programme - Stepping Stones - whereby individuals undergo one-year intensive development program followed by impartial assessment for key positions HR Relationship Managers - A pioneering and unique concept in the industry where HR follows the model of relationship management for internal customers

Going ahead, the Company plans to strive continuously to further strengthen its HR systems to align them even more intricately with the ever-changing needs of the customers.

HCL Infosystems Annual Report 2008-09 | 31

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Integrating ourselves with a greener tomorrow


A tomorrow that is safe for our children and the generations to follow. A tomorrow that is free of all hazardous wastes.That is the tomorrow with which we, at HCL, are always aspiring to integrate through a variety of programmes and Go Green initiatives.

HCL Infosystems Annual Report 2008-09 | 32

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

HCLs Go Green initiatives include:


1 2 3 4 5

Drive for energy conservation Integration of environment management processes in manufacturing facilities Best Assured Campaign Green belt creation HCLs Green Bag Campaign

At HCL, we are committed to continually improve the conservation of natural resources, ensure minimisation of waste & pollutants and comply with applicable legal, regulatory and other requirements relevant to our products,processes and environment. HCL ecoSafe is one of our biggest initiatives as part of our drive for a greener tomorrow and an endeavour to protect the environment, health and safety of all our stakeholders. Under HCL ecoSafe policy, energy conservation has been a key area of work to reduce power consumption in products,while employing measures in manufacturing of products to minimise energy consumption. All HCL products have been incorporated with Green PC features and ACPI mode for power saving.

In line with our focus on environment protection, HCLs manufacturing facilities practice various measures to reduce power consumption by using natural light during daytime, installing different capacity DG sets that consume optimum amount of diesel as per required load. We shall remain committed in our focus towards environment protection and sustainability,moving ahead. HCL Green Bag Campaign is an initiative taken by the company to dispose of any e-waste in a 100% environment friendly manner. In order to facilitate this we have engaged all our HCL Touch centres to collect any e-waste the customer wishes to dispose off.

HCL Infosystems Annual Report 2008-09 | 33

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Awards & accolades


Strongly vindicating the strengths of our business model and the successful focus of our strategy, HCL has been the proud recipient of some of the industrys top awards and recognitions through the years.

Among the major awards and accolades that came HCLs way during 2008-09 were:
?

Other top-level recognitions awarded to the Company included:


?

Ranked No 1 in the DQ-IDC Best Employer Survey 2009, among the IT companies in India
?

Upgradation of Quality Management System ISO 9001: 2000 to ISO 9001:2008 standards Ranked among the top three Best Companies to Work, across industry segments by BusinessToday - January,2009

GoldAward inIT &Automation Hardware category by Frost & Sullivan in India Manufacturing ExcellenceAward (IMEA 2008) Awarded the Gold Star rating for customer satisfaction excellence in the CISCO PAL Survey Ranked No1 company in IT services as per DQ CSA 2009 Dun & Bradstreet Rolta corporate Award 2008 for being leader in Computer Hardware & Peripherals category Best Desktop PC Category award by ComputerActive EmeraldAward for best all round performance from Infocus Platinum Certificate of Excellence award from HDFC Standard Life Insurance Co. Ltd in appreciation of its contribution & efforts towards the continued success of HDFC SLI

? ?

? ? ?

In a strong endorsement of his visionary strengths, the Companys Founder Chairman & CEO, Mr. Ajai Chowdhry was felicitated by Times Ascent Asia Pacific HR Congress with the CEO with HR orientation Award during the Global HR Excellence Awards 2008-09. He was also ranked third in the Power List of 75 Most Powerful Brand Builders of India and has been adjudged among India Incs Most Powerful CEOs byThe EconomicTimes.

HCL Infosystems Annual Report 2008-09 | 34

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Our management team


A futuristic management team with in-depth experience and high level of expertise, successfully translating the Companys vision into a game-changing strategy, is at the core of HCLs business model.

A look at our Management Team:


AJAI CHOWDHRY
Chairman & CEO A visionary par excellence,Ajai Chowdhry is one of the six founder members of HCL.An engineering graduate by training, he took over the reins of HCL Infosystems, the flagship company of the enterprise, as President and CEO in 1994. Instrumental in steering the Company into an internationally recognised corporate in the niche areas of its business, he was appointed the Chairman of HCL Infosystems in November 1999. He has received various prestigious honours and accolades endorsing his outstanding capabilities, including the DATAQUEST 'IT Man of the Year 2007' Award, among others.

J V RAMAMURTHY
Chief Operating Officer The Chief Operating Officer of HCL Infosystems, J V Ramamurthy brings to the table over three decades of exceptional expertise and diverse industry experience. A technocrat and a man of broad vision, he has led the Company to scale new parameters of growth by spearheading its entry into a number of new verticals and partnerships.

SANDEEP KANWAR
CFO & EVP Associated with the Company since 1988, Sandeep Kanwar has the distinction of progressing to the position of Chief Financial Officer, in a span of just eight years, at the young age of 35.A respected name among his colleagues and customers, he is known for his financial acumen and management skills.

HARI BASKARAN
EVP A BE graduate and alumni of IIM - Bangalore, Hari has been instrumental in building the largest retail network for digital lifestyle products in the country. As head of the Distribution and Marketing Services and Retail business division for HCL, he has given a new meaning to the success of these operations.

RAJEEV ASIJA
EVP Rajeev, an engineering graduate, joined HCL in 1983.With two decades of industry experience, he heads the Enterprise Solutions & Services business of the Company.

HCL Infosystems Annual Report 2008-09 | 36

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

M CHANDRASEKARAN
Sr.VP M Chandrasekaran joined HCL in 1984.With over two decades of industry experience in sales, support and marketing, he heads the office automation products, HCL Infinet and CDC business for HCL.

ROTHIN BHATTACHARYYA
CEO (HCL Security Ltd.) Rothin Bhattacharyya is the Chief Executive Officer (CEO) of HCL Security, headquartered in NOIDA India. A senior business leader, with over 24 years of business management experience, Rothin is considered a thought leader in technology & services sector. His primary responsibility in HCL is to expand companys capability to lead large, complex, global businesses.

GEORGE PAUL
EVP As head of the Marketing function along with HCL R&D, George Paul has been pivotal in steering the Company's growth trajectory to exceptional levels of success.A graduate in Electronics & Telecommunications, he joined HCL in 1983 and is now a core member of HCL leaders.

RAJENDER KUMAR
EVP With over three decades of industry experience in procurement, manufacturing & channel development, Rajendra Kumar heads the Corporate Initiatives, including Quest for Excellence Program. He has been associated with the Company since 1976 and has, over the years, become an integral member of its leadership team.

VIVEK PUNEKAR
VP HR An engineer by profession with over two decades of industry experience in various functions,Vivek heads the HR function for the company. Vivek, who joined HCL in 1986, is credited with innovative HR initiatives that have made HCL among the best companies to work for.

HCL Infosystems Annual Report 2008-09 | 37

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Chairman's message

HCL continues its relentless pursuit to bring to its customers,products and solutions on the cutting edge ICT technology. It is our endeavour to leverage our knowledge, experience and best practises to touch lives through technology in all spheres of life and make a difference to the citizens of our country.
- Ajai Chowdhry, Founder, Chairman & CEO, HCL Infosystems Ltd.

HCL Infosystems Annual Report 2008-09 | 38

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

Dear Stakeholders, The year gone by has witnessed a major turmoil in the global economic and political scenario, which has had an impact on the ICT industry in India as well. However, history testifies that every crisis presents opportunities and opens new avenues for development and resurgence. I believe India is witnessing a resurgence of its economy and stands at an inflection point, of growth. It is projected that within this,the Indian ICT market is among the fastest growing in the world. Your company HCL Infosystems, is one of the leading India facing ICT companies, with diverse business portfolio's including Products & Services, System Integration, Distribution & Marketing, Education & Training & Security,each with its specific growth trajectory. In these exciting times, your company is poised at the right place to address the opportunities that are being thrown up in different sectors. This growth requires setting up of a core ICT infrastructure that is critical to the functioning of businesses and delivery of governance.An ICT infrastructure that is the backbone to keep all parts of the system connected, to increase productivity levels, and provide information and intelligenceon tap. We are witnessing the convergence of adjacent technologies into the core with emergence of concepts like integrated security & surveillance solutions, mobile workforce automation solutions, electronic payment gateways, integrated command and control systems,and integration of the shop floor with central MIS etc.We are witnessing the emergence of an era of the Intelligent Infrastructure. In this period of immense possibilities, your company, HCL Infosystems, with over three decades of expertise in various core technology fields, is building up vertical domain System Integration practices to address the various emerging and growing opportunities. Touching lives Product innovations & service expansion continue to engage our attention as we establish new relationships across the country.We are in the midst of a change where technology is enabling a mobile lifestyle that demands service on the go, anytime, anywhere. It is this understanding that has inspired us to conceptualise and launch HCL Touch, a 24x7 service support system spread across 4,000 towns in the country. Your company continues to be the torchbearer, being the first to bring products based on the power of new technology to Indian consumers. As we venture into new categories of products we believe that we will continue to tap into our prowess to touch lives every day,in different spheres of life.

Sustainable Growth I am proud to state that your Company has also taken a leadership position in adopting a policy of sustainable growth. Under the HCL ecoSafe program we are bringing out products that are environmentally friendly, programs that enable safe disposal of e-waste, reduction of carbon dioxide footprint, reducing energy consumption in products & internal operations, etc among various steps initiated. People power I would like to mention that the growth and success of any organization rests on the strong foundation of its people. Your company has built one of the largest multi-technology talent pools in the ICT industry, and has nurtured a mature home-grown management team to enable it to scale new heights.

GoingAhead With all these initiatives, I am confident that as your company moves forward on its growth trajectory with a focused strategy, it is geared towards making the most of the unfolding opportunities across the verticals of our presence, be it Telecom, Power, BFSI, e-Governance, Infrastructure or,Railways,Education and Healthcare. On a concluding note In conclusion, I would like to thank you, fellow stakeholders, for your interest and constant support in HCL's progress and the faith you have reposed in the future of your Company.

With warm regards,

Ajai Chowdhry

HCL Infosystems Annual Report 2008-09 | 39

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Management Discussion and Analysis


Overview All trends indicate that the economic slowdown is behind us and we, as a country, are poised to grow.With the government clearly spelling out its focus on taking development to the masses, today there is demand and opportunity to extend the ICT revolution beyond the metropolises of India into the real Bharat. Despite the global slowdown, the Indian economy is estimated to have grown at close to 6.7 per cent in 2008-09.The Confederation of Indian Industry (CII) pegs the GDP growth at 6.1 per cent in 2009-10. This scenario factors in sectoral growth rates of 2.8-3 per cent,5-5.5 per cent and 7.5-8 per cent for agriculture,industry and services respectively.

HCL Infosystems Annual Report 2008-09 | 40

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

Business outlook
The annual IT/ITeS market forecast by IDC suggests that important changes are taking place in the Indian market on the back of global economic meltdown. This will in turnl propel a new market order in the IT/ITeS industry. According to IDC, in Growth Phase I (2003-08), the domestic market witnessed an unprecedented growth, nearly tripling in market size from Rs. 34,000 Crore in 2003 to Rs.1,01,031 Crore in 2008; a CAGR of over 24%. IDCs India Domestic IT/ITeS Market - Top 10 Predictions for 2009 states that Growth Phase II will leverage the IT infrastructure built and consolidated during the first phase. Growth Phase II is expected to commence from 2009 onwards. This new market order will be quite different from the earlier phase and will be built on the back of new and innovative services sought by consumers and enterprises alike. The technology behind these services, such as infrastructure , applications and connectivity would need to be completely orchestrated and re-oriented in order to support their mass adoption. Indian domestic IT/ITeS market growth rate is expected to be 16.4% over the coming five years till 2013.The Growth Phase II will

see the emergence of new technology usage paradigm, leading to a rapidly changing strategy and continuous market realignment on the path of ICT market participants. The year 2009 is expected to herald the beginning of a new business cycle. The issues in the short run will be productivity, cost savings and customer retention. This would eventually pave the way for innovative services (for both the consumer and enterprises) by leveraging the existing infrastructure so as to align it with emerging opportunities. Players who are uniquely positioned to take advantage of such opportunities will benefit.

transforming itself into a multi-faceted technology company addressing the Enterprise, Small & Medium & the Consumer spectrum of the Indian Market. The multi-faceted HCL of today has specialized verticals addressing different segments of the technology spectrum. Under one roof, its built a comprehensive range of capabilities, giving it a unique advantage to leverage the new paradigms that are emerging from a converging world. At this point it is worth mentioning that HCL has the distinction of being one of the unique Indian ICT technology companies of its scale, which has an India centric customer focus. Innovation, Transformation & Momentum: This has been at the core of what your Company has been working on, over the last several years. Innovating new products & services for the Indian Market and building technology frameworks, HCL is transforming itself into a Services and Infrastructure Design & System Integration company. Concurrently, it continues to be a leader in the core products business in the field of computing, office automation, ICT infrastructure for small, medium & large enterprises,ICT education,and ICT retail. The year gone by has seen your Company

The HCL of today


We are today in a world where ICT technology is all-pervasive, touching every aspect of life. It is transforming the way we work and live, and driving the global human community towards a flatter world,in turn opening up new opportunities. As pioneers of modern computing in India; having created ICT hardware, software & training business the, HCL is driven by a vision to bring technology solutions that make a difference to the lives of people in this country. This customer-focused strategy has paid rich dividends, with HCL

HCL Infosystems Annual Report 2008-09 | 41

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Management Discussion and Analysis


System Integration Roll Out & Infrastructure Management
Telecom E-Gov Power Railway Health Security Media & Ent Airport / Ports Defence Education BFSI+Co-op Retail
B2B Indias largest Direct Sales Organization Solutions : Computing & Storage, Networking, Security, telecom, Imaging, Printing & Copying,Voice & Data Comm Video, Conferencing, Digital Signage, Enterprise Services, managed Networks, POS Retail Complete ICT Solutions from HCL Computer Systems : PCs, laptops,Workstations,Thin Client, Peripherals, Racks, Kiosks, Software, Servers, Storage, Backup Solutions, Networking Products, Security Solutions, Enterprise VPN, Hosting,ASP Servers Imaging Products : Digital Copier, Multimedia Projects, Plasma / LCD Display Panels,Audio Visual System Integration, laser Printers (Mono / Colour), MFDs Telecom Products : IP Phones,TDM / IP PBX,Video Conferencing, call Centre Solutions,TV Broadcasting, FM Broadcasting, GPS Solutions VPN and MPLS : Broadband,VPN, Co-Location Services HCL Accutracker : HCL Vehicle Tracking Services Indias largest Service Support Network Multi-location Project Services, network Security & management Services, FM Services, Multi Vendor & System Integration Support, IT / BPO Outsourcing Services, Copy & Printing Services, Spot maintenance Services, Document management Services, Branch Rollout Solutions,& Data Centre Hosting Services, CDC, infrastructure Support and HCL Touch 24x7 Services B2C Indias largest Distribution & Retail Network (65 DLS, 93k retail outlets) Products : Desktops, Laptops, Imaging, mobile handsets, iPods, Digital camera, Accessories, Wireless headsets, Memory products, Solar chargers

ICT Training & Education


Manufacturing ISO-14001, 9001: ISO-13485-2003:TS 16949-2002:TUV - Accredited

invest for the future through various landmark initiatives. Your Companys strategy of focusing on core defensive sectors has enabled it to address new business opportunities in growth sectors, and initiatives taken to expand the spectrum of business have enabled HCL to de-risk its business strategy. HCL has built Indias largest distribution and retail chain to address digital lifestyle demands of todays customers. With a network of HCL Digilife stores across the country, more than 93,000 retail outlets across more than 11,000 towns and cities of India, HCL has by far the largest valueadded distribution network in the country.

It has also partnerships with leading brands, such as Nokia, Apple, Kodak, Toshiba, Microsoft,Konica Minolta,among others. HCL Digilife stores,a unique concept in our country, offer a single window for ICT consumers to experience a comprehensive range of digital lifestyle products, including Notebooks, PCs, digital cameras, MP3 players, mobile phones, LCDs, Plasma TVs and related accessories. During the year under review, your company, along with Nokia, announced the establishment of a joint venture to sell mobile entertainment and value-added services. This joint venture aims to sell

mobile value-added ser vices and entertainment content directly to consumers in India. With an objective to meet the increasing demand for skilled professionals in the ICT arena, HCL has established high-end ICT Education & Training, with HCL Career Development Centres across India. HCL CDCs impart to students real-world practical training on enterprise-wide ICT deployment and integration assignments to transform them into industry-ready professionals. HCL has seen a very encouraging response to this initiative and today, there are HCL

HCL Infosystems Annual Report 2008-09 | 42

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

CDCs across the country offering specially designed courses in high-end infrastructure hardware, software, and middleware and networking integration.

Neutron PC, respectively. The HCL Neutron PC has been widely acclaimed for its eco-friendly features and economy in space and power consumption. On the consumer front, HCL has undertaken several initiatives to value-add to the consumers digital lifestyle experience. HCL Leaptops and Desktops, along with accessories,were made available online on www.hclstore.in alongside the retail presence. Targeting the youth, HCL launched a special MTV edition HCL Leaptop with the latest NVIDIA Geforce graphics engine for improved gaming and multimedia applications. HCL special promotion offers, such as HCL Ghar Lao, Winner Ban Jao contest during the festive season and Affordable Technology during Republic Day, have been extremely successful in promoting HCL Leaptops to upcountry markets across the length and breadth of the country. HCL is undoubtedly the leader in the desktop business in India and its existing range of products for the enterprise segment and the consumer segment continues to grow. This year, HCL strengthened this category with two unique products - The Green PC, and the Infiniti Challenger Series Workstations based on Intels Quad Core Technology for the Gaming andAnimation Industry. The Green PC is a fully functional PC that is aptly suited for home, SOHO, SMB and enterprise environment and saves 33% more power than a standard desktop.The HCL Green PC and HCL Neutron PC replicate HCLs ecoSafe initiative and is a mark of the Companys commitment to support the cause of a green and healthy environment. HCLs quest for saving power and providing a greener earth has found its footprint in the server business as well. Answering customer need to save power, and the demand for greater efficiency from their

Computer Systems & Related Services


Over the years, HCL has been foreseeing the trends in the Indian ICT industry and understanding needs of varied customers. Through these years, the adoption of a digital lifestyle by consumers has evolved and it is more mobile than it has ever been. To meet the demands of this emerging always on-the-go consumer, your company formulated a never before service in ICT for the Indian consumer called HCL Touch. This unique 24X7 service covers 4,000 towns across the country and provides customer service in 11 regional languages of India. Today, HCL Touch is a landmark in ICT services in the country and is a benchmark in the IT business. In line with HCLsDesign for India strategy, and in keeping with its commitment to develop & deliver world-class products for Indian consumers, your Company developed the HCL Leaptop Series 39 designed for the harsh weather conditions in India. HCLs R&D labs developed the Advanced Thermal Engineering (ATE) Technology for the HCL Leaptop Series 39. The HCL Leaptop Series 39 is a powerful machine and can work at a stretch for long hours without getting heated on its surface. HCL created a niche in CY 2008 by being the first in the country to launch theUltraportable Computing as a new product category. This year too, HCL was among the frontrunners to launch products based on the Intel Atom for the ultra-small form factor. HCL was among the global firsts to launch the Netbook and the Nettop, based on the Intel Atom processor technology called HCL Mileap Series 04 and the HCL

data-centers, HCL forayed in the space of power-conscious server range, based on policy-based power management It thus launched innovative server systems powered with Intel Intelligent power management technology, Intel turbo-boost t e c h n o l o g y, H y p e r- t h re a d i n g f o r performance-driven and optimized TCO requirements.HCL also launched a range of servers based on Nehalem processors platform from Intel.

Te l e c o m m u n i c a t i o n s & Office Automation Products


During the year under review, HCL has further consolidated its position in the distribution of Nokia Cellular phones and Digital Lifestyle products. India continues to show growth in the mobile subscriber base with 125 million new subscribers added during the year ended March 2009. The total mobile subscriber base was 392 million subscribers at the end of March 2009, with strong growth coming in from tier-2 and tier-3 markets. Nokia continues to dominate the market share in the GSM cellular phone market with its aggressive product line-up and strong distribution. 3G licensing and Mobile Number Portability are expected to hit the market within the next 6-9 months. HCL continues to grow the Digital Lifestyle business by adding new products to its portfolio of Consumer Electronics and Mobile Accessories. Further additions are planned in the coming months. This year, your Company continued to build a robust Office Automation (OA) channel to address the sale of Imaging and Printing products.The Company added new products in the area of 3D virtual reality solution digital publishing, photo printing and transaction printing segment.

System Integration Services


HCL, over the years, has successfully transformed itself into a leading Services

HCL Infosystems Annual Report 2008-09 | 43

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Management Discussion and Analysis


and System Integration company in the country. HCL brought about this transformation by leveraging its strength in core technologies and its direct service capabilities.This process of transformation has built up momentum with the set-up of various Centre of Excellence (COE) and product development centres at Jaipur and other places. HCL has designed,developed and delivered cost-effective , technolog y-enabled solutions that have enabled businesses to achieve a competitive advantage in their respective ver ticals. HCL System Integration capabilities span the entire gamut of services - from consulting, to d e s i g n , ro l l - o u t i m p l e m e n t a t i o n , management and support. HCL partners with leading technology vendors - CA, Cisco, EMC, Hitachi, HP, IBM, Intel, Microsoft, Oracle, SAP, Sun & Symantec - to roll out solutions that are customized as per the requirement of each business vertical. Certified under ISO 9001-2000 BVQI; HCL has mature project management and implementation processes that enable it to deliver consistent and timely solutions to its customers. HCL System Integration services have been growing at an exceptional pace in over 13 industry verticals, viz. Telecom, e-Governance, BFSI, Power, Media & Entertainment, Retail, Healthcare, Infrastructure, Railways, E d u c a t i o n , H o m e l a n d s e c u r i t y, Cooperative banks & Defence. SI e-Governance HCL SI e-Governance has designed & developed solution frameworks for the National e-Governance Program and have been working in association with several central & state government departments towards development, empowerment and betterment of services for the citizens of India. HCL has been working on several e-Governance projects, like NREGA (National Rural Employment Guarantee Act), PDS (Public Distribution System), RSBY (Rashtriya Swasthya Bima Yojna) and SSP (Social Security Pension). All e-Governance projects are dependent on the setting up of a robust infrastructure reaching out to every village. There is an urgent need to develop the core and support infrastructure for e-Governance, such as Data Centres,WideArea Networks and the physical access points for delivery of government services. These would be

HCL Infosystems Annual Report 2008-09 | 44

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

common to all departments and where services could be delivered at the doorsteps of the citizens in an integrated manner. NREGA goal is to enhance livelihood security in rural areas by providing at least 100 days of guaranteed wage employment to every household in a financial year. HCL Infosystems implemented a complete solution for NREGA, including e-Job card to workers at worksites & financial inclusion solutions to ensure t payments reach the correct beneficiaries. HCL has also developed special kit for rural environment which is sleek and handy even for field work calledHCL Finmate. Furthermore, HCL provided complete automation Solution for urban local bodies to integrate all departments of ULBs.

SITelecom The convergence of applications, networks or content like voice,video and data on this new age information super highway has become the next path breaking move in core mass market technology, providing seamless connectivity and integrated user experience. HCL, with its multi-product and multiservice approach, is able understand and address the challenges and opportunities brought by convergence. Our SI Telecom projects encompass the following:
?

Provided VPN Backbone Solution to manage VPN network of a leading PSU in India Integrated solutions for complete ICT Core, Billing, Datacenter & disaster recovery

SI Power The thrust of the Indian Power sector is on increasing power generation transmission & distribution. HCL SI Power is working closely with the power distribution sector to address AT & C loss reduction, bring t r a n s p a re n c y, i m p ro ve c u s t o m e r satisfaction and increase employee productivity through convergence of IT & Automation. Customer service & reducing distribution losses are two main HCL focus areas. HCL's Power practice broadly caters to the needs of Electric Utilities by offering

Complete infrastructure rollout for WIMAX implementation for a leading Telecom player Roll out of Broad Band Multiplay Project & developed single window billing solution to manage all the services of a leadingTelecom operator

HCL Infosystems Annual Report 2008-09 | 45

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Management Discussion and Analysis


customized solutions in areas like Enterprise IT, Customer Services, Advanced Metering Infrastructure, AMRs, Revenue Management. HCL implemented complete IT package in HPSEB for computerized billing & energy accounting which involved computerization of Sub Division offices of Shimla circle along with setting up of Data Centre & customer care centres also. HCL also implemented Sub Division Automation Project including Centralized Billing Engine, Windows based Electrical Network Management System,Web Based CRM Application for one of the state electricity boards. SI BFSI & Cooperative HCL SI BFSI is focused on Retail & Corporate Banking, Insurance and Capital Markets. HCL has been working with several nationalized, MNC, private, rural and cooperative banks across the country. HCL, at its R & D center, has developed a Core Banking Solution - HCL BancMate. The Company this year also launched state-of-the-art co-brandedATM solutions for India. HCL is the preferred partner for many BFSI customers and its clientele includes all major banks and insurance companies. HCL implemented our own product called HCL BancMate in some of the leading cooperative banks. HCL Implemented a web based Management Information System (MIS) & BI solution for one of the India's largest state-run banks. HCL implemented complete mobile banking solution to one of the leading nationalized banks of India to extend its full fledged mobile banking technology services to its customers across the globe. SI Education HCL E2 Initiative: - Education Everywhere, Enable Education & eEducation.

HCL SI Education has developed a wide range of customizable content-enabling solutions.The Company is providing world class library management solutions (LMS) for the market. Our LMS is designed on all international standards like MARC-21, UNICODE,SIP/SIP2,etc.LMS is completely user-friendly, menu-driven interface, providing online help, complete and elaborative help documentation, online downloading of bibliographic details, sharing of database or bibliographic details with international or national libraries based on international standards like ISO 2709,Z39.50,etc. SI Home Land Security During the year, HCL Home Land Security (HLS) developed solutions for:
?

Command and Control Center Dial 100 IP-Multimedia contact center &Voice Logger ? GPS based Vehicle Tracking & management ? Digital Map & Display Solutions ? City Surveillance ? Traffic Enforcement ? Prison Solutions HCL Infinet is an Internet Infrastructure
?

HCL Infosystems Annual Report 2008-09 | 46

Integrating the future through people power 30

Integrating ourselves with a greener tomorrow 32

Awards and accolades 34

Financial highlights 35

Our management team 36

Chairman's message 38

Management Discussion and Analysis 40

Report on Corporate Social Responsibility 55

initiative of the HCL group. HCL Infinet offers state-of-the-art Managed Network Services to enterprises across the country, and provides complete range of networking services & solutions like: Internet Bandwidth Services, Virtual Private Network Services, Internet Telephony, Managed Data Centre, Co-location Services, MPLS Networking Services, Corporate Messaging Solution, Wireless Broadband Services and Value Added Services like Enterprise Mailing Solutions. HCL Infinet has increased its direct presence to almost 160 locations. HCL Infinet has also set up eight Tier-III Data Centres to cater to its customers.

Quality initiatives
During the year, there have been several initiatives undertaken by the Company on the Business Excellence and Quality front. The Chairman formally launched C o m p a ny - w i d e Q F E ( Q u e s t f o r Excellence) journey, which combines the Best Business Practices under the EFQM (European Foundation for Quality Management), ISO and QIPM (Quality Improvement Process Model). Customer Satisfaction initiatives in 2008-09 have propelled HCL Infosystems to the top position in CSA 2009 (Customer Satisfaction Audit) conducted by IDC-DQ during Oct-Dec 08. This Audit also found that the Companys range of Service

Offerings and past Contract-Service Delivery experience have been rated highest amongst all IT Service providers in the country. On the Technology Certification front, HCL achieved the highest partnership status with each of 10 core partners in S4N business area (Server, Storage, Security, Software and Network), that forms a key component of our high growth System Integration and Services Business. Consolidating on the COEs (Centre of Excellence) and Enterprise Response Centres, we have improved capability in designing and implementing Emerging Technology Solutions like Unified Communications etc. The Company also started innovative solution labs in the area of DairyAutomation,Cloud Computing etc.

HCL Infosystems Annual Report 2008-09 | 47

Who we are 08

What we offer 10

Our manufacturing facilities 12

Our vision, mission and quality assurance 13

Our service support network 14

Our geographic network 14

Milestones 16

Integrating systems for the future 18

Management Discussion and Analysis


On the Manufacturing front, the Puducherry Manufacturing Operations and Uttarakhand Manufacturing Operations have undergone regular external audits and successfully migrated to the new ISO (IS0 9001-2008) standard for Quality Management Systems and Environment Management Systems (EMS 14001-2004). As part of quality journey, the newly acquired Jaipur Software centre has been certified as CMMI level- 3. This year, HCL has won the IMEA (India Manufacturing Excellence Award) for Manufacturing Excellence.) The Company also won the prestigious Gold Award for IT automation from Foster and Sullivan. Further, the HCL Nokia Repair Facility has been certified as ISO 9001:2008 this year. evaluate all business risks and process gaps. The top management of the Company takes periodic review of the business processes and environment risk analysis reports by the respective business heads. In order to further enhance its business in System Integration, the Company has entered into Security Business through the establishment of HCL Security Ltd. as a new venture. The Company has further strengthened its focus on cost reduction and overhead control including current assets. In view of the high potential in adoption of mobile computing in India, including in nonMetro towns, the Company has launched HCLTouch 24X7 support its customers. Attrition is one of the major risks which organizations are facing today. With the increasing demand and limited availability of specialised and adroit workforce for the ICT domain, identifying, recruiting and retaining this talent is vital. HCL has strong HR policies that attract and retain best of industry talent and also imparts training through knowledge portals to enhance the skill-set of the employees.

Internal control systems and their adequacy


The Company has in place adequate systems for internal control that are commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate polices. The Company has a well-defined delegation of power with authority limits for approving revenue as well as capital expenditure. Processes for formulating and reviewing annual and long-term business plans have been laid down. The InternalAudit is based on anAudit Plan,

Risks & concerns and risk mitigation


HCL has developed a well-defined Risk Management Framework to track and

HCL Infosystems Annual Report 2008-09 | 48

FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED JUNE 30, 2009
The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP) in India. The Groups consolidated financial statements have been prepared in compliance with the standard AS 21 on Consolidation of Accounts and presented in a separate section of the Annual Report. The Management Discussion and Analysis on Financial performance relates to Consolidated Financial statements of the Company and its subsidiaries. This should be read in conjunction with the financial statements and related notes to the consolidated accounts for the year ended June 30, 2009. CONSOLIDATED FINANCIAL PERFORMANCE Consolidated FY 2009 FY 2008 12,378 12,403 12,252 11,163 1,089 683 21 385 37 -26 45 351 111 240 14.0 12,245 11,191 1,054 607 19 428 48 2 48 430 130 300 17.6 Rs. crores Parent FY 2009 FY 2008 12,337 12,367 12,211 111,29 1,082 654 17 411 34 -26 45 374 114 260 15.2 12,209 11,167 1,042 592 16 434 46 2 48 434 129 305 17.9

Particulars Gross Business Revenue Net Business Revenue Cost of Sales Gross Margin Operating Expenses Depreciation Operating Profit Other Income Exchange Fluctuation Finance Cost Profit Before Tax Tax Expense Profit After Tax Basic EPS (in Rupees)

Gross Business Income Consolidated Revenue for the year is Rs. 12378 crores as against Rs. 12403 crores in the previous year. Services revenue grew by 43% from Rs. 458 crores to Rs. 654 crores in the current year.
FY 09 FY 08

Revenue
12378 12403 11855 11455 7787 Rs. crores

Services Revenue

Rs. 654 crores +43% Y on Y


2008: Rs. 458 crores

FY 07 FY 06 FY 05

Gross Margins Gross margins for the current year grew by 30 basis points from 8.5% to 8.8% in FY 2009. In absolute value, gross margins are Rs. 1089 crores as against Rs. 1054 crores in the previous year. Gross Margins

Rs. 1089 crores


2008: Rs. 1054 crores

HCL Infosystems Annual Report 2008-09 | 50

1 HCL 50-54.p65

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10/1/2009, 1:58 PM

FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED JUNE 30, 2009
Operating expenses a). Personnel Costs

Manpower

5753 5082 4323 3879

5921

Personnel costs increased from Rs. 301 crores in FY 2008 to Rs. 338 crores in FY 2009. The Company strengthened its technical and support employee base from 5753 to 5921 in the year and also increased the flexible manpower to cater to the increased services business and new initiatives. Employee costs as a percentage of sales increased from 2.4% to 2.7% in current year, consequent to a higher service revenue component.

FY 05

FY 06

FY 07

FY 08

FY 09

b).

Administration, Selling, Distribution and Other Expenses Administration, Selling & other operating expenses (including provisions) increased from Rs. 306 crores in FY 2008 to Rs. 345 crores in FY 2009. Costs as a % to sales are at 2.8% in FY 2009 as against 2.5% in FY 2008.

Operating Profit Operating profit for FY 2009 is Rs. 385 crores as against Rs. 428 crores in FY 2008. Other Income Other income in FY 2009 is Rs. 37 crores as against Rs. 48 crores in FY 2008, primarily due to lower average level of investments made from surplus funds. Exchange Fluctuation During FY 2009, rupee steeply declined from the opening levels of Rs. 43.1/ USD to a high of Rs. 52.1/ USD before ending the year at Rs. 47.9/ USD. Exchange difference on account of difference in rate on payments and collections made during the year and also on restatement of debtor and vendor balances as on June 30, 2009 total to Rs. (26) crores as against positive of Rs. 2 crores for the last financial year. Finance Costs Finance costs in FY 2009 are Rs. 45 crores, lower from Rs. 48 crores in FY 2008. Finance costs mainly represent interest on borrowings for working capital, and usance interest on acceptances. Profit Before Tax Profit Before Tax (PBT) Profit before tax for Parent Standalone in FY 2009 is Rs. 374 crores as against Rs. 434 crores in the previous year. Excluding exchange fluctuations, PBT for Parent Standalone is Rs. 400 crores as against Rs. 432 crores in the previous year. Loss in subsidiaries in FY 2009 is Rs. 23 crores as against loss of Rs. 4 crores in the previous year.
FY 09 FY 08 FY 07 FY 06 FY 05

351 430 429 385 296


Rs. crores

HCL Infosystems Annual Report 2008-09 | 51

FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED JUNE 30, 2009
Tax Expense The provision for current tax, deferred tax and fringe benefit tax for the year is Rs. 111 crores. The Company provided Fringe benefit Tax (FBT) during the nine months ended March 31, 2009. FBT has been discontinued from April09 vide Finance (No 2) Act, 2009. Accordingly, Company has not provided for FBT in the last quarter ended June 30, 2009. Effective Tax rate for the year is 31% as against 29% in the previous year. Profit After Tax Profit after Tax for FY 2009 is Rs. 240 crores as against Rs. 300 crores in FY 2008. Basic EPS for FY 2009 is Rs. 14.0.
FY 09 FY 08 FY 07 FY 06 FY 05 228 Rs. crores 280

Profit After Tax


240 300 316

Dividend The Board recommends a final dividend of Rs. 1.50 per share (75% per fully paid up equity share) to shareholders. This will be paid, subject to shareholder approval on October 23, 2009. The total dividend proposed and paid for FY 2009 (including interim dividend of Rs. 5.00 per share) is Rs. 6.50 per share (325% per fully paid up equity share), amounting to Rs. 130 crores including dividend distribution tax. Dividend Declared

Rs. 6.50 per share, Payout ratio 54%


2008: Rs. 8.00 per share, Pay out ratio: 53%

Dividend %
FY 09 FY 08 FY 07 FY 06 FY 05 310% 325% 400% 400% 400%

The dividend for the year is 54% of the net profits of the company.

Book Value - Rs. / share


FINANCIAL CONDITIONS Net Worth / Shareholders Fund Net Worth grew to Rs. 1122 crores as at June 30, 2009 from Rs. 1016 crores as at the close of the previous year. Paid up capital as at June 30, 2009 is Rs. 34.2 crores, comprising 17.1 crores equity shares of Rs. 2/- each Reserves & Surplus are Rs. 1088 crores at year-end after appropriating Rs. 130 crores for dividend and dividend distribution tax.
FY 08 FY 07 FY 06 FY 05 33 41 51 59 FY 09 66

HCL Infosystems Annual Report 2008-09 | 52

FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED JUNE 30, 2009
Borrowings During the year, the Company raised Rs. 80 crores by issue of 800 Redeemable, Non-Convertible Debentures (NCDs) of Rs. 10 lacs each to LIC of India on private placement basis. Fitch has assigned stable outlook rating for the NCD programme. These NCDs are listed on the National Stock Exchange of India Limited. The company also repaid borrowings to the extent of Rs. 208 crores during the year. Loan Funds, therefore, decreased to Rs. 227 crores as at June 30, 2009 from Rs. 355 crores as on June 30, 2008. The Debt/ (Debt + equity) ratio reduced to 17%. Fixed Assets Net block grew from Rs. 170 crores as at June 30, 2008 to Rs. 185 crores as at June 30, 2009. The capital expenditure during the year is mainly on Office premises, Infrastructure and Technology upgrades. Inventories Inventories as at June 30, 2009 are Rs. 889 crores as against Rs. 899 crores as on June 30, 2008. Inventory turnover on sales in financial year ended 2009 is 14 times, as in the previous year. Debtors Debtors as at June 30, 2009 are Rs. 1506 crores as against Rs. 1248 crores as at June 30, 2008. Debtors as number of days of sales in FY 2009 are at 44 days as against 37 days in the FY 2008. Increase in debtor levels is mainly due to change in revenue composition with higher System Integration business. Liquid Assets (Investments and Cash Bank) Investments in Mutual Funds and Term Deposits with Banks increased from Rs. 216 crores as at June 30, 2008 to Rs. 269 crores as at June 30, 2009. Cash in Hand & Balances with Bank in collection/ disbursement accounts are Rs. 201 crores as at June 30, 2009 as against Rs. 319 crores as at June 30, 2008. Other Current Assets Other current assets increased from Rs. 239 crores as at June 30, 2008 to Rs. 306 crores as at June 30, 2009. The increase is primarily in accrued revenue to be billed, and other recoverable. Current Liabilities & Provisions The Company had current liabilities and provisions of Rs. 2014 crores as at June 30, 2009 as against Rs. 1713 crores as at June 30, 2008. The increase is primarily in vendor liability and deferred revenue. Working Capital The Companys working capital base reduced from Rs. 992 crores as at June 30, 2008 to Rs. 898 crores as at June 30, 2009. The Company balanced inventory, receivables and vendor terms effectively resulting in lower working capital base. Current ratio as at the year end stands at 1.4.

Debt - Equity Ratio


FY 09 FY 08 FY 07 FY 06 FY 05 11% 13% 22% 17% 26%

Working Capital
FY 09 FY 08 FY 07 FY 06 FY 05 400 424 Rs. crores 685 898 992
FY 09 FY 08 FY 07 FY 06 FY 05

Current Ratio
1.4 1.6 1.4 1.3 1.5

HCL Infosystems Annual Report 2008-09 | 53

FINANCIAL COMMENTS ON CONSOLIDATED OPERATIONS FOR THE YEAR ENDED JUNE 30, 2009
Segment Performance The company has identified three primary segments namely Computer Systems and related products & services, Telecommunication & Office Automation and Internet & related services. Computer Systems and Related Products & Services The segment operations comprise of sale of Computer hardware, providing System Integration, Roll Out and Infrastructure Management solutions in different industry verticals and providing IT services including maintenance, facilities management etc. Segment revenue increased by 4% in FY 2009 to Rs. 3540 crores from Rs. 3389 crores in FY 2008.

Computer Systems - PBIT


FY 09 FY 08 FY 07 FY 06 FY 05 126 138 174 177 200

Computer Systems - Revenue


FY 09 FY 08 FY 07 FY 06 FY 05 2785 2381 1971 3540 3389

Rs. crores

Rs. crores

Segment PBIT in FY 2009 is Rs. 177 crores as against Rs. 200 crores in FY 2008. Excluding exchange fluctuations, PBIT as a % to sales is 5.7%, same as in the previous year. Capital employed in the segment as at June 30, 2009 is Rs. 876 crores as against Rs. 953 crores as at June 30, 2008. Telecommunication & Office Automation The segment operations comprise of distribution of telecommunication and other digital lifestyle products, office automation products and related comprehensive maintenance and allied services. Segment revenue in FY 2009 is Rs. 8874 crores as against Rs. 9020 crores in the previous year. Segment PBIT in FY2009 is Rs. 246 crores as against Rs. 285 crores in the previous year. PBIT as % to sales is 2.8% in

Telecom & OA - PBIT


FY 09 FY 08 FY 07 FY 06 FY 05 147 Rs. crores 246 285 267 244

Telecom & OA - Revenue


FY 09 FY 08 FY 07 FY 06 FY 05 5779 8874 9020 9049 9050

Rs. crores

FY 2009 as against 3.2% in FY 2008. Capital employed in the segment as at June 30, 2009 is Rs. 187 crores as against Rs. 178 crores as at June 30, 2008. Internet and Related Services The segment provides Virtual Private Network, Internet Access services and other connectivity services. Segment Revenue in FY 2009 is Rs. 46 crores and Profit before Interest, Depreciation and Tax is Rs. (14) crores. HCL Infosystems Annual Report 2008-09 | 54

DIRECTORS REPORT
To the Members, Your Directors have pleasure in presenting their Twenty Third Annual Report together with the Audited Accounts for the financial year ended 30th June, 2009. Financial Highlights (Rs. in Crores) Particulars Net Sales and other income Profit before Interest, Depreciation and Tax Finance Charges Depreciation Profit before Tax Provision for Taxation : Current Fringe Benefit Deferred Net Profit after Tax Profit available for appropriation Appropriations Debenture Redemption Reserve Interim Dividend Proposed Dividend Tax on Dividend (including Interim Dividend) Transfer to General Reserve Balance of Profit carried forward to next year Scheme of Amalgamation During the year under review, a Scheme of Amalgamation u/s 391/394 of the Companies Act 1956, (the Scheme) for amalgamation of Natural Technologies Private Limited (NTPL), the wholly owned subsidiary with the Company was approved by the Honble High Courts of Delhi and Rajasthan vide their respective orders dated August 11, 2008 and May 29, 2009, which came into effect from July 6, 2009 from the appointed date i.e. July 1, 2008. Accordingly, the results of Company on standalone basis for the year ended June 30, 2009 include the results of NTPL for the 12 months period from July 1, 2008 to June 30, 2009. Please also refer to Note 23(a) on Scheme of Amalgamation given in Notes to Accounts in this report. Raising of Funds Pursuant to the Board approval and subject to the approval of shareholders at the Extra-ordinary General Meeting scheduled to be held on September 23, 2009, the Company proposes to raise funds by: (a) Issuance of Convertible Warrants not exceeding Rs. 322 Crores including premium to Promoters of the Company. (b) Issuance in the form of Equity Shares or Equity linked securities including, but not limited to Foreign Currency Convertible Bonds, Optionally Convertible Debentures, Bonds with Share Warrants attached, Global Depositary Receipts, American Depositary Receipts or any other equity related instrument or a combination thereof in the domestic and/or international offerings and/or Qualified Institutions Placements for a value not exceeding Rs. 500 Crores including premium. The funds so raised shall be utilised for investing in expansion of existing business, development of infrastructure for future growth, meeting working capital requirements and for acquisitions. Performance The consolidated net revenue of the Company was Rs. 12289.54 crores as against Rs. 12294.56 crores in the previous year. The consolidated profit before tax was Rs. 351.31 crores as against Rs. 430.13 crores in the previous year. Your Directors are pleased to recommend final Dividend of Rs. 1.50 (75%) per share on the fully paid-up equity shares of Rs. 2/- each for the financial year ended on 30th June, 2009. During the first nine months, three interim (quarterly) dividends aggregating to Rs. 5/- (250%) per share were declared, taking the total dividend for the year 2008-09 to Rs. 6.50 (325%) per share of Rs. 2/-. HCL Infosystems Annual Report 2008-09 | 61 Consolidated Parent Company 2008-09 2007-08 2008-09 2007-08 12289.54 12294.56 12244.33 12256.52 417.22 496.35 435.79 498.39 44.66 21.25 351.31 122.17 1.55 (-)12.36 239.95 951.18 4.00 85.59 25.68 18.91 26.05 790.95 47.60 18.62 430.13 131.51 4.11 (-)5.63 300.15 903.72 102.61 34.23 23.26 30.47 713.14 44.66 17.27 373.86 122.77 1.45 (-)10.80 260.44 961.57 4.00 85.59 25.68 18.91 26.05 801.34 47.57 16.35 434.47 131.50 3.85 (-)5.63 304.75 893.38 102.61 34.23 23.26 30.47 702.81

DIRECTORS REPORT
Operations A review of operations of the businesses of your Company for the year ended June 30, 2009 is provided in the Management Discussion and Analysis Report forming part of the Annual Report. Awards & Recognition HCL bagged several awards and accolades. Your Company this year was honoured with the Gold Certification Merit Award for India Manufacturing Excellence 2008 from Frost and Sullivan. HCL Ranked Third among the Best Companies to Work For by Business Today Issue - Jan 25, 2009, HCL Infosystems ranked top 3 for the fourth consecutive year in the best employer study by IDC -DQ 2008. The year that went by witnessed numerous recognitions for your company; HCL won the prestigious Dun & Bradstreet Rolta Corporate Award 2008 for being leader in Computer Hardware & Peripherals category, HCL also won the Best Desktop PC Category award by Computer Active and was ranked No. 1 company in IT services, No. 3 in Desktops and No. 4 in servers as per DQ CSA 2009. The company won top market share award for the highest market share amongst the countries and also bagged Gold partner award for achieving sizable business revenue. Infocus recognized HCL as its strategic partner and HCL received Emerald Award for best all round performance over the year. HCL received the Platinum Certificate of Excellence award in August 2008 for HDFC Standard Life Insurance Co. Ltd. in appreciation of its contribution & efforts towards the continued success of HDFC SLI. HCL Manufacturing facility have been awarded GOLD AWARD in IT & Automation Hardware category by Frost & Sullivan in India Manufacturing Excellence Award (IMEA 2008) and Quality management system ISO 9001: 2000 is upgraded to ISO 9001: 2008 standards. This year your Companys Founder Chairman & CEO, Mr. Ajai Chowdhry was felicitated by Times Ascent Asia Pacific HR Congress with the CEO with HR orientation Award during the Global HR Excellence Awards 2008-09. He was also ranked third in the Power List of 75 Most Powerful Brand Builders of India and has been adjudged among India Incs Most Powerful CEOs by The Economic Times. Employee Stock Option Plan Employee Stock Option Scheme 2000 Pursuant to the approval of the shareholders at the Extra-Ordinary General Meeting held on February 25, 2000 for grant of options to the employees of the Company and its subsidiaries, the Board of Directors had approved the grant of 30,18,000 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. Employee Stock Based Compensation Plan 2005 The shareholders of the Company have approved the Employee Stock Based Compensation Plan 2005 through a Postal Ballot for grant of 33,35,487 options to the employees of the Company and its subsidiaries. The Board of Directors has granted 31,96,840 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 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. Credit Ratings The credit rating by ICRA continued at A1+ rating indicating highest safety to the Companys Commercial Paper program of Rs. 325 crores. The long term credit rating assigned by Fitch to the Company continued at AA-(ind) indicating stable outlook. Fitch also assigned stable rating AA-(ind) for Rs. 80 Crores of Non-Convertible Debenture programme issued during the year. Fixed Deposits As on June 30, 2009, no deposits were due for repayment. During the year, fixed deposits amounting to Rs.0.70 Lacs, including interest of Rs. 0.17 Lacs, have been repaid to the depositors. Deposits amounting to Rs. 0.60 Lacs, including interest of Rs. 0.12 Lacs, have been transferred to Investor Education and Protection Fund pursuant to the provisions of Section 205A of the Companies Act, 1956. Listing The shares of the Company are listed at The Bombay Stock Exchange Limited, Mumbai and National Stock Exchange of India Limited, Mumbai. During the year under review, the Company has issued Non-Convertible Debentures (NCDs) amounting to Rupees 80 Crores which are listed on National Stock Exchange of India Limited, Mumbai. Directors Mr. Nikhil Sinha has been appointed as Additional Director with effect from July 29, 2009. The Company has received a notice from a member of the Company, under section 257 of the Companies Act, 1956, proposing his appointment as Director of the Company, along with the requisite deposit. During the year, Mr. Narasimhan Jegadeesh resigned from the Directorship of the Company. The Board places on record its appreciation for the services rendered by him during his tenure with the Company. In accordance with the Articles of Association of the Company, Mr. Ajai Chowdhry, Mr. S. Bhattacharya and Ms. Anita Ramachandran, Directors retire by rotation and being eligible, offer themselves for re-appointment. HCL Infosystems Annual Report 2008-09 | 62

DIRECTORS REPORT
Corporate Governance Report and Management Discussion and Analysis Statement A report on Corporate Governance is attached to this Report along with the Management Discussion and Analysis statement. Directors Responsibility Statement Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, 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, if any; b. appropriate accounting policies have been selected and applied consistently, and that the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at June 30, 2009 and of the profit of the Company for the said period; c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. the annual accounts have been prepared on a going concern basis. Auditors & Auditors Report M/s Price Waterhouse, Chartered Accountants, who are the statutory auditors of the Company hold office, in accordance with the provisions of the Companies Act, 1956, upto the conclusion of the forthcoming Annual General Meeting and are eligible for re-appointment. The proposed re-appointment, if made will be in accordance with the limits prescribed under Section 224(1B) of the Companies Act, 1956. Personnel Industrial Relations during the period under review continued to be peaceful and harmonious. No man-day was lost due to any Industrial Dispute. HCL bagged best honors for its HR management. Your company was ranked among top three for the fourth consecutive year in the Best Employer Study 2008 conducted by IDC Dataquest and was also ranked among top three in the Best Companies to Work for Study 2008, conducted by BT, Mercer & TNS. The information as are required to be provided in terms of section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 have been set out in the annexure to the Directors report. However, in terms of the provisions of section 219(1)(b)(iv) of the said Act, the Annual Report is being sent to the members of the Company excluding the said information. Any member interested in obtaining the said information may write to the Company Secretary at the registered office of the Company. Additional information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The additional information required in accordance with sub-section (1)(e) of Section 217 of the Companies Act, 1956, read with the Company (Disclosure of Particulars in the Report of the Board of Directors) Rules,1988, is appended to and forms part of this report. Particulars of subsidiaries On the Scheme of Amalgamation for merger of Natural Technologies Private Limited (NTPL), the wholly owned subsidiary of the Company, becoming effective, NTPL has been dissolved without winding up. A wholly owned subsidiary in the name and style of HCL Infocom Limited was incorporated on December 17, 2008. HCL Infocom Limited holds 49% share capital in Scout Mobile Internet Services Limited, a joint venture with Nokia Corporation, Finland to engage in the business of sale of products and providing services meant for cellular phones in India under single brand of Nokia. The Company has obtained permission from Ministry of Corporate Affairs, Government of India vide its letter number 47/104/2009-CL-III, dated 13.04.2009 for not annexing the accounts of the wholly owned subsidiaries, namely HCL Infinet Limited, HCL Security Limited, NTPL and HCL Infocom Limited. The detailed annual accounts of the subsidiaries of the Company are available on any working day at the Registered Office of the Company to the shareholders of the Company requiring such information. Acknowledgement The Directors wish to place on record their appreciation for the continued co-operation the Company received from various departments of the Central and State Government, Bankers, Financial Institutions, Dealers and Suppliers and also acknowledge the contribution made by the Employees. The Board also wishes to place on record its gratitude to the valued Customers, Members and Investing Public for the continued support and confidence reposed in the Company. On behalf of the Board of Directors Sd/September 8, 2009 AJAI CHOWDHRY Chairman and Chief Executive Officer HCL Infosystems Annual Report 2008-09 | 63

ANNEXURE TO DIRECTORS REPORT


INFORMATION RELATING TO CONSERVATION OF ENERGY, R&D, TECHNOLOGY ABSORPTION AND INNOVATION, AND FOREIGN EXCHANGE EARNINGS/ OUTGO FORMING PART OF THE DIRECTORS REPORT IN TERMS OF SECTION 217(1)(e) OF THE COMPANIES ACT, 1956. A. Conservation of Energy Under HCL ecoSafe policy, energy conservation has been a key area of work to reduce power and minimise consumption in products & product manufacturing. HCL ecoSafe Policy clearly recognizes the importance of products that are energy efficient and helps customers cut costs of ownership and attain broader goals of protecting the environment. All our products have been incorporated with Green PC features and ACPI mode for power saving. All our manufacturing facilities practice various measures to reduce power consumption by using natural light during daytime, installing different capacity DG sets that consume optimum amount of diesel as per required load. 1. 2. 3. 4. 5. 6. 7. 8. Made S3 as the default sleep state in all the products shipped with Microsoft Windows OS, so that the product automatically enters into standby state after specified amount of system in activity. Compliance for MPR-II certification for CRT monitors. Compliance for TCO03 certification for LCD monitors. Organization has gone for Energy star 4.0 certification for all it ES series of desktops and all laptop products are released with Energy Star 4.0 certification. Initiated actions for moving to SMPS with active or passive power factor correction as option. Actions implemented for using 80plus high efficiency SMPS as option in desktop products. New desktop & laptop products released with support to system management technologies for effective power management and off hour remote maintenance. Display devices shipments shifted from cathode ray tube (CRT) monitors to flat panel displays significantly leading to less material use per unit. Flat panel display typically uses 40 to 50% less (by weight) materials when compared to conventional CRT screen and requires approximately 60% less energy in use. The new HCL products are being replaced by mercury-free light-emitting diode (LED) displays instead of conventional CCFL-backlit displays which are more power efficient and have long life than conventional CCFL. This thereby reduces the emission of radiations affecting the health of the customer.

9.

10. Optimal Power management settings are configured in all products. 11. Low power consuming notebooks which uses Atom CPU (just 2.5W) were released. 12. Working towards launching CULV (Consumer ULV) category Product with lower power consumption Chipset & CPU. 13. In MiLeap Series netbook, Mechanical HDD is replaced by SSD which conserves power. 14. Desktop product with Green Power Hard Disks from Western Digital released which consumes less power of 8W whereas normal HDD consumes 15W. 15. HCL 4 in 1 PC & HCL 6 in 1 PC: normally 1 PC consumes 150W per user, but using this multi user X box a single user (Xbox) consumes only 1W. 16. Desktop product with specially designed mother board with DES (Dynamic Energy Saver) technology released which are 20% efficient than normal mother board based products. 17. The new generation Intel Core 2 Duo CPU in HCL products has hafnium metal in its silicon chip giving more energy efficiency. 18. Sourcing cabinets in SKD form and assembling in house, allowed us to increase the number of units per pallet, which translated into less energy required to ship each cabinet. 19. Periodic energy audit for optimum utilization of power consumption in plants. 20. Use of pull cord switch for lights for individual control. 21. We are in the process of converting the HCL manufacturing plant lighting with CFL. As of now 80% of the plant lighting uses CFL. HCL Infosystems Annual Report 2008-09 | 64

ANNEXURE TO DIRECTORS REPORT


22. Nearly 100 nos. of 250 watts MV lamp fittings were replaced with 125 Watts MV lamp fittings by increasing the height from the roof to increases illumination and reduce power consumption. 23. We now practice switching off power consuming equipment when not required including UPS resulting in saving of 110,000 units per annum. 24. Rain water harvesting facility at HCL plants with a capacity of 3,000 kilo litres. 25. Daily monitoring of power consumption at HCL plants to detect abnormal consumption. 26. Daily monitoring of water consumption at HCL plants to detect abnormal consumption. 27. Regular maintenance of office and manufacturing equipments on a monthly basis to ensure that it does not consume higher power than normal. B. Research & Development: 1. Product Innovation and Engineering: During the year under review, your company has laid special emphasis on innovative solutions specially suitable for the Indian Market. HCL developed Operation Support System (OSS) which allow telecom service providers to manage and monitor their entire network in the area of performance, fault, configuration, security and accountability from a single desktop. Developed as per international standard TMF specification, HCL OSS supports a sophisticated event correlation engine for better fault alarm correlation as more that a Hundred Thousand events flow into OSS system every hour. It also provides, various kinds of network performance reports for both IP and Non IP telecom devices, element availability status reports & has intelligent and standard user authentication systems. HCL OSS has its own notification engine to notify any action to end user or Service providers in timely manner. The notification is being provided by email and SMS. It provides 2D topology Network Monitoring System for graphical system monitoring. It supports multiple database, has in-built software redundancy for full time online support. HCL has released Automatic Ticket Vending machine which utilizes contact less smart card for transactions. HCL also released the Management Console, a customized Linux based terminal to issue / top up the value of smart cards which are being used by passengers as a transaction card with the Automatic Ticket Vending Machine. HCL R&D also developed Thin client models to address the requirement of local Indian Languages in the e-Governance projects. HCL also introduced new version of HDMS (HCL Desktop Management Software ) based on CIM. The new HDMS uses minimum system resources to boost efficiency. Also more features were added to HDMS like simultaneous remote Bios update of multiple client machines, AMC 5.0 ( Active Management Console ) - an improved version of AMC 3.0 which enabled management of the Client machines in out of band state not only on an intranet but also via the internet. Apart from this HCL also developed an application for Telecom Networks for Monitoring & managing IP and Non IP telecom devices by providing five major Operations (fault, performance, configuration, security & accountability). HCL delivered efficient & competitive product on network management system for managing & Monitoring IP & MPLS based network. HCL has undertaken the design and development of Hand Held terminal for Banking, Public Distribution System, NREGA etc. The Handheld terminals will have Biometric authentication, Smart Card interface (both contact and contactless), Thermal or Impact printer support, Voice guided transaction processing, Local language support apart from host of other application features. HCL has developed HCL Kiosk Content Management Application Tool. It enables users to develop information contents by themselves. It also has provision to use a hardware lock in the kiosk to avoid piracy of software. HCL developed multifunction kiosk for Total Banking, which authenticates with the ATM switch for its transactions. It includes utility payment, Cheque deposit, statement printing, Passbook printing, information about account details, Cheque book request, stop payment etc. HCL has also developed a cost effective Cheque depository solution which provides an easy way to deposit cheques /DD with an acknowledgement receipt. This solution is exclusively developed based on the RBI guidelines of self service cheque depository solutions. HCL Infosystems Annual Report 2008-09 | 65

ANNEXURE TO DIRECTORS REPORT


2. Benefits derived as a result of R & D: On the Thin client product range, HCL released quite a few models customized for specific customer requirements and retained No 1 position in this segment. HCL Infosystems has once again reinstated its leadership status in technology & quality by winning the VARIndia Best Thin Client Technology Provider Award for the consecutive Fourth year at the VARIndia Star Nite Awards 2008. The acknowledgement comes in the wake of the growing need for Thin Client due to the various benefits viz. better TCO & ROI along with the cost advantage and the robust security it brings to the organizations vital data. HCL research provides a competitive edge to our system integration practice in Telecom. As Globally there are very few companies that offer Operation Support System (OSS), HCL scores above the rest in terms of delivery time, customized features etc. As the OSS is web based application, the end-user has an added advantage to work at any location at any time. HCL Multifunction KIOSK enables Banks to serve their customers 24x7 in a better and secure way for all their banking needs. This particular banking application is just like as a non-cash ATM, where people can use this kiosk for their banking related transactions and queries in an efficient & user friendly manner. HCL Cheque depository solution helps the banking segments to serve their customers more efficiently. The solution comes with special features like acknowledgement receipt for cheque deposits in the kiosk. The solution also offers an option to provide an image of the cheque along with Cheque details in the acknowledgement receipt. Its a low cost solution to fulfill the requirement of Cheque depository system under RBI guidelines. It can also be used for utility payments through cheques. 3. Expenditure on R & D: Capital Revenue Total C. Technology Absorption, Adaptation and Innovation Working closely with its global partners on various initiatives HCL has closely tied up with its global partners to rollout & deploy global technologies for the Indian customers. In line with this HCL is gearing up to deliver Microsoft Windows 7 certified products for upcoming Windows 7 operating system. HCL also upgraded ISMS management software powered by Microsoft System Center Essentials released from 2.0 to 3.1. This year HCL was among first in India to partner with Intel and launch HCL Mileap MH04, netbook series based on the Diamondville platform from Intel. This year HCL took various initiatives to develop and adapt technology that enabled development and up-gradation of different products and solutions. This year your company launched high-end desktop with next generation LGA 1366 socketed Intel Core i7 which uses Intels latest Nehalem micro architecture. HCL also launched series of products in its desktop range. These include the Infiniti series SL 1280/ SL 1265/SL 1245/ are energy efficient and specially designed to consume very less desk space. In the server business HCL kept the momentum going on its product range to cater to Small & Medium Businesses. HCL upgraded the popular HCL Datacenter in a Box (DCIB) with shared LUN enabling clustering capability, DCIB now also includes Dual SCM, enhancing the redundancy features. HCL also upgraded HCL IGL & HCL NM servers with PCI-express based SAS solution. HCL also revamped most of the HCL IGL/NM series servers with indigenous developed firmware which improves acoustical noise of the servers, giving a much quieter server environment. Under display product range, new 18.5" TFT monitor series was launched with TCO03 certification, which became a cost effective main stream product. This year, HCL Operation Support System (OSS) developed its own CORBA architecture and 3GPP library which are being used in all domains for data processing and data communication. HCL OSS introduces new and latest technology in multiple database usage i.e. Hibernate. This is new form of Database access for better performance as well as DB independent system. Since the technology is introduced by HCL OSS, other HCL products can also be adapted to this system. This year, HCL OSS also introduce new system i.e. inter system/software redundancy. HCL OSS achieves the task using latest JAVA technology. This feature helps HCL OSS to run online 24 X 7 with any stoppage for any reason. D. Foreign exchange earnings and outgo During the period under review, the Companys earnings in foreign currency were Rs. 95.45 Crores (Previous Year Rs 97.79 Crores). The expenditure in foreign currency including imports during the year amounted to Rs. 2219.91 Crores (Previous year Rs. 2139.67 Crores). HCL Infosystems Annual Report 2008-09 | 66 Rs./Crores) 0.01 4.63 4.64

INFORMATION REGARDING EMPLOYEE STOCK OPTION SCHEME


The details of the options granted under the HCL Infosystems Limited, Employee Stock Option Scheme 2000 (Scheme 2000) and Employee Stock Based Compensation Plan 2005 (Scheme 2005) as on 30th June, 2009 are given below:Employee Stock Option Scheme 2000 Options Granted Pricing Formula : 30,18,000 which confer a right to get 1 equity share of Rs.10/- each (each equity share of the face value of Rs. 10/- has been sub divided into five equity shares of Rs. 2/- each). : The members of the Company at the Extra Ordinary General Meeting held on February 25, 2000 approved the exercise price as the price which will be not less than 85% of the fair market value of the shares on the date on which the Board of Directors of the Company approved the Grant of such options to the employees or such price as the Board of Directors may determine in accordance with the regulations and guidelines prescribed by the Securities and Exchange Board of India (SEBI). The members of the Company at the Annual General Meeting held on October 21, 2004, approved the amendment to the pricing formula that the options granted but not yet exercised by the employees or options that would be granted in future, would be at the market price on the date of grant. For this purpose the market price as specified in the amended provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the regulations / guidelines prescribed by SEBI or any relevant authority, from time to time to the extent applicable. : The pricing formula has been amended that the options granted but not yet exercised by the employees or options that would be granted in future, would be at the market price on the date of grant. For this purpose, the market price means the market price as specified in the amended provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the regulations/ guidelines prescribed by SEBI or any relevant authority, from time to time to the extent applicable. Date of Grant 10/08/2000 28/01/2004 25/08/2004 18/01/2005 15/02/2005 15/03/2005 15/04/2005 14/05/2005 15/06/2005 15/07/2005 13/08/2005 15/09/2005 15/03/2007 23/01/2008 Grant Price (Rs.) 289.00 538.15 603.95 809.85 809.30 834.40 789.85 770.15 756.15 978.75 1144.00 1271.25 648.75 898.25 Options Vested till 30/06/2009 Fully Fully Fully Fully Fully Fully Fully Fully Fully Fully Fully Fully vested vested vested vested vested vested vested vested vested vested vested vested 90600 24093 Options Exercised till 30/06/2009 1363708 836039 57512 39977 2400 3794 960 970 3565 1318 6700 Options Lapsed/ Forfeited during Y. E. 30/06/2009 5830 11176 8139 13227 4098 1760 1536 7360 4480 3000 15375 Options in force as on 30/06/2009 214163 50933 172082 1600 26072 5784 8270 675 10442 17630 9140 82100 22316

Variance of terms of option

Options Details :

The vesting schedule is as follows:30%-12 months after the grant date 30%- 24 months after the grant date 40%- 42 months after the grant date Employee Stock Based Compensation Plan 2005 Options Granted Pricing Formula : 31,96,840 which confer a right to get 5 equity shares of Rs.2/- each. : As per the resolution passed by members of the Company, through postal ballot, the result whereof was declared on June 13, 2005, the options are granted at the market price on the date of grant or such price as the Board of Directors may determine in accordance with the Regulations and Guidelines prescribed by SEBI or other relevant authority from time to time. For this purpose, the market price as specified in the amended provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the regulations / guidelines prescribed by SEBI or any relevant authority from time to time to the extent applicable. : No variation made. HCL Infosystems Annual Report 2008-09 | 67

Variance of terms of options

INFORMATION REGARDING EMPLOYEE STOCK OPTION SCHEME


Options Details : Date of Grant 13/08/2005 19/10/2005 15/11/2005 15/12/2005 14/01/2006 15/02/2006 16/03/2006 17/04/2006 15/05/2006 15/06/2006 17/07/2006 15/03/2007 23/01/2008 Grant Price (Rs.) 1144.00 1157.50 1267.75 1348.25 1300.00 1308.00 1031.00 868.75 842.50 620.50 673.75 648.75 898.25 Options Vested till 30/06/2009 1494204 38734 14224 14840 18694 4190 21316 10400 15770 14744 15802 165860 43410 Options Exercised till 30/06/2009 9074 430 80 6420 Options Lapsed/ Forfeited during Y. E. 30/06/2009 225004 14170 4250 6450 6740 824 14640 3920 3630 6530 5680 14860 45060 Options in force as on 30/06/2009 1197061 28368 10170 8790 10866 3030 14740 4140 9420 10710 8812 155220 42630

The vesting schedule is as follows:20%-12 months after the grant date 20%- 24 months after the grant date 20%- 36 months after the grant date 20%- 48 months after the grant date 20%- 60 months after the grant date Other Details Scheme 2000 Total number of shares arising as a result of exercise of options : Money realized by exercise of options : Employee-wise details of options granted to i) Senior Management : Name Mr. T.S. Purushothaman (ceased to be Whole- time Director w.e.f. 20th July 2005) Mr. J.V. Ramamurthy Mr. Sandeep Kanwar Mr. Rajendra Kumar Mr. Hari Baskaran Mr. George Paul Mr. Rajeev Asija Mr. Suman Ghose Hazra ii) Employees holding 5% or more of the total number of options granted during the year : Identified employees who were granted options during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant : No. of Name options Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. J.V. Ramamurthy Sandeep Kanwar Rajendra Kumar Hari Baskaran George Paul Rajeev Asija Suman Ghose Hazra Sushil Kumar Jain No. of options 7,500 7,500 7,500 7,500 7,500 7,500 7,500 2,500 115,84,715 equity shares of Rs.2/- each. Rs.92,60,81,373.05 Scheme 2005 80,021 equity shares of Rs.2/- each. Rs.1,48,66,574.80

40,000 45,500 42,000 41,000 31,000 30,000 30,000 18,500 NIL

NIL

iii)

NIL

NIL

HCL Infosystems Annual Report 2008-09 | 68

INFORMATION REGARDING EMPLOYEE STOCK OPTION SCHEME


Weighted average exercise price of options granted (Rs.) : Weighted average fair value of options granted (Rs.) : 443.48 124.64 1067.66 144.43

The fair value of each stock option granted under Employee Stock Option Plan 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: Employee Stock Option Scheme 2000 Volatility : Risk free rate : Exercise Price : Time to Maturity (years) : Dividend Yield : Life of options : Fair Value of options as at the grant date : Notes: 1. 2. 3. 4. Volatility: Based on historical volatility in the share price movement of the Company. Risk Free Rate: Being the interest rate applicable for maturity equal to the expected life of options based on yield curve for Government Securities. Time to Maturity: Vesting period and volatility of the underlying equity shares have been considered for estimation. Dividend Yield: Based on historical dividend payouts. The Company has used intrinsic value method for calculating the employee compensation cost with respect to the Stock Option The impact on the profit of the Company for the year ended June 30, 2009 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: 2009 Rs./Crores Profit/(Loss) after tax as per Profit and Loss Account (a) Add: Employee Stock Compensation Expense as per Intrinsic Value Method Less: Employee Stock Compensation Expense as per Fair Value Method (Net of amount attributable to employees of subsidiaries Rs.0.16 Crores) Profit/(Loss) after tax recomputed for recognition of employee stock compensation expense under fair value method (b) Earning Per Share based on earnings as per (a) above: (Refer note 20) - Basic - Diluted Earning Per Share had fair value method been employed for accounting of employee stock options: - Basic - Diluted 260.44 4.62 2008 Rs./Crores 304.75 8.07 45% to 68% 4.57% to 7.99% Rs. 538.15 to Rs. 1271.25 2.20 to 5.50 9% to 28% 8.5 Years Rs. 35.10 to Rs. 203.14 Employee Stock Based Compensation Plan 2005 47% to 62% 6.49% to 7.98% Rs. 620.50 to Rs. 1348.25 2.50 to 7.00 10% to 28% 10 Years Rs. 24.75 to Rs. 292.97

Where the Company has calculated the employee compensation cost using the intrinsic value of Stock Options, the difference between the employee compensation cost that shall have been recognised if it had used the fair value of Option The impact of this difference on profit and on EPS of the Company

255.82

296.68

15.21 15.21

17.88 17.64

14.94 14.94

17.41 17.18

HCL Infosystems Annual Report 2008-09 | 69

INFORMATION REGARDING EMPLOYEE STOCK OPTION SCHEME

Auditors Certificate
We have examined the books and records of the HCL Infosystems Limited Employee Stock Option Scheme 2000 and Employee Stock based Compensation Plan 2005 (The Scheme) as produced before us and based on such books and records and according to the information and explanations given to us, we hereby certify that HCL Infosystems Limited (The Company) has implemented The Scheme in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999 and in conformity with the resolutions passed by the shareholders in the ExtraOrdinary General Meeting of The Company held on February 25, 2000 and through postal ballot, the results whereof declared on June 13, 2005.

Place: New Delhi Date: September 8, 2009

V. Nijhawan Partner Membership No: F -87228 For and on behalf of Price Waterhouse Chartered Accountants

HCL Infosystems Annual Report 2008-09 | 70

REPORT ON CORPORATE GOVERNANCE


1. COMPANYS PHILOSOPHY ON CORPORATE GOVERNANCE : The Company firmly believes that good corporate governance practices ensure efficient conduct of the affairs of the Company while upholding the core values of transparency, integrity, honesty and accountability and help the Company in its goal to maximize value for all its stakeholders. The Company adopts and adheres to the best recognized corporate governance practices and continuously strives to better them. The Company is in compliance with the requirement of the guidelines on corporate governance stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges. 2. BOARD OF DIRECTORS : (i) The Board of Directors of the Company comprises of Ten Directors with an Executive Chairman. Of the Ten Directors, Eight are Non-executive Directors and Five are Independent Directors. The composition of the Board is in conformity with Clause 49 of the Listing Agreement entered into with the Stock Exchanges.

(ii) None of the Directors on the Board is a member of more than 10 Committees or Chairman of more than 5 Committees as specified in Clause 49 across all the Companies in which he is a Director. Necessary disclosures regarding Committee position in other public companies as at June 30, 2009 have been made by the Directors. (iii) The names and categories of the Directors on the Board, their attendance at Board Meetings held during the year and the number of Directorships and Committee Chairmanship / Memberships held by them in other companies is given below. Other Directorships do not include alternate directorships, directorships of private limited companies, companies incorporated outside India and companies incorporated under section 25 of the Companies Act, 1956. Chairmanship/ Membership of Board Committees include only Audit and Shareholders / Investors Grievance Committees.
Names Category No of Board Meetings during 2008-09 Held Attended 6 6 Whether attended last AGM held on October 24, 2008 Yes No. of Directorships In other public companies No. of Committee positions held In other public companies Chairman Member 2

Chairman 4

Member 1

Mr. Ajai Chowdhry (Chairman & CEO)

Promoter & Executive Director

Mr. J. V. Ramamurthy Executive (Whole Time Director Director & COO) Mr. R. P. Khosla Independent & Non-Executive Director Independent & Non-Executive Director Promoter & Non-Executive Director Non-Independent & Non-Executive Director Independent & Non-Executive Director Independent & Non-Executive Director Independent & Non-Executive Director

Yes

No

Mr. S. Bhattacharya

Yes

Mr. D. S. Puri

No

Mr. E. A. Kshirsagar

Yes

Ms. Anita Ramachandran Mr. T.S. Purushothaman Mr. V.N. Koura

No

Yes

No

Mr. Narasimhan Jegadeesh *

Independent & Non-Executive Director Mr. Nikhil Sinha ** NonIndependent & Non-Executive Director

No

N.A.

N.A.

HCL Infosystems Annual Report 2008-09 | 71

REPORT ON CORPORATE GOVERNANCE


* Mr. Narasimhan Jegadeesh resigned from the post of Directorship w.e.f 7th January, 2009. ** Mr. Nikhil Sinha was appointed as Additional Director of the Company w.e.f. 29th July, 2009. (iv) Six Board Meetings were held during the year and the gap between two meetings did not exceed four months. The dates on which the Board Meetings were held are as follows: 2nd September 2008, 23rd October 2008, 27th November 2008, 27th January 2009, 23rd April 2009 and 10th June 2009. (v) None of the Non-executive Directors has any material pecuniary relationship or transactions with the Company.

(vi) Necessary information as mentioned in Annexure 1A to Clause 49 of the listing agreement has been placed before the Board for their consideration. Some of the items discussed at the Board meetings are listed below: 3. Annual operating plans, budgets and all updates. Capital budgets and all updates. Quarterly Results for the Company and its operating divisions or business segments. Minutes of meetings of audit committee and other committee of Board. Minutes of Meetings of Board of Directors of Subsidiary Companies. Show Cause, Demand, Prosecution notices and penalty notices if any, which are materially important. Foreign exchange exposures and steps taken by management to limit the risks of adverse exchange rate movement, if material. Review of operations of subsidiary companies. Scheme of Amalgamation of the subsidiary with the Company. Review of related party transactions including transactions under section 297 of the Companies Act, 1956. Review of operations. Review of statutory compliances. Noting risk management procedures. Non-compliance of any regulatory, statutory nature or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer etc. Approval of payment of enhanced remuneration to Whole Time Directors. Noting of contribution for charitable purposes. Acquisition of properties. Investment in subsidiary companies and periodic updates. Approve of issuance of Non-convertible Debentures. Approval of investment in Joint Venture Company. Discussion on Economic Conditions & Business Outlook. Discussion on review of Business Operations.

ACCOUNTS AND AUDIT COMMITTEE : (i) The Accounts and Audit Committee of the Company was constituted in August, 1998 in line with the provisions of Clause 49 of the Listing Agreements with the Stock Exchanges read with Section 292A of the Companies Act, 1956.

(ii) The primary objective of the Committee is to monitor and effectively supervise the Companys financial reporting process with a view to provide accurate, timely and proper disclosures and ensure the integrity and quality of financial reporting and internal controls. (iii) The composition, powers, roles and the terms of reference of the Committee are in terms of the requirement of Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement. All the committee members have reasonable knowledge of finance and accounting and two members possess financial and accounting expertise. (iv) The Composition of the Accounts and Audit Committee and details of meetings attended by its members are given below: Name Mr. R. P. Khosla (Chairman)* Mr. S. Bhattacharya (Member)* Ms. Anita Ramachandran (Member)** Mr. E. A. Kshirsagar (Member) Mr. Ajai Chowdhry (Ex- Officio) Category Independent, Non-executive Independent, Non-executive Independent, Non-executive Non-independent, Non-executive Non-independent, Executive No of meetings Held Attended 6 6 6 6 6 6 6 4 6 6

* Mr. R.P. Khosla ceased to be Chairman w.e.f 23rd October, 2009. He was again appointed as Chairman of the HCL Infosystems Annual Report 2008-09 | 72

REPORT ON CORPORATE GOVERNANCE


Committee w.e.f. 27th January, 2009. Mr. S. Bhattacharya acted as Chairman from 23rd October, 2008 to 26th January, 2009. ** Ms. Anita Ramachandran was appointed as Member of the Committee w.e.f. 27th January, 2009. (v) The Audit Committee met 6 times during the financial year 2008-09 on the following dates: 1st September 2008, 23rd October 2008, 27th January 2009, 25th February 2009, 23rd April 2009 and 10th June 2009.

(vi) The previous Annual General Meeting of the Company was held on 24th October, 2008 and it was attended by the Chairman of the Committee. (vii) The Company Secretary of the Company acts as Secretary to the Committee. 4. EMPLOYEES COMPENSATION AND EMPLOYEES SATISFACTION COMMITTEE : (i) The Employees Compensation & Employees Satisfaction Committee was constituted in August 1998 to recommend/ review remuneration of Executive Directors and other employees based on their performance and defined assessment criteria and other matters relating to employees.

(ii) The composition of the Employees Compensation & Employees Satisfaction Committee and the details of meetings attended by its members are given below: Name Ms. Anita Ramachandran (Chairperson) Mr. Ajai Chowdhry (Member) Mr. S. Bhattacharya (Member) Mr. R. P. Khosla (Member) Category Independent, Non-executive Non-independent, Executive Independent, Non-executive Independent, Non-executive No of meetings Held 5 5 5 5 Attended 5 5 5 5

(iii) The Committee met 5 times during the financial year 2008-09 on the following dates: 1st September 2008, 23rd October 2008, 27th January 2009, 23rd April 2009 and 10th June, 2009. (iv) Compensation policy for Non-executive Directors (NEDs): Within the ceiling of 1% of the net profits of the Company computed under the applicable provisions of the Companies Act, 1956 and after obtaining the approval of the shareholders, the Non-executive Directors (other than Promoter Director) are paid a commission, the amount whereof is determined by the Board. The basis of determining the specific amount of commission payable to these directors is related to their attendance at meetings and contribution at meetings as perceived by the Chairman. These Directors are also paid sitting fees at the rate of Rs. 20,000 for attending each meeting of the Board. (v) Details of remuneration paid / payable to all the Directors for the period from 1/7/2008 to 30/6/2009: (Rs. / Lacs) Name Mr. Ajai Chowdhry Mr. J.V. Ramamurthy* Mr. R.P. Khosla Mr. Subroto Bhattacharya Mr. D.S. Puri Mr. E.A. Kshirsagar Ms. Anita Ramachandran Mr. T.S. Purushothaman* Mr. Narasimhan Jegadeesh Mr. V.N. Koura Salary & Allowances 120.66 50.20 Perquisites 24.22 6.04 Performance Linked Bonus 190.00 60.00 Commission 4.99 6.26 3.75 7.69 2.85 1.99 Sitting Fees 1.20 1.20 1.00 1.00 0.80 0.80

During the year Mr. Ajai Chowdhry and Mr. J.V. Ramamurthy were paid Performance Linked Bonus of Rs.180 lacs and Rs.50 lacs respectively pertaining to the year 2007-08. The above remuneration excludes reimbursement of expenses on actual to Directors for attending meetings of the Board / Committees. * Mr. T.S. Purushothaman and Mr. J.V. Ramamurthy were granted 40000 and 45500 options respectively under Employee Stock Option Plan 2000. Mr. J.V. Ramamurthy has also been granted 7500 options under Employee Stock Based Compensation Plan 2005.

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REPORT ON CORPORATE GOVERNANCE


(vi) Period of contract of Executive Director (a) Mr. Ajai Chowdhry, Chairman & C.E.O: - 5 Years from April 1, 2009. The contract may be terminated by either party giving the other party three months notice or the Company paying three months salary in lieu thereof. There is no separate provision for payment of Severance Fees.

(b) Mr. J.V. Ramamurthy, Whole Time Director: - 5 Years from August 11, 2005 The contract may be terminated by either party giving the other party three months notice or the Company paying three months salary in lieu thereof. There is no separate provision for payment of Severance Fees.

(vii) There were no other pecuniary relationships or transactions of the Non-executive Directors of the Company. (viii) Details of Shares of the Company held by the Non-executive Directors as on June 30, 2009 are as below: S.I. No. 1. 2. Name of the Director Mr. T.S. Purushothaman Mr. D.S. Puri No. of Shares 5455 44731

The Company has not issued any convertible instruments. 5. SHAREHOLDERS/ INVESTORS GRIEVANCE COMMITTEE : (i) The Board has constituted Shareholders / Investors Grievance Committee to oversee and review all matters connected with the transfer of Shares of the Company and redressal of Shareholders /Investors complaints.

(ii) The composition of the Shareholders / Investors Grievance Committee and the details of meeting attended by its members are given below: Name Mr. R. P. Khosla (Chairman) Mr. E.A. Kshirsagar (Member) Mr. S. Bhattacharya (Member) Mr. Ajai Chowdhry (Ex- Officio) Category Independent, Non-executive Non-independent, Non-executive Independent, Non-executive Non-independent, Executive No of meetings Held 4 4 4 4 Attended 4 4 4 4

(iii) The Committee met 4 times during the financial year 2008-09 on the following dates: 1st September 2008, 23rd October 2008, 27th January 2009 and 23rd April 2009. (iv) Name, designation and address of: Compliance Officer : Mr. Sushil Kumar Jain Company Secretary HCL Infosystems Limited E- 4,5,6, Sector 11, Noida Tel: 0120-4203107 Fax: 0120-2525196 (v) During the year the Company received 14 complaints from SEBI/ stock exchanges / MCA. All complaints were redressed to the satisfaction of the shareholder. No complaints were pending either at beginning or at the end of the year. There were no shares pending for transfer as on 30th June, 2009.

6.

CODE OF BUSINESS CONDUCT AND ETHICS FOR DIRECTORS AND SENIOR MANAGEMENT : The Company has adopted a comprehensive Code of Conduct for its Directors and Senior Management, which lays the standard of business conduct, ethics and governance. The Code has been circulated to all the members of the Board and Senior Management and they have affirmed compliance of the same. The declaration signed by the Chairman & CEO is given below: I hereby confirm that: The Company has obtained from all the members of the Board and Senior Management affirmation that they have complied with the Code of Conduct for Directors and Senior Management in respect of the financial year 2008-09. Sd/Ajai Chowdhry Chairman & CEO HCL Infosystems Annual Report 2008-09 | 74

REPORT ON CORPORATE GOVERNANCE


7. UNLISTED SUBSIDIARY COMPANIES : The Company has four unlisted wholly owned subsidiaries as on 30th June 2009 namely HCL Infinet Limited, incorporated on 15th September, 1975, Natural Technologies Private Limited (NTPL) incorporated on 28th July 1995, HCL Security Limited (HSL) incorporated on 19th March, 2008 and HCL Infocom Limited (HIL), incorporated on 17th December, 2008. Mr. S. Bhattacharya, the Independent Director and Mr. Ajai Chowdhry and Mr. J.V. Ramamurthy, the Whole-time Directors of the Company are also Directors of HCL Infinet Limited. Mr. Ajai Chowdhry and Mr. J.V. Ramamurthy, the Whole-time Directors of the Company are also Directors of NTPL, HSL and HIL. The Minutes of the Board Meetings of the subsidiary companies are regularly placed before the Board. 8. GENERAL BODY MEETINGS : (i) The last three Annual General Meetings were held as under:
Financial Year 2007-08 2006-07 2005-06 Date 24/10/2008 23/10/2007 19/10/2006 Time 10.00 A.M 10.00 A.M 10.00 A.M Location FICCI Auditorium, 1, Tansen Marg, New Delhi-110001 FICCI Auditorium, 1, Tansen Marg, New Delhi-110001 FICCI Auditorium, 1, Tansen Marg, New Delhi-110001

(ii) During the year none of the resolutions have been passed through postal ballot. (iii) Special Resolutions passed at last three AGMs: (a) At the AGM held on 24rd October 2008, no special resolution was passed.

(b) At the AGM held on 23rd October 2007, no special resolution was passed. (c) At the AGM held on 19th October 2006, special resolutions were passed for: Alteration in Articles of Association with regard to increase in Authorised Capital. To maintain register of members, the index of members and copies of annual returns at the office of Companys Registrar and Share Transfer Agents, i.e. M/s Intime Spectrum Registry Limited (RTA) or any other RTA who may be appointed in their place.

9.

DISCLOSURES : (i) There are no materially significant related party transactions of the Company, which have potential conflict with the interests of the company at large.

(ii) The Company has complied with the requirements of the Stock Exchanges / SEBI / any Statutory Authority on all matters related to capital markets during the last three years. There are no penalties or strictures imposed on the Company by Stock Exchanges or SEBI or any statutory authorities relating to the above. (iii) A qualified Practicing Company Secretary carried out a secretarial audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The secretarial audit report confirms that the issued / paid-up capital is in agreement with the total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL. (iv) The Company has fulfilled the following non-mandatory requirements as prescribed in Annexure 1D to Clause 49 of the Listing Agreement with the Stock Exchanges: (a) The Company has set up an Employees Compensation & Employees Satisfaction Committee. Please see para 4 for further details.

(b) The statutory financial statements of the Company are unqualified. 10. MEANS OF COMMUNICATION : (i) Quarterly/Half Yearly/Annual Results: The Quarterly, Half Yearly and Annual Results of the Company are sent to the stock Exchanges immediately after they are approved by the Board.

(ii) News Releases: The Quarterly, Half Yearly and Annual Results of the Company are published in the prescribed proforma within 48 hours of the conclusion of the meeting of the Board in which they are considered, at least in one English newspaper circulating in the whole or substantially the whole of India and in one Vernacular newspaper of the State where the Registered Office of the Company is situated. HCL Infosystems Annual Report 2008-09 | 75

REPORT ON CORPORATE GOVERNANCE


The quarterly financial results during the financial year 2008-09 were published as detailed below: Quarter (FY 2008-09) 1 2 3 Date of Board Meeting 23 October, 2008 27th January, 2009 23rd April, 2009
rd

Date of Publication 24 October, 2008 28th January, 2009 24th April, 2009
th

Name of the Newspaper Business Standard & Veer Arjun Business Standard & Veer Arjun Business Standard & Veer Arjun

(iii) Website: The Companys website www.hclinfosystems.in contains a separate section Investors where latest shareholders information is available. The Quarterly, Half Yearly and Annual Results are regularly posted on the website. Press releases made by the Company from time to time and the presentation made to the institutional investors and analysts are displayed on the Companys website. (iv) Corporate Filing and Dissemination System (CFDS) Filing: As per the requirements of Clause 52 of the Listing Agreement, all the data relating to quarterly financial results, shareholding pattern etc. have been electronically filed on the Corporate Filing and Dissemination System (CFDS) portal, www.corpfiling.co.in within the time frame prescribed in this regard. (v) Annual Report: Annual Report containing, inter alia, Audited Annual Accounts, Consolidated Financial Statements, Directors Report, Auditors Report and other important information is circulated to members and others entitled thereto. The Management Discussion and Analysis (MDA) Report forms part of the Annual Report. The Annual Report is also available on the Companys website.

(vi) Chairmans Communique: The Highlights of the quarterly financial results along with a message from the Chairman are sent to each shareholder. Printed copy of the Chairmans Speech is distributed to all the shareholders at the Annual General Meetings. (vii) Reminders to Investors: Reminders for unpaid/unclaimed dividend are sent to the Shareholders as per records. 11. GENERAL SHAREHOLDERS INFORMATION : (i) Annual General Meeting: Date : Friday, October 23, 2009 Time : 10.00 A.M. Venue : FICCI Auditorium, 1, Tansen Marg, New Delhi-110 001. (ii) Financial Calendar (Tentative Calendar for the financial year 2009-10): Adoption Adoption Adoption Adoption of of of of Results Results Results Results for for for for the the the the quarter quarter quarter quarter ending ending ending ending September 30, 2009 December 31, 2009 March 31, 2010 June 30, 2010 : : : : October 22, 2009 January 28, 2010 April 29, 2010 September 01, 2010

(iii) Date of Book Closure (iv) Dividend payment date (v) Listing on Stock Exchanges

: November 3 to November 4, 2009 (both days inclusive) : The Final Dividend if declared shall be paid on or before November 21, 2009. : National Stock Exchange of India Limited Bombay Stock Exchange Limited : HCL-INSYS : Physical Form 179 : Electronic Form 500179

(vi) Stock Codes/ Symbol: National Stock Exchange of India Limited The Bombay Stock Exchange Limited

HCL Infosystems Annual Report 2008-09 | 76

REPORT ON CORPORATE GOVERNANCE


(vii) Market price data: Month Companys Share Price High (Rs.) 142.20 128.00 120.40 109.80 92.05 96.00 92.75 89.40 83.05 107.00 134.80 133.90 Low (Rs.) 119.00 112.20 88.00 77.00 63.25 65.15 70.00 71.00 65.25 75.70 89.60 107.50
140 130 120
HCL Infosystems Share Price in Rs.

Historical Stock Chart


5000 4500
S&P CNX NIFTY INDEX in points

July, 2008 August, 2008 September, 2008 October, 2008 November, 2008 December, 2008 January, 2009 February, 2009 March, 2009 April, 2009 May, 2009 June, 2009

4000 3500 3000 2500 2000 1500


1-Jul-08 12-Aug-08 25-Sep-08 11-Nov-08 11-Feb-09 30-Mar-09 19-May-09 29-Dec-08 30-Jun-09

110 100 90 80 70 60

1000

HCL INSYS SHARE PRICE

S&P CNX NIFTY

(source : The National Stock Exchange of India Ltd.) (viii) Registrar and Transfer Agents (RTA): Name & Address : M/s. Alankit Assignments Limited Alankit House, 2E/21, Jhanewalan Extension, New Delhi 110 055 Contact Person : Mr. Mahesh Jairath, Senior Vice President Phone No. : 91-11-23541234; Fax No. : 91-11-42541967 E-Mail : rta@alankit.com (ix) Share Transfer System: Transfer of dematerialized shares is done through the depositories with no involvement of the Company. As regards transfer of shares held in physical form, the transfer documents can be lodged with Alankit Assignments Limited, the RTA of the Company, at their address mentioned above. Transfer of shares in physical form are normally processed within 10-15 days from the date of receipt, if the documents are complete in all respects. (x) Shareholders Referencer: The shareholders referencer is available on the Companys website. Any shareholder who wishes to obtain copy of the same can send his request to the Company Secretary. (xi) Distribution of Shareholding as on June 30, 2009: Shareholders No. of Equity Shares Upto 500 501-1000 1001-2000 2001-3000 3001-4000 4001-5000 5001-10000 10000 and above Total Number 29055 2672 1384 489 158 114 202 189 34263 % 84.80 7.80 4.04 1.43 0.46 0.33 0.59 0.55 100.00 Total Shares Number 3770435 2121983 2026750 1226933 563468 530326 1454660 159517476 171212031 % 2.20 1.24 1.18 0.72 0.33 0.31 0.85 93.17 100.00

HCL Infosystems Annual Report 2008-09 | 77

REPORT ON CORPORATE GOVERNANCE


(xii) Shareholding pattern as on June 30, 2009: Category Promoters / Promoters Group Mutual Funds / UTI Financial Institutions / Banks Foreign Institutional Investors Bodies Corporate Indian Public NRI / OCBs TOTAL (xiii) Dematerialisation of shares: The shares of the Company are compulsorily traded in dematerialised form and are available for trading on both the depositories in India i.e. NSDL & CDSL. As on June 30, 2009, 97.92% equity shares of the Company are held in dematerialised form. The Companys shares are regularly traded on the NSE and the BSE in electronic form. Under the Depository system, the International Securities Identification Number (ISIN) allotted to the Companys shares is INE 236A01020. (xiv) The Company has not issued any GDRs/ADRs/Warrants or Convertible instruments. (xv) Plant locations: R.S. Nos: 34/4 to 34/7 and part of 34/1, Sedarapet, Puducherry - 605 111. R.S. Nos: 107/5, 6 & 7, Main Road, Sederapet Puducherry - 605 111. Plot No. 78, South Phase, Ambattur Industrial Estate, Chennai - 600 058. Plot No. SPL. A2, Thattanchavadi, Industrial Area, Puducherry - 605 009. Plot Nos. 1, 2, 27 & 28, Sector 5, SIDCUL, Rudrapur, Distt. Udham Singh Nagar, Uttarakhand - 263 145. F - 214, G - 215, EPIP, Sitapura Industrial Area, Jaipur, Rajasthan 302021. No. of shares 93,357,957 6,701,303 3,557,996 53,403,410 953,847 12,780,487 457,031 171,212,031 Percentage (%) 54.53 3.91 2.08 31.19 0.56 7.46 0.27 100.00

(xvi) Address for Correspondence: The shareholders may address their communication/ suggestions/ grievances/ queries to the Registrar and Share Transfer Agents at the address mentioned above, or to: The Company Secretary HCL Infosystems Limited E 4, 5, 6, Sector XI, NOIDA (U.P.) 201 301. Tel. No.: 0120-4203107, Fax: 0120-2525196 Email: cosec@hcl.in (xvii)Shareholders Database: In order to enable the Company to include the contact details of the shareholders in the shareholders database maintained by the Company, the Members are requested to provide their phone number and e-mail address along with their Folio No./DP ID and Client ID No. This will facilitate quick communication by the Company/RTA to its shareholders. The details may be addressed to the Company at its Corporate Office at E-4,5,6, Sector XI, Noida (U.P) or by mailing it to cosec@hcl.in. This can also be sent by SMS. For sending SMS, please type SHDB,Client ID-DP ID, eMail ID and send it to +919911115555 eg. SHDB,IN300513-15289788,rajeevgupta@yahoo.com in case the shares are held in electronic form. For shares held in physical form, please type SHDB, Folio No., eMail ID and send it to +919911115555 eg. SHDB,R000551,rajeevgupta@yahoo.com. (xviii) Company Website: The Company has its website namely www.hclinfosystems.in. This provides detailed information about the Company, its products and services offered, locations of its corporate office and various sales offices etc. It also contains updated information of the financial performance of the Company and procedures involved in completing various investors related transactions expeditiously. The quarterly results, annual reports and shareholding distributions etc. are updated on the website of the company from time to time. HCL Infosystems Annual Report 2008-09 | 78

REPORT ON CORPORATE GOVERNANCE


Auditors Certificate regarding compliance of conditions of Corporate Governance
To the Members of HCL Infosystems Limited We have examined the compliance of conditions of Corporate Governance by HCL Infosystems Limited, for the year ended June 30, 2009, as stipulated in Clause 49 of the Listing Agreements of the said Company with stock exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the Companys management. Our examination was carried out in accordance with the Guidance Note on Certification of Corporate Governance (as stipulated in Clause 49 of the Listing Agreement), issued by the Institute of Chartered Accountants of India and was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements. We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. V. Nijhawan Partner Membership No: F -87228 For and on behalf of Price Waterhouse Chartered Accountants

Place: New Delhi Date: September 8, 2009

HCL Infosystems Annual Report 2008-09 | 79

AUDITORS REPORT
To The Members of HCL Infosystems Limited 1. Wehave audited the attached Balance Sheet of HCL Infosystems Limited, as at June 30, 2009, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of The Companies Act, 1956 of India (the Act) and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: (a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

2.

3.

4.

(b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act; (e) On the basis of written representations received from the directors, as on June 30, 2009 and taken on record by the Board of Directors, none of the directors is disqualified as on June 30, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Balance Sheet, of the state of affairs of the company as at June 30, 2009;

(f)

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Place: New Delhi Date: September 8, 2009

V.Nijhawan Partner Membership Number F - 87228 For and on behalf of Price Waterhouse Chartered Accountants

HCL Infosystems Annual Report 2008-09 | 80

ANNEXURE TO AUDITORS REPORT


[Referred to in paragraph 3 of the Auditors Report of even date to the members of HCL Infosystems Limited on the financial statements for the year ended June 30, 2009] 1. (a) The company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed. (c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the company during the year. 2. (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. (c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material. 3. 4. The company has not taken or granted any loans, secured or unsecured, from / to companies, firms or other parties covered in the register maintained under Section 301 of the Act. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items purchased are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations, there is an adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

5.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. 6. In our opinion and according to the information and explanations given to us, the company has complied with the provisions of Sections 58A and 58AA or any other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public. According to the information and explanations given to us, no Order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal on the company in respect of the aforesaid deposits. In our opinion, the company has an internal audit system commensurate with its size and nature of its business. We have broadly reviewed the books of account maintained by the company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete. (a) According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company is generally regular in depositing the undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the appropriate authorities.

7. 8.

9.

(b) According to the information and explanations given to us and the records of the company examined by us, there are no dues of wealth tax, service tax and custom duty and cess as at June 30, 2009 which have not been deposited on account of dispute except for sales tax, income tax and excise duty as mentioned below :

HCL Infosystems Annual Report 2008-09 | 81

ANNEXURE TO AUDITORS REPORT


Name of the statute (Nature of Dues) Amount (Rs./ Crores) Amount deposited under protest (Rs./ Crores) 3.50 Period to which the amount relates 1998 to 2008 Forum where the dispute is pending

U.P. Trade Tax Act, 1948 (Sales Tax including Penalty)

13.07

Joint Commissioner (Appeals) of Commercial Tax/ Commercial Tax Tribunal/ High Court/Additional Commissioner (Appeals) of Commercial Tax Joint Commissioner (Appeals) of Commercial Tax Additional Commissioner of Sales Tax/ Deputy Commissioner (Appeals) of Sales Tax Deputy Commissioner (Appeals) of Sales Tax Tribunal Commercial Tax/ Commercial Tax Officer/ Assistant Appellate Commissioner/ Commercial Tax Officer Joint Commissionner (Appeals) of Sales Tax Superintendent, Sales Tax Deputy Commissioner (Appeals) of Commercial Tax Deputy Commissioner of Commercial Tax Deputy Commissioner (Appeals) of Sales Tax Deputy Commissioner (Appeals) of Sales Tax Additional Commissioner of Sales Tax Assessing Officer Commissioner Appeals Deputy Commissioner Appeals

U.P. Value Added Tax Act, 2008 (Commercial Tax including Penalty) Delhi Sales Tax Act, 1975

0.14 1.02

0.13 0.03

2008 to 2009 1999 to 2005

Delhi Value Added Tax Act, 2004 (Trade Tax) Tamil Nadu General Sales Tax Act, 1959 (Sales Tax)

0.17 0.68

0.14

2005-2006 1998 to 2005

West Bengal Sales Tax Act, 1994 (Sales Tax) Assam General Sales Tax, 1993 (Sales Tax) Rajasthan Sales Tax Act, 1994 (Sales Tax) Rajasthan Value Added Tax Act, 2003 (Commercial Tax) Kerala General Sales Tax Act, 1963 (Sales Tax) Maharashtra Sales Tax Act, 1969 (Sales Tax) Himachal Pradesh Value Added Tax Act, 2005 (Sales Tax including Penalty) Karnataka Value Added Tax Act, 2003 (Sales Tax) Andhra Pradesh Value Added Tax Act, 2005 (Sales Tax) Punjab General Sales Tax Act, 1948 (Sales Tax including Penalty) Punjab Value Added Tax Act, 2005 (Sales Tax including Penalty) Jammu and Kashmir Value Added tax Act, 2005 (Sales Tax including Penalty) Uttarakhand Value Added Tax Act, 2005 (Sales Tax including Penalty) Sub Total (a)

0.02 0.05 0.06 0.17 0.39 0.01 0.08

0.01 0.01 0.15 0.01 0.08

2000 to 2006 2001 to 2004 1998 to 2004 2006 to 2008 2000 to 2002 2003-2004 2006-2007

0.47 0.91 0.06

2006-2007 2006 to 2008 2004-2005

0.44

0.11

2007-2008

Deputy Commissioner Appeals

2.75

0.08

2007 to 2009

Deputy Commissioner Appeals

0.70

1.00

2007 to 2009

Joint Commissioner of Commercial Tax

21.19

5.25

HCL Infosystems Annual Report 2008-09 | 82

ANNEXURE TO AUDITORS REPORT


Name of the statute (Nature of Dues) Amount (Rs./ Crores) Amount deposited under protest (Rs./ Crores) 0.85 Period to which the amount relates 1980 to 2008 Forum where the dispute is pending

Central Excise Act, 1944 (Excise Duty, Interest including Penalty) Sub Total (b) Income Tax Act, 1961 (Income Tax) Sub Total (c) Total (a)+(b)+(c)

10.86

CESTAT/ Commissioner (Appeals)

10.86 2.94 2.94 34.99

0.85 0.16 0.16 6.26 1989 to 2007 Commissioner Appeals/ High Court

For detailed listing refer Note 26 on Schedule 21. 10. The company has no accumulated losses as at June 30, 2009 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year. 11. According to the records of the company examined by us and the information and explanation given to us, the company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date. 12. The company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/societies are not applicable to the company. 14. In our opinion, the company is not a dealer or trader in shares, securities, debentures and other investments. 15. In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the company. 16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained. 17. On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment. 18. The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. 19. The company has created security or charge in respect of debentures issued and outstanding at the year-end. 20. The company has not raised any money by public issues during the year. 21. During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the company, noticed or reported during the year, nor have we been informed of such case by the management.

Place: New Delhi Date: September 8, 2009

V.Nijhawan Partner Membership Number F - 87228 For and on behalf of Price Waterhouse Chartered Accountants

HCL Infosystems Annual Report 2008-09 | 83

BALANCE SHEET AS AT JUNE 30, 2009


As at 30.06.2009 Rs./Crores As at 30.06.2008 Rs./Crores

Schedule (Note No.) Sources of Funds: Shareholders Funds : Capital Reserves and Surplus Loan Funds: Secured Loans Unsecured Loans Deferred Tax Liabilities (Net) Application of Funds: Fixed Assets: Gross Block Less: Depreciation Net Block Capital Work-In-Progress (Including Capital Advances) Investments Deferred Tax Assets (Net) Current Assets, Loans and Advances: Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loans and Advances Less: Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets 5 234.10 83.47 150.63 9.50

1 2 3 4 21(5)

34.24 1098.12 101.85 125.00 1359.21

34.23 972.03 352.66 6.85 1365.77

216.68 78.11 138.57 13.89 160.13 152.46 215.02 898.37 1241.46 317.36 92.26 139.94 2689.39 276.10 4.08

6 21(5) 7 8 9 10 11 12 1882.97 81.89 1964.86 888.26 1498.26 202.99 102.35 191.90 2883.76

1620.25 70.85 1691.10 918.90 1359.21 998.29 1365.77

Significant Accounting Policies Notes to Accounts

20 21

This is the Balance Sheet referred to in our report of even date

The schedules referred to above form an integral part of the Balance Sheet For and on behalf of the Board of Directors

V.NIJHAWAN Partner Membership Number F-87228 For and on behalf of Price Waterhouse Chartered Accountants Place : New Delhi Dated : September 08, 2009

AJAI CHOWDHRY Chairman and Chief Executive Officer

J.V. RAMAMURTHY SANDEEP KANWAR Chief Operating Officer Chief Financial Officer

SUSHIL KUMAR JAIN Company Secretary

HCL Infosystems Annual Report 2008-09 | 84

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2009
Year ended 30.06.2009 Rs./Crores 12336.81 126.08 12366.77 158.00 Year ended 30.06.2008 Rs./Crores

Schedule (Note No.) Income Business Income Less : Excise Duty Other Income Expenditure Cost of Goods and Services Sold Personnel Administration, Selling, Distribution and Others Repairs Finance Charges Depreciation and Amortisation Less : Transfer from Revaluation Reserve Profit before Tax Tax expense - Current [ Wealth tax Rs.0.02 Crores (2008 - Rs.0.02 Crores)] - Fringe Benefit - Deferred 21 (5) 122.77 1.45 (10.80) 13 14 15 16 17 18 19 5

12210.73 33.60 12244.33 11128.50 325.98 344.73 9.33 44.66

12208.77 47.75 12256.52 11166.95 292.96 286.72 11.50 47.57

17.31 0.04

17.27 11870.47 373.86

16.40 0.05

16.35 11822.05 434.47

113.42 260.44 702.81 0.55 (2.23) 961.57 4.00 25.68 4.36 85.59 14.55 26.05 801.34 961.57 15.21 15.21

131.50 3.85 (5.63)

129.72 304.75 589.03 (0.40) 893.38 34.23 5.82 102.61 17.44 30.47 702.81 893.38 17.88 17.64

Profit after Tax Add: Balance in Profit and Loss Account brought forward Adjustments due to scheme of arrangement - as on April 1, 2007 and for the period April 1, 2007 to June 30, 2007 (Loss- Rs. 0.01 Crores) 21 [23(b)] - as on July 1, 2008 Adjustments as per scheme of arrangement 21 [23(a)] Profit available for appropriation Less: Appropriations: Debenture Redemption Reserve 3 Proposed Dividend Corporate Dividend Tax on Proposed Dividend Interim Dividend [including Rs. 0.00 Crores (2008-Rs.0.20 Crores) paid for previous year ] Corporate Dividend Tax on Interim Dividend Transfer to General Reserve Balance Carried over Earning per equity share (in Rs.) Basic (of Rs.2/- each) Diluted (of Rs.2/- each) Significant Accounting Policies Notes to Accounts

21 (20) 21 (20) 20 21

This is the Profit and Loss Account referred to in our report of even date

The schedules referred to above form an integral part of the Profit and Loss Account For and on behalf of the Board of Directors

V. NIJHAWAN Partner Membership Number F-87228 For and on behalf of Price Waterhouse Chartered Accountants Place : New Delhi Dated : September 08, 2009

AJAI CHOWDHRY Chairman and Chief Executive Officer

J.V. RAMAMURTHY SANDEEP KANWAR Chief Operating Officer Chief Financial Officer

SUSHIL KUMAR JAIN Company Secretary

HCL Infosystems Annual Report 2008-09 | 85

CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2009
Year ended 2009 Rs./Crores 1. Cash flow from operating activities Net profit before tax Adjustments for: Depreciation Interest Expense Interest Income Dividend Income Loss on Sale of Fixed Assets Fixed Assets Written Off (Profit)/Loss on sale of Investments Provision for Doubtful Debts and Bad Debts written off Provision Doubtful Loans and Advances Provision for Other Current Assets Provisions/Liability no longer required written back Provision for Gratuity and other Employee Benefits Provision for diminution in the value of Investments Unrealised foreign exchange (gain) /loss Provision for warranty liability Operating profit before working capital changes Adjustments for changes in working capital : - (Increase)/Decrease in Sundry Debtors (285.17) (244.49) (68.59) (106.65) 235.49 373.86 434.47 Year ended 2008 Rs./Crores

17.27 44.66 (7.15) (4.38) 0.30 0.12 (0.93) 27.10 5.49 0.38 (15.59) 5.14 0.04 7.75 12.90 93.10 466.96

16.35 47.57 (7.81) (14.02) 0.00 (1.75) 1.23 (15.17) 4.41 0.21 8.54 13.28 52.84 487.31

- (Increase)/Decrease in Other Current Assets, Loans and Advances (69.96) - (Increase)/Decrease in Inventories 10.11 - Increase/(Decrease) in Current Liabilities and Provisions 251.52 Cash generated from operations - Taxes (Paid) / Received (Net of Tax Deducted at Source) Net cash from operating activities 2. Cash flow from Investing activities: Adjustments for changes in : Purchase of fixed assets Capital Work in Progress Proceeds from Sale of fixed assets Proceeds from Sale of Investments Purchase of investments Interest Received Dividend Received Purchase of Investment in Subsidiary Net cash from / (used in) investing activities (B) (24.07) 5.81 1.52 1,980.11 (2,034.38) 7.34 4.38 (14.33) (A)

(93.50) 373.46 (105.91) 267.55

(184.24) 303.07 (150.40) 152.67

(37.26) 7.46 2.45 3,611.32 (3,553.34) 7.86 14.02 (8.46) (73.62) 44.05

HCL Infosystems Annual Report 2008-09 | 86

CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2009
Year Ended 2009 Rs./Crores 3. Cash Flow from Financing Activities Share Capital issued Share Premium Received (Net) Secured Loans - Short term received/(paid) - Long term received - Long term paid Unsecured Loans - Short term received/(paid) - Long term received - Long term paid Interest Paid Dividend Paid Dividend Tax Paid Net cash from / (used in) financing activities 0.01 0.26 (1.52) 103.59 (1.74) (147.47) (81.45) (40.85) (119.55) (20.36) (C) (309.08) (115.15) 317.36 0.78 202.99 0.40 16.12 (6.02) (6.00) 183.00 67.94 123.06 (46.40) (136.12) (23.20) (73.34) 123.38 193.94 0.04 317.36 Year Ended 2008 Rs./Crores

Net Increase/(Decrease) in Cash and Cash Equivalents (A+B+C) Opening Balance of Cash and Cash Equivalents Cash and Cash Equivalents Acquired of erstwhile NTPL as on June 30, 2008 (Refer Note 3 below) Cash and Cash Equivalents Acquired of erstwhile Stelmac as on June 30, 2007 Closing Balance of Cash and Cash Equivalents [Includes exchange rate fluctuation of Rs. 1.04 Crores (2008-Rs. 0.14 Crores)] Cash and cash equivalents comprise Cash,Cheques and Drafts (in hand) Balance with Scheduled Banks in Current Accounts Balance with Scheduled Banks in Deposits Accounts Balance with Non-Scheduled Banks in Current Accounts

202.99 52.04 138.94 4.00 8.01

317.36 100.26 216.61 0.02 0.47

Notes :1. The above Cash Flow Statement has been prepared under the indirect method set out in Accounting Standard-3, notified u/s 211(3C) of Companies Act, 1956. 2. Cash and cash equivalents include the following balances with scheduled banks which are not available for use by the company: Year ended Year ended 2009 2008 Rs./Crores Rs./Crores Deposit Accounts 3.35 Unclaimed Dividend 3.22 2.94 Margin Money for Bank Guarantee 0.32 0.43 3. Assets / (Liabilities) of erstwhile Natural Technologies Private Limited (NTPL) amalgamated under the scheme of Amalgamation have not been considered as cash flows, rather their net impact has been taken as Cash and Cash Equivalents of erstwhile Natural Technologies Private Limited (NTPL) as on June 30, 2008 (Refer note 23 of schedule 21). 4. Schedule 1 to 21 form integral part of Cash Flow Statement 5. Figures in brackets indicate cash outgo.
This is the Cash Flow Statement referred to in our report of even date V.NIJHAWAN Partner Membership Number F-87228 For and on behalf of Price Waterhouse Chartered Accountants Place : New Delhi Dated : September 08, 2009 For and on behalf of the Board of Directors AJAI CHOWDHRY Chairman and Chief Executive Officer J.V. RAMAMURTHY Chief Operating Officer SANDEEP KANWAR Chief Financial Officer

SUSHIL KUMAR JAIN Company Secretary

HCL Infosystems Annual Report 2008-09 | 87

SCHEDULES TO THE BALANCE SHEET AS AT JUNE 30, 2009


As at 30.06.2009 Rs./Crores 1- Capital [Schedule-21, Note 18 and 24] Authorised: 55,00,00,000 (2008 - 55,00,00,000) Equity Shares of Rs. 2/- each 5,00,000 (2008 - 5,00,000) Preference Shares of Rs. 100/- each Issued, Subscribed and Paid up: 17,12,12,031 (2008 - 17,11,49,656) Equity shares of Rs.2/- each, fully paid up. Add : Shares Forfeited [Represents Rs.1000 (2008 - Rs.1000)] Notes:1. Paid up share capital includes : a) 5,04,47,295 (2008 - 5,04,47,295) Equity Shares of Rs.2/- each issued pursuant to contract without payment being received in cash. b) 5,31,82,765 (2008 - 5,31,82,765) Equity Shares of Rs.2/- each Bonus shares issued from Securities Premium Account. c) 1,15,84,715 (2008 - 1,15,22,340) Equity Shares of Rs.2/- each issued pursuant to the exercise of options granted under Employee Stock Option Scheme 2000. d) 80,021 (2008 - 80,021) Equity Shares of Rs.2/- each issued pursuant to the exercise of options granted under Employee Stock Based Compensation Plan 2005. 2 Of the above subscribed shares, 7,58,79,734 (2008 - 7,46,51,388) Equity Shares of Rs.2/- each are held by HCL Corporation Limited. 2- Reserves and Surplus [Schedule-21, Notes 18 and 23] As at 01.07.2008 Rs./Crores 0.00 (0.00) 124.91 (108.79) 141.11 (110.64) 3.20 (2.92) (-) 702.81 (589.03) 972.03 (811.38) Notes:1 Addition to the Securities Premium Account is in respect of allotment of equity shares of Rs.2 each to employees of the company and its subsidiaries under the Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005 is Rs. 0.36 Crores (2008 Rs. 22.66 Crores) . 2 Deduction from the Securities Premium Account is in respect of the amount paid towards Fringe benefit tax on exercise of options granted under Employee Stock Option Scheme 2000 and Employee Stock Based Compensation plan 2005. 3 Previous years figures are given in brackets. HCL Infosystems Annual Report 2008-09 | 88 Additions/ Adjustments Rs./Crores (-) 0.80 (22.66) 26.05 (30.47) 2.54 (17.03) 4.00 (-) 100.76 (113.78) 134.15 (183.94) Deductions/ Adjustments Rs./Crores (-) 0.09 (6.54) (-) 5.74 (16.75) (-) 2.23 (-) 8.06 (23.29) As at 30.06.2009 Rs./Crores 0.00 (0.00) 125.62 (124.91) 167.16 (141.11) (3.20) 4.00 (-) 801.34 (702.81) 1098.12 (972.03) As at 30.06.2008 Rs./Crores

110.00 5.00 115.00

110.00 5.00 115.00

34.24 0.00 34.24

34.23 0.00 34.23

Capital Reserve [Represents Rs. 37,135 (2008 -Rs.37,135)] Securities Premium Account General Reserve Revaluation Reserve (Adj.) Debenture Redemption Reserve Profit and Loss Account

SCHEDULES TO THE BALANCE SHEET AS AT JUNE 30, 2009


As at 30.06.2009 Rs./Crores 3- Secured Loans Long Term Debentures Loans from Others: -Long Term Loan 80.00 21.85 101.85 As at 30.06.2008 Rs./Crores

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 12.75% per annum payable annually on private placement basis to Life Insurance Corporation of India on December 19, 2008. These Debentures are redeemable at par at the end of 5th year from the date of allotment, with a call option excercisable by the issuer, only at the end of 3 years from the date of allotment. Debentures are secured by way of first mortgage and charge on identified immovable and movable assets of the company. 2) Term loan from others is secured by way of first charge on IT and Telcommunication assets. Payable within one year Rs.4.82 crores (2008-Rs. Nil Crores).

4- Unsecured Loans Public Deposits Short Term Loans From Banks - Commercial Paper - Foreign Currency Loan Other Loans - Commercial Paper - Others 105.00 125.00 1) Amount payable within one year is Rs. 125.00 Crores (2008 - Rs. 352.66 Crores) 145.00 81.44 352.66 20.00 20.00 106.21 0.01

HCL Infosystems Annual Report 2008-09 | 89

SCHEDULES TO THE BALANCE SHEET AS AT JUNE 30, 2009


5- Fixed Assets [Schedule-21, Notes 1, 2, 19(b) and 23]
Gross Block As at Additions/ during the year Tangible : Land - Leasehold Land - Freehold Buildings Plant & Machinery and Air Conditioners Furniture, Fixtures and Office Equipment Vehicles Intangible : Software TOTAL Previous Year Capital Work in Progress [Including capital advances of Rs.0.86 Crores (2008 - Rs.3.84 Crores)] 2.92 216.68 162.31 0.67 32.27 58.93 0.35 14.85 4.56 3.24 234.10 216.68 1.21 78.11 63.83 0.84 18.27 16.40 0.09 12.91 2.12 1.96 83.47 78.11 9.50 160.13 13.89 152.46 1.28 150.63 1.71 138.57 1.48 0.19 0.20 1.47 0.89 0.25 0.18 0.96 0.51 0.59 59.64 13.80 8.66 64.78 38.06 9.20 7.19 40.07 24.71 21.58 7.97 25.61 75.15 43.91 4.98 0.06 8.04 4.53 0.03 5.61 12.95 25.67 83.16 42.83 0.58 13.44 23.93 0.19 1.98 5.81 0.01 5.44 0.77 15.41 24.30 12.18 25.67 67.75 18.53 7.39 25.61 61.71 19.98 Deductions/ Adjustments/ Retired during the year As at 30.06.2009 As at 01.07.2008 Adjustments Depreciation Additions/ Deductions/ As at As at

Rs./Crores
Net Block As at

01.07.2008 Adjustments Adjustments/ 30.06.2009 30.06.2009 30.06.2008 during Retired during the year the year

Notes :1. Land-Freehold and Building at Ambattur amounting to Rs.0.57 Crores (2008 - Rs.0.57 Crores) are pending registration in the name of the company. 2. For current year, additions to gross block and depreciation include Rs.5.05 Crores and Rs.0.96 Crores respectively on account of transfer of fixed assets of the amalgamating company as on July 1, 2008 (Refer Note 23 on Schedule 21). During the year capital work in progress of Rs.0.80 Crores as on July 01, 2008 relating to Natural Technologies Private Limited was capitalised. 3. Software comprise of cost of acquiring licences and implementation charges.

6- Investments [Schedule-21, Notes 15, 23 and 25] As at 30.06.2009 Units Unquoted (Trade) : Long Term in Subsidiary Company HCL Security Limited-Equity Shares Natural Technologies Private LimitedEquity Shares HCL Infinet Limited-Equity Shares (Formerly known as Microcomp Limited) HCL Infocom Limited 4,050,000 2,701,810 330,000 50,000 484,856 1,701,810 10 10 100 10 4.05 11.68 0.33 16.06 Unquoted Others : Current Dividend Options HSBC Ultra Short Term Bond Fund Institutional Plus HSBC Liquid Plus 17,901,873 10,438,484 10 10 18.00 10.47 0.05 8.41 1.68 10.14 As at 30.06.2008 Units Face Value Rs. As at 30.06.2009 Rs./Crores As at 30.06.2008 Rs./Crores

HCL Infosystems Annual Report 2008-09 | 90

SCHEDULES TO THE BALANCE SHEET | AS AT JUNE 30, 2009


As at 30.06.2009 Units IDFC Floating Rate Fund - Long Term Plan ICICI Prudential Flexible Income Plan Kotak Flexi Debt- Quarterly Dividend Kotak Flexi Debt- Daily Dividend Principal Cash Management Fund Reliance Liquid Plus Reliance Money Manager Fund Institutional Option- Weekly Dividend Tata Floater Fund UTI Liquid Cash Plan HDFC Cash Management Fund IDFC Money Manager Fund Institutional Plus 17,986,279 25,691,455 19,762,322 14,948,452 38,790,521 200,214 179,924 26,444,252 33,970,011 23,984,230 As at 30.06.2008 Units 29,051,418 40,575,673 24,946,136 20,034,216 320,890 19,630,564 167,269 7,995,757 Face Value Rs. 10 10 10 10 10 1,000 10 10 1,000 10 10 As at 30.06.2009 Rs./Crores 18.02 27.08 20.13 15.02 39.00 20.06 18.02 26.66 34.03 24.02 260.04 As at 30.06.2008 Rs./Crores 29.14 42.80 25.37 20.04 32.15 19.79 17.11 8.01 204.88

276.10

215.02

Note :- Net asset value of Unquoted (Others) Current Investments in Mutual Funds as on June 30, 2009 is Rs. 260.07 Crores (2008 - Rs. 204.95 Crores)

As at 30.06.2009 Rs./Crores 7- Inventories [Schedule-21, Notes 8(c)] Raw materials and Components [Including in Transit Rs. 13.15 Crores (2008 -Rs. 36.81 Crores)] Stores and Spares Finished Goods [Including in Transit Rs.149.30 Crores (2008-Rs. 118.23 Crores)] Work-In-Progress 89.25 66.64 731.21 1.16 888.26

As at 30.06.2008 Rs./Crores

119.67 64.23 712.79 1.68 898.37

HCL Infosystems Annual Report 2008-09 | 91

SCHEDULES TO THE BALANCE SHEET AS AT JUNE 30, 2009


As at 30.06.2009 Rs./Crores 8- Sundry Debtors - Unsecured Debts outstanding for a period exceeding six months : - Considered Good - Considered Doubtful Other debts - Considered Good Less : Provision for Doubtful Debts 529.54 19.95 549.49 968.72 1518.21 19.95 364.27 1.74 366.01 877.19 1243.20 1.74 As at 30.06.2008 Rs./Crores

1498.26

1241.46

1498.26 9- Cash and Bank Balances [Schedule -21, Note 23] Cash balance on hand Cheques in Hand Balances with Scheduled Banks: - On Current Account Less :- Money held in Trust - On Dividend Account - On Margin Account - On Fixed Deposits [Includes Escrow Account Rs. 3.35 Crores (2008. Rs. Nil)] Less :- Money held in Trust Balances with Non-Scheduled Banks: - On Current Account Standard Chartered Bank, Singapore-USD [Maximum amount outstanding during the year Rs. 11.15 Crores (2008-Rs.1.05 Crores)] Standard Chartered Bank, Singapore- SGD [Maximum amount outstanding during the year Rs. 0.04 Crores (2008-Rs.0.03 Crores)] 0.29 51.75 135.42 0.02 213.63 0.39

1241.46

0.42 99.84

135.40 3.22 0.32

213.24 2.94 0.43

4.32 0.32

4.00

0.34 0.32

0.02

7.99

0.44

0.02

8.01

0.03

0.47

202.99 10- Other Current Assets - Unsecured [Schedule-21, Notes 3 (c), 19(a) and 23] Considered Good Deposits Lease Rental Recoverable Unbilled Revenue Considered Doubtful Less: Provision for Doubtful Assets 0.38 0.38 32.22 20.09 50.04 102.35 -

317.36

26.43 35.63 30.20 92.26

HCL Infosystems Annual Report 2008-09 | 92

SCHEDULES TO THE BALANCE SHEET | AS AT JUNE 30, 2009


As at 30.06.2009 Rs./Crores 11- Loans and Advances - Unsecured [Schedule-21, Note 17, 23 and 27] Considered Good - Amounts recoverable in cash or in kind or for value to be received - Advances and Loans to Subsidiaries - Balances with Customs, Port Trust, Excise and Sales Tax Authorities Considered Doubtful Less: Provision for Doubtful Loans and Advances 5.49 5.49 As at 30.06.2008 Rs./Crores

159.19 2.76 29.95 -

120.47 1.63 17.84

191.90

139.94

12- Current Liabilities and Provisions [Schedule-21, Notes 4, 5, 6, 22, 23 and 27] Current Liabilities: Acceptances Sundry Creditors - Due to Subsidiaries - Due to Micro and Small Enterprises - Other than Micro and Small Enterprises Sundry Deposits Interest accrued but not due: - On Secured Loans - On Unsecured Loans Investor Education and Protection Fund : - Unclaimed Dividend * Advances from Customers Deferred Revenue Other Liabilities

438.16 2.21 1.76 1169.59 0.01 0.60 1156.21

252.82

1173.56 4.15 5.51 3.22 31.91 155.87 70.59 1882.97

1156.82 4.31 1.73 2.94 24.74 142.50 34.39 1620.25

Provisions: Proposed Dividend Corporate Dividend Tax on Proposed Dividend For Income Tax [Net of Advance Income Tax of Rs. 381.77 Crores (2008-Rs. 364.10 Crores)] For Warranty Liability For Gratuity and Other Employee Benefits

25.68 4.36 23.28 4.28 24.29 81.89 1964.86

34.23 5.82 5.07 5.61 20.12 70.85 1691.10

* There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at June 30, 2009. These shall be credited and paid to the fund as and when due.

HCL Infosystems Annual Report 2008-09 | 93

SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2009
Year ended 30.06.2009 Rs./Crores 13- Business Income [Schedule-21, Notes 8(c)] Sales and Related Income Services 14- Other Income [Schedule-21, Notes 19(a) and Note 30] Interest : - On Lease Rental - On Fixed Deposits (Gross) [Tax deducted at source Rs. 0.07 Crores (2008 - Rs.0.03 Crores)] - On Other Loans and Advances - Others Dividend from (Others) Current Investments Insurance Claims Provisions/Liabilities no longer required written back Profit on disposal of (Others) Current Investments Profit on Foreign Exchange Fluctuation Miscellaneous Income 15- Cost of Goods and Services Sold [Schedule-21, Notes 8(b), 8(c), 9 and 10] Raw Materials and Components Consumed Purchase of Traded Goods Purchase of Services Stores and Spares Consumed Power and Fuel Labour and Processing Charges Royalty Closing Stock - Finished Goods (Including in Transit) [Including excise duty of Rs. 3.97 Crores (2008 - Rs. 3.43 Crores)] - Work-In-Progress Opening Stock - Finished Goods (Including in Transit) [Including excise duty Rs. 3.15 Crores (2008 - Rs. 3.77 Crores)] - Work-In-Progress (Increase)/Decrease in Stocks of Finished Goods and Work-In-Progress : 1860.66 8927.75 223.66 28.46 1.72 10.93 93.22 11146.40 731.21 1753.94 9270.16 91.66 29.38 1.60 10.50 99.52 11256.76 712.79 4.63 0.76 5.28 0.20 11724.25 612.56 12336.81 11945.40 421.37 12366.77 Year ended 30.06.2008 Rs./Crores

0.01 1.75

7.15 4.38 0.27 15.59 0.93 5.28 33.60

0.01 2.32

7.81 14.02 0.03 15.17 1.75 1.66 7.31 47.75

1.16 732.37 712.79 1.68 714.47 (17.90) 11128.50

1.68 714.47 623.43 1.23 624.66 (89.81) 11166.95

HCL Infosystems Annual Report 2008-09 | 94

SCHEDULES TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2009
Year ended 30.06.2009 Rs./Crores 16- Personnel [Schedule-21, Note 22] Salaries, Wages, Allowances, Bonus and Gratuity Contribution to Provident Fund and Other Funds Staff Welfare Expenses 305.66 11.93 8.39 325.98 17- Administration, Selling, Distribution and Others [Schedule-21, Note 19 (b) and Note 30] Rent Rates and Taxes Printing and Stationery Communication Travelling and Conveyance Packing, Freight and Forwarding Legal and Professional Training and Conference Office Electricity and Water Insurance Advertisement, Publicity and Entertainment Hire Charges Commission on Sales Bank Charges Provision for Doubtful Debts Provision for Doubtful Loans and Advances Provision for Other Current Assets Loss on Sale of Fixed Assets Fixed Assets Written Off Loss on Foreign Exchange Fluctuation Diminution in the value of current investments Miscellaneous Less : Operating Cost Recovered from Subsidiaries 22.85 11.90 3.92 10.57 30.45 51.68 23.04 4.32 7.48 7.64 57.06 1.55 22.14 10.52 19.47 5.49 0.38 0.30 0.12 26.39 0.04 27.91 345.22 0.49 344.73 18- Repairs Plant and Machinery Buildings Others 0.60 0.91 7.82 9.33 19- Finance Charges Interest on : - Debentures - Other fixed loans - On Others 0.46 0.83 10.21 11.50 18.39 9.70 5.05 12.00 32.82 55.32 18.80 4.92 6.82 7.22 71.53 1.86 18.73 9.41 1.29 0.00 0.00 0.21 13.20 287.27 0.55 286.72 275.43 9.90 7.63 292.96 Year ended 30.06.2008 Rs./Crores

5.42 22.80 16.44

44.66 44.66

32.76 14.81

47.57 47.57

HCL Infosystems Annual Report 2008-09 | 95

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


SCHEDULE 20 - SIGNIFICANT ACCOUNTING POLICIES 1. BASIS OF ACCOUNTING The financial statements of the Company have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India and comply with the mandatory Accounting Standards notified under section 211(3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956. 2. FIXED ASSETS Fixed Assets including in-house capitalisation and Capital Work-in-Progress are stated at cost except those which are revalued from time to time on the basis of current replacement cost / value to the Company, net of accumulated depreciation. Assets taken on finance lease on or after 1.4.2001 are stated at fair value of the assets or present value of minimum lease payments whichever is lower. Intangible Assets are stated at cost net of amortization. 3. DEPRECIATION (i) Depreciation has been calculated as under: (a) Depreciation on fixed assets is provided on a prorata basis using the straightline method based on economic useful life determined by way of periodical technical evaluation. Economic useful lives which are not exceeding those stipulated in Schedule XIV of the Companies Act, 1956 are as under: Plant and machinery Building - Factory - Others - Capitalised prior to 1.5.1986 - Acquired on or after 1.5.1986 and before 16.12.1993 Furniture & Fixture Air Conditioners Vehicles Office Equipment Computers 4-6 years 25-28 years 50-58 years As per Section 205(2)(b) of the Companies Act, 1956 At the rates specified in Schedule XIV of the Companies (Amendment) Act, 1988 4-6 years 3-6 years 4-6 years 3-6 years 3-5 years

(b) The assets taken on finance lease on or after April 1, 2001 over their expected useful lives. (ii) Leasehold assets viz land are amortised over the period of lease. Leasehold improvements are amortised on straight line basis over the period of three years or lease period whichever is lower. (iii) Intangible Assets are amortised over a period of 1-3 years. (iv) Individual assets costing Rs.5,000 or less are depreciated/ amortised fully in the year of acquisition 4. INVESTMENTS Long-term investments are stated at cost of acquisition inclusive of expenditure incidental to acquisition. Any decline in the value of the said investment, other than a temporary decline, is recognised and charged to Profit and Loss Account. Current Investments are carried at lower of cost or fair value where fair value for mutual funds is based on net asset value. 5. INVENTORIES Raw Materials and components held for use in the production of inventories and Work-in-progress are valued at cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. If there is a decline in the price of materials/ components and it is estimated that the cost of finished goods will exceed the net realisable HCL Infosystems Annual Report 2008-09 | 96

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value, the materials/components are written down to net realisable value measured on the basis of their replacement cost. Cost is determined on the basis of weighted average. Finished Goods and Wok in Progress are valued at lower of cost and net realisable value. Cost of Finished Goods and Work in Progress include cost of raw materials and components, direct labour and proportionate overhead expenses. Cost is determined on the basis of weighted average. Stores and Spares are valued at lower of cost and net realisable value. Adequate adjustments are made to the carrying value for obsolescence. Cost is determined on the basis of weighted average. Goods in Transit are valued inclusive of custom duty, where applicable. 6. FOREIGN CURRENCY TRANSACTIONS a) Foreign currency transactions are recorded at the exchange rates prevailing at the date of transaction. Exchange differences arising on settlement of transactions, are recognised as income or expense in the year in which they arise. At the balance sheet date, all assets and liabilities denominated in foreign currency, are reported at the exchange rates prevailing at the balance sheet date and the resultant gain or loss is recognised in the profit and loss account. Pursuant to notification under section 211(3C) of the Companies Act, 1956 issued by Ministry of Corporate Affairs on March 31, 2009 amending Accounting Standard - 11 (AS - 11) The Effects of Changes in Foreign Exchange Rates (revised 2003), exchange differences arising on translation of long term foreign currency monetary items having a term of 12 months or more are recognised as stated below: (i) Exchange differences relating to long term foreign currency monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to or deducted from the cost of the asset and depreciated over the balance life of the asset.

b)

c)

(ii) In other cases, such differences are accumulated in the Foreign Currency Monetary Translation Difference Account and amortised over the balance period of the long term assets / liabilities but not beyond March 31, 2011. d) In case of forward foreign exchange contracts where an underlying asset or liability exists at the balance sheet date, the difference between the forward rate and the exchange rate at the inception of the contract is recognised as income or expense over the life of the contract. In case of forward foreign exchange contracts taken for highly probable /forecast transactions, the net loss, if any, calculated on Mark to Market principle as at the balance sheet date is recorded. Profit or loss arising on cancellation or renewal of a forward contract is recognised as income or expense in the year in which such cancellation or renewal is made.

e) f) 7.

EMPLOYEE BENEFITS Defined Benefit: Liability for gratuity and leave encashment is provided as determined on actuarial valuation made at the end of the year which is computed using projected unit credit method. Gains/losses arising out of actuarial valuation are recognised immediately in the profit and loss account as income/expense. Defined Contribution: Companys contributions towards recognised Provident Fund and Superannuation Fund are accounted for on accrual basis. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the provident fund trust and the notified interest rate. The Company makes defined contributions to a superannuation trust established for the purpose. The Company has no further obligation beyond the monthly contributions.

8.

REVENUE RECOGNITION (a) Sales, after adjusting trade discount, are inclusive of excise duty and the related revenue is recognised (after providing for expenses to be incurred connected to such sale) on transfer of all significant risks and rewards of ownership to the customer and when no significant uncertainty exists regarding realisation of the consideration. HCL Infosystems Annual Report 2008-09 | 97

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(b) Composite contracts, outcome of which can be reliably estimated, where no significant uncertainty exists regarding realisation of the consideration, revenue is recognised in accordance with the percentage completion method, under which revenue is recognised on the basis of cost incurred as a proportion of total cost expected to be incurred. The foreseeable losses on the completion of contract, if any, are provided for immediately. (c) i) Service income includes income From maintenance of products and facilities under maintenance agreements and extended warranty, which is recognised upon creation of contractual obligations rateably over the period of contract, where no significant uncertainty exists regarding realisation of the consideration. From software services (a) The revenue from time and material contracts is recognised based on the time spent as per the terms of contracts.

ii)

(b) In case of fixed priced contracts revenue is recognised on percentage of completion basis. Foreseeable losses, if any, on the completion of contract are recognised immediately. 9. GOVERNMENT GRANTS Revenue grants, where reasonable certainty exists that the ultimate collection will be made are recognized on a systematic basis in profit and loss statement over the periods necessary to match them with the related cost which they are intended to compensate. 10. ROYALTY Royalty expense, net of performance based discounts, is recognised when the related revenue is recognised. 11. LEASES a) Assets taken under leases where the Company has substantially all the risks and rewards of ownership are classified as Finance leases. Such assets are capitalised at the inception of the lease at the lower of fair value or the present value of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate of interest on outstanding liability for each period. Assets taken on leases where significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals are charged to the Profit and Loss account on straight-line basis over the lease term. Profit on sale and leaseback transactions is recognised over the period of the lease. Assets given under finance lease are recognised as receivables at an amount equal to the net investment in the lease. Inventories given on finance lease are recognised as deemed sale at fair value. Lease income is recognised over the period of the lease so as to yield a constant rate of return on the net investment in the lease. Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over the lease term. Initial direct costs relating to the finance lease transactions are included as part of the amount capitalised as an asset under the lease.

b)

c) d)

e) f)

12. INCOME TAXES The current charge for income taxes including fringe benefit tax is calculated in accordance with the relevant tax regulations. Deferred tax assets and liabilities are recognised for timing differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the tax rates that have been enacted or substantially enacted at the balance sheet date. Deferred tax asset is recognized and carried forward when it is reasonably certain that sufficient taxable profits will be available in future against which deferred tax assets can be realised.

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13. PROVISIONS AND CONTINGENCIES The company creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that probably will not require an outflow of resources or where a reliable estimate of the amount of the obligation cannot be made. 14. USE OF ESTIMATES The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Examples of such estimates include estimate of cost expected to be incurred to complete performance under composite arrangements, income taxes, provision for warranty, employment retirement benefit plans, provision for doubtful debts and estimated useful life of the fixed assets. The actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. 15. EMPLOYEE STOCK OPTION SCHEME The Company calculates the employee stock compensation expense based on the intrinsic value method wherein the excess of market price of underlying equity shares as on the date of the grant of options over the exercise price of the options given to employees under the Employee Stock Option Scheme of the Company, is recognised as deferred stock compensation expense and is amortised over the vesting period on the basis of generally accepted accounting principles in accordance with the guidelines of Securities and Exchange Board of India. 16. BORROWING COSTS Borrowing costs to the extent related /attributable to the acquisition/construction of assets that necessarily take substantial period of time to get ready for their intended use are capitalised along with the respective fixed asset up to the date such asset is ready for use. Other borrowing costs are charged to the Profit and Loss Account. 17. SEGMENT ACCOUNTING The segment accounting policy is in accordance with the policies consistently used in the preparation of financial statements. The basis of reporting is as follows: a) Revenue and expenses distinctly identifiable to a segment are recognised in that segment. Identified expenses include direct material, labour, overheads and depreciation on Fixed Assets. Expenses that are identifiable with/ allocable to segments have been considered for determining segment results. Allocated expenses include support function costs which are allocated to the segments in proportion of the services rendered by them to each of the business segments. Depreciation on Fixed Assets is allocated to the segments on the basis of their proportionate usage. b) c) d) e) Unallocated expenses/income are enterprise expenses/income, which are not attributable or allocable to any of the business segment. Assets and liabilities which arise as a result of operating activities of the segment are recognised in that segment. Fixed Assets which are exclusively used by the segment or allocated on a reasonable basis are also included. Unallocated assets and liabilities are those which are not attributable or allocable to any of the segments and includes liquid assets like Investments, Bank Deposits and Investments in assets given on finance lease. Segment revenue resulting from transactions with other business segments is accounted on the basis of transfer price which is at par with the prevailing market price.

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SCHEDULE 21 - NOTES TO ACCOUNTS 1. Land and Buildings and certain Plant and Machinery were revalued by 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: Land Land Leasehold Land Buildings Buildings Plant and Machinery Total Less : Goodwill Transferred to Revaluation Reserve Less: -Expenditure incurred on acquisition of business in 1992 -Loss on sale of Land -Depreciation and Amortisation -Adjusted on amalgamation of Stelmac Engineering Private Limited (Refer Note 23 (b)) -Adjusted on amalgamation of Natural Technologies Private Limited (Refer Note 23 (a)) Balance as at June 30, 2009 2. 3. Date of Revaluation June 30, 1992 November 1, 2006 March 27, 2006 and August 13, 2007 June 30, 1992 November 1, 2006 June 30, 1992 Rs./Crores 4.44 16.78 2.53 6.44 0.25 (1.01) 29.43 5.70 23.73 0.86 0.15 0.33 16.70 5.69 -

Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for amount to Rs 1.46 Crores (2008-Rs.5.81 Crores). Contingent Liabilities: a) Claims against the Company not acknowledged as debts: 2009 Rs./Crores Sales Tax* Excise* Income Tax* Industrial Disputes, Civil Suits and Consumer Disputes 21.19 10.86 2.94 8.40 2008 Rs./Crores 8.64 14.87 1.41 8.37

* Includes sum of Rs. 5.21 Crores (2008 - Rs. 2.88 Crores) deposited by the Company against the above. The amounts shown in the 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. 6.50 Crores (2008-Rs. 6.50 Crores) was given to a Bank for working capital facilities and Rs. 6.07 Crores (2008- Rs. Nil) was given to a non-banking finance company for operating lease sanctioned to a 100% subsidiary, HCL Infinet Limited (Formerly Microcomp Limited) against which the total amount utilised as at June 30, 2009 is Rs. 4.25 Crores and Rs. 6.07 Crores (2008- Rs. 2.25 Crores) respectively. (ii) Corporate Guarantee of Rs. 5.00 Crores has been given to a Bank for working capital facilities sanctioned to a 100% subsidiary, HCL Security Limited against which the total amount utilised as at June 30, 2009 is Rs. 0.99 Crores (2008 Rs. Nil). c) The Company has transferred Financial Assets (Lease Rental Recoverable) to a bank under a financing arrangement for which the balance outstanding with the bank as on June 30, 2009 is Rs. 21.12 Crores (2008 Rs. 30.55 Crores). The transfer of these Financial Assets is with recourse to the Company.

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4. The company has the following warranty provision in the books of accounts: 2009 Rs./Crores Opening Balance as on July 1 Additions during the year Utilised/Reversed during the year Closing Balance as on June 30 5.61 12.90 14.23 4.28 2008 Rs./Crores 3.80 13.28 11.47 5.61

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, it is not possible to estimate the timing of cash outflows due to uncertainties relating to the outflows of economic benefits. 5. 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, 2009, 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. Deferred Tax: Major Components of Deferred Tax arising on account of temporary timing difference along with their movement as at June 30, 2009 are: Rs./Crores As at Movement during As at 30.06.08* the year 30.06.09 Assets Allowances doubtful debts/ Advances / Other Current Assets Expense accruals (Bonus, Gratuity, Leave Encashment and Provision for warranty) Depreciation Total (A) Liabilities Lease rental recoverable Cenvat balances with excise authorities Taxes deposited under protest for excise duty, custom duty and sales tax Other timing differences Total (B) Net Deferred Tax Assets / (Liability) (A)-(B) Previous Year Note: 1. The Finance (No.2) Act, 2009, which was introduced in the parliament on July 6, 2009 has received assent of President of India on August 19, 2009, has abolished Fringe Benefit Tax with effect from April1,2009. Consequently, no Fringe Benefit Tax has been provided for the period April 1, 2009 to June 30, 2009. 2 *Excludes Deferred Tax Assets on amalgamation of Natural Technologies Private Limited of Rs. 0.13 Crores [Refer Note 23 (a)]. 6. Disclosure of Micro, Small and Medium Enterprises based on information available with the company: 2009 Rs./Crores a. b. (i) Principal amount remaining unpaid to any supplier as at the end of the year. (ii) Interest due on the above amount. (i) Amount of interest paid in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 (Act). (ii) Amount of payments made to the suppliers beyond the appointed day during the year. Amount of interest due and payable for the period of delay in making payment but without adding the interest specified under the Act. Amount of interest accrued and remaining unpaid at the end of the year. Amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprises. HCL Infosystems Annual Report 2008-09 | 101 1.76 0.06 Nil 6.75 Nil 0.06 Nil 2008 Rs./Crores 0.60 0.02 Nil 1.31 Nil 0.02 Nil 0.58 10.44 1.26 12.28 9.80 5.62 0.83 2.88 19.13 (6.85) (12.48) 7.53 1.67 (0.56) 8.64 (5.15) (1.43) 4.16 0.13 (2.29) 10.93 5.63 8.11 12.11 0.70 20.92 4.65 4.19 4.99 3.01 16.84 4.08 (6.85)

b)

c. d. e.

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


7. Expenditure on Research and Development: 2009 Rs./Crores Capital Revenue (Depreciation, Personnel, Travel and Other administration expenses) Total 8. Capacities, Production, Stocks and Sales: a) Sales, Purchases, Opening and Closing stocks have been given in terms of value and /or, where ascertainable, in numbers. Bought out Computers and certain peripherals have been included in stock/sales of systems. 0.01 4.63 4.64 2008 Rs./Crores 0.31 3.99 4.30

Particulars of goods manufactured: Class of Product Installed capacity Nos. Nos. 1230000 (1230000) 846600 (713250) Actual Production 643330 (738636) 476263 (396854)

Computers/Micro processor based systems Data Graphic/Display Monitor/Terminals, Hubs etc.

Note: Installed capacity being a technical matter has been certified by the management. b ) Information in respect of purchase of traded goods: Nos. Computers Photocopiers/ Electronic Equipments Printers/Scanners/UPS/CVT Cellular Phones EPABX Systems Others * Total 3099 (32800) 23430 (29286) 178396 (173513) 30715588 (31420517) 545 (900) Value Rs./Crores 10.28 (119.70) 174.77 (191.38) 181.98 (180.30) 7510.91 (7984.10) 57.73 (77.58) 992.08 (717.09) 8927.75 (9270.15)

*Does not include any item which in value individually accounts for 10% or more of the total value of purchase of traded goods.

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c) Stocks and Sales: Unit Class of Products Computers/Micro Nos. Processors based Systems Photocopiers/ Nos. Electronic/Equipments Printers/Scanners/UPS/ CVT Nos. Cellular Phones EPABX Systems Others* Total Sales/Adjustments Qty Value# Rs./Crores 1493.68 (1754.99) 234.59 (243.30) 217.75 (200.93) 7781.11 (8207.97) 71.05 (87.82) 1926.07 (1450.39) 11724.25 (11945.40) Opening Stock Qty Value Rs./Crores 37523 (33216) 4924 (4480) 10495 (13860) 1568617 (862702) 179 (201) 96.31 (91.60) 38.73 (28.55) 9.09 (11.97) 387.91 (309.56) 12.07 (11.50) 168.68 (170.25) 712.79 (623.43) Closing Stock Qty Value Rs./Crores 47014 (37523) 4910 (4924) 13459 (10495) 1510148 (1568617) 171 (179) 97.23 (96.31) 31.93 (38.73) 11.88 (9.09) 384.56 (387.91) 10.97 (12.07) 194.64 (168.68) 731.21 (712.79)

636938 (767129) 23444 (28842) 175432 (176878) Nos. 30774057 (30714602) Nos. 553 (922)

# Except trade discount, no other discount has been adjusted. *Does not include any item which in value individually accounts for 10% or more of the total value of sales/stock. Note: Previous years figures are given in brackets. d) The Ministry of Company Affairs, Government of India vide its Order No. 46/4/2009-CL-III dated May 21, 2009 issued under section 211(4) of the Companies Act, 1956 has exempted the Company from disclosure of quantitative details in the Profit and Loss Account, for those class of goods which form less than 10% of the total value of turnover, purchase, traded, sales, consumption of raw material etc. as the case may be, for the financial year ended June 30, 2009, under Para 3(ii)(d) of Part-II, Schedule-VI to the Companies Act, 1956 as amended vide Notification No. GSR494(E), dated October 30, 1973.

9.

Value of imported and indigenous raw materials and components consumed during the year (excluding value of consumption of stores and spares which is not readily ascertainable) classified on the basis of ratio between purchase of imported and indigenous raw materials and components during the year: 2009 % of Consumption 74% 26% 100% 2008 % of Consumption 77% 23% 100%

Rs./Crores Imported Indigenous Total 1376.40 484.26 1860.66

Rs./Crores 1342.61 411.34 1753.95

10. Details of raw materials and components consumed (in value): 2009 Rs./Crores Mother Boards and Assemblies Hard Disk Drives Processors Monitors CRT Key Tops PCBs and Cabinets Networking Products Others Total 414.79 172.70 246.53 242.38 11.84 618.89 153.53 1860.66 2008 Rs./Crores 412.61 193.41 230.11 233.34 55.18 467.24 162.06 1753.95

Note: Separate quantitative numbers of raw material and components (including for resale) are not readily ascertainable.

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11. Value of Imports calculated on CIF basis: 2009 Rs./Crores a) b) c) d) Raw materials and components Stores and spares Capital goods Traded items Total 12. Expenditure in Foreign Currency: (On cash basis) 2009 Rs./Crores 0.38 87.61 9.56 0.43 1.07 99.05 2009 Rs./Crores 0.65 68.75 26.05 95.45 2009 Rs./Crores a) b) As Auditor * In Other Capacity Tax Audit * Certification * Management Services* Out-of-Pocket Expenses Total * Excluding service tax 15. Details of Investments purchased, reinvested and sold on various dates within the financial year are as follows:Name of the Fund Face Value Rs. per unit 10 10 10 10 10 10 10 10 10 * No. of Units Cost Rs./Crores 21.01 11.00 20.00 10.00 30.00 43.01 15.00 25.01 32.01 1.20 0.20 0.05 0.07 1.52 2008 Rs./Crores 0.60 103.30 3.41 1.29 108.60 2008 Rs./Crores 0.14 73.63 24.02 97.79 2008 Rs./Crores 1.00 0.17 0.02 0.25 0.05 1.49 1634.09 36.01 0.20 450.56 2120.86 2008 Rs./Crores 1617.17 45.51 0.23 368.16 2031.07

a) b) c) d) d)

Travel Royalty (Net of tax deducted at source) Interest Technical Fee Others (Include Consultancy, Certifications charges, License) Total

13. Earnings in Foreign Currency:

a) b) c)

Commission FOB value of exports (including deemed exports) Others (including reimbursement of expenses) Total

14. Remuneration to Auditor:

HSBC Ultra Short Term Bond Fund - Growth HSBC Cash Fund - Institutional Plus - Growth HDFC Cash Management Fund Treasury Advantage Plan - Wholesale - Growth HDFC Liquid Fund- Premium Plan - Growth IDFC Money Manager Fund - Institutional Plan - Growth ICICI Prudential Flexible Income Plan - Growth Kotak Flexi Debt - Growth Tata Floater Fund - Growth Principal Cash Management Liquid Option - Institutional Premium Plan - Growth

17188186 7992502 10401491 5674242 22006789 26332353 13935340 19114116 23288700

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Name of the Fund Reliance Money Manager Fund - Growth DWS Insta Cash Plus Fund - Institutional Plan - Dividend HSBC Cash Fund - Institutional Plan - Dividend HDFC Liquid Fund - Premium Plan - Dividend IDFC Money Manager Fund - Treasury Plan - Dividend IDFC Cash Fund - Dividend ICICI Prudential Liquid Plan - Dividend Templeton India Treasury Management Account - Dividend UTI Liquid Cash Plan - Dividend Face Value Rs. per unit 1000 10 10 10 10 10 10 1000 1000 * No. of Units 83645 9000000 139135619 117175137 33334326 10117767 30412002 558766 510386 Cost Rs./Crores 10.00 9.00 142.00 131.01 63.10 112.01 160.02 57.06 52.22

* Represents total of transactions on account of renewals and reinvestments.

16.

Managerial Remuneration: (i) Computation of net profit under Section 349 of the Companies Act, 1956. 2009 Rs./Crores Profit before Taxation Add: Managerial Remuneration Paid/payable Depreciation Loss on Sales of Fixed Assets (Net) Fixed Assets Written Off Provision for Doubtful Debts, Loans and Advances and Others Current Assets 373.86 4.65 17.27 0.30 0.12 25.34 47.68 421.54 Less: Depreciation under Section 350 of the Companies Act, 1956 Profit on Disposal of (Others) Investments (Net) Net Profit under Section 349 Calculation of Commission under Section 309 of the Companies Act 1956 @ 1% Restricted to (ii) Paid/payable to the Wholetime Directors a) Salaries, Allowances and Bonus* Contribution to Provident and Superannuation Funds** Perquisites 3.81 0.20 0.30 4.31 0.06 0.28 4.65 3.76 0.19 0.29 4.24 0.05 0.20 4.49 17.27 0.93 18.20 403.34 4.03 0.28 16.35 1.75 18.10 438.50 4.38 0.20 4.49 16.35 0.00 0.00 1.29 22.13 456.60 2008 Rs./Crores 434.47

b) Directors Sitting Fees Commission to Non Wholetime Directors Managerial remuneration under Section 198 of the Companies Act, 1956

* Includes profit linked bonus on actual payment basis. ** 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.

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17. Unaccrued forward exchange cover as on June 30, 2009 of Rs. 2.91 Crores (2008- Rs.1.81 Crores) has been included under amounts recoverable in cash or in kind or for value to be received. 18. 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 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 Date of grant Exercise price Options of the option outstanding for five equity at the shares of beginning Rs. 2/- each of the year 289.00 538.15 603.95 809.85 809.30 834.40 789.85 770.15 756.15 978.75 1144.00 1271.25 648.75 898.25 TOTAL 18025 (35195) 225619 (560758) 59072 (89619) 185309 (225350) 1600 (3500) 30170 (44488) 5784 (13848) 8270 (9240) 2435 (11840) 11978 (18384) 24990 (25630) 13620 (13620) 144300 (158000) 88200 819372 (1209472) Options granted during the year (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (105000) (105000) Options forfeited during the year (-) (1864) (4736) (6912) (-) (5004) (3072) (-) (1280) (2784) 2560 (640) 1792 (-) 2100 (7000) 13598 (16800) 20050 (50092) Options exercised during the year 12195 (10460) 280 (310058) (19775) (23897) (1900) (3794) (960) (970) (3565) (1318) (-) (-) (6700) (-) 12475 (383397) Options Options expired outstanding during at the end the year of the year 5830 (6710) 11176 (23217) 8139 (6036) 13227 (9232) (-) 4098 (5520) (4032) (-) 1760 (4560) 1536 (2304) 4800 (-) 2688 (-) 900 (-) 1777 (-) 55931 (61611) (18025) 214163 (225619) 50933 (59072) 172082 (185309) 1600 (1600) 26072 (30170) 5784 (5784) 8270 (8270) 675 (2435) 10442 (11978) 17630 (24990) 9140 (13620) 141300 (144300) 72825 (88200) 730916 (819372) Options exercisable at the end of the year (18025) 214163 (225619) 50933 (59072) 172082 (97457) 1600 (-) 26072 (18224) 5784 (3470) 8270 (4574) 675 (35) 10442 (7754) 17630 (15378) 9140 (8172) 82100 (38600) 22316 (-) 621207 (496380)

10/Aug/00 28/Jan/04 25/Aug/04 18/Jan/05 15/Feb/05 15/Mar/05 15/Apr/05 14/May/05 15/Jun/05 15/Jul/05 13/Aug/05 15/Sep/05 15/Mar/07 23/Jan/08

Note: Previous years figures are given in brackets

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Details of Grants made under Employee Stock Based Compensation Plan 2005 Date of grant Exercise price Options of the option outstanding for five equity at the shares of beginning Rs. 2/- each of the year 1144.00 1157.50 1267.75 1348.25 1300.00 1308.00 1031.00 868.75 842.50 620.50 673.75 648.75 898.25 TOTAL 2207129 (2430660) 60950 (67340) 21200 (22928) 21100 (25260) 24550 (31754) 5874 (7374) 37740 (39940) 10820 (15400) 19330 (30150) 24480 (31510) 27470 (36380) 402820 (431100) 256050 (-) 3119513 (3169796) Options granted during the year (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (293475) (293475) Options forfeited during the year 107644 (139190) 7420 (4090) 2310 (1400) 3480 (2130) 3540 (5160) 360 (1200) 8664 (1760) 2160 (3200) 1830 (8830) 4270 (5256) 3480 (7160) 10640 (21860) 44280 (37425) 200078 (238661) Options exercised during the year (9074) () (-) (-) () (-) (-) (-) (-) (430) (80) (6420) (-) (16004) Options Options expired outstanding during at the end the year of the year 117360 1982125 (75267) (2207129) 6750 46780 (2300) (60950) 1940 16950 (328) (21200) 2970 14650 (2030) (21100) 3200 17810 (2044) (24550) 464 5050 (300) (5874) 5976 23100 (440) (37740) 1760 6900 (1380) (10820) 1800 15700 (1990) (19330) 2260 17950 (1344) (24480) 2200 21790 (1670) (27470) 4220 387960 (-) (402820) 780 210990 (-) (256050) 151680 2767755 (89093) (3119513) Options exercisable at the end of the year 1197061 (891173) 28368 (24588) 10170 (8720) 8790 (8470) 10866 (10060) 3030 (2388) 14740 (15216) 4140 (4520) 9420 (8080) 10710 (9630) 8812 (5526) 155220 (77700) 42630 (-) 1503957 (1066071)

13/Aug/05 19/Oct/05 15/Nov/05 15/Dec/05 14/Jan/06 15/Feb/06 16/Mar/06 17/Apr/06 15/May/06 15/Jun/06 17/Jul/06 15/Mar/07 23/Jan/08

Note: Previous years figures are given in brackets.

HCL Infosystems Annual Report 2008-09 | 107

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


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: Employee Stock Option Scheme 2000 Volatility Risk free rate Exercise Price Time to Maturity (years) Dividend Yield Life of options Fair Value of options as at the grant date 45% to 68% 4.57% to 7.99% Rs.538.15 to Rs.1271.25 2.20 to 5.50 9% to 28% 8.5 Years Rs.35.10 to Rs.203.14 Employee Stock Based Compensation Plan 2005 47% to 62% 6.49% to 7.98% Rs.620.50 to Rs.1348.25 2.50 to 7.00 10% to 28% 10 Years Rs.24.75 to Rs.262.97

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, 2009 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: Proforma disclosures 2009 Rs./Crores Profit/(Loss)after tax as per Profit and Loss Account (a) Add: Employee Stock Compensation Expense as per Intrinsic Value Method Less: Employee Stock Compensation Expense as per Fair Value Method [Net of amount attributable to employees of subsidiary Rs. 0.16 Crores (2008-Rs.0.19 Crores)] Profit/(Loss) after tax recomputed for recognition of employee stock compensation expense under fair value method (b)* Earning Per Share based on earnings as per (a) above: (Refer note 20) - Basic - Diluted Earning Per Share had fair value method been employed for accounting of employee stock options: - Basic - Diluted * Excludes impact on tax expense of employee stock compensation expense. 260.44 2008 Rs./Crores 304.75 -

4.62 255.82

8.07 296.68

Rs. 15.21 Rs. 15.21

Rs. 17.88 Rs. 17.64

Rs. 14.94 Rs. 14.94

Rs. 17.41 Rs. 17.18

HCL Infosystems Annual Report 2008-09 | 108

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


19. Leases: a) (i) Finance Leases: The Company has given on finance lease certain Assets/ Inventories which comprise of computers 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. The gross investment in the assets given on finance leases as at June 30, 2009 and its present value as at that date are as follows [Refer Note 3(c)]: Total minimum lease payments receivable Rs./Crores Not later than one year Later than one year and not later than five years Total Note: Previous years figures are given in brackets. b) Operating Leases: (i) Cancelable Operating leases (a) The Company has taken various residential /commercial premises under cancelable operating leases. These leases are normally renewable on expiry. (b) The rental expense in respect of operating leases is Rs. 22.85 Crores (2008-Rs 18.39 Crores) (c) 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: 2009 Rs./Crores 15.28 5.21 10.07 1.84 2008 Rs./Crores 13.43 3.37 10.06 1.42 16.91 (24.28) 6.90 (17.05) 23.81 (41.33) Interest included in minimum lease payments receivable Rs./Crores 2.57 (3.80) 1.15 (1.90) 3.72 (5.70) Present value of minimum lease payments receivable Rs./Crores 14.34 (20.48) 5.75 (15.15) 20.09 (35.63)

(ii)

Gross Block Accumulated Depreciation Net Block Depreciation Expense (ii) Non-Cancelable Operating leases As Lessee:

(a) The Company has taken computer systems and furniture and fixture on non-cancelable operating leases the future minimum lease payments in respect of which are: 2009 2008 Rs./Crores Rs./Crores Not later than one year 1.62 1.62 Later than one year and not later than five years 2.98 4.60 Total 4.60 6.22

(b) Minimum Lease Payments in respect of assets taken on lease recognised as an expense in the Profit and Loss Account for the year ended June 30, 2009 are Rs. 1.92 Crores (2008 - Rs. 0.45 Crores) As Lessor: The company has given photocopying machines on non-cancelable operating leases the future minimum lease receipts in respect of which are: 2009 2008 Rs./Crores Rs./Crores Not later than one year 0.00 0.01 Later than one year and not later than five years Total 0.00 0.01

HCL Infosystems Annual Report 2008-09 | 109

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


20. Earnings per share (EPS) The earnings considered in ascertaining the Companys 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 earnings per share 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: Particulars Profit after tax (Rs./Crores) Weighted average number of shares considered as outstanding in computation of Basic EPS Add dilutive impact of stock options: - Exercised - Lapsed - Issued for no consideration Weighted average number of shares outstanding in computation of Diluted EPS Basic EPS (of Rs.2/- each) Diluted EPS (of Rs.2/- each) 21. Segment Reporting The Group recognises the following segments as its primary segments. a) The operations of Product and Related Services consists of sale of Computer Hardware and System Integration products and providing a comprehensive range of IT services including System Maintenance and Facility Management in different industries. b) The businesses of Telecom products, Office Automation and services consist of sale of telecommunication products, office equipment products and related services. 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 Companys revenues results and assets relate to the domestic market. 2009 260.44 171,180,498 2008 304.75 170,454,520

11,554 4,521 171,196,573 Rs. 15.21 Rs. 15.21

264,066 110,209 1,900,787 172,729,582 Rs.17.88 Rs.17.64

Segment wise performance for the year ended June 30, 2009 Primary Segments Computer Systems & Other Related Products and Services 3486.58 (3365.26) 53.44 (23.15) 3540.02 (3388.41) 126.08 (157.84) 3413.94 (3230.57) (ii) Results Less: Unallocable Expenditure Operating Profit Add: Other Income (Excluding Operational Income) Less: Finance Charges 177.27 (199.77) Telecommunication & Office Automation Inter-segment Elimination

Rs./Crores Total

(i) Revenue External Revenue Intersegment Revenue Total Gross Revenue Less: Excise Duty Total Net Revenue

8850.23 (9001.51) 21.98 (18.80) 8872.21 (9020.31) (0.16) 8872.21 (9020.15) 250.81 (285.45)

12336.81 (12366.77) -75.42 (-41.95) -75.42 (-41.95) 126.08 (158.00) -75.42 (-41.95) 12336.81 (12366.77)

12210.73 12208.77 428.08 (485.22) 24.43 (30.06) 403.65 (455.16) 14.87 (26.88) 44.66 (47.57)

HCL Infosystems Annual Report 2008-09 | 110

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


Profit Before Tax Less: Tax Expense - Current Tax - Deferred Tax - Fringe Benefit Tax Profit After Tax (iii) Segment Assets Unallocated Corporate Assets a) Liquid Assets b) Others (including investment in assets given on finance lease) c) Deferred Tax Asset 2109.32 (1781.36) 857.49 (975.93) 373.86 (434.47) 122.77 (131.50) (10.80) (-5.63) 1.45 (3.85) 260.44 (304.75) 2966.81 (2757.29) 264.04 (215.04) 89.14 (84.55) 4.08 (-) 3324.07 (3056.88) 1903.18 (1635.86) 61.68 (55.24) (6.85) 226.85 (352.66) 2191.71 (2050.61) 22.19 (41.16) 16.37 (15.79) 62.05 (28.11)

Total Assets (iv) Segment Liabilities Unallocated Corporate Liabilities a) Current Liabilities b) Deferred Tax Liability c) Loan Funds Total Liabilities (v) Capital Expenditure 17.63 (35.72) 12.31 (11.61) 45.45 (21.09) 4.56 (5.44) 4.06 (4.18) 16.60 (7.02) 1233.72 (837.73) 669.46 (798.13)

(vi) Depreciation

(vii) Other Non Cash Expenses Note: Previous years figures are given in brackets

22. The Company has calculated the various benefits provided to employees as under: (a) Defined Contribution Plans (i) Provident Fund (ii) Superannuation Fund During the year the Company has recognised the following amounts in the Profit and Loss account: 2009 Rs./Crores Employers Contribution to Provident Fund* Employers Contribution to Superannuation Fund* (b) State Plans (i) Employee State Insurance (ii) Employee's Pension Scheme 1995 HCL Infosystems Annual Report 2008-09 | 111 3.89 1.14 2008 Rs./Crores 3.26 1.01

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


During the year the Company has recognised the following amounts in the Profit and Loss account: 2009 Rs./Crores Employers contribution to Employee State Insurance * Employers contribution to Employee's Pension Scheme 1995 * 2.45 4.45 2008 Rs./Crores 1.98 3.65

* Included in Contribution to Provident Fund and Other Funds under Personnel Cost (Refer Schedule-16) (c) Defined Benefit (i) Gratuity (ii) Leave Encashment/Compensated Absence In accordance with Accounting Standard 15 (revised 2005), an actuarial valuation was carried out in the respect of the aforesaid defined benefit plans based on the following assumptions. Employees Gratuity Fund 2009 Discount Rate (per annum) Rate of increase in compensation levels Rate of return on plan assets 7.00% 7.00% Not Applicable 25.47 2008 8.00% 7.00% Not Applicable 25.70 Leave Encashment/ Compensated Absence 2009 7.00% 7.00% Not Applicable 25.47 2008 8.00% 7.00% Not Applicable 25.70

Expected Average remaining working lives of employees (years)

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. Rs./Crores 2009 Gratuity Reconciliation of opening and closing balances of the present value of the defined benefit obligation: Present value of obligation at the beginning of the year Current service cost Interest cost Actuarial (gain)/loss Benefits (paid) Present value of obligation at the end of the year Reconciliation of the present value of the defined benefit obligation and the fair value of the plan assets: Present value of the obligation as at the end of the year Fair value of plan assets at the end of the year Assets/(Liabilities) recognised in the Balance Sheet. Cost recognised for the year (included under Salaries, Wages, Allowances (Bonus and Gratuity) Currents service cost Interest cost Actuarial (gain)/loss Net cost recognised for the year * Leave Encashment Gratuity 2008 Leave Encashment

12.20 1.75 0.85 0.79 (0.69) 14.90

7.92 1.92 0.54 (0.71) (0.28) 9.39

10.76 1.23 0.83 0.06 (0.68) 12.20

6.76 1.36 0.47 0.46 (1.13) 7.92

14.90 (14.90)

9.39 (9.39)

12.20 (12.20)

7.92 (7.92)

1.75 0.85 0.79 3.39

1.92 0.54 (0.71) 1.75

1.23 0.83 0.06 2.12

1.36 0.47 0.46 2.29

* Included in Salaries Wages Allowances Bonus and Gratuity under Personnel Cost (Refer Schedule- 16)

HCL Infosystems Annual Report 2008-09 | 112

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


23. (a) The Scheme of Amalgamation (Scheme) for merging the wholly owned subsidiary Natural Technologies Private Limited (NTPL) with the Company under sections 391 to 394 of the Companies Act, 1956 sanctioned by Honble High Courts of Delhi and Rajasthan vide their respective orders dated August 11, 2008 and May 29, 2009 has come into effect on July 6, 2009 from the appointed date of July 1, 2008. On the scheme becoming effective NTPL stands dissolved without winding up. Pursuant to the Scheme: The amalgamation of erstwhile NTPL with the Company has been accounted for under the pooling of interest method in the manner specified in the Scheme and complies with the Accounting Standard notified u/s 211(3C) of the Companies Act,1956 and the following balances as at July 1, 2008 of erstwhile NTPL have been adjusted with the profit and loss account forming part of reserves of the Company: Rs./Crores Assets Fixed assets ( Including Captial Work in Progress Rs. 0.80 Crores ) Deferred Tax Assets Sundry Debtors Cash & Bank Balance Other Current Assets Loans & Advances Total Liabilities Current Liabilities and Provisions Secured Loan Unsecured Loan Total Net assets acquired on amalgamation (a) Transfer of balances of Amalgamated Company Securities Premium Account Profit and Loss Revaluation Reserve Total Reserves and Surplus (b) Less:Adjustment for cancellation of Companys investment in Transferor Company (c) Shortfall arising on Amalgamation (a) (b) ( c) = ( d ) Adjusted with :- Revaluation Reserve - Profit and Loss Account Total 4.09 0.13 3.34 0.78 2.19 0.03 10.56 3.68 1.52 1.34 6.54 4.02 0.45 0.55 2.54 3.54 8.41 (7.93) 5.70 2.23 7.93

The transactions including income and expenses for the period from July 01, 2008 to June 30, 2009 when the business was being run and managed in trust by erstwhile Natural Technologies Private Limited have also been incorporated in these accounts which do not have any material impact on the profit for the year and net assets at the balance sheet date. 23. (b) The Scheme of Amalgamation (Scheme) for merging the wholly owned subsidiary Stelmac Engineering Private Limited (Stelmac) with the company under sections 391 to 394 of the Companies Act, 1956 sanctioned by Honble High Court of Delhi vide order dated December 07, 2007 was concluded in the previous year. The amalgamation of erstwhile Stelmac with the Company was accounted for under the pooling of interest method in the manner specified in the Scheme and complies with the Accounting Standard notified u/s 211(3C) of the Companies Act,1956.The accounts of the Company for the year ended June 30, 2008 included the results of said business which did not have any material impact on the profit for that year and net assets as at that balance sheet date. 24. Pursuant to the approval given by the Board of Directors, the Committee of Directors (Securities) at the meeting held on August 14, 2009 approved a) b) c) Issuance of Convertible Warrants not exceeding Rs 322 crores, including premium to the promoters of the Company. Issuance in the form of Equity shares or Equity linked securities in the domestic and /or international offerings and/ or Qualified Institutional Placements for a value not exceeding Rs 500 crores, including premium. An Extra - ordinary General Meeting is scheduled to be held on September 23, 2009 for taking the shareholders approval for the same. HCL Infosystems Annual Report 2008-09 | 113

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


25. During the year, the Company has incorporated HCL Infocom Limited as a wholly owned subsidiary. HCL Infocom Limited holds 49% of the equity share capital of Scout Mobile Internet Services Limited, a Joint Venture with Nokia Corporation, Finland. 26. Pursuant to clause ix (b) of section 227 (4A) of the Companies Act, 1956, the details of disputed dues are as follows:
SL. No. Name of Statute Nature of the dues Amount (Rs./crores) Amount Deposited under protest (Rs./crores) Period to which the amount relates Forum where dispute is pending

1.1

U.P. Trade Tax Act, 1948.**

Sales Tax (Including Penalty)*

0.01

1998-1999

1.2 1.3 1.4 1.5 1.6 1.7

Sales Tax (Including Penalty)* Sales Tax (Including Penalty)* Sales Tax (Including Penalty)* Sales Tax (Including Penalty)* Sales Tax (Including Penalty)* Sales Tax (Including Penalty)*

1.12 0.07 0.18 1.67 3.26 2.29

0.13 0.07 0.36 0.75 0.80 0.49

2002-2003 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007

1.8 1.9 1.10 1.11 2.1 2.2 2.3 2.4 2.5 2.6 3.1 3.2 3.3 3.4 4.1 4.2 West Bengal Sales Tax Act, 1994.** Delhi Value Added Tax Act-2004** Tamil Nadu General Sales Tax Act, 1959.** Delhi Sales Tax Act, 1975** U.P.Value Added Tax Act-2008**

Sales Tax (Including Penalty)* Sales Tax (Including Penalty)* Commercial tax (Including Penalty)* Commercial tax (Including Penalty)* Sales Tax* Sales Tax* Sales Tax* Sales Tax* Sales Tax* Trade Tax* Sales Tax* Sales Tax* Sales Tax* Sales Tax* Sales Tax* Sales Tax*

4.22 0.25 0.13 0.01 0.26 0.00 0.20 0.56 0.17 0.04 0.07 0.44 0.13 0.005 0.02

0.71 0.19 0.12 0.01 0.001 0.004 0.03 0.04 0.10 -

2006-2007 2007-2008 2008-2009 2009-2010 1999-2000 2001-2002 2003-2004 2003-2004 2004-2005 2005-2006 1998-1999 2001-2002 2002-2003 2004-2005 2000-2001 2005-2006

Joint Commissioner (Appeals) of Commercial Tax, Noida Commercial Tax Tribunal, Noida High Court, Allahabad. Commercial Tax Tribunal, Noida Joint Commissioner (Appeals) of Commercial Tax, Noida Joint Commissioner (Appeals) of Commercial Tax, Noida Additional Commissioner (Appeals) of Commercial Tax, Noida Joint Commissioner (Appeals) of Commercial Tax, Noida Joint Commissioner (Appeals) of Commercial Tax, Noida Joint Commissioner (Appeals) of Commercial Tax, Noida Joint Commissioner (Appeals) of Commercial Tax, Noida Additional Commissioner of Sales Tax, Delhi Additional Commissioner of Sales Tax, Delhi Deputy Commissioner (Appeals) of Sales Tax, Delhi Deputy Commissioner (Appeals) of Sales Tax, Delhi Additional Commissioner of Sales Tax, Delhi Deputy Commissioner (Appeals) of Sales Tax, Delhi Tribunal Commercial Tax, Chennai Commercial Tax Officer, Chennai Assistant Appellate Commissioner, Chennai Commercial Tax Officer, Chennai Joint Commissioner (Appeals) of Sales Tax, Kolkata Joint Commissioner (Appeals) of Sales Tax, Kolkata Superintendent, Sales Tax, Guwahati Superintendent, Sales Tax, Guwahati Superintendent, Sales Tax, Guwahati Deputy Commissioner (Appeals) of Sales Tax, Jaipur

5.1 5.2 5.3 6.1

Assam General Sales Tax, 1993.**

Sales Tax* Sales Tax* Sales Tax*

0.01 0.03 0.01 0.06

0.01 0.01

2001-2002 2002-2003 2003-2004 1998-1999; 2000-2001; 2001-2002 and 2003-2004. 2006-2007 and 2007-2008 2000-2001

Rajasthan Sales Tax Act, 1994.**

Sales Tax*

6.2 7.1

Rajasthan Value Added Tax Act-2003** Commercial tax * Kerala General Sales Tax Act, 1963.** Sales Tax*

0.17 0.05

0.02

Deputy Commissioner (Appeals) of Commercial Tax, Jaipur Deputy Commissioner (Appeals) of Sales Tax, Kochi

HCL Infosystems Annual Report 2008-09 | 114

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


SL. No. Name of Statute Nature of the dues Amount (Rs./crores) Amount Deposited under protest (Rs./crores) 0.13 0.01 0.08 0.11 0.08 1.00 5.25* 2002-2003 and CESTAT, Chennai 2003-2004 March 2006 to Commissioner (Appeals), December 2006 Chennai August 2006, Commissioner (Appeals), November 2006, Chennai December 2006 1980-1981; CESTAT Delhi 1981-1982; 1982-1983 and 1983-1984 March 2006 CESTAT, Chennai Cenvat balance CESTAT, Chennai as on March1, 2006 January 2006 to CESTAT, Chennai September 2006 July 2006 to Commissioner (Appeals), December 2006 Chennai Balance as on Commissioner (Appeals), March 1, 2006 Chennai March 2006 to Commissioner (Appeals), September 2006 Chennai As on March 1, 2006Commissioner (Appeals), Chennai January 2007 to Commissioner (Appeals), March 2007 Chennai April 2007 to Commissioner (Appeals), July 2007 Chennai October 2006 to Commissioner (Appeals), December 2006 Chennai August 2007 to Commissioner (Appeals), January 2008 Chennai July 2003 to CESTAT, Chennai September 2005 July 2003 to CESTAT, Chennai March 2006 October 2006 to Commissioner (Appeals), June 2007 Chennai September 2005 Commissioner (Appeals), to September 2006 Chennai September 2005 Commissioner (Appeals), to September 2006 Chennai January 2007 to Commissioner (Appeals), June 2007 Chennai Period to which the amount relates Forum where dispute the amount relates

7.2 8.1 9.1 10.1 11.1 11.2 12.1 12.2 13.1 14.1 Maharashtra Sales Tax Act, 1969.**

Sales Tax* Sales Tax*

0.34 0.01 0.08 0.47 0.14 0.77 0.06 0.44 2.75 0.70 21.19

2001-2002 2003-2004 2006-2007 2006-2007 2006-2007 2007-2008 2004-2005 2007-2008 2007-2008 and 2008-2009 2007-2008 and 2008-2009

Himachal Pradesh Sales Tax (Including Penalty)* Value Added Tax Act-2005** Karnataka Value Added Tax Act,2003.** Sales Tax* Andhra Pradesh Sales Tax* Value Added Tax Act, 2005** Sales Tax* Punjab General Sales Tax Act, 1948** Punjab Value Added Tax Act-2005** Jammu & Kashmir Value Added tax Act-2005** Uttarakhand Value Added Tax Act-2005 ** Sub Total (a) Central Excise Act, 1944. Excise Duty (Including Penalty) Excise Duty (Including Penalty) Excise Duty (Including Penalty) Sales Tax (Including Penalty)* Sales Tax (Including Penalty)* Sales Tax (Including Penalty)* Sales Tax (Including Penalty)*

Deputy Commissioner (Appeals) of Sales Tax, Kochi Deputy Commissioner (Appeals) of Sales Tax, Mumbai Additional Commissioner of Sales Tax, Shimla Assessing Officer, Bengaluru Commissioner Appeals, Hyderabad Commissioner Appeals, Hyderabad Deputy Commissioner Appeals, Mohali Deputy Commissioner Appeals, Mohali Deputy Commissioner Appeals, Jammu Joint Commissioner Commercial Tax, Dehradun

0.95 0.04 0.01

Excise Duty (Including Penalty)

3.24

0.60

Excise Duty (Including Penalty) Excise Duty (Including Penalty) Excise Duty (Including Penalty) Excise Duty Excise Duty (Including Penalty) Excise Duty (Including Penalty) Excise Duty (Including Penalty) Excise Duty reversed Excise Duty reversed Excise Duty reversed Excise Duty (Including Penalty) Interest on reversal of Cenvat Credit (Including Penalty) Interest on reversal of Cenvat Credit (Including Penalty) Excise Duty (Including Penalty) Excise Duty (Including Penalty) Excise Duty (Including Penalty) Excise Duty (Including Penalty) Sub Total (b)#

0.25 1.08 1.14 0.08 0.01 0.02 0.05 0.04 0.04 1.03 1.63 0.44 0.34 0.34 0.13 10.86

0.15 0.10 0.85

HCL Infosystems Annual Report 2008-09 | 115

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


SL. No. Name of Statute Nature of the dues Amount (Rs./crores) Amount Deposited under protest (Rs./crores) 0.16 Period to which the amount relates Forum where dispute the amount relates

Income Tax Act 1961

Income Tax (Representative Assessee) Income Tax (Representative Assessee) Income Tax (Regular Assessment of erstwhile HCL Infinet Limited ) Income Tax (Regular Assessment of erstwhile HCL Infinet Limited )

0.37 0.16 0.87

1989-1990 1990-1991 2005-06

High Court, Delhi High Court, Delhi Commissioner (Appeals), Delhi

1.54

2006-07

Commissioner (Appeals), Delhi

Sub Total (c) Total (a) + (b) + (c )

2.94 34.99

0.16 6.26

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.

27. Disclosure of related parties and related party transactions. a) Company having substantial interest: HCL Corporation Ltd due to substantial interest in the voting power b) List of Parties where control exists/existed: Wholly owned Subsidiaries: HCL Infinet Limited (Formerly known as Microcomp Limited) HCL Infocom Limited (Refer Note 25) HCL Security Limited Natural Technologies Private Limited (Refer Note 23) 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 HCL Peripherals Limited HCL BPO Services (NI) Limited Others (where significant influence exist): SSN College of Engineering Shri Sivasubramaniya Nadar Educational and Charitable Trust Key Management Personnel Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Ajai Chowdhry J. V. Ramamurthy Sandeep Kanwar C.S. Dwivedi George Paul Hari Baskaran Rajeev Asija Rajendra Kumar Rakesh Mehta1 S.R. Bisht Suman Ghose Hazra Sushil Kumar Jain Vivek Punekar

d) Summary of Related Party disclosures Note: All transactions with related parties have been entered into in the normal course of business.
1

Resigned w.e.f June 30, 2008 HCL Infosystems Annual Report 2008-09 | 116

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


(Rs./Crores) A. Transactions Company having substantial interest Subsidiaries Others Key Management Personnel Total

Jun-09 Jun-08 Jun-09 Jun-08 Jun-09 Jun-08 Jun-09 Jun-08 Jun-09 Jun-08

Sales and Related Income 2.27 2.22 - HCL Technologies Limited. - HCL Infinet Limited. Services 0.40 - HCL Technologies Limited. - HCL Infinet Limited. Other Income - HCL Technologies Limited. Purchase of Goods - HCL Security Limited. - HCL Technologies Limited. Purchase of Services - HCL Technologies Limited. - HCL Comnet Limited. - HCL Peripherals Limited. - HCL Infinet Limited. Purchase of Investment - HCL Infinet Limited. - HCL Security Limited. - Natural Technologies Private Limited. Loans and Advances Given - HCL Security Limited. - Natural Technologies Private Limited. - HCL Infinet Limited. Donations Given - Shri Sivasubramaniya Nadar Educational and Charitable Trust Assets Purchased - HCL Technologies Limited. Remuneration - Mr. Ajai Chowdhry - Mr. Rajeev Asija - Mr. J V Ramamurthy - Mr. Sandeep Kanwar Reimbursements towards expenditure a) Received 0.05 0.05 - HCL Technologies Limited. - HCL Comnet Limited. - HCL Infinet Limited. b) Made 0.06 0.05 - HCL Technologies Limited. - HCL Comnet Limited. - HCL Infinet Limited. B. Amount due to / from related parties Investment Accounts Receivables 0.89 1.81 Other Recoverables Creditors Other Payables 0.03 0.01

2.60 2.16 0.91 0.77

1.05 1.05 2.47 2.47

84.15 79.02 24.00 17.34 1.23 1.23 8.54 7.32 0.53 0.61

68.70 57.37 10.09 9.27 1.31 1.31 0.33 0.33 5.71 4.37 0.25 0.73

0.02

0.01

89.04

71.98

25.31

12.56

1.23 4.50

1.31 0.33

4.50 4.50 2.53

1.75

11.07

7.46

2.43 14.33 10.00 4.00 2.76 1.66 1.02

1.75 8.46 0.05 8.41 1.63 1.28 0.25 0.48 0.48 0.66 0.66 9.27 3.25 1.00 1.06 0.93 9.01 3.25 1.00 0.99 0.86

14.33

8.46

2.76

1.63

9.27

0.48 0.66 9.01

0.49

0.56

0.06 0.05 0.01 0.81 0.70 0.02 0.02

0.11 0.09 0.02 0.04 0.01 0.03 0.02

0.60

0.72

0.49 0.02

0.56 0.02

0.89

0.11

16.06 0.75 2.76 2.21

10.13 1.61 1.63 0.01

38.87 0.47 2.08 0.56

21.25 0.46 0.99 0.88

16.06 40.51 3.23 4.29 0.59

10.13 24.67 2.09 1.00 0.89

HCL Infosystems Annual Report 2008-09 | 117

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


28. Additional disclosure as per Clause 32 of the Listing Agreement 2009 Rs./Crores Disclosure of amounts at the year end and the maximum amount of loans/advances/investments outstanding during the year ended June 30, 2009. (Refer Note 23) A. Loans and Advances in the nature of Loans to Subsidiary. a. Name b. Balance outstanding at the year end c. Maximum amount outstanding during the year ended June 30, 2009 B. Loans and Advances in the nature of loans to Fellow Subsidiaries a. Name b. Balance outstanding at the year end c. Maximum amount outstanding during the year ended June 30, 2009 C. Loans and Advances in the nature of Loans where there is no repayment schedule a. Name b. Balance outstanding at the year end c. Maximum amount outstanding during the year ended June 30, 2009 D. Loans and Advances in the nature of loans where no interest or interest below Section 372A of Companies Act is charged a. Name b. Balance outstanding at the year end c. Maximum amount outstanding during the year ended June 30, 2009 Loans given to employees under various schemes of the Company have been considered to be out of purview of disclosure requirement. E. Loans and Advances in the nature of loans to firms/companies in which directors are interested F. Disclosure of Investment in the Company's own shares a. b. c. d. e. Name of the Loanee Balance outstanding at the year end Maximum amount outstanding during the year ended June 30, 2009 Investments made by the Loanee Maximum amount of Investment during the year ended June 30, 2009 Nil Nil Nil Nil Nil Nil Nil Nil - Natural Technologies Private Limited Nil 1.00 Nil 1.00 - Natural Technologies Private Limited Nil 1.00 Nil 1.00 Nil Nil Nil Nil Nil Nil Nil Natural Technologies Private Limited 1.00 1.00 2008 Rs./Crores

Nil

Nil

29. Pursuant to notification u/s 211(3C) of the Companies Act, 1956 issued by the Ministry of Corporate Affairs on March 31, 2009, 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 amortize such exchange difference over the useful life of the item. Accordingly, the profit before tax for the year ended June 30, 2009 is lower by Rs.0.12 Crores on account of above mentioned exchange difference, which will be amortised in future period(s) but not beyond March 31, 2011. 30. i) An amount of Rs. 0.23 Crores (2008- Rs. 0.05 Crores), being profit on sale of fixed assets has been adjusted against the loss on sale of fixed assets.

ii) The Profit/ loss on account of foreign exchange fluctuations and on disposal of current investments are disclosed after deducting or adding related loss or profit, as the case may be, on similar transactions. iii) Advertisement, Publicity & Entertainment expenses, wherever on sharing basis, are shown at amounts borne by the company.

HCL Infosystems Annual Report 2008-09 | 118

SCHEDULES TO THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT


31. Derivative Instruments outstanding at the Balance Sheet date: The Company has following outstanding forward contracts to buy foreign currency as at June 30, 2009:

Currency

Foreign Currency Value/Crores 2009 2008 $ 8.19 Kr 0.48 15.12 $9.57 2.66

Average Rate 2009 49.61 50.31* 2008 41.72 7.06 40.20*

Maximum Maturity Period 2009 5 Months 1 Month 2008 5 Months 3 Months 3 Months

USD SEK JPY

*Average rate of JPY/INR is for 100 Yen. The above forward contracts have been undertaken to hedge the foreign currency exposures on Import/Royalty payables as at June 30, 2009. As on June 30, 2009, the foreign currency exposure that is not hedged by a derivative instrument or otherwise is Rs.188.88 Crores (2008-Rs.165.86 Crores). 32. Amount due from companies under the same management under section 370(IB) of the Companies Act, 1956 2009 2008 Rs./Crores Rs./Crores HCL Technologies Limited 35.82 17.81 HCL Comnet Limited 0.40 0.13 HCL Comnet Systems and Services Limited 0.21 0.38 HCL BPO Services (NI) Limited 0.61 1.36 HCL Peripherals Limited 0.05 -

Loans and Advances and Other Recoverables HCL Comnet Limited HCL Peripherals Limited

0.05 0.42

0.04 0.42

33. The company remits the dividends to its non resident shareholders in Indian Rupees. 34. Previous years figures have been regrouped / recasted, where necessary, to confirm to current years presentation.

HCL Infosystems Annual Report 2008-09 | 119

BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE


Registration Details Corporation Identity Number (CIN) L 7 2 2 0 0 D L 1 9 8 6 P L C 0 2 3 9 5 5 State Code 5 5 Balance Sheet Date 3 0 D D 0 6 M M 2 0 0 9 Y Y Y Y

Capital Raised During the Year (Amount in Rs. Thousands) Public Issue N I L Rights Issue N I L Private Placement N I L

Bonus Issue N I L

Position of Mobilisation and Deployment of funds (Amount in Rs. Thousands) Total Liabilities Sources of Funds 1 3 5 9 2 0 6 9 Paid-up Capital 3 4 2 4 2 4 Secured Loans 1 0 1 8 4 9 4 Application of Funds Net Fixed Assets 1 6 0 1 3 0 9 Net Current Assets 9 1 8 8 9 8 4 Accumulated Losses N I Performance of Company Turnover 1 2 2 4 4 3 3 0 3 (Please tick Appropriate box + for Profit, - for Loss) Profit/ Loss before Tax + 3 7 3 8 6 0 4 L Total Expenditure 1 1 8 7 0 4 6 9 9 Profit/ Loss After Tax + 2 6 0 4 3 7 1 Total Assets 1 3 5 9 2 0 6 9 Reserves and Surplus 1 0 9 8 1 1 5 1 Unsecured Loans 1 2 5 0 0 0 0 Investments 2 7 6 0 9 5 7 Misc. Expenditure N I L

Earning Per Share in Rs. 1 5 . 2 1

Dividend Rate (%) 3 2 5

Generic Name of Three Principal Products/ Services of Company (as per monetary terms.) Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description 8 4 7 1 C O M P U T E R S 8 5 1 7 T E L E C O M M U N I C A T I 8 4 4 3 O F F I C E A U T O M A T I O N P R O D U C T S O N P R O D U C T S

HCL Infosystems Annual Report 2008-09 | 120

CONSOLIDATED ACCOUNTS

HCL Infosystems Annual Report 2008-09 | 122

AUDITORS REPORT
Report of the Auditors to the Board of Directors of HCL Infosystems Limited on the Consolidated Financial Statements of HCL Infosystems and its Subsidiaries. 1. We have audited the attached consolidated Balance Sheet of HCL Infosystems Limited and its subsidiaries and joint venture of a subsidiary (the Group), as at June 30, 2009, the consolidated Profit and Loss Account and consolidated Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These consolidated financial statements are the responsibility of Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We did not audit the financial statements of the joint venture of a subsidiary whose financial statements reflect total assets of Rs. 0.50 crores as at June 30, 2009 and there is no revenue for the period ended on that date, considered in the consolidated financial statements. Attention is invited to Note No. 19 of Notes to Accounts (Schedule 21) regarding the Joint Venture whose financial statements are unaudited, the impact of which is not likely to be material. We report that the consolidated financial statements have been prepared by HCL Infosystems Limiteds management in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements and Accounting Standard (AS) 27 Financial Reporting of Interests in Joint Ventures, notified under Section 211(3C) of the Companies Act, 1956 and on the basis of the separate audited financial statements of HCL Infosystems Limited and its subsidiaries and joint venture, included in the consolidated financial statements. On the basis of the information and explanations given to us and on consideration of the separate audit reports on individual audited financial statements of HCL Infosystems Limited and its aforesaid Subsidiaries and joint venture, in our opinion, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: a. b. c. in case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Group as at June 30, 2009; in case of the Consolidated Profit and Loss Account, of the consolidated results of operations for the Group for year ended on that date; and in case of the Consolidated Cash Flow Statement, of the Consolidated Cash Flows of the Group for the year ended on that date.

2.

3.

4.

5.

Place : New Delhi Date : September 8, 2009

V. Nijhawan Partner Membership No. F 87228 For and on behalf of Price Waterhouse Chartered Accountants

HCL Infosystems Annual Report 2008-09 | 123

CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE


As at 30.06.2009 Rs./Crores As at 30.06.2008 Rs./Crores

Schedule (Note No.) Sources of Funds: Shareholders Funds : Capital Reserves and Surplus Loan Funds: Secured Loans Unsecured Loans Deferred Tax Liabilities (Net) 1 2 3 4 21 (5 b)

34.24 1087.66 101.85 125.00 1348.75

34.23 981.96 1.52 353.00 6.72 1377.43

Application of Funds: Fixed Assets: Gross Block Less: Depreciation Net Block Capital Work-in-Progress (Including Capital Advances) Investments Deferred Tax Assets (Net) Current Assets, Loans and Advances: Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loans and Advances 5 290.16 122.21 167.95 17.26 6 21 (5 b) 7 8 9 10 11 889.09 1506.31 210.07 104.68 201.44 2911.59 Less: Current Liabilities and Provisions Current Liabilities Provisions 12 1935.40 78.33 2013.73 Net Current Assets 897.86 1348.75 Consolidated Significant Accounting Policies Consolidated Notes to Accounts 20 21 1643.36 69.15 1712.51 992.01 1377.43 270.87 116.36 154.51 15.30

185.21 260.04 5.64

169.81 215.61 -

898.53 1248.08 319.20 95.20 143.51 2704.52

This is the Consolidated Balance Sheet referred to in our report of even date

The schedules referred to above form an integral part of the Consolidated Balance Sheet For and on behalf of the Board of Directors

V. NIJHAWAN Partner Membership Number F-87228 For and on behalf of Price Waterhouse Chartered Accountants Place : New Delhi Date : September 08, 2009

AJAI CHOWDHRY Chairman and Chief Executive Officer SUSHIL KUMAR JAIN Company Secretary

J.V. RAMAMURTHY Chief Operating Officer

SANDEEP KANWAR Chief Financial Officer

HCL Infosystems Annual Report 2008-09 | 124

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
Year ended 30.06.2009 Rs./Crores 12378.49 126.08 12402.62 158.00 Year ended 30.06.2008 Rs./Crores

Schedule (Note No.) Income Business Income Less : Excise Duty Other Income Expenditure Cost of Goods and Services Sold Personnel Administration, Selling, Distribution and Others Repairs Finance Charges License Fees Depreciation and Amortisation Less : Transfer from Revaluation Reserve 13 14

12252.41 37.13 12289.54

12244.62 49.94 12294.56 11188.62 301.17 294.61 11.63 47.60 2.18

15 16 17 18 19 5 21.30 0.05

11160.87 338.23 359.42 11.68 44.66 2.12 21.25 11938.23 351.31 18.67 0.05

18.62 11864.43 430.13

Profit before Tax Tax Expense 21 (5 b) - Current [Wealth tax Rs. 0.02 Crores (2008 - Rs. 0.02 Crores)] - Fringe Benefit - Deferred Profit after Tax Add: Balance in Profit and Loss Account brought forward Adjustments due to scheme of arrangement Profit available for Appropriation Less: Appropriations: Debenture Redemption Reserve Proposed Dividend Corporate Dividend Tax on Proposed Dividend Interim Dividend [including Rs. 0.00 Crores (2008-Rs. 0.20 Crores) paid for previous year] Corporate Dividend Tax on Interim Dividend Transfer to General Reserve Balance Carried over Earning per equity share (in Rs.) Basic (of Rs. 2/- each) Diluted (of Rs. 2/- each) Consolidated Significant Accounting Policies Consolidated Notes to Accounts

122.17 1.55 (12.36)

111.36 239.95 713.14 (1.91) 951.18 4.00 25.68 4.36 85.59 14.55 26.05 790.95 951.18

131.50 4.11 (5.63)

129.98 300.15 603.57 903.72 34.23 5.82 102.61 17.44 30.47 713.14 903.72 17.61 17.38

21 (9) 21 (9) 20 21

14.02 14.02

This is the Consolidated Profit and Loss Account referred to in our report of even date

The schedules referred to above form an integral part of the Consolidated Profit and Loss Account For and on behalf of the Board of Directors

V. NIJHAWAN Partner Membership Number F-87228 For and on behalf of Price Waterhouse Chartered Accountants Place : New Delhi Date : September 08, 2009

AJAI CHOWDHRY Chairman and Chief Executive Officer SUSHIL KUMAR JAIN Company Secretary

J.V. RAMAMURTHY Chief Operating Officer

SANDEEP KANWAR Chief Financial Officer

HCL Infosystems Annual Report 2008-09 | 125

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE
Year ended 2009 Rs./Crores 1 Cash Flow from Operating Activities: Net profit before tax Adjustments for: Depreciation Interest Expense Interest Income Dividend Income Loss on Sale of Fixed Assets Fixed Assets Written Off (Profit)/Loss on sale of Investments Provision for Doubtful Debts and Bad Debts written off Provision Doubtful Loans and Advances Provision For Other Current Assets Provisions/Liability no longer required written back Provision for Gratuity and other Employee Benefits Provision for diminution in value of Investments Unrealised foreign exchange (gain) /loss Provision for warranty liability Operating profit before working capital changes Adjustments for changes in working capital : - (Increase)/Decrease in Sundry Debtors - (Increase)/Decrease in Other Current Assets, Loans and Advances - (Increase)/Decrease in Inventories - Increase/(Decrease) in Current Liabilities and Provisions Cash generated from operations - Taxes (Paid)/Received (Net of Tax Deducted at Source) Net cash from Operating Activities 2. Cash Flow from Investing Activities: Purchase of fixed assets Additions during the period (excludes Exchange Fluctuation) Capital Work in Progress Proceeds from Sale of fixed assets Proceeds from Sale of Investments Purchase of investments Interest Received Dividend Received Net cash from/(used in) investing activities (B) (36.99) 2.27 1.71 1,990.83 (2034.37) 7.59 4.61 (64.35) (52.23) 11.51 2.51 3,611.33 (3,553.81) 7.92 14.50 41.73 (A) 9.45 276.98 (72.30) 372.08 (107.73) 264.35 (106.65) 236.84 (180.95) 303.46 (152.12) 151.34 (282.15) (76.58) (238.15) (72.99) 21.25 44.66 (7.47) (4.61) 0.30 0.12 (0.93) 26.00 5.49 0.38 (18.32) 5.56 0.04 7.70 12.90 93.07 444.38 18.62 47.60 (7.87) (14.50) (1.75) 2.34 (16.66) 4.43 0.21 8.54 13.32 54.28 484.41 351.31 430.13 Year ended 2008 Rs./Crores

HCL Infosystems Annual Report 2008-09 | 126

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE
Year ended 2009 Rs./Crores 3. Cash Flow from financing activities: Share Capital issued Share Premium Received (Net) Secured Loan Short term received/(paid) Long term received Long term paid Unsecured Loan Short term received/(paid) Long term received Long term paid Interest Paid Dividend Paid Dividend Tax Paid Net cash from/(used in) financing activities (C) 0.01 0.26 (1.52) 103.59 (1.74) (147.47) (81.45) (40.90) (119.55) (20.36) (309.13) (109.13) 319.20 210.07 0.40 16.12 (4.50) (6.00) 183.33 67.94 (123.06) (46.43) (136.12) (23.20) (71.52) 121.55 197.65 319.20 Year ended 2008 Rs./Crores

Net Increase/(Decrease) in Cash & Cash Equivalents (A+B+C) Opening Balance of Cash and Cash Equivalents Closing Balance of Cash and Cash Equivalents [Includes exchange rate fluctuation of Rs. 1.04 Crores (2008-Rs. 0.14 Crores)] Cash and cash equivalents comprise Cash,Cheques and Drafts (in hand) Balance with Scheduled Banks in Current Accounts Balance with Scheduled Banks in Deposits Accounts Balance with Non-Scheduled Banks in Current Accounts

210.07 52.62 140.95 8.49 8.01

319.20 100.62 217.32 0.79 0.47

Notes: 1 The above Consolidated Cash Flow Statement has been prepared under the indirect method set out in Accounting Standard-3, notified u/s 211(3C) of Companies Act, 1956. 2 Cash and cash equivalents include the following balances with scheduled banks which are not available for use by the company: Year ended Year ended 2009 2008 Rs./Crores Rs./Crores Deposit Accounts Unclaimed Dividend Margin Money for Bank Guarantee 3 Schedule 1 to 21 form integral part of the Consolidated Cash Flow Statement 4 Figures in brackets indicate cash outgo. This is the Consolidated Cash Flow Statement referred to in our report of even date For and on behalf of the Board of Directors V. NIJHAWAN Partner Membership Number F-87228 For and on behalf of Price Waterhouse Chartered Accountants Place : New Delhi Date : September 08, 2009 HCL Infosystems Annual Report 2008-09 | 127 AJAI CHOWDHRY Chairman and Chief Executive Officer SUSHIL KUMAR JAIN Company Secretary J.V. RAMAMURTHY Chief Operating Officer SANDEEP KANWAR Chief Financial Officer 3.35 3.22 0.32 2.94 0.43

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE


As at 30.06.2009 Rs./Crores 1- Capital [Schedule-21, Note 6 & 13] Authorised: 55,00,00,000 (2008 - 55,00,00,000 Equity shares of Rs. 2/- each) 5,00,000 (2008 - 5,00,000) Preference Shares of Rs. 100/- each As at 30.06.2008 Rs./Crores

110.00 5.00 115.00

110.00 5.00 115.00

Issued, Subscribed and Paid up: 17,12,12,031 (2008 - 17,11,49,656) Equity shares of Rs. 2/- each, fully paid up. Add : Shares Forfeited [Represents Rs. 1000 (2008 - Rs. 1000)]
Notes:1. Paid up share capital includes :

34.24 0.00 34.24

34.23 0.00 34.23

a) 5,04,47,295 (2008 - 5,04,47,295) Equity Shares of Rs. 2/- each issued pursuant to contract without payment being received in cash. b) 5,31,82,765 (2008 - 5,31,82,765) Equity Shares of Rs. 2/- each Bonus shares issued from Securities Premium Account. c) 1,15,84,715 (2008 - 1,15,22,340) Equity Shares of Rs. 2/- each issued pursuant to the exercise of options granted under Employee Stock Option Scheme 2000. d) 80,021 (2008 - 80,021) Equity Shares of Rs. 2/- each issued pursuant to the exercise of options granted under Employee Stock Based Compensation Plan 2005. 2. Of the above subscribed shares, 7,58,79,734 (2008 - 7,46,51,388) Equity Shares of Rs. 2/- each are held by HCL Corporation Limited.

2- Reserves and Surplus [Schedule-21, Notes 6 and 15]

As at 01.07.2008 Rs./Crores 0.00 (-) 124.91 (108.79) 141.04 (110.57) 2.87 (2.92) 713.14 (603.57) 981.96 (825.85)

Additions/ Adjustments Rs./Crores (-) 0.80 (22.66) 26.05 (30.47) 4.00 (-) 77.81 (109.57) 108.66 (162.70)

Deductions/ Adjustments Rs./Crores (-) 0.09 (6.54) (-) 2.87 (0.05) (-) 2.96 (6.59)

As at 30.06.2009 Rs./Crores 0.00 (-) 125.62 (124.91) 167.09 (141.04) 4.00 (2.87) 790.95 (713.14) 1087.66 (981.96)

Capital Reserve [Represents Rs. 37,135 (2008 - Rs. 37,135)] Securities Premium Account General Reserve Debenture Redemption Reserve Revaluation Reserve (Adj.) Profit and Loss Account

Notes:1 Addition to the Securities Premium Account is in respect of allotment of equity shares of Rs. 2 each to employees of the company and its subsidiaries under the Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005 is Rs. 0.36 Crores (2008 Rs. 22.66 Crores ) . 2 Deduction from the Securities Premium Account is in respect of the amount paid towards Fringe benefit tax on exercise of options granted under Employee Stock Option Scheme 2000 and Employee Stock Based Compensation Plan 2005. 3 Previous years figures are given in brackets. HCL Infosystems Annual Report 2008-09 | 128

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE


As at 30.06.2009 Rs./Crores 3- Secured Loans Long Term Debentures Loans from Banks: - Cash Credits Loans from Others: - Long Term Loan Finance Lease Obligation 21.85 101.85 Notes:1) The Company issued 800 Rated taxable Secured Redeemable Non-Convertible Debentures of face value of Rs. 10 lakhs each, aggreagating to Rs. 80.00 Crores, at a coupon rate 12.75% per annum payable annually on private placement basis to Life Insurance Corporation of India on December 19, 2008. These Debentures are redeemable at par at the end of 5th year from the date of allotment, with a call option excercisable by the issuer, only at the end of 3 years from the date of allotment. Debentures are secured by way of first mortgage and charge on identified immovale and movable assets of the company. 2) Cash Credits along with non-fund based facilities from Banks 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. The charge ranks pari-passu amongst Bankers. 3) Term loan from others is secured by way of first charge on IT and Telcommunication assets. 4) Payable within one year Rs. 4.82 crores (2008-Rs. 1.52 Crores). 0.06 1.52 1.46 80.00 As at 30.06.2008 Rs./Crores

4- Unsecured Loans Public Deposits Short term Loans From Banks Commercial Paper Foreign Currency Loan Others From Others Commercial Paper Others 0.01

20.00 105.00 125.00

20.00 106.21 0.34 145.00 81.44 353.00

Note: Amount payable within one year is Rs. 125.00 Crores (2008 - Rs. 353.00 Crores)

HCL Infosystems Annual Report 2008-09 | 129

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE


5- Fixed Assets [Schedule-21, Notes 1, 2, 7(b), and 15]
Gross Block
As at 01.07.2008 Additions/ Adjusments during the Year Tangible: Land - Leasehold Land - Freehold Leasehold Premises Buildings Plant and Machinery, Air Conditioners and Networking Equipments Furniture, Fixtures and Office Equipment Vehicles - Owned - Leased Intangible : Goodwill Software License Fees TOTAL Previous Year Capital Work-in-Progress [Including Capital Advances of Rs. 0.87 Crores (2008 - Rs. 3.92 Crores)] Notes:1. 2. Land-Freehold and Building at Ambattur amounting to Rs.0.57 Crores (2008 - Rs.0.57 Crores) are pending registration in the name of the company. Software comprise of cost of acquiring licences and implementation charges. 4.22 5.16 2.50 270.87 223.78 0.87 41.33 52.19 4.14 1.52 22.04 5.10 0.08 4.51 2.50 290.16 270.87 3.45 0.25 116.36 99.37 0.88 0.13 21.63 19.64 1.26 15.78 2.65 3.07 0.38 122.21 116.36 17.26 185.21 15.30 169.81 0.08 1.44 2.12 167.95 4.22 1.71 2.25 154.51 61.68 1.48 0.16 14.42 0.19 8.25 0.20 0.16 67.85 1.47 40.44 0.92 0.09 8.99 0.25 6.89 0.18 0.09 42.54 0.99 25.31 0.48 21.24 0.57 0.06 10.88 25.61 1.82 75.19 82.17 2.05 0.06 8.05 15.69 0.03 7.74 12.93 25.67 1.82 83.21 90.12 0.62 0.09 13.42 57.08 0.15 0.03 1.98 9.22 0.01 7.35 0.77 0.12 15.39 58.95 12.16 25.67 1.70 67.82 31.17 10.26 25.61 1.73 61.77 25.09 Deductions/ Adjustments/ Retired during the Year As at 30.06.2009 As at 01.07.2008

Rs./Crores Depreciation
Additions/ Adjustments during the Year Deductions Adjustments/ Retired during the Year As at 30.06.2009 As at 30.06.2009

Net Block
As at 30.06.2008

6- Investments
As at 30.06.2009 Units Unquoted (Others) : Current Dividend Options HSBC Liquid Plus IDFC Floating Rate Fund - Long Term Plan IDFC Money Manager Fund ICICI Prudential Flexible Income Plan Kotak Flexi Debt- Quarterly Dividend Kotak Flexi Debt- Daily Dividend Reliance Liquid Plus Reliance Money Manager Fund Institutional Option- Weekly Dividend Tata Floater Fund UTI Liquid Cash Plan HDFC Cash Management Fund Principal Cash Management Fund Grindlays Cash Fund - Daily Dividend 179,924 26,444,252 33,970,011 38,790,521 19,630,564 167,269 7,995,757 20,034,216 10,135,922 10 10 1000 10 10 10 18.02 26.66 34.03 39.00 260.04 19.79 17.11 8.01 20.04 10.73 215.61 17,901,873 17,986,279 23,984,230 25,691,455 19,762,322 14,948,452 200,214 10,438,484 29,051,418 40,575,673 24,946,136 320,890 10 10 10 10 10 10 1000 18.00 18.02 24.03 27.07 20.13 15.02 20.06 10.47 29.14 42.80 25.37 32.15 As at 30.06.2008 Units Face Value Rs. As at 30.06.2009 Rs./Crores As at 30.06.2008 Rs./Crores

Note:- Net asset value of Unquoted (Others) Current Investments in Mutual Funds as on June 30, 2009 is Rs. 260.07 Crores (2008 Rs. 215.69 Crores).

HCL Infosystems Annual Report 2008-09 | 130

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE


As at 30.06.2009 Rs./Crores 7- Inventories Raw materials and Components [Including in Transit Rs. 13.15 Crores (2008 - Rs. 36.81 Crores)] Stores and Spares Finished Goods [Including in Transit Rs. 149.30 Crores (2008 - Rs. 118.23 Crores)] Work-In-Progress 89.25 66.64 732.04 1.16 889.09 8- Sundry Debtors - Unsecured Debts outstanding for a period exceeding six months : - Considered Good - Considered Doubtful 529.78 20.35 550.13 Other Debts : - Considered Good Less : Provision for Doubtful Debts 976.53 1526.66 20.35 1506.31 1506.31 9- Cash and Bank Balances Cash balance on hand Cheques in hand Balances with Scheduled Banks : - On Current Account Less :- Money held in Trust - On Dividend Account - On Margin Account - On Fixed Deposits [Includes Escrow Account Rs. 3.35 Crores (2008 Rs. Nil)] Less :- Money held in Trust Balances with Non-Scheduled Banks: - On Current Account Standard Chartered Bank, Singapore-USD [Maximum amount outstanding during the year Rs. 11.15 Crores (2008 - Rs.1.05 Crores)] Standard Chartered Bank, Singapore- SGD [Maximum amount outstanding during the year Rs. 0.04 Crores (2008 - Rs.0.03 Crores)] 0.29 52.33 137.43 0.02 214.34 0.39 0.43 100.19 364.49 3.25 367.74 883.59 1251.33 3.25 1248.08 1248.08 119.67 64.22 712.96 1.68 898.53 As at 30.06.2008 Rs./Crores

137.41 3.22 0.32

213.95 2.94 0.43 1.11 0.79

8.81 0.32

8.49

0.32

7.99

0.44

0.02

8.01

0.03

0.47

210.07 319.20 Note:1) Fixed Deposit includes Rs. 0.06 Crores (2008 - Rs. 0.07 Crores) under lien as margin money on bank guarantee. 2) Balance with current accounts includes Rs. 0.25 Crores which represent 49% share in bank balance of Scout Mobile Internet Services Limited, a Joint Venture with Nokia Corporation, Finland (Refer Note 14 on schedule 21). 10- Other Current Assets- Unsecured [Schedule-21, Notes 3(c) and 7] Considered Good Deposits Lease Rental Recoverable Unbilled Revenue Considered Doubtful Less: Provision for Doubtful Assets

34.55 20.09 50.04 0.38 0.38 104.68 -

27.40 35.63 32.17 95.20

HCL Infosystems Annual Report 2008-09 | 131

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE


As at 30.06.2009 Rs./Crores 11- Loans and Advances - Unsecured [Schedule - Notes 8] Considered Good - Amounts Recoverable in cash or in kind or for value to be received - Balances with Customs, Port Trust, Excise and Sales Tax Authorities Considered Doubtful Less: Provision for Doubtful Loans and Advances 169.76 31.68 201.44 12- Current Liabilities and Provisions [Schedule-21, Notes 4, 5 and 12] Current Liabilities: Acceptances Sundry Creditors : - Due to Micro and Small Enterprises - Other than Micro and Small Enterprises Sundry Deposits Interest accrued but not due : - On Secured Loans - On Unsecured Loans - Others Investor Education and Protection Fund : - Unclaimed Dividend * Advances from Customers Deferred Revenue Other Liabilities 124.93 18.58 143.51 As at 30.06.2008 Rs./Crores

5.49 5.49

438.40 1.76 1199.92 0.60 1170.22

252.82

1201.68 4.15 5.51 3.22 36.94 174.05 71.45 1935.40

1170.82 4.31 1.73 2.94 26.82 147.14 36.78 1643.36 34.23 5.82 3.02 5.65 20.43 69.15 1712.51

Provisions: Proposed Dividend Corporate Dividend Tax on Proposed Dividend For Income Tax [Net of Advance Income Tax of Rs. 387.82 Crores (2008 - Rs. 368.60 Crores)] For Warranty Liability For Gratuity and other Employee Benefits

25.68 4.36 19.00 4.28 25.01 78.33 2013.73

* There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as at June 30, 2009. These shall be credited and paid to the fund as and when due.

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SCHEDULES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
Year ended 30.06.2009 Rs./Crores 13- Business Income Sales and Related Income Services 11724.82 653.67 12378.49 14- Other Income [Schedule-21, Notes 7(a)] Interest : - On Lease Rental - On Fixed Deposits [TDS Rs. 0.13 Crores (2008 - Rs. 0.06 Crores)] - On Other Loans and Advances - On Others Dividend from (Others) Current Investments Insurance Claims Provisions/Liabilities no longer required written back Profit on disposal of (Others) Current Investments Profit on Foreign Exchange Fluctuation Miscellaneous Income 11944.40 458.22 12402.62 Year ended 30.06.2008 Rs./Crores

4.63 1.08 0.01 1.75 0.01 2.32

5.28 0.26

7.47 4.61 0.27 18.32 0.93 5.53 37.13

7.87 14.50 0.10 16.66 1.75 1.66 7.40 49.94

15- Cost of Goods and Services Sold Raw Materials and Components Consumed Purchase of Traded Goods Purchase of Services and Network Operating Cost Stores and Spares Consumed Power and Fuel Labour and Processing Charges Royalty Closing Stock - Finished Goods (Including in Transit) [Including excise duty of Rs. 3.97 Crores (2008 - Rs. 3.43 Crores)] - Work-in-Progress Opening stock - Finished Goods (Including in Transit) [Including excise duty Rs. 3.15 Crores (2008 - Rs. 3.77 Crores)] - Work-in-Progress (Increase)/Decrease in stocks of Finished Goods and Work-in-Progress :

1860.34 8928.35 256.41 28.46 1.72 10.93 93.22 11179.43 732.04 1.16 733.20 712.96 1.68 714.64 (18.56) 11160.87

1753.81 9269.33 114.32 29.38 1.60 10.49 99.52 11278.45 712.96 1.68 714.64 623.58 1.23 624.81 (89.83) 11188.62

16- Personnel [Schedule-21, Note 12] Salaries, Wages, Allowances, Bonus and Gratuity Contribution to Provident and Other Funds Staff Welfare Expenses

317.23 12.32 8.68 338.23

283.02 10.16 7.99 301.17

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SCHEDULES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE
Year ended 30.06.2009 Rs./Crores 17- Administration, Selling, Distribution and Others [Schedule-21,Note 7 (b)] Rent Rates and Taxes Printing and Stationery Communication Travelling and Conveyance Packing, Freight and Forwarding Legal and Professional Training and Conference Office Electricity and Water Insurance Advertisement, Publicity and Entertainment Hire Charges Commission on Sales Bank Charges Provision for Doubtful Debts Provision for Doubtful Loans and Advances Provision for Other Current Assets Loss on Sale of Fixed Assets Fixed Assets written off Loss on Foreign Exchange Fluctuation Diminution in value of Current Investment Miscellaneous 26.62 12.02 3.99 8.79 31.52 51.71 23.93 4.53 10.90 7.71 57.31 4.19 22.39 10.56 20.19 5.49 0.38 0.30 0.12 26.35 0.04 30.38 359.42 18- Repairs Plant and Machinery Buildings Others 1.62 1.40 8.66 11.68 19- Finance Charges Interest on : - Debentures - Other fixed loans - On Others 5.42 22.80 16.44 44.66 32.76 14.84 47.60 1.62 0.84 9.17 11.63 19.50 9.75 3.98 10.71 33.64 55.32 19.00 5.02 8.34 7.27 71.61 4.15 20.03 9.43 2.36 0.21 14.29 294.61 Year ended 30.06.2008 Rs./Crores

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SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
SCHEDULE 20 - CONSOLIDATED SIGNIFICANT ACCOUNTING POLICIES 1. GROUP COMPANIES HCL Infosystems Limited (The Company) has three wholly owned subsidiary companies and Joint venture (JV) (The Group), as given in the following table. Name of the Subsidiary/JV Company HCL Infinet Ltd. (formerly known as Microcomp Limited) HCL Infocom Limited (Refer Note 14 on schedule No. 21) HCL Security Limited Natural Technologies Private Limited (NTPL) (Refer Note 15 on schedule No. 21) Scout Mobile Internet Services Limited (Refer Note 14 on schedule No. 21) Country of Incorporation India India India India India Extent of holding (%) as at June 30 2009 2008 100 100 100 49 100 100 100 -

2. BASIS FOR PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements of the Group have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India and comply with the mandatory Accounting Standards notified under section 211(3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956. Financial statements of the Company and the subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances/ transactions in full as per Accounting Standard 21 on Consolidated Financial Statements. All unrealized surpluses and deficits on transactions between the Group companies are eliminated. Accounting policies between the Group companies are consistent to the extent practicable. Appropriate disclosure is made of significant deviations from the company accounting policies, which have not been adjusted. 3. FIXED ASSETS Fixed Assets including in-house capitalisation and Capital Work-in-Progress are stated at cost except those which are revalued from time to time on the basis of current replacement cost / value to the Group, net of accumulated depreciation. Assets taken on finance lease on or after 1.4.2001 are stated at fair value of the assets or present value of minimum lease payments whichever is lower. Intangible Assets are stated at cost net of amortization. 4. DEPRECIATION (i) Depreciation has been calculated as under: a) Depreciation on fixed assets is provided on a prorata basis using the straightline method based on economic useful life determined by way of periodical technical evaluation: Economic useful lives which are not exceeding those stipulated in Schedule XIV of the Companies Act, 1956 are as under: Plant and Machinery Building - Factory - Others - Capitalised prior to 1.5.1986 - Acquired on or after 1.5.1986 and before 16.12.1993 Furniture & Fixture Air Conditioners 4-6 years 25-28 years 50-58 years As per Section 205(2)(b) of the Companies Act, 1956 At the rates specified in Schedule XIV of the Companies (Amendment) Act, 1988 4-6 years 3-6 years

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SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Vehicles Office Equipment Networking equipment Computers b) 4-6 3-6 3-6 3-5 years years years years

The assets taken on finance lease on or after 1st April, 2001 over their expected useful lives.

(ii) Leasehold assets viz land and vehicles are amortised over the period of lease. Leasehold improvements are amortised on straight line basis over the period of three years or lease period whichever is lower. (iii) Intangible Assets are amortised over a period of 1-3 years. (iv) The One-time license fee capitalised is amortised equally over the balance period of license from the date of payment of license fee. (v) Individual assets costing Rs. 5,000 or less are depreciated/amortised fully in the year of acquisition. 5. INVESTMENTS Current Investments are carried at lower of cost or fair value where fair value for mutual funds is based on net asset value. 6. INVENTORIES Raw Materials and components held for use in the production of inventories and Work-in-Progress are valued at cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. If there is a decline in the price of materials/components and it is estimated that the cost of finished goods will exceed the net realisable value, the materials/components are written down to net realisable value measured on the basis of their replacement cost. Cost is determined on the basis of weighted average or First in First Out (FIFO). Finished Goods and Work in Progress are valued at lower of cost and net realisable value. Cost of Finished Goods and Work in Progress includes cost of raw materials and components, direct labour and proportionate overhead expenses. Cost is determined on the basis of weighted average. Stores and Spares are valued at lower of cost and net realisable value. Adequate adjustments are made to the carrying value for obsolescence. Cost is determined on the basis of weighted average. Goods in Transit are valued inclusive of custom duty, where applicable. 7. FOREIGN CURRENCY TRANSACTIONS a) Foreign currency transactions are recorded at the exchange rates prevailing at the date of transaction. Exchange differences arising on settlement of transactions, are recognised as income or expense in the year in which they arise.

b) At the balance sheet date, all assets and liabilities denominated in foreign currency, are reported at the exchange rates prevailing at the balance sheet date and the resultant gain or loss is recognised in the profit and loss account. c) Pursuant to notification under section 211(3C) of the Companies Act, 1956 issued by Ministry of Corporate Affairs on March 31, 2009 amending Accounting Standard - 11 (AS - 11) The Effects of Changes in Foreign Exchange Rates (revised 2003), exchange differences arising on translation of long term foreign currency monetary items having a term of 12 months or more are recognised as stated below: (i) Exchange differences relating to long term foreign currency monetary items, arising during the year, in so far as they relate to the acquisition of a depreciable capital asset are added to or deducted from the cost of the asset and depreciated over the balance life of the asset.

(ii) In other cases, such differences are accumulated in the Foreign Currency Monetary Translation Difference Account and amortised over the balance period of the long term assets / liabilities but not beyond March 31, 2011. d) In case of forward foreign exchange contracts where an underlying asset or liability exists at the balance sheet date, the difference between the forward rate and the exchange rate at the inception of the contract is recognised as income or expense over the life of the contract. HCL Infosystems Annual Report 2008-09 | 136

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
e) f) In case of forward foreign exchange contracts taken for highly probable/forecast transactions, the net loss, if any, calculated on Mark to Market principle as at the balance sheet date is recorded. Profit or loss arising on cancellation or renewal of a forward contract is recognised as income or expense in the year in which such cancellation or renewal is made.

8. EMPLOYEE BENEFITS Defined Benefit: Liability for gratuity and leave encashment is provided as determined on actuarial valuation made at the end of the year which is computed using projected unit credit method. Gains/losses arising out of actuarial valuation are recognised immediately in the profit and loss account as income/expense. Defined Contribution: Groups contributions towards recognised Provident Fund and Superannuation Fund are accounted for on accrual basis. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the provident fund trust and the notified interest rate. The Company makes defined contribution to a superannuation trust established for the purpose. The Company has no further obligations beyond its monthly contributions. 9. REVENUE RECOGNITION a) Sales, after adjusting trade discount, are inclusive of excise duty and the related revenue is recognised (after providing for expenses to be incurred connected to such sales) on transfer of all significant risks and rewards to the customer and when no significant uncertainty exists regarding realisation of the consideration.

b) Composite contracts, outcome of which can be reliably estimated, where no significant uncertainty exists regarding realisation of the consideration, revenue is recognised in accordance with the percentage completion method, under which revenue is recognised on the basis of cost incurred as a proportion of total cost expected to be incurred. The foreseeable losses on the completion of contract, if any, are provided for. c) Service income includes income i) From maintenance of products and facilities under maintenance agreements, and extended warranty, which is recognised upon creation of contractual obligations rateably over the period of contract, where no significant uncertainty exists regarding realisation of the consideration. From software services (a) The revenue from time and material contracts is recognised based on the time spent as per the terms of contracts. (b) In case of fixed priced contracts revenue is recognised on percentage of completion basis. Foreseeable losses, if any, on contract completion are recognised immediately. iii) Virtual private networks: Revenue is recognised on proportionate basis over the period of contract with the customer. One time charges recovered from the customers are recognised as revenue at the commencement of service. iv) Technical help desk: The Group is engaged in providing technical and administrative help desk support to its various customers through the Web. Revenue for the same has been recognised based on fulfilling obligations as contracted in the respective agreements. 10. GOVERNMENT GRANTS Revenue grants, where reasonable certainty exists that the ultimate collection will be made, are recognized on a systematic basis in profit and loss statement over the periods necessary to match them with the related cost which they are intended to compensate. 11. LICENSE FEES REVENUE SHARE With effect from December 16th, 2004 the variable license fee computed at prescribed rate of revenue share is being charged to the Profit and Loss Account in the year in which the related revenue from the Groups Networking and Internet related products and services segment arises.

ii)

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SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
12. ROYALTY Royalty expense, net of performance based discounts, is recognised when the related revenue is recognised. 13. LEASES i) Assets taken under leases where the Group has substantially all the risks and rewards of ownership are classified as Finance leases. Such assets are capitalised at the inception of the lease at the lower of fair value or the present value of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate of interest on outstanding liability for each period.

ii) Assets taken on leases where significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals are charged to the Profit and Loss Account on straight line basis over the lease term. iii) Profit on sale and leaseback transactions is recognised over the period of the lease. iv) Assets given under finance lease are recognised as receivables at an amount equal to the net investment in the lease. Inventories given on finance lease are recognised as deemed sale at fair value. Lease income is recognised over the period of the lease so as to yield a constant rate of return on the net investment in the lease. v) Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over the lease term.

vi) Initial direct costs relating to the finance lease transactions are included as part of the amount capitalised as an asset under the lease. 14. SEGMENT ACCOUNTING The segment accounting policy is in accordance with the policies consistently used in the preparation of financial statements of the Group. The basis of reporting is as follows: a) Revenue and expenses distinctly identifiable to a segment are recognised in that segment. Identified expenses include direct material, labour, overheads and depreciation on Fixed Assets. Expenses that are identifiable with/ allocable to segments have been considered for determining segment results. Allocated expenses include support function costs which are allocated to the segments in proportion of the services rendered by them to each of the business segments. Depreciation on Fixed Assets is allocated to the segments on the basis of their proportionate usage. b) Unallocated expenses/income are enterprise expenses/income, which are not attributable or allocable to any of the business segment. c) Assets and liabilities which arise as a result of operating activities of the segment are recognised in that segment. Fixed Assets which are exclusively used by the segment or allocated on a reasonable basis are also included.

d) Unallocated assets and liabilities are those which are not attributable or allocable to any of the segments and includes liquid assets like Investments, Bank Deposits; and Investments in assets given on finance lease. e) Segment revenue resulting from transactions with other business segments is accounted on the basis of transfer price which is at par with the prevailing market price.

15. BORROWING COSTS Borrowing costs to the extent related/attributable to the acquisition/construction of assets that necessarily take substantial period of time to get ready for their intended use are capitalised along with the respective fixed asset up to the date such asset is ready for use. Other borrowing costs are charged to the Profit and Loss Account. 16. INCOME TAXES The current charge for income taxes including fringe benefit tax is calculated in accordance with the relevant tax regulations. Deferred tax assets and liabilities are recognised for timing differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates that have been enacted or substantially enacted tax rates at the balance sheet date. Deferred tax asset HCL Infosystems Annual Report 2008-09 | 138

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
is recognized and carried forward when it is virtually certain that sufficient taxable profits will be available in future against which deferred tax assets can be realised. 17. PROVISIONS AND CONTINGENCIES The Group creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that probably will not require an outflow of resources or where a reliable estimate of the amount of the obligation cannot be made. 18. USE OF ESTIMATES The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Examples of such estimates include estimate of cost expected to be incurred to complete performance under composite arrangements, income taxes, provision for warranty, employment retirement benefit plans, provision for doubtful debts and estimated useful life of the fixed assets. The actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. 19. EMPLOYEE STOCK OPTION SCHEME The Company calculates the employee stock compensation expense based on the intrinsic value method wherein the excess of market price of underlying equity shares as on the date of the grant of options over the exercise price of the options given to employees under the Employee Stock Option Scheme of the Company, is recognised as deferred stock compensation expense and is amortised over the vesting period on the basis of Generally Accepted Accounting Principles in accordance with the guidelines of Securities and Exchange Board of India.

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SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
SCHEDULE 21 - NOTES TO ACCOUNTS 1. Land and Buildings and certain Plant and Machinery were revalued by 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: Land Land Leasehold Land Leasehold Premises Buildings Buildings Plant and Machinery Total Less : Goodwill Transferred to Revaluation Reserve Less: -Expenditure incurred on acquisition of business in 1992 -Loss on sale of Land -Depreciation and Amortisation -Cancellation on consolidation of HCL Infinet Limited -Adjusted on amalgamation of Stelmac Engineering Private Limited -Adjusted on amalgamation of Natural Technologies Private Limited Balance as at June 30, 2009 Date of Revaluation June 30, 1992 November 1, 2006 March 27, 2006 and August 13, 2007 April 24, 2005 June 30, 1992 November 1, 2006 June 30, 1992 Rs./Crores 4.44 16.78 2.53 1.81 6.44 0.25 (1.01) 31.24 5.70 25.54 0.86 0.15 0.33 1.81 16.70 5.69 -

2. Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for amount to Rs. 2.48 Crores (2008Rs.8.73 Crores ) 3. Contingent Liabilities: (a) Claims against the Company not acknowledged as debts: 2009 Rs./Crores Sales Tax* Excise* Income Tax* Industrial Disputes, Civil Suits and Consumer Disputes 21.21 10.86 2.94 10.14 2008 Rs./Crores 8.66 14.87 1.59 8.37

*Against the above, the Group has deposited a sum of Rs. 5.29 Crores (2008 - Rs. 3.19 Crores) The amounts shown in the item (a) represents the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the outcome of the different legal processes which have been initiated by the company or the claimants as the case may be and therefore cannot be predicted accurately. b) (i) Corporate Guarantee of Rs. 6.50 Crores (2008 - Rs. 6.50 Crores) was given to a Bank for working capital facilities and Rs. 6.07 Crores (2008- Rs. Nil) was given to a non-banking finance company for operating lease sanctioned to a 100% subsidiary, HCL Infinet Limited (Formerly Microcomp Limited) against which the total amount utilised as at June 30, 2009 is Rs. 4.25 Crores and Rs. 6.07 Crores (2008 - Rs. 2.25 Crores) respectively. (ii) Corporate Guarantee of Rs. 5.00 Crores has been given to a Bank for working capital facilities sanctioned to a 100% subsidiary, HCL Security Limited against which the total amount utilised as at June 30, 2009 is Rs. 0.99 Crores (2008 - Rs. Nil). c) The Company has transferred Financial Assets (Lease Rental Recoverable) to a bank under a financing arrangement for which the balance outstanding with the bank as on June 30, 2009 is Rs. 21.12 Crores (2008 Rs. 30.55 Crores). The transfer of these Financial Assets is with recourse to the Company.

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SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
4. The company has the following warranty provision in the books of accounts: 2009 Rs./Crores Opening Balance as on July 1 Additions during the year Utilised/Reversed during the year Closing Balance as on June 30 5.65 12.90 14.27 4.28 2008 Rs./Crores 3.80 13.32 11.47 5.65

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, it is not possible to estimate the timing of cash outflows due to uncertainties relating to the outflows of economic benefits. 5. 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, 2009, although the actual tax liability of the Group has to be computed each year by reference to taxable profit for each fiscal year ended March 31. Deferred Tax: Major Components of Deferred Tax arising on account of temporary timing difference along with their movement as at June 30, 2009 are: Rs./Crores As at 30.06.08 Assets Allowances for doubtful debts/Advances/Other Current Assets Expense accruals (Bonus, Gratuity, Leave Encashment and Provision for warranty) Other timing differences Depreciation Income Tax Loss Total (A) Liabilities Lease rental recoverable Cenvat balances with excise authorities Taxes deposited under protest for excise duty, custom duty and sales tax Other timing differences Total (B) Net Deferred Tax Assets/(Liability) (A)-(B) Previous Year c) Fringe Benefit Tax: The Finance (No. 2) Act, 2009, which was introduced in the parliament on July 6, 2009 has received assent of President of India on August 19, 2009, has abolished Fringe Benefit Tax with effect from April 1, 2009. Consequently, no Fringe Benefit Tax has been provided for the period April 1, 2009 to June 30, 2009. 6. 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 over a period of 42 and 60 months respectively from the date of grant and are to be exercised within 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). 0.58 10.44 2.12 13.14 9.80 10.06 19.86 (6.72) (12.48) Movement As at during the year 30.06.09 7.53 1.74 0.01 (1.42) 1.48 9.34 (5.15) (0.16) 2.89 (0.60) (3.02) 12.35 5.76 8.11 12.18 0.01 0.70 1.48 22.48 4.65 (0.16) 2.89 9.46 16.84 5.63 (6.72)

b)

HCL Infosystems Annual Report 2008-09 | 141

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Details of Grants made under Employee Stock Option Scheme 2000. Date of grant Exercise price Options of the option outstanding for five equity at the Shares of beginning Rs. 2/- each of the year 289.00 538.15 603.95 809.85 809.30 834.40 789.85 770.15 756.15 978.75 1144.00 1271.25 648.75 898.25 TOTAL 18025 (35195) 225619 (560758) 59072 (89619) 185309 (225350) 1600 (3500) 30170 (44488) 5784 (13848) 8270 (9240) 2435 (11840) 11978 (18384) 24990 (25630) 13620 (13620) 144300 (158000) 88200 (-) 819372 (1209472) Options granted during the year (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (105000) (105000) Options forfeited during the year (-) (1864) (4736) (6912) (-) (5004) (3072) (-) (1280) (2784) 2560 (640) 1792 (-) 2100 (7000) 13598 (16800) 20050 (50092) Options exercised during the year 12195 (10460) 280 (310058) (19775) (23897) (1900) (3794) (960) (970) (3565) (1318) (-) (-) (6700) (-) 12475 (383397) Options Options expired outstanding during at the end the year of the year 5830 (6710) 11176 (23217) 8139 (6036) 13227 (9232) (-) 4098 (5520) (4032) (-) 1760 (4560) 1536 (2304) 4800 (-) 2688 (-) 900 (-) 1777 (-) 55931 (61611) (18025) 214163 (225619) 50933 (59072) 172082 (185309) 1600 (1600) 26072 (30170) 5784 (5784) 8270 (8270) 675 (2435) 10442 (11978) 17630 (24990) 9140 (13620) 141300 (144300) 72825 (88200) 730916 (819372) Options exercisable at the end of the year (18025) 214163 (225619) 50933 (59072) 172082 (97457) 1600 (-) 26072 (18224) 5784 (3470) 8270 (4574) 675 (35) 10442 (7754) 17630 (15378) 9140 (8172) 82100 (38600) 22316 (-) 621207 (496380)

10/Aug/00 28/Jan/04 25/Aug/04 18/Jan/05 15/Feb/05 15/Mar/05 15/Apr/05 14/May/05 15/Jun/05 15/Jul/05 13/Aug/05 15/Sep/05 15/Mar/07 23/Jan/08

Note: Previous years figures are given in brackets. Details of Grants made under Employee Stock Based Compensation Plan 2005. Date of grant Exercise price Options of the option outstanding for five equity at the Shares of beginning Rs. 2/- each of the year 1144.00 1157.50 1267.75 1348.25 1300.00 1308.00 1031.00 2207129 (2430660) 60950 (67340) 21200 (22928) 21100 (25260) 24550 (31754) 5874 (7374) 37740 (39940) Options granted during the year (-) (-) (-) (-) (-) (-) (-) Options forfeited during the year 107644 (139190) 7420 (4090) 2310 (1400) 3480 (2130) 3540 (5160) 360 (1200) 8664 (1760) Options exercised during the year (9074) () (-) (-) () (-) (-) Options Options expired outstanding during at the end the year of the year 117360 1982125 (75267) (2207129) 6750 46780 (2300) (60950) 1940 16950 (328) (21200) 2970 14650 (2030) (21100) 3200 17810 (2044) (24550) 464 5050 (300) (5874) 5976 23100 (440) (37740) Options exercisable at the end of the year 1197061 (891173) 28368 (24588) 10170 (8720) 8790 (8470) 10866 (10060) 3030 (2388) 14740 (15216)

13/Aug/05 19/Oct/05 15/Nov/05 15/Dec/05 14/Jan/06 15/Feb/06 16/Mar/06

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SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Date of grant Exercise price Options Options of the option outstanding granted for five equity at the during Shares of beginning the year Rs. 2/- each of the year 17/Apr/06 868.75 10820 (15400) (-) 15/May/06 842.50 19330 (30150) (-) 15/Jun/06 620.50 24480 (31510) (-) 17/Jul/06 673.75 27470 (36380) (-) 15/Mar/07 648.75 402820 (431100) (-) 23/Jan/08 898.25 256050 (-) (293475) TOTAL 3119513 (3169796) (293475) Note: Previous year's figures are given in brackets. 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: Employee Stock Option Plan 2000 45% to 68% 4.57% to 7.99% Rs. 538.15 to Rs. 1271.25 2.20 to 5.50 9% to 28% 8.5 Years Rs. 35.10 to Rs. 203.14 Employee Stock Based Compensation Plan 2005 47% to 62% 6.49% to 7.98% Rs. 620.50 to Rs. 1348.25 2.50 to 7.00 10% to 28% 10 Years Rs. 24.75 to Rs. 262.97 Options forfeited during the year 2160 (3200) 1830 (8830) 4270 (5256) 3480 (7160) 10640 (21860) 44280 (37425) 200078 (238661) Options exercised during the year (-) (-) (430) (80) (6420) (-) (16004) Options Options expired outstanding during at the end the year of the year 1760 6900 (1380) (10820) 1800 15700 (1990) (19330) 2260 17950 (1344) (24480) 2200 21790 (1670) (27470) 4220 387960 (-) (402820) 780 210990 (-) (256050) 151680 2767755 (89093) (3119513) Options exercisable at the end of the year 4140 (4520) 9420 (8080) 10710 (9630) 8812 (5526) 155220 (77700) 42630 (-) 1503957 (1066071)

Volatility Risk free rate Exercise Price Time to Maturity (years) Dividend Yield Life of options Fair Value of options as at the grant date

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, 2009 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: Proforma disclosures 2009 Rs./Crores 239.95 4.78 235.17 2008 Rs./Crores 300.15 8.26 291.89

Profit/(Loss) after tax as per Profit and Loss Account (a) Add: Employee Stock Compensation Expense as per Intrinsic Value Method Less: Employee Stock Compensation Expense as per Fair Value Method Profit/(Loss) after tax recomputed for recognition of employee stock compensation expense under fair value method (b)* Earning Per Share based on earnings as per (a) above: (Refer note 9) - Basic - Diluted Earning Per Share had fair value method been employed for accounting of employee stock options: - Basic - Diluted * Excludes impact on tax expense of employee stock compensation expense. HCL Infosystems Annual Report 2008-09 | 143

Rs. 14.02 Rs. 14.02

Rs. 17.61 Rs. 17.38

Rs. 13.74 Rs. 13.74

Rs. 17.12 Rs. 16.90

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
7. Leases : a) Finance Leases: (i) The Company has given on finance lease certain Assets/Inventories which comprise of computers 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. (ii) The gross investment in the assets given on finance leases as at June 30, 2009 and its present value as at that date are as follows [Refer Note 4(c)]: Rs./Crores Total minimum lease payments receivable Not later than one year Later than one year and not later than five years Total Note: Previous years figures are given in brackets. b) Operating Leases: (i) Cancelable Operating Leases (a) The Group has taken various residential /commercial premises under cancelable operating leases. These leases are normally renewable on expiry. (b) The rental expense in respect of operating leases is Rs. 26.62 Crores (2008-Rs. 19.50 Crores) (c) The gross carrying amount, accumulated depreciation and depreciation expense in respect of building and office automation products i.e. photocopying machines given on operating lease are as below: 2009 Rs./Crores Gross Block Accumulated Depreciation Net Block Depreciation Expense (ii) Non-cancelable Operating Leases As Lessee: a) The Group has taken computer systems, furniture and fixture, routers and networking equipments on noncancelable operating leases the future minimum lease payments in respect of which are: 2009 Rs./Crores Not later than one year Later than one year and not later than five years Total 3.84 5.84 9.68 2008 Rs./Crores 3.72 6.82 10.54 15.28 5.21 10.07 1.84 2008 Rs./Crores 13.43 3.37 10.06 1.42 16.91 (24.28) 6.90 (17.05) 23.81 (41.33) Interest included in minimum lease payments receivable 2.57 (3.80) 1.15 (1.90) 3.72 (5.70) Present value of minimum lease payments receivable 14.34 (20.48) 5.75 (15.15) 20.09 (35.63)

(b) Minimum Lease Payments in respect of assets taken on lease recognised as an expense in the Profit and Loss Account for the year ended June 30, 2009 are Rs. 4.37 Crores (2008 - Rs. 2.35 Crores). As Lessor: The company has given photocopying machines on non-cancelable operating leases the future minimum lease receipts in respect of which are: 2009 Rs./Crores Not later than one year Later than one year and not later than five years Total 8. 0.00 0.00 2008 Rs./Crores 0.01 0.01

Unaccrued forward exchange cover as on June 30, 2009 of Rs. 2.91 Crores (2008 - Rs. 1.81 Crores) has been included under amounts recoverable in cash or in kind or for value to be received. HCL Infosystems Annual Report 2008-09 | 144

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
9. Earnings per share (EPS) The earnings considered in ascertaining the Groups earnings per share comprise net profit for the year after tax. Basic earnings per share is computed and disclosed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share 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: Particulars Profit after tax (Rs./Crores) Weighted average number of shares considered as outstanding in computation of Basic EPS Add dilutive impact of stock options: - Exercised - Lapsed - Issued for no consideration Weighted average number of shares outstanding in computation of Diluted EPS Basic EPS (of Rs. 2/- each) Diluted EPS (of Rs. 2/- each) 10. Segment Reporting The Group recognises the following segments as its primary segments. a) The operations of Product and Related Services consists of sale of Computer Hardware and system integration products and providing a comprehensive range of IT services, including system maintenance and facility management in different industries. The businesses of Telecom products, Office Automation and services consist of sale of telecommunication products, Office equipment products, security and surveillance products and related services. Internet and Related Services include Internet related products and services consisting of Internet Access services, Virtual Private Network, other connectivity services and sale of related hardware. 2009 239.95 171,180,498 2008 300.15 170,454,520

11,554 4,521 171,196,573 Rs. 14.02 Rs. 14.02

264,066 110,209 1,900,787 172,729,582 Rs. 17.61 Rs. 17.38

b) c)

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 Groups revenues, results and assets relate to the domestic market.

Consolidated Segment wise performance for the year ended June 30, 2009 Primary Segments Products & Related Services Computer Systems & Other Related Products and services (i) Revenue External Revenue Intersegment Revenue Total Gross Revenue Less: Excise Duty Total Net Revenue 3485.40 (3363.45) 54.62 (25.47) 3540.02 (3388.92) 126.08 (157.84) 3413.94 (3231.08) 8849.39 (9000.32) 25.10 (19.99) 8874.49 (9020.31) (0.16) 8874.49 (9020.15) 43.70 (38.85) 2.36 (1.75) 46.06 (40.60) 46.06 (40.60) -82.08 (-47.21) -82.08 (-47.21) -82.08 (-47.21) Telecommunication & Office Automation Internet & Related Services Inter-segment Elimination

Rs. Crores Total

12378.49 (12402.62)

12378.49 (12402.62) 126.08 (158.00) 12252.41 (12244.62)

HCL Infosystems Annual Report 2008-09 | 145

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Rs. Crores Primary Segments Products & Related Services Computer Systems & Other Related Products and services (ii) Results Less: Unallocable Expenditure Operating Profit Add: Other Income (Excluding Operational Income) Less: Finance Charges Profit Before Tax Less: Tax Expense - Current Tax - Deferred Tax - Fringe Benefit Tax Profit After Tax (iii) Segment Assets Unallocated Corporate Assets a) Liquid Assets b) Others (including investment in assets given on finance lease) c) Deferred Tax Assets Total Assets (iv) Segment Liabilities Unallocated Corporate Liabilities a) Current Liabilities b) Deferred Tax Liabilities c) Loan Funds Total Liabilities (v) Capital Expenditure (vi) Depreciation (vii) Other Non Cash Expenses Note : Previous years figures are given in brackets. 13.53 (44.10) 12.31 (11.63) 45.45 (21.09) 4.91 (5.44) 4.13 (4.18) 16.82 (7.02) 12.56 (1.63) 4.09 (2.26) 0.93 (1.12) 1233.72 (841.04) 676.40 (798.13) 46.36 (21.76) 2109.32 (1794.42) 863.85 (975.93) 37.59 (19.50) 177.27 (199.52) Telecommunication & Office Automation 246.20 (285.44) -17.81 (-4.10) 405.66 (480.86) 25.11 (30.54) 380.55 (450.32) 15.42 (27.41) 44.66 (47.60) 351.31 (430.13) 122.17 (131.50) -12.36 (-5.63) 1.55 (4.11) 239.95 (300.15) 3010.76 (2789.85) 268.54 (216.40) 77.54 (83.69) 5.64 (-) 3362.48 (3089.94) 1956.48 (1660.93) 57.25 (51.58) (6.72) 226.85 (354.52) 2240.58 (2073.75) 31.00 (51.17) 20.53 (18.07) 63.20 (29.23) Internet & Related Services Inter-segment Elimination Total

HCL Infosystems Annual Report 2008-09 | 146

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
11 Disclosure of related parties and related party transactions. a) Company having substantial interest: HCL Corporation Limited, due to substantial interest in the voting power b) 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 HCL Peripherals Limited HCL BPO Services (NI) Limited HCL EAI Services Limited NEC HCL System Technologies Limited HCL America Inc Others (where significant influence exists): SSN College of Engineering Shri Sivasubramaniya Nadar Educational and Charitable Trust. Note: Parties with whom transactions are more than 10% of the total value have been disclosed separately. Key Management Personnel Mr. Ajai Chowdhry Mr. J.V. Ramamurthy Mr. Sandeep Kanwar Mr. C.S. Dwivedi Mr. George Paul Mr. Hari Baskaran Mr. Rajeev Asija Mr. Rajendra Kumar Mr. Rakesh Mehta1 Mr. S.R. Bisht Mr. Suman Ghose Hazra Mr. Sushil Kumar Jain Mr. Vivek Punekar 1 Resigned w.e.f June 30, 2008 c) Summary of Related Party disclosures Note: All transactions with related parties have been entered into in the normal course of business.
(Rs./Crores) A. Transactions Company having Substantial interest June-09 June-08 2.27 0.40 2.22 0.00 Others June-09 85.11 79.98 38.28 10.33 1.23 1.23 8.54 7.32 0.53 0.25 June-08 68.70 57.37 11.42 8.76 1.31 1.31 0.33 0.33 5.84 4.37 0.25 0.48 Key Management Personnel June-09 June-08 0.02 0.01 Total June-09 June-08 87.40 38.68 1.23 8.54 70.93 11.42 1.31 0.33 5.84

Sales & Related Income - HCL Technologies Ltd. Services - HCL Technologies Ltd. Other Income - HCL Technologies Ltd. Purchase of Goods - HCL Technologies Ltd. Purchase of Services - HCL Technologies Ltd. - HCL Comnet Ltd. Purchase of Investment Donations Given

0.25 -

0.48

HCL Infosystems Annual Report 2008-09 | 147

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
(Rs./Crores) A. Transactions Company having Substantial interest June-09 June-08 Others June-09 0.21 June-08 0.48 0.66 9.27 3.25 1.00 1.06 0.93 0.39 0.30 0.01 0.81 0.70 0.11 0.09 0.02 0.04 0.02 9.03 3.25 1.00 0.99 0.86 Key Management Personnel June-09 June-08 Total June-09 June-08 0.21 9.27 0.66 9.03

- Shri Sivasubramaniya Nadar Educational & Charitable Trust Assets Purchased Remuneration - Mr. Ajai Chowdhry - Mr. Rajeev Asija - Mr. J.V. Ramamurthy - Mr.Sandeep Kanwar Reimbursements towards expenditure a) Received 0.60 0.05 - HCL Technologies Ltd. - HCL Comnet Ltd. b) Made 0.06 0.05 - HCL Technologies Ltd. B. Amount due to/from related parties Accounts Receivables Loans & Advances & Other Recoverables Creditors Other Payables

0.99

0.16

0.87

0.09

0.89

1.81

0.03

0.01

40.50 0.47 2.32 0.59

21.33 0.46 1.06 0.90

41.39 0.47 2.32 0.62

23.14 0.46 1.06 0.91

12. The Group has calculated the various benefits provided to employees as under: (a) Defined Contribution Plans (i) Provident Fund (ii) Superannuation Fund During the year the Group has recognised the following amounts in the Profit and Loss account: 2009 Rs./Crores Employers Contribution to Provident Fund* Employers Contribution to Superannuation Fund* (b) State Plans (i) Employee State Insurance (ii) Employees Pension Scheme 1995 During the year the Group has recognised the following amounts in the Profit and Loss account: 2009 Rs./Crores Employers contribution to Employee State Insurance* Employers contribution to Employees Pension Scheme 1995* * Included in Contribution to Provident Fund and Other Funds under Personnel Cost (Refer Schedule-16) (c) Defined Benefit (i) Gratuity (ii) Leave Encashment/Compensated Absence In accordance with Accounting Standard 15 (revised 2005), an actuarial valuation was carried out in respect of the aforesaid defined benefit plans based on the following assumptions. 2.52 4.58 2008 Rs./Crores 2.03 3.76 4.05 1.17 2008 Rs./Crores 3.34 1.03

HCL Infosystems Annual Report 2008-09 | 148

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Employees Gratuity Fund 2009 Discount Rate (per annum) Rate of increase in compensation levels Rate of return on plan assets Expected Average remaining working lives of employees (years) 2008 7.00% 7.00%-8.00% 7.00% 6.50%-7.00% Not Not Applicable Applicable 25.47-25.90 25.70-25.92 Leave Encashment/ Compensated Absence 2009 2008 7.00% 7.00%-8.00% 7.00% 6.50%-7.00% Not Not Applicable Applicable 25.47-25.90 25.70-25.92

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. Rs./Crores 2009 Gratuity Leave Encashment Gratuity 2008 Leave Encashment

Reconciliation of opening and closing balances of the present value of the defined benefit obligation: Present value of obligation at the beginning of the year 12.36 Current service cost 1.95 Interest cost 0.86 Actuarial (gain)/loss 0.85 Benefits (paid) (0.68) Present value of obligation at the end of the year 15.34 Reconciliation of the present value of the defined benefit obligation and the fair value of the plan assets: Present value of the obligation as at the end of the year 15.34 Fair value of plan assets at the end of the year Assets/(Liabilities) recognised in the Balance Sheet (15.34) Cost recognised for the period (included under Salaries, Wages, Allowances, Bonus and Gratuity) Current service cost 1.95 Interest cost 0.86 Actuarial (gain)/loss 0.85 Net cost recognised for the year* 3.66 * Included in Salaries, Wages, Allowances, Bonus and Gratuity under Personnel

8.07 2.06 0.55 (0.71) (0.30) 9.67

10.93 1.26 0.84 0.03 (0.70) 12.36

6.96 1.41 0.48 0.41 (1.19) 8.07

9.67 (9.67)

12.36 (12.36)

8.07 (8.07)

2.06 1.26 0.55 0.84 (0.71) 0.03 1.90 2.13 Cost (Refer Schedule - 16)

1.41 0.48 0.41 2.30

13. Pursuant to the approval given by the Board of Directors, the Committee of Directors (Securities) at the meeting held on August 14, 2009 approved a) b) c) Issuance of Convertible Warrants not exceeding Rs. 322 crores, including premium to the promoters of the Company. Issuance in the form of Equity shares or Equity linked securities in the domestic and /or international offerings and/ or Qualified Institutional Placements for a value not exceeding Rs. 500 crores, including premium. An Extra-ordinary General Meeting is scheduled to be held on September 23, 2009 for taking the shareholders approval for the same.

14. During the year, the Company has incorporated HCL Infocom Limited as a wholly owned subsidiary. HCL Infocom Limited holds 49% of the equity share capital of Scout Mobile Internet Services Limited, a Joint Venture with Nokia Corporation, Finland. 15. The Scheme of Amalgamation (Scheme) for merging the wholly owned subsidiary Natural Technologies Private Limited (NTPL) with the Company under sections 391 to 394 of the Companies Act, 1956 sanctioned by Honble High Courts of Delhi and Rajasthan vide their respective orders dated August 11, 2008 and May 29, 2009 has come into effect on July 6, 2009 from the appointed date of July 1, 2008. On the scheme becoming effective NTPL stands dissolved without winding up. The amalgamation of erstwhile Natural Technologies Private Limited (NTPL) has been accounted for under the pooling of interest method in the manner specified in the Scheme and comply with the Accounting Standard notified under section 211(3C) of the Companies Act, 1956. The amalgamation of Natural Technologies Private Limited (NTPL) with the Company has no impact on the consolidated financial statements.

HCL Infosystems Annual Report 2008-09 | 149

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Pursuant to scheme of Amalgamation referred above, Goodwill created on acquisition of Natural Technologies Private Limited during the year ended June 30, 2008 has been adjusted against revaluation reserve and profit and loss account and amount of Rs. 0.45 Crores has been restated in securities premium account. 16. i) An amount of Rs. 0.23 Crores (2008- Rs. 0.05 Crores), being profit on sale of fixed assets has been adjusted against the loss on sale of fixed assets.

ii) The Profit/loss on account of foreign exchange fluctuations and on disposal of current investments are disclosed after deducting or adding related loss or profit, as the case may be, on similar transactions. iii) Advertisement, Publicity & Entertainment expenses, wherever on sharing basis, are shown at amounts borne by the company. 17. Pursuant to notification u/s 211(3C) of the Companies Act, 1956 issued by the Ministry of Corporate Affairs on March 31, 2009, 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 amortize such exchange difference over the useful life of the item. Accordingly, the profit before tax for the year ended June 30, 2009 is lower by Rs. 0.12 Crores on account of above mentioned exchange difference, which will be amortised in future period(s) but not beyond March 31, 2011. 18. Derivative Instruments outstanding at the Balance Sheet date: The Company has the following outstanding forward contracts to buy foreign currency as at June 30, 2009: Currency USD SEK JPY Foreign Currency Value/Crores 2009 2008 $9.57 2.66 $8.19 Kr 0.48 15.12 Average Rate 2009 2008 49.61 50.31* 41.72 7.06 40.20* Maximum Maturity Period 2009 2008 5 Months 1 Month 5 Months 3 Months 3 Months

*Average rate of JPY/INR is for 100 Yen. The above forward contracts have been undertaken to hedge the foreign currency exposures on Import/Royalty payables as at June 30, 2009. As on June 30, 2009, the foreign currency exposure that is not hedged by a derivative instrument or otherwise is Rs. 188.88 Crores (2008 - Rs. 165.86 Crores). 19. The results of Scout Mobile Internet Services Limited, a Joint Venture with Nokia Corporation, Finland has been taken on the basis of unaudited financial statements for the financial year ended June 30, 2009. It is unlikely that the audited results would be materially different from unaudited results. 20. Previous years figures have been regrouped/recasted, where necessary, to conform to current years presentation.

HCL Infosystems Annual Report 2008-09 | 150

SCHEDULES TO THE CONSOLIDATED BALANCE SHEET & PROFIT AND LOSS ACCOUNT
FINANCIAL SUMMARY OF SUBSIDIARIES AS AT JUNE 30, 2009 HCL Infinet Limited Particulars Share Capital Reserves Total Assets Total Liabilities Investments Turnover (Loss) before taxation Provision for taxation (Current/FBT) (Loss) after taxation Proposed Dividend #. The figures are for 15 months period HCL Security Limited Particulars Share Capital Reserves Total Assets Total Liabilities Investments Turnover (Loss) before taxation Provision for taxation (Current/FBT) (Loss) after taxation Proposed Dividend Amount in Rs. 40500000 40500000 40500000 71753928 (46116697) (15468145) (30648552) Amount in Rs. # 270181000 16909056 287090056 287090056 594671380 (185436855) 1140837 (186577692) -

HCL Infocom Limited Particulars Share Capital Reserves Total Assets Total Liabilities Investments Turnover (Loss) before taxation Provision for taxation (Current/FBT) (Loss) after taxation Proposed Dividend Amount in Rs. 3300000 3300000 3300000 (925186) (925186) -

HCL Infosystems Annual Report 2008-09 | 151

NOTICE
HCL Infosystems Limited Regd. Office: 806, Siddharth, 96, Nehru Place, New Delhi-110 019.
NOTICE is hereby given that the Twenty Third Annual General Meeting of the Company will be held on Friday, the 23rd day of October, 2009 at FICCI Auditorium, 1, Tansen Marg, New Delhi-110 001 at 10.00 A.M. to transact the following business: ORDINARY BUSINESS: 1. To receive, consider and adopt the audited Balance Sheet of the Company as at 30th June, 2009, the Profit and Loss Account for the financial year ended on that date and the Reports of the Directors and Auditors thereon. 2. To declare Dividend. 3. To appoint a Director in place of Mr. Ajai Chowdhry who retires by rotation and being eligible, offers himself for reappointment. 4. To appoint a Director in place of Mr. S. Bhattacharya who retires by rotation and being eligible, offers himself for reappointment. 5. To appoint a Director in place of Ms. Anita Ramachandran who retires by rotation and being eligible, offers herself for reappointment. 6. To appoint Auditors to hold office from the conclusion of this Meeting until the conclusion of the next Annual General Meeting and to fix their remuneration. M/s. Price Waterhouse, Chartered Accountants, the retiring Auditors, being eligible, offer themselves for re-appointment. SPECIAL BUSINESS: 7. To consider and if thought fit, to pass, with or without modification(s) the following resolution as an Ordinary Resolution: RESOLVED that pursuant to Sections 198, 309, 310, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for payment of enhanced remuneration to Mr. Ajai Chowdhry, Chairman and Chief Executive Officer, w.e.f. 1st July, 2009 as recommended by the Employees Compensation and Employees Satisfaction Committee and as set out in the explanatory statement attached to the notice of this Annual General Meeting. 8. To consider and if thought fit, to pass, with or without modification(s) the following resolution as an Ordinary Resolution: RESOLVED that pursuant to Sections 198, 309, 310, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for payment of the enhanced remuneration to Mr. J. V. Ramamurthy, Whole-time Director and Chief Operating Officer, w.e.f. 1st July, 2009 as recommended by the Employees Compensation and Employees Satisfaction Committee and as set out in the explanatory statement attached to the notice of this Annual General Meeting. 9. To consider and if thought fit, to pass, with or without modification(s) the following resolution as an Ordinary Resolution: RESOLVED that Mr. Nikhil Sinha, who was appointed as an additional Director, in terms of Section 260 of the Companies Act, 1956 read with Article 92 of the Articles of Association of the Company to hold office till the conclusion of this Annual General Meeting of the Company and in respect of whom the Company has received a notice in writing from a member under section 257 of the said Act proposing his appointment, be and is hereby appointed as Director of the Company with office term subject to retirement by rotation.

By Order of the Board for HCL Infosystems Ltd. Sd/Sushil Kumar Jain Company Secretary

New Delhi September 8, 2009

Notes : 1. The explanatory statement, pursuant to Section 173(2) of the Companies Act, 1956 in respect of the business under items 7, 8 & 9 is attached hereto. 2. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER. A BLANK PROXY FORM IS ENCLOSED FOR THE USE BY MEMBERS, IF REQUIRED, WHICH MUST BE SUBMITTED WITH THE COMPANYS REGISTERED OFFICE AT LEAST 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING. 3. The Registers of Members and the Share Transfer Books of the Company shall remain closed from Tuesday, the 3rd day of November 2009 to Wednesday, the 4th day of November, 2009 (both days inclusive) for the purpose of payment of dividend. 4. The dividend when declared will be paid to the Members whose names appear in the Register of Members on Friday, the 30th day of October, 2009 and the beneficial owners as on Friday, the 30th day of October, 2009 as furnished by NSDL/ CDSL. 5. All correspondence with regard to share transfers/dividends and matters related therewith may directly be addressed to the Companys Share Registrar and Transfer Agents (RTA) at the address given below: M/s. Alankit Assignments Ltd. Alankit House, 2E/21, Jhandewalan Extension, New Delhi 110 055 Phone : 011-23541234 Fax : 011-42541967 Email : rta@alankit.com Website : www.alankit.com 6. The Members are requested to lodge/notify the transfer deeds, communication for change of address, Bank details, ECS details, wherever applicable, mandates (if any) with the Companys RTA for shares held in physical mode. The Members holding shares in electronic form are requested to lodge the above details to their depository participants and not to the Company or RTA of the Company as the Company is obliged to use only the data provided by the Depositories while making payment of dividend. 7. In order to enable the Company to include the contact details of the shareholders in the shareholders database maintained by the Company, the Members are requested to provide their phone number and e-mail address along with their Folio No./DP ID and Client ID No. This will facilitate quick communication by the Company/RTA to its shareholders. The details may be addressed to the Company at its Corporate Office at E-4,5,6, Sector XI, Noida (U.P) or by mailing it to cosec@hcl.in. This can also be sent by SMS. For sending SMS, please type SHDB, Client ID-DP ID, eMail ID and send it to +919911115555 eg. SHDB,IN300513-15289788,rajeevgupta@yahoo.com in case the shares are held in electronic form. For shares held in physical form, please type SHDB,Folio No.,eMail ID and send it to +919911115555 eg. SHDB,R000551,rajeevgupta@yahoo.com. 8. Members/Proxy holders are requested to produce at the entrance of the auditorium the enclosed admission slip duly completed and signed. 9. The certificate from the Auditors of the Company certifying that the Employees Stock Option Schemes of the Company are being implemented in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and in accordance with the resolution passed by members shall be placed at the AGM. 10. Pursuant to the provisions of Section 205A of the Companies Act, 1956, dividend declared for the financial year 20012002, which remains unpaid and unclaimed for a period of seven years will be due for transfer to the Investor Education and Protection Fund (Fund) of the Central Government on January 24, 2010. Shareholders who have not encashed the dividend warrant(s) are requested to return the unpaid dividend warrant(s) for revalidation or write to the Company at the above address to obtain duplicate dividend warrant immediately. Please note that after such transfer no claims shall lie against the Fund or the Company in respect of individual amounts and no payment shall be made in respect of any such claims.

11. Information under the Listing Agreement of the Directors proposed to be appointed/re-appointed: (i) Directors seeking appointment/re-appointment in Annual General Meeting scheduled to be held on October 23, 2009 (Pursuant to Clause 49 (IV)(E) and 49 (IV)(G)(i) of the Listing Agreement) Name of Director Mr. NIKHIL SINHA Mr. AJAI CHOWDHRY August 29, 1950 59 April 01, 1989 Graduate in Electronics and Telecommunication Mr. S. BHATTACHARYA October 12, 1940 69 April 22, 1994 Chartered Accountant Ms. ANITA RAMACHANDRAN April 28, 1955 54 August 28, 1998 Management Graduate from Jamnalal Bajaj Institute - 23 years of experience in HR Consultancy

Date of Birth Age (years) Date of Appointment Qualifications

August 3, 1960 49 July 29, 2009 B.A.(Hons), M.A., Ph.D

Expertise in specific functional area

- A leading international expert on information and communication technology industries

- Over 37 years experience in computer industry in India and abroad. Associated with the Company since its inception. A key force in driving the growth of the Company - HCL Technologies Limited - Appollo Trading & Finance Private Limited - HCL Infinet Limited - HCL Security Limited - HCL Infocom Limited - Junior Achievement India Services - BFL Investments & Financial Consultants Private Limited

- Vast experience in area of Finance and Accounts

Directorships held in other Companies as on date

EMR Technology Ventures Private Limited

- HCL Corporation Limited - NIIT Limited - HCL Peripherals Limited - HCL Technologies Limited - NIIT Technologies Limited - HCL Infinet Limited

- Connexus Consultants Private Limited - Geometric Limited - Force Motors Limited - Godrej & Boyce Mfg. Co. Limited - UTI AMC Limited - UTI Venture Funds Mgmt. Co. Private Limited - Swaadhar FinServe Private Limited - Cerebrus Consultants Private Limited

Name of Director Membership/ Chairmanship in Committees of other companies as on date

Mr. NIKHIL SINHA

Mr. AJAI CHOWDHRY Accounts & Audit Committee - HCL Infinet Limited Shareholders Committee - HCL Technologies Limited

Mr. S. BHATTACHARYA Accounts & Audit Committee - HCL Technologies Limited - NIIT Technologies Limited* - NIIT Limited* - HCL Corporation Limited* - HCL Infinet Limited* Shareholders Committee - HCL Technologies Limited Employees Stock Option Allotment Committee - HCL Technologies Limited Compensation/ Remuneration Committee - NIIT Technologies Limited - NIIT Limited Share Allotment Committee - NIIT Limited Debenture Allotment Committee - NIIT Limited Asset Liability Management Committee - HCL Corporation Limited NIL

Ms. ANITA RAMACHANDRAN Accounts & Audit Committee - Geometric Limited HR Committee - UTI AMC Limited* Shareholders Grievance Committee - UTI AMC Limited* Compensation/ Remuneration Committee - Geometric Limited

NIL

Number of shares held in the Company as on date

NIL

198490

NIL

* Chairman of the Committee

12. The Company has obtained permission from the Ministry of Corporate Affairs, Government of India, vide its letter number 47/104/2009-CL-III dated April 13, 2009 for not annexing the accounts of the wholly owned subsidiaries, namely, HCL Infinet Limited, HCL Security Limited, Natural Technologies Private Limited and HCL Infocom Limited. The accounts of the subsidiaries are available at the Registered Office of the Company for inspection on any working day to the shareholders of the Company requiring such information. The Company has obtained permission from the Ministry of Corporate Affairs, Government of India, vide their letter No: 46/4/2009-CL-III dated May 21, 2009 for not disclosing the quantitative details in compliance of para 3(ii) (d) of PartII, Schedule-VI to the Companies Act, 1956 for the year ended 30th June, 2009 subject to such terms and conditions as mentioned in the aforesaid permission letter. EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 Item No. 7 At the Twenty Second Annual General Meeting held on October 24, 2008, the shareholders of the Company had accorded their consent for re-appointment of Mr. Ajai Chowdhry as Whole-time Director of the Company for a period of five years effective from April 1, 2009. Mr. Chowdhry, aged 59 years, is a graduate in Electronics and Telecommunication with over 37 years experience in computer industry in India and abroad. It is proposed to enhance the remuneration of Mr. Chowdhry for the period from July 1, 2009 to June 30, 2010 as under: Basic Salary: from Rs. 4,50,000/- per month to Rs. 5,00,000/- per month (with increase of Rs. 50,000/- per month on yearly basis) Consolidated Allowance: Rs. 20,000/- per month City Compensatory Allowance: @ 12% of Basic Salary Performance Linked Bonus: Annually payable as approved by the Board of Directors/Board Committee. Perquisites: Part A: Company Leased Accommodation / House Rent Allowance, Electricity, Gas, Water and Hard and Soft Furnishings, Medical Reimbursement, Leave Travel Assistance, Club Fee, Medical Insurance, House Repairs / Distemper Expenses, Security Guards and Domestic help at residence : As per the scheme of the Company applicable to the Whole-time Directors. Part B: Contribution to Provident Fund, Superannuation Fund and Annuity Fund: As per the rules of the Company, which shall be limited to the extent these either singly or put together are not taxable under the Income Tax Act, 1961. Gratuity: Which shall be limited to half a months salary for each completed year of service, as per the scheme of the Company. Part C: Use of own or Companys car with driver and reimbursement of related expenses on running, maintenance, etc., and telephone at the residence. Provided further that the aggregate of the aforesaid salary, perquisites and other benefits, as per the scheme of the Company applicable to the Whole-time Directors, shall not exceed five percent of Companys net profit for the Whole-time Director and the aggregate of remuneration to all Whole-time Directors shall not exceed ten percent of the Companys net profits as provided under the provisions of section 198, 309, Schedule XIII and other applicable provisions, if any of the Companies Act, 1956. Minimum Remuneration The remuneration as set out above may be paid as the minimum remuneration to Mr. Ajai Chowdhry, Chairman and Chief Executive Officer, in the absence or inadequacy of profits in any financial year, provided that the total remuneration by way of salary, perquisites and any other allowance shall not exceed the ceiling of Rs. 24,00,000/- per annum or Rs. 2,00,000/ - per month and the perquisites provided in Section II of Part II of Schedule XIII of the said Act or such other amount and perquisites as may be provided in the said Schedule XIII as may be amended from time to time or an equivalent statutory re-enactment thereof.

The payment of enhanced remuneration to Mr. Ajai Chowdhry is subject to the approval of the Shareholders. The Directors recommend the resolution set out at item No. 7 for your approval. Except Mr. Chowdhry, none of the Directors of the Company are interested in this resolution. Item No. 8 At the Twenty Second Annual General Meeting held on October 24, 2008, the shareholders had approved the remuneration to Mr. J. V. Ramamurthy for the year July 1, 2008 to June 30, 2009. Mr. J.V. Ramamurthy, aged 56 years is an Engineer from Madras University and a post graduate in Applied Electronics from Madras Institute of Technology, Madras. He has over 30 years experience and a long association with electronic industry. It is proposed to enhance the remuneration of Mr. Ramamurthy for the period from July 1, 2009 to June 30, 2010 as under: Basic Salary: from Rs. 1,70,000/- per month to Rs. 2,25,000/- per month Consolidated Allowance: from Rs. 46,000/- per month to Rs. 60,000/- per month City Compensatory Allowance: @ 12% of Basic Salary Performance Linked Bonus: Annually payable as approved by the Board of Directors/Board Committee. Perquisites: Part A: Company Leased Accommodation / House Rent Allowance, Electricity, Gas, Water and Hard and Soft Furnishings, Medical Reimbursement, Leave Travel Assistance, Club Fee, Medical Insurance, House Repairs / Distemper Expenses, Security Guards and Domestic help at residence : As per the scheme of the Company applicable to the Whole-time Directors. Part B: Contribution to Provident Fund, Superannuation Fund and Annuity Fund: As per the rules of the Company, which shall be limited to the extent these either singly or put together are not taxable under the Income Tax Act, 1961. Gratuity: Which shall be limited to half a months salary for each completed year of service, as per the scheme of the Company. Part C: Use of own or Companys car with driver and reimbursement of related expenses on running, maintenance, etc., and telephone at the residence. The limit of remuneration being paid to Mr. J.V. Ramamurthy for reimbursement of electricity, gas, water, soft furnishing, LTA, club fee, house repairs/distemper expenses, expenses on running and maintenance of own or companys car, driver salary, security guard and domestic help at residence shall stand increased from existing Rs. 11,70,000/- per annum to Rs. 14,52,193/- per annum. Provided that consequent upon the increase in the basic salary, the perquisites and other allowances related to basic salary shall also stand revised. There shall be no change in other terms and conditions of appointment of Mr. J.V. Ramamurthy. Provided further that the aggregate of the aforesaid salary, perquisites and other benefits, as per the scheme of the Company applicable to the Whole-time Director, shall not exceed five percent of the Companys net profit for the Whole-time Director and the aggregate of remuneration to all Whole-time Directors shall not exceed ten percent of the Companys net profits as provided under the provisions of Section 198, 309, Schedule XIII, of the Companies Act and other applicable provisions, if any. Minimum Remuneration The remuneration as set out above may be paid as the minimum remuneration to Mr. J.V. Ramamurthy, Whole-Time Director, in the absence or inadequacy of profits in any financial year, provided that the total remuneration payable by way of salary, perquisites and any other allowance shall not exceed the ceiling of Rs.24,00,000/- per annum or Rs.2,00,000/- per month and the perquisites provided in Section II of part II of Schedule XIII of the said Act or such other amount and perquisite may be provided in the said Schedule XIII as may be amended from time to time or an equivalent statutory re-enactment thereof. The payment of enhanced remuneration to Mr. J.V. Ramamurthy is subject to the approval of the Shareholders. The Directors recommend the resolution set out at item No. 8 for your approval.

Except Mr. Ramamurthy, none of the Directors of the Company are interested in this resolution. Item No. 9 Mr. Nikhil Sinha was appointed as an Additional Director on the Board pursuant to the Board Resolution dated July 29, 2009 and holds office till the conclusion of this Annual General Meeting. Due notice under Section 257 of the Companies Act, 1956 along with requisite deposit has been received from a member, proposing the appointment of Mr. Nikhil Sinha as Director with office term subject to retirement by rotation. Mr. Nikhil Sinha is B.A., M.A. and Ph.D. He is a leading international expert on Information and Communication Technology industries, and has held important positions in many reputed bodies. He has published numerous articles and papers in scholarly journals on international business and global communications. His appointment as a Director shall be in the interest of the Company. The Directors recommend the resolution as set out at Item No. 9 for approval. Except Mr. Nikhil Sinha, none of the Directors of the Company are interested in this resolution.

By Order of the Board for HCL Infosystems Ltd. Sd/Sushil Kumar Jain Company Secretary

New Delhi September 8, 2009

HCL INFOSYSTEMS LIMITED


Regd. Office : 806, Siddharth, 96, Nehru Place, New Delhi-110 019

ATTENDANCE SLIP
23rd Annual General Meeting - October 23, 2009

DP ID NO. __________________________ CLIENT ID NO. _______________________ FOLIO NO.


(Electronic Mode) (Electronic Mode) (Physical Mode) (Please mention both DP ID & Client ID Nos.)

______________________
(Please mention the Folio No.)

I certify that I am a registered Member/Proxy of the registered Member of the Company. I hereby record my presence at the 23rd ANNUAL GENERAL MEETING of the Company held on Friday, October 23, 2009 at FICCI Auditorium, 1, Tansen Marg, New Delhi-110 001 at 10.00 A.M.

__________________________________________________ Members/Proxys name in BLOCK LETTERS

________________________________ Members/Proxys Signature

Note : Please fill in this attendance slip and hand over at the entrance of the Meeting Hall.

FOR THE KIND ATTENTION OF SHAREHOLDERS NO GIFTS WOULD BE DISTRIBUTED AT THE AGM

HCL INFOSYSTEMS LIMITED


Regd. Office : 806, Siddharth, 96, Nehru Place, New Delhi-110 019

PROXY FORM
23rd Annual General Meeting - October 23, 2009 DP ID NO. __________________________ CLIENT ID NO. ______________________ FOLIO NO.
(Electronic Mode) (Electronic Mode) (Physical Mode) (Please mention the Folio No.) (Please mention both DP ID & Client ID Nos.)

_______________________

I/We ________________________________________________________________________of _________________________________________ being a Member/Members of the above named Company, hereby appoint _________________________________________ of __________________________________________________________________________________________________________ or failing him __________________________________________________________ of ____________________________________________ ______________________________________________________________ as my/our proxy to vote for me/us on my/our behalf at the 23rd ANNUAL GENERAL MEETING of the Company to be held on Friday, October 23, 2009 at FICCI Auditorium, 1, Tansen Marg, New Delhi-110 001 at 10.00 A.M. and at any adjournment thereof. Affix Re. 1 Revenue Stamp

Signed this _____________________ day of _____________________ 2009

Signature of Proxy _________________________ Signature of the Member ____________________________________

Note : The proxy form in order to be effective must be duly stamped, completed and signed and must be deposited at the Registered Office of the Company not less than 48 hours before the meeting.

NO GIFTS WOULD BE DISTRIBUTED AT THE AGM