To the Members, Your Directors have pleasure in presenting their Twenty Ninth Annual Report together with the Audited Accounts for the financial year ended 30th June, 2015. Performance The consolidated net revenue of the Company was Rs. 6,284.40 Crores as against Rs. 7,955.32 Crores in the previous year. The consolidated loss before tax was Rs. 173.59 Crores as against Rs. 185.81 Crores in the previous year. The net revenue on standalone basis was Rs. 4,456.73 Crores as against Rs. 5,797.01 Crores in the previous year. The consolidated loss before tax was Rs. 66.21 Crores as against Rs. 177.08 Crores in the previous year. Your Board of Directors do not recommend any dividend for the year under review. Operations A detailed analysis and insight into the financial performance and operations of your Company for the year ended 30th June, 2015, is appearing in the Management Discussion and Analysis, forming part of the Annual Report. There is no change in the authorized share capital of the Company. Awards & Recognition Your Company won the Banking & Financial Services Award for its contribution in the field of Financial Inclusion at the Elets-BFSI Leadership Summit and Awards, 2015. HCL Services Limited, a subsidiary of your Company bagged following awards this year: • The "IT Service Provider of the Year" award at the 2015 Frost & Sullivan India ICT Awards. This prestigious award recognizes the relentless efforts of HCL Services in delivering exceptional business performance in the year 2014. • The Consumer Services business division of HCL Services won the Best Retailer of the Year Award in the field of Mobile & Telecom Services at the Asia Retail Congress (ARC), 2015. • The DQ LIVE Business Technology Award 2015 for 'Excellence in the Implementation' and 'Use of Technology for Business Benefits in the Enterprise Applications and Cloud' category. HCL Infotech Limited, another subsidiary of your Company bagged two Skoch Order-of-Merit Awards in the 'Solution Development' and 'Access to Banking & Financial Services' categories for enabling nationalized and regional rural banks to offer financial services at an affordable cost to the unbanked and under-banked population through its technology infrastructure and service solutions. Employee Stock Option Plan Employee Stock Option Scheme 2000 Pursuant to the approval of the Shareholders at an ExtraOrdinary General Meeting held on 25th February, 2000 for grant of options to the employees of the Company and its subsidiaries (the Scheme 2000), the Board of Directors had approved the grant of 31,90,200 options including the options that had lapsed out of each grant. Each option confers on the employee a right for five equity shares of Rs. 2/- each. During the year under review, the Company had allotted 10,000 equity shares of Rs. 2/- each under the Scheme 2000. Employee Stock Based Compensation Plan 2005 Pursuant to the approval of Shareholders of the Company through a Postal Ballot, the result whereof was declared on 13th June, 2005, the Board of Directors had granted 33,35,487 options including the options that had lapsed out of each grant under the Employee Stock Based Compensation Plan 2005 (the Plan 2005). Each option confers on the employee a right for five equity shares of Rs. 2/- each at the market price as specified in the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, on the date of grant. During the year under review, the Company had allotted 15,000 equity shares of Rs. 2/- each under the Plan 2005. Fixed Deposits The Company has not accepted/renewed any deposits from the public during the year and there were no fixed deposits outstanding either at the beginning or at the end of the year. Listing The equity shares of the Company are listed at The BSE Limited, Mumbai (BSE) and National Stock Exchange of India Limited, Mumbai (NSE). The Company has paid the listing fee for the year 2015-2016 to BSE and NSE. Directors and Key Managerial Personnel Mr. Harshavardhan Madhav Chitale stepped down as Managing Director & CEO and the Director of the Company w.e.f. close of the business hours on 31st December, 2014. Mr. Ajay Vohra ceased to be director of the Company w.e.f. 1st April, 2015 under the provisions of section 167 (1)(b) of Companies Act, 2013. The Board places on record its appreciation for the contributions made by them during their tenure with the Company. Mr. Premkumar Seshadri, the Director, was designated as Executive Vice Chairman effective from 10th September, 2014. He was also appointed as 'Managing Director' of the Company for a period of 3 (three) years w.e.f. 1st January, 2015. Ms. Ritu Arora was appointed as an additional director of the Company w.e.f. 6th April, 2015 and designated as Independent Director and holds office up to the date of the ensuring Annual General Meeting of the Company. The Company has received declarations from all the Independent directors confirming that they meet with the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. In terms of the provision of Section 149, 152(6) and other applicable provisions of the Companies Act, 2013, Ms. Ritu Arora, on approval of her appointment as Director in the forthcoming AGM, shall hold office up to a term of five consecutive years on the Board of the Company upto 5th April, 2020 and shall not be liable to retire by rotation. On induction of Independent Director on the Board of the Company, a familiarization program is conducted to familiarize him/her with the Company, its businesses, financial performance, budget and control processes etc. Company's Managing Director, CFO and Business Heads attend the meeting and necessary documents/brochures, reports and internal policies are provided to enable him/her to familiarize with the Company's policies. The details of such familiarization program are posted on the website of the Company and can be accessed at <http://www.hclinfosystems.in/sites/default/files>. In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Dr. Nikhil Sinha, retires from office by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. A brief resume, details of expertise and other directorships/committee memberships held by the above Directors, form part of the Notice convening the Twenty Ninth Annual General Meeting. Mr. Sandeep Kanwar stepped down from the position of Chief Financial Officer (CFO) of the Company w.e.f. 1st April, 2015 and Mr. S. G. Murali was appointed to act as Group Chief Financial Officer (CFO) of the Company w.e.f. 1st April, 2015. Committees of Board Currently, the Board has 6 (Six) Committees: Accounts and Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility (CSR) Committee, Finance Committee and Technology Committee. A detailed note on Committees is provided in the Corporate Governance Report. Board and Committees Evaluation The Board of Directors has carried out an annual evaluation of its own performance, Board Committees and individual Directors pursuant to the provisions of the Companies Act, 2013 and the corporate governance requirements as prescribed by Securities and Exchange Board of India ("SEBI") under Clause 49 of the Listing Agreements ("Clause 49"). The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of Board processes, information and functioning, etc. The performance of the Committees was evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc. The Board and the Nomination & Remuneration Committee ("NRC") reviewed the role, functions, duties and performance of the individual Directors on the basis of the criteria such as the contribution of the individual Director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role. In a separate meeting of independent Directors, performance of non-independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of executive Directors and non-executive Directors. The same was discussed in the Board meeting that followed the meeting of the independent Directors, at which the performance of the Board, its committees and individual Directors was also discussed. Criteria/Policy on Appointment and Remuneration The Board has, on the recommendation of the Nomination & Remuneration Committee (NRC) framed a criteria for appointment of Directors, Key Managerial Personnel/Senior Management. The Board has also adopted a remuneration policy for Directors, Key Managerial Personnel/ Senior Management and other employees. The criteria/policy on appointment and remuneration Policy are stated in the Corporate Governance Report. Board Meetings During the financial year 2014-15, Nine Board Meetings were held and the gap between two meetings did not exceed one hundred and twenty days. The details of Board Meetings held are stated in the Corporate Governance Report. Corporate Social Responsibility (CSR) A report on Corporate Social Responsibility (CSR) is attached as Annexure to this Report. The policy is available on the website of the Company. Corporate Governance Report and Management Discussion and Analysis Statement The Corporate Governance Report and the Management Discussion and Analysis Statement are attached and are to be read with the Directors' Report. Insider Trading Regulations As per the requirements under the SEBI (Prohibition of Insider Trading) Regulations, 2015, the 'Code of Conduct for Internal Procedures and to Regulate, Monitor and Report Trading By Insiders' and the 'Code of Fair Disclosure' were adopted w.e.f. 15th May, 2015. These codes replaced the earlier codes which were adopted under the SEBI (Prohibition of Inside Trading) Regulation 1992. Directors' Responsibility Statement Pursuant to the requirement of Section 134(3)(c) of the Companies Act, 2013, and based on the representations received from the operating management, the Directors hereby confirm that: (a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period; (c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safe guarding the assets of the company and for preventing and detecting fraud and other irregularities; (d) the directors had prepared the annual accounts on a going concern basis; (e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. (f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Particulars of Loans, Guarantees or Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. Related Party Transactions All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length under the provisions of Section 188 and other applicable sections of the Companies Act, 2013 read with the relevant Rules. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. Mr. Premkumar Seshadri, Executive Vice Chairman also appointed as Managing Director of the Company for a period of 3 (three) years w.e.f 1 st January, 2015. M/s HCL Corporation Private Limited, the Promoter Company pays the remuneration to Mr. Seshadri as per the agreement. Policy on dealing with related party transactions is available on the website of the Company.<http://www.hclinfosystems.in/> sites/default/files/Policy on Related party transactions.pdf Internal Control Systems The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed. Vigil Mechanism/Whistle Blower Policy Pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a Vigil Mechanism/ Whistle Blower Policy for Directors and employee to report concerns about unethical behavior, actual or suspected fraud or violation of the Company's code of conduct or ethics policy. The said Policy is posted on the website of the Company and can be assessed at <http://www.hclinfosystems.in/> sites/default/files/Whistleblower_Policy_0.pdf Auditors & Auditors' Report Statutory Auditors M/s Price Waterhouse, Chartered Accountants, who are the statutory auditors of the Company, hold office until the conclusion of forthcoming Annual General Meeting. It is proposed to re-appoint M/s Price Waterhouse, Chartered Accountants as statutory auditors of the Company from the conclusion of forthcoming Annual General Meeting till the conclusion of thirtieth (30th) AGM to be held in the year 2016. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for re-appointment. It is also proposed to authorize the Board of Directors to fix their remuneration. The Auditors' Report does not contain any qualification, reservation or adverse remark. Secretarial Audit Pursuant to the requirements of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M/s Navneet K. Arora & Co., Practicing Company Secretaries (CoP 3005) as the Secretarial Auditor for the year ended on 30th June, 2015. The Secretarial Audit report issued by M/s Navneet K. Arora & Co., Practicing Company Secretaries is attached separately to this report. The report does not contain any qualification, reservation or adverse remark. Additional information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is attached as Annexure to this Report. Consolidated Financial Statement In accordance with the Companies Act, 2013 ("the Act") and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with AS - 23 on Accounting for Investments in Subsidiaries/Associates/JVs and AS - 27 on Financial Reporting of Interests in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report. Subsidiaries, Joint Ventures and Associate Companies The Company divested its entire investment in the equity shares of RMA Software Park Private Limited on 24th September, 2014. A list of Subsidiaries/Associates/JVs is given in the Extract of Annual Return attached to this report. Policy for determining material subsidiaries of the Company is available on the website of the Company at <http://www>. hclinfosystems.in/sites/default/files/Policy on Subsidiaries.pdf Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT 9 is attached herewith as "Annexure to this Report". Significant and Material Orders Passed by the Regulators or Courts There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Acknowledgements The Directors place on record their appreciation for the continued co-operation extended by all stakeholders including various departments of the Central and State Government, Shareholders, Investors, Bankers, Financial Institutions, Customers, Dealers and Suppliers. The Board also places on record its gratitude and appreciation of the committed services of the executives and employees of the Company. On behalf of the Board of Directors Sd/-Nikhil Sinha (Chairman) Place : Noida Date : August 20, 2015 |