Professional Documents
Culture Documents
PROJECT REPORT
ON
UNIVERSITY OF PUNE
UNDER GUIDENCE OF
PRO. NIMBOLKAR.V
IN PARTIAL FULFILMENT OF THE
REQUIREMENT FOR THE
(2013-2014)
SGGP COLLEGE
BBA/BCA/B.C&B .COM JATEGAON BK.
ACKOWLEDGEMENT
Achievement is finding out what you would be then doing, what you have to do. The higher
the summit, the harder is the climb. The goal was fixed and we began with a determined
resolved and put in ceaseless sustained hard work. Greater challenge, greater was our effort
to overcome it.
This project work, which is my first step in the field of professionalization, has been
successfully accomplished only because of my timely support of well-wishers. I would like
to pay my sincere regards and thanks to those, who directed me at every step in my project
work.
I would also like to thank the faculty members and the staff members of HCL Infosystems
Ltd. for their kind support and help during the project.
TABLE OF CONTENTS
Acknowledgement
Exicutive summary
1. Introduction
The problems
Objective of the project
2. HCL Infosystems An Overview
Companys history
Management team
Corporate information
3. Conceptual Framework
Introduction to Working Capital Management
Inventory management
Cash management
Receivables management
Managing payables (Creditors)
Financing current assets
Working capital & short-term financing
4. Analysis
Industry analysis
Financial graphs
Concluding analysis
Suggestions and recommendations
Bibliography
5. Appendices
EXECUTIVE SUMMARY
This project is based on the study of working capital management in HCL Infoystems. An
insight view of the project will encompass what it is all about, what it aims to achieve,
what is its purpose and scope, the various methods used for collecting data and their sources,
including literature survey done, further specifying the limitations of our study and in the
last, drawing inferences from the learning so far.
HCL Infosystems Limited (HCL), is a leading domestic computer hardware and hardware
services company. HCL is engaged in selling manufactured ( like PCs, servers, monitors and
peripherals) and traded hardware ( like notebooks, peripherals) to institutional clients as well
as in retail segment. It also offers hardware support services to existing clients through
annual maintenance contracts, network consulting and facilities management.
The working capital management refers to the management of working capital, or precisely
to the management of current assets. A firms working capital consists of its investments in
current assets, which includes short-term assetscash and bank balance, inventories,
receivable and marketable securities.
This project tries to evaluate how the management of working capital is done in HCL
Infosystems through inventory ratios, working capital ratios, trends, computation of cash,
inventory and working capital, and short term financing.
INTRODUCTION
The problems
Objective of the prpject
INTRODUCTION:
The objectives of this project were mainly to study the inventory, cash and receivable at
HCL Infosystems Ltd., but there are some more and they are The main purpose of our study is to render a better understanding of
the concept Working Capital Management.
To understand the planning and management of working capital at HCL Infosystems
Ltd.
To measure the financial soundness of the company by analyzing various ratios.
To suggest ways for better management and control of working capital at the concern.
Companys history
Management team
Corporate information
HISTORY
HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with
its origins in 1976. For over quarter of a century, we have developed and
implemented solutions for multiple market segments, across a range of
technologies in India. We have been in the forefront in introducing new
technologies and solutions. The highlights of the HCL saga are
summarized below:
Y E AR
H IG HLI GHTS
1976
1977
- Launch of the first microcomputer-based commercial computer with a ROM -based Basic
interpreter
- Unavailability of programming skills with customers results in HCL developing bespoke
applications for their customers
1980
- Formation of Far East Computers Ltd., a pioneer in the Singapore IT market, for SI
(System Integration) solutions
1983
- HCL launches an aggressive advertisement campaign with the theme ' even a typist can
operate' to make the usage of computers popular in the SME (Small & Medium Enterprises)
segment. This proposition involved menu-based applications for the first time, to increase
ease of operations. The response to the advertisement was phenomenal.
-HCL develops special program generators to speed up the development of applications
1986
1991
1994
- HCL acquires and executes the first offshore project from IBM Thailand
- HCL sets up core group to define software development methodologies
1995
acceptance in the
- Sets up the STP ( Software Technology Park ) at Chennai to execute software projects for
international customers
- Becomes national integration partner for SAP
1997
1998
1999
2000
2001
2009
2010
2011
2012
2013
(till
June)
12
OBJECTIVES:
MANAGEMENT OBJECTIVES
To fuel initiative and foster activity by allowing individuals, freedom of action and
innovation in attaining defined objectives.
PEOPLE OBJECTIVES
To help people in HCL Infosystems Ltd., share companys success, which
they
MANAGEMENT TEAM:
Ajai Chowdhry
Co-Founder HCL, Chairman and CEO - HCL Infosystems.
An engineer by training, Ajai Chowdhry is one of the six co-founder members
of HCL, India 's premier IT conglomerate.
J V Ramamurthy
Chief Operating Officer HCL Infosystems Ltd.
J V Ramamurthy has an engineering degree in Electronics & Communications,
from Guindy Engineering College, and a Masters' degree in Applied Electronics
from the Madras Institute of Technology, both in Chennai.
13
Rajendra Kumar
Executive Vice President - Frontline Division HCL Infosystems Ltd. Mr.
Rajendra Kumar has been with HCL for over 30 years and has seen HCL grow
from a startup company to a gigantic conglomerate that it is today.
CORPORATE INFORMATION:
BOARD OF DIRECTORS
COMPANY SECRETARY
AUDITORS
BANKERS
806, Siddharth,
96, Nehru Place, New Delhi - 110 019.
CORPORATE OFFICE
WORKS
15
Introduction
16
of funds. Net working capital also covers the question of judicious mix of long-term and
short-term funds for financing current assets.
18
KINDS OF WORKING
CAPITAL
ON THE
BASIS
OF
CONCEP
T
GROSS
WORKIN
G
CAPITAL
ON THE
BASIS
OF TIME
NET
WORKIN
G
CAPITAL
PERMAN
ENT/FIXE
D
WORKIN
G
CAPITAL
REGULAR
WORKING
CAPITAL
19
RESERVE
WORKING
CAPITAL
TEMPOR
ARY/VARI
ABLE
WORKIN
G
CAPITAL
SEASONA
L
WORKING
CAPITAL
SPECIAL
WORKING
CAPITAL
PARTICULARS
CURRENT
2013
100970
2012
81533
2011
54091
2010
45042
2009
55985
ASSETS
NET BLOCK
TOTAL ASSETS
CA/TA
7970
122479
82.44
5329
99139
82.24
4925
87076
62.12
4954
71285
63.18
5552
75205
74.43
The current asset percentage on total asset is the highest over the years.
This increasing percentage of current assets to the total assets at first
might indicate a preference for liquidity in place of profitability, but a
look into the nature of the business carried on by HCL Infosystems
reveal the reason behind it. How far their preference to current assets
has affected the sales is shown below.
23
2013
40343
2012
34742
2011
14301
2010
18752
2009
27065
238136
16.12
199886
142.93
154295
-23.736
166604
-30.7
127003
-0.46
19.14
29.54
-7.38
31.18
8.7
The sales has increased and the profits risen despite the 16.12% increase
in working capital. But what is noteworthy here is that the firm has
managed to maintain the trend of an increase in net current assets.
Whether the change has worked for the company has to be analysed in
the context of the growth in sales as compared to the previous year.
There has been a 19.14% rise in the sales or revenue generated.
CURRENT ASSET FIXED ASSET
PARTICULARS
NET CA/NET BLOCK
2013
5.062:1
2012
6.519:1
2011
2.903:1
2010
3.785:1
2009
4.875:1
The ratio of the net current asset to the fixed ones is an indicator as to the
liquidity position of the firm. This ratio has declined for the firm
compared to the previous year. There could be an argument as to whether
the increased ratio of working capital to net block is a conservative policy
and whether it would be detrimental to the interest of the company. Or,
whether it would have been proper if the company invested more into the
capital expenditure in the form of plant and machinery or invested in any
other form that would have got them an internal rate of return.
COMPUTER and MICRO PROCESSOR BASED SYSTEMS
YEAR
INSTALLED
CAPACITY
ACTUAL
PRODUCTION
24
% CAPACITY
UTILIZATION
2013
2012
2011
1150000
600000
525000
581805
448121
295192
50.59
74.69
56.23
INSTALLED
CAPACITY
250000
250000
350000
ACTUAL
PRODUCTION
267326
259617
297991
% CAPACITY
UTILIZATION
106.93
103.85
85.14
That the fixed assets of the firm are being put to efficient use and the firm
is trying for optimum capacity utilization is something that can be easily
deduced. Whether the current assets or the working capital of the firm has
anything to do with it is for us to see. An increased production in normal
circumstances means better raw material to finished goods conversion
rate, i.e. the firm is taking less of time in the production process and this
happens when the current asset employed in relation with the fixed ones
are at optimum. The other notable feature here is that though the firm has
added on to its installed capacity in all three years, they were still able to
increase the capacity utilization. That they have been able to do it shows
that the more current assets, especially inventory used in relation to the
fixed assets, i.e., plant and machinery and their management has only
helped in increasing their utilization to the maximum.
PARTICULARS
CURRENT ASSETS
CURRENT LIABILITES
% CURRENT ASSETS
INCREASE
2013
100970
60627
23.84
25
2012
81533
46791
50.7
2011
54091
39790
20.09
2010
45042
26290
-19.54
2009
55985
28920
8.9
%CURRENT LIABILITES
INCREASE
29.57
17.6
51.35
-9.1
The 16.12% increase in Net Current assets despite of the fact that there
has been an increase in the Current Assets by 23.84% and increase in
Current Liability has been by 29.57% over that of the previous year has to
be attributed to the fact that in 2012, the company showed such a high
increase in CA, that it is still being offset. This is an indication as to the
expanding operations of the firm. HCL has increased its current assets in
order to meet the increasing sales. The firms level of liquidity being
high, we need a check on whether it affects the return on assets.
INVENTORY MANAGEMENT
Inventories
Inventories constitute the most important part of the current assets of
large majority of companies. On an average the inventories are
approximately 60% of the current assets in public limited companies in
India. Because of the large size of inventories maintained by the firms, a
considerable amount of funds is committed to them. It is therefore,
imperative to manage the inventories efficiently and effectively in order
to avoid unnecessary investment.
Nature of Inventories
Inventories are stock of the product of the company is manufacturing for
sale and components make up of the product. The various forms of the
inventories in the manufacturing companies are:
26
19.45
Composition
Raw Material
Stores and Spares
Finished Goods
Work-in-progress
2013
6349
3713
13374
595
2012
7749
2987
7245
784
2011
6127
2622
6506
871
29
gone for these bulk purchases because of the lower margins and the
discounts it availed because of procuring in bulk quantities.
A negative growth in WIP could be because:
a) The time taken to convert raw materials to finished goods is
very minimal
b) This is also due to capacity being not utilized at the
optimum.
2014
1176.73
3.32
129.29
40.15
2015
682.05
1.86
184.53
99.20
2016
592.92
1.62
340.08
209.92
Work-in-progress
Particulars
Cost of Production
Cost of Production/day
Work in progress inventory
WIP Holding days
2013
191911
525.78
689.5
1.31
31
2012
159651.19
437.4
827.52
1.89
2011
113500.33
310.95
679.455
2.19
Finished Goods
Particulars
Cost of goods sold
Cost of goods sold/day
Finished goods inventory
Finished goods inventory Holding days
2013
228177
625
10310
16
2012
178438.85
488.87
6875.725
14.06
2011
124768.92
341.832
5026.505
14.8
The time taken for the firm to realize its finished goods as sales has
increased as compared to last year. This growth in sales could be traced
back to the growing domestic IT market for the commercial as consumer
segment in India. HCL has around 15% of the market in desktop and it is
the market leader in this segment. So it is only natural that they are able
to better their conversion rate of finished goods to sales.
Operating Cycle
Particulars
Inventory conversion period
Average collection period
Gross operating cycle
Average payment period
Operating cycle
2013
38
70
108
22
86
32
2012
42
63
105
23
82
2011
45
66
111
17
94
The operating cycle of the firm reveals the days within which the
inventory procured gets converted to sales or revenue for the firm. This
time period is of importance to the firm as a lag here could significantly
affect the profitability, liquidity, credit terms, and the policies of the firm.
All the firms would like to reduce it to such extend that their cash inflows
are timely enough to meet their obligations and support the operations.
That the firm has been able to reduce the ratio is in itself an achievement
as they were having huge stocks of inventory. But the reduction in the
cycle could also be attributed to the boom in the market and the growth it
is expected to reach. This boom automatically ensures the demand for the
finished goods and thus helping in it to garner sales for the firm.
Raw Material Consumption
Particulars
Imported
Indigenous
% Imports
2013
92014
29070
75.99
2012
70784.27
27187.04
72.25
2011
42129.63
15645.51
72.92
A major chunk of the imports come from Korea and Taiwan and is
purchased in US$. The value of imported and indigenous raw material
consumed give a clear picture that if there is a change in the EXIM policy
of the government it is bound to affect the company adversely as more
than 70% of their consumption is from imports. But this is the scenario
witnessed in the industry as a whole and though HCL is into expanding
its operation to Uttaranchal it in the present state is would be affected by
a change in the import duty structure.
CASH MANAGEMENT
SOURCES OF CASH:
Sources of additional working capital include the following:
33
34
2013
0.24:1
2012
0.31:1
2011
0.11:1
The absolute liquid ratio is the best for three years and the cash balances
as to the current liability has improved for the firm. Firm has large
resources in cash and bank balances. While large resources in cash and
bank balances may seem to affect the revenue the firm could have earned
by investing it elsewhere as maintenance of current assets as cash and in
near cash assets and marketable securities may increase the liquidity
position but not the revenue or profit earning capacity of the firm.
Dividend Policy-Cash
Particulars
Dividend Policy%
Shift in Sales
Cash Balance
2011
210
154295
4463.43
35
2012
310
199886
14582.65
2013
400
238136
14529.29
Cash in Hand
118.33
128.97
Dividend Policy %
450
400
350
300
Dividend Policy %
250
200
150
100
50
0
2011
2012
2013
CASH BALANCE
16000
14000
12000
Cash Balnce
10000
Cash in hand
8000
6000
4000
2000
0
2011
2012
2013
36
128.97
Shift in Sales
300000
250000
200000
Shift in Sales
150000
100000
50000
0
2011
2012
2013
The other notable feature in HCL statements has been the growing
dividend policy of the firm. The payment of dividend means a cash
outflow. Thus cash position is an important criterion at the time of paying
dividends. There is a theory that greater the cash position and ability to
pay dividends. The firm has adopted a policy of disbursing the revenue
earned as profits to the shareholders as dividends as could be seen from
the increasing % of dividends declared.
Particulars
PBIDT
Equity Dividend%
2013
14284
400
2012
15634
310
2011
14523
210
This could mean two things for the firm the amount of cash retained in
the business for capital expenditure purposes are minimal or nil. But
rather than investing more in plant and machine which they can at any
point in time by adding on a additional line if need they would like to
optimize their utilization in fixed assets at present. This also means that
the percentage of cash in hand maintained by the firm as a source of
liquidity could be reduced, i.e. the amount of idle cash in the business
could be made to a level which the firm feels optimum.
37
The firm feels that they should retain cash and it would be in the interest
of the firm as well as the shareholders. This would automatically mean as
decrease in Earning/share (EPS)(Basic EPS declined from 8 in 2012 to
6.74 in 2013). It would prompt more of investors being interested in the
shares of the company, which would boost the purchase of the securities
and increase the market price/share thus being beneficial for the firm.
Cash Flows
Cash Flows
Net Cash from Operating activities
Net Cash from Investing activities
Net Cash from Financing activities
2013
6924
-3515
-3512
2012
2675.57
15661.29
-8217.68
2011
13706.34
-2169.16
-11412.1
The firm has disposed of investments worth around 655 Crores to meet
its growing needs. The other notable feature is decline is the firms
inflows from operations primarily due to the reason that the cash
generated from the operations is the lowest in three years. And the firms
growing dividend policy has contributed to the outflows in financing
activities.
2013
-14166
-5221
13026
2012
-14510.69
-2683.92
6419.13
2011
-7106.68
-7221.11
14311.5
The cash from the operation has been subject to considerable change due
to the changes that could be adjusted towards trade receivables and trade
38
2013
13539
-65992
65312
2012
12277.44
-53075.99
65489.84
2011
28059.88
-59249.81
52087.36
The investments have reduced from the last year due to the redemption of
investments taken place to meet various needs such as increasing demand
in stock or inventory and to ensure better credit and receivables policy.
We can see that the firm has in these three years increased their cash
inflow from the investing activities by way of disposal of investments
when in need. That is the firm has redeemed to realize cash as to meet its
expanding operations, fund the inventory procurement and meet the
obligations.
The investments in mutual funds are beneficial to the firm in the context
that they contain interest bearing securities which add up as a source of
revenue for the firm unlike cash which remains idle and unproductive
when not in use. This reduction of dividend could be attributed to
disposal of investments in mutual funds and subsidiary. This disposal
creates a fund, which can be used by the company as and when the need
arises.
39
RECEIVABLES MANAGEMENT
Recognize that the longer someone owes you, the greater the chance you
will never get paid. If the average age of your debtors is getting longer,
or is already very long, you may need to look for the following possible
defects.
Poor collection procedures.
Lax enforcement of credit terms.
Slow issue of invoices or statements.
Errors in invoices or statements.
Customer dissatisfaction.
Weak credit judgement
Debtors due over 90 days (unless within agreed credit terms) should
generally demand immediate attention. Look for the warning signs of
a future bad debt. For example..
Longer credit terms taken with approval, particularly for smaller
orders.
Use of post-dated checks by debtors who normally settle within
agreed terms.
Evidence of customers switching to additional suppliers for the same
goods.
New customers who are reluctant to give credit references.
Receiving part payments from debtors.
41
PARTICULARS
2013
2012
2011
2010
5.21
5.80
5.53
6.62
70
63
66
55
39
A better turnover ratio implies for the firm, more efficiency in converting the
accounts receivable to cash. A firm with very high turnover ratio can take the
freedom of holding very little balances in cash, as their debtors are easily
realizable. In case of HCL, the collection period for the firm is 70 days.
PARTICULARS
2013
2012
2011
25
47
49.8
5
134.
09
69.8
The debts doubtful have doubled but their percentage on the debts has almost
become half. This implies a sales and collection policy that get along with
the receivables management of the firm.
COLLECTION POLICIES:
It refers to the collection procedures such as letters, phone calls and other
follow up mechanism to recover the amount due from the customers. It is
obvious that costs are incurred towards the collection efforts, but bad debts
as well as average collection period would decrease. Further, a strict
collection policy of the firm is expensive for the firm because of the high
cost is required to be incurred by the firm and it may also result in loss of
goodwill. But at the same time it minimizes the loss on account of bad debts.
Therefore, a firm has to strike a balance between the cost and benefits
associated with collection policies.
The steps usually followed in collection efforts are:
Sending repeated letters and reminders to the customers
Personal visits
Using agencies involved in collection process
Making telephonic reminders
40
creditors- slow payment by you may create ill feeling and can signal that
your company is inefficient (or in trouble!).
INDIAN BANK
SYNDICATE BANK
TOTAL
FUND BASED
300
200
500
NON-FUND
BASED
250
100
350
In order to finance the working capital needs of the firm in the form of
Working Capital Demand Loan, there is a consortium of nine banks. The
consortium if banks provide a fund based limit of 125 Crores which
comprises of cash credit and working capital demand loans and non-fund
based limits which has bank gurantee and letter of credit subject to a limit of
1375 Crores. The Lead Bank in this consortium of banks is State Bank of
India and the second lead bank is ICICI. It is SBI, which fixes the limit on
the basis of consortium. The allocation cannot be higher than the limits fixed
by it. SBI is the biggest contributor in the consortium for both fund and
non-fund based limits with about
31.30 in funds and 34.02 in non-fund limits. The ratio of both limits for
the year 2013 is 0.23:0.7
RENEWAL OF LIMITS
LIMITS
FUND BASED
NON FUND
BASED
TOTAL
2013
11500
48500
2012
11500
38500
2011
11500
28500
60000
50000
40000
All banks sanction the limits for a period of one year. Thereafter it is to be
renewed every year. SBI appraises the limit on the basis of consortium. The
individual banks appraise for their own individual limit. The non fund based
limits of the firm in consortium financing has been subjected to change for
the past two years as per the requirements of the firm and the consent of the
lead bank to its proposal. It was around 385 Crores in 2012 and had been
risen to around 485 Crores in 2013.
The company needs to provide the following information to bank for
appraisals:
CONSORTIUM MEETING :
All the members of the consortium are required to meet to discuss various
issues relating to the working facilities. As per RBI guidelines, the lead bank,
i.e., SBI should ensure that one consortium meeting is held every quarter snd
this meeting has to be arranged by HCL.
There are various documents that need to be signed at the time of renewal or
inducting any bank to the consortium. The various documents are as follows:
Loan agreement
Hypothecation agreement for movable machinery
Hypothecation agreement for movables and book debts
Counter Indemnity
The above are the standard agreements asked for by the banks. The common
seal has to be witnessed by the company secretary and one of the directors of
the company.
As of 2012, no additions or deletions were made to the consortium of the
banks. But over the years the number of banks in the consortium have been
reduced. Indian Banks and State Bank of Hyderabad are the two banks
which were earlier a part of the consortium.
sanctioned by it. The drawing power for it fund based limits out of the
consortium are determined on the basis of the stock statement submitted by
the company. HCL is required to submit the stock statement to all member
banks in consortium for every month.
SECURED LOANS
SHORT TERM
LONG TERM
TOTAL
2013
3849
0
3849
2012
4991.28
530.07
5521.35
2011
6903.7
0
6903.7
2010
4987.52
3461.36
8448.88
%SHORT TERM
100
90.4
100
59.03
Under secured loan cash credit, along with non fund based facilities, foreign
currency term loan from banks are secured by way of hypothecation of
stock-in-trade, book debts as first charge and by way of second chanrge on
all the immovable and movable assets of the parent company. Term loan in
Indian rupees from a bank is subject to a prior charge in favour of companys
bankers on book debts and stock in trade for working capital facilities.
UNSECURED
LOANS
SHORT TERM
LONG TERM
TOTAL
% SHORT TERM
2013
2012
2011
2010
15104
11
15115
99.93
2593.39
17
2610.39
99.348
63.94
169.51
233.45
27.38
76.84
3261.42
3338.26
2.3
Here HCL has a major portion of their financing done through short term
financing than long term financing. The preference of short term financing to
long term as such is not the part of any policy employed by the firm but it
was
due to the reason that the interest rates in short term were more investor
friendly and the cost involved in them were also low.
RESEARCH METHODOLOGY
The management of working capital involves managing inventories,
accounts receivable and payable and cash. Therefore one also needs to
have a sound knowledge about cash management, inventory management
and receivables management.
Then comes the financing of working capital requirement, i.e. how the
working capital is financed, what are the various sources through which it
is done.
And, in the end, suggestions and recommendations on ways for better
management and control of working capital are provided.
This project will be a learning device for the finance student.
Through this project I would study the various methods of the working
capital management.
The project will be a learning of planning and financing working capital.
The project would also be an effective tool for credit policies of the
companies.
This will show different methods of holding inventory and dealing with
cash and receivables.
This will show the liquidity position of the company and also how do they
maintain a particular liquidity position.
ANALYSIS
Industry analysis
Financial graphs
Concluding analysis
Suggestions and recommendations
Bibliography
INDUSTRY ANALYSIS
INDUSTRY STRUCTURE AND DEVELOPMENTS
FINANCIAL GRAPHS
PBT grew by 11% from, Rs. 385 crores in the previous year to Rs.
429 crores in the current year. The Compounded Annual Growth Rate
(CAGR) for the preceding five years is 53%.
Profit after tax grew by 13%, from Rs. 280 crores in the previous
year to Rs. 316 crores. The Compounded Annual Growth Rate (CAGR)
for the preceding five years is 36%. Profits for the current year are after a
provision for Rs. 106 crores for current tax expense, Rs. 3 crores for
deferred tax expense and Rs. 4 crores for Fringe Benefit Tax.
Basic EPS grew from Rs. 16.7 in the previous year to Rs. 18.7 in
the current year. Diluted EPS grew from Rs. 16.5 in the previous year to
Rs. 18.6 in the current year.
Net Worth grew from Rs. 698 crores as at previous year-end to Rs.
860 crores as on June 30, 2014. Share capital as at year-end is Rs. 34
crores divided into 16.9 crores shares of Rs. 2/- each. Reserves & surplus
as at year-end are Rs. 826 crores after appropriating Rs 156 crores for
dividends. Book value per share grew from Rs. 41.3 as at June 30, 2013
to Rs.50.8 as at June 30, 2014.
CONCLUDING ANAYSIS
The working capital position of the company is sound and the various
sources through which it is funded are optimal.
The company has used its dividend policy, purchasing, finance
ing and investment decisions to good effect can be seen from the inferences
made earlier in the project.
The debts doubtful have been doubled over the years but their percentage
on the debts has almost become half. This implies a sales and collection
policy that get along with the receivables management of the firm.
The returns have been affected by a marked growth in working capital
and though a 29.75% in 2013 return on investment is good, but it got
reduced as compared to 39.01% return in 2012.
The various ratios calculated are an indicator as to the fact that the
profitability of the firm and sales are on a rise and also the deletion of the
inefficiencies in the working capital management.
The firm has not compromised on profitability despite the high liquidity
is commendable.
HCL Infosystems has reached a position where the default costs are as
low as negligible and where they can readily factor their accounts
receivables for availing finance is noteworthy.
receivables and stocks etc. This will ultimately improve the efficiency of its
operations. Following are few recommendations given to the company in
achieving its desired objectives:
The business runs successfully with adequate amount of the working
capital but the company should see to it that the cash should not be tied
up in excessive amount of working capital.
Though the present collection system is near perfect, the company as
due to the increasing sales should adopt more effective measures so as
to counter the threat of bad debts.
The over purchasing function should be avoided as it could lead to
liquidity problems.
The investment of cash in marketable securities should be increased, as
it is very profitable for the company.
Holding of excessive and insufficient stock must be avoided as it creates
a burden on the cash resources of a business and results in lost sales,
delays for customers, etc respectively.
BIBLIOGRAPHY
Following sources have been sought for the preparation of this report:
Corporate Intranet
Financial Statements (Annual Reports)
Direct interaction with the employees of the company
Internet ----www.hclinfosystems.in
Textbooks on financial management -
I.M.Pandey
Khan and Jain
Prasanna Chandra
APPENDICES
Currency in
Millions of Indian Rupees
As
of:
Jun
30
2011
Restat
ed
Assets
1,452.3
2,512
.7
Jun 30
2013
Reclassif
ied
Resta
ted
Jun
30
2012
2,149.2
Jun
30
2014
1,976
.5
114.8
1,573
.6
3,137.7
2,939
.9
1,567.1
4,086
.3
5,286.9
4,916
.4
4,390.4
6,103
.1
7,691.4
10,52
0.0
228.2
400.5
468.1
593.4
4,618.7
6,503
.6
8,159.5
11,11
3.4
2,804.2
3,493
.9
4,696.1
7,918
.8
107.0
163.0
Short-Term Investments
Accounts Receivable
Other Receivables
TOTAL RECEIVABLES
Inventory
Prepaid Expenses
9,120.8
14,30
3.2
1,406.1
1,404
.7
Accumulated Depreciation
146.0
287.8
23.8
-749.1
657.0
56.4
744.9
659.8
86.8
84.8
18,375.3
24,32
1.2
1,731.9
2,431
.0
-852.4
879.5
966.5
1,464
.5
Goodwill
--
--
Long-Term Investments
Other Intangibles
--
--
TOTAL ASSETS
2,190.9
--
--
--
59.1
--
--
--
0.2
0.8
95.3
32.4
30.9
5.1
71.8
16.0
12,027.
9
15,06
3.4
19,359.2
25,83
3.4
Accounts Payable
Accrued Expenses
Short-Term Borrowings
4,100
.9
100.4
101.0
--
307.9
690.4
499.6
3,390.6
8,298
.5
140.4
209.8
784.9
1,182
.4
0.4
892.5
5,964.8
Long-Term Debt
TOTAL LIABILITIES
Common Stock
328.9
334.4
673.9
883.7
Retained Earnings
4,297
.3
30.1
3,377
.3
536.4
965.8
2,914.6
80.9
77.4
252.8
5,216
.6
557.9
775.2
16,82
7.8
60.1
284.0
107.6
124.8
4,687.9
7,662.6
9,433
.4
12,213.7
15.8
7.2
109.0
73.5
13.9
7,801.3
3.8
9,517
.9
1.0
--
17,23
6.6
337.5
338.3
1,044.5
1,087
.9
5,565.2
7,141
.4
12,382.4
3,193.2
30.6
30.1
29.6
29.2
4,226.6
5,545
.5
6,976.8
8,596
.8
TOTAL EQUITY
4,226.6
5,545
.5
6,976.8
8,596
.8
12,027.
9
19,359.2
25,83
3.4
15,06
3.4
Currency in
Millions of Indian Rupees
As
of:
Jun
30
2011
Resta
ted
Jun
30
2012
NET INCOME
1,751.
1
2,27
7.0
180.1
152.
4
--
Jun
30
2014
2,803.6
3,15
9.5
124.3
144.
0
Reclassifi
ed
--
152.
4
-0.4
-1.6
180.1
Jun 30
2013
Resta
ted
--
124.3
4.1
148.
1
-79.6
0.0
292.8
-84.9
31.2
0.6
-61.5
0.5
0.5
--
79.6
-55.2
--
271.
8
14.8
Change in Inventories
-423.3
1,471.
8
1,56
1.6
2,759.5
3,11
2.2
1,614.
0
1,26
7.5
2,786.3
264.
7
Capital Expenditure
-180.7
1,593.
4
14.4
7.2
1,99
3.4
-1,724.7
689.
7
-1,202.2
267.
8
-
3,15
8.8
3,22
2.7
-424.3
10.7
73.7
841.
4
-1,453.6
30.8
622.
4
-1,683.3
41.1
169.
5
200.8
231.
3
200.5
1,83
7.2
241.9
400.
8
200.5
1,83
7.2
--
-707.9
--
302.
7
80.3
-
674.
5
3.5
9.2
--
--
289.
0
-172.3
1.6
-
231.
9
--
-74.7
250.
0
-866.2
-866.2
-707.9
283.3
-98.9
1,147.
8
497.1
215.
2
163.9
1,04
7.4
-1,526.6
1,04
7.4
-1,526.6
-95.4
829.
5
1,06
0.4
-132.0
-1,466.5
-172.3
302.
7
-363.5
-
324.
7
44.2
1,54
6.1
-
1,54
6.1
216.
1
-
205.
5
-
172.
7
Year over year, HCL Infosystems Ltd. has seen revenues remain relatively
flat (113.7B to 116.9B), though the company was able to grow net income
from 2.8B to 3.2B. A reduction in the percentage of sales devoted to cost of
goods sold from 93.21% to 92.53% was a key component in the bottom line
growth in the face of flat revenues.
Currency in
Millions of Indian Rupees
As
of:
Jun
30
2011
Jun
30
2012
Jun 30
2013
Jun 30
2014
116,85
3.0
Reclassif
ied
Restat
ed
Restat
ed
43,064.
4
77,47
8.9
Revenues
Other Revenues
TOTAL REVENUES
43,064.
4
77,44
3.2
38,701.
3
71,49
6.1
GROSS PROFIT
4,363.1
2,268.8
2,449.4
OPERATING INCOME
113,683
.1
--
-35.7
61.6
63.8
116,91
6.8
105,96
4.4
108,12
1.4
5,947
.1
7,780.3
8,795.
4
3,305
.9
3,764.3
4,527.
1
180.6
152.4
124.3
148.1
--
-84.0
3,374
.3
3,973.4
4,766.
4
1,913.7
2,572
.8
3,806.9
4,029.
0
113,744
.7
84.8
91.2
Interest Expense
-82.8
-77.6
-132.6
-214.6
132.1
146.1
223.8
208.0
49.4
68.5
37.9
145.0
32.0
0.4
2.3
Insurance Settlements
2.3
75.4
9.2
2,033.0
-144.4
--
2,786
.3
79.6
189.6
--
3,737.9
--
4,227.
8
85.0
61.5
55.2
1.6
-0.5
-0.6
87.2
4.0
4.7
3.7
4.0
4.7
--
84.0
2,960
.1
364.0
683.1
2,115.1
--
--
3,802.9
4,287.
1
999.3
1,127.
6
1,751.1
2,277
.0
2,803.6
3,159.
5
NET INCOME
1,751.1
2,277
.0
2,803.6
3,159.
5
ITEMS
1,751.1
2,277
.0
2,803.6
3,159.
5
ITEMS
1,751.1
2,277
.0
2,803.6
3,159.
5