Rakesh Hcl

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A

REPORT ON

FINANCIAL RATIO ANALYSIS

OF

HCL INFOSYSTEMS LTD.

Rakesh S. Prajapati

Roll No. : 11MBA041

Vishal Goel

Indus Institute of Technology & Engineering

Rancharda, Via Thaltej, Ahmedabad 382 115.

Telfax: +91 2764 260277/78/79


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The amazing story of the birth of HCL

In 1976, during lunch time at Delhi Cloth Mills, DCM, a group of six young engineers in the officecanteen were discussing their work woes at DCM's calculator division.

Despite them all have having jobs that paid them well, they were an unhappy lot -- they wanted to do

more, riding on their own gumption. They decided to quit their jobs and start a venture of their own.

The man who was fuelling the ambitions of his five other colleagues at that canteen was a 30-year-old

engineer from Tamil Nadu, Shiv Nadar. And this is how the story of Hindustan Computers Limited,

HCL began.

Nadar and his five colleagues quit DCM in the summer of 1976. They decided to set up a companythat would make personal computers. They had gathered enough technical expertise at DCM's

calculator division, but like for all start-ups, getting funds was the problem.

However, Nadar's passion for his new dream company and the support of his enthusiastic colleagues

soon made the task very easy.

Founder, Chairman and CEO, HCL Technologies, Shiv Nadar told CNBC-TV18, "The first person I

met was Arjun and he was also a management trainee like me. He was a couple of batches junior to

me. . . We became very good friends and we are still very good friends. Then, the rest of them all

worked for DCM and we all are of similar age, so we used to hang out together, crib together, have

fun together, work together.

Nadar would first have to gather cash to give wings to his idea of manufacturing computers. He

floated a company called Microcomp Limited -- through which he would sell teledigital calculators.

This venture threw up enough cash to allow the founders to give shape to their ultimate dream to

manufacture computers in India , at a time when computers were just sophisticated cousins of the

good old calculator but support also came from the Uttar Pradesh government.

Finally, the founders put together Rs 20 lakh (Rs 2 million) and HCL was born.

The year after HCL was floated, the Indian government reigned in the ambitions of the foreign

companies in India. This pronounced the death knell of companies like IBM and Coca-Cola while

bells began to ring for Indian entrepreneurships like HCL.

Managing Editor, The Smart Manager, Dr Gita Piramal says, "Few Indian businessmen were happy

when George Fernandes became industry minister in 1977, when the Janata Party came to power.

Foreign businessmen were even less happy that Coca-Cola and IBM left India. IBM's leaving, left a

major vacuum and this was the vacuum in which Shiv Nadar spotted an opportunity. He stepped in

and customers began to trickle in."


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HCL started shipping its in-house microcomputers around the same time as its American

counterpart Apple, and took only two more years to introduce its 16 bits processor.

By 1983, it indigenously developed a relational data based management system, a networking

operational system and client-server architecture, almost at the same time as its global peers. The roadto the top was now in sight and HCL took it a step further by exploring foreign shores.

HCL's first brush with international business came about in 1979 when it set up a venture in

Singapore; it was called Far East computers. HCL was only three years old and its net worth was

around Rs 3 crore (Rs 30 million). Shiv Nadar set up an ambitious target for the venture and notched

up sales of Rs 10 lakh (Rs 1 million) in the very first year.

Co-Founder, HCL Technologies, Ajai Chowdhry says, "We discovered that there was a good

opportunity to enter Singapore with our own hardware we had manufactured in Singapore. But the

strategy was very clearly around selling computerization rather than computers and so we actually

took the whole idea of hardware, software solution and service and packaged it and presented it as

computerization."

Even as it was basking in its success in Singapore, HCL planned a whole new area of expansion and it

tapped into a territory that was lying unexplored in the country - computer education. Sensing the

increasing demand for computer training, HCL set up NIIT in 1981 to impart high quality IT

education in India.

Nadar explains, "We knew many people in IIT and Indian Institute of Science. We formed an

advisory panel and asked them, can you help us navigate this whole thing and they were very

enthusiastic about this and they of course shaken up a little bit when they saw that we started

advertising in Bombay -- selling education as a commercial project."

From calculators to IT education, the first five years of HCL was a combination of growth and

expansion riddled with uncertainty but the company was now gearing up to set a much bigger target

for itself and an announcement from the government would help it takeoff to those soaring heights.

In 1984, the Indian government announced a new policy that would change the fortunes of the entire

computer industry. The government opened up the computer market and permitted import oftechnology. With new guidelines and regulations in place, HCL grabbed the opportunity to launch its

own personal computer.

The demand for personal computers was slowly but surely mounting in the Indian market. Most banks

were shifting to the UNIX platform. A few companies approached HCL for personal computers, so,

the founders flew all over the world to bring back PCs they could take apart, study and reproduce and

indigenously upgrade. Their first innovative personal computer was ready in three weeks' times and

soon they launched their first range of computers, and they called it the Busybee.


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Chowdhry says, "In a lot of ways, it opened up the market because one thing was that, you no

longer had to develop basic stuff in India - like operating systems but on the other hand it opened new

opportunities like banking because as per government policy, all banking computers must be UNIX

based. So, feverishly we set out creating a UNIX based computer and we bought the UNIX source

code and created that product out of nothing."

In two years, HCL became one of the largest IT companies in India. The founders now went to

different corners of the country to set up sales and marketing offices and it now needed the brightest

minds to take it to the next level of competition.

Campus recruitment in management and technical institutes began in full swing and HCL grabbed

some of the best talent by offering pay packages that outscored some of the best companies of the

time -- Rs 2,000 per month to start with.

The adrenaline rush of the first half of the 1980s and the rapid expansion strategy soon caught up with

HCL. A turning point came in 1989, when HCL on the basis of a report by McKinsey and Company

decided to venture into the American computer hardware market.

HCL America was born but the project fell flat on its face. HCL had failed to follow a very crucial

step necessary to enter the US market. A big disappointment was on its way.

Piramal says, "For every entrepreneur, the US will always remain the dream market. It's the biggest

market in the world and Shiv Nadar obviously was drawn to it but he really didn't know what he was

getting into. The computers he made didn't get environmental clearances. In fact, HCL probably

turned into his biggest mistake but HCL and Shiv himself, he is a very strong person, he understood

he was making a mistake, he saw that Infosys and Wipro are doing really well in software and he was

not too proud to change gears and finally HCL did enter the software market."

It didn't take too long for HCL to brush off the disappointment in the US. Its first failure in the US

was set aside in 1991 and HCL entered into a partnership with HP (Hewlett-Packard ) to form HCL

HP Limited. It opened new avenues for HCL and gave opportunities to firm up its revenues.

In three years, another new possibility came knocking at its door and in 1994, HCL looked beyond

PCs and tied up with Nokia cellphones and Ericsson switches for distribution.

Chowdhry explains, 'In 1991, when India didn't have enough foreign exchange. We were in the

hardware business and we didn't have enough funds. That's the time when a clear thought entered our

minds - that we should globalize and in the very early days, we actually created a joint venture with

Hewlett-Packard.

In 1997, HCL was already a multi-dimensional company spun off HCL Technologies Limited to mark

their entry into the global software space. It made up its mind to focus on software development,

which was twenty years behind its entrepreneurial journey, Shiv Nadar was now ready to take on

global competition with all his might.


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From 70s to 90s, the HCL story was one of steady rise but in the face of its rapid expansion and

continuous flow of achievements, Shiv Nadar didn't anticipate that he would be in for a rude shock

and that it would come from someone very close.

In 1998, Arjun Malhotra, Shiv Nadar's comrade and friend decided to leave the company to start hisown TechSpan, headquartered in Sunnyvale, California. He was also one of the largest shareholders in

HCL Infosystems at that time. For Shiv Nadar, it was time to think afresh

The revenues were shrinking from the hardware sector and Nadar now decided to redesign HCL. The

company once again needed funds to grow and this time around, Nadar decided to look at the capital

market. An initial public offer (IPO) was made on the Indian Stock Exchange in 1999, which was a

stupendous success.

President, HCL Technologies, Vineet Nayar says, "The shareholders supported us and then I think we

started with Rs 580 an IPO and went up to Rs 2,800 or something like that. So, it was a dream run, I

think the shareholders bought the argument we were making, they liked the articulation of the

strategy, they liked the management team and they liked the vision we were painting and they

supported the stock full time and that was a turning point for HCL."

Shiv Nadar now put aside his dream of becoming a global hardware major and venture into software

with an open mind and a clean slate. Technology was opening up vistas of opportunities in the

software sector and HCL now wanted to build new businesses.

Global business became a priority, so, now they started a BPO in Ireland in 2001. His partner in this

ambitious venture was British Telecom.

The years that followed saw HCL in an expansion mode. In 2005 alone, HCL signed a software

development agreement with Boeing for its 787 dreamliner programme. Next came a venture with

NEC, Japan .

It even brought out the joint ventures Deutsche Bank and British Telecom's Apollo Contact Center. In

the same year, HCL Infosystems launched it sub Rs 10,000 personal computer and joined hands with

AMD and Microsoft to bridge the digital divide.

The successes of 2005 spilled over into 2006 and the company now produced over 75,000 machines

in a single month, with more parallel joint ventures growing on its list. But in spite of this

overwhelming success, Shiv Nadar would not rest. There was a nagging sense of dissatisfaction and

perhaps not having exploited its full potential that still drove Nadar and the company to achieve much

more.

Thirty years after starting his company, Shiv Nadar really does not have much to complain about.

Hindustan Computers Ltd today is an empire worth $3.5 billion with staff strength of 34,000.

Company Background - HCL Infosystems


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Industry Name Computers - Hardware

House Name HCL Group

Collaborative Country Name N.A.

Joint Sector Name N.A.

Year Of Incorporation 1986

Year Of Commercial Production N.A.

Regd. Office

Address 806, Siddharth,, 96, Nehru Place

District New Delhi

State Delhi

Pin Code 110019

Tel. No. 011-2526519,011-2520977

Fax No. 011-2525196Email :[email protected] Internet :http://www.hclinfosystems.com

AuditorsPrice Waterhouse

Company StatusN.A.

Registrars

Name Intime Spectrum Registry Ltd.

Listing Details - HCL Infosystems

Key Dates

Year Ending Month Jun

AGM Date (Month) Nov

Book Closure Date (Month) Nov

Listing Information

Face Value Of Equity Shares 2

Market Lot Of Equity Shares 1BSE Code 500179

NSE Code HCL-INSYS

BSE Group N.A.

Whether The Company Forms A Part Of The Following Indices -

Sensex No

Nifty No

BSE-100 No

BSE-200 No

S&P CNX 500 Yes

CNX Midcap Yes
mailto:[email protected]:[email protected]:[email protected]://www.hclinfosystems.com/http://www.hclinfosystems.com/http://www.hclinfosystems.com/http://www.hclinfosystems.com/mailto:[email protected]


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But then dissatisfaction has been the quintessential factor that has made Shiv Nadar the visionary that

he was and continues to be. Dissatisfaction once drove him to quit his job at DCM and it is that same

quality even today, that is driving him to achieve much more when he can quite easily rest on his

laurels.

History of HCL

In 1976, Shiv Nadar, Arjun Malhotra, Subhash Arora, Badam Kishore Kumar, T.VBharadwaj,& Arun Kumar H started Microcomp Limited. The focus of the companywas design and manufacturing of scientific calculators. The venture provided itsfounders money to start a company that focused on manufacturing computers. Thecompany name "HCL" used to stand for "Hindustan Computer Limited" but now HCL

is the only one name that the company goes by. HCL received support from the UttarPradesh government to setup manufacturing in Noida.

HCL infosystems

HCL Infosystems Ltd., a listed subsidiary of HCL, is an India-based hardware and systems

integrator. It has a presence in 170 locations and 300 service centres throughout India. Its

manufacturing facilities are based in Chennai, Pondicherry and Uttarakhand. It isheadquartered at Noida.

HCL Peripherals (a unit of HCL Infosystems Ltd.), founded in the year 1983, is a

manufacturer of computer peripherals in India of Display Products, Thin Client solutions,

Information and Interactive Kiosks and a range of Networking products & Solutions. HCL

Peripherals has two Manufacturing facilities, one in Pondicherry (Electronics) and the other

in Chennai (Mechanical). The company has been given ISO:27001 certifications.

CNX FMCG No

Listing On

Listed OnThe Stock Exchange, Mumbai, National Stock Exchange of

India Ltd.Address Sri Venkatesh Bhawan, No. W-40, Okhala Industrial Area Phase -II, New Delhi - 110020, Delhi

Tel. No. : 51406149, 51406151, 51406152, 51709885, 51609386 Fax No. : 51709881

Email : N.A. Internet :http://www.intimespectrum.com
http://en.wikipedia.org/wiki/Shiv_Nadarhttp://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/Uttarakhandhttp://en.wikipedia.org/wiki/Noidahttp://www.intimespectrum.com/http://www.intimespectrum.com/http://www.intimespectrum.com/http://www.intimespectrum.com/http://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/Uttarakhandhttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/Shiv_Nadar


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HCL

Type Private

Industry IT Services

Founded 11 August 1976

Founder(s) Shiv Nadar

Headquarters Noida,India

Area served Worldwide

Key people Shiv Nadar(Chairman&CSO)

Revenue US$6.1 billion (2011)

Employees 85,000 (2011)

Subsidiaries HCL Technologies

HCL Infosystems

Website hcl.in
http://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/IT_Serviceshttp://en.wikipedia.org/wiki/Shiv_Nadarhttp://en.wikipedia.org/wiki/New_Okhla_Industrial_Development_Authorityhttp://en.wikipedia.org/wiki/New_Okhla_Industrial_Development_Authorityhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Shiv_Nadarhttp://en.wikipedia.org/wiki/Shiv_Nadarhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Chief_Strategy_Officerhttp://en.wikipedia.org/wiki/Chief_Strategy_Officerhttp://en.wikipedia.org/wiki/Chief_Strategy_Officerhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Subsidiaryhttp://en.wikipedia.org/wiki/Subsidiaryhttp://en.wikipedia.org/wiki/HCL_Technologieshttp://en.wikipedia.org/wiki/HCL_Technologieshttp://www.hcl.in/http://en.wikipedia.org/wiki/File:HCL_Technologies_logo.svghttp://en.wikipedia.org/wiki/File:HCL_Technologies_logo.svghttp://www.hcl.in/http://en.wikipedia.org/wiki/HCL_Technologieshttp://en.wikipedia.org/wiki/Subsidiaryhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Chief_Strategy_Officerhttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Shiv_Nadarhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/New_Okhla_Industrial_Development_Authorityhttp://en.wikipedia.org/wiki/Shiv_Nadarhttp://en.wikipedia.org/wiki/IT_Serviceshttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Types_of_business_entity


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HCL Infosystems

Profit & Loss account ------------------- in Rs. Cr. -------------------

Jun '11 Jun '10 Jun '09 Jun '08 Jun '07

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Sales Turnover 11,059.14 12,061.78 12,336.81 12,569.44 11,818.25

Excise Duty 122.19 108.77 126.08 158.00 170.13

Net Sales 10,936.95 11,953.01 12,210.73 12,411.44 11,648.12

Other Income 67.45 46.93 -8.84 32.37 52.81

Stock Adjustments -230.80 -140.85 17.90 89.81 270.99

Total Income 10,773.60 11,859.09 12,219.79 12,533.62 11,971.92

Expenditure

Raw Materials 9,475.80 10,611.66 11,040.53 11,347.82 10,929.68

Power & Fuel Cost 1.88 1.78 1.72 1.60 1.64

Employee Cost 448.31 368.41 325.98 292.96 217.73

Other Manufacturing Expenses 121.22 115.99 104.75 110.47 121.76

Selling and Admin Expenses 340.88 290.50 270.40 255.37 197.09

Miscellaneous Expenses 43.86 39.46 44.51 31.46 36.29

Preoperative Exp Capitalised -1.38 -0.54 -0.49 -0.55 0.00

Total Expenses 10,430.57 11,427.26 11,787.40 12,039.13 11,504.19



Operating Profit 275.58 384.90 441.23 462.12 414.92PBDIT 343.03 431.83 432.39 494.49 467.73

Interest 89.90 53.08 56.73 58.84 31.59

PBDT 253.13 378.75 375.66 435.65 436.14

Depreciation 33.20 21.73 17.27 16.35 12.55

Other Written Off 0.00 0.00 0.00 0.00 0.00

Profit Before Tax 219.93 357.02 358.39 419.30 423.59

Extra-ordinary items 15.38 11.68 15.59 15.17 6.40

PBT (Post Extra-ord Items) 235.31 368.70 373.98 434.47 429.99

Tax 58.08 107.10 113.42 129.72 112.14

Reported Net Profit 177.23 261.55 260.44 304.75 317.85

Total Value Addition 954.77 815.60 746.87 691.31 574.51Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend 176.30 170.73 111.27 136.84 135.30

Corporate Dividend Tax 29.11 28.68 18.91 23.26 20.98

Per share data (annualised)

Shares in issue (lakhs) 2,228.80 2,182.59 1,712.12 1,711.50 1,691.53

Earning Per Share (Rs) 7.95 11.98 15.21 17.81 18.79

Equity Dividend (%) 400.00 375.00 325.00 400.00 400.00

Book Value (Rs) 87.36 87.26 66.14 58.61 49.79


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HCL Infosystems

Balance Sheet ------------------- in Rs. Cr. -------------------



Sources Of Funds

Total Share Capital 44.58 43.65 34.24 34.23 33.83

Equity Share Capital 44.58 43.65 34.24 34.23 33.83

Share Application Money 0.00 17.67 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 1,902.46 1,860.94 1,098.12 968.83 808.46

Revaluation Reserves 0.00 0.00 0.00 3.20 2.92

Networth 1,947.04 1,922.26 1,132.36 1,006.26 845.21Secured Loans 110.43 152.02 101.85 0.00 12.02

Unsecured Loans 467.11 357.91 125.00 352.66 223.87

Total Debt 577.54 509.93 226.85 352.66 235.89

Total Liabilities 2,524.58 2,432.19 1,359.21 1,358.92 1,081.10



Application Of Funds

Gross Block 364.05 274.88 234.10 216.68 162.31

Less: Accum. Depreciation 131.99 103.66 83.47 78.11 63.83

Net Block 232.06 171.22 150.63 138.57 98.48Capital Work in Progress 19.95 25.69 9.50 13.89 21.36

Investments 705.05 911.19 276.10 215.02 279.78

Inventories 586.25 835.40 888.26 898.37 791.73

Sundry Debtors 2,084.26 1,956.92 1,498.26 1,241.46 1,002.51

Cash and Bank Balance 230.50 289.86 198.67 316.91 179.34

Total Current Assets 2,901.01 3,082.18 2,585.19 2,456.74 1,973.58

Loans and Advances 714.99 555.31 315.17 244.48 170.28

Fixed Deposits 4.19 2.75 4.32 0.45 14.60

Total CA, Loans & Advances 3,620.19 3,640.24 2,904.68 2,701.67 2,158.46

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 1,949.25 2,182.10 1,899.81 1,639.38 1,395.88Provisions 103.42 134.05 81.89 70.85 81.10

Total CL & Provisions 2,052.67 2,316.15 1,981.70 1,710.23 1,476.98

Net Current Assets 1,567.52 1,324.09 922.98 991.44 681.48

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 2,524.58 2,432.19 1,359.21 1,358.92 1,081.10

Contingent Liabilities 338.98 113.65 57.18 49.73 349.75

Book Value (Rs) 87.36 87.26 66.14 58.61 49.79

RATIO ANALYSIS AND INTERPRETATIONS


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CURRENT RATIO

The current ratio is a measure of the firms short-terms solvency. It indicates the

availability of current assets in rupees for every one rupees of current liability. Current

ratio is defined as a ratio of the current assets to the current liabilities. Mathematically

it is given as.

Current Ratio = Current Assets

Current Liabilities

ANALYSIS & INTERPRETATION:

As mentioned above, it shows the relationship between C.A and C.L according tomeasure the ideal ratio is of 2:1 and minimum required should 1.33:1 for bank. Hearwe can see that ratio is continuously increased every year but company had notreached the ideal ratio (2:1). So as per analysis is 9-jun the current ratio was 1.46:1

Current assets Jun 11 Jun 10 Jun 09Inventories 586.25 835.40 888.26

Sundry debtors 2084.26 1956.92 1498.26

Cash & bank balance 234.69 289.86 198.67

Loan & advance 703.61 540.94 315.17

TOTAL 3608.81 3623.12 2900.36

Current liabilities Jun 11 Jun 10 Jun 09Current liabilities 1937.87 2167.73 1899.81

Provisions 103.42 134.05 81.89

TOTAL 2041.29 2301.78 1981.70

CURRENT RATIO 1.77:1 1.57:1 1.46:1

1.461.57

1.77

1

1.5

2

9-Jun 10-Jun 11-Jun

CURRENT RATIO OF HCL

INFOSYSTEMS JUN 9 TO JUN 11

0

1000

2000

3000

4000

9-Jun 10-Jun 11-Jun

Current assets Current liabilities


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which is increased to 1.57:1 in the year 10-jun and 1.77:1 in the year 11-jun. Henceit can say that HCL Infosystems maintained their efficiency in working capitalmanagement as well as of company among its shareholders and try to reached idealratio 2:1.

QUICK RATIO

Quick ratio establishes the relationship between quick assets and current liabilities.

Generally it is used as a measure of companys ability to meet its current obligation.

Mathematically it is given by

Quick Ratio = Current Assets

InventoriesCurrent Liabilities

Current assets Jun 11 Jun 10 Jun 09Sundry debtors 2084.26 1956.92 1498.26

Cash & bank balance 234.69 289.86 198.67Loan & advance 703.61 540.94 315.17

TOTAL 3022.56 2787.72 2012.1

Current liabilities Jun 11 Jun 10 Jun 09Current liabilities 1937.87 2167.73 1899.81

Provisions 103.42 134.05 81.89

TOTAL 2041.29 2301.78 1981.70

QUICK RATIO 1.48:1 1.21:1 1.01:1

1.01

1.21

1.48

1

1.5

2

9-Jun 10-Jun 11-Jun

QUICK RATIO OF HCL INFOSYSTEMSJUN 9 TO JUN 11

0

1000

2000

3000

4000

9-Jun 10-Jun 11-Jun

Current assets Current liabilities


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Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial

position. Hear we can see that the quick ratio of HCL infosystems of year 9-jun to 11-

jun is 1.01 to 1.48 and that is more than satisfactory. It may therefore be said that short

term liquidity of the company is very sound.

DEBT TO EQUITY RATIO

It is the ratio which indicates the relationship between loan funds and net worth or

share holder funds of the company, which is known as gearing. This ratio helps incontrolling debt, which is a part of working capital management. This ratio also helps

the stockholder in taking the decision of investment. Mathematically it is given as

Debt to Equity Ratio = Loan Funds

Share holder fund

Year Jun-11 Jun -10 Jun -09

Secured loan + unsecured loan 577.54 509.93 226.85

Share capital + Reserves 1947.04 1922.26 1132.36

DEBT-TO-EQUITY RATIO 0.30 0.27 0.20

0

500

1000

1500

2000

2500

9-Jun 10-Jun 11-Jun

LONG & SHORT TERM DEBTS

SHARE HOLDER FUND

0.2

0.270.3

0.1

0.15

0.2

0.25

0.3

0.35

9-Jun 10-Jun 11-Jun

Debt to Equity Ratios


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This ratio has same trend as debt to equity ratio had. This shows increasing in ratios

every year which is 0.30 in year 11-Jun. As we can see performance of the companyin past three year net worth (Share capital + Reserves) and loan fund (Secured loan +

Unsecured loan) are consistently increasing.

LONG-TERM DEBT TO EQUITY RATIO

It is ratio of long-term debt to the net worth. This ratio would be of more interest to

the contributories of long-term finance to the firm, as the ratio gives a factual idea of

the assets available to meet long-term liabilities. It gives the idea about long term debt

like long-term loans, debenture, bonds etc. Mathematically it is given by

Long-term debt to Equity = Long-term DebtNet Worth

0

500

1000

1500

2000

2500

9-Jun 10-Jun 11-Jun

Long term debt Net wort

Year Jun-11 Jun-10 Jun-09

Long term debts 110.43 132.02 101.85

Net worth 1947.04 1922.26 1132.26

Long term debt to equity ratio 0.07 0.08 0.09

0.09

0.070.08

0

0.05

0.1

9-Jun 10-Jun 11-Jun

LONG TERM DEBT TO EQUITY

RATIO


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This ratio also has same trend as debt to equity ratio had. This show fluctuation in the

ratios every year which is 0.08 in year 11-jun. as we can see performance of the

company in past three year net worth in consistently increased but long term debt is

decreased in year jun 11.

INVENTORY TURNOVER RATIO

The Inventory Turnover ratio indicates the movement of average stock holding of

each item of material in relation of its consumption during accounting period. Average

stock is equal to opening stock + closing stock divided by 2 for that year. Calculated

days are as follows:

Inventory Turnover Ratio = Cost ofsalesInventory

Year Jun-11 Jun-10 Jun-09

Cost of sales 10679.87 11568.11 11778.56

Stock 710.86 861.83 893.32

Long term debt to equity ratio 15.02 13.42 13.11

13.1113.42

15.025

12

13

14

15

16

9-Jun 10-Jun 11-Jun

INVENTORY TURNOVER RATIO

0

5000

10000

15000

9-Jun 10-Jun 11-Jun

Cost of goods stock


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It can be seen from the table that management of HCL has tried to improve every year

for the better usage of assets. It can be seen that the all year assets consistently

increased which is 2524.58 in the year 11-jun. Hence it proves that the efficiency of

finance department of HCL.

DEBTORS TURNOVER RATIO

This ratio indicates the relationship between net sales and trade debtors. It shows the rate at

which cash is generated by the turnover of debtors. The term debtors includes trade debtors

and b ills receivable. Doubtful debts are not deducted from debtors. Moreover, debtors that

do not arise from regular sales should be excluded.

DEBTORS TURNOVER RATIO = Credit Sales

Average Debtors

Year Jun -11 Jun-10 Jun - 09

Credit Sales 10936.95 11953.01 12210.73

Average Debtors 2020.59 1727.59 1369.86

DEBTORS TURNOVER RATIO 5.41 6.92 8.91

8.91

6.92

5.41

2

4

6

8

10

9-Jun 10-Jun 11-Jun

DEBTORS TURNOVER RATIO OF

HCL INFOSYSTEMS

0

5000

10000

15000

9-Jun 10-Jun 11-Jun

Credit Sales Average Debtors


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The Debtors turnover ratio measures the efficacy of a firms credit policy and

collection mechanism and shows the number of time each year the debtors turn intocash. We can see that as from the above table and graph it can said that debtors has

been decreased as compared to sales in last three year and credit sales also decreased

in last three year. Initially in year 9-Jun the debtors turnover was 8.91 which is was

now decreased to5.41 in 11-jun.

INTEREST COVER RATIO:

Interest cover ratio is a measure of protection available to the creditors for payment of

interest charges by company. The ratio shows whether the company has sufficient

income to cover its interest requirements by wide margin.

Interest Cover Ratio = Profit Before Interest And TaxInterest Expense


Profit before interest and tex 311.07 406.09 418.52

Interest expense 73.97 37.44 44.66

Interest cover ratio 4.21 10.83 9.37

4.21

10.849.37

2

7

12

9-Jun 10-Jun 11-Jun

INTEREST COVER RATIO OF HCL

INFOSYSTEMS

0

200

400

600

9-Jun 10-Jun 11-Jun

Profit before tex and interest

Interest expanse


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Analysis and interpretation:

It can see from table and graph that interest cover ratio of HCL fluctuation in every

year which is 9.37 in 11- jun year. The extent of interest cover depends on profit, debt

level and interest rate. As we have seen, HCL has increased in year 10-jun and

decreased in year 11-jun. so it has a very high interest cover. It is also possible to use

operating profit from reformulated profit and loss account.

CAPITAL TURNOVER RATIO:

This ratio shows the relationship between cost of sales and the total capital employed.

The term capital employed includes the long term liability and total of shareholder

fund. From this are deducted non-operating assets (e.g. investment) and fictitious

assets like preliminary expenses, discount on the issue of share, debits balance of

profit and loss account.

Capital turnoverRatio = Cost of salesTotal capital employed


Sales 10936.95 11953.01 12210.73

Total capital employed 2057.77 2056.61 1234.21

Capital turnover ratio 5.31 5.81 9.89


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0

5000

10000

15000

9-Jun 10-Jun 11-Jun

Cost of sales Capital employed

Analysis and Interpretation

This ratio shows the efficiency with which capital employed in business is used. A

high capital turnover ratio indicates the possibility of greater profit and a low capital

turnover ratio is a sign of insufficient sales and possibility of lower profits. Hear we

can see that capital ratio of HCL infosystems is consistently decreased of last three

year. Cost of sales is also consistently decreased and capital employed is increased.Hence we can see that HCL infosystems sales and profit is lower.

GROSS PROFIT RATIO.

Gross profit ratio expresses the relationship between gross profit and sales. Gross

profit ratio indicates the average margin on the good sold. It shows whether the selling

prices are adequate or not. It also indicates the extent to which selling price may be

reduced without resulting.

Gross profit ratio = Gross profit

Net sales * 100

9.89

5.81 5.31

2

7

12

9-Jun 10-Jun 11-Jun

CAPITAL TURNOVER RATIO OF HCL

INFOSYSTEMS


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Analysis and Interpretation:

Gross profit ratio indicates the average margin on the good sold. Hear we can see that

the ratio of gross profit is consistently reduced last three year. Reason is that net seals

also reduced last three year company which is 10936 in year Jun -11.

NET PROFIT RATIO :

expresses the relationship between net profit after taxes and sales. This ratio is a

measure of the overall profitability net profit is arrived at after taking into account

both the operating and non-operating items of incomes and expenses. The ratio


Gross Profit 257.08 384.9 441.25

Net sales 10936.95 11953.02 12210.73

Gross profits ratio 5.31 5.81 9.89

3.61

3.2

2.4

2

2.5

3

3.5

4

9-Jun 10-Jun 11-Jun

CAPITAL TURNOVER RATIO OF HCLINFOSYSTEMS

0

5000

10000

15000

9-Jun 10-Jun 11-Jun

Gross profit Net sales


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indicates what portion of the net sales is left for the owners after all expenses have

been met.

Net profit ratio = Net profit

Net sales * 100

Analysis and Interpretation:

The net profit ratio indicate the capacity of earning profit from net sales. Hear we canInterpret that the capacity of earning is higher in jun-10 as per compare of jun -09 and

jun -11. The ratio is sharply decline from 2.19 to 1.62 in current year it is notaffordable for HCL.


Net Profit 177.23 261.55 260.44

Net sales 10936.95 11953.01 12210.73

Net profits ratio 1.62 2.19 2.13

2.13 2.19

1.62

1

1.5

2

2.5

9-Jun 10-Jun 11-Jun

CAPITAL TURNOVER RATIO OF HCL

INFOSYSTEMS

0

5000

10000

15000

9-Jun 10-Jun 11-Jun

Net profit Net sales


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CONCLUSION

As per the workings done above through the technique of Ratio Analysis and

the calculations of Working Capital Requirement; we got the view regarding

financial efficiency and performance of the company.

It is noticed through the analysis of the ratios that, many of ratios show the

positive sign for the company while others represent the improving in the

workings of the company.

Thus the report concludes on the point that the fund utilization has been

managed well and the prospects of the company have been improving year by

year

WEBLIOGRAPHY

www.moneycontrol.comwww.hclinfosystem.com
http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.hclinfosystem.com/http://www.hclinfosystem.com/http://www.hclinfosystem.com/http://www.moneycontrol.com/


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