Annual Report 2012-13.Pdf
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CONTENTS Board of Directors 2 Management’s Discussion and Analysis 3 Directors’ Report 19 Corporate Governance 31 CEO Declaration on Code of Conduct 52 CEO & CFO Certificate 52 Financial Statements 53 Indian GAAP Standalone 58 Consolidated Statements 103 Statement under Section 212 148 Statement regarding Subsidiary Companies 150 1 Content.p65 1 10/7/2013, 3:16 PM BOARD OF DIRECTORS MR. SHIV NADAR Chairman & Chief Strategy Officer Ms. ROSHNI NADAR MALHOTRA Non-Executive Director MR. VINEET NAYAR Non-Executive Director MR. AMAL GANGULI Non-Executive & Independent Director MR. KEKI MISTRY Non-Executive & Independent Director MR. R. SRINIVASAN Non-Executive & Independent Director AuditorsAuditorsAuditors Ms. ROBIN ABRAMS M/s. S. R. Batliboi & Co. LLP Non-Executive & Independent Director Chartered Accountants Gurgaon MR. SOSALE SHANKARA SASTRY Non-Executive & Independent Director BankersBankersBankers Citibank, N.A. MR. SRIKANT MADHAV DATAR Global Corporate & Investment Banking Non-Executive & Independent Director DLF Centre, 5th Floor Parliament Street MR. SUBRAMANIAN MADHAVAN New Delhi-110001 Non-Executive & Independent Director Deutsche Bank AG MR. SUBROTO BHATTACHARYA Corp. Office - DLF Square Non-Executive & Independent Director 4th floor, Jacaranda Marg, DLF City, Phase - II MR. SUDHINDAR KRISHAN KHANNA Gurgaon-122002 Non-Executive & Independent Director Standard Chartered Bank Corporate & Institutional Banking Credit Operations, India H -2, Connaught Circus New Delhi-110001 State Bank of India Corporate Accounts Group Branch 11th /12th Floor, Jawahar Vyapar Bhawan 1, Tolstoy Marg New Delhi-110001 2 2 HCLTechno MDA 2-18.p65 2 10/7/2013, 3:16 PM MANAGEMENT DISCUSSION AND ANALYSIS Investors are cautioned that this discussion contains forward looking statements that involve risks and uncertainties. When words like 'anticipate', 'believe', 'estimate', 'intend', 'will', and 'expect' and other similar expressions are used in this discussion, they relate to the Company or its business and are intended to identify such forward-looking statements. The Company undertakes no obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such statements. Factors that could cause or contribute to such differences include those described under the heading 'Risk Factors' in the Prospectus filed with the Securities and Exchange Board of India (SEBI) as well as factors discussed elsewhere in this report. Readers are cautioned not to place undue reliance on the forward-looking statements as they speak only as of their dates. The following discussion and analysis should be read in conjunction with the Company's financial statements included herein and the notes thereto. Current State of the Indian IT Industry QUICK FACTS The Indian IT Services industry has exhibited rapid evolution in terms of expanding their vertical and geographic markets, attracting new customer segments, transforming [NASSCOM on the Indian IT Industry] from technology partners to strategic business partners imbibing a shared vision and • The industry is estimated to aggregate offering a considerably wider spectrum of services. revenues of USD 108 billion in FY 2013 According to NASSCOM estimates, export revenues (excluding hardware) are expected • IT software and services sector to cross USD 75.8 billion in FY 2013, growing by 10.2% during FY'13. Software and (excluding hardware) account for USD Services export revenue (excluding hardware) had posted 14.9% growth during FY 95 billion of revenue. 2012. • As a proportion of national GDP, the • Verticals:Verticals:Verticals: The industry's vertical market mix is well balanced across several mature sector revenues have grown from 1.2% and emerging sectors. Growth this year was driven by emerging verticals of in FY 1998 to nearly 8% in FY 2013 healthcare, retail and utilities growing at a consolidated 12%, even as the traditional verticals BFSI and manufacturing recorded above industry growth. • Its share of total Indian exports (merchandise plus services) increased • Geographies: The year was characterized by healthy growth in Europe (including from less than 4% in FY 1998 to about United Kingdom) and Asia Pacific. US, the biggest market for IT-BPM exports 23-25 % in FY 2013 also continued its growth momentum albeit at a slower pace. As the European market is becoming more amenable to off -shoring, growth in this region is expected to firm up further. • Service Lines: As per NASSCOM estimates, amongst service lines, Business Process Management segment is expected to be the fastest growing at 12.2% and is estimated to gross USD 17.8 billion in FY 2013. The IT services segment aggregated export revenues of USD 43.9 billion, accounting for nearly 58% of total exports and a growth of 9.9% over FY 2012. HCL Technologies (HCLT) continues to outperform the Indian IT-Industry . As shown in the chart (Figure 1.3), during the period ending March 2013, HCLT's revenues grew by 12% YoY to reach USD 4.53 Billion. HCLT's revenue has grown by 21% on a 3 year CAGR basis whereas the Indian IT Industry grew by 13.5% during the same period. On a 5 year CAGR basis, HCLT's revenue grew by 21% whereas the Indian IT-BPO industry grew by 11.4%. 3 2 HCLTechno MDA 2-18.p65 3 10/7/2013, 3:16 PM The Industry Outlook Future Outlook As per NASSCOM estimates the global economic environment is set to improve from 2013 onwards, with global GDP expected to increase by 3.5 per cent in 2013 and • Worldwide packaged software revenue further by 4.1 per cent in 2014. Service providers are realigning themselves to current expected to grow by over 6.5 per cent and emerging opportunities in the form of Intellectual Property (IP) based platforms, in 2013 customized business models, tailor made customer solutions and hybrid delivery. • Global IT-BPM spend is expected to This, in turn, is helping the industry to evolve and position itself as a strategic business grow between 5-6 per cent partner to global customers. • Business process management Five major technological changes are expected to open up new opportunities for spending in 2013 is expected to be service providers: increasingly driven by F&A and Smart Computing procurement segments, followed by HR outsourcing and customer care Software-as-a-Service (SaaS) Social Technologies Mobility Analytics The IT buying landscape has also undergone a major shift. One mega trend is the expanding role of IT. The stakeholder has expanded beyond the role of the CIO. HCLT- Key growth drivers: Information Technology's role is shifting from a reactive back-end support operation to a strategic enabler of innovation. New capabilities to adapt to a changing market and intensifying competition IT services industry is expected to grow by 4.2% in 2013 as per NASSCOM as firms work at ways to reduce costs and increase profitability, realizing the need for information • Organically upgraded Lines of Business technology to create competitive advantage. (LoBs) such as infrastructure and engineering and R&D services NASSCOM estimates that, total revenues for FY 2014 from IT (domestic as well as exports, excluding hardware) will grow between 13% and 15% to reach USD 106-111 • A well balanced portfolio to address full billion; of this, exports are likely to be about USD 84-87 billion, a growth of about IT opportunities 12-14%. • A simplified and consolidated structure Drivers for future growth instead of the erstwhile fragmented one- clearly established lines of accountability Smart computing, 'anything'-as-a-service, technology enablement in emerging verticals as well as the small and medium business market are expected to open new • Positioning as a provider of end-to-end opportunities for the industry. services and not just skills, due to new Domestic IT-Business Process Management Industry revenue (excluding hardware) offerings, domain depth and consulting is expected to grow at 14.1% to gross INR 1,047 billion in FY 2013. Rapid advancement capabilities in technology infrastructure, increasingly competitive Indian organizations and • Focus on revenue growth through emergence of business models that help provide IT services and enablement to new existing and new customers customer segments are key drivers for increased technology adoption in India. • Evolving account management practices The Indian IT industry will continue to redefine and transform itself by establishing new to become "best in class" business and global delivery models and partnerships. Global sourcing will be the key growth driver, with organizations trying to reduce operational costs, enter new markets • Investments in high value services and and focus on innovation. global delivery model HCLT - Opportunities for Growth • Looking beyond traditional levers to achieve non-linear growth For existing customers: • Offering a wide portfolio of services At HCLT, new customer acquisition and growth across existing customers has been the key to success. • $10 Mn clients quadrupled from 26 in FY 07 to 102 in FY 13 • $ 20 Mn clients quadrupled from 13 in FY 07 to 51 in FY 13 4 2 HCLTechno MDA 2-18.p65 4 10/7/2013, 3:16 PM Future growth opportunities will also come from existing as well as new customers. • From existing customers: Opportunities reside in cross-sell, up-sell and new propositions such as business-aligned IT, Cloud computing, platform-based BPO and Green IT. HCLT provides increased value to its customers by leveraging key alliances and partnerships to facilitate joint solution development. • From new customers: Growth opportunities could come from vendor consolidation, new verticals and new geographies. Vendor consolidation will contribute significantly to global offshoring. HCLT's ability to grow customer relationships, particularly into large accounts, will be critical for its growth in the coming years. The HCLT Strategy HCLT's strategy of focusing on growth, service innovation and unique positioning in the marketplace has further improved its competitive standing.