A REPORT ON FINANCIAL RATIO ANALYSIS OF

HCL INFOSYSTEMS LTD.

Submitted By:
Rakesh S. Prajapati Roll No. : 11MBA041

Submitted To:
Vishal Goel

Indus Institute of Technology & Engineering Rancharda, Via Thaltej, Ahmedabad 382 115. Telfax: +91 2764 260277/78/79

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 office canteen 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 company that 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."

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 road to 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 of technology. 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.

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.

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 his own 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

Industry Name House Name Collaborative Country Name Joint Sector Name Year Of Incorporation Year Of Commercial Production Regd. Office Address District State Pin Code Tel. No. Fax No. Email : sushiljain@hcl.in

Computers - Hardware HCL Group N.A. N.A. 1986 N.A.

806, Siddharth,, 96, Nehru Place New Delhi Delhi 110019 011-2526519,011-2520977 011-2525196 Internet : http://www.hclinfosystems.com

Auditors Price Waterhouse Registrars Name Intime Spectrum Registry Ltd.

Company Status N.A.

Listing Details - HCL Infosystems Key Dates Year Ending Month AGM Date (Month) Book Closure Date (Month) Jun Nov Nov

Listing Information Face Value Of Equity Shares Market Lot Of Equity Shares BSE Code NSE Code BSE Group 2 1 500179 HCL-INSYS N.A.

Whether The Company Forms A Part Of The Following Indices Sensex Nifty BSE-100 BSE-200 S&P CNX 500 CNX Midcap No No No No Yes Yes

CNX FMCG Listing On Listed On

No

The 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 Email : N.A. Fax No. : 51709881 Internet : http://www.intimespectrum.com

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.V Bharadwaj,& Arun Kumar H started Microcomp Limited. The focus of the company was design and manufacturing of scientific calculators. The venture provided its founders money to start a company that focused on manufacturing computers. The company 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 Uttar Pradesh 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 is headquartered 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.

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

HCL Infosystems
Profit & Loss account Jun '11 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 9,475.80 1.88 448.31 121.22 340.88 43.86 -1.38 10,430.57 Jun '11 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 275.58 343.03 89.90 253.13 33.20 0.00 219.93 15.38 235.31 58.08 177.23 954.77 0.00 176.30 29.11 2,228.80 7.95 400.00 87.36 10,611.66 1.78 368.41 115.99 290.50 39.46 -0.54 11,427.26 Jun '10 12 mths 384.90 431.83 53.08 378.75 21.73 0.00 357.02 11.68 368.70 107.10 261.55 815.60 0.00 170.73 28.68 2,182.59 11.98 375.00 87.26 11,040.53 1.72 325.98 104.75 270.40 44.51 -0.49 11,787.40 Jun '09 12 mths 441.23 432.39 56.73 375.66 17.27 0.00 358.39 15.59 373.98 113.42 260.44 746.87 0.00 111.27 18.91 1,712.12 15.21 325.00 66.14 11,347.82 1.60 292.96 110.47 255.37 31.46 -0.55 12,039.13 Jun '08 12 mths 462.12 494.49 58.84 435.65 16.35 0.00 419.30 15.17 434.47 129.72 304.75 691.31 0.00 136.84 23.26 1,711.50 17.81 400.00 58.61 10,929.68 1.64 217.73 121.76 197.09 36.29 0.00 11,504.19 Jun '07 12 mths 414.92 467.73 31.59 436.14 12.55 0.00 423.59 6.40 429.99 112.14 317.85 574.51 0.00 135.30 20.98 1,691.53 18.79 400.00 49.79 11,059.14 122.19 10,936.95 67.45 -230.80 10,773.60 12,061.78 108.77 11,953.01 46.93 -140.85 11,859.09 12,336.81 126.08 12,210.73 -8.84 17.90 12,219.79 12,569.44 158.00 12,411.44 32.37 89.81 12,533.62 11,818.25 170.13 11,648.12 52.81 270.99 11,971.92 ------------------- in Rs. Cr. ------------------Jun '10 12 mths Jun '09 12 mths Jun '08 12 mths Jun '07 12 mths

HCL Infosystems
Balance Sheet Jun '11 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 44.58 44.58 0.00 0.00 1,902.46 0.00 1,947.04 110.43 467.11 577.54 2,524.58 Jun '11 12 mths Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 364.05 131.99 232.06 19.95 705.05 586.25 2,084.26 230.50 2,901.01 714.99 4.19 3,620.19 0.00 1,949.25 103.42 2,052.67 1,567.52 0.00 2,524.58 338.98 87.36 274.88 103.66 171.22 25.69 911.19 835.40 1,956.92 289.86 3,082.18 555.31 2.75 3,640.24 0.00 2,182.10 134.05 2,316.15 1,324.09 0.00 2,432.19 113.65 87.26 234.10 83.47 150.63 9.50 276.10 888.26 1,498.26 198.67 2,585.19 315.17 4.32 2,904.68 0.00 1,899.81 81.89 1,981.70 922.98 0.00 1,359.21 57.18 66.14 216.68 78.11 138.57 13.89 215.02 898.37 1,241.46 316.91 2,456.74 244.48 0.45 2,701.67 0.00 1,639.38 70.85 1,710.23 991.44 0.00 1,358.92 49.73 58.61 162.31 63.83 98.48 21.36 279.78 791.73 1,002.51 179.34 1,973.58 170.28 14.60 2,158.46 0.00 1,395.88 81.10 1,476.98 681.48 0.00 1,081.10 349.75 49.79 43.65 43.65 17.67 0.00 1,860.94 0.00 1,922.26 152.02 357.91 509.93 2,432.19 Jun '10 12 mths 34.24 34.24 0.00 0.00 1,098.12 0.00 1,132.36 101.85 125.00 226.85 1,359.21 Jun '09 12 mths 34.23 34.23 0.00 0.00 968.83 3.20 1,006.26 0.00 352.66 352.66 1,358.92 Jun '08 12 mths 33.83 33.83 0.00 0.00 808.46 2.92 845.21 12.02 223.87 235.89 1,081.10 Jun '07 12 mths ------------------- in Rs. Cr. ------------------Jun '10 12 mths Jun '09 12 mths Jun '08 12 mths Jun '07 12 mths

RATIO ANALYSIS AND INTERPRETATIONS

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

Current assets
Inventories Sundry debtors Cash & bank balance Loan & advance TOTAL

Jun 11
586.25 2084.26 234.69 703.61 3608.81

Jun 10
835.40 1956.92 289.86 540.94 3623.12

Jun 09
888.26 1498.26 198.67 315.17 2900.36

Current liabilities
Current liabilities Provisions

Jun 11
1937.87 103.42

Jun 10
2167.73 134.05

Jun 09
1899.81 81.89

TOTAL

2041.29
1.77:1

2301.78
1.57:1

1981.70
1.46:1

CURRENT RATIO

CURRENT RATIO OF HCL

2 INFOSYSTEMS JUN 9 TO JUN 11

4000

Current assets

Current liabilities

1.77
1.5

3000 2000 1000

1.46

1.57

1 9-Jun 10-Jun 11-Jun

0 9-Jun 10-Jun 11-Jun

ANALYSIS & INTERPRETATION:

As mentioned above, it shows the relationship between C.A and C.L according to measure the ideal ratio is of 2:1 and minimum required should 1.33:1 for bank. Hear we can see that ratio is continuously increased every year but company had not reached the ideal ratio (2:1). So as per analysis is 9-jun the current ratio was 1.46:1

which is increased to 1.57:1 in the year 10-jun and 1.77:1 in the year 11-jun. Hence it can say that HCL Infosystems maintained their efficiency in working capital management as well as of company among its shareholders and try to reached ideal ratio 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 Inventories Current Liabilities

Current assets
Sundry debtors Cash & bank balance Loan & advance TOTAL

Jun 11
2084.26 234.69 703.61 3022.56

Jun 10
1956.92 289.86 540.94 2787.72

Jun 09
1498.26 198.67 315.17 2012.1

Current liabilities
Current liabilities Provisions

Jun 11
1937.87 103.42

Jun 10
2167.73 134.05

Jun 09
1899.81 81.89

TOTAL

2041.29
1.48:1

2301.78
1.21:1

1981.70
1.01:1

QUICK RATIO
2
QUICK RATIO OF HCL INFOSYSTEMS JUN 9 TO JUN 11

4000 3000

Current assets

Current liabilities

1.5

1.48 1.21

2000 1000

1.01
9-Jun 10-Jun 11-Jun

0 9-Jun 10-Jun 11-Jun

ANALYSIS & INTERPRETATION:

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 11jun 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 in controlling 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 Secured loan + unsecured loan Share capital + Reserves DEBT-TO-EQUITY RATIO

Jun-11 577.54 1947.04 0.30

Jun -10 509.93 1922.26 0.27

Jun -09 226.85 1132.36 0.20

Debt to Equity Ratios

0.35 0.3 0.25 0.2 0.15 0.1 9-Jun 10-Jun 11-Jun

2500 2000

LONG & SHORT TERM DEBTS SHARE HOLDER FUND

0.27 0.2

0.3

1500 1000 500 0 9-Jun 10-Jun 11-Jun

ANALYSIS & INTERPRETATION:

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 company in 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 = Year Long term debts Net worth Long term debt to equity ratio

Long-term Debt Net Worth Jun-11 110.43 1947.04 0.07 Jun-10 132.02 1922.26 0.08 Jun-09 101.85 1132.26 0.09

0.1

LONG TERM DEBT TO EQUITY RATIO 0.09 0.08 0.07

2500 2000 1500 1000 500

Long term debt

Net wort

0.05

0 9-Jun 10-Jun 11-Jun

0 9-Jun 10-Jun 11-Jun

ANALYSIS & INTERPRETATION:

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 of sales Inventory Jun-11 10679.87 710.86 15.02 Jun-10 11568.11 861.83 13.42 Jun-09 11778.56 893.32 13.11

Year Cost of sales Stock Long term debt to equity ratio

INVENTORY TURNOVER RATIO

16 15 14 13 12 9-Jun 10-Jun 11-Jun

15000 10000 5000 0 9-Jun

Cost of goods

stock

15.025 13.11 13.42

10-Jun

11-Jun

ANALYSIS & INTERPRETATION:

The above ratio shows the consistently increased which is shows that HCL always tries to minimize its buy and always try to block its fund as it can be possible and to minimize the application of fund for working capital. They always keep in mind and work accordingly so that they never get shortfall of materials and do not suffer loss by shutting down plants of various until due to such reason.

ASSETS TURNOVER RATIO

It shows the relationship between the assets and the net sales. It gives the amount of net sales in rupee of assets. Mathematically it is given as

Assets Turnover Ratio =

_Net Sales Assets

Year Net sales Total assets Assets Turnover ratio

Jun-11 10936.95 2524.58 4.33

Jun-10 11953.01 2432.19 4.94

Jun-09 12210.73 1359.21 8.98

TOTAL ASSETS TURNOVER RATIO

10 8 6 4 2 0 9-Jun 10-Jun 11-Jun

15000 10000

Sales

Assets

8.98 4.94

4.33

5000 0 9-Jun 10-Jun 11-Jun

ANALYSIS & INTERPRETATION:

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 Credit Sales Average Debtors DEBTORS TURNOVER RATIO

Jun -11 10936.95 2020.59 5.41

Jun-10 11953.01 1727.59 6.92

Jun - 09 12210.73 1369.86 8.91

10 8 6 4 2

DEBTORS TURNOVER RATIO OF HCL INFOSYSTEMS

15000 10000

Credit Sales

Average Debtors

8.91 6.92 5.41

5000 0

9-Jun

10-Jun

11-Jun

9-Jun

10-Jun

11-Jun

ANALYSIS & INTERPRETATION:

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 into cash. 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 Tax Interest Expense

Year Profit before interest and tex Interest expense Interest cover ratio

Jun -11 311.07 73.97 4.21

Jun-10 406.09 37.44 10.83

Jun - 09 418.52 44.66 9.37

12

INTEREST COVER RATIO OF HCL INFOSYSTEMS

600 400 200 0

10.84

Profit before tex and interest Interest expanse

9.37
7

4.21
2 9-Jun 10-Jun 11-Jun

9-Jun

10-Jun

11-Jun

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 turnover Ratio

Cost of sales Total capital employed

Year Sales Total capital employed Capital turnover ratio

Jun -11 10936.95 2057.77 5.31

Jun-10 11953.01 2056.61 5.81

Jun - 09 12210.73 1234.21 9.89

12

CAPITAL TURNOVER RATIO OF HCL INFOSYSTEMS

15000 10000

9.89
7

Cost of sales

Capital employed

5.81

5.31
11-Jun

5000 0 9-Jun 10-Jun 11-Jun

2 9-Jun 10-Jun

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

Year Gross Profit Net sales Gross profits ratio

Jun -11 257.08 10936.95 5.31

Jun-10 384.9 11953.02 5.81

Jun - 09 441.25 12210.73 9.89

4 3.5 3 2.5 2

CAPITAL TURNOVER RATIO OF HCL INFOSYSTEMS

15000 10000 5000

Gross profit

Net sales

3.61 3.2 2.4

0 9-Jun 10-Jun 11-Jun 9-Jun 10-Jun 11-Jun

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

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

Year Net Profit Net sales Net profits ratio

Jun -11 177.23 10936.95 1.62

Jun-10 261.55 11953.01 2.19

Jun - 09 260.44 12210.73 2.13

2.5 2 1.5 1

CAPITAL TURNOVER RATIO OF HCL INFOSYSTEMS

15000 10000

Net profit

Net sales

2.13

2.19 1.62

5000 0

9-Jun

10-Jun

11-Jun

9-Jun

10-Jun

11-Jun

Analysis and Interpretation:

The net profit ratio indicate the capacity of earning profit from net sales. Hear we can Interpret 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 not affordable for HCL.

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

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