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SUMMER TRAINING REPORT Submitted in partial fulfillment of the requirements for the award of the Degree of

Bachelor Of Business Administration





I, Dipankar Hans, hereby declare that the following project report titled Working Capital Management in HCL Infosystems. The information and findings presented in this report are genuine, comprehensive and reliable based on the data collected by me. The project was undertaken as a part of the course curriculum of BBA fulltime program of Birla Institute Of Technology, Noida Extension Centre, for the fulfillment of the degree. The matter presented in this report will not be used for any other purpose and will be strictly confidential.

DIPANKAR HANS Mrs. Ritu Jain BBA/4580/09 Birla Institute Of Technology Noida


This is certify that the Vocational Training Report entitled WORKING CAPITAL MANAGEMENT submitted to HCL Infosystems , Sector-8 , Noida(U.P) in partial fulfillment of requirement for the award of the degree of Bachelor of Business Administration (BBA), original work carried out by Mr. Dipankar Hans .Under my guidance. It is understood that by this approval, the undersigned do not necessarily endorse any conclusion drawn or opinion expressed therein, but approve the project for the purpose for which it has been submitted

. Mrs. Meenakshi Sharma In Charge, Management

.. Prof. (Dr.) S.L.GUPTA Academic Coordinator

.. Director

Birla Institute of Technology, Noida


I feel it a matter of great opportunity to pursue my summer training from HCL Infosystems, Noida. I would like to convey my sincere thanks to my Project Guide Ms. Miti Saxena at HCL Infosystems for suggesting this topic and taking keen interest in solving our every small problem, clearing our doubts and helping us to think, behave and act from managers stand point. I sincerely thank to Mrs. Ritu Jain, Faculty Guide for the support and help received during Summer Training.


Project Title: Working Capital Management in HCL Infosystems Ltd. At HCL a substantial part of the total assets are covered by current assets. Current assets forms around 80% of the total assets. However this could be less profitable on the assumption that current assets generate lesser returns as compared to fixed assets. But in todays competition it becomes mandatory to keep large current assets in form of inventories so as to ensure smooth production an excellent management of these inventories has to be maintained to strike a balance between all the inventories required for the production. So, in order to manage all these inventories and determine the investments in each inventories, the system call for an excellent management of current assets which is really a tough job as the amount of inventories required are large in number. So, I have been given this topic to make an in-depth analysis and detailed study to come out with a clear magnified view as to whether the management of working capital at HCL is sound or not. The project report consists of four major chapters. The first chapter Introduction gives the information regarding HCL Infosystems Ltd.. It also gives brief introduction about the project and its objectives. The second chapter is on Research Methodology, includes Research design, the sampling procedures, and the data collection method and analysis procedures. The third chapter is about Finding & Analysis, which is mainly concerned with the management of firms current assets and current liabilities by keeping in mind that current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. The fourth chapter is on Conclusion(s) & Recommendations, which is concerned with the profitability, fixed asset turnover ratio, stock turnover ratio.

CHAPTER NO. CHAPTER 1 1.1 Introduction of The Study 1.2 Conceptual Framework 1.3 Industry/Company Profile 1.4 Problem Formulation 1.5 Scope Of The Study Chapter-2 LITERATURE REVIEW SUBJECT INTRODUCTION

CHAPTER 3 3.2 Research Design


3.1 Objectives Of The study

CHAPTER 4 4.2 Interpretations CHAPTER-5


4.1 Data Analysisi Of The Study FINDINGS OF THE STUDY

5.3 Trade-Off b/w Profitability & Risk 5.4 Determine Financing Mix 5.5 Working Capital Cycle 5.6 Trade Credit 5.7 Commercial Papers 5.8 Cash Management 5.9 Introduction to the concept of Receivables Management

5.10 Introduction to the concept of Inventory Management 5.11 Financial Performance 5.12 Financial Conditions 5.13 Working Capital Position 5.14 Risk-Return Analysis 5.15 Current Asset Scenario 5.16 Inventory Management CHAPTER 6 4.1 Conclusion(s) 4.2 Recommendations Bibliography CONCLUSIONS(S) & RECOMMENDATIONS

CHAPTER 1 INTRODUCTION Introduction Of The Study

Working Capital Management is concerned with problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exist between them. The term current assets refer to those assets which in ordinary course of business can be, or will be converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivable and inventory. Current liabilities are those liabilities which are intended, at their inception, to be paid in the ordinary course of business, within a year, out of current assets or earnings of the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft and outstanding expenses. The goal of Working Capital Management is to manage the firms current assets and current liabilities in such a way that a satisfactory level of Working Capital is maintained. This is so because if the firm cannot maintain a satisfactory level of Working Capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. Nevertheless the level of current assets should not be too high since in that case it will affect the overall profitability of the firm. The interaction between current assets and current liabilities is, therefore the main theme of Working Capital Management.

Conceptual Framework
Understand Level Of Current Assests And Current Liabilities

Working Capital Cycle Of HCL INFOSYSTEMS

Cash Management Inventory Management Receivables Management Financial Condition Of HCL INFOSYSTEM RISK-RETURN ANALYSIS 8

Financial Performance 1.3Indusrty/Company Profile HCL Infosystems Ltd. Is one of the pioneers in the It market, with its origin in 1976. The company has been in the forefront in introducing new technologies and solutions. It has drawn its strength since 30 years of experience in handling the ever changing IT scenario, strong customer relationships, ability to provide the cutting edge technology at best value for money and on the top of it, an excellent service and support infrastructure. Today HCL is the countrys premier information enabling company. It offers one stop shop convenience to its diverse customers having a diverse set of requirements. Since, last 30 years HCL has been continuing the relationship with the customer, thereby increasing customer confidence in it. The strengths of the company are: Ability to understand customers business and offer right technology. Long standing relationship with customers. Best value for money offerings.

SCOPE OF THE STUDY From this project we have a broad knowledge on different aspects of working capital management. Some of the aspects of working capital management are: To Know Concepts of working capital management. What Is The Need of working capital What Is Operating cycle or working capital cycle? What are Factors affecting working capital requirements? 9

1) Salmi T. & Martikainen T wrote in his article A Review of Theoritical and Empirical Basis of Financial Ratios,Published in The Finnish Journal of Business Economics 4/94. Financial ratios are widely used for modelling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas, ex post. The existing themes include

the functional form of the financial ratios, i.e. the proportionality discussion, distributional characteristics of financial ratios, classification of financial ratios, comparability of ratios across industries, and industry effects, time-series properties of individual financial ratios, bankruptcy prediction models, explaining (other) firm characteristics with financial ratios, stock markets and financial ratios, forecasting ability of financial analysts vs financial models, estimation of internal rate of return from financial statements. 2) Anonymus wrote in the article Capital Budgeting 10

Financial planners recommend developing a capital budgeting process for small and large businesses to ensure long-term success. In today's economy, it takes money to make money and it takes making wise choices to stay on top. Whether large or small, no business can operate efficiently without implementing a long-term plan to invest monetarily in equipment and facilities to expedite the corporate mission and increase profitability. Improper planning results in failed enterprises and a loss of resources; but proprietorships and corporations which make prudent decisions about what, where, when, and how much money to allocate to new facilities or improve on existing ones will have a fighting chance at staying in the black. The capital budgeting process may vary between corporations, but the principle remains constant. The goal is to assess current operating procedures, equipment, personnel, and capabilities; investigate other more cost effective means to increase productivity and profitability; and devise an investment proposal which makes a good case for improving or expanding facilities.Capital budget or valuation of investments as the name suggests refers to capital investments that determine the financial viability of a long-term project. Capital budgeting is an issue deep enough and is part of the curriculum finance and financial management worldwide. This technique of determining the financial viability attracts investors due to the fact that it takes into account the cash flow streams over the life of the project and to exclude non-cash expenses, depreciation etc. Also cash flows discounted present value of investors required rate of return therefore, taking into account the time value of money. The exceptional qualities above the capital budget do more than any other approach to the criterion of acceptance or rejection of a project. Investment appraisal is essential for the understanding of financial management. Planning process involves decisions on capital spending based on the concept of maximization of shareholder wealth. This process requires: Ability to classify investment projects of a significant order of profitability Ability to provide a cutoff point beyond which it is not worth further 11

investment consistency with corporate objectives In business effectively managed this is a fundamental requirement that decisions should be based on knowledge and efficiency. Countless decisions on the nature of capital have to be taken by management as the replacement of worn and obsolete equipment, acquisition of fixed assets, and evaluating proposals for strategic investment.


2.1 Research Methodology Methodology includes the overall research procedures, which are followed in the research study. This includes Research design, the sampling procedures, and the data collection method and analysis procedures. To broad methodologies can be used to answer any research questionexperimental research and non-experimental research. The major difference between the two methodologies lies in the control of extraneous variables by the intervention of the investigator in the experimental research. 3.1 OBJECTIVES OF THE STUDY To Know About Working Capital postion Of HCL Infosystem To Know Level Of Current Assets Maintained By The Company To Know Various Aspects Of Working Capital Through Published Sources To Know The Level Of Current Assests As Compared To Current Liabilities


2.1.1 RESEARCH DESIGN A research design is defined, as the specification of methods and procedures for acquiring the Information needed. It is a plant or organizing framework for doing the study and collecting the data. Designing a research plan requires decisions all the data sources, research approaches, Research instruments, sampling plan and contact methods.

2.1.2 Data Collection Sources Government publication Report committees Private publication Research institute Magazines News paper articles

2.1.3 Data Collection Methods




SECONDARY Unpublished Sources

Direct personal Interview Indirect personal Interview Information from correspondents Mailed questionnaire Question filled by enumerators

Published Sources Govt. Publication

Private Publication Research Institu




There has been a significant decline in volume over the years from 2004-05

to 2008-09 as can be seen in the graph below:


40000 35000 30000 25000 20000 15000 10000 5000 0 38016 31696 25550 21011 29425

) ( S R E B M U N

2004-05 2005-06 2006-07 2007-08 2008-09 YEAR

The volume decreased by 17005 in 2005-06 as compared to that in 2004-05. There has been increased in the volume by 4539 in 2006-07 as compared that in 2005-06.

There has been increased in the volume by 6146 in 2007-08 as compared to that in 2006-07.


The volume decreased by 2271 in 2008-09 as compared to that in 200708.


3.1 FINDINGS Trade Of Between profitability And Risk To Determine The Financing Mix The Computation Of Operating Cycle Trade Credit Cash Management Inventory Management Receivables Management Financial Performance


3.3 TRADE-OFF BETWEEN PROFITABILITY AND RISK: The level of net working capital has a bearing on profitability as well as risk. Hence in evaluating firms working capital position an important consideration is the trade-off between profitability and risk. Profitability refers to the net profits and risk refers to the probability of being insolvent so that the firm will not be able to meet its obligations when they become due for payment.

3.4 DETERMINING FINANCING MIX: One of the most important decisions involved in the management of working capital is how current assets will be financed. There are broadly two sources from which funds can be raised for asset financing: i) short-term sources (current liabilities) ii) long-term sources, such as share capital, long term borrowings, internally generated resources like retained earnings and so on. Now what portion of current assets should be financed by current liabilities and how much by long-term resources? There are basically three approaches to determine an appropriate financing mix: Hedging approach (or Matching approach) Conservative approach Trade-off between these two.


Short-Term V/s Long Term Financing

Financing Maturity

Asset Maturity


Short-Term (Temporary)

Moderate Risk-Profitability

Low Risk-Profitability

Long-Term (Permanent)

High Risk-Profitability

Moderate Risk-Profitability

Table 3.4.1 Short-Term v/s Long-Term Financing


Computation of Operating Cycle Operating Cycle = R+W+F+D-C R= Raw material storage period W= Work-in-progress period F= Finished goods storage period D= Debtors collection period C=Creditors deferral Period

The various components of operating cycle may be calculated as shown below:

Average stock of raw material

Raw Material Storage Period =

Average cost of raw material consumed per day

Average work-in-progress inventory

Work-in-progress holding period =

Average cost of production per day

Average stock of finished goods

Finished goods storage period =

Average cost of goods sold per day

Average book debts

Debtors collection period =

Average credit sales per day


Average trade creditors

Credit collection period =

Average credit purchases per day

3.6 Trade Credit: Trade credit refers to the credit extended by the supplier of goods and services in the normal course of transaction/business/sale of the firm i.e., cash is not paid immediately for purchases but after an agreed period of time. Thus, deferral of payment represents a source of finance for credit purchases. There is however, no formal formal/specific negotiation for trade credit. It is an informal arrangement between the buyer and seller without any legal instruments or acknowledgements of debts. Such credit appears in the record of buyer of goods as sundry creditors/accounts payable.


3.10 Introduction to the concept of Cash Management Cash management is one of the key areas of working capital management. Apart from the fact that it is the most current liquid assets, cash is the most common denominator to which all the current assets can be reduced because the other major liquid assets, that is, receivables and inventory get eventually converted into cash. This underlines the significance of cash management.




3.11 Introduction to the concept of Receivables Management: The receivables represent an important component of the current assets of any firm. The term receivables are defined as debt owe to the firm by the customers arising from sale of goods and services in the ordinary course of business. When a firm makes an ordinary sale of goods or services and does not receive payment, the firm grants trade credit and creates accounts receivable. It is also referred as trade credit management. Management should way the benefits as well as the costs to determine the goal of receivables management.


3.12 Introduction to the concept of Inventory Management The term inventory refers to the stock of the products a firm is offering for sale and the components that make up the product. That is, inventory is composed of assets that will be sold in future in the normal course of business operations. These assets are i) Raw materials, ii) Work-in-progress and iii) Finished goods. The views concerning the appropriate level of inventory would differ among the different functional areas.








Table A. Five Year Financial Overview








Table B. Assets & Liabilities


FY 06

FY 07


April 08

FY 06

FY 07


3.13 FINANCIAL PERFORMANCE 1. Gross Revenue: Revenue grew by 76% from Rs. 4412 crores in the previous year to Rs. 7784 crores in the current year. Revenue for the Parent Company grew by 29% from Rs. 1522 crores in the previous year to Rs. 1967 crores in the current year.

2. Other Income: Other Income for the current year is Rs. 51 crores as against Rs. 29 crores in the previous year. It includes income from investment in Mutual Funds Rs.11 crores (Previous Year Rs. 12 crores), Interest income of Rs. 12 crores (Previous Year Rs. 9 crores) and gains from foreign exchange fluctuation Rs. 14 crores (Previous Year Rs. 4 crores).

Revenue 7784 2705 4412


Rs Crores

6000 4000 2000 0

FY 08 FY 09 FY 10
Figure 3.13.1 Revenue 3. Gross Margins:


Gross margins for the current year are at Rs. 603 crores as against Rs. 445 crores in the previous year. Gross margins for the Parent Company are at Rs. 332 crores as against Rs. 282 crores in the previous year.

4. Personnel Costs: Staff cost for the current year increased to Rs. 145 crores from Rs. the previous year. Manpower increased from 3287 as at June 2007 to 3879 as at June 2008. Staff cost is 1.9% of sales for the current year as against previous year. Staff cost for the Parent Company for the current year is Rs. 102 crores Rs. 78 crores in the previous year.

Staff Costs
4000 3500 3000 2500 2000 1500 1000 500 0




Rs Crores

FY 08 FY 09 FY 10
Figure 3.13.2 Staff Cost

5. Administrative, Selling, Distribution and others: Expenses amounted to Rs. 190 crores, as against Rs. 127 crores in the previous year. The expenses as a % to sales declined to 2.4% from 3.0%.


6. Operating Profit (EBIDT): Operating profit excluding Other income grew by 28% from Rs. 209 crores in the previous year to Rs. 268 crores. 7. Finance Charges: Finance charges for the year is Rs. 8 crores as against Rs. 9 crores in the previous year. 8. Profit Before Tax: PBT grew by 40% from Rs. 212 crores in the previous year to Rs. 296 crores in the current year. PBT for Parent Company grew by 16% from Rs. 128 crores in the previous year to Rs. 149 crores in the current year. 9. Profit After Tax: Profit after tax grew by 30% from Rs. 175 crores in the previous year to Rs. 228 crores. The profits for the current year are after a provision for Rs. 65 crores for current tax expenses, Rs. 2 crores for deferred tax expenses and Rs. 1 crore for Fringe Benefit Tax applicable from April 05. Profit after tax for the Parent Company grew by 10% from Rs. 121 crores in the previous year to Rs. 133 crores.


Profit After Tax


Rs Crore s

200 100 0

175 93


FY 08 FY 09 FY 10
Figure 3.13.3 Profit After Tax

10. Dividend: The company continued with the practice of declaring quarterly dividend accordingly. It distributed dividends @ 70% in each of the first three quarters. The company proposes to pay a final dividend of Rs 100% per fully paid up equity share Rs. 2/each. The interim dividends paid together with proposed final dividend total to 310 % for the current year, entailing an outflow of Rs. 117 crores including distribution tax.
Dividend 310%

210% 100%

FY 08 FY 09 FY 10 Figure 3.13.4 Dividend 11. Earning Per Share: Consolidated Basic EPS grew from Rs 10.9 in the previous year toRs. 13.7 in the current year. Diluted EPS grew from Rs. 10.2 in the previous year to Rs. 12.9 in the current year. 28

Basic EPS of the Parent Company grew from Rs. 7.5 in the previous year to Rs. 8.0 in the current year. Diluted EPS grew from Rs. 7.0 in the previous year to Rs. 7.5 in the current year.
Basic EPS

10.90% 5.80%



10.00% 5.00% 0.00%

FY 08

FY 09

FY 10

Figure 3.13.5 Basic EPS


3.14 FINANCIAL CONDITIONS 1. Net Worth/ Shareholders Funds: Net Worth as on 30th June 2010 is RS. 555 crores. Share capital as at 30th June 2010 is Rs. 33.4 crores divided into 16.7 crores share of Rs. 2/- each. Reserves & surplus as at 30th June 2010 is Rs. 50 Crores after appropriating Rs. 117.3 crores for three quarterly interim and final dividends.

Net worth of the Parent Company is Rs. 435 crores. The book value per Rs 2/- share of the Parent Company increase from Rs. 24 as on 30th June 2010 to Rs. 26 as on 30th June 2010.

During the year, the Company allotted 5.46 lakh share of Rs. 10/- each (sub divided into 27.32 lakh share Rs. 2/- each 0 UNDER THE Employee Stock Options realizing Rs. 21.5 crores. The increase in share capital on account ESOP is Rs 0.5 crores and increase in reserves is Rs. 21.0 crores.

2. Borrowings: Yearend loan balances marginally increased from Rs. 72 crores as on 30th June 2009 to Rs. 81 crores as on 30 th June 2010. The Debt: Equity dropped from 15% to 13%.
Debt/Equity Ratio
0.29 0.15 0.1

FY 08

FY 09
Detx/Deal Equity

FY 10


Figure 3.14.1 Debt/Equity Ratio

3. Fixed Assets: Net block as on 30th June 2010 is 76 crores. During the current year the Company made capital expenditure of Rs. 27 crores mainly for acquisition of Land in Uttaranchal expanding customer support network. One time license fee to DOT for Internet Business and additions to Plants & Machinery. The Company retired various assets with a Gross block of Rs. 25 crores and a net book value of Rs . 0.1 crores. Net block of Parent Company as on 30th June 2010 is Rs. 53 crores.

4. Inventories: Inventories increased from Rs. 280 crores as on 30th June 2009 to Rs 349 crores as on 30th June 2010 . The inventory turn over on sales grew from 15.7 times in the previous year to 22.3 times in the current year. Inventories of Parent Company increased from Rs. 161 crores as on 30th June 2009 to Rs. 188 crores as on 30th June 2010. The inventory turn over on sales grew from 9.4 times in the the previous year to 10.5 in the current year.

5. Debtors: Debtors increased from Rs. 416 Crores as on 30th June 2009 to Rs. 532 crores as on 30th June 2010. Debtors as number of days of sale stands reduced to 25 days as on 30th June 2009 from 34 days as on 30th June 2010.

Debtors of the Parent Company increased from Rs. 295 crores as on 30th June 2009 to Rs. 370 crores as on 30th June 2010. Debtors as number of days of sale stands reduced to 69 days as on 30th June 2009 from 71 days as on 30th June 2010.


6. Liquid Assets(Investment in Mutual Funds and Fixed Deposits with Banks): Liquid Assets as on 30th June 2010 are at Rs. 253 crores as against Rs. 254 crores as on 30th June 2009. These Excludes cash in hand & balance with bank in collection & disbursement accounts.

7. Other Current Assets including loan & Advances: Other current assets increased from Rs 70 crores as on 30th June 2009 to Rs 154 crores as on 30th June 2010. Other current assets of the Parent Company increased from Rs. 40 crores as on 30th June 2009 to Rs 111 crores as on 30th June 2010. Lease rent recoverable as on 30th June 2010 is Rs. 60 crores.

8. Current Liabilities & Provisions: Current Liabilities & Provisions increased from Rs. 697 crores as on 30th June 2009 to Rs. 863 crores as on 30th June 2010. Current liabilities and provisions of the Parent Company increased from Rs . 398 crores as on 30th June 2009 to 468 crores as on 30th June 2010.

9. Cash Flow: The Cash generation from operating activities in the current year is Rs. 127 crores. The cash generation of Parent Company from operating activities in the current year is Rs. 27 crores.


Balance Sheet for the Year Ended as on 31st March 2011

2011 2010

Table C. Balance Sheet for the Year Ended as on March11



2011 2010


2009 2008

Table E. Cash Flow Statement for the Year Ended 31st March 2009




2010 54091 4925 87076 62.11 14301

2009 45042 4954 71285 63.18 18752

2008 55985 5552 75205 74.44 27065

Table 3.15.1 Working Capital Position

The 143 percent increase in Net Current Assets is due to the fact that there has been an increase in the Current Assets by 50.73% and increase in Current Liability has been only 17.50% over that of the previous year. The firms level of liquidity being high we need a check on whether it affects the return on assets. Now there is a substantial increase in the current assets to total assets. This could be less profitable on the assumption that current assets generate lesser return as compared with return on fixed assets.


3.16 RISK-RETURN ANALYSIS SALES EBIT RETURN ON INVESTMENT (%) 2011 199886 15634 39 2010 154295 14523 75.5 2009 166604 11491

Table 3.16.1 Risk-Return Analysis In case instead of Net Current assets and net block if total assets had been used in computation of ROI then TOTAL ASSETS RETURN ON INVESTMENT (%) 52348 60.36 47286 30.3



Table 3.17.1 Current Asset Scenario

2005 - 2011 2010


While there has been increase in the value of all components of the Current Assets the proportion of inventory debtors and loans and advances to the current assets have declined. Whether this proportionate decline to current assets is as a result of reduced lead time and better operating cycle? This might directly implicate better receivables management and inventory control.


3.18 INVENTORY MANAGEMENT COMPOSITION RAW MATERIAL STORES AND SPARES FINISHED GOODS WORK IN PROGRESS 2011 41.43 15.88 38.51 4.16 2010 38 16.25 40.34 5.4 % INC 27.2 13.94 11.36 -10.03

Table 3.18.1 Inventory Management



The increasing component of raw materials in inventory is due to the fact that the company has gone for bulk purchases and has increased consumption due to a fall in prices and reduced margins for the year.



To the question as to whether the increasing costs in inventory are justified by the returns from it the answer could be found in the HCL retail expansion. They are more into it than earlier and at present more than 650 retail outlets branded with HCL signages and more are in the pipeline. This also ensures availability of products to meet the increasing sales.

A negative growth in WIP could be because of 1) Better and efficient conversion of raw materials to finished goods i.e. the time taken to convert raw materials after procurement to the end product is very minimal. 2) This also is due to capacity being not utilized at the optimum which should mean that more of goods are stagnant at the operations. But this is not the scenario witnessed here as could be easily seen from the increased utilization of plant capacity.

The 69.5% rise in value is primarily due to the increase in the consumption of raw materials in processors. This shifting value has to be traced back to the sales of computers / micro processor based systems i.e. whether sales justify this increase. The sales in value have increased by 30% (42584.75/142148.56). This is a marked increase from the previous year where despite the increase in the value of raw materials consumed there was a decline in the value of sales. The current ratio after a decline in 2009 has increased which means an increase in liquidity and solvency position of the firm. This reaffirms what had been stated earlier firms current assets are at an all time high. This they might have done to cover the risk involved in their expanding operations. The present ratio of 1.742:1 could be claimed to be optimal as the desired ratio of the company is about is about 1.33:1. but how far has been the ratio successful in indicating the relative liquidity of current assets and liabilities have not been answered.


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 than70%of their consumption is from imports. But this is a scenario witnessed in the industry as a whole and though HCL is into expanding its operations to Uttaranchal it is also bound to be affected by a change in the import duty structure. CASH MANAGEMENT In cash management the collect float taken for the cheques to be realized into cash is irrelevant and non- interfering here because banks such as Standard Chartered, HDFC and CITI who give credit on the basis of these cheques after charging a very small amount. Even otherwise the time taken for the cheques to be processed is instantaneous. Their Cash Management System is quite efficient. WORKING CAPITAL & SHORT TERM FINANCING(in crores) NAME OF THE BANK STATE BANK OF INDIA ICICI BANK HDFC BANK STANDARD CHARTERED BANK STATE BANK OF SAURASHTRA STATE BANK OF PATIALA CANARA BANK SOCIETE GENERALE TOTAL FUND BASED 3600 1282 1200 1200 715 1300 1203 1000 11500 NON FUND BASED 13000 4790 6025 4000 4000 3350 2335 1000 38500

The consortium of banks provide a fund based limit of 115 crores which comprises of cash credit and working capital demand loans and non fund based limits which has bank guarantee and letter of credit subject to a limit of 385 crores.Any issue of the commercial paper in the part of the firm 42

leads to a decline in the limit of fund based limits. Currently the firm having issued commercial papers worth rs30crores for the year 2011 has asked the lead bank to deduct the fund based limit from 115 crores to 85 crores.

In terms of desirability the commercial papers are cheaper and advantageous to the firm compared to the consortium financing. But the firm depends on both and for working capital financing is depended on the banks for funds such as working capital demand loans and cash credits.


2011 4991.28 530.07 5521.35 90.4 2011 2593.39 17 2610.39 99.348

2010 6903.7 0 6903.7 100 2010 63.94 169.51 233.45 27.38

2009 4987.52 3461.36 8448.88 59.03 2009 76.84 3261.42 3338.26 2.3

The preference of short term financing to long term as such is not the part of any policy employed by the firm but due to the reason that they were cheaper and the interest rates lower.


The other notable feature in HCL statements has been the growing dividend policy of the firm which has meant that the firm doesnt have at its disposal too much cash in hand. That is the firm disburse as dividends profits which could have either been retained in the business for capital expenditure. 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 be they would like to optimize their utilization in fixed assets at present.

DIVIDEND POLICY 2011 DIVIDEND PAID ( INCLUDIND CDT) PROFIT AFTER TAX DIVIDEND PAY-OUT RATIO 11729.69 13276.75 88.34 2010 7723.22 12089.64 63.88 2009 3599.79 6172.89 58.31

The dividend pay-out ratio is increasing tremendously over the years. Dividends imply outflow of cash and lowers future growth. However a high dividend pay-out ratio may lead to a rise in prices of shares.


SECURED LOANS 2011 TOTAL BORROWINGS SHORT-TERM 5521.35 4991.28 2010 6903.7 6903.7 2009 8448.88 4987.52 44





UN-SECURED LOANS 2011 TOTAL BORROWINGS SHORT-TERM PERCENTAGE SHORT-TERM 2610.39 2593.39 99.36 2010 233.45 63.94 27.39 2009 3338.26 76.84 2.3

The company is going for more and more shore-term financing, could be because of the fact that it is considered as a cheaper source than long-term financing.


4.1 CONCLUSION Sales are decreasing during the year 2009-10. Hence profitability has declined over

this time period Due to increase in the time period for the realization of debtors, cash and bank balance

has decreased. Stock turnover ratio is decreasing; it shows that capital is blocked into the inventory. Fixed asset turnover ratio has decreased this year, which shows that assets have not been used efficiently as they had been used in the previous year. 45

All the above ratios show a decreased or unfavorable situation because of the work of entire replacement of coolant channel, due to which the production process had been stopped.

4.2 RECOMMENDATIONS Specail Efforts Shold Be Made To Analyze Loans And Advances(loans) Inventory Should Be Reviewed Constantly(inventory Management) A Study May Be Conducted If Required against Customer Marketing Efforts Or other Reasons(customer Satisfaction) Company Should Try To Improve its Current Ratio(Ratios) Loans & Advances Special efforts should be made to analyze loans & advances, which are between 35% to 56% of current assets. This can be classified between production / operation relation related and nonproduction / operation related. No production related cases might be financed from other sources like debenture etc. and treated separately. Inventory Inventory should be reviewed constantly to identify show / dead / obsolete item and then disposed until 2003-04 level is again achieved. Optimum level should be revised periodically, keeping in view, distance of suppliers, production lead time of supplier, transport problem if any and reliability of suppliers. This will help to avoid obsolesce and dead inventory. Debtors A study may be conducted if required by experts to pinpoint reason behind HCL INFOSYSTEM LTD. high correction period of 95 days in 2010-11 against 50 days of TCS It is due to quality


of products, quality of customer, the segment of customers marketing effort, distribution pattern or other reasons.

Creditors Though high payout days may be apparently beneficial for the company. It has it very heavy long term cost like high interest cost, bad credit ratings and shyness of good quality / standard suppliers.

Cash & Bank This is the most liquid element in current asset and target shall be fixed most cautiously. Too low a figure of 4.4% of total current assets of HCL Infosystems Ltd. in 2010-11 as against 15.5% of TCS may be apparently too good to look at, but this may be lead to payment crisis at various sorts.


Ratios The company should try to improve its current situation. The ratios, which are taken in this research to evaluate the companys position, are Current ratio, Quick ratio and Activity ratio. These ratios show the actual position of the company. The Quick ratio is declining since 2006-07 till now. There is a drastic declining in the working capital turnover ratio. This ratio goes to negative position in current year compared to previous. The Debts collection period is 359 days for Exporters. This shows the poor collection policy. The current ratio is 1.02 in 2008-09, which is not upto the ideal ratio. This shows that the current assets are equal to the current liabilities. Not satisfactory. LIMITATIONS OF THE STUDY Information Required is Not Available Properly.


Referred Sites 1. 2. 3. 4. 5. Reference Books 6. Khan and Jain Financial Management. 7. ICAIs Module.