CERTIFICATE

Certificate

This is to certify that Amanjyot kaur and research report entitled WORKING CAPITAL MANAGEMENT IN HCL INFOSYSTEM LTD. is approved and is acceptable in quality and form.

_______________Faculty Guide

date:________________

Place: :_______________DECLARATION

I hereby declare that the project report entitled:

A Research Report on WORKING CAPITAL MANAGEMENT IN HCL INFOSYSTEM LTD. submitted in partial fulfillment of the requirement for the degree of BBA, is my original work and not submitted for the award of any other degree, diploma, fellowship, or any other similar title or prizes.

Place: Noida

Date: _________

ACKNOWLEDGEMENT

I wish to express my gratitude to all that concerned persons who have extended their kind help, guidance and suggestions without which it could not have been possible for me to complete this project report.

I am deeply indebted to my guide Mr. Atul Sahu and Mr. Gaurav for his valuable guidance and support at all time.

My sincere thanks to all those people who has provided me all the necessary information throughout this research report has been successfully completed at time.

TABLE OF CONTENTS Page No PART 1 CHAPTER 1

1.1Introduction of the problem.

5

1.2 Title of the project.

6

1.3 Executive Summary

7

1.4Background of the problem undertaken.

91.5Rationale of the study.

101.6Limitations and Scope of the study.

11

CHAPTER 2

2.1 HYPOTHESIS

13

2.2SWOT ANALYSIS

13

CHAPTER 3

3.1RESEARCH METHODOLOGY

16

3.2Research Design

16

3.3Data Collection Instrument

18

CHAPTER 4

4.1Review of Literature Working Capital Management.244.2Finding Analysis

25

4.3Working Capital Financing.

53

4.4Cash Management.

63

4.5Receivables Management.

79

4.6Inventory Management.

87

4.7 HCL Infosystems Ltd.

97

CHAPTER 5

5.1Conclusion

5.2Recommendation

CHAPTER 6

Bibliography.

CHAPTER 1PROFILE OFTHE COMPANYTITLE OF THE PROJECTThe title of the project is Working Capital Management and the management of its components at HCL InfosystemsLtd.

Born in 1976, HCL has a 3 decade rich history of inventions and innovations. In 1978, HCL developed the first indigenous micro-computer at the same time as Apple and 3 years before IBM's PC. During this period, India was a black box to the world and the world was a black box to India. This micro-computer virtually gave birth to the Indian computer industry. The 80's saw HCL developing know-how in many other technologies. HCL's in-depth knowledge of Unix led to the development of a fine grained multi-processor Unix in 1988, three years ahead of Sun and HP.

HCL's R&D was spun off as HCL Technologies in 1997 to mark their advent into the software services arena. During the last eight years, HCL has strengthened its processes and applied its know-how, developed over 28 years into multiple practices - semi-conductor, operating systems, automobile, avionics, bio-medical engineering, wireless, telecom technologies, and many more.

Today, HCL sells more PCs in India than any other brand, runs Northern Ireland's largest BPO operation, and manages the network for Asia's largest stock exchange network apart from designing zero visibility landing systems to land the world's most popular airplane.

HCL Infosystems Ltd is one of the pioneers in the Indian IT market, with its origins in 1976. For over quarter of a century, we have developed and implemented solutions for multiple market segments, across a range of technologies in India. We have been in the forefront in introducing new technologies and solutions.

In the early 70s a group of young and enthusiastic and ambitious technocrats embarked upon a venture that would make their vision of IT revolution in India a reality. Shiv nadir and five of his colleagues got together and 1975 set up a new company MICROCOMP to start with; they started to capitalize on their marketing skills. Micro comp marketed calculators and within a few month of starting operation, the company was out selling its major competitors.

On 11th August, 1976 HINDUSTAN COMPUTERS LIMITED was incorporated as joint venture between the entrepreneurs and UPSCE, with an initial equity of Rs.1.83 Lacs.

Also I have gathered information from financial bulletin, annual reports and company magazines.

With the valuable information and time imparted by executives and employees to me and from the informations gathered by me from secondary sources, I have been able to make a complete analysis of the components of working capital.

In the analysis of components of working capital, a detailed analysis of current assets current liabilities have been done.HCL infosystems ltd. HCL technologies ltd.(corporate office) (Registered Office)Address AddressHCL Infosystems Ltd. 806, Siddharth,E-4,5 & 6, Sector 11, 96, Nehru Place,NOIDA 201 301, UP New Delhi,110019India India

Tel & Fax Tel & faxTel: +91 120 2526518/19, 2520977 Tel: 011-26444812Fax: 2550923

Fax: 011-26436336Prefix from Delhi: 95120

Email-id:investors@hcl.com Web Id:

http://www.hcltech.comThe HCL of Today

This year (2007-08), IT industry is expected to grow by 20% over 2007, as per IDC, which is amongst the highest rates of growth in the world. With employment to 2.13 crore households already in place, the National e-Governance Plan (NEGP) is surging ahead with investments of Rs. 23,000 crores planned for initial five years, for identified core projects.

HCL Infosystems Ltd, with annual revenue of US$ 2.7 Bn (Rs.11,855 crores) is Indias premier information enabling and ICT System Integration company offering a wide spectrum of ICT products that includes Computing, Storage, Networking, Security, Telecom, Imaging and Retail. HCL is a one-stop-shop for all the ICT requirements of an organization.

Indias leading System Integration and Infrastructure Management Services Organization, HCL has specialized expertise across verticals including Telecom, BFSI, E-Governance & Power.

HCL has Indias largest distribution and retail network, taking to market a range of Digital Lifestyle products in partnership with leading global ICT brands, including Nokia, Apple, Casio, Kodak, Toshiba, Bull, Ericsson, Cisco, Microsoft, Konica Minolta and many more.

HCL today has Indias largest vertically integrated computer manufacturing facility with over three decades of electronic manufacturing experience HCL desktops is the largest selling brand into the enterprise space.

With Indias largest ICT services network that reaches to every corner of India, HCLs award winning Support Services makes it the preferred choice of enterprise and consumers alike.HCL Enterprise is a leading global technology and IT enterprise with annual revenues of US $4.1 Bn (Rs. 17,889 crores). The HCL Enterprise comprises two companies listed in India - HCL Technologies & HCL Infosystems. The 3-decade-old enterprise, founded in 1976, is Indias original IT garage start-up. Its range of offerings span Product Engineering, Technology and Application Services, BPO, Infrastructure Services, IT Hardware, Systems Integration, and distribution of ICT products. The HCL team comprises over 47,000 professionals of diverse nationalities, who operate from 17 countries including 360 points of presence in India. HCL has global partnerships with several leading Fortune 1000 firms, including leading IT and Technology firms.

HCLS BUSINESS MODEL

1.2 NATURE OF THE ORGANISATIONHCL Infosystems manufacturing facilities are ISO 9001 - 2000 & ISO14001 certified and adhere to stringent quality standards and global processes. With the largest installed PC base in the country, HCL Infosystems owns the brand of indigenously developed and manufactured,most popular PC 'Ezeebee', 'Busybee' 'Beanstalk' and 'Infiniti' -and its robust manufacturing facilities; HCL Infosystems aims to further leverage its dominance in the PC market. It has been consistently rated as Top player in PC industry by IDC. A strong dominance also prevails in verticals like Finance, Government, and Education & Research. The Channel Business ofHCL Infosystems has an extensive network of over 2500+ resellers across 300 locations. It has actively promoted the penetration of PCs and Laptops in the home and the small office/home office (SOHO) segments.

As a leading information enabler, HCL infosystems has long standing relationships with world technology leaders such as SUN for enterprise computing solutions, Intel and AMD for PCs & PC Servers; Microsoft, Novell and SCO for operating systems and software solutions; Toshiba Corp. for business automation equipment ;SAP AG for specialist ERP solutions; and Oracle, Sybase and Informix for RDBMS platform, EMC, Veritas for storage solutions. The aim is to straddle the entire landscape ofinformation enabling technology far more comprehensively, effectively and competitively. Indeed, a vision to create enterprises of tomorrowScope of the study

Vision Statement

It is the most preferred employer and principal taking leading edge IT & Telecom products and services to the masses through sustained excellence.

Mission Statement

We shall increase the awareness of HCL PALOMINO-IP PBX and increase the sale of EAPBX product of HCL INFOSYSTEM.

Advantage of DGS&D

Finding the needs of customer through mailing

Quality Policy Statement

We will deliver defect-free products, services and solutions to meet the requirements of our external and internal customers the first time, every time.

mAN-POWER SIZE OF THE ORGANIZATION

HCL Infosystems continues to invest in strong people management initiatives. The total employee strength was 6165. HCL was rank no.3 in Best Companies to Work For in India conducted by

BT, TNS, Mercer.

Employee engagement continues to be a key focus area with many initiatives organized during this quarter towards 'Celebrating Diversity' & encouraging appreciation for individual strengths. In response to modern day lifestyle changes, various programmes have been adopted to improve the wellbeing & fitness of the employees.

TURNOVER SIZE OF THE ORGANIZATION

Consolidated

Revenue at Rs. 3140 crores.

Services revenue at Rs. 172 crores, a growth of 41% Y-o-Y.

Profit before tax at Rs. 81 crores.

Profit after tax at Rs. 55 crores.

EPS at Rs. 3.2 per share.

Computer Systems

Revenue at Rs. 818 crores. PBIT at Rs. 37 crores.

Telecommunication & Office Automation

Revenue at Rs. 2325 crores. PBIT at Rs. 61 crores.

Second Interim dividend of Rs. 1.5/- per share (75%% on an equity share of par value of Rs. 2/- each) declared for the quarter.product range of the company Computing Products

Offering an entire range of Computing Products for Corporate, Businesses and Small to Large Setups.

Office Automation Imaging & Printing Solutions

Introducing world class imaging products and solutions to meet business requirements Display Products

Introducing great display products that you would love setting your eyes on.

Office Automation Telecom & AVSI Solutions

Introducing world class telecom products and AVSI solutions to meet business requirements.

Storage Solutions

Offering an entire range of storage solutions. Office Automation Document Management Solutions & System Integration

Wide Range of turnkey solutions which cater to the requirement of Document Management, Homeland Security & Vehicle Tracking.

Software Licenses

Enjoy benefits of genuine software licenses through HCL Iinfosystems.

Networking Products

Enjoy fast data transfer with our exclusive range of Networking Products.

POS, KIOSK, Customer Service Counter Products

Offering an entire range of POS products and solutions.

Software Solutions

Bringing to you world class software solutions.

Racks & Enclosures

HCL offers a comprehensive range of 19 racks with standard accessories for Computer networking applications and IP Enclosures of all standards.

CURRENT LEADERSHIP

Technology Leadership:

HCL Infosystems is known to harbinger of technology in the country. The company has done technology introductions in the country either through research and development or through partnerships with world technology leaders. Using own research and development the company has:

Created own UNIX and RDBMS capability (in80s).

Developed firewalls for enterprise and personal system security.

Launched own range of enterprise storage products.

Launched own range of enterprise networking products.

HCL Infosystems Ltd. has initiated several pioneer technologies. Some of them are as under:

.Countrys first desktop PC- Busy Bee in 1985.

Countrys first home PC- Beanstalk in 1995

Countrys first Pentium IV based PC at sub 40k price point.

Countrys first media centre PC.

CHAPTER 2

SWOT ANALYSIS OF THE COMPANY

Hypothesis

In my view my study of the working capital management has certain limitation. Because I just spent only four weeks in the HCL INFOSYSTEM LTD. And whatever information during that short period I could gather, I working upon that. Thus my study does not present and overall view of the working capital management at HCL INFOSYSTEM LTD..

SWOT ANALYSIS

STRENGTH & WEAKNESSES

STRENGTH

Strong technological base.

Highly skilled professionally qualified workforce.

Adoption of innovative fuel optimization.

Outage management.

WEAKNESSES The manpower at HCL INFOSYSTEM LTD. is in excess that is a burden.

OPPORTUNITIES & THREATSOPPORTUNITIES

HCL INFOSYSTEM LTD. has become a generic name in the power generation. So, company has great opportunities in such market if services will be regular with reasonable prices.

Diversification in the areas of conventional and non-conventional power generation.

THREATS

If competitor is providing electricity at more reasonable prices than HCL INFOSYSTEM LTD. , then the customers of the company are attracted towards them.

Expansion of thermal power plants and hydro power plants.

CHAPTER 2

OBJECTIVE &RESEARCH METHODOLOGY

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 question-experimental 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.

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.

Research design is mainly of following types: -

1. Exploratory research.

2. Descriptive studies

3. Casual studiesEXPLORATORY RESEARCH

The major purposes of exploratory studies are the identification of problems, the more precise Formulation of problems and the formulations of new alternative courses of action. The design of exploratory studies is characterized by a great amount of flexibility and ad-hoc veracity.

DESCRIPTIVE STUDIES

Descriptive research in contrast to exploratory research is marked by the prior formulation of specific research Questions. The investigator already knows a substantial amount about the research problem. Perhaps as a Result of an exploratory study, before the project is initiated. Descriptive research is also characterized by a Preplanned and structured design.

Data Collection Methods

PRIMARY DATA

These data are collected first time as original data. The data is recorded as observed or encountered. Essentially they are raw materials. They may be combined, totaled but they have not extensively been statistically processed. For example, data obtained by the peoples.

SECONDARY DATA

The Secondary data collected has been collected from books, journals, broachers, internet and other secondary sources.

Official Publications,

Publications Relating to Trade

Journal/ Newspapers etc Industry Associations: CHAPTER 4

FINDINGS AND DATA ANALYSIS

FINDING

There has been a significant decline in volume over the years from 2001-02 to 2005-06 as can be seen in the graph below:

The volume decreased by 17005 in 20002-03 as compared to that in 2001-02. There has been increased in the volume by 4539 in 2003-04 as compared to that in 2002-03. There has been increased in the volume by 6146 in 2004-05 as compared to that in 2003-04. The volume decreased by 2271 in 2005-06 as compared to that in 2004-05. The Net Contribution Per Tractor has increased considerably from the year 2001-02 to 2003-04 which can be seen in the graph below:

The Net Contribution Per Tractor has increased considerably from 2001-02 to 2002-03,

that is an increase of Rs.5077 per tractor. This can be mainly attributed to changes in

Variable and material costs and in the price.

The Net Contribution Per Tractor has decreased considerably from 2002-03 to 2003-04,

that is an decrease of Rs.7216 per tractor. This can be mainly attributed to changes in

Variable and material costs and in the prices.

This increasing Net Contribution Per Tractor signifies that efficiencies have been achieved and had there been not such a drastic drop in volume. It could have lead to profits.

The AMG could only achieve the following percentage of its budgeted volumes :

YEAR% of BUD. VOLUME

2001-0276

2002-0350.03

2003-0473

2004-0576

These percentages can be explained by the graph.

These differences can be explained due to drop in actual sales as per the following reasons:

Slump in the market

Stiff competitions

Emergence of foreign players

HCL Infosystems ltd.

INTRODUCTION OF THE COMPANY

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.

WORKING CAPITAL POSITION2006200520042003

CURRENT ASSETS81533540914504255985

NET FIXED ASSETS5329492549545552

TOTAL ASSETS99139870767128575205

CA / TA82.2462.1163.1874.44

NET CURRENT ASSETS34742143011875227065

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.

RISK-RETURN ANALYSIS

200620052004

SALES199886154295166604

EBIT156341452311491

RETURN ON INVESTMENT (%)3975.5

In case instead of Net Current assets and net block if total assets had been used in computation of ROI then

TOTAL ASSETS5234847286

RETURN ON INVESTMENT (%)60.3630.3

CHAPTER 5CONCLUSIONS, LIMITATIONS AND SUGGESTIONS

CONCLUSION

Sales are decreasing during the year 2006-07. 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 turn over 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.

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.

RECOMMENDATION

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 non-production / 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 2000-01 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 2004-05 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 INFOSYSTEM LTD. in 2003-04 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 2001-02 till now. There is a drastic declining in the working capital turnover ratio. This ratio goes to ve 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 2005-06, which is not upto the ideal ratio. This shows that the current assets are equal to the current liabilities. Not satisfactory.

CHAPTER 6

BIBLIOGRAPHYMagazines & Newspapers

1. Business World

2. Business Today

3. The Economic Times

4. The Hindu Business Standard Lines

5. The Times of India

Referred Sites

www.financehcl.com www.hcleconomic.org www.google.com www.hclinfosystems.com EMBED Excel.Sheet.8

EMBED Excel.Sheet.8

Balance Sheet for the Year Ended as on 31st march 2006

2006 2005

Profit and Loss Account for the Year Ended as on 31st march 2006

20062005

PAGE

_976740689.xlsChart2

38016

21011

25550

31696

29425

YEAR

NUMBERS(S)

CHANGES IN VOLUME OF SALES

Sheet1

2001-0238016

2002-0321011

2003-0425550

2004-0531696

2005-0629425

Sheet1

YEAR

NUMBERS(S)

CHANGES IN VOLUME OF SALES

Sheet2

Sheet3

_976741058.xlsChart3

69764

70234

75541

68325

75671

YEAR

NET CONTRIBUTION/ TRAC(RS.)

CHANGES IN NET CONTRIBUTION PER TRACTOR

Sheet1

2000-0169764

2001-0270234

2002-0375541

2003-0468325

2004-0575671

Sheet1

YEAR

NET CONTRIBUTION/ TRAC(RS.)

CHANGES IN NET CONTRIBUTION PER TRACTOR

Sheet2

Sheet3