A STUDY ON FINANCIAL PERFORMANCE OF HCL Pro
A STUDY ON FINANCIAL PERFORMANCE OF HCL Pro
Chapter-1
INTRODUCTION
Finance is broad term that describes activities associated with banking, leverage or debt,
credit, capital markets, money, and investments. Finance also encompasses the oversight,
creation, and study of money, banking, credit, investments, assets, and liabilities that make up
financial systems. Financial performance is a subjective measure of how well a firm can use
assets from its primary mode of business and generate revenues. The term is also used as a
general measure of a firm’s overall financial health over a given period.
Finance is the study of money and how it is used. Specifically, it deals with the questions
of how an individual, company or government acquires the money needed - called capital in the
company context - and how they then spend or invest that money. Finance is, correspondingly,
often split into three areas: personal finance, corporate finance and public finance. At the same
time, finance is about the overall "system" - the financial markets that allow the flow of money,
via investments and other financial instruments, between and within these areas; this "flow" is
facilitated by the financial services sector. A major focus within finance is thus investment
management called money management for individuals, and asset management for institutions
and finance then includes the associated activities of securities trading, investment
banking, financial engineering, and risk management.
An entity whose income exceeds its expenditure can lend or invest the excess income to
help that excess income produce more income in the future. Though on the other hand, an entity
whose income is less than its expenditure can raise capital by borrowing or
selling equity claims, decreasing its expenses, or increasing its income. The lender can find
a borrower—a financial intermediary such as a bank—or buy notes or bonds (corporate
bonds, government bonds, or mutual bonds) in the bond market. The lender receives interest,
the borrower pays a higher interest than the lender receives, and the financial intermediary earns
the difference for arranging the loan.
A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits
from lenders, on which it pays interest. The bank then lends these deposits to borrowers. Banks
allow borrowers and lenders, of different sizes, to coordinate their activity. Finance is used by
individuals (personal finance), by governments (public finance), by businesses (corporate
finance) and by a wide variety of other organizations such as schools and non-profit
organizations. In general, the goals of each of the above activities are achieved through the use
of appropriate financial instruments and methodologies, with consideration to their institutional
setting.
Area of Finance:
Personal Finance:
Personal finance] is defined as the mindful planning of monetary spending and saving, while
also considering the possibility of future risk. The following steps, as outlined by the Financial
Planning Standards Board, suggest that an individual will understand a potentially secure
personal finance plan after:
Personal finance may involve paying for education, financing durable goods such as real
estate and cars, buying insurance, e.g. health and property insurance, investing and saving
for retirement.
Corporate Finance:
Corporate finance deals with the sources of funding and the capital structure of corporations,
the actions that managers take to increase the value of the firm to the shareholders, and the tools
and analysis used to allocate financial resources. (Capital is of two types in the main, equity,
and debt). Although it is in principle different from managerial finance which studies the
financial management of all firms, rather than corporations alone, the main concepts in the
study of corporate finance are applicable to the financial problems of all kinds of firms. Short
term financial management is often termed "working capital management", and relates
to cash-, inventory- and debtors management. In the longer term, corporate finance generally
involves balancing risk and profitability, while attempting to maximize an entity's assets, net
incoming cash flow and the value of its stock, and generically entails three primary areas of
capital resource allocation.
In the first, "capital budgeting", management must choose which "projects" (if any) to
undertake. The discipline of capital budgeting may employ standard business
valuation techniques or even extend to real options valuation; see Financial modeling.
The second, "sources of capital" relates to how these investments are to be funded:
investment capital can be provided through different sources, such as by shareholders, in the
form of equity (privately or via an initial public offering), creditors, often in the form
of bonds, and the firm's operations (cash flow). Short-term funding or working capital is
mostly provided by banks extending a line of credit. The balance between these elements
forms the company's capital structure.
The third, "the dividend policy", requires management to determine whether any
unappropriated profit (excess cash) is to be retained for future investment / operational
requirements, or instead to be distributed to shareholders, and if so, in what form.
Financial risk management, an element of corporate finance, is the practice of creating and
protecting economic value in a firm by using financial instruments to manage exposure to risk,
particularly credit risk and market risk. (Other risk types include foreign exchange,
shape, volatility, sector, liquidity, inflation risks, etc.) It focuses on when and how
to hedge using financial instruments; in this sense it overlaps with financial engineering. Similar
to general risk management, financial risk management requires identifying its sources,
measuring it (see: Risk measure#Examples), and formulating plans to address these, and can be
qualitative and quantitative. In the banking sector worldwide, the Basel Accords are generally
adopted by internationally active banks for tracking, reporting and exposing operational, credit
and market risks.
Public Finance:
Public finance describes finance as related to sovereign states and sub-national entities
(states/provinces, counties, municipalities, etc.) and related public entities (e.g. school districts)
or agencies. It usually encompasses a long-term strategic perspective regarding investment
decisions that affect public entities. These long-term strategic periods usually encompass five or
more years.[10] Public finance is primarily concerned with:
Financial Theory
Financial Economics:
It essentially explores how rational investors would apply risk and return to the problem
of an investment policy. Here, the twin assumptions of rationality and market efficiency lead
to modern portfolio theory (the CAPM), and to the Black–Scholes theory for option valuation;
it further studies phenomena and models where these assumptions do not hold, or are extended.
Although they are closely related, the disciplines of economics and finance are distinct.
The "economy" is a social institution that organizes a society's production, distribution, and
consumption of goods and services, all of which must be financed.
Financial Mathematics:
Experimental Finance:
Behavioral Finance:
A strand of behavioral finance has been dubbed quantitative behavioral finance, which uses
mathematical and statistical methodology to understand behavioral biases in conjunction with
valuation. Some of these endeavors has been led by Gunduz Caginalp (Professor of
Mathematics and Editor of Journal of Behavioral Finance during 2001–2004) and collaborators
including Vernon Smith (2002 Nobel Laureate in Economics), David Porter, Don Balenovich,
Vladimira Ilieva, Ahmet Duran). Studies by Jeff Madura, Ray Sturm, and others have
demonstrated significant behavioral effects in stocks and exchange traded funds. Among other
topics, quantitative behavioral finance studies behavioral effects together with the non-classical
assumption of the finiteness of assets.
1. Comparative Statements,
2. Ratio Analysis,
3. Trend Analysis,
4. Common-size statements,
Comparative Statements
Under comparative statement, financial statements like balance sheet and income
statement are prepared in comparative form for financial analysis. The items of financial
statements are shown in a comparative form to give an idea of financial position of the business
at two or more periods. As the items are shown in a comparative form so the analysts are able to
draw useful conclusion out of it. For example, when sales figure of current period is compared
with the previous periods then the analysts will be able to study the trend of sales over different
period. A COMAPARATIVE ANALYSIS OF CAPITAL STRUCTURE BETWEEN ULTRA-
TECH CEMENT AND SHREE CEMENTS.
Trend Analysis
From the name of the analysis it is clear that here financial statements are analyzed based
on trends of figures in the statements. In trend analysis, percentage of each item of statement is
calculated in relation to the same item in the base year. Here the information for number of
years is taken and generally, the beginning year is taken as the base year. The base year should
be a normal year. The figure of the base year is taken as 100 and trend percentages for other
years are calculated based on base year. Down or upward trends of figures of items are seen in
this analysis.
Ratio Analysis
Ratios express a relationship between two more financial statement totals, and compare
to budgets and industry benchmarks. Five common categories of ratios exist: liquidity, asset
turnover, leverage, profitability and solvency. Reviewing ratios for performance compared with
prior periods or industry specific benchmarks provides financial statements users with
recognition of strengths and weaknesses. Risk Management Association, or RMA, publishes
data on industry specific benchmarks for more in-depth analysis.
Common-Size Statement
In common-size statements, balance sheet and income statement the figures are shown in
percentages. The figures of these statements are expressed as percentages of total assets, total
liabilities and total sales. Total assets are taken as 100 and different assets are shown as
percentage of total assets. Similarly total liabilities are taken as 100 and different liabilities are
expressed as a percentage of total liabilities. Here every item of the statements is expressed as a
percentage of the total 100.
The statement of cash flows summarizes the money generated by business activities and
the money spent by the business. Specifically, the cash flows statement illustrates the money
that comes in and out from every source including cash from operations, investments, interest
payments, financing, debt service, and expenses.
Fund Flow Statement
The fund flow statement is designed to analyze the changes in the financial condition of a
business enterprise between two periods. This statement will show the sources from which the
funds are received and the uses to which these have been put. This statement enables the
management to have an idea about the sources of fund and their uses for various purposes. This
statement helps in policy formulation and performance appraisal.
Cost-Volume-Profit Analysis
It means the amount of any given volume of output by which aggregate costs are changed
if the volume of output is increased by one unit.
Objectives of Study :
HCL has lagged its peers on concerns over organic growth and near team profitability.
The stock has shed about 4 per cent in the last three months, compared to a 0.5% gain for the
Nifty IT index .Valuations , too, are at a 22-45 per cent discount to IT peers, and this is unlikely
to improve soon. Investments made for new deal wins and additional fixed costs for its recently
concluded IBM deal will weigh on near – term profitability and earnings. The management ,
too, had cut its FY20 margin guidance by 100 bps to the 18.5-19.5 percent range. At my point
of view the company financial performance rises in one year and decreases in one year. The
company does not have stable growth. So my analysis might find some changes r modifications
, that I will mention in finding and suggestions.
The study is based on the financial position on the company by using ratio analysis and
trend analysis.
These statements helps the company analyze performance of the company, profit,
solvency, liquidity, and efficiency etc.
This study covers only the financial performance of the company from the year 2015-
2019.
The reliability and validity of the study is basically depends upon the validity of the data
provided in the financial statement.
It is also very difficult in the collection of relevant data for the study.
The organization due to official busy schedule and they were busy in audit works.
Research Methodology
The term ‘research’ refers to the systematic method consisting of enunciating the
problem, formulating a hypothesis, collecting the facts or data, analyzing the facts and
reaching certain conclusion either in the form of solutions towards the concerned problem
or in certaining generalizing for some theoretical formulation.
The system of collecting data for research projects is known as research methodology.
The data may be collected for either theoretical or practical research.
Research Design:
A research design is the arrangement of conditions for collection and analysis of data in
a manner that aims to combine relevance to the research purpose with economy in
procedure.
The study is based on secondary data obtained from audited annual report of the concern.
Company profile and certain other related information are collected from internet site and
webpage of HCL Company.
Tools used for the study:
Ratio Analysis
Trend Analysis
CHAPTER SCHEME
Chapter I: It deals with Introduction and Statement of the Problem, Objectives of the study,
Scope of the study, Research Methodology, Significance of the study, Limitations of the study
and the Chapter Scheme.
Chapter II: It provides the summary of the literature available in the area relevant to the study.
Chapter III: It consists of profiles of the companies: HCL
Chapter IV: It deals with the analysis of data with the help of ratios and statement of changes
in capital structure of the companies.
Chapter V: It presents the Summary of Findings, Suggestions, and Conclusion
CHAPTER - II
REVIEW OF THE RELATED LITERATURE
INTRODUCTION:
Review of literature has vital relevance with any research work, due to literature review
the possibility of repetition of study can be eliminated and another dimension can be selected
for the study. The literature reviews helps researcher to remove limitations of existing work or
may assist to extend prevailing study. Several researchers have been conducted to analyze the
different aspects of performance of different companies all over India. Only very few researches
are listed below.
Ram Kumar Mishra(2000) in the study “A Study on Financial Performance of Ashok Leyland
Finance Limited”, concluded that the overall financial position of the company is sound and the
net sales have increased when compared to the previous year.
Kennedy and Muller (2002) in the study on “Financial Performance of Non - Banking
Financial Companies in India”, concluded that there existed a significant variation in the
profitability ratios, leverage ratios and liquidity ratios of various categories of non banking
financial companies. Also, concluded that the analysis of variance along with the details of
average ratio may become a useful guide to companies so as to decide for continuation (or)
otherwise in same line of business considering the overall profitability within the regulatory
framework.
Peeler J.Patsula (2004)have made a study on the “Financial Performance of Software
Companies”, with special focus on examining the structure of liquidity position, leverage and
profitability. The study has revealed a favorable position of liquidity and working capital in
software companies. The study has also pointed out that the companies relied more on internal
financing and the overall profitability had been increasing at a moderate rate.
Miss F. Infanta Beena (2005 – 2007)in the study “A Study on Financial Performance of ELGI
Equipment Limited”, concluded that the overall financial position of ELGI equipment limited
was good and the company is under action to implement effective measures for their growth
and improvements to earn a better status in the coming future.
Maria Abraham (2007 – 2008) in the study “A Study on Financial Performance of Lakshmi
Works Limited”concluded that the overall financial position of the company was good and the
company has undertaken to implement effective measures for their growth and make
improvements to earn a better status in the future.
Gulnar Zara (2011-2013) in her study a study of “Financial Performance of Pricol Ltd”
concluded that the liquidposition was satisfactory the company did not have enough and more
cash and equivalents to meet their current obligation the long term solvency position of the
company was satisfactory.
CHAPTER 3
COMPANY PROFILE
HCL Ltd is one of the pioneers in the Indian IT market, with its origins in 1976. For over
quarter of a century, HCL have developed and implemented solutions for multiple market
segments, across a range of technologies in India.HCL have been in the forefront in introducing
new technologies and solutions. HCL (HCLI) draws its strength from 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 top of it, an excellent service & support
infrastructure. Today, HCL is country's premier information enabling company. It offers one-
stop-shop convenience to its diverse customers having an equally diverse set of requirements.
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
crore planned for initial five years, for identified core projects.HCL Infosyst em s Lt d,
wit h annual r evenue of US $ 2.7 Bn (Rs.11,855 cror es) is India’s 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.
, Casio, Kodak, Toshiba, Bull, Ericsson, Cisco, Microsoft, Konica Minolta and
many India’s leading System Integration and Infrastructure Management Services
Organization,HCL has specialized expertise across verticals including Telecom,
BFSI, E-Governance &Power.HCL has India’s largest distribution and retail network,
taking to market a range of Digital Lifestyle products in partnership with leading
global ICT brands, including Nokia, Applemore.
HCL today has India’s largest vertically integrated computer manufacturing facility with
over t hree decades of elect roni c manufact uri ng exper ience HCL deskt ops are
t he l ar gest selling brand into the enterprise space. With India’s largest ICT services network
that reaches to every corner of India, HCL’s 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 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
COMPANY PROFILE
Type : Public
Industry : IT sector
Founder : Mr.ShivNadar
Services : IT and outsourcing services
Revenue : 11,024.14 crore
Operating income : 256.58 crore
HISTORY OF HCL
HCL Info systems 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 same year, the company acquired 20 per cent equity stake in another Dubai-
based firm Tech mart Telecom Distribution FZCO through its Singapore-based subsidiary
HCL Investments PvtLtd.Part of HCL Group which includes IT services firm HCL
Technologies, HCL Infosystems Ltd offers a wide spectrum of ICT products that includes
computing, storage, networking, security, telecom, imaging and retail. Last month, the firm
had acquired education content provider Edurix, a part of Atta no Media and Education and
designs content for the K-12 education segment for an undisclosed amount. In 2008, HCL
Info acquired stake in Natural Technologies Pvt Ltd for $2.1 million.
VISION
"We will be the employer of choice and the partner of choice by focusing on our
stated values of Employees First, Trust, Transparency, Flexibility and Value
Centricity."
MILESTONE
Hancom Inc. has announced its tie up with HCL Ltd. to extend Hancom's Think Free
Mobile - Android edition on HCL Tablets. HCL is one of India’s most well known
hardware, services and ICT systems integration and Distribution Company.
The latest version of Think Free Mobile app has been embedded in 'HCL ME U1’, HCL
Info system’s recently launched range of Tablet PCs, available for Rs. 7999. In the past too,
HCL's Android tablets have had Think Free Mobile as one of their standard apps.
DEPARTMENTS IN HCL:
Production department
Human resource department
Marketing department
Administration and Operation department
Finance department.
CHAPTER – 4
In this chapter the analysis and interpretation of the study on a financial performance of
HCL company by Ratio and Trend analysis based on the financial data collected.
Analysis and interpretation are the two different processes. Analysis refers to the process
of breaking down a complex set of figures into simple statements. However, interpretation
means explaining the meaning and significance of these simplifies statements. Analysis and
interpretation are inter related. It is so because interpretation is not possible without analysis
and without interpretation, analysis has no value or meaning. Further, interpretation begins
where analysis ends.
The ‘Analysis’ literally means ‘To break into parts’. In the context of financial statements,
analysis is the process of breaking down a complex set of figures into simple statements in
order to have a better understanding.
The term ‘Interpretation’ literally means ‘To explain the meaning of’. In the context of
financial analysis, interpretation means explaining the meaning and significance of data. In
short, interpretation means explaining financial statements based on analysis.
Ratio Analysis:
Liquidity Ratios
Profitability Ratios
Activity Ratios
Solvency Ratios
Liquidity Ratios:
In accounting, the term liquidity is defined as the ability of a company to meet its financial
obligations as they come due. The liquidity ratio, then, is a computation that is used to measure
a company's ability to pay its short-term debts. There are three common calculations that fall
under the category of liquidity ratios. The current ratio is the most liberal of the three. It is
followed by the acid ratio, and the cash ratio. These three ratios are often grouped together by
financial analysts when attempting to accurately measure the liquidity of a company
There are four liquidity ratios:
Current ratio
Quick ratio
Absolute liquid ratio
Current cash debt coverage ratio.
Current ratio:
The current ratio indicates a company's ability to pay its current liabilities from its current
assets. This ratio is one used to quickly measure the liquidity of a company. The formula for the
current ratio is:
Current Ratio = Current Assets ÷ Current Liabilities
TABLE: 1
2018
Ratio
2017
2016
2015