A Report

On

“working capital management in hcl infosystems limited”

By

(Submitted in partial fulfillment of the requirements of

MBA program at

ICFAIBusinessSchool, Chandigarh)

ACKOWLEDGEMENT

Achievement is finding out what you would be then doing, what you have to do. The higher the summit, the harder is the climb. The goal was fixed and we began with a determined resolved and put in ceaseless sustained hard work. Greater challenge, greater was our effort to overcome it.

This project work, which is my first step in the field of professionalization, has been successfully accomplished only because of my timely support of well-wishers. I would like to pay my sincere regards and thanks to those, who directed me at every step in my project work.

I would also like to thank the faculty members and the staff members of HCL Infosystems Ltd. for their kind support and help during the project.

TABLE OF CONTENTS

Acknowledgement

Abstract

  1. Introduction
  • The problems
  • Purpose of study
  • Research methodology
  • Scope of the study
  • Data sources
  • Limitations
  1. Hindustan Computers Limited
  2. HCL Infosystems – An Overview
  • Company’s history
  • HCL at a glance
  • Alliances and partnerships
  • Management team
  • Corporate information
  1. Conceptual Framework
  • Introduction to Working Capital Management
  • Significance of working capital management
  • Liquidity vs Profitability: Risk – Return trade off
  • Classification of working capital
  • Types of working capital needs
  • Financing of working capital
  • Factors determining working capital requirements
  • Working capital cycle
  • Sources of working capital
  • HCL financials
  • Working capital position
  • Inventory management
  • Cash management
  • Receivables management
  • Managing payables (Creditors)
  • Financing current assets
  • Working capital & short-term financing
  1. Analysis
  • Industry analysis
  • Financial graphs
  • Concluding analysis
  • Suggestions and recommendations
  • Bibliography
  1. Appendices

ABSTRACT

This project is based on the study of working capital management in HCLInfoystems. An insight view of the project will encompass – what it is all about, what it aims to achieve, what is its purpose and scope, the various methods used for collecting data and their sources, including literature survey done, further specifying the limitations of our study and in the last, drawing inferences from the learning so far.

HCL Infosystems Limited (HCL), is a leading domestic computer hardware and hardware services company. HCL is engaged in selling manufactured ( like PCs, servers, monitors and peripherals) and traded hardware ( like notebooks, peripherals) to institutional clients as well as in retail segment. It also offers hardware support services to existing clients through annual maintenance contracts, network consulting and facilities management.

The working capital management refers to the management of working capital, or precisely to the management of current assets. A firm’s working capital consists of its investments in current assets, which includes short-term assets—cash and bank balance, inventories, receivable and marketable securities.

This project tries to evaluate how the management of working capital is done in HCL Infosystems through inventory ratios, working capital ratios, trends, computation of cash, inventory and working capital, and short term financing.

INTRODUCTION


INTRODUCTION:

The project undertaken is on “WORKING CAPITAL MANAGEMENT IN HCL INFOSYSTEMS LIMITED”.

It describes about how the company manages its working capital and the various steps that are required in the management of working capital.

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations, reinvest and meet capital requirements and payments. Understanding a company's cash flow health is essential to making investment decisions. A good way to judge a company's cash flow prospects is to look at its working capital management (WCM).
Working capital refers to the cash a business requires for day-to-day operations or, more specifically, for financing the conversion of raw materials into finished goods, which the company sells for payment. Among the most important items of working capital are levels of inventory, accounts receivable, and accounts payable. Analysts look at these items for signs of a company's efficiency and financial strength.
The working capital is an important yardstick to measure the company’s operational and financial efficiency. Any company should have a right amount of cash and linesof credit for its business needs at all times.

This project describes how the management of working capital takes place at

HCL Infosystems.

The Problems

In the management of working capital, the firm is faced with two key problems:

  1. First, given the level of sales and the relevant cost considerations, what are the optimal amounts of cash, accounts receivable and inventories that a firm should choose to maintain?
  2. Second, given these optimal amounts, what is the most economical way to finance these working capital investments? To produce the best possible results, firms should keep no unproductive assets and should finance with the cheapest available sources of funds. Why? In general, it is quite advantageous for the firm to invest in short term assets and to finance short-term liabilities.

PURPOSE OF STUDY

The objectives of this project were mainly to study the inventory, cash and receivable at HCL Infosystems Ltd., but there are some more and they are -

  • The main purpose of our study is to render a better understanding of

the concept “Working Capital Management”.

  • To understand the planning and management of working capital at HCL Infosystems Ltd.
  • To measure the financial soundness of the company by analyzing various ratios.
  • To suggest ways for better management and control of working capital at the concern.

RESEARCH METHODOLOGY

  • This project requires a detailed understanding of the concept – “Working Capital Management”.Therefore, firstly we need to have a clear idea of what is working capital, how it is managed in HCL Infosystems, what are the different ways in which the financing of working capital is done in the company.
  • The management of working capital involves managing inventories, accounts receivable and payable and cash. Therefore one also needs to have a sound knowledge about cash management, inventory management and receivables management.
  • Then comes the financing of working capital requirement, i.e. how the working capital is financed, what are the various sources through which it is done.
  • And, in the end, suggestions and recommendations on ways for better management and control of working capital are provided.

SCOPE OF THE STUDY

This project is vital to me in a significant way. It does have some importance for the company too. These are as follows –

  • This project will be a learning device for the finance student.
  • Through this project I would study the various methods of the working capital management.
  • The project will be a learning of planning and financing working capital.
  • The project would also be an effective tool for credit policies of the companies.
  • This will show different methods of holding inventory and dealing with cash and receivables.
  • This will show the liquidity position of the company and also how do they maintain a particular liquidity position.

DATA SOURCES:

The following sources have been sought for the prep of this report:

  • Primary sources such as business magazines, current annual reports, book on Financial Management by various authors and internet websites the imp amongst them being : .
  • Secondary sources like previous years annual reports, reports on working capital for research, analysis and comparison of the data gathered.
  • While doing this project, the data relating to working capital, cash management, receivables management, inventory management and short term financing was required.
  • This data was gathered through the company’s websites, its corporate intranet, HCL’s annual reports of the last five years.
  • A detailed study on the actual working processes of the company is also done through direct interaction with the employees and by timely studying the happenings at the company.
  • Also, various text books on financial management like Khan & Jain, Prasanna Chandra and I.M.Pandey were consulted to equip ourselves with the topic.

LIMITATIONS OF THE STUDY:

  • We cannot do comparisons with other companies unless and until we have the data of other companies on the same subject.
  • Only the printed data about the company will be available and not the back–end details.
  • Future plans of the company will not be disclosed to the trainees.
  • Lastly, due to shortage of time it is not possible to cover all the factors and details regarding the subject of study.
  • The latest financial data could not be reported as the company’s websites have not been updated.

HINDUSTAN COMPUTERS LIMITED:

Type / Public
(BSE: 500179,BSE: 532281)
Founded / 11th August 1976
Headquarters / Noida, India
(Delhi metropolitan area), India
Key People / Shiv Nadar, Founder, Chairman & CEO
Sanjay Kumar Choudhary , Vineet Nayar
Industry / Information Technology Services
Revenue / ▲4.7 billion USD
Employees / ~53,000 (as on 31st Dec 2007)
Website /

Hindustan Computers Limited, also known asHCL Enterprise, is one of India's largest electronics, computing and information technology company. Based in Noida, near Delhi, the company comprises two publicly listed Indian companies, HCL Technologies and HCL Infosystems.

HCL was founded in 1976 by Shiv Nadar, Ajai Chowdhry and four of their colleagues. HCL was focused on addressing the IT hardware market in India for the first two decades of its existence with some sporadic activity in the global

market. In 1981, HCL seeded a company focused on addressing the computer training industry, NIIT, though it has currently divested its stake in the company. In 1991, HP took minority stake in the company (26%) and the company was known as HCL HP for the five years of the joint venture. On termination of the joint venture in 1996, HCL became an enterprise which comprises HCL Technologies (to address the global IT services market) and HCL Infosystems (to address the Indian and APAC IT hardware market). HCL has since then operated as a holding company.

HCL INFOSYSTEMS – AN OVERVIEW


HCL INFOSYSTEMS LIMITED

AN OVERVIEW ABOUT THE COMPANY

HCL Infosystems is no flash in the Information Technology pan. Founded in 1976, the firm has climbed into pantheon of India's corporate giants on the strength of its IT products and services. HCL Infosystems specializes in IT hardware (PC's and servers, as well as networking, imaging and communications products), and system integration services serving the domestic Indian market. In addition to its consumer products, the company provides commercial IT products, facilities management, network services, and IT security services for clients in such industries as government, financial services, and education. HCL Corporation owns significant stakes in HCL Infosystems (about 44%) and sister company HCL Technologies.

HCL Infosystems Ltd, a listed subsidiary of HCL, is an India-based hardware and systems integrator. It claims a presence in 170 locations and 300 service centres. Its manufacturing facilities are based in Chennai, Pondicherry and Uttarakhand .Its headquarters is in Noida.

HCL Peripherals (A Unit of HCL Infosystems Limited) Founded in the year 1983, has established itself as a leading manufacturer of computer peripherals in India, encompassing Display Products, Thin Client solutions, Information and Interactive Kiosks. HCL Peripherals has two Manufacturing facilities, one in Pondicherry (Electronics) and the other in Chennai (Mechanical) .The Company has been accredited with ISO 9001:2000, ISO 14001, TS 16949 and ISO 13485.

HISTORY

/ 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. The highlights of the HCL saga are summarized below:
Y E AR / H I G H L I G H T S
1976 / - Foundation of the Company laid
- Introduces microcomputer-based programmable calculators with wide acceptance in the scientific / education community
1977 / - Launch of the first microcomputer-based commercial computer with a ROM -based Basic interpreter
- Unavailability of programming skills with customers results in HCL developing bespoke applications for their customers
1980 / - Formation of Far East Computers Ltd., a pioneer in the Singapore IT market, for SI (System Integration) solutions
1983 / - HCL launches an aggressive advertisement campaign with the theme ' even a typist can operate' to make the usage of computers popular in the SME (Small & Medium Enterprises) segment. This proposition involved menu-based applications for the first time, to increase ease of operations. The response to the advertisement was phenomenal.
-HCL develops special program generators to speed up the development of applications
1986 / - Zonal offices of banks and general insurance companies adopt computerization
- Purchase specifications demand the availability of RDBMS products on the supplied solution (Unify, Oracle). HCL arranges for such products to be ported to its platform.
- HCL assists customers to migrate from flat-file based systems to RDBMS
1991 / - HCL enters into a joint venture with Hewlett Packard
- HP assists HCL to introduce new services: Systems Integration, IT consulting, packaged support services ( basic line, team line )
1994 / - HCL acquires and executes the first offshore project from IBM Thailand
- HCL sets up core group to define software development methodologies
1995 / - Starts execution of Information System Planning projects
- Execution projects for Germany and Australia
- Begins Help desk services
1996 / - Sets up the STP ( SoftwareTechnologyPark ) at Chennai to execute software projects for international customers
- Becomes national integration partner for SAP
1997 / - Kolkata and Noida STPs set up
- HCL buys back HP stake in HCL Hewlett Packard
1998 / - Chennai and Coimbatore development facilities get ISO 9001 certification
1999 / - Acquires and sets up fully owned subsidiaries in USA and UK
- Sets up fully owned subsidiary in Australia
- HCL ties up with Broadvision as an integration partner
2000 / - Sets up fully owned subsidiary in Australia
- Chennai and Coimbatore development facilities get SEI Level 4 certification
- Bags Award for Top PC Vendor In India
- Becomes the 1st IT Company to be recommended for latest version of ISO 9001 : 2000
- Bags MAIT's Award for Business Excellence
- Rated as No. 1 IT Group in India
2001 / -Launched Pentium IV PCs at below Rs 40,000
-IDC rated HCL Infosystems as No. 1 Desktop PC Company of 2001
2002 / -Declared as Top PC Vendor by Dataquest
-HCL Infosystems & Sun Microsystems enters into a Enterprise Distribution Agreement
- Realigns businesses, increasing focus on domestic IT, Communications & Imaging products, solutions & related services
2003 / - Became the first vendor to register sales of 50,000 PCs in a quarter
- First Indian company to be numero uno in the commercial PC market
- Enters into partnership with AMD
- Launched Home PC for Rs 19,999
2004 / - 1st to announce PC price cut in India, post duty reduction, offers Ezeebee at Rs. 17990
- Maintains No.1 position in the Desktop PC segment for year 2003
- Becomes the 1st company to cross 1 lac unit milestone in the Indian Desktop PC market
- Partners with Union Bank to make PCs more affordable, introduces lowest ever EMI for PC in India
- Registers a market share of 13.7% to become No.1 Desktop PC company for year 2004
- Crosses the landmark of $ 1 billion in revenue in just nine months
2005 / - Launch of HCL PC for India, a fully functional PC priced at Rs.9,990/-
- Rated as the No.1 Desktop PC company by IDC India -Dataquest
- 'Best Employer 2005' with five star ratings by IDC India -Dataquest.
- 'The Most Customer Responsive Company 2005'
-IT Hardware Category by The Economic Times -Avaya Global Connect.
-Top 50 fastest growing Technology Companies in India' & 'Top 500 fastest Growing Technology Companies in Asia Pacific' by 'Deloitte & Touche'. by 'Deloitte & Touche'
-'7th IETE -Corporate Award 2005' for performance excellence in the field of Computers & Telecommunication Systems by IETE.
-India 's 'No.1 vendor' for sales of A3 size Toshiba Multi Functional Devices for the year '04 -'05 by IDC.
-Toshiba 'Super Award 2005 towards business excellence in distribution of Toshiba Multifunctional products,
-Strategic Partners in Excellence' Award by In focus Corporation for projectors.
-'Most valued Business Partner' Award for projectors by In focus Corporation in 2005
2006
(till June) / - 75, 000+ machines produced in a single month
- HCL Infosystems in partnership with Toshiba expands its retail presence in India by unveiling 'shop Toshiba'
- HCL Infosystems & Nokia announce a long term distribution strategy
- HCL the leader in Desktops PCs unveils India's first segment specific range of notebooks brand - 'HCL Laptops'
- IDBI selects HCL as SI partner for 100 branches ICT infrastructure rollout
- HCL Infosystems showcases Computer Solutions for the Rural Markets in India
- HCL Support wins the DQ Channels-2006 GOLD Award for Best After Sales Service on a nationwide customer satisfaction survey conducted by IDC
- HCL Infosystems First in India to Launch the New Generation of High Performance Server Platforms Powered by Intel Dual - Core Xeon 5000 Processor
- HCL Forms a Strategic Partnership with APPLE to provide Sales & Service Support for iPods in India

VISION STATEMENT:

"Together we create the Enterprises of Tomorrow"

MISSION STATEMENT:

"To provide world-class Information Technology solutions and services
in order to enable our customers to serve their customers better"

CORE VALUES:

  • Nothing transforms life like education.
  • We shall honor all commitments
  • We shall be committed to Quality, Innovation and Growth in every endeavor
  • We shall be responsible corporate citizens

QUALITY POLICY:

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

OBJECTIVES:

  • MANAGEMENT OBJECTIVES –

To fuel initiative and foster activity by allowing individuals, freedom of action and innovation in attaining defined objectives.

  • PEOPLE OBJECTIVES –

To help people in HCL Infosystems Ltd., share company’s success, which they make possible; to provide job security based on their performance; to