Professional Documents
Culture Documents
Subsidiaries
Condensed Consolidated Financial Statements
For The Three and Nine Month Periods ended December 31, 2015 and 2016
With Report of Independent Auditors
Page
Review Report of Independent Auditors .............................................................................................. 1
Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets ............................................................................................... 2
Condensed Consolidated Statements of Income ...................................................................................... 4
Condensed Consolidated Statements of Comprehensive Income............................................................. 5
Condensed Consolidated Statements of Cash Flows ............................................................................... 6
Notes to Condensed Consolidated Financial Statements ......................................................................... 7
March 31,
2016
As of
December 31,
2016
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents
$110,069
$326,043
1,298,073
1,328,319
299,615
218,539
1,165,295
1,176,779
452,971
358,160
80,959
12,517
Inventories
39,913
50,960
323,839
350,684
3,770,734
3,822,001
279,964
303,217
24,434
21,962
1,704
652,407
1,209,034
60,643
52,195
Goodwill
908,120
862,152
Other assets
305,406
261,876
$6,001,708
$6,534,141
March 31,
2016
As of
December 31,
2016
(Unaudited)
$14,955
$5,410
Accounts payable
137,013
375,817
32,359
8,500
5,950
16,785
241,974
266,578
Deferred revenue
167,961
164,688
157,129
149,356
715,952
736,972
1,473,293
1,724,106
108,566
65,813
2,729
2,042
16,015
37,812
108,483
94,782
Deferred revenue
50,461
43,034
Other liabilities
12,989
6,730
$1,772,536
$1,974,319
57,286
57,310
711,027
7
712,030
1
Retained earnings
4,098,241
4,557,524
(669,298)
(793,627)
4,197,263
4,533,238
31,909
26,584
4,229,172
4,559,822
$6,001,708
$6,534,141
Noncontrolling interest
Total equity
Total liabilities and equity
(a)
Consolidated assets at March 31, 2016 and December 31, 2016 include assets totaling
$29,317 and $38,980, respectively, of certain variable interest entities (VIEs) that can only be used to
settle the liabilities of those VIEs. Consolidated liabilities at March 31, 2016 and December 31, 2016,
include liabilities of certain VIEs for which the VIEs creditors do not have recourse to HCL
Technologies Limited and Subsidiaries (See Note 8).
See accompanying notes.
December, 31 (Unaudited)
December, 31 (Unaudited)
2015
2016
2015
2016
$1,566,127
$1,745,335
$4,648,160
$5,158,383
1,024,925
1,153,620
3,069,176
3,407,501
541,202
591,715
1,578,984
1,750,882
204,188
203,372
593,960
611,042
23,132
(57,431)
32,498
(37,399)
63,389
(135,136)
89,441
(116,076)
3,493
3,302
10,833
9,109
367,820
389,942
1,045,938
1,157,366
76,995
83,774
212,750
245,097
290,825
306,168
833,188
912,269
15
136
17
(247)
$290,810
$306,032
$833,171
$912,516
$0.21
$0.21
$0.22
$0.22
$0.59
$0.59
$0.65
$0.65
1,407,635,747
1,411,067,882
1,406,512,999
1,410,843,219
1,411,549,109
1,412,280,784
1,410,413,204
1,412,058,063
Revenues
Cost of revenues (exclusive
of depreciation and
amortization)
Gross profit
Selling, general and
administrative expenses
Depreciation and
amortization
Other income, net
Finance cost
Income before income
taxes
Provision for Income taxes
Net income
Net income (loss)
attributable to
noncontrolling interest
2015
2016
2015
2016
$290,810
$306,032
$833,171
$912,516
15
$136
$17
($247)
6,231
6,564
(619)
26,610
(6)
45
(1)
137
(7)
(46)
1,070
(782)
(38,125)
(95,771)
(163,421)
(150,294)
(31,907)
(89,208)
(162,971)
(124,329)
(1,169)
(5,078)
$258,918
$215,791
$670,217
$782,862
Net
income
attributable
to
HCL
Technologies Limited shareholders
Add : Noncontrolling interest
Other comprehensive income (loss) net
of taxes:
$833,188
$912,269
63,389
(43,640)
(21,741)
1,986
2,040
(8,254)
(3,669)
(1,388)
(1,244)
2,601
89,441
(13,694)
21
(966)
(4,055)
83
4,113
10,350
(12,191)
(14,571)
(2,382)
16,671
28,259
839,054
20,822
5,147
11,713
23,694
52,158
1,111,096
(1,022,291)
908,241
(645)
(197,167)
90,102
(132,206)
29,344
(952,904)
891,466
(35,505)
(3,015)
1,600
(422,980)
(1,026,481)
963,940
(1,198)
3,744
(115,758)
190,206
(465,116)
14,989
(963,939)
1,035,180
(1,812)
(1,373)
(3,007)
(370,625)
(3,120)
4,952
(57,380)
645
16,539
(9,535)
533
70
45
(362,954)
8,254
(401,951)
(1,213)
29,485
(48,063)
1,198
(3,744)
3,783
(25,984)
(4,920)
17
1
(453,107)
966
(501,581)
(23,913)
(9,790)
134,114
124,324
(22,916)
215,974
110,069
$326,043
Assets acquired under capital leases are capitalized as assets by the Group at the lower of the fair value
of the leased property or the present value of the related lease payments. Assets under capital leases are
depreciated over the shorter of the lease term or the estimated useful life of the assets. Leasehold
improvements are amortized on a straight-line basis over the shorter of the lease period or the estimated
10
11
12
13
14
15
16
17
The resultant goodwill is tax deductible over the period of 15 years and has been allocated to the software
segment.
The table below shows the values and life of intangibles recognized on acquisition:Amount
$539
816
$1,355
Customer relationship
Customer contract
Total Intangibles
Life (Years)
4.8
1.11
During the nine months ended December 31, 2016, the Group has made a payment of $2,652 based on
satisfaction of the performance obligation as set out in agreement. The $348 difference between the
liability recorded and the amount paid was recognized in the statement of income.
Concept to Silicon Systems (C2SiS)
In October 2015, the Group acquired 100% equity interest of a Bengaluru-based engineering services
firm, Concept to Silicon Systems (C2SiS). With this strategic acquisition, the Group is able to leverage
C2SiSs capability in areas such as system-on-chip and physical design.
Purchase consideration payable for the acquisition was $1,884 out of which $1,765 has been paid till
March 31, 2016 and the balance has been paid during the nine months period ended December 31, 2016.
18
Customer contract
Total Intangibles
Life (Years)
0.9
In addition to the purchase consideration, $1,060 is payable to selling shareholders in tranches of $530
each over a two year period. Payment of this amount is contingent upon achieving certain specified
targets and the selling shareholder continuing to be the employee of the subsidiary on the payment date.
This consideration is being accounted for as post acquisition employee compensation expense in
accordance with ASC 805 on Business combination.
Amount of $530 payable at the end of the year one was not paid as the performance obligation as set out
in agreement was not met and it has been recognised in the statement of income during the nine months
ended December 31, 2016.
Powerteam LLC
In October 2015, the Group acquired 100% equity interest of Minneapolis-based Power team LLC - a
North American professional services firm providing service, support, education and add-ons for Microsoft
Dynamics CRM. This acquisition enables the Group to take advantage of the rapidly-growing global CRM
market.
Total purchase price for the acquisition was $41,356 which includes deferred earn-out component of
$13,500 dependent on achievement of certain specified performance obligations as set out in the
agreement and is payable in tranches over a three year period ending November 2018. The Group has
paid, $27,856 through December 31, 2016.
This earn-out liability was considered probable and initially fair valued at $8,157 and recorded as part of
the purchase price allocation The purchase price of $36,013 has been allocated to the acquired assets
and liabilities as follows:
Amount
Net working capital
$2,937
Property plant and equipment
666
Customer relationship
6,500
Customer contract
500
Brand
700
Goodwill
24,710
Total purchase consideration
$36,013
The resultant goodwill is tax deductible over the period of 15 years and has been allocated to the software
segment.
19
Customer relationship
Customer contract
Brand
Total Intangibles
Life (Years)
5.8
0.6
3.0
During the nine months ended December 31, 2016, the Group has made a payment of $2,268 for the first
tranche based on satisfaction of the performance obligation as set out in agreement. The $581 difference
between the liability initially recorded for the first tranche and the amount paid has been recognized in the
statement of income.
The balance earn out liability has been fair valued at $6,215 including finance expense of $326 on
reassessment of fair valuation recognized in statement of income
In addition to the purchase consideration, $5,000 held in escrow account, is payable to the selling
shareholders in tranches of $2,500 each over two year period. Payment of this amount is contingent upon
the selling shareholders continuing to be the employees of the subsidiary on the payment date. This
consideration is being accounted for as post acquisition employee compensation expense in accordance
with ASC 805 on Business combination.
During the nine months ended December 31, 2016, the Group has paid $2,500 based on satisfaction of
employment condition.
Arrangement with Computer Science Corporation (CSC)
In November 2015, the Group entered into an arrangement with Computer Science Corporation (CSC) to
operate and expand the existing Core Banking business of CSC. Under the arrangement, two entities,
Celeritifintech Limited and Celeritifintech Services Limited have been formed, where Celeritifintech Limited
would be focusing on account management and delivery governance and Celeritifintech Services Limited
would be focusing on service delivery and product development.
The Group owns 51% interest in Celeritifintech Limited and is obligated to contribute $32,045 over a
period of two years. As at December 31, 2016, the Group has contributed $6,437 in cash. CSC has
contributed right to exploit and sub license its core banking, cards, payments and default management
solutions and its existing business and customers in exchange for 49% interest. The fair value of CSCs
contribution has been allocated to intangibles of $23,331, with the residual $9,257 accounted for as
goodwill. The resultant goodwill is not tax deductible and has been allocated to the software segment.
The table below shows the values and life of intangibles recognized on acquisition:Amount
14,336
8,995
$23,331
Technology
Customer relationships
Total Intangibles
Life (Years)
5-15
10
The Group has majority shareholding in Celeritifintech Limited, and is consolidating this entity in its Group
accounts pursuant to ASC 810 Consolidation.
The Group owns a 49% interest in Celeritifintech Services Limited and is obligated to contribute $21,363
over a period of two years. As at December 31, 2016, the Group has contributed $4,292 in cash. CSC has
contributed right to exploit and sub license its core banking, cards, payments and default management
solutions, and its existing business and customers in exchange for 51% interest.
Investment in Celeritifintech Services Limited is accounted on equity investment method as the Group has
the ability to exercise significant influence over this entity.
20
Customer relationship
Customer contract
Brand
Total Intangibles
Life (Years)
4.11
0.11
2.0
The resultant goodwill is not tax deductible and has been allocated to the Infrastructure Services segment.
In addition to the purchase consideration, $2,760 is payable over two years from the closing date, of
which $1,319 is payable after one year, and is currently held in escrow account. The payment of $2,760 is
contingent upon the selling shareholders and certain key employees continuing to be the employees of
the subsidiary on the payment date. This consideration is being accounted for as post acquisition
employee compensation expense in accordance with ASC 805 on Business combination.
HCL Training and Staffing Services Private Limited (HCLTSS)
In February 2016, the Company acquired 100% equity interest of HCLTSS for total purchase
consideration of $355. The acquisition enables the Company to supplement its capabilities in hiring of
trained resources.
Purchase consideration of $355 has been allocated to net liabilities of $338 with the residual $693
allocated to goodwill. The resultant goodwill is not tax deductible and has been allocated to the
Infrastructure Services segment.
IT Division of Volvo
In March 2016, the Group has acquired the IT divisions of Volvo IT AB ('Volvo IT'), a subsidiary of AB
Volvo, the holding company of the Volvo Group, providing IT services to the Volvo group as well as nonVolvo group customers.
This acquisition enables the Group to create a market leading position in the Nordics and France, gives it
a differentiated offering in Mainframe services and provides it with significant domain capabilities to serve
the its global automotive and manufacturing customers.
21
The resultant goodwill has been allocated to the Infrastructure Services segment .Out of total goodwill,
$84,724 is tax deductible over the period of 10 years
The table below shows the values and life of intangibles recognized on acquisition:Amount
$8,391
$8,391
Customer relationship
Total Intangibles
Life (Years)
10.0
The purchase price allocation remains preliminary because the valuation of property, plant and equipment
is not final.
As per shareholders agreement, certain items of working capital including employee obligations, unbilled
revenue etc. will also be transferred to the Group. All these along with certain leases that have not yet
been novated to the Group are not part of the purchase consideration. These are likely to be finalized
during the current year.
6. PROPERTY AND EQUIPMENT
As of March 31, 2016 and December 31, 2016, property and equipment comprises the following:
March 31, 2016
Freehold land
Buildings
Computer and networking equipment
Software
Furniture, fixtures and office equipment
Plant and equipment
Vehicles
Capital work-in-progress
$8,316
328,843
341,281
112,542
105,308
240,784
15,891
99,574
1,252,539
(600,132)
$652,407
Depreciation expense was $20,238 and $29,161 for the three months period and $56,622 and $80,053
for nine months period ended December 31, 2015 and 2016, respectively.
22
Infrastructure
services
$ 784,027
(34,542)
$749,485
$100,931
(10,473)
$90,458
Business
process
outsourcing
services
$ 23,162
(953)
$22,209
Total
$908,120
(45,968)
$862,152
Intellectual property
rights
Technology
Customer related
intangibles
Customer contracts
Non-compete
agreements
Brand and contractors
database and others
Accumulated
amortization
Gross
carrying
amount
Net
Accumulated
amortization
Net
$520
($520)
$-
$529
($529)
$-
22,753
(7,613)
15,140
19,962
(7,827)
12,135
146,534
(105,510)
41,024
130,221
(99,752)
30,469
7,333
(4,035)
3,298
6,435
(4,451)
1,984
3,102
(2,657)
445
2,898
(2,695)
203
3,716
$183,958
(2,980)
($123,315)
736
$60,643
10,585
$170,630
(3,181)
($118,435)
7,404
$52,195
The estimated annual amortization expense schedule for intangible assets based on current balance is as
follows:
Year ending March 31,
2017(January 1, 2017 to March 31,2017)
2018
2019
2020
2021
Thereafter
$3,083
13,622
11,007
6,766
5,426
12,291
$52,195
23
$1,347
6,023
6,920
2,565
1,701
$18,556
3,023
6,234
423
1,081
$29,317
$2,959
13,035
5,220
3,999
1,529
$26,742
4,926
6,125
180
1,007
$38,980
$897
1,283
153
2,263
$4,596
220
$4,816
$431
923
2,315
$3,669
241
$3,910
Current assets
Cash and cash equivalents
Short term deposits with banks
Accounts receivables, net
Unbilled revenue
Other current assets
Total Current Assets
Deferred income taxes
Property and Equipment, net
Intangible assets, net
Other assets
Total Assets
Current liabilities
Accounts payable
Accrued employee costs
Deferred revenue
Other current liabilities
Total current liabilities
Accrued employee costs
Total liabilities
a) Assets and liabilities exclude all intercompany accounts and transactions, which are eliminated in
consolidation.
b) For the three months period ended December 31, 2015 and 2016, total revenues from VIEs were
$10,249 and $11,637, respectively and for the nine months period ended December 31, 2015 and
2016, total revenues from VIEs were $26,794 and $34,882,respectively.
9. INVESTMENT SECURITIES
Available for sale investment securities consist of the following:
As of March 31, 2016:
Carrying
value
$80,698
$80,698
Gross unrealized
holding gains
$261
$261
Fair value
$80,959
$80,959
24
Proceeds from the sale of available- for -sale securities was $345,796 and $410,715 for the three months
period and $891,466 and $1,035,180 for the nine months period ended December 31, 2015 and 2016,
respectively.
The cost of a security sold or the amount reclassified out of accumulated other comprehensive income
(loss) into earnings was determined on FIFO basis.
The table summarizes the transactions for available for sale securities:
Three Months ended
December 31,
2015
2016
$654
$986
$80
$142
$1,901
$275,250
2,816
10,950
2,000
December 31,
2016
(Sell)
(Sell)
(Sell)
(Sell)
AUD 4,350 (Sell)
SEK 13,880 (Sell)
ZAR 112,000 (Sell)
CHF 370 (Sell)
CHF 9,599 (Sell)
MXN 70,000 (Sell)
$139,681 (Sell)
77,847 (Sell)
NOK 73,723 (Sell)
AUD 6,000 (Sell)
SEK 180,500 (Sell)
ZAR 45,000 (Sell)
CHF 7,750 (Sell)
CHF 18,100 (Sell)
MXN 88,000 (Sell)
25
($7,061)
(19)
(195)
335
(9)
(63)
(268)
(1)
86
(98)
(88)
(114)
December 31,
2016
($916)
982
60
265
(120)
33
67
1434
153
(53)
-
CAD/USD
SGD/USD
JPY/USD
GBP/USD
CHF/USD
MYR/USD
DKK/USD
NOK/INR
ZAR/USD
USD/INR
AUD/USD
CNY/USD
December 31,
2016
CAD 23,000 (Buy)
SGD 22,450 (Buy)
JPY 806,000 (Buy)
59,130 (Buy)
MYR 54,000 (Buy)
DKK 56,000 (Buy)
NOK 75,000 (Sell)
ZAR 45,000 (Buy)
$80,001 (Buy)
AUD 8,350 (Buy)
CNY 60,100 (Sell)
December 31,
2016
(17)
(289)
(230)
(151)
(190)
9
386
(5)
(74)
(136)
(156)
$1,052
The following table presents the aggregate notional principal amounts of the outstanding forward options
together with the related balance sheet exposure:
Balance sheet exposure
Notional principal amounts
Asset (Liability)
March 31, 2016
December 31,
2016
December 31,
2016
Range Forward
USD/INR
EUR/INR
GBP/INR
AUD/INR
CHF/INR
PUT
USD/INR
Seagull
USD/INR
EUR/USD
EUR/INR
$481,955
82,300
36,920
AUD 25,950
$842,410
109,900
72,510
AUD 43,460
$7,298
215
4,311
(317)
$15,984
9,858
11,058
1,591
CHF 1,235
15
$24,000
$4,000
47
12
$8,000
4,000
6,400
19,000
149
(44)
$11,674
26
486
$39,015
The notional amount is a key element of derivative financial instrument agreements. However, notional
amounts do not represent the amount exchanged by counterparties and do not measure the Groups
exposure to credit risk as these contracts are settled at their fair values at the maturity date.
The balance sheet exposure denotes the fair value of these contracts at the reporting date and is
presented in US Dollars.
The Group presents its foreign exchange derivative instruments on a net basis in the consolidated
financial statements due to the right of offset by its individual counterparties under master netting
agreements.
26
Other
Current
Liabilities
$10,709
(4,413)
$6,296
$2,186
(207)
$1,979
$4,413
(5,959)
($1,546)
$207
(2,910)
($2,703)
$17,515
(13,489)
$4,026
$2,506
(770)
$1,736
$$-
$770
(1,096)
($326)
$$-
$3,276
(1,866)
$1,410
$8,032
$1,979
($1,872)
($2,703)
$5,436
Other
Current
Liabilities
$34,644
(509)
$6,119
(96)
$509
(945)
$96
(230)
$41,368
(1,780)
$34,135
$6,023
($436)
($134)
$39,588
$2,486
(1,496)
$-
$1,496
(2,007)
$-
$3,982
(3,503)
$990
$-
($511)
$-
$479
$35,125
$6,023
($947)
($134)
$40,067
The following tables set forth the fair value of derivative instruments included in the condensed
consolidated balance sheets as on March 31, 2016 and December 31, 2016:
Derivatives designated as hedging instruments:
Unrealized gain on financial instruments classified
under current assets
Unrealized gain on financial instruments classified
under non-current assets
Unrealized loss on financial instruments classified under
current liabilities
Unrealized loss on financial instruments classified under
non-current liabilities
27
$6,296
$34,135
1,979
6,023
(1,546)
(436)
(2,703)
(134)
$4,026
$39,588
($326)
($511)
1,736
990
$1,410
$479
The following tables summarize the activities in the consolidated statement of income during the three
months period ended December 31, 2015
Derivatives in
Cash flow
Hedging
Relationships
Foreign
Exchange
Contracts
Amount of
Gain or
(Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)
Location of
Gain or (Loss)
Reclassified
from
AOCI into
Income
(Effective
Portion)
Other Income
(Expense),net
$6,531
$6,531
Amount of Gain
or (Loss)
Reclassified
from
AOCI into Income
(Effective Portion)
($1,068)
Location of Gain or
(Loss) Recognized in
Income on
Derivatives
(Ineffective Portion)
and Amount
Excluded from
Effectiveness
Testing)
Other Income
(Expense),net
($1,068)
Amount of Gain or
(Loss)
Recognized in
Income on
Derivatives
(Ineffective Portion and
Amount Excluded
from
Effectiveness
Testing)
Nil
Nil
The following tables summarize the activities in the consolidated statement of income during the three
months period ended December 31, 2016
Derivatives in
Cash flow
Hedging
Relationships
Foreign
Exchange
Contracts
Amount of
Gain or
(Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)
$13,490
Location of
Gain or (Loss)
Reclassified
from
AOCI into
Income
(Effective
Portion)
Amount of Gain
or (Loss)
Reclassified
from
AOCI into Income
(Effective Portion)
Other Income
(Expense),net
$5,190
$13,490
Location of Gain or
(Loss) Recognized in
Income on
Derivatives
(Ineffective Portion)
and Amount
Excluded from
Effectiveness
Testing)
Other Income
(Expense),net
$5,190
Location of Gain or (Loss)
recognized in
Income on Derivatives
Other Income (Expense),net
28
Amount of Gain or
(Loss)
Recognized in
Income on
Derivatives
(Ineffective Portion and
Amount Excluded
from
Effectiveness
Testing)
Nil
Nil
Derivatives in
Cash flow
Hedging
Relationships
Foreign
Exchange
Contracts
Amount of
Gain or
(Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)
($4,399)
Location of
Gain or (Loss)
Reclassified
from
AOCI into
Income
(Effective
Portion)
Other Income
(Expense),net
($4,399)
Amount of Gain
or (Loss)
Reclassified
from
AOCI into Income
(Effective Portion)
($3,129)
Location of Gain or
(Loss) Recognized in
Income on
Derivatives
(Ineffective Portion)
and Amount
Excluded from
Effectiveness
Testing)
Other Income
(Expense),net
($3,129)
Amount of Gain or
(Loss)
Recognized in
Income on
Derivatives
(Ineffective Portion and
Amount Excluded
from
Effectiveness
Testing)
Nil
Nil
The following tables summarizes activities in the condensed consolidated statement of income during the
nine months period ended December 31, 2016
Derivatives in
Cash flow
Hedging
Relationships
Foreign
Exchange
Contracts
Amount of
Gain or
(Loss)
Recognized
in AOCI on
Derivatives
(Effective
Portion)
$42,786
Location of
Gain or (Loss)
Reclassified
from
AOCI into
Income
(Effective
Portion)
Amount of Gain
or (Loss)
Reclassified
from
AOCI into Income
(Effective Portion)
Other Income
(Expense),net
$9,511
$42,786
Location of Gain or
(Loss) Recognized in
Income on
Derivatives
(Ineffective Portion)
and Amount
Excluded from
Effectiveness
Testing)
Other Income
(Expense),net
$9,511
Location of Gain or (Loss)
recognized in
Income on Derivatives
Other Income (Expense),net
Amount of Gain or
(Loss)
Recognized in
Income on
Derivatives
(Ineffective Portion and
Amount Excluded
from
Effectiveness
Testing)
Nil
Nil
The following table summarizes the activity in the accumulated Other comprehensive (loss) gain within
equity related to all derivatives classified as cash flow hedges during the nine months period ended
December 31, 2015 and December 31, 2016:
December 31,
2015
2016
Balance as at the beginning of the period
($4,923)
$1,506
Unrealized gain (loss) on cash flow hedging derivatives during the period
($4,399)
42,786
Net loss (gain) reclassified into net income on occurrence of hedged
transactions
$3,129
(9,511)
Effect of exchange rate fluctuations
$475
(99)
Balance as at the end of the period
($5,718)
$34,682
Deferred tax
1,101
(6,852)
($4,617)
$27,830
As of December 31, 2016, the estimated net amount of existing gain that is expected to be reclassified
into the income statement from AOCI within the next twelve months is $30,369.
29
11. INVENTORY
As of March 31, 2016 and December 31, 2016, Inventory comprises the following:
Finished goods
Stores and spares
Prepaid expenses
Prepaid rentals for leasehold land
Interest receivable
Prepaid/advance taxes
Deposits
Deferred cost
Employee receivables
Derivative financial instruments
Advance to suppliers
Entrusted loan receivable
Finance lease receivable
Restricted cash
Others
Deposits
Deferred cost
Prepaid expenses
Prepaid rentals for leasehold land
Derivative financial instruments
Advance to suppliers
Finance lease receivable
Restricted cash
Others
30
From banks
Other
Less: Current portion
The Groups borrowings are subject to certain financial and non financial covenants. At December 31,
2016, the Group was in compliance with all such covenants.
Long term debts from banks include:
In March 2016, an unsecured Long term loan of $101,910 is borrowed by a subsidiary in Sweden at
STIBOR + 1.15% (at an effective interest rate of 0.54%) repayable over 16 quarterly installments
beginning June 2017. During the nine months period ended December 31, 2016 the Group has made a
prepayment of $19,738. Principal amount outstanding as of December 31, 2016 is $72,281.
Term loans of $6,357 and $6,558 as of March 31, 2016 and December 31, 2016, respectively, at interest
rates ranging from 9.45% to 10.50% per annum and secured by hypothecation of vehicles with a book
value of $14,507 and $14,715 as of March 31, 2016 and December 31, 2016, respectively.
Term loans of $2,897 and Nil as of March 31, 2016 and December 31, 2016, respectively, at effective
interest rate of 2.95% per annum, respectively.
31
* The Group has negotiated extended interest bearing credit terms with certain vendors for extended
payment terms up to 360 days. Interest rate on this arrangement ranges from 1.5% to 9.75% per annum.
16. EQUITY SHARES
The Company has only one class of capital stock referred to herein as equity shares. Par value of each
equity share outstanding as of December 31, 2016 is $0.03 ( ` 2.00 ).
Voting
Each holder of equity shares is entitled to one vote per share.
Dividends
Dividends declared and paid by the Company are in Indian Rupees. Dividends payable to equity
stockholders are based on the net income available for distribution as reported in the standalone financial
statements of the Company prepared in accordance with Ind- AS. Indian law on foreign exchange governs
the remittance of dividends outside India. Such dividend payments are subject to applicable taxes.
Liquidation
In the event of liquidation of the Company, the holders of equity shares shall be entitled to receive all of
the remaining assets of the Company, after distribution of preferential amounts, if any. Such amounts will
be in proportion to the number of equity shares held by the stockholders.
Stock options
There are no voting, dividend or liquidation rights to the option holders under the Companys stock option
plans.
32
2015
2016
2015
2016
Interest income
Loss on divestment of stake in affiliates
Gain on sale of investment securities and other
investments, net
$33,049
-
$29,076
-
$97,299
(2,040)
$90,252
-
654
986
3,669
4,055
1,686
763
21,074
6,379
933
(63)
10,974
1,388
21,741
20,890
(83)
(21)
205
88
2,105
983
$57,431
$37,399
$135,136
$116,076
Miscellaneous income
Other income, net
18. INCOME TAXES
The effective tax rate for the Group for the three and nine months period ended December 31, 2015 and
2016 is 20.93% and 21.48% and 20.34% and 21.18%, respectively. The changes in effective tax rate in
three months and nine months period ended December 31, 2015 and 2016 is mainly due to change in
profit mix between taxable and nontaxable business units in India.
A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:
Balance at the beginning of the period
Increase due to tax position taken during the current period
Decrease due to tax position taken during the prior period
Effect of exchange rate fluctuations
Balance at the end of the period
2015
2016
2015
2016
1,407,635,747
1,411,067,882
1,406,512,999
1,410,843,219
3,913,362
1,212,902
3,900,205
1,214,844
1,411,549,109
1,412,280,784
1,410,413,204
1,412,058,063
For the three and nine months ended Decmber 31 2015 and 2016, there were no options to purchase
equity shares of common stock with exercise price greater than the average market value of our stock that
would have been anti-dilutive.
33
Service cost
Interest cost
Amortization of unrecognized actuarial loss
Net gratuity cost
2016
$1,954
926
(17)
$2,863
2016
$6,171
2,801
(52)
$8,920
Provident fund
In accordance with Indian law, all employees receive benefits from a provident fund, which is a defined
benefits plan. Under this plan, the employer and employee make monthly contributions to a fund managed
by certain employees of the Group (Trust). The employees contribute 12% of their basic compensation,
which is matched by an equal contribution by the employer. The Group contributes two-third of the
contribution to the Government administered pension fund subject to a maximum of $0.02 (`1250/-) and
the remaining portion is contributed to the Trust. The rate at which the annual interest is payable to the
beneficiaries by the Trust is administered by the government. The Group has an obligation to fund any
shortfall on the yield of the Trusts investments over the administered interest rates. The funds contributed
to the Trust are invested in specific securities as mandated by law and generally consist of federal and
state government bonds, debt instruments of government-owned corporations and other eligible market
securities.
Total contributions made by the Group in respect of this plan for the three and nine months period ended
December 31, 2015 and 2016 are $3,190 and $3,991 and $10,031 and $11,467, respectively
Total contributions made by the Group towards Employees Pension Scheme for the three and nine
months period ended December 31, 2015 and 2016 are $3,223 and $3,350 and $9,830 and $9,692,
respectively
Defined Contribution Plan
Superannuation
In respect of superannuation, a defined contribution plan for eligible employees who contribute to a
recognized Trust under schedule IV, Part B of Income Tax 1961, Trust funds are administered on its
behalf by an appointed fund manager and such contributions for each year of service rendered by the
employees are charged to the statement of profit and loss. The Group has no further obligations to the
superannuation plan beyond its contributions. Total contributions made in respect of this plan for the three
and nine months period ended December 31, 2015 and 2016 are $73 and $58 and $204 and $178,
respectively
34
35
Business
process
outsourcing
services
$923,855
$555,415
$86,857
$1,566,127
13,861
7,273
1,998
23,132
$182,830
$115,466
$15,586
$313,882
Software
services
Revenue
Depreciation and amortization
Segment earnings
Total
Information on reportable segments for the three months period ended December 31, 2016 is as follows:
Infrastructure
management
services
Business
process
outsourcing
services
$979,845
$694,902
$70,588
$1,745,335
17,014
13,565
1,919
32,498
$207,507
$137,596
$10,742
$355,845
Software
services
Revenue
Depreciation and amortization
Segment earnings
Total
Information on reportable segments for the nine months period ended December 31, 2015 is as follows:
Infrastructure
management
services
Business
process
outsourcing
services
$2,760,685
$1,639,914
$247,561
$4,648,160
37,708
20,093
5,588
63,389
$543,683
$347,669
$30,283
$921,635
Software
services
Revenue
Depreciation and amortization
Segment earnings
Total
Information on reportable segments for the nine months period ended December 31, 2016 is as follows:
Infrastructure
management
services
Business
process
outsourcing
services
$2,885,353
$2,062,741
$210,289
$5,158,383
45,382
38,660
5,399
89,441
$609,286
$415,354
$25,759
$1,050,399
Software
Services
Revenue
Depreciation and amortization
Segment earnings
36
Total
The CODM assesses the performance of the operating segments based on a measure of segment
earnings. This measurement basis adjusts income before income taxes to exclude the effects of stock
based compensation, cash flow hedge accounting gains (losses), foreign exchange gains (losses),
finance costs and other income.
A reconciliation of segment earnings to income before income taxes is provided as follows:
Segment earnings
Foreign exchange gain
Finance cost
Other income, net
Income before income taxes
37
Level 1 inputs
Level 2 inputs
Level 3 inputs
$17,685
$1,301,163
$301,096
$80,959
$10,011
$17,685
$80,959
-
$1,301,163
$301,096
$10,011
($4,575)
($4,575)
The following table discloses the assets and liabilities measured at fair value on a recurring basis as of
December 31, 2016 and the basis for that measurement:
Fair value
Assets
Deposits with banks, having maturities
less than three months
Term deposits with banks
Deposits with corporation
Investment securities, available for sale
Derivative contracts
Liabilities
Derivative contracts
Level 1 inputs
Level 2 inputs
Level 3 inputs
$18,219
$1,333,208
$219,754
$12,517
$41,148
$18,219
$12,517
-
$1,333,208
$219,754
$41,148
($1,081)
($1,081)
Valuation Methodologies
Quoted market prices in active markets are available for investments in securities and, as such, these
investments are classified within Level 1.
Investments: The Companys investments consist primarily of investment in debt linked mutual funds. Fair
values of investment securities classified as available -for -sale are determined using quoted prices for
identical assets or liabilities in active markets and are classified as Level 1. Fair value of term deposits with
banks and corporations is determined using observable markets inputs and is classified as Level 2.
Derivative financial instruments: The Groups derivative financial instruments consist of foreign currency
forward exchange contracts. Fair values for derivative financial instruments are based on broker
quotations and are classified as Level 2. See note 12 for further details on Derivative financial
instruments.
Fair value of earn-out consideration: The fair value measurement of earn-out consideration is determined
using Level 3 inputs. The Group earn-out consideration represents a component of the total purchase
consideration for its acquisition of Powerteam LLC. The measurement is calculated using unobservable
inputs based on the Companys own assessment of achievement of certain performance goals by
Powerteam LLC. The Group estimated the total fair value of the earn out consideration to be $6,215. See
Note 5 for further details
The fair value of the Groups current assets and current liabilities including short term deposits with
Banks, and short term loans approximate their carrying values because of their short-term maturity. The
fair value of held- to- maturity investment securities is based on the quoted prices and approximates its
fair value.
Certain assets are measured at fair value on a non-recurring basis and therefore are not included in the
recurring fair value table above. The assets and liabilities consist primarily of long term debt and other non
financial assets such as goodwill and intangible assets. Goodwill and intangible assets are measured at
fair value initially and subsequently when there is an indicator of impairment, the impairment is
recognized.
38
$60
77
$306
172
$55
1,639
$214
1,992
(80)
(5)
2
$54
(142)
13
2
$351
(1,627)
(25)
12
$54
(1,901)
43
3
$351
($10,849)
6,531
$21,266
13,490
($3,999)
(4,399)
$1,220
42,786
1,068
(1,434)
(5,190)
(1,707)
3,129
176
(9,511)
(6,566)
66
($4,618)
(29)
$27,830
475
($4,618)
(99)
$27,830
$947
-
$2,018
-
($130)
1,437
$2,754
-
(321)
(715)
(7)
$940
(53)
$1,972
(46)
$940
(67)
$1,972
($636,232)
(38,125)
($728,009)
(96,940)
($510,936)
(163,421)
($673,486)
(155,372)
1,169
5,078
($674,357)
($823,780)
($674,357)
($823,780)
1 Reclassification into employee benefit expenses are recognized in cost of revenues and selling, general
and administrative expenses
39
December 31,2016
$351
27,830
1,972
(823,780)
($793,627)
The Group through a wholly owned subsidiary has entered into an agreement to acquire 100%
shareholding of Butler America Aerospace, LLC (Butler Aerospace), a provider of engineering, design
services and aftermarket engineering services to US Aerospace and Defence customers for purchase
consideration of $85,000 payable in cash. The acquisition will bolster HCLs capabilities in
engineering services and access to clients with large R&D spends. The acquisition is consummated
after the end of current reporting period i.e.December 31, 2016. Accordingly, the acquisition will be
accounted for in the subsequent quarter.
d. The Group has evaluated all the subsequent events through January 24, 2017, which is the date on
which these financial statements were issued, and no events have occurred from the balance sheet
date through that date that would have material impact on the condensed consolidated financial
statements.
40