A PROJECT REPORT ON

HCL Technology Financial Analysis

Submitted by:

Ambar 2022HRLP007

Ishant 2022HRLP014

Goutham 2022HRLP012

Balaji 2022HRLP032

NITIN 2022HRLP021

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Contents
Company Overview………………………………………………………………………………………………………………………..3

SWOT Analysis……………………………………………………………………………………………………………………………….4

Key Personal Information……………………………………………………………………………………………………………….5

Management Discussion & Analysis of Last year’s performance……………………………………………………..6

Contingent Liabilities as a % of Net worth and its nature…………………………………………………………………8

Last 3 years Financial Statements with Ratios………………………………………………………………………………….9

o Standalone Profit & Loss Account

o Balance Sheet
o Cash Flow
o Investment Valuation Ratios
o Profitability Ratios
o Liquidity & Solvency Ratios
o Management Efficiency Ratios
o Cash Flow indicator Ratios

Comparison with Peers……………………………………………………………………………………………………………………13

Major Shareholders, FII Holdings and changes in the three years……………………………………………………14

Auditors & Qualifications…………………………………………………………………………………………………………………16

Trend Analysis for the last five years of important financial figures………………………………………………….17

Change in Accounting Policy……………………………………………………………………………………………………………..19

Credit rating and Debt Security………………………………………………………………………………………………………….20

Key Performance Indicators……………………………………………………………………………………………………………….21

Conclusion & Analysis…………………………………………………………………………………………………………………………22

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Company Overview
It provides IT/ITES services in the fields of aerospace and defense; automotive; consumer electronics;
energy and utilities; financial services; government; independent software vendors; industrial
manufacturing; mining and natural resources; life sciences and healthcare; media and entertainment;
retail and consumer; oil and gas; telecom; public services; semiconductors; server and storage; travel;
transportation and logistics; and hospitality.

Major Brands
HCL Technologies Limited provides software development and related engineering services. The Group's
technologies utilize a variety of technologies, including Internet and e-commerce, networking, internet
telephony, embedded software, ASIC/VLSI design and testing, satellite and wireless communications,
and component-based object technologies, including COM, DCOM and COBRA.

Segment view
 IT and Business Services (ITBS)
 Engineering and R&D Services (ERS)
 Products and Platforms

Major Products

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SWOT Analysis

1) Strengths:

 Core strategies - The company works on disruptive technologies like Analytics, Digitization,
Cloud, Automation etc. and these technologies are the core of any enterprise that wants to
reinvent itself. HCL has developed a strategy called HCL’s Mode 1-2-3 strategy which is truly
differentiating HCL technologies in the market and is able to gain confidence from the clients.
The company focuses on re-skilling, training, and building capabilities to make the strategy
future-ready.
 Global Presence - The company operates out of 43 countries and has people from 140
nationalities working together. HCL technologies have an extensive network of global delivery
systems that work together to provide extensive customer service to customers. The strategy to
“Think Global, Act Local” has a local interface based geo-adapted ecosystem. In Europe, HCL has
developed capabilities in Frankfurt and also in Northern Ireland and Germany. HCL also has
capabilities in Malaysia, Japan, and Singapore. The company is a huge conglomerate and is able
to serve large accounts with the help of its global presence.
 Strategic Alliances and Partnerships - The company has strategic alliances that have played a
major role in driving the ecosystem-based innovation of the company. The alliances with global
technology vendors have helped HCL technology create service offerings and solutions across
industry verticals. The alliances have helped the company accelerate time to market, reduce the
risk of implementation and also the total cost of ownership. HCL technologies also help the
alliance partners to increase their revenue growth, enhance their products and service offerings
etc. The strategic alliance has helped HCL technologies create a point of differentiation as well.

2) Weakness:

 Competition - The main competitors of HCL technologies are Infosys, Wipro Technologies, and
TATA Consultancy Services etc. TCS and Infosys are two larger consultancy firms with revenue of
$5.05 billion and $2.83 billion. HCL technologies have recently lost against Wipro to become the
third largest software service company in India. HCL Technologies said that it has signed 27
transformational deals with companies from the telecom, retail and financial services. The
company must implement strategic decisions to stay ahead of the competition.
 Struggle to retain existing clients - In 2016, HCL technologies lost $1.5 billion worth of contracts
resulting in the slowdown of the revenue growth. This is due to the fact that the company was
unable to cross-sell more services to the customers and also the company’s old infrastructure
maintenance contracts that are getting overpowered by competitors like Amazon’s Aws and
Microsoft Azure. The trend is worrying the analyst so the company aims to seek to get the
higher number of contract renewals.

3) Opportunities:

 Expected growth - HCL Technologies is expected to reach 9.5-11.5% in FY19. The company
projected a profit of Rs. 2,540 for September and also a year-on-year rise of 16.10 percent. The
company remains confident of retaining this trajectory in the coming years. HCL has deep

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 capabilities and mindset of innovation and also a commitment to CSR, inclusion, and diversity
and uses this to differentiate itself from the marketplace.
 Technology adoption - The adoption rate of new technologies is 10 times higher than the
smaller business and it is expected that by 2020, 86% of the companies which has more than
5,000 employees will adopt groundbreaking technologies like IOT (Internet of Things), 64% plan
to deploy edge computing, 64% will adopt AI (Artificial Intelligence (and 56% will adopt block-
chain enabled technology. Today, the industry wants to move towards digitization and HCL
technologies can leverage this opportunity for its success and survival.
 Engineering & Research - HCL technologies have development centers in over 30 countries and
are embracing research-driven digitization. The company has emerged as a global innovation
and R&D organization. HCL technology is strategic partners with 7 out of the top 10 OEMs of
medical devices. The R&D centers have helped HCL technology develop end-to-end customer
engagement strategies, improve experiences etc. With more investment in R&D, the company
can become a next-generation enterprise.

4) Threats:

 Risky Bets - The company’s strategy is pinned on investments worth $1.1 billion in licensing the
IPs (intellectual properties) from companies and plans to build products for the clients with it
the problem is that some of the IPs are very old and losing the share to the offerings provided by
the rivals. For instance, HCL acquired IBM’s Lotus Notes and the product is clearly losing
relevance in today’s world. Investment in legacy technology is not good for the future, HCL
technologies need to invest in technology that can secure its future.
 Forex risks - HCL Technology may be reporting top and bottom-line growth but one factor that
severely affects its foreign exchange losses. The company has been constantly posting foreign
exchange losses. HCL Technologies has taken huge hedges a few years back which had adversely
affected their foreign exchange position and with rupee depreciating the losses are still pretty
high. The company needs to develop certain policies that help to average out the profit and
losses from the foreign exchanges.

Key Personal Information

Board of Directors

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Management Discussion & Analysis of Last Year Performance
A. Industry Overview

As digital technologies transform business models around the globe, enterprises are increasing their
technology spending. Investments in digital, analytics, cloud, internet of things (IoT), cybersecurity and
other emerging technologies have been growing exponentially in nearly every large enterprise.

HCL has been at the forefront of every one of these trends. Given our demonstrated ability to execute
on our strategy, the next decade holds tremendous promise. Indeed, we fully expect to continue the
upward trajectory that we have driven over our last four decades

B. HCLS MODE 1-2-3 In a world of constant technology

HCLs Mode 1: offers core services in the areas of Application Services, Infrastructure Services,
Engineering and Research & Development, and Digital Process Operations

HCLs Mode 2 offerings help enterprises take the next digital leap through insight-based, experience-
centric and outcome- based integrated services that leverage new technologies

Mode 3 offerings represent HCLs vision of creating innovative IP by leveraging an ecosystem model
through strategic partnerships

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C. HCL GO TO MARKET

As clients are adopting new technologies at the core of their business model, HCLs service offerings,
products and platforms are organized to solve the key business and technology challenges of specific
industries that show a high propensity for growth and impact on the global economy

Key Units
J Financial Services The Financial Services (FS) industry unit is at an exciting inflection point with
technology helping redefine priorities and improve outcomes.
Life Sciences & HCLs Life Sciences and Healthcare industry unit is poised to play a primary role in
Healthcare Industries digital transformations across leading health and life sciences companies

J Manufacturing HCLs Manufacturing industry unit creates smart and scalable next-generation supply
Industries chain solutions to help manufacturing companies reshape their business strategies
and convert possibilities to reality
J Public Services HCLs Public Services industry unit delivers critical services and key outcomes to the
Industries travel, transportation, logistics and hospitality industries (TTLH); oil and gas
industries (O&G); and aerospace and defense industries (A&D)
Retail and Consumer Our unique capability set has delivered key outcomes for RCPG enterprises
Packaged Goods worldwide. For instance, HCL has helped a leading food retail chain in creating an
Industries (RCPG) entire digital platform to enable no-contact home deliveries.
J Technology Industry The technology industry today is going through a period where a confluence of
policy-related, technology, and industry changes have created a foundation for
upheaval and disruption
Telecom, Media and The advent of key technologies like 5G, artificial intelligence, internet of things (lot),
Entertainment Industries analytics, blockchain and mixed reality (AR/VR) is driving next-generation
experiences and new revenue opportunities. HCL is well positioned to leverage
these

D. Business segment

Key Segments
IT and Business Services ITBS segment is strategically positioned to capture these enormous opportunities.
(ITBS) We have a comprehensive and mature suite of end-to-end offerings to address the
traditional and emerging transformational needs of large enterprises
Engineering and R&D Engineering and R&D Services primarily include services across the product lifecycle
Services (ERS) from conceptualization, design, engineering and sustenance to new product
introduction across varied products and platforms
Products and Platforms HCL Products & Platforms segment comprises the HCL Software Division, Action
software, and an IP partnership with DXC, which together account for a significant
part of our Mode 3 revenue

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E. Insights

FY20 saw a significant change in how clients look at their enterprise applications. The focus is shifting
toward newer ways of working - agility in operations and a holistic approach to automation, cost
optimization and digital transformation. This shift was fueled by innovation using new technologies like
digitization, application modernization, analytics, leveraging ecosystems and Software as a Service
offerings and integration

Changing business environments and stressful market conditions are forcing even the most established
enterprises into transforming quickly. Evolving customer expectations are disrupting the traditional
cost/labor arbitrage of business process outsourcing (BPO) services. Legacy processes are being
streamlined through innovative process-centric methodologies to make them more standardized, agile
and lean. Enterprises are doing this with one eye on cost reduction and compliance/ risk management
and the other on providing sustained profitable growth and superior customer experiences.

These partnerships enable HCL clients to move faster with innovations in their highly competitive
businesses which are being re-defined by a new era in IT solutions.

Contingent Liabilities as Percentage of Net Worth and Its Nature

2020 2019 2018 2017

0.85% 0.86% 0.73% 1.55%

Over the years the Contingent liabilities as fluctuated, when comparing last 2 years i.e., 2019 and 2020
we see a decrease in the percentage which is favorable to the company.

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Last Three Financial Statements with Ratios

HCL Technologies
Standalone Profit & Loss account
Mar '21 Mar '20 Mar '19

Income

Sales Turnover 35,673.00 32,606.00 26,012.00

Net Sales 35,673.00 32,606.00 26,012.00

Other Income 965 524 815

Stock Adjus tm ents 3 -4 -22

Total Income 36,641.00 33,126.00 26,805.00

Expenditure

Raw Materials 142 144 142

Power & Fuel Cost 0 0 0

Employee Cost 11,749.00 9,916.00 8,079.00

Other Manufacturing
0 7,207.00 4,901.00
Expens es
Miscellaneous Expenses 9,350.00 2,555.00 2,450.00

Total Expenses 21,241.00 19,822.00 15,572.00

Operating Profit 14,435.00 12,780.00 10,418.00

PBDIT 15,400.00 13,304.00 11,233.00

Interes t 177 238 16

PBDT 15,223.00 13,066.00 11,217.00

Depreciation 2,813.00 1,952.00 1,276.00

Profit Before Tax 12,410.00 11,114.00 9,941.00

PBT (Post Extra-ord Item s) 12,410.00 11,114.00 9,941.00

Tax 3,667.00 2,208.00 1,746.00

Reported Net Profit 8,743.00 8,969.00 8,185.00

Total Value Addition 21,099.00 19,678.00 15,430.00

Equity Dividend 0 1,357.00 1,099.00

Corporate Dividend Tax 0 268 222

Per share data (annualised)

Shares in issue (lakhs) 27,150.00 27,136.65 13,562.79

Earning Per Share (Rs) 32.2 33.05 60.35

Equity Dividend (%) 1,600.00 500 400

Book Value (Rs) 160.42 137.44 224.43

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 HCL Technologies
Standalone Balance Sheet (in Rs. Cr.)

Mar '21 Mar '20 Mar '19

Sources Of Funds

Total Share Capital 543 543 271

Equity Share Capital 543 543 271

Reserves 43,010.00 36,753.00 30,168.00

Networth 43,553.00 37,296.00 30,439.00

Secured Loans 207 160 32

Total Debt 207 160 32

Total Liabilities 43,760.00 37,456.00 30,471.00

Application Of Funds

Gros s Block 25,656.00 26,158.00 14,556.00

Less : Accum . Depreciation 0 3,537.00 3,321.00

Net Block 25,656.00 22,621.00 11,235.00

Capital Work in Progress 0 311 212

Investments 6,605.00 10,875.00 5,810.00

Inventories 18 14 18

Sundry Debtors 5,217.00 7,504.00 6,245.00

Cash and Bank Balance 5,056.00 1,291.00 6,273.00

Total Current Ass ets 10,291.00 8,809.00 12,536.00

Loans and Advances 12,809.00 10,899.00 7,663.00

Total CA, Loans & Advances 23,100.00 19,708.00 20,199.00

Current Liabilities 10,508.00 15,115.00 6,291.00

Provisions 1,093.00 944 694

Total CL & Provisions 11,601.00 16,059.00 6,985.00

Net Current Assets 11,499.00 3,649.00 13,214.00

Total Assets 43,760.00 37,456.00 30,471.00

Contingent Liabilities 0 318 263

Book Value (Rs) 160.42 137.44 224.43

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 HCL Technologies
Cash Flow (in Rs. Cr.)
Mar '20 Mar '19 Mar '18

Net Profit Before Tax 11177 9931 9125

Net Cash From Operating
9855 8676 6339
Activities
Net Cash (used in)/from
-11091 995 -973
Investing Activities
Net Cash (used in)/from
-1988 -5335 -5547
Financing Activities
Net (decrease)/increase In
-3232 4313 -142
Cash and Cash Equivalents
Opening Cash & Cash
4523 210 352
Equivalents
Closing Cash & Cash
1291 4523 210
Equivalents

Ratios

Investment Valuation Ratios

Dividend Per Share Operating Profit Per Share (Rs)

32.00 76.81

53.17
47.09

10.00
8.00

Mar '21 Mar '20 Mar '19 Mar '21 Mar '20 Mar '19

Net Operating Profit Per Share (Rs) Bonus in Equity Capital

88.90
191.79

131.39 120.15
77.98

Mar '21 Mar '20 Mar '19 Mar '20 Mar '19

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 Profitability Ratios

Operating Profit Margin(%) Net Profit Margin(%)

40.46 40.46
40.05 40.05

39.19 39.19

Mar '21 Mar '20 Mar '19 Mar '21 Mar '20 Mar '19

Return On Capital Employed(%) Return On Net Worth(%)

32.64 26.88
24.04
30.47 20.07

28.76

Mar '21 Mar '20 Mar '19 Mar '21 Mar '20 Mar '19

Liquidity And Solvency Ratios

Current Ratio Quick Ratio

2.89 2.59

1.93
1.99

1.23 1.10

Mar '21 Mar '20 Mar '19 Mar '21 Mar '20 Mar '19

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 Management Efficiency Ratios

Inventory Turnover Ratio Total Assets Turnover Ratio

2329.00 1.68
1981.83
1.14
1445.11
0.82

Mar '21 Mar '20 Mar '19 Mar '21 Mar '20 Mar '19

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit Earnings Per Share

15.12 60.35

32.20 33.05
13.42

Mar '20 Mar '19 Mar '21 Mar '20 Mar '19

Book Value
224.43

160.42
137.44

Mar '21 Mar '20 Mar '19

Comparison with its Peers

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 MCAP (IN CR.) P/E
35.86 36.00
1188449 33.94
29.79

675404

328288 269738

TCS Infosys Wipro HCL Tech. TCS Infosys Wipro HCL Tech.

ROE% ROCE%
42.02 56.24

27.12 26.48 36.79

33.59
22.06
25.52

TCS Infosys Wipro HCL Tech. TCS Infosys Wipro HCL Tech.

Major Shareholders, FII Holdings and changes in the three years

HCL Technologies has 214 institutional owners and shareholders that have filed 13D/G or 13F forms with
the Securities Exchange Commission (SEC).

Largest shareholders include:

 ARTKX - Artisan International Value Fund Investor Shares,

 HEMZX - Virtus Vontobel Emerging Markets Opportunities Fund Class A,
 VEIEX - Vanguard Emerging Markets Stock Index Fund Investor Shares,
 VGTSX - Vanguard Total International Stock Index Fund Investor Shares,
 IEMG - iShares Core MSCI Emerging Markets ETF,
 INDA - iShares MSCI India ETF,
 POEYX - Origin Emerging Markets Fund Class A,
 DFCEX - Emerging Markets Core Equity Portfolio - Institutional Class,
 EEM - iShares MSCI Emerging Markets ETF, and
 CVMAX - Calvert Emerging Markets Equity Fund Class A.

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A. Major Shareholders

As evident from the graphical analysis, majority of the contribution is holded by the promoters with
60.33% followed by FII at 23.22% trailed by DII and public holdings at 11.35% and 5.1% respectively

Now let us take a look at some of the Top Holders in terms of promoter’s holdings: -

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B. In terms of FII holdings:

C. M&A News
 HCL Technologies has acquired 19 companies, including 10 in last 3 years. A total of 6
acquisitions came from private equity firms. It also has divested 2 assets.
 HCL’s largest acquisition to date was in 2018, when it acquired International Business
Machines – S/W products for $1.8 billion. HCL has acquired in 9 different US states and 4
nations. The company’s most targeted sectors include IT (36%) and business services (24%).

About the Auditor and Qualifications

BSR& Co. LLP: Chartered Accountants

Bsr & Co. Llp is a Limited Liability Partnership firm incorporated on 14 October 2013. It is registered at
Registrar of Companies, Mumbai. Its total obligation of contribution is Rs. 19,27,86,608. Bsr & Co. Llp's
last financial year end date for which Statement of Accounts and Solvency were filed is N/A and as per
records from Ministry of Corporate Affairs (MCA), date of last financial year end date for which Annual
Return were filed is N/A.

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Trend Analysis for the last five years of important financial figures

Trend Analysis of Balance Sheet

  Mar-21 Mar-20 Mar-19 Mar-18 Mar-17
Equity Share Capital 190.526 190.53 95.09 97.54 100.00
Total Share Capital 3
190.526 190.53 95.09 97.54 100.00
Reserves and Surplus 3
181.759 155.29 125.81 110.54 100.00
Total Reserves and Surplus 7
181.759 155.29 125.81 110.54 100.00
Total Shareholders’ Funds 7
181.835 155.60 125.55 110.43 100.00
Minority Interest 6
97.6878 89.02 59.54 - 100.00
NON-CURRENT LIABILITIES 6
Long Term Borrowings 999.477 743.60 777.28 88.25 100.00
Other Long Term Liabilities 8
1513.71 1669.0 346.46 202.65 100.00
Long Term Provisions 7
191.523 3
150.57 117.96 100.57 100.00
Total Non-Current Liabilities 668.888 594.25 368.35 117.24 100.00
CURRENT LIABILITIES 9
Short Term Borrowings 0 3354.5 1316.3 76.36 100.00
Trade Payables 215.480 5
145.57 6
162.92 114.61 100.00
Other Current Liabilities 6
146.851 200.01 96.78 86.12 100.00
Short Term Provisions 9
203.594 149.26 123.89 112.05 100.00
Total Current Liabilities 1
153.356 209.35 108.50 89.17 100.00
Total Capital and Liabilities 9
188.352 181.17 128.00 104.94 100.00
ASSETS 8
NON-CURRENT ASSETS
Tangible Assets 506.878 203.65 132.39 114.06 100.00
Intangible Assets 4
0 278.77 180.31 156.22 100.00
Capital Work-In-Progress 0 89.29 52.46 71.43 100.00
Fixed Assets 220.775 236.80 153.20 133.72 100.00
Non-Current Investments 7
55.625 48.13 53.13 189.38 100.00
Deferred Tax Assets [Net] 71.4891 140.25 148.61 111.20 100.00
Long Term Loans and Advances
Other Non-Current Assets 244.789 232.93 157.15 111.81 100.00
Total Non-Current Assets 4
223.550 230.51 149.51 121.59 100.00
CURRENT ASSETS 4
Current Investments 591.012 609.86 193.72 205.67 100.00
Inventories 2
34.0579 32.97 32.97 62.32 100.00
Trade Receivables 7
164.594 170.23 141.02 116.12 100.00
Cash And Cash Equivalents 6
98.2751 55.02 87.04 44.43 100.00
Short Term Loans and Advances 192.027 135.74 52.04 135.26 100.00
OtherCurrentAssets 169.893 170.26 126.01 95.88 100.00
Total Current Assets 7
162.683 145.18 112.32 92.80 100.00
Total Assets 7
188.352 181.17 128.00 104.94 100.00
CONTINGENT LIABILITIES, 8
COMMITMENTS
Contingent Liabilities 0 128.34 87.02 66.73 100.00

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 Trend Analysis of Income Statement
Mar-21 Mar-20 Mar-19 Mar-18 Mar-17
INCOME
Revenue From Operations [Gross] 158.4658 148.5789 127.0329 106.3089 100
Revenue From Operations [Net] 158.4658 148.5789 127.0329 106.3089 100
Total Operating Revenues 158.4658 148.5789 127.0329 106.3089 100
Other Income 86.39329 54.89282 87.88444 113.4203 100
Total Revenue 156.8759 146.5122 126.1693 106.4657 100
EXPENSES
Purchase Of Stock-In Trade 205.569 185.9564 195.5206 151.4528 100
Operating And Direct Expenses 0 123.471 112.624 99.46919 100
Changes In Inventories Of FG,WIP And Stock-In Trade 27.27273 0 -736.364 -945.455 100
Employee Benefit Expenses 169.916 152.7508 128.0635 108.1475 100
Finance Costs 574.1573 567.4157 195.5056 77.52809 100
Depreciation And Amortisation Expenses 556.8841 413.0435 250.3623 167.029 100
Other Expenses 305.6233 128.0959 119.1234 95.49307 100
Total Expenses 158.6651 150.3504 127.9441 107.0182 100
Profit/Loss Before Exceptional, ExtraOrdinary Items And Tax 150.408 132.6376 119.7533 104.4687 100
Profit/Loss Before Tax 150.408 132.6376 119.7533 104.4687 100
Tax Expenses-Continued Operations
Current Tax 248.4881 149.6552 164.1379 126.5782 100
Deferred Tax 0 200 -1160.78 -164.706 100
Total Tax Expenses 241.9421 150.9814 129.2355 118.905 100
Profit/Loss After Tax And Before ExtraOrdinary Items 129.8117 128.51 117.6197 101.2204 100
Profit/Loss From Continuing Operations 129.8117 128.51 117.6197 101.2204 100
Profit/Loss For The Period 129.8117 128.51 117.6197 101.2204 100
Minority Interest 0 0 0 650 100
Share Of Profit/Loss Of Associates 129.5027 128.4801 117.5924 101.3363 100
Consolidated Profit/Loss After MI And Associates
OTHER ADDITIONAL INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) 68.33333 68.33333 123.3333 103.3333 100
Diluted EPS (Rs.) 68.33333 68.33333 123.3333 103.3333 100
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 0 40.07679 32.45718 49.97047 100
Tax On Dividend 0 39.23865 32.50366 49.78038 100

Common size statement and comments

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Change in Accounting Policy
The financial statements of the Company have been prepared in accordance with recognition and
measurement principles laid down in Indian Accounting Standards (Ind AS) prescribed under section 133
of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015 (as
amended from time to time) and presentation requirements of Schedule III (Division II) to the
Companies Act, 2013, as applicable to the financial statements.

These financial statements have been prepared under the historical cost convention on an accrual and
going concern basis except for the following assets and liabilities which have been measured at fair
value:

 Derivative financial instruments

 Certain financial assets and liabilities (refer accounting policy regarding financial instruments)

The accounting policies adopted in the preparation of these financial statements are consistent with
those of the previous year except where a newly issued accounting standard is initially adopted or a
revision to an existing accounting standard requires a change in the accounting policy.

Credit rating and Debt Security

CRISIL has reaffirmed its corporate credit rating on HCL Technologies Limited (HCL Technologies) at 'CCR
AAA/Stable'

1. Key Rating Drivers & Detailed Description

Strengths:

 Strong business risk profile, marked by presence across diverse verticals and service lines, and
healthy operating profitability - HCL Technologies is the third-largest, listed Indian information
technology (IT) services provider in terms of revenue
 Healthy financial risk profile ' Healthy capital structure with comfortable gearing at 0.10 time,
large networth of Rs 49,565 crore and cash and cash equivalents of Rs 11,965 crore as on March
31, 2020. Debt-protection metrics are robust, with interest coverage ratio of 37 times and net
cash accrual to total debt ratio of 2.5 times in fiscal 2020

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Weakness:

 Exposure to intense competition in the IT industry ' Company has to compete with Indian IT
majors such as TCS, Infosys (rated CRISIL AAA/Stable/ A1+), Cognizant, and Wipro; and also,
global players such as IBM, Accenture, and DXC Technology.

2. Liquidity Strong

 Liquidity remains strong driven by cash surplus of Rs 11,965 crore as of March 2020. Repayment
obligations remains moderate at about Rs 378 crore and Rs 272 crore in fiscal 2021 and 2022
respectively

3. Outlook: Stable

 CRISIL believes HCL Technologies will sustain its business risk profile over the medium term,
driven by healthy revenue growth across segments, expanding customer base and timely
execution of large deals. Furthermore, financial risk profile will continue to be backed by strong
cash generating abilities, robust debt protection metrics, and cash surplus.

4. Rating Sensitive factors

Downward factors:

 Decline in OPBDIT (Operating profit before depreciation, interest and tax) margins below 19%
levels (compared to 24.54% reported in fiscal 2020).
 Sustained slowdown in revenue growth due to regulatory changes in the regions in which it
operates, resulting in weakening of business risk profile, overriding the advantage of healthy
diversity in clientele and geographies.
 Sustained reduction in cash surplus below Rs 5000 crore (compared to Rs 11,985 crore as of
March 2020) due to large acquisitions or capital return to investors which can impact the
healthy financial risk profile.

Key Performance Indicators

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 The Graph past 5 years
Net Sales & CAGR%. The
values are in Crore
It shows the compounded
growth in Net profit for
1,3, and 5 years.
It measures the ability of a
It measures how efficiently
firm to generate profits
a company is using its
from its shareholders
capital employed

It is used to calculate It determines how easily a The ratio higher than 1 is good as it
market value with its cash company can pay interest tells us that company is turning its
flow on its outstanding debt profit into cash

Conclusion & Analysis

HCL Tech. Stock Price Analysis and Quick Research Report. Is HCL Tech. an attractive stock to invest in?

Stock investing requires careful analysis of financial data to find out the company's true net worth. This
is generally done by examining the company's profit and loss account, balance sheet and cash flow
statement. This can be time-consuming and cumbersome. An easier way to find out about a company's

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performance is to look at its financial ratios, which can help to make sense of the overwhelming amount
of information that can be found in a company's financial statements.

Here are the few indispensable tools that should be a part of every investor’s research process.

 PE ratio: - Price to Earnings' ratio, which indicates for every rupee of earnings how much an
investor is willing to pay for a share. A general rule of thumb is that shares trading at a low P/E
are undervalued (it depends on other factors too). HCL Tech. has a PE ratio of 29.79 which is
high and comparatively overvalued.
 Return on Assets (ROA): - Return on Assets measures how effectively a company can earn a
return on its investment in assets. In other words, ROA shows how efficiently a company can
convert the money used to purchase assets into net income or profits. HCL Tech. has ROA of
20.65 % which is a good sign for future performance. (Higher values are always desirable)
 Current ratio: - The current ratio measures a company's ability to pay its short-term liabilities
with its short-term assets. A higher current ratio is desirable so that the company could be
stable to unexpected bumps in business and economy. HCL Tech. has a Current ratio of 1.69 .
 Return on equity: - ROE measures the ability of a firm to generate profits from its shareholders
investments in the company. In other words, the return on equity ratio shows how much profit
each rupee of common stockholders’ equity generates. HCL Tech. has a ROE of 26.48 %. (Higher
is better)
 Debt to equity ratio: - It is a good metric to check out the capital structure along with its
performance. HCL Tech. has a D/E ratio of 0.00 which means that the company has low
proportion of debt in its capital
 Sales growth: - HCL Tech. has reported revenue growth of 25.35 % which is fair in relation to its
growth and performance.
 Operating Margin: - This will tell you about the operational efficiency of the company. The
operating margin of HCL Tech. for the current financial year is 39.19 %.
 Dividend Yield: - It tells us how much dividend we will receive in relation to the price of the
stock. The current year dividend for HCL Tech. is Rs 8 and the yield is 1.21 %.

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