HCL Technology Ltd.

General Overview
HCL Technologies is one of the successful tech companies from India that has flourished over
the past 3 decades. It was originally incorporated in 1991. Its first IPO was released in 1999 at
Rs. 4 each. Now it's worth around Rs. 1000. Over the past years, HCL has collaborated with a
number of companies that include Gtech, Kla Tencor, Globeset Inc, Conexant Inc, Hewlett
Packard, etc. Its business was not only limited to India, but it has business operations all over
the world.
HCL was one of the major reasons for the technological revolution and development in India as
it provided new and updated technological services to its customers. It has also helped its
partner by setting up its business and this company has brought a technological revolution in
India.
The company has strategic partnerships with some global giants like Google, IBM, Cisco, HP,
Microsoft and Dell. HCL recently closed the $1.8 billion acquisition of IBM products for security,
marketing, commerce and digital solution. They also launched HCL Software, a new business
unit that provides modernized software to businesses to help them in their digital transformation.

Shareholding pattern of company

The percentage of the shareholding pattern is as follows:
● Promoters hold 60.33%
● Mutual Funds hold 6.79%
● Foreign Institutional Investor holds 24.14%
● Public holding is 4.97%
Observing the promoter’s shareholding pattern Vama Sundari Investments holds around
43.39% of shares, HCL Holdings Private Ltd. holds 16.46% shares. On observing the
individuals of the family, the whole family holds only 0.02% of shares. Kiran Nadar wife of Shiv
Nadar the founder of HCL Technologies holds the majority of these family owned shares, i.e
around 494,602; Shiv Nadar holds only 736 shares and their daughter Rohni Nadar holds 696
shares.
Among the Mutual Funds shareholders majority of the shares are held by SBI Mutual Fund
constituting 2.18% and ICICI Mutual Funds of around 1.18%.
Among the Foreign Institutional Investor Artisan International Value Fund holds 1.56% of
shares.
Life Insurance Corporation of India holds 1.45% of shares.
Management of company
Mr Shiv Nadar is the Founder and Chairman of the company. He is credited with being one of
the pioneers of the computing and IT industry in India.
C VijayKumar is the President and CEO of the company. He joined HCL 25 years ago as a
member of the core team and has initiatives to leverage the transformative nexus of forces such
as Digitalization, Internet of Things, Cloud, Cybersecurity, and Artificial Intelligence.
Prateek Agarwal is the Chief Financial Officer and has experience of over 27 years driving
strategic initiatives, financial planning and analysis, business finance and contracting,
controllership, investor relations, treasury, insurance, global taxation, and legal and compliance.
He also has experience in operations, having managed factories and distribution chains, apart
from setting up and running shared services.
GH Rao is a Senior Corporate Officer at HCL Technologies Ltd and the President of HCL’s
Engineering and R&D Services (ERS) division and is one of the early leaders of the Indian IT
industry with a career spanning more than 39 years. He started his career as an R&D Engineer
at HCL’s computer division.
HCL technology is a family operated business and its Board of Directors includes Shiv
Nadar(founder of HCL), Roshni Nadar Malhorta(daughter of Shiv Nadar), Shikhar
Malhorta(husband of Roshni Malhotra) etc.
The company also has some prominent names in the Indian IT industry as their CFO, CTO and
Board members. Overall the management has shown interest in shareholders wealth and does
not have a history of any principal-agent conflict.

SWOT analysis

Strength
● HCL has low debt and sends signals to the outside world that they are able to manage
their funding requirements predominantly through internally generated cash and thus
they are a cash rich firm.
● The company has strong cash generating ability from its core business. Its cash flow
from the operation has improved significantly for the last 2 years.
● Company with zero promoter pledge.
● For the past three quarters the revenue of the company has increased. The march
revenue was up by 1.8% sequentially and 5.7% Y-O-Y basis.
● Annual net profit of the company has increased for the last 2 years.
● The company reported the highest ever new deal booking this quarter of $1.3 billion, a
49% increase annually.
Weakness
● The company has growing costs for long term projects on a Y-O-Y basis.
● Return on Asset(ROA) has decreased in the last 2 years, indicating inefficient use of
assets to generate profit.
● Impacted by higher taxes and one-time bonus payment, the company reported a 6.1
per cent fall in its fourth-quarter net profit at Rs 2,962 crore. The profit was down
25.6 percent on a sequential basis. The provision for tax nearly doubled sequentially
in Q4 to Rs 1,191 crore.

Opportunities
● The Relative Strength Index (RSI) is a measurement used by traders to assess the
price momentum of a stock or other security has indicated price strength.
● Strong presence in defense space and potential to benefit from offset provision in Indian
defense imports.

Threats
● The company has an increasing trend in non-core income. This may indicate that the
company is not able to generate enough income from its core operations.

Competitive Analysis
The major competitors of HCL are TCS, Infosys and Wipro.

Name Market Cap Sales Turnover Net Profit Total Asset

(Rs cr)

TCS 1,210,736.50 135,963.00 30,960.00 74,794.00

Infosys 638,977.70 85,912.00 18,048.00 71,531.00

Wipro 296,699.97 50,299.40 10,060.90 51,046.90

HCL 265,084.37 35,673.00 8,743.00 43,760.00

From the above table it can be inferred that HCL is ranked 4th as compared with TCS, infosys
and Wipro on Market Capitalisation, Sales Turnover, Net Profit and Total Asset.
Conclusion
Overall the company has solid fundamentals and has delivered consistent growth and
profitability. HCL has a strong ability to generate cash from its core business and for the past
three quarters its revenue has increased significantly. With this ability the HCL can very well
tackle the problem of decreasing ROA, by increasing the revenue from its business operations.
The future outlook is also stable once the COVID-19 situation clears.
HCL has delivered the highest industry leading growth consistently for the last four years and
highest CAGR over the last four years. HCL has ramped up its effort to mitigate the impact of
COVID-19 on its business. The company are supporting government action in Uttar Pradesh,
Tamil Nadu and Karnataka by establishing and scaling innovative digital solutions, setting up
integrated control centers and helplines. The external environment has created new demand for
products and services and the company has seen growth in several areas, including
infrastructure and cybersecurity services, e-commerce, digital marketing, and digital experience.
With strong fundamentals and increasing revenue and increasing demands of products and
services, the company has the manpower, technical expertise and digital infrastructure to
execute large demands and projects.