HCL Technologies Result Updated

8/3/2019 HCL Technologies Result Updated

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Please refer to important disclosures at the end of this report 1

(` cr) 2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy)Net revenue 5,245 4,651 12.8 3,888 34.9EBITDA 970 795 22.1 635 52.9

EBITDA margin (%) 18.5 17.1 141bp 16.3 218bp

PAT 573 497 15.2 400 43.3Source: Company, Angel Research

For 2QFY2012, HCL Technologies (HCL Tech) reported a modest set of numbers.

The highlights of the result were the 4.9% qoq overall volume growth and 5.7%

qoq onsite volume growth in core software services. The company signed 18

deals during the quarter, with total contract value of these deals being more than

US$1bn. Management has indicated that deal bookings in CY2012 will be

coming from deal renewals, which is indicated by TPI data according to which

~US$47bn of restructuring deals are coming for renewals in CY2012. HCL Tech

has been a beneficiary of the return in demand for enterprise services, and we

expect it to ride on the spending on discretionary services. We maintain our Buyrating on the stock.Quarterly highlights: For 2QFY2012, HCL Tech reported revenue ofUS$1,022mn, up 2.0% qoq, on the back of 4.9% qoq volume growth. In INR

terms, revenue came in at `5,245cr, up by whopping 12.8% qoq, aided by INR

depreciation. EBITDA and EBIT margins of the company expanded by 141bp and

156bp qoq to 18.5% and 15.8%, respectively, because of 260bp positive impacton account of INR depreciation during the quarter. PAT came in at `573cr,

negatively affected by`76cr forex loss.

Outlook and valuation: Management is witnessing a strong demand environmentand has signed 18 multi-year, multi-million dollar deals during the quarter,

excluding contract renewals. Total contract value of these deals exceeds US$1bn.

We expect HCL Tech to be the outperformer among tier-I IT companies, with USD

and INR revenue CAGR of 16.3% and 22.3%, respectively, over FY201113E, on

the back of its higher-value services portfolio, which is set to address the current

demand landscape. EBITDA and PAT are expected to grow at a 20.0% and 22.1%

CAGR over FY201113E. We maintain our Buy rating on the stock with a targetprice of `520.Key financials (Consolidated, US GAAP)Y/E June (` cr) FY2009 FY2010 FY2011 FY2012E FY2013ENet sales 10,630 12,564 16,034 20,767 23,979% chg 39.2 18.2 27.6 29.5 15.5

Net profit 1,277 1,310 1,874 2,361 2,804% chg 13.6 2.6 43.0 26.0 18.8

EBITDA margin (%) 22.1 20.5 18.2 18.6 17.5

EPS (`) 18.8 19.0 26.8 33.7 40.0P/E (x) 22.5 22.3 15.8 12.6 10.6

P/BV (x) 5.1 4.2 3.5 2.9 2.4

RoE (%) 22.5 18.6 22.2 23.5 23.1

RoCE (%) 14.9 15.3 16.5 20.9 20.9

EV/Sales (x) 2.9 2.4 1.8 1.4 1.2

EV/EBITDA (x) 13.0 11.5 10.0 7.7 6.9

Source: Company, Angel Research

BUYCMP `425

Target Price `520

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 64.3

MF / Banks / Indian Fls 6.7

FII / NRIs / OCBs 20.5

Indian Public / Others 8.5

Abs. (%) 3m 1yr 3yr

Sensex (3.3) (12.8) 76.6

HCL Tech (3.2) (10.7) 260.9

HCLT@IN

29,053

1.1

528/360

97,788

Face Value (`)

BSE SensexNifty

Reuters Code

2

16,4664,967

HCLT.BO

IT

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

Ankita Somani+91 22 3935 7800 Ext: 6819

[email protected]

HCL TechnologiesPerformance Highlights

2QFY2012 Result Update | IT

January 17, 2012


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HCL Technologies | 2QFY2012 Result Update

January 17, 2012 2

Exhibit 1:2QFY2012 performance (Consolidated, US GAAP)

Y/E June (` cr) 2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy) 1HFY12 1HFY11 % chg (yoy)Net revenue 5,245 4,651 12.8 3,888 34.9 9,897 7,596 30.3Cost of revenue 3,514 3,187 10.3 2,661 32.0 6,701 5,179 29.4Gross profit 1,731 1,464 18.2 1,227 41.1 3,195 2,418 32.2SG&A expense 761 669 13.7 592 28.4 1,430 1,162 23.0

EBITDA 970 795 22.1 635 52.9 1,765 1,255 40.6Dep. and amortisation 139 131 6.5 124 12.6 270 249 8.6

EBIT 831 664 25.1 511 62.6 1,495 1,006 48.5

Other income 9 24 5 33 6

PBT 840 688 22.1 516 62.6 1,527 1,012 50.9

Income tax 191 173 10.6 103 85.4 364 186 96.2

PAT 649 515 25.9 413 57.0 1,163 827 40.7Forex loss (76) (18) 323.5 (13) 465.7 (94) (79) 18.8

Adjusted PAT 573 497 15.2 400 43.3 1,070 748 43.0EPS 8.2 7.1 15.3 5.8 42.0 15.3 10.8 41.7

Gross margin (%) 33.0 31.5 152bp 31.6 145bp 32.3 31.8 46bp

EBITDA margin (%) 18.5 17.1 141bp 16.3 218bp 17.8 16.5 131bp

EBIT margin (%) 15.8 14.3 156bp 13.1 270bp 15.1 13.2 186bp

PAT margin (%) 10.9 10.6 27bp 10.3 63bp 10.8 9.8 94bp


Exhibit 2:2QFY2012 Actual vs. Angel estimates

(` cr) Actual Estimate Variation (%)Net revenue 5,245 5,263 (0.3)

EBITDA margin (%) 18.5 19.6 (114)bp

PAT 573 629 (8.9)


INR depreciation brings in cheer

For 2QFY2012, HCL Tech reported revenue of US$1,022mn, up 2.0% qoq, on the

back of 4.9% qoq volume growth. Cross-currency movement impacted the

companys USD revenue by 1.7% qoq. Pricing declined by 1.0% qoq, but it is

expected to remain flat going ahead. In constant currency (CC) terms, revenue

grew by 3.7% qoq to US$1,038.9mn.

HCL Techs revenue growth was led by modest volume growth of 4.6% in core

software services; however, USD revenue of infrastructure services declined by

0.7% qoq in CC terms. Volume growth of 4.9% qoq in core software services was

on account of 4.6% and 5.7% volume growth offshore and onsite, respectively.


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January 17, 2012 3

Exhibit 3:Volume growth trend (Effort wise)


In INR terms, revenue came in at `5,245cr, up by whopping 12.8% qoq; higher

growth as against USD revenue growth was due to qoq INR depreciation against

USD.

Core software services led the companys growth: During the quarter, coresoftware services (contributed 72% to revenue) posted reasonable 3.8% qoq

revenue growth (USD terms) to US$736.4mn, led by 4.9% qoq volume growth. In

CC terms, revenue growth in core software services came in at 5.3% qoq. This was

on the back of USD revenue growth of 6.5%, 4.0% and 5.4% qoq (CC terms) in

enterprise application services (EAS, contributed 20.3% to revenue), engineeringand R&D services (ERD, contributed 18.9% to revenue) and custom application

services (contributed 32.8% to revenue). In EAS, the company is witnessing traction

from areas like mobility, data analytics and cloud.

Infrastructure services decline, a negative surprise: The infrastructure managementservices (IMS) segment (contributed 23.45 to revenue) reported a 2.9% qoq decline

in its revenue (USD terms) to US$239.1mn. In CC terms, revenue of IMS declined

by 0.7% qoq. Cross-currency movement severely impacted IMS revenue by 2.2%.

Management indicated that this is basically due to softness in India business;

globally IMS is doing well. The company has to stop few system integration

projects in India due to sharp INR depreciation, which made these projectsunviable for HCL Tech. The company is currently in the process of renegotiations

for the above-mentioned contracts and expects to again start soon. Currently, the

segment is witnessing continued demand traction for technology and operational

transformation outsourcing as well as system integration. Continental Europe and

emerging markets are focusing on reducing operations cost, which is driving

transformational outsourcing.

BPO services: The BPO segment reported almost flat qoq revenue growth withrevenue coming at US$46.4mn. In CC terms, the segment reported 1.6% qoq

growth in revenue. The demand environment is heating up as clients are looking at

globalization of delivery capabilities, which is driving transformation andenterprise-wide cost efficiency. The company is continuously investing in building

platforms for non voice-based businesses in this segment. Demand is seen in

areas of cloud, mobility, social media and multi-tower end-to-end process data.

7.1

5.6

3.03.7

4.6

5.6

3.0 3.0

4.9

5.7

6.7

4.9

3.0

4.0

4.9

0

1

2

3

4

5

6

7

8

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12

(%)

Offshore Onsite Total


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January 17, 2012 4

Exhibit 4:2QFY2012 performance (Segment wise)

(US$ mn) 2QFY12 1QFY12 % chg qoq 2QFY11 % chg yoySOFTWARE SERVICES

Revenue 736 709 3.8 618 19.2Gross profit 259 238 8.6 210 23.2

Gross margin (%) 35.1 33.6 154bp 34.0 115bp

EBITDA 144 128 13.0 108 33.5

EBITDA margin (%) 19.6 18.0 160bp 17.5 210bpEBIT 127 109 16.3 90 40.9

EBIT margin (%) 17.3 15.4 185bp 14.6 265bp

INFRASTRUCTURE SERVICESRevenue 239 246 (2.9) 197 21.4Gross profit 69 68 1.5 53 29.4


EBITDA 46 45 3.1 36 29.3

EBITDA margin (%) 19.2 18.1 113bp 18.0 117bpEBIT 38 37 3.0 29 33.2

EBIT margin (%) 15.9 15.0 91bp 14.5 141bp

BPO SERVICESRevenue 46 46 (0.1) 50 (6.2)Gross profit 10 10 2.1 10 1.0


EBITDA (1) (1) (2)

EBITDA margin (%) (2.2) (1.5) (65)bp (4.8) 269bpEBIT (4) (3) (5)

EBIT margin (%) (7.5) (7.3) (23)bp (10.9) 337bp


Exhibit 5:Revenue growth trend (Service wise in CC terms)


5.7

1.7

(0.6)

6.5

1.6

5.2

8.6

4.05.1

2.5

7.3

5.4

7.79.2

5.8

(0.7)(1.0)

(5.7)

(1.3)

1.6

(8)

(6)

(4)

(2)

0

2

4

6

8

10

3QFY11 4QFY11 1QFY12 2QFY12

(%)

EAS ERD Custom application IMS BPO services


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January 17, 2012 5

HCL Techs anchor industry segments, financial services (contributed 25.3% to

revenue) and manufacturing (contributed 29.5% to revenue), continued their

growth momentum and reported 6.1% and 4.6% qoq growth (CC terms) in

revenue, respectively. In the financial services space, IT-related spend is comingfrom work related to regulatory compliance, efficiency gains, cost optimization and

vendor churning. Demand in the manufacturing space is coming for business

needs related to operational efficiency, cost reduction and product development.

Also, in the manufacturing segment, pent-up demand is seen for transformation

projects related to digital transformation, mobility and multi-channel commerce in

the U.S. and Europe.

The healthcare industry segment emerged as the companys primary growth

driver, with its revenue growing by 16.9% qoq (CC terms). In addition, the retail

and consumer product group (CPG) industry segment posted revenue growth of

7.8% qoq in CC terms. On the other hand, the energy, utilities and public sector(EPU), telecom and media, publishing and entertainment (MPE) segments posted a

15.8%, 3.1% and 2.2% qoq (CC terms) decline in their revenue, respectively.

Management has indicated that EPU will rebound from the next quarter, but

telecom will continue to witness some systemic softness in IT spending.

Exhibit 6:Revenue growth trend (Industry wise in CC terms)

Growth by vertical (%) 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12Financial services 3.3 10.5 2.0 2.1 6.1

Manufacturing 6.7 6.1 7.6 8.2 4.6

Telecom 5.0 (0.3) (8.3) (2.0) (3.1)

Retail and CPG 14.2 (0.4) (5.2) 12.0 7.8

MPE 6.0 1.7 11.7 0.4 (2.2)

Healthcare 7.1 0.5 2.9 - 16.9

EPU 12.3 6.3 18.7 1.6 (15.8)

Others 4.8 1.3 5.5 23.1 8.0


During the quarter, HCL Tech reported growth across the U.S. and Europe, with

revenue growing by 7.3% and 6.3% qoq, respectively. However, revenue from Rest

of the World declined by 11.7% qoq (CC terms).


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January 17, 2012 6

Exhibit 7:Revenue growth trend (Geography wise in CC terms)


Hiring spree continues

During the quarter, HCL Tech added 7,804 gross employees, of which 6,017 were

lateral additions. The company added 2,556 net employees, taking its total

employee base to 83,076.

In the core software services segment, 3,635 gross and 1,353 net employees were

added during the quarter, taking the segments total employee base to 54,624.

Gross lateral employee addition in this segment stood robust at 1,854, which

indicates that the company is witnessing a strong deal pipeline. Attrition rate for

the core software services segment declined by 50bp qoq to 15.3% (LTM basis)during the quarter.

The infrastructure services segment reported net addition of only 381 employees in

2QFY2012, taking the segments total employee base to 17,431. Gross addition

in the segment stood at 1,296 employees, of which 1,290 were laterals, indicating

just-in-time hiring strategy adopted by management. Attrition rate for this segment

increased by 60bp qoq to 17.0% (LTM basis).

The BPO segment, which was witnessing employee rationalization since the past

one year, reported addition of 822 net employees, taking the segments total

employee base to 11,021. The company added 2,873 gross employees (alllaterals) in the BPO segment during the quarter. The quarterly offshore attrition

rate for this segment declined by 240bp qoq to 6.1% during the quarter.

5.8

0.7

5.56.8

7.3

5.8

4.2

3.0 4.56.3

10.8

20.5

0.7 0.7

(11.7)(12)

(9)

(6)

(3)

0

3

6

9

12

15

18

21


(%)

US Europe Rest of the world


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January 17, 2012 7

Exhibit 8:Hiring trend (Net addition, Service wise)

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12Net additionsSoftware services 1,475 867 2,416 3,053 1,353Infrastructure services 784 750 1,533 783 381

BPO (210) (464) (323) (362) 822

Total employeesSoftware services 46,935 47,802 50,218 53,271 54,624

Infrastructure services 13,984 14,734 16,267 17,050 17,431

BPO 11,348 10,884 10,561 10,199 11,021


Utilization level, offshore including as well as excluding trainees declined by

10bp and 40bp qoq to 69.6% and 76.1%, respectively, in 2QFY2012. Also,

utilization level-onsite declined marginally by 10bp qoq to 95.9%. Management

indicated that, going ahead, utilization level (including trainees) will inch up as

trainees hired couple of quarters back will start turning billable, which can be an

important lever to improve margins.

Exhibit 9:Utilization trend (%)


EBIT margin enhances

During 2QFY2012, HCL Techs EBITDA and EBIT margins improved by 141bp and

156bp qoq to 18.5% and 15.8%, respectively, because of INR depreciation. EBIT

margin movement was because of the following factors: 1) 260bp positive impact

due to INR depreciation; and 2) 106bp negative impact because of annual

increments, milestone bonuses and SG&A investments.

70.171.9 72.5

69.7 69.6

75.076.3 76.1 76.5 76.1

95.9 96.5 96.2 96.0 95.9

60

70

80

90

100


(%)

Offshore - Including trainees Offshore -E xcluding trainees Ons ite


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January 17, 2012 8

Exhibit 10:Margin profile


Going ahead, in 3QFY2012, the company expects its margins to improve.

For FY2012, the company expects its EBIT margin to remain flat yoy at 14.0% in

CC terms.

Segment wise, EBIT margin for core software services and infrastructure services

increased by 185bp and 91bp qoq to 17.3% and 15.9%, respectively, in

2QFY2012. The BPO segment again managed to pull up its gross margin by 46bp

qoq to 21.1%, but at the EBITDA and EBIT level, margins further decreased by

65bp and 23bp qoq, respectively.

Exhibit 11:BPO segment Margin trend


31.633.3

34.7

31.533.0

16.318.5

20.7

17.118.5

13.1

15.6

17.7

14.315.8

10

15

20

25

30

35

40


(%)

Gross margin EBITDA margin EBIT margin

19.5 18.9 19.220.6 21.2

(4.9)(3.2) (1.9) (1.6) (2.1)

(11.0) (9.1) (8.1)(7.2)

(7.6)

(18)

(12)

(6)

0

6

12

18

24


(%)

Gross margin EBITDA margin EBIT margin


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January 17, 2012 9

Client pyramid strengthens

During the quarter, HCL Tech enhanced its client pyramid with the addition of 57

new clients. The most remarkable development for the company during the quarter

was the addition of two clients in the US$100mn plus revenue bracket. One client

was moved to the higher revenue bracket of US$40mn-50mn from the US$30mn-

40mn revenue bracket. Also, the company added four new clients in each of the

US$5mn-10mn and US$1mn-5mn revenue brackets. Active client base of the

company increased to 516 in 2QFY2012 from 480 in 1QFY2012. The companys

top clients also registered modest growth, with revenue from the top 5, top 10 and

top 20 clients growing by 7.7%, 4.9% and 3.5% qoq (LTM basis), respectively.

The company won 18 multi-year, multi-million dollar deals during the quarter. The

total contract value of these deals exceed US$1bn. These deals span across all

services lines and verticals.

Exhibit 12:Client pyramid

Particulars 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 Active client relationship 434 453 467 480 516

New client relationship 46 58 70 66 57

US$1mn5mn 199 205 206 214 218

US$5mn10mn 46 49 53 56 60

US$10mn20mn 39 39 38 42 42

US$20mn30mn 12 12 13 14 19

US$30mn40mn 7 9 12 12 11

US$40mn50mn 2 2 1 2 3

US$50mn100mn 6 7 8 8 6

US$100mn plus 1 1 1 1 3


Outlook and valuation

HCL Tech has recorded a 4.3% CQGR in its revenue over the past four quarters.

This is primarily on the back of discretionary services such as ERD and custom

applications coming back strongly for the company, recording a CQGR of 4.8%

and 5.2% over OND201011, respectively. In addition, the companys anchor

service line, infrastructure services maintained its growth momentum at a 5.0%

CQGR over OND2010-11.Verticals such as financial services and manufacturing

have proved to be the companys growth drivers. Also, geography wise,

continental Europe has proved to be a strong spender vis--vis its peers because of

a strong footprint gained in this geography post the acquisition of Axon.

Management is witnessing a strong demand environment and has signed

18 multi-year, multi-million dollar deals during the quarter, excluding contract

renewals. The total contract value of these deals exceeds US$1bn. Management

maintained its stance that the deals are out of vendor-churn exercises rather than

any incremental spending. However, we believe, in such a competitive scenario

where all companies are eyeing the existing pool of deals, an aggressive companylike HCL Tech with end-to-end IT capabilities and a strong client mining ability will

emerge as a front runner. We expect HCL Tech to be the outperformer among

tier-I IT companies, with USD and INR revenue CAGR of 16.3% and 22.3%,


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January 17, 2012 10

respectively, over FY201113E, on the back of its higher-value services portfolio,

which is set to address the current demand landscape. At the operating front,

levers such as 1) managing SG&A, 2) expanding utilization levels and

3) turnaround in the BPO segment on account of strong growth are expected toimprove the companys margins. Thus, we expect EBITDA to grow at a 20.0%

CAGR over FY201113E. PAT, on the other hand, is expected to post a much

higher CAGR of 22.1%, with improving profitability, forex gains on hedges and

treasury gains.

At the CMP of `425, the stock is trading at cheap valuations of 10.6x FY2013E EPS

of `40.0. We value the company at 13x FY2013E EPS and give it a target price of`520.We maintain our Buy rating on the stock.

Exhibit 13:Key assumptions

FY2012 FY2013Revenue growth (USD) 17.8 14.8

USD-INR rate (realized) 49.7 50.0

Revenue growth (INR) 29.5 15.5

EBITDA margin (%) 18.6 17.5

EBIT margin (%) 15.9 14.9

Tax rate (%) 25.0 24.0

EPS growth (%) 25.5 18.8


Exhibit 14:One-year forward PE (x) chart


50

150

250

350

450

550

650

750

850

Aug-0

7

Jan-0

8

Jun-0

8

Nov-0

8

Apr-

09

Sep-0

9

Fe

b-1

0

Jul-10

Dec-1

0

May-1

1

Oct-11

(`)

Price 19x 16x 13x 10x 6x


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January 17, 2012 11

Exhibit 15:Recommendation summary

Company Reco CMP Tgt Price Upside Target FY2013 FY2013E FY2011-13E FY2013E FY2013E(`) (`) (%) P/E (x) EBITDA (%) P/E (x) EPS CAGR (%) RoCE (%) RoE (%)

HCL Tech Buy 425 520 22.4 13.0 17.5 10.6 22.1 20.9 23.1Hexaware Accumulate 84 96 14.4 11.0 18.7 9.6 74.1 21.4 19.8

Infosys Accumulate 2,660 3,047 14.5 18.0 32.0 15.7 18.9 25.8 23.8

Infotech Enterprises Neutral 125 120 (3.8) 8.0 15.8 8.0 11.3 15.6 12.9

KPIT Cummins Accumulate 148 163 10.3 10.0 15.4 9.0 19.9 19.5 16.9

Mahindra Satyam Accumulate 72 82 13.9 11.0 14.8 9.7 33.0 11.7 13.8

MindTree Neutral 443 - - 10.0 14.7 9.8 34.8 20.3 16.4

Mphasis Neutral 361 - - 11.5 16.6 9.8 (3.1) 14.0 14.2

NIIT^ Buy 42 55 30.5 6.9 16.3 5.3 19.3 11.0 15.6

Persistent Neutral 327 - - 9.0 22.4 9.6 (1.1) 20.0 14.0

TCS Accumulate 1,104 1,262 14.3 19.5 29.9 17.1 20.6 32.1 33.3

Tech Mahindra Accumulate 609 666 9.4 9.0 16.8 7.3 29.9 14.6 20.0

Wipro Neutral 415 -- 15.3 19.7 15.4 11.6 14.6 20.0

Source: Company, Angel Research; Note: ^Valued on SOTP basis


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January 17, 2012 12

Profit and loss statement (Consolidated, US GAAP)

Y/E June (` cr) FY2009 FY2010 FY2011 FY2012E FY2013ENet sales 10,630 12,564 16,034 20,767 23,979Cost of revenues 6,625 8,196 10,749 13,917 16,458Gross profit 4,005 4,369 5,285 6,850 7,520% of net sales 37.7 34.8 33.0 33.0 31.4

SG&A expenses 1,661 1,796 2,371 2,993 3,327

% of net sales 15.6 14.3 14.8 14.4 13.9

EBITDA 2,345 2,573 2,914 3,857 4,193% of net sales 22.1 20.5 18.2 18.6 17.5

Dep. and amortization 449 501 498 562 620

% of net sales 4.2 4.0 3.1 2.7 2.6

EBIT 1,895 2,072 2,416 3,295 3,572% of net sales 17.8 16.5 15.1 15.9 14.9

Other income, net 164 (55) 26 30 10

Profit before tax 2,058 2,017 2,441 3,325 3,583

Provision for tax 254 240 485 831 860

% of PBT 12.4 11.9 19.9 25.0 24.0

PAT 1,803 1,777 1,956 2,494 2,723Share from equity invst. 3 1 - - -

Forex loss (530) (476) (82) (133) 81

Adj. net profit 1,277 1,302 1,874 2,361 2,804EPS (`) 18.8 18.9 26.8 33.7 40.0


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January 17, 2012 13

Balance sheet (Consolidated, US GAAP)

Y/E June (` cr) FY2009 FY2010 FY2011 FY2012E FY2013ECash and cash equivalent 420 469 520 370 420

Account receivables, net 2,708 2,514 2,591 3,584 4,139Unbilled receivables - 536 816 993 1,120

Deposit with banks 1,456 1,091 1,079 769 871

Deposit (one year with HDFC ltd) - 100 - - -

Investment securities, available for sale 23 782 643 458 519

Other current assets 1,070 885 1,255 1,385 1,599

Total current assets 5,678 6,376 6,902 7,560 8,668Property and equipment, net 1,586 1,849 2,217 2,741 2,942

Intangible assets, net 4,533 4,312 4,188 4,137 4,085

Deposits with HDFC Ltd. - - 50 36 40

Fixed deposits with banks - - 110 78 89

Investment securities HTM 20 50 95 68 77

Investment in equity investee 17 21 23 23 23

Other assets 861 964 1,039 1,108 1,202

Total assets 12,694 13,571 14,624 15,750 17,127Current liabilities 3,268 3,133 3,376 3,198 3,204

Borrowings 2,977 2,663 2,124 1,884 1,222

Other liabilities 763 739 689 608 577

Total liabilities 7,008 6,535 6,189 5,689 5,002Minority interest - - - - -

Total stockholder equity 5,686 7,037 8,435 10,060 12,124

Total liabilities and stock holder equity 12,694 13,571 14,624 15,750 17,127


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January 17, 2012 14

Cash flow statement (Consolidated, US GAAP)

Y/E June (` cr) FY2009 FY2010 FY2011 FY2012E FY2013EPre tax profit from operations 1,810 1,908 2,259 3,131 3,453

Depreciation 449 501 498 562 620

Expenses (deferred)/written off (530) (476) (82) (133) 81

Pre tax cash from operations 1,730 1,934 2,675 3,560 4,154

Other income/prior period ad 248 117 182 194 130

Net cash from operations 1,977 2,051 2,857 3,754 4,284

Tax (254) (240) (485) (831) (860)

Cash profits 1,723 1,810 2,372 2,922 3,424(Inc)/dec in current assets (1,429) (156) (727) (1,301) (896)

Inc/(dec) in current liabilities 1,497 (135) 243 (178) 6

Net trade working capital 68 (290) (484) (1,479) (890)

Cash flow from oper. actv. 1,791 1,520 1,888 1,443 2,534(Inc)/dec in fixed assets (609) (652) (797) (1,035) (770)

(Inc)/dec in intangibles (3,669) 109 56 - -

(Inc)/dec in investments 491 (528) 45 568 (188)

(Inc)/dec in minority interest (6) - - - -

Inc/(dec) in non-current liab. 168 (25) (50) (81) (31)

(Inc)/dec in non-current assets (355) (103) (75) (69) (94)

Cash flow from invest. actv. (3,980) (1,199) (821) (617) (1,083)Inc/(dec) in debt 2,950 (314) (539) (241) (662)

Inc/(dec) in equity/premium (145) 770 229 - (0)

ESOP charges (43) (88) (90) (79) (84)

Dividends (617) (640) (615) (656) (656)Cash flow from financing actv. 2,144 (272) (1,016) (975) (1,402)Cash generated/(utilised) (45) 48 51 (149) 49Cash at start of the year 465 420 469 520 371

Cash at end of the year 420 469 520 371 420


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January 17, 2012 15

Key ratios

Y/E June FY2009 FY2010 FY2011 FY2012E FY2013EValuation ratio (x)P/E (on FDEPS) 22.5 22.3 15.8 12.6 10.6

P/CEPS 16.7 16.1 12.4 10.1 8.6

P/BVPS 5.1 4.2 3.5 2.9 2.4

Dividend yield (%) 1.9 1.9 1.9 1.9 2.1

EV/Sales 2.9 2.4 1.8 1.4 1.2

EV/EBITDA 13.0 11.5 10.0 7.7 6.9

EV/Total assets 2.4 2.2 2.0 1.9 1.7

Per share data (`)EPS (Fully diluted) 18.8 19.0 26.8 33.7 40.0

Cash EPS 25.5 26.3 34.1 42.1 49.3

Dividend 8.0 8.0 8.0 8.0 9.0

Book value 83.9 102.2 121.4 144.8 174.4

Dupont analysisTax retention ratio (PAT/PBT) 0.9 0.9 0.8 0.7 0.8

Cost of debt (PBT/EBIT) 1.1 1.0 1.0 1.0 1.0

EBIT margin (EBIT/Sales) 0.2 0.2 0.2 0.2 0.1

Asset turnover ratio (Sales/Assets) 0.8 0.9 1.1 1.3 1.4

Leverage ratio (Assets/Equity) 2.2 1.9 1.7 1.6 1.4

Operating ROE 31.7 25.4 23.2 24.8 22.5

Return ratios (%)RoCE (pre-tax) 14.9 15.3 16.5 20.9 20.9

Angel RoIC 17.6 18.8 19.9 23.6 23.RoE 22.5 18.6 22.2 23.5 23.1

Turnover ratios (x) Asset turnover (fixed assets) 2.2 1.8 2.2 2.7 2.9

Receivables days 79 76 59 63 63


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Disclosure of Interest Statement HCL Tech

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