HCL Technologies
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
16 January
2021
3QFY21 Results Update | Sector: Technology
CMP: INR989
TP: INR1,300 (+31%)
Buy
Product driven 3Q beat should ease viability concerns
All round performance; expect mid-teen growth for FY22
HCLT IN
2,714
2684.9 / 38.2
1074 / 376
6/25/49
5192
Financials & Valuations (INR b)
Y/E Mar
2021E 2022E 2023E
761
875
990
Sales
21.6
21.8
22.1
EBIT Margin (%)
130
153
176
PAT
48.0
56.5
65.0
EPS (INR)
18.0
17.5
15.1
EPS Gr. (%)
217
241
260
BV/Sh. (INR)
Ratios
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div Yield (%)
23.6
20.8
37.5
20.6
4.6
12.4
1.8
24.6
21.7
50.0
17.5
4.1
10.6
2.9
25.9
22.9
60.0
15.2
3.8
9.3
3.9
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Dec-20 Sep-20 Dec-19
60.3
60.3
60.0
10.3
10.7
8.5
24.9
24.9
27.7
4.5
4.1
3.9
FII Includes depository receipts
HCL Technologies (HCLT) delivered strong revenue growth (3.5% QoQ CC) in
3QFY21, above our expectation and its guidance, led by stronger than
expected seasonality in the Products and Platforms vertical (P&P, +8.3%
QoQ in CC) and continued traction in Mode 2 services (+10.9% QoQ in CC).
We expect HCLT to return to mid-teens growth in FY22 (14% YoY in CC USD)
as continued strength in P&P – due to improving deal wins and new client
additions – complements improving demand environment in IT Services and
R&D verticals. The P&P business should deliver low teen USD revenue
growth over the next two years.
We view the improvement in deal wins (+13% YoY), robust deal pipeline, and
large ER&D exposure (~16% of revenue) as positive. It should also continue
to benefit from high demand for Cloud migration (Digital foundation) work.
EBIT margin expanded by 130bp QoQ to 22.9%, driven by lower SG&A
spends (+80bp) and increased offshoring (+50bp), despite a partial wage
hike impact (-50bp). While we see a wage hike and sales investments as
margin headwinds in FY22, it should also benefit from growth led positive
operating leverage. We expect the company to report 21.8% EBIT margin, up
20bp YoY, but still 110bp below the peak delivered in 3QFY21.
We expect HCLT to deliver 4Q revenue growth and FY21 EBIT margin at the
upper end of its guidance band of 2-3% and 21-21.5%, respectively.
For 9MFY21 it delivered sales (USD)/EBIT/PAT growth of 1.2%/21.2%/20.1%.
Along with robust operational performance, cash conversion (percentage)
for the company more than doubled in 9MFY21 with FCF/PAT at 150% as
against 63% in FY20.
HCLT is our preferred pick in IT Services space, and also a part of our model
portfolio.
We upgrade our EPS estimate for FY21E/FY22E/FY23E by
4%/4%/7%. Maintain
Buy
as we expect HCLT to re-energize its Products
business, while keeping positive traction in the Services business, driven by
higher IMS/Cloud focused deals. Our TP of INR1,300 per share implies 20x
FY23E EPS (~20% discount to TCS).
In constant currency (CC), revenue grew 3.5% QoQ in 3QFY21, above our
estimate of 2.2%.
Mode 1 (61% of business) grew 0.1% QoQ, Mode 2 (23%) grew 11% QoQ,
and Mode 3 (16%) was up 7.1% QoQ CC. Growth in Mode 2 was led by good
traction seen in Cloud native and Digital programs.
Growth was driven by Telecom/Media/Entertainment vertical, up a
significant 12% QoQ CC. Other key contributors were Technology and
Services (+6.8% QoQ CC) and Manufacturing (+5.6% QoQ CC).
HCLT won 13 large deals across industry verticals, including Life Sciences and
Healthcare, Technology, and Financial Services.
Performance ahead of estimates
Mukul Garg – Research analyst
(Mukul.Garg@MotilalOswal.com)
Research analyst: Anmol Garg
(Anmol.Garg@MotilalOswal.com) /
Heenal Gada
(Heenal.Gada@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
 Motilal Oswal Financial Services
HCL Technologies
In terms of business segments, growth was led by P&P (+8.3% QoQ CC). E&D/IT
Services business grew by 2.5%/2.7% QoQ CC.
Despite a partial wage hike during the quarter, EBIT margin inched up 130bp
QoQ to 22.9%, above our estimate of 21%.
Improvement in EBIT margin was a function of 80bp QoQ improvement in gross
margin and 70bp reduction in SG&A cost.
Adjusted PAT stood at INR34.3b as against our expectation of INR 31.6b, a beat
of 8.6%. During the quarter, there was a one-time tax reversal, which led to
reported ETR of 12% as against 24.1% QoQ.
The management pegged its 4QFY21 revenue growth guidance between 2% and
3% QoQ CC. This would imply FY21 growth of 1.2-1.4% YoY CC
EBIT margin is expected to be in the 21-21.5% range in 4QFY21.
Net cash stood at USD2.2b. OCF/PAT and FCF/PAT came in at 127% and 115%,
respectively.
Attrition in IT Services (LTM) stood at 10.2%, down 670bp YoY. There were net
additions of 6,597 during the quarter.
HCLT reported a 3.5% sequential growth in CC terms. Two out of the three
segments are operating above the peak of pre-COVID levels. The ER&D segment
is lagging, but is expected to catch up soon.
The strong performance during the quarter was led by Digital, Cloud, and the
P&P business. The demand environment continues to remain strong.
In the current environment, it is seeing deals around: 1) commerce
modernization; 2) customer experience, and 3) supply chain modernization.
The management sees better growth in the next five years than the previous
five years.
3QFY21 was a strong quarter. The company has completed the acquisition of
select IBM products six quarters ago, of which two were majorly transition
quarters. However, the same is yielding results now.
The management sees a lot of opportunities to work with other software
companies, though it would not enter into the product reseller business.
Total new bookings during 3QFY21 stood at USD91m, a 250% YoY increase.
There will be some margin pressure resulting from investments in sales and
incremental R&D in products.
The sequential expansion of 130bp was impacted by: 1) wage hike (-50bp), 2)
SG&A leverage (80bp), 3) move to offshore (+50bp), and 4) reversal in some
provisions.
The company witnessed a revenue catch up in Mode 2 and ER&D business,
which has flown to margin (40bp).
The management expects margin in 4QFY21 to face a headwind of 80bp on
account of salary increments.
Going forward, higher offshoring would result in margin tailwinds. However, this
would be offset by travel resuming and the company’s investments in sales and
marketing.
It sees various opportunities, especially in asset heavy industries.
Key highlights from the management commentary
16 January 2021
2
 Motilal Oswal Financial Services
HCL Technologies
Valuation and view – Subdued multiples offer a safety margin
HCLT’s exposure to deeply troubled verticals (e.g., Energy, Travel,
Transportation, Hospitality, and Retail) are lower v/s its peers. It has a higher
exposure to Financial Services, Technology Services, and Life Sciences where we
anticipate a better outlook.
Higher exposure to IMS (~37% of revenue), comprising a larger share of non-
discretionary spend, offers a better resilience to its portfolio in the current
context, with increased demand for Cloud, Network, Security, and Digital
workplace services.
Broad-based sequential growth, coupled with healthy deal wins and a robust
pipeline, indicates an improved outlook. We estimate strong performance in the
Products business driven by HCLT’s capabilities to rightly align and sell these
products.
Given its deep capabilities in the IMS space and strategic partnerships,
investments in Cloud, and Digital capabilities, we expect HCLT to emerge
stronger on the back of an expected increase in enterprise demand for these
services. The stock is currently trading at a modest ~15x FY23E earnings, which
offers a margin of safety. Our TP is based on 20x FY23E EPS (a 20% discount to
TCS). Maintain Buy.
(INR b)
FY20
FY21E
4Q
2,543
0.0
186
16.3
40.0
12.9
47
25.4
39
20.9
0
18.3
32
3.8
22.8
11.6
1Q
2,356
-7.4
178
8.6
39.9
12.4
46
25.6
37
20.5
2
24.0
29
-7.3
31.7
10.7
2Q
2,507
6.4
186
6.1
41.2
12.7
50
26.6
40
21.6
1
24.1
31
7.5
18.5
11.6
3Q
2,617
4.4
193
6.4
42.0
12.0
54
28.2
44
22.9
1
24.1
34
9.2
13.0
12.6
FY20
FY21E
3QFY21E
2,575
2.7
190
4.8
40.4
12.5
49
26.0
40
21.0
2
24.0
32
0.5
4.0
11.6
Quarterly performance
Y/E March
Revenue (USD m)
QoQ (%)
Revenue (INR b)
YoY (%)
GPM (%)
SGA (%)
EBITDA
EBITDA margin (%)
EBIT
EBIT margin (%)
Other income
ETR (%)
Adjusted PAT
QoQ (%)
YoY (%)
EPS
1Q
2,364
3.8
164
18.4
35.3
12.8
34
20.7
28
17.1
1
24.0
22
-13.6
-7.7
8.2
2Q
2,486
5.2
175
17.9
36.9
11.6
41
23.4
35
20.0
0
23.9
27
19.4
4.4
9.8
3Q
2,543
2.3
181
15.5
38.4
11.9
45
24.6
37
20.2
1
18.5
30
14.6
16.4
11.2
4QE
2,709 9,936 10,188
3.5 15.1
2.5
203
707
761
9.3 17.0
7.6
41.2 37.7
41.1
12.6 12.3
12.4
54
167
204
26.7 23.6
26.8
44
139
164
21.4 19.6
21.6
2
2
7
22.0 20.9
23.5
35
111
130
3.4
12.5
9.3
17.9
13.1 40.7
48.0
Variance
(%/bp)
1.6
167bp
1.6
166bp
160bp
-54bp
10.3
224bp
10.9
192bp
-33.7
4bp
8.6
869bp
899bp
8.6
16 January 2021
3
 Motilal Oswal Financial Services
HCL Technologies
Key performance indicators
Y/E March
Revenue (QoQ CC %)
Costs (as a % of revenue)
COGS
SGA
Margin
Gross margin
EBIT margin
Net margin
Operating metrics
Headcount (k)
Attrition (%)
Fixed price
Key verticals (YoY CC %)
BFSI
Manufacturing
Key geographies (YoY CC
%)
North America
Europe
1Q
4.2
64.7
12.8
35.3
17.1
13.5
144
17.3
63.5
0.9
28.3
FY20
2Q
6.0
63.1
11.6
36.9
20.0
15.1
147
16.9
66.5
19.0
33.0
3Q
2.1
61.6
11.9
38.4
20.2
16.8
149
16.8
67.8
16.8
38.1
4Q
0.8
60.0
12.9
40.0
20.9
17.0
150
16.3
68.3
14.1
34.3
1Q
-7.2
60.1
12.4
39.9
20.5
16.4
150
14.6
66.7
0.0
-15.5
FY21
2Q
4.5
58.8
12.7
41.2
21.6
16.9
153
12.2
67.4
-2.5
-11.5
FY20
3Q
3.5
58.0
12.0
42.0
22.9
17.8
160
10.2
68.4
-0.5
-13.1
4QE
16.7
58.8
12.6
41.2
21.4
17.5
62.3
12.3
37.7
19.6
15.7
150
16.3
66.5
11.1
33.9
58.9
12.4
41.1
21.6
17.2
FY21E
21.3
11.3
16.3
30.9
12.9
21.4
13.1
11.9
1.2
-0.3
-1.3
-2.6
2.2
-1.0
15.8
18.3
16 January 2021
4
 Motilal Oswal Financial Services
HCL Technologies
Key highlights from management commentary
Deal wins and demand outlook:
HCLT reported a 3.5% sequential growth in CC terms. Two out of the three
segments are operating above the peak of pre-COVID levels. The ER&D segment
is lagging, but is expected to catch up soon.
The strong performance during the quarter was led by Digital, Cloud, and the
P&P business. The demand environment continues to remain strong.
The three key drivers of growth for the company are: 1) strong strategy
execution, 2) Better sales organization, and 3) greater customer focus.
Growth in Media and Telecom was led by one-time deal activity, while in
Manufacturing, growth was attributed to the ramp-up in deal wins.
TCV signed by the company increased 13% YoY. HCLT won 12 transformational
deals. Going forward, the pipeline remains strong and would accelerate.
Deals in verticals like Manufacturing and Retail have returned, and clients in
BFSI, Grocery, Telecom, etc. are now making golden bets.
In the current environment, it is seeing deals around: 1) commerce
modernization; 2) customer experience, and 3) supply chain modernization.
The management sees better growth in the next five years than the previous
five years.
Mode 2 business:
Application modernization plays a significant role in the market as clients
transform them to Cloud. The management alluded that enterprises across
industries are transforming themselves.
With value chains being reimagined and delivery being virtual and agile, it
expects HCLT to be a key beneficiary of the same.
Products and Platforms business:
3QFY21 was a strong quarter. The company has completed the acquisition of
select IBM products six quarters ago, of which two were majorly transition
quarters. However, the same is yielding results now.
This business faces seasonality in the March quarter, whereas second and third
quarters are strong.
The company has made investments in every product and some products have
performed better than the others.
The management sees a lot of opportunities to work with other software
companies, though it would not enter into the product reseller business.
Total new bookings during 3QFY21 stood at USD91m, a 250% YoY increase.
There will be some margin pressure resulting from investments in sales and
incremental R&D in products.
Margin drivers:
The sequential expansion of 130bp was impacted by: 1) wage hike (-50bp), 2)
SG&A leverage (80bp), 3) move to offshore (+50bp), and 4) reversal in some
provisions.
The company witnessed a revenue catch up in Mode 2 and ER&D business,
which has flown to margin (40bp).
5
16 January 2021
 Motilal Oswal Financial Services
HCL Technologies
The management expects margin in 4QFY21 to face a headwind of 80bp on
account of salary increments.
Going forward, higher offshoring would result in margin tailwinds. However, this
would be offset by travel resuming and the company’s investments in sales and
marketing.
Guidance:
The management guided for 2-3% QoQ CC growth and EBIT margin of 21-21.5%
in 4QFY21.
It expects FY21/FY22 ETR to be ~20%/~23.5%.
Captive carve-outs:
The management sees various opportunities, especially in asset heavy
industries.
This trend has picked up in most segments.
Exhibit 1: Americas and Europe report robust sequential growth
Geographies
Americas
Europe
ROW
Contr. To rev. (%)
62.5
29.5
8.0
CC QoQ Gr. (%)
CC YoY Gr. (%)
3.2
2.2
6.3
-1
-4.5
0.1
Source: Company, MOFSL
Exhibit 2: Financial Services, Life Sciences and Healthcare, and Public Service remained
largely flat while other verticals posted robust growth
Verticals
Financial Services
Manufacturing
Technology
Life Sciences and Healthcare
Telecom MP&E
Retail and CPG
Public Services
Contr. To rev. (%)
21.4
17.7
17.3
13.6
8.3
10.5
10.4
CC QoQ Gr. (%)
CC YoY Gr. (%)
-0.4
-0.5
5.6
-13.1
6.8
20.2
0
13.3
12.1
-7
3.7
3
0.5
-3.4
Source: Company, MOFSL
CC QoQ Gr. CC YoY Gr.
(%)
(%)
2.7
1.1
2.5
-5.1
8.3
9.3
Source: Company, MOFSL
Exhibit 3: All service lines reported growth, with Products and Platforms leading the pack
Segments
IT and Business Services
Engineering and R&D Services
Products and Platforms
Contr. To rev. (%)
70.4
15.5
14.1
16 January 2021
6
 Motilal Oswal Financial Services
HCL Technologies
Valuation and view – Subdued multiples offer a safety margin
HCLT’s exposure to deeply troubled verticals (e.g., Energy, Travel,
Transportation, Hospitality, and Retail) are lower v/s its peers. It has a higher
exposure to Financial Services, Technology Services, and Life Sciences where we
anticipate a better outlook.
Higher exposure to IMS (~37% of revenue), comprising a larger share of non-
discretionary spend, offers a better resilience to its portfolio in the current
context, with increased demand for Cloud, Network, Security, and Digital
workplace services.
Broad-based sequential growth, coupled with healthy deal wins and a robust
pipeline, indicates an improved outlook. We estimate strong performance in the
Products business driven by HCLT’s capabilities to rightly align and sell these
products.
Given its deep capabilities in the IMS space and strategic partnerships,
investments in Cloud, and Digital capabilities, we expect HCLT to emerge
stronger on the back of an expected increase in enterprise demand for these
services. The stock is currently trading at a modest ~15x FY23E earnings, which
offers a margin of safety. Our TP is based on 20x FY23E EPS (a 20% discount to
TCS). Maintain Buy.
Exhibit 4: Over the long term, P/E multiple averaged ~14x
24
18
12
6
-
HCLT P/E (one-year forward)
Source: Bloomberg, MOFSL
Exhibit 5: Revision to our estimates
FY21E
74.7
10,188
2.5
21.6
130
48.0
Revised
FY22E
75.0
11,666
14.5
21.8
153
56.5
FY23E
75.0
13,202
13.2
22.1
176
65.0
FY21E
74.7
10,112
1.8
21.0
126
46.3
Earlier
FY22E
75.0
11,516
13.9
21.3
148
54.5
FY23E
75.0
12,842
11.5
21.3
165
60.9
FY21E
0.0%
0.8%
80bps
60bps
3.7%
3.7%
Change
FY22E
0.0%
1.3%
60bps
60bps
3.6%
3.6%
FY23E
0.0%
2.8%
170bps
80bps
6.7%
6.7%
USD:INR
Revenue (USD m)
Growth (%)
EBIT margin (%)
PAT (INR b)
EPS
Source: MOFSL
16 January 2021
7
 Motilal Oswal Financial Services
HCL Technologies
Story in charts
Exhibit 6: HCLT reports robust growth on the back of…
Revenue growth (QoQ CC %)
2.7
3.0
5.6
3.3
4.2
6.0
2.1
0.8 (7.2)
4.5
3.5
8.2
Exhibit 7: …increase traction in its Mode 2 business
Mode 2 growth (QoQ CC %)
13.1 14.3
5.3
7.1
3.6
3.0
1.1
-1.6
6.9
10.9
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 8: Sequential expansion of 130bp in 3QFY21 due to…
EBIT margins (%)
19.7 20.0 19.7
20.9 20.5
20.0 20.2
17.1
21.6
22.9
Exhibit 9: …an improvement in gross margin despite wage
hikes and…
Gross margins (%)
38.4
40.0 39.9
41.2
42.0
19.0
35.5 35.3 34.8 35.3
34.4
36.9
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 10: …decrease in SG&A expenses
SG&A expenses (as % of sales)
12.8
11.9
11.1
12.1
12.3
11.6
11.9
12.9
12.4
12.7
12.0
Exhibit 11: Attrition inches down further during the quarter
Attrition (LTM) - IT services (excl involuntary)
18% 18% 17% 17% 17%
16% 17%
16%
15%
12%
10%
Source: Company, MOFSL
Source: Company, MOFSL
16 January 2021
8
 Motilal Oswal Financial Services
HCL Technologies
Operating metrics
Exhibit 12: Operating metrics
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21
Service line wise (%)
IT and Business Services
Engineering and R&D Services
Products and Platform
Vertical wise (%)
BFSI
Manufacturing
Technology and Services
Retail and CPG
Telecom MP&E
Life Sciences
Public Services
Geography wise (%)
US
Europe
RoW
Client wise (%)
Top 5 clients
Top 10 clients
Top 20 clients
QoQ growth (%)
Vertical wise (%)
BFSI
Manufacturing
Technology and Services
Retail and CPG
Telecom MP&E
Life Sciences
Public Services
Geography wise (%)
US
Europe
RoW
74.9
17.3
7.8
23.8
18.3
18.2
9.1
7.3
12.8
10.5
64.5
28.1
7.5
17.0
24.6
34.2
73.8
17.5
8.7
23.0
18.0
18.2
10.0
7.2
12.9
10.7
65.8
26.8
7.4
17.3
24.8
34.2
74.0
17.1
8.9
21.6
17.7
18.7
10.2
9.2
13.0
9.7
64.4
28.2
7.3
17.4
24.8
34.1
75.8
16.6
7.6
21.1
17.9
18.5
10.0
8.6
13.0
11.1
62.9
29.7
7.4
17.0
24.1
33.4
75.3
16.9
7.8
20.3
18.3
18.2
9.5
8.0
12.8
10.5
67.7
25.9
6.4
16.6
23.9
34.2
71.4
16.9
11.7
22.4
18.7
16.5
10.0
8.4
12.9
11.0
64.4
28.2
7.4
15.6
23.1
33.7
70.2
16.7
13.1
21.6
20.9
15.1
10.3
9.0
12.2
10.9
62.8
29.2
8.0
15.2
22.4
33.0
70.6
16.3
13.1
21.1
20.7
16.2
10.2
8.3
12.5
11.1
63.4
28.7
7.9
15.1
22.0
32.1
70.2
16.0
13.8
22.4
18.1
17.2
10.0
7.6
13.7
11.0
63.7
28.3
8.0
13.9
20.9
30.8
70.8
15.7
13.5
22.1
17.7
17.3
10.4
7.7
14.1
10.7
63.1
28.4
8.5
13.7
20.9
30.6
70.4
15.5
14.1
21.4
18.1
17.8
10.5
8.3
13.6
10.4
62.5
29.5
8.0
13.5
21.0
30.9
(4.0)
(3.9)
9.2
(4.4)
(0.5)
12.2
(0.1)
5.6
(5.6)
(11.0)
(1.4)
0.5
2.1
12.1
0.6
2.8
4.0
4.2
(2.6)
0.8
(1.6)
3.2
7.8
6.9
33.9
5.6
(5.0)
2.7
10.4
3.5
1.2
4.6
2.4
1.5
(3.2)
3.6
18.5
1.1
9.0
4.9
(0.2)
6.1
2.1
(1.4)
(3.5)
2.2
(1.9)
11.7
(9.5)
(10.3)
(1.0)
7.5
(4.7)
15.6
21.0
6.0
10.2
-
14.5
23.5
(1.3)
14.4
(6.4)
5.4
9.6
(3.2)
1.4
(0.2)
6.0
10.6
(2.3)
(1.0)
7.3
(1.0)
(7.8)
2.5
1.8
1.0
(1.7)
(1.3)
(1.7)
(19.0)
(1.7)
(9.2)
(15.2)
1.5
(8.2)
(6.9)
(8.7)
(6.2)
5.0
4.1
7.0
10.7
7.8
9.5
3.5
5.4
6.8
13.1
1.1
6.7
7.4
5.4
12.5
0.7
1.5
3.4
8.4
(1.8)
Source: Company, MOFSL:
16 January 2021
9
 Motilal Oswal Financial Services
HCL Technologies
Financials and valuations
Income Statement
Y/E March
Sales
Change (%)
Cost of Goods Sold
Gross Profit
Selling and Admin Exp.
EBITDA
% of Net Sales
Depreciation
EBIT
% of Net Sales
Other Income
PBT
Tax
Rate (%)
PAT
Net Income
Change (%)
FY16
409
14.6
268
141
52
89
21.8
6
83
20.4
10
94
19
20.4
74
74
1.9
FY17
467
14.2
309
158
55
103
22.1
8
95
20.3
9
104
23
21.7
82
85
13.5
FY18
506
8.2
332
173
59
114
22.6
15
100
19.8
11
111
23
20.9
88
88
3.8
FY19
604
19.5
393
212
72
140
23.1
21
118
19.6
8
126
25
19.6
101
101
15.3
FY20
707
17.0
453
254
87
167
23.6
28
139
19.6
2
140
29
20.9
111
111
9.3
FY21E
761
7.6
462
298
94
204
26.8
39
164
21.6
7
171
40
23.5
131
130
17.9
FY22E
875
15.0
528
347
110
237
27.0
45
191
21.8
10
201
47
23.5
154
153
17.5
(INR b)
FY23E
990
13.2
595
395
125
270
27.3
51
219
22.1
12
231
54
23.5
177
176
15.1
Balance Sheet
Y/E March
Reserves
Net Worth
Loans
Other liabilities
Capital Employed
Gross Block
Less: Depreciation
Net Block
Other assets
Investments
Curr. Assets
Debtors
Cash and Bank Balance
Other Current Assets
Current Liab. and Prov.
Net Current Assets
Application of Funds
FY16
280
280
10
13
303
163
55
107
40
111
139
107
7
24
95
44
303
FY17
335
335
5
13
353
225
64
161
39
114
151
108
13
30
111
40
353
FY18
368
368
4
13
385
274
78
196
40
83
165
123
17
25
99
66
385
FY19
422
422
40
15
477
335
100
235
57
55
243
146
59
37
111
131
477
FY20
517
517
51
55
623
511
128
383
65
105
279
178
48
53
209
70
623
FY21E
590
590
51
58
699
572
167
404
68
105
335
186
93
57
213
122
699
FY22E
654
654
51
65
770
642
213
429
75
105
393
212
115
65
232
161
770
(INR b)
FY23E
706
706
51
72
829
721
264
457
82
105
433
238
121
74
248
185
829
16 January 2021
10
 Motilal Oswal Financial Services
HCL Technologies
Financials and valuations
Ratios
Y/E March
Diluted (INR)
EPS
Cash EPS
Book Value
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Asset Turnover (x)
FY16
52.8
56.8
199.4
22.0
41.7
18.7
17.4
15.6
3.4
5.0
2.2
28.2
24.5
96
3.8
FY17
28.9
32.9
118.6
12.0
41.6
34.3
30.1
27.0
6.0
8.3
1.2
26.5
23.6
84
2.9
FY18
31.3
36.4
131.4
6.0
19.2
31.6
27.1
24.1
5.5
7.5
0.6
25.0
22.2
88
2.6
FY19
36.8
44.6
153.5
4.0
10.9
26.9
22.2
19.3
4.5
6.4
0.4
25.6
22.8
88
2.6
FY20
40.7
51.2
190.3
8.0
19.7
24.3
19.3
16.1
3.8
5.2
0.8
23.6
21.3
92
1.8
FY21E
48.0
62.6
217.3
18.0
37.5
20.6
15.8
13.0
3.5
4.6
1.8
23.6
20.8
89
1.9
FY22E
56.5
73.2
240.9
28.2
50.0
17.5
13.5
11.1
3.0
4.1
2.9
24.6
21.7
89
2.0
FY23E
65.0
83.9
260.3
39.0
60.0
15.2
11.8
9.7
2.6
3.8
3.9
25.9
22.9
88
2.2
Cash Flow Statement
Y/E March
CF from Operations
Chg. in Working Capital
Net Operating CF
Net Purchase of FA
Net Purchase of Invest.
Net Cash from Inv.
Issue of shares/other adj.
Proceeds from LTB/STB
Dividend Payments
Net CF from Finan.
Free Cash Flow
Net Cash Flow
Forex difference
Opening Cash Balance
Closing Cash Balance
FY16
80
-8
72
-11
-7
-18
0
5
-31
-26
61
29
-35
13
7
FY17
90
5
95
-62
-2
-64
0
9
-34
-25
33
6
0
7
13
FY18
102
-35
68
-49
30
-19
0
-1
-17
-18
18
31
-27
13
17
FY19
123
-34
88
-61
29
-32
0
35
-11
24
28
81
-41
17
57
FY20
103
31
134
-176
-51
-227
0
104
-22
82
-43
-11
0
57
46
FY21E
171
-8
163
-61
0
-61
0
0
-57
-57
102
45
0
46
91
FY22E
199
-16
182
-70
0
-70
0
0
-90
-90
112
23
0
91
114
(INR b)
FY23E
228
-19
209
-79
0
-79
0
0
-124
-124
130
6
0
114
120
16 January 2021
11
 Motilal Oswal Financial Services
HCL Technologies
NOTES
16 January 2021
12
 Motilal Oswal Financial Services
HCL Technologies
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL
(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products.
Details
of
associate
entities
of
Motilal
Oswal
Financial
Services
Limited
are
available
on
the
website
at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell
the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the
analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware
that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment
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https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report
is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer
or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First
Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
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such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
16 January 2021
13
 Motilal Oswal Financial Services
HCL Technologies
-
-
-
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or
in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be
used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal,
accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this
report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This
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options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied,
is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is
provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and
the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform
or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is
already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
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licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose
possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be
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The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
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costs, damages,
expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
16 January 2021
14