HCL Technologies
BSE SENSEX
24,480
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
7,435
HCLT IN
1,409.3
1,181.7 / 17.5
1058 / 798
3/0/15
2,000
39.4
19 January 2016
2QFY16 Results Update | Sector: Technology
CMP: INR839
TP: INR1,000(+19%)
Buy
1HCY16 visibility alleviates headcount concerns
Financials & Valuation (INR b)
Y/E Jun
2015 2016E* 2017E
Net Sales
370.6 310.5 492.2
EBITDA
87.0
67.9 109.9
PAT
71.1
56.0
87.1
EPS (INR)
50.4
39.6
61.6
Gr. (%)
11.7 -21.3
55.5
BV/Sh (INR)
177.0 201.5 241.7
RoE (%)
31.7
21.1
28.1
RoCE (%)
33.9
22.8
32.1
P/E (x)
16.7
21.3
13.7
P/BV (x)
4.8
4.2
3.5
*FY16 is Estimates are for 9 months and
hence growth not comparable
Estimate change
TP change
Rating change
In-line 2Q, strong 1HCY16 visibility:
HCLT’s 2QFY16 CC revenue growth of 2.1%
QoQ was in line with our estimate (and ~1.7% QoQ CC organic), but lopsided in
nature—contributed mainly by Americas (+5.5% QoQ CC), BPO (+8% QoQ CC),
Retail/CPG (+10.3% QoQ CC) and Public Services (+8.4% QoQ CC). The concern
around second successive quarter of decline in headcount was partially offset
by expectation of strong revenue growth in 1HCY16, visibility for which is lent
by 8 IMS deals approaching steady state in 3QFY16 (v/s 2 in 2QFY16)
Margin expansion to accompany 1HCY16 traction:
Going forward, EBIT margin
should move to the targeted 21-22% band v/s 20.3% in 1H (excluding 1Q one-
off). Multiple IMS deals reaching a steady state will drive profitability up, along
with further rationalization in G&A costs.
2Q profitability in line; one-time asset sale drives net income beat:
EBIT
margin (excluding one-off in 1QFY16) was down 60bp QoQ to 20%, in line with
our estimate of 20.2%. PAT was INR19.2b (+5.3% QoQ), a healthy beat to our
estimate of INR17.8b (-2.6% QoQ)—driven by one-time asset sale, which
contributed ~INR1.4b to other income.
Valuation view:
HCLT’s EBIT margin guidance of 21-22% for FY16 and outlook
of IMS-led healthy growth in 1HCY16 offset a slow start to the year. Over the
medium to long term, HCLT’s capabilities in IMS, Engineering and Continental
Europe are likely to keep the company in good stead—the key risk will be the
unfolding competitive intensity. We expect the company to post a 15%
revenue CAGR and 17% EPS CAGR over FY16-18. Maintain
Buy
with a one-year
price target of INR1,000, which discounts forward EPS by 15x.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Ashish Chopra
(Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Sagar Lele
(Sagar.Lele@MotilalOswal.com); +91 22 3982 5585

HCL Technologies
2QFY16: Results largely in-line
HCLT’s 2QFY16 USD revenues grew 1.4% QoQ to USD1,566m, (in line with our of
1.4% QoQ). Constant currency revenue growth was 2.1% QoQ CC (our estimate
was 2%), but after adjusting for contribution from inorganic activity, growth was
1.7% QoQ CC.
YoY CC revenue growth was 9.3%, marks a slowdown from 13.5% YoY in 1Q, and
15%+ growth in three quarters before that.
Exhibit 1: CC USD revenue growth of 2.1% QoQ was in line with our estimate
CC Revenues (USD m)
6.2
CC Growth ( QoQ %)
Reported Revenues (USD m)
3.5
2.7
2.9
1.2
2.1
4.0
3.4
1.9
0.0
4.0
Growth (QoQ %)
3.2
0.5
1.4
3.6
3.0
2.9
2.8
3.2
3.0
1,272 1,309 1,360 1,399 1,452 1,522 1,530 1,534 1,555 1,578
1,270 1,321 1,361 1,407 1,434 1,491 1,491 1,538 1,545 1,566
Source: Company, MOSL
In reported terms Software Services grew 0.3% QoQ, to USD923.9m. Growth in
IMS was 2.4% QoQ to USD555.4m, marking an acceleration compared to 0.1%
growth in 1Q. BPS however contributed most to incremental growth, having
grown by 6.9% QoQ to USD86.9m.
In terms of constant currency, Application Services grew by 2% QoQ and
Engineering and R&D Services declined by 1.5% QoQ. Infrastructure Services and
Business Services grew faster than company average at 3.4% QoQ and 8.0% QoQ
respectively.
Exhibit 2: QoQ growth in services in CC terms (%)
Software Services
13.7
8.7
1.0
1.9
2.3
6.0
2.2
5.1
(0.7)
17.7
6.9
5.4
4.7
3.9
2.4
2.3
0.5 0.1 0.3
0.4 1.7
BPO
IMS
2.1
3.7
2.1
4.4 3.6
2.0
1.9
(0.2)
(0.5)
Source: Company, MOSL
EBIT margin is 20%, -60bp QoQ, compared to our estimate of 20.2%, -40bp QoQ.
While furloughs and business continuity costs in Chennai were headwinds in
addition to partial wage hikes, these were offset by depreciation of the Rupee
and sequential decline in headcount by 1,875 employees to 103,696.
19 January 2016
2

HCL Technologies
Exhibit 3: Margins bottomed out at current levels
EBITDA margin (%)
SG&A as % of sales (RHS)
84.9
12.7 12.5
12.1
11.8 11.7 12.0
12.7 12.8 12.5 13.0
84.1
Exhibit 4: Gross additions continue declining
Gross Addition
84.2
84.5
Blended Utilization (%)
83.6
84.7
82.7
82.9
81.9
83.5
26.3 26.0 26.7 26.3 25.1 25.0 22.6 21.5 21.9 21.5
8,061 7,593 8,291 8,442 11,63111,73411,041 9,448 7,889 6,234
Source: Company, MOSL
Source: Company, MOSL
Other Income at INR3.6b was higher than our estimate of INR1.7b – led by one-
time asset sale of ~INR1.4b. ETR was 20.9%, v/s estimate of 21.5%.
Consequently, PAT was INR19.2b, +5.3% QoQ, compared to our estimate of
INR17.8b, -2.6% QoQ.
Segment-wise performance in CC terms: Americas, BPO, Retail and Public
Service lead
Amongst geographies, Americas was strong during the quarter, having grown
5.5% QoQ in CC terms. However, Europe was weak as it declined 2.4% QoQ CC.
RoW declined for the second consecutive quarter (-3.4% QoQ CC). In 1Q, it was
lower by 8.4% QoQ because of the slump in India business, which declined by
25% QoQ.
On an LTM basis, growth of 13.5% YoY CC has remained particularly impressive
considering the broad-based nature across Americas and Europe, as well as
across all verticals – with 10.1% growth at Financial Services being the least.
Among services too, excluding Application services (+6.4% YoY CC), other
services grew between 16.4-23.9% YoY.
Exhibit 5: RoW declined for the second consecutive quarter
Geographies
Americas
Europe
RoW
Contr.
to rev. (%)
61.0
29.9
9.1
CC QoQ
Gr. (%)
5.5
-2.4
-3.4
CC LTM
YoY Gr. (%)
13.8
15.1
7.9
Source: MOSL, Company
Smaller verticals have led growth in the last four quarters, and that trend
continued in 2QFY16. Retail & CPG (9.5% of revenues, +10.3% QoQ), Telecom /
Media (9.7% of revenues, +3.4% QoQ) and Public Services (10.6% of revenues,
+8.4% QoQ) delivered growth above company average.
19 January 2016
3

HCL Technologies
Exhibit 6: Smaller verticals showed stronger growth
Verticals
Financial Services
Manufacturing
Retail & CPG
Telecom MP&E
Life Sciences & Healthcare
Public Services
Contr.
to rev. (%)
25.9
31.5
9.5
9.7
12.2
10.6
CC QoQ
Gr. (%)
1.9
-1.3
10.3
3.4
0.3
8.4
CC LTM
YoY Gr. (%)
10.1
12.3
12.6
23.6
27.7
17.8
Source: MOSL, Company
In terms of Services, growth during the quarter was facilitated by BPO (+8.0%
QoQ CC). IMS grew by 3.4% QoQ CC as two of the ten deals in transition moved
to steady state. Revenue in Engineering and R&D Services declined by 1.5% QoQ
CC.
Exhibit 7: IMS, ESI, BPO led growth among services
Services
Application Services
IMS
BPO
Engg and R&D Services
Contr.
to rev. (%)
40.4
18.6
5.5
18.6
CC QoQ
Gr. (%)
2.0
3.4
8.0
-1.5
CC LTM
YoY Gr. (%)
6.4
16.4
23.9
23.0
Source: MOSL, Company
Expect stronger revenue growth in 1HCY16 compared to 2HCY15
Multiple factors have weighed on HCLT’s growth in the last couple of quarters,
but amid them, it has signed large deals with significant chunk of infra-related
services, yet to ramp up fully. It had announced 10 deals in the July-September
quarter, only 2 of which have transitioned to steady state, and the ramp up in
remaining deals will follow in the near term. That lends visibility of strong
revenue pick up over the next couple of quarters.
The uptick in revenues is expected to help push up profitability into the targeted
21-22% EBIT margin range. However, while HCLT had earlier guided for full year
EBIT margin of 21-22%, but now only expects it to be the case in 2HFY16 (in the
erstwhile June-year end format). This feeds into some incremental decline in our
margin assumption over the near term (~50bp).
Our revenue growth estimates are largely unchanged, notwithstanding the
change in Financial Year End to March. We expect a CQGR of 2.9-3% over FY17-
18.
19 January 2016
4

HCL Technologies
Takeaways from management commentary
Guided for stronger 1HCY16:
HCLT had earlier announced 10 deals in the July-
September quarter, only 2 of which have transitioned to steady state, and the
ramp up in remaining deals will follow in the near term. That lends visibility of
strong revenue pick up over the next couple of quarters. Based on this pick-up
expected in IMS, it has guided for a strong 2HFY16 (erstwhile June-end year).
Retains 21-22% EBIT margin outlook, but for the next half:
HCLT had earlier
retained its full year EBIT margin outlook of 21-22%. However, with multiple
factors that have affected costs in 1Q and 2Q of the current year, the company
has guided for the band to prevail in 1HCY16. It expects to drive the levers of
utilization and G&A expense optimization in order to maintain margins in the
near term. Moreover, the absence of costs associated with the Chennai floods in
3Q, and material pick-up expected in revenue growth, there is visibility on
margin expansion.
Headcount reduction:
The headcount reduction during the quarter was not a
function of lower demand expectation. The company has ample visibility of
ramp up in deals over the next two quarters. Transformational deals can take up
significant costs and resources when acquired, and hence don’t see increased
allocation of manpower as the deal ramps up. Moreover, on account of changes
in technology, reskilling efforts have been ongoing. Additional attrition would be
caused because of the bunch of people who are unable to cope with these
changes.
Various factors playing out in the application services space:
Growth slowing
down in the application services space has been largely on account of pressure
in ERP and packaged applications. The company is seeing negligible growth in
these areas. However, it has been strong growth in the areas of application
modernization, middleware and analytics.
Differentiated positioning in Financial Services:
Financial Services has been
seeing a shift in spending patterns. While budgets continue to grow in the range
of 3-4%, a higher proportion is being captured by Digital/new technologies.
HCLT’s efforts to differentiate include: [1] Creating co-innovation labs with
customers, [2] Leveraging BeyondDigital by industrializing digital asset creation
for customers, [3] Higher use of cognitive and automation tools, [4] Aiding
clients with their transformational/legacy modernization needs, and [5]
Outcome based models.
Volvo deal progressing well:
HCLT’s deal with Volvo has been progressing well.
The LOI was signed when it was announced in the previous quarter. Conversion
to revenue is likely to happen 1QFY17 onwards (March-end year).
19 January 2016
5

HCL Technologies
Valuation view
Maintain Buy on healthy near term growth visibility
HCLT’s differentiated positioning in IMS has helped it grow ahead of the industry
average in the last few years and additionally its capabilities in Engineering
Services have compounded to that in CY15. Disconcertingly however, the rapid
decline in margins (522bp over the past seven quarters) created uncertainty
around revival of margins, in combination with couple of quarters of tepid
revenue growth
While 1HFY16 was relatively muted, led by transition in IMS deals and some
softness in select verticals; over foreseeable near-term, visibility is strong, and
opportunities in IMS and Engineering should help drive relatively stronger
growth compared to peers.
1. IMS, which grew at a CAGR of 30% over FY10-15, and contributed 46% of
HCLT’s incremental revenues during this period, saw some slowness in YoY
growth momentum in recent quarters. While this raised fears of competitive
intensity taking its toll, deal signings have remained healthy, and we expect
growth in IMS to remain strong at least in the foreseeable future. HCLT
enjoys a healthy lead as far as scale in IMS is concerned, with FY15 revenue
of USD2.2b+.
2. Total estimated spend on Engineering Services and R&D is USD1.4t, of which
exports from India are pegged at merely USD12.5b. ~50% of this is serviced
out of captives, while the remainder is outsourced to third party vendors
like HCLT. As per Nasscom, ER&D exports will grow to ~USD50b by 2020.
With FY15 revenues of USD1b+, HCLT is the largest provider of outsourced
Engineering Services (18% of HCLT’s revenue).
HCLT trades at 16.2x/13.8x FY16E/F17E EPS. We expect it to post USD revenue
CAGR of 15% over FY16-18E and EPS at a CAGR of 17%, during this period. Our
one-year target price of INR1,000 discounts forward earnings by 15x (v/s 16x
previously). Lower valuation multiple embeds: [1] Relative slackening in
Engineering Services activity v/s a spike in 2HCY14 (though the segment should
still grow above company average), and [2] Risks to IMS growth beyond the
foreseeable future from disruption in the market through cloud / automation /
software-defined infrastructure. While these trends do not rule out HCLT’s
ability to continue gaining share in the market, they do introduce a greater
element of uncertainty than before. Our TP implies 19% upside. Maintain
Buy.
Key triggers
Uptick in quarterly deal wins TCV – led by compounding of Engineering Services
deals to IMS and ITO signings
Return to industry-leading growth
Sustenance of broad-based nature of growth
Key risks
Further decline in margins beyond next couple of quarters
Pull back in IMS growth amid competitive intensity
Discontinuation of traction in Engineering Services or Financial Services
19 January 2016
6

HCL Technologies
Exhibit 8: HCLT 1 year forward PE chart
24
19
14
9
4
5.8
14.3
14.8
PE (x)
Peak(x)
Avg(x)
Min(x)
22.6
Exhibit 9: HCLT 1-year forward PB chart
5.5
4.5
3.5
2.5
1.5
0.5
1.0
3.3
3.8
PB (x)
Peak(x)
Avg(x)
5.1
Min(x)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 10: Comparative valuations
Company
TCS
Infosys
Wipro
HCL Tech
TechM
Cognizant
Mkt cap
(USD b)
67.1
39.2
20.1
17.8
7.4
35.5
Rating
Neutral
Buy
Neutral
Buy
Neutral
Not Rated
TP (INR)
2,575
1,350
625
1,000
570
Upside
(%)
13.0
18.4
15.6
19.3
11.1
EPS (INR)
FY17E
FY18E
136.3
157.1
68.2
76.4
41.6
46.9
61.6
69.7
37.4
44.6
3.1
3.5
P/E (x)
FY17E
FY18E
16.7
14.5
16.7
14.9
13.0
11.6
13.6
12.0
13.7
11.5
18.7
16.6
RoE (%)
FY17E
FY18E
35.6
33.3
25.2
24.8
20.8
20.6
28.1
26.5
21.4
19.4
18.6
17.5
Source: Bloomberg, Company, MOSL
19 January 2016
7

HCL Technologies
Story in charts
Exhibit 11: Opportunity from
continues to remain healthy…
churn
in
rebid
market
Exhibit 12: … and HCLT continues to reap its benefits
through deal wins…
Deals TCV (USD b)
2
1
1
Churn market oppurtunity (USD b)
Dec 2011 estimates
Dec 2013 estimates
1
42 48
2014
28 46
2015
24 34
2016
54
2017
26
2018
1
1
2
1
1
1
Source: Company, MOSL
Source: Company, MOSL
Exhibit 13: IMS growth moderation could impact
future growth, remains strong for now
IMS Revenues
% of overall revenues
% of incremental revenues
68
67
41
49
35
Exhibit 14: Parts apart from IMS adding to incremental
growth
Incremental Revenue Contribution (%)
IMS
67.3
ER&D
67.4
36.5
21.6
8.6
FY12
FY13
9.3
FY14
FY15
1HFY16
48.9
37.1
41
16
23 21
23
30
24
29 29
34
35
30.3
15.9
29.5
21.6
FY09
FY10
FY11
FY12
FY13
FY14
FY15 1HFY16
FY11
Source: Company, MOSL
Source: Company, MOSL
Exhibit 15: Operating margins have bottomed out at current
levels
EBIT margin (%)
SGA (%)
Exhibit 16: …expect PAT growth to be similar to revenue
growth as margins stabilize
PAT (INR m)
63.9
52.6
58.3
87,142
71,057
24,553
40,250
63,709 11.5
55,963
16.8
5.0
13.2
YoY growth (%)
98,686
14.8
14.0
13.3
12.3
12.3
12.7
12.0
12.0
36.8
16,092
13.4
FY11
16.0
FY12
19.7
FY13
24.1
FY14
22.3
FY15
20.5
21.2
21.1
FY11
FY16E FY17E FY18E
Source: Company, MOSL
FY12
FY13
FY14
FY15 FY16E FY17E FY18E
Source: Company, MOSL
19 January 2016
8

HCL Technologies
Exhibit 17: Comparative Valuation
4QFY13 1QFY14
Service Line wise (%)
Application services
Engineering and R&D Services
Infrastructure Services
BPO Services
Vertical wise (%)
BFSI
Manufacturing
Retail & CPG
Telecom MP&E
Life Sciences
Public Services
Others
Geography wise (%)
US
Europe
ROW
Client wise (%)
Top 5 clients
Top 10 clients
Top 20 clients
QoQ Growth (%)
Service Line wise
Application services
Engineering and R&D Services
Infrastructure Services
BPO Services
Vertical wise
BFSI
Manufacturing
Retail & CPG
Telecom MP&E
Life Sciences
Public Services
Others
Geography wise
US
Europe
ROW
Client wise
Top 5 clients
Top 10 clients
Top 20 clients
46.9
17.3
31.5
4.3
25.3
32.7
8.6
10.1
11.3
8.0
4.0
57.0
30.5
12.5
15.4
23.8
33.0
45.8
16.9
33.1
4.2
26.0
33.3
8.3
9.1
11.6
7.8
3.9
57.2
30.2
12.6
15.1
23.8
33.2
2QFY14
45.1
16.6
33.7
4.6
25.9
33.6
8.6
8.9
10.8
9.2
3.1
56.9
31.3
11.8
14.8
23.8
33.6
3QFY14
44.9
16.1
34.5
4.5
26.9
33.3
8.5
8.4
10.4
10.1
2.3
55.4
31.8
12.8
15.0
24.1
34.2
4QFY14
44.2
16.2
34.5
5.1
28.4
31.6
8.5
8.9
10.2
10.1
2.3
54.3
33.0
12.7
14.7
23.7
33.7
1QFY15
43.4
17.1
34.5
5.0
28.2
32.3
9.5
8.7
9.8
9.3
2.2
56.3
32.3
11.4
14.4
23.1
33.0
2QFY15
42.4
18.3
34.4
4.9
26.6
32.9
9.7
8.4
11.1
9.5
1.8
57.4
31.7
10.9
14.0
22.3
32.4
3QFY15
41.5
18.9
34.5
5.1
26.1
33.4
8.4
9.0
11.2
10.4
1.5
57.5
31.0
11.5
13.5
21.8
32.2
4QFY15
40.9
18.7
35.3
5.2
26.0
32.7
8.8
9.5
12.0
9.7
1.3
58.6
30.4
11.0
13.2
21.7
32.4
1QFY16
40.4
19.2
35.1
5.3
26.1
32.5
8.8
9.6
12.4
10.0
0.6
58.7
31.7
9.6
13.6
21.9
32.4
2QFY16
40.4
18.6
35.5
5.5
25.9
31.5
9.5
9.7
12.2
10.6
0.6
61.0
29.9
9.1
13.6
21.7
32.4
-0.7
4.3
8.6
3.1
4.3
18.7
-0.4
55.4
3.1
7.1
-14.1
2.9
8.8
-8.0
3.1
2.2
3.7
0.8
1.4
8.7
1.9
6.2
5.6
-0.7
-6.4
6.8
1.5
-2.6
4.0
2.6
3.2
1.5
3.5
4.1
2.4
2.1
6.0
13.7
3.8
5.0
7.5
1.2
-3.8
21.8
-16.9
3.4
7.8
-2.3
1.9
4.0
5.3
2.9
0.1
5.1
-0.7
6.8
2.0
2.8
-2.6
-0.7
13.9
-20.4
0.4
4.8
11.0
4.4
4.3
4.9
1.6
3.8
3.7
17.7
9.3
-2.1
2.9
9.5
1.4
2.8
2.1
1.3
7.4
2.2
1.3
1.6
1.8
0.0
7.6
1.9
-0.2
1.2
4.4
14.3
-0.4
-2.1
-6.1
-6.7
5.7
-0.3
-8.9
-0.2
-0.7
-0.2
1.6
11.5
3.6
2.0
-1.9
5.9
5.6
0.4
17.9
6.2
-15.8
6.0
2.1
-0.6
1.1
0.4
2.1
-2.1
3.0
0.4
4.1
-2.0
1.3
-13.4
7.1
0.8
9.3
-12.0
0.0
-2.6
7.9
-3.6
-2.3
-0.6
1.6
2.0
5.5
4.8
2.8
1.0
8.1
8.9
10.5
-3.8
-10.6
5.1
1.2
-1.3
0.9
2.7
3.8
-0.7
3.3
-0.1
2.8
0.8
-0.2
0.5
1.5
3.8
3.6
-53.6
0.6
4.8
-12.3
3.5
1.4
0.5
1.4
-1.8
2.6
5.2
0.6
-1.7
9.5
2.5
-0.2
7.5
1.4
5.4
-4.4
-3.9
1.4
0.5
1.4
Source: Company, MOSL
19 January 2016
9

HCL Technologies
Financials and Valuation
Key assumption
INR/USD Rate
Revenues (USD m)
IMS Revenue (USD m)
Software Services Rev (USD m)
Total Headcount
Net Addition
Per Capita Productivity (USD)
2011
44.9
3,545
827
2,523
77,046
12,489
46,015
2011
159,118
26.6
26,312
16.5
4,935
21,377
-541
0
20,836
4,744
22.8
0
16,092
16,092
36.7
2011
2,729
81,616
84,345
21,240
105,585
49,608
27,443
22,165
52,270
19,991
51,809
34,065
5,198
12,546
40,650
11,159
105,585
2012
50.7
4,152
1,005
2,957
84,319
7,273
49,237
2012
210,312
32.2
39,396
18.7
5,641
33,755
-1,170
0
32,585
8,032
24.6
0
24,553
24,553
52.6
2012
2,762
104,552
107,314
19,222
126,536
57,859
33,084
24,775
69,453
19,723
75,325
53,440
6,673
15,212
62,740
12,585
126,536
2013
54.9
4,687
1,367
3,114
85,505
1,186
54,810
2013
257,336
22.4
57,536
22.4
6,726
50,810
1,570
0
52,380
12,130
23.2
0
40,250
40,250
63.9
2013
2,777
140,168
142,945
6,960
149,905
67,093
39,810
27,283
72,046
42,991
88,159
61,767
7,321
19,071
80,574
7,585
149,905
2014
61.4
5,360
1,820
3,293
91,691
6,186
58,454
2014
329,180
27.9
86,670
26.3
7,320
79,350
-160
0
79,190
15,480
19.5
1
63,709
63,710
58.3
2014
2,793
198,021
200,814
7,509
208,323
78,595
47,130
31,465
74,954
89,948
108,537
77,086
10,206
21,245
96,581
11,956
208,323
2015
62.3
5,952
2,064
3,588
106,107
14,416
56,097
2015
370,620
12.6
87,020
23.5
4,440
82,580
7,559
1,551
91,690
19,080
20.8
2
72,608
71,059
11.5
2015
2,797
244,713
247,510
4,690
252,200
89,770
51,570
38,200
82,700
104,450
131,760
94,860
13,520
23,380
104,910
26,850
252,200
2016E*
65.8
4,718
1,684
2,776
108,696
2,589
43,405
2016E*
310,514
-16.2
67,935
21.9
4,154
63,781
7,280
0
71,062
15,099
21.2
0
55,963
55,963
-21.2
2016E*
2,799
279,199
281,999
1,597
283,596
103,442
51,570
51,872
90,777
109,995
138,778
100,673
9,526
28,579
107,826
30,952
283,596
2017E
67.0
7,347
2,994
3,952
130,896
22,200
56,126
2017E
492,224
58.5
109,892
22.3
5,655
104,237
6,772
0
111,009
23,867
21.5
0
87,142
87,142
55.7
2017E
2,802
335,901
338,703
1,597
340,300
111,187
51,570
59,617
97,760
109,995
203,126
121,370
47,186
34,569
130,197
72,928
340,300
2018E
68.5
8,249
3,444
4,341
146,996
16,100
56,114
Income Statement
Y/E Jun
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
(INR Million)
2018E
565,207
14.8
125,884
22.3
6,360
119,525
6,808
0
126,333
27,646
21.9
0
98,686
98,686
13.2
Balance Sheet
Y/E Jun
Share Capital
Reserves
Net Worth
Debt
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Intangibles
Investments
Current Assets
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Net Current Assets
Total Assets
(INR Million)
2018E
2,806
402,415
405,220
1,597
406,817
118,527
51,570
66,957
104,046
109,995
275,973
139,366
96,646
39,961
150,153
125,819
406,817
*FY16 is Estimates are for 9 months and hence growth not comparable
19 January 2016
10

HCL Technologies
Financials and valuation
Ratios
Y/E Jun
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Net Debt/Equity (x)
2011
11.5
15.1
61.8
3.8
32.6
2012
17.5
21.6
77.7
6.0
34.3
2013
28.6
33.3
103.0
6.0
21.0
2014
45.1
50.3
143.8
11.0
24.4
2015
50.4
54.5
177.0
16.0
31.8
2016E*
39.6
42.6
201.5
15.0
37.9
2017E
61.6
65.6
241.7
18.0
29.2
2018E
69.7
74.1
288.9
19.0
27.3
0.0
0.0
0.0
0.0
0.0
0.0
20.8
19.7
48.1
39.1
10.8
5.5
29.4
0.7
25.6
26.8
29.5
25.3
8.2
4.4
19.6
0.7
32.2
33.3
18.7
16.8
5.9
3.3
12.5
1.3
37.1
40.9
16.7
15.5
4.8
2.9
12.2
1.9
31.7
33.9
21.3
19.8
4.2
3.4
15.6
1.8
21.1
22.8
13.7
12.9
3.5
2.1
9.3
2.1
28.1
32.1
12.1
11.4
2.9
1.7
7.8
2.3
26.5
30.7
7.8
74.0
0.2
2011
26,312
-752
-4,836
-4,744
0
15,980
-7,370
8,610
-50
0
-7,420
3,885
-5,392
-6,541
-8,048
512
4,686
5,198
9.0
75.9
0.1
2012
39,396
-9,657
-6,410
-8,032
0
15,297
-15,777
-480
6,727
0
-9,050
8,118
-2,018
-10,871
-4,772
1,475
5,198
6,673
9.9
81.7
0.0
2013
57,536
-2,415
3,843
-12,130
0
46,834
-9,412
37,422
-21,463
0
-30,875
5,134
-12,262
-8,183
-15,311
648
6,673
7,321
11.2
77.0
0.0
2014
86,670
-999
-950
-15,480
0
69,241
-13,412
55,829
-47,493
0
-60,905
12,155
549
-18,156
-5,452
2,884
7,321
10,206
10.6
84.7
0.0
2015
87,020
-7,200
-9,555
-19,080
0
51,185
-10,172
41,013
-16,527
0
-26,699
1,040
-2,819
-19,393
-21,171
3,315
10,206
13,520
6.9
114.9
0.0
2016E*
67,935
-2,660
-7,211
-15,099
0
42,965
-23,243
19,723
-6,430
0
-29,672
3,856
-3,093
-18,051
-17,288
-3,994
13,520
9,526
8.8
82.3
-0.1
2017E
109,892
-6,983
-6,770
-23,867
0
72,272
-13,400
58,872
2,453
0
-10,947
-2
0
-23,663
-23,665
37,660
9,526
47,186
8.9
84.2
-0.2
Cash Flow Statement
Y/E Jun
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
(INR Million)
2018E
125,884
-6,286
-5,639
-27,646
0
86,313
-13,700
72,613
2,208
0
-11,492
-6
0
-25,355
-25,361
49,460
47,186
96,647
*FY16 is Estimates are for 9 months and hence growth not comparable
19 January 2016
11

HCL Technologies
Corporate profile
Company description
HCL Technologies is one of the largest IT services
companies in India, employing over one lakh people.
It is a leader in remote infrastructure management,
engineering and R&D services and has sizeable BPO,
Enterprise Solutions and ADM practices.
Sensex rebased
Source: MOSL/Bloomberg
Shareholding pattern (%)
Promoter
DII
FII
Others
Sep-15
60.6
5.0
28.4
6.1
Jun-15
60.6
4.5
28.9
6.0
Sep-14
61.5
3.6
29.1
5.8
Top holders
Holder Name
NA
NA
NA
NA
NA
% Holding
0.0
0.0
0.0
0.0
0.0
Source: Capitaline
Note: FII Includes depository receipts
Source: Capitaline
Top management
Name
Shiv Nadar
Manish Anand
Designation
Chairman & Chief Strategy
Off.
Company Secretary
Directors
Name
Amal Ganguli
R Srinivasan
Roshni Nadar Malhotra
Srikant Madhav Datar
Sudhindar Krishan Khanna
Name
Keki Mistry
Robin Abrams
Sosale Shankara Sastry
Subramanian Madhavan
Thomas Sieber
Source: Capitaline
*Independent
Auditors
Name
S Chandrasekaran
S R Batliboi & Co LLP
Type
Secretarial Audit
Statutory
MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
MOSL
forecast
40.0
62.2
70.4
Consensus
forecast
53.9
61.8
69.4
Variation (%)
-25.8
0.6
1.4
Source: Bloomberg
Source: Capitaline
19 January 2016
12

HCL Technologies
NOTES
19 January 2016
13

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HCL Technologies
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HCL Technologies
No
No
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