4QFY2011 Result Update | IT

July 27, 2011

HCL Technologies
Performance Highlights
(` cr) Net revenue EBITDA EBITDA margin (%) PAT 4QFY11 4,300 794 18.5 511 3QFY11 4,138 716 17.3 468 % chg (qoq) 3.9 10.8 116bp 9.1 4QFY10 3,425 638 18.6 342 % chg (yoy) 25.5 24.5 (15)bp 49.5

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code IT 34,395 0.9 529/368 97,855 2 18,432 5,547 HCLT.BO HCLT@IN

`503 `578
12 Months

Source: Company, Angel Research

For 4QFY2011, HCL Technologies (HCL Tech) reported a mixed performance. Volume growth came in lower than expected at 3.9% qoq due to moderate volume growth of 3.0% qoq in core software services business. The company signed 20 transformational deals during the quarter. Going ahead, management has indicated that deal booking will be higher in 2HCY2011 as compared to 1HCY2011. HCL Tech has been a beneficiary of the return in demand for enterprise services, and we expect it to ride on spending on discretionary services. The company is expected to post a revenue (USD terms) and PAT CAGR of 22.2% and 30.0%, respectively, over FY201113E. We maintain Buy on the stock. Quarterly highlights: For 4QFY2011, HCL Tech reported revenue of US$963mn, up 5.3% qoq, on the back of 3.9% qoq volume growth and 1.3% qoq benefit due to cross-currency movement. EBITDA and EBIT margin increased by 116bp and 106bp qoq to 18.5% and 15.5% on the back of 1) improvement in utilisation level, 2) lower SG&A investment and 3) higher revenue productivity. PAT came in at `511cr, up 9.1% qoq, aided by forex gain of `8.3cr (the company was making losses on the forex front since 1QFY2009). Outlook and valuation: Management is witnessing a strong demand environment and has signed 20 transformational deals in 4QFY2011 itself on the back of 11 sign-offs in 3QFY2011. We expect HCL Tech to be the outperformer among tier-I IT companies, with a revenue (INR terms) CAGR of 20.6% over FY201113E, on the back of its higher-value services portfolio. At the operating front, levers such as 1) managing SG&A 2) expanding utilisations and 3) turnaround in the BPO segment are expected to improve margins. Thus, we expect EBITDA to grow at a 23.3% CAGR over FY201113E. PAT, on the other hand, is expected to post a much higher CAGR of 30.0%, with improving profitability, forex gains on hedges and treasury gains. We maintain our Buy rating with a target price of `578. Key financials (Consolidated, US GAAP)
Y/E June (` cr) Net sales % chg Net profit % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 64.4 6.1 21.4 8.2

Abs. (%) Sensex HCL Tech

3m (5.2)

1yr 2.0

3yr 29.1 146.2

(2.4) 32.3

FY2009 10,630 39.2 1,277 13.6 22.1 18.8 26.7 6.0 22.5 14.9 3.4 15.4

FY2010 12,564 18.2 1,302 2.0 20.5 18.9 26.6 4.9 18.5 15.3 2.8 13.7

FY2011 16,034 27.6 1,710 31.3 17.1 24.5 20.5 4.1 20.3 15.4 2.2 12.6

FY2012E 19,641 22.5 2,175 27.2 17.2 31.0 16.2 3.5 21.9 17.0 1.7 10.0

FY2013E 23,308 18.7 2,892 32.9 17.9 41.3 12.2 2.9 23.8 18.1 1.4 7.5

Srishti Anand
+91 22 3935 7800 Ext: 6820 srishti.anand@angelbroking.com

Ankita Somani
+91 22 3935 7800 Ext: 6819 ankita.somani@angelbroking.com

Please refer to important disclosures at the end of this report

HCL Technologies | 4QFY2011 Result Update

Exhibit 1: 4QFY2011 performance (Consolidated, US GAAP)

Y/E June (` cr) Net revenue Cost of revenue Gross profit SG&A expense EBITDA Dep. and amortisation EBIT Other income PBT Income tax PAT Forex loss Adjusted PAT EPS Gross margin (%) EBITDA margin (%) EBIT margin (%) PAT margin (%)
Source: Company, Angel Research

4QFY2011 4,300 2,906 1,393 599 794 129 665 7 672 170 502 8 511 7.3 32.4 18.5 15.5 11.9

3QFY2011 4,138 2,812 1,326 610 716 120 596 13 609 130 479 (11) 468 6.7 32.0 17.3 14.4 11.3

% chg (qoq) 3.9 3.3 5.1 (1.7) 10.8 7.4 11.5 10.4 30.7 4.8 (174.1) 9.1 9.1 36bp 116bp 106bp 58bp

4QFY2010 3,425 2,292 1,133 495 638 113 525 (21) 504 25 479 (137) 342 5.0 33.1 18.6 15.3 10.0

% chg (yoy) 25.5 26.8 23.0 21.1 24.5 14.0 26.8 33.4 569.1 5.0 (106.1) 49.5 47.1 (66)bp (15)bp 15bp 182bp

FY2011 16,034 10,914 5,120 2,371 2,749 498 2,251 26 2,277 485 1,791 (82) 1,709 24.5 31.9 17.1 14.0 10.6

FY2010 12,564 8,196 4,369 1,796 2,573 501 2,072 (55) 2,017 240 1,778 (481) 1,302 18.9 34.8 20.5 16.5 10.4

% chg (yoy) 27.6 33.2 17.2 32.0 6.8 (0.7) 8.7 12.9 101.9 0.7 (83.0) 31.3 29.5 (284)bp (333)bp (245)bp 23bp

Exhibit 2: 4QFY2011 Actual vs. Angel estimates

(` cr) Net revenue EBITDA margin (%) PAT
Source: Company, Angel Research

Actual 4,300 18.5 511

Estimate 4,340 18.6 516

Variation (%) 0.9 (15)bp 1.0

Growth momentum continues

For 4QFY2011, HCL Tech reported revenue of US$962.9mn, up 5.3% qoq. This growth was on the back of 3.9% qoq volume growth and 1.3% qoq benefit because of cross-currency movement derived due to USD depreciation of 1.8%, 5.2% and 5.7% qoq as against the GBP, Euro and AUD, respectively. Pricing remained flat during the quarter. In constant currency (CC) terms, revenue grew by 3.9% qoq to US$950.1mn. Growth again proved to be broad-based, spanning across verticals, geographies and service lines. HCL Techs revenue growth was led by modest volume growth of 3.0% in core software services and strong USD revenue growth of 9.2% qoq in CC terms in infrastructure services. Volume growth of 3.0% qoq in core software services was on account of 3.0% qoq volume growth offshore as well as onsite.

July 27, 2011

HCL Technologies | 4QFY2011 Result Update

Exhibit 3: Volume growth trend (Effort wise)

12 10 8
(%)

10.9 10.3 10.5 7.9 7.7 7.9 7.1 5.6 6.7 5.6 4.9 3.0 3.0 3.0 3.0

6 4 2 0 4QFY10 1QFY11 Offshore

2QFY11 Onsite

3QFY11 Total

4QFY11

Source: Company, Angel Research

In INR terms, revenue came in at `4,299.5cr, up 3.9% qoq; lower growth as against dollar revenue was due to 1.0% qoq INR appreciation against USD in 4QFY2011. Core software continues its growth momentum, albeit at a slower pace: During the quarter, core software services posted decent 4.3% qoq revenue growth (USD terms) to US$679.0mn, led by 3.0% qoq volume growth. This was on the back of USD revenue growth of 5.2%, 2.5% and 1.7% qoq (CC terms) in engineering and R&D services (ERD) (contributed 17.8% to revenue), custom application services (contributed 31.8% to revenue) and enterprise application services (EAS) (contributed 20.9% to revenue). In EAS, the company is witnessing continued traction from the consolidation of projects (multi-platform to single-platform) and upgradation of existing systems. In terms of ERP, hi-tech and aerospace continue to drive IT spends with energy and utilities showing signs of growth potential. Infrastructure services led to strong growth: The infrastructure services segment reported whopping 10.5% qoq growth in revenue (USD terms) to US$236.2mn on the back of strong 9.2% qoq growth (CC terms) in infrastructure management services (IMS), contributing 24.5% to revenue; and cross-currency benefit of 1.3%. 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. A large part of the deal flow is from existing clients due to contract renewals. BPO declines: The BPO segment, which has returned to its growth path since the last couple of quarters, again posted a decline in revenue by 4.4% qoq at US$47.7mn. In CC terms, the segment reported a 5.7% qoq decline. The demand environment is heating up as clients are looking at globalisation of delivery capabilities, which is driving transformation and enterprise-wide cost efficiency. The company is continuously investing in building platforms for non voice-based businesses in this segment. The company is expected to invest US$5mn6mn every quarter in BPO services until CY2011 and BPO is expected to breakeven from CY2012.

July 27, 2011

HCL Technologies | 4QFY2011 Result Update

Exhibit 4: 4QFY2011 performance (Segment wise)

(US$ mn) SOFTWARE SERVICES Revenue Gross profit Gross margin (%) EBITDA EBITDA margin (%) EBIT EBIT margin (%) INFRASTRUCTURE SERVICES Revenue Gross profit Gross margin (%) EBITDA EBITDA margin (%) EBIT EBIT margin (%) BPO SERVICES Revenue Gross profit Gross margin (%) EBITDA EBITDA margin (%) EBIT EBIT margin (%)
Source: Company, Angel Research

4QFY11 679 235 34.7 132 19.5 114 16.8

3QFY11 651 225 34.5 119 18.3 103 15.8

% chg qoq 4.3 4.8 15bp 11.1 119bp 10.9 100bp

4QFY10 527 192 36.4 111 21.1 95 18.0

% chg yoy 28.9 22.9 (170)bp 18.9 (165)bp 20.5 (117)bp

236 68 28.6 46 19.6 39 16.5

214 59 27.7 41 19.0 34 15.7

10.5 14.4 96bp 14.0 60bp 16.1 79bp

165 47 28.3 31 18.8 25 15.1

42.9 44.4 31bp 49.2 83bp 56.2 141bp

48 9 19.3 (1) (1.9) (4) (8.2)

50 9 18.9 (2) (3.2) (5) (9.0)

(4.4) (2.1) 44bp (43.8) 132bp (13.3) 85bp

46 6 12.5 (5) (11.4) (7) (14.3)

4.7 61.4 678bp (82.7) 954bp (40.0) 610bp

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

15 10 5
(%)

0 (5) 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11

(10) (15) EAS ERD Custom application IMS BPO services

Source: Company, Angel Research

July 27, 2011

HCL Technologies | 4QFY2011 Result Update

HCL Techs anchor industry segments, financial services (contributed 26.0% to revenue) and manufacturing (contributed 28.0% to revenue) continued their growth momentum and reported 2.0% and 7.6% qoq growth (CC terms) in revenue, respectively. In the financial services space, IT spend is coming from work related to regulatory compliance, risk prevention and data analytics. 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 US and Europe. The energy, utilities and public sector (EPU) segment emerged as the companys primary growth driver, with its revenue growing by 18.7% qoq (CC terms). In addition, media, publishing and entertainment (MPE) and healthcare posted revenue growth of 11.7% and 2.9% qoq (CC terms), respectively. However, the retail and consumer product group (CPG) vertical and the telecom vertical again reported a decline in revenue by 5.2% and 8.3% qoq (CC terms), respectively, in 4QFY2011. Management has indicated that the retail vertical 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 (%) Financial services Manufacturing Telecom Retail and CPG MPE Healthcare EPU Others
Source: Company, Angel Research

4QFY10 8.3 10.4 2.9 19.6 1.5 19.3 6.8 5.7

1QFY11 7.2 7.9 7.2 11.2 1.3 10.5 6.5 4.5

2QFY11 3.3 6.7 5.0 14.2 6.0 7.1 12.3 4.8

3QFY11 10.5 6.1 (0.3) (0.4) 1.7 0.5 6.3 1.3

4QFY11
2.0 7.6 (8.3) (5.2) 11.7 2.9 18.7 5.5

During the quarter, HCL Tech reported growth across all geographies. Revenue from North America and Europe grew by 5.5% qoq and 3.0% qoq (CC terms), respectively, while rest of the world posted just 0.7% qoq growth (CC terms).

July 27, 2011

HCL Technologies | 4QFY2011 Result Update

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

22 18 14 11.3 13.4 9.1 4.2 2 (2) 4QFY10 1QFY11 US
Source: Company, Angel Research

16.7

20.5

10.8

(%)

10 6

5.8 2.8 4.2 5.8 0.7 3QFY11

5.5 3.0 0.7

2QFY11 Europe

4QFY11

Rest of the world

Hiring spree continues

During the quarter, HCL Tech added 9,572 gross employees, out of which 6,267 were lateral additions. The company added 3,626 net employees, taking its total employee base to 77,046. In the core software services segment, 4,763 gross and 2,416 net employees were added during the quarter, taking the segments total employee base to 50,218. Gross lateral employee addition in this segment stood robust at 2,244, which indicates that the company is witnessing a strong deal pipeline for transformational projects. Attrition rate for the core software services segment declined by 50bp qoq to 16.3% (LTM basis) during the quarter. The infrastructure services segment, which has been growing at a scorching pace since the last few quarters, reported net addition of 1,533 employees in 4QFY2011, taking the segments total employee base to 16,267. Gross addition in the segment stood at 2,323 employees, out of which 1,537 were laterals. Attrition rate for this segment declined by 60bp qoq to 17.0% (LTM basis). The BPO segment again witnessed employee rationalisation in 4QFY2011, reporting a reduction of 323 net employees, taking the segments total employee base to 10,561. However, the company added 2,486 gross employees (all laterals) in the BPO segment during the quarter. The quarterly offshore attrition rate for this segment declined by 180bp qoq to 9.2% during the quarter.

July 27, 2011

HCL Technologies | 4QFY2011 Result Update

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

4QFY10
Net additions Software services Infrastructure services BPO Total employees Software services Infrastructure services BPO

1QFY11 4,347 980 334 45,460 13,200 11,558

2QFY11 1,475 784 (210) 46,935 13,984 11,348

3QFY11 867 750 (464) 47,802 14,734 10,884

4QFY11
2,416 1,533 (323) 50,218 16,267 10,561

4,944 465 1,019 41,113 12,220 11,224

Source: Company, Angel Research

Utilisation, onsite and offshore-excluding trainees, declined by 30bp and 20bp qoq to 96.2% and 76.1%, respectively. Utilisation level, offshore-including trainees, improved by 60bp qoq to 72.5%. The company is trying to improve its utilisation level (including trainees) further to 7475%, which can be an important lever to improve margins.

Exhibit 9: Utilisation trend (%)

100 95.2 95.7 95.9 96.5 96.2

90

(%)

80

77.0

74.1

75.0

76.3

76.1

70

72.9

70.1

70.1

71.9

72.5

60 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 Onsite

Offshore - Including trainees

Source: Company, Angel Research

Offshore - Excluding trainees

EBIT margin enhances

During 4QFY2011, HCL Techs EBITDA and EBIT margins increased by 116bp and 106bp qoq to 18.5% and 15.5%, respectively. The improvement in EBIT margin was on account of 1) improvement in utilisation level (offshore including trainees), 2) lower SG&A investment and 3) higher productivity. EBIT margin growth was because of 50bp positive effect derived on account of operational efficiency, including higher utilisation and 67bp positive impact due to SG&A optimisation. However, the exchange rate negatively affected EBIT margin by 12bp qoq due to 1.0% qoq INR appreciation against USD.

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HCL Technologies | 4QFY2011 Result Update

Exhibit 10: Margin profile

35 30 25
(%)

33.1

31.6

31.6

32.0

32.4

20 15

18.6 16.3 15.3 16.3

17.3

18.5

10 4QFY10

12.9 1QFY11 Gross margin

13.1 2QFY11 EBITDA margin

14.4 3QFY11

15.5

4QFY11

EBIT margin

Source: Company, Angel Research

HCL Tech has been expanding its margins since the last three quarters. Going ahead, in 1QFY2012, the company has announced wage hikes of 1214% for offshore employees and 2-4% for onsite employees, which will negatively impact operating margins by 300350bp. Segment wise, EBIT margin for core software services and infrastructure services increased by 100bp and 79bp qoq to 16.8% and 16.5%, respectively, in 4QFY2011. The BPO segment again managed to pull up its gross margin by 44bp qoq to 19.3%. Also, at the EBITDA and EBIT level, the segment trimmed down its losses with margins improving by 132bp and 85bp qoq, respectively. The BPO segment is expected to breakeven in 1QCY2012.

Exhibit 11: BPO segment Margin trend

24 18 12 12.4 18.1 19.5 18.9 19.2

(%)

6 0 (6) (11.4) (14.3) 4QFY10 (8.7) (8.1) (14.8) 1QFY11

Gross margin

(4.9)

(3.2)

(1.9)

(12) (18)

(11.0) 2QFY11
EBITDA margin

(9.1)

3QFY11

4QFY11
EBIT margin

Source: Company, Angel Research

July 27, 2011

HCL Technologies | 4QFY2011 Result Update

Client pyramid strengthens

During the quarter, HCL Tech enhanced its client pyramid with the addition of 70 new clients. One client moved from the US$40mn50mn bracket to the US$50mn100mn bracket. The company added three clients in the US$30mn40mn bracket, one client in the US$20mn30mn bracket and four clients in the US$5mn10mn bracket. Active client base of the company increased to 467 in 4QFY2011 from 453 in 3QFY2011. The companys top clients also registered decent growth, with revenue from the top 5, top 10 and top 20 clients growing by 1.3%, 4.0% and 4.2% qoq (LTM basis), respectively. The company won 20 transformational deals during the quarter. These deals span across all services lines and verticals.

Exhibit 12: Client pyramid

Particulars Active client relationship New client relationship US$1mn5mn US$5mn10mn US$10mn20mn US$20mn30mn US$30mn40mn US$40mn50mn US$50mn100mn US$100mn plus
Source: Company, Angel Research

4QFY10 408 51 176 49 34 12 5 2 4 1

1QFY11 426 48 180 48 38 12 7 1 5 1

2QFY11 434 46 199 46 39 12 7 2 6 1

3QFY11 453 58 205 49 39 12 9 2 7 1

4QFY11 467 70 206 53 38 13 12 1 8 1

Outlook and valuation

HCL Tech has recorded a 6.9% CQGR in revenue over the past four quarters. This is primarily on the back of discretionary services such as EAS and custom applications coming back strongly for the company, recording a CQGR of 5.3% and 8.8% over AMJ201011, respectively. In addition, the companys anchor service line, infrastructure services maintained its growth momentum at a 9.3% CQGR over AMJ201011. Verticals such as financial services, manufacturing and EPU have proved to be the growth drivers for the company. 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 20 large deals in 4QFY2011 itself, most being transformational deals, on the back of 11 sign-offs in 3QFY2011. Management indicated 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 company like 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 a revenue (INR terms) CAGR of 20.6%% 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 utilisations and 3)
July 27, 2011

HCL Technologies | 4QFY2011 Result Update

turnaround in the BPO segment on top of strong growth are expected to improve the companys margins. Thus, we expect EBITDA to grow at a 23.3% CAGR over FY201013E. PAT, on the other hand, is expected to post a much higher CAGR of 30.0%, with improving profitability, forex gains on hedges and treasury gains. At the CMP of `503, the stock is trading at 12.2x FY2013E EPS of `41.3. The outperformance registered by the company warrants the discount to Infosys to be bridged. Thus, we value the company at 14x FY2013E EPS i.e., at a discount of 30% to Infosys target multiple of 20x (vs. historical discount of 3540%). We maintain our Buy view on the stock with a target price of `578.

Exhibit 13: Key assumptions

FY2012E Revenue growth (US$) USD-INR rate (realised) Revenue growth (INR) EBITDA margin (%) EBIT margin (%) Tax rate (%) EPS growth (%)
Source: Company, Angel Research

FY2013E 19.5 44.0 18.7 17.9 15.1 23.0 32.9

25.0 44.3 22.5 17.2 14.2 25.0 26.7

Exhibit 14: Change in estimates

FY2012E Parameter (` cr) Net revenue EBITDA Other income PBT Tax PAT Earlier estimates 19,451 3,517 93 3,037 729 2,320 Revised estimates 19,641 3,374 90 2,885 721 2,175 Variation (%) 1.0 (4.1) (2.7) (5.0) (1.0) (6.2) Earlier estimates 23,391 4,325 236 3,894 974 2,934 FY2013E Revised estimates 23,308 4,179 225 3,737 860 2,891 Variation (%) (0.4) (3.4) (4.7) (4.0) (11.7) (1.5)

Source: Company, Angel Research

July 27, 2011

10

HCL Technologies | 4QFY2011 Result Update

Exhibit 15: One-year forward PE (x) chart

850 750 650 550

(`)

450 350 250 150 50 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Price 19x 16x 13x 10x 6x

Source: Company, Angel Research

Exhibit 16: Recommendation summary

Company 3iInfotech Educomp Everonn HCL Tech Hexaware Infosys Infotech Enterprises KPIT Cummins MindTree Mphasis NIIT^ Persistent TCS Tech Mahindra Wipro Reco Neutral Buy Neutral Buy Accumulate Accumulate Accumulate Accumulate Accumulate Accumulate Buy Buy Buy Neutral Neutral CMP (`) 42 362 544 503 82 2,796 135 187 418 437 56 357 1,147 788 403 Tgt Price (`) 522 578 88 3,200 145 206 445 499 69 424 1,368 Upside (%) 44.1 15.0 7.3 14.4 7.2 9.9 6.6 14.1 24.1 18.8 19.3 Target P/E (x) 10 14 11.5 20 9 12 11 11 10 11 22 FY2013 EBITDA (%) 21.5 46.7 33.5 17.9 15.1 30.6 16.1 16.1 13.3 17.2 13.8 19.5 28.9 18.3 18.7 FY2013E P/E (x) 3.6 7.0 12.9 12.2 10.7 17.5 8.3 11.1 10.3 9.8 8.0 9.3 18.4 14.0 15.4 FY2011-13E EPS CAGR (%) (4.3) 17.7 27.7 29.8 63.4 15.7 13.9 21.8 27.5 9.2 11.2 5.1 18.4 6.8 9.9 FY2013E RoCE (%) 12.0 16.4 15.5 18.1 16.8 24.7 15.2 20.6 16.9 16.8 12.4 16.6 30.2 14.9 13.8 FY2013E RoE (%) 15.1 17.0 16.7 23.8 17.8 22.7 13.4 17.7 15.4 16.8 16.6 15.4 31.3 15.6 19.8

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

July 27, 2011

11

HCL Technologies | 4QFY2011 Result Update

Profit and loss statement (Consolidated, US GAAP)

Y/E June (` cr) Net sales Cost of revenues Gross profit % of net sales SG&A expenses % of net sales EBITDA % of net sales Dep. and amortization % of net sales EBIT % of net sales Other income, net Profit before tax Provision for tax % of PBT PAT Share from equity invst. Forex loss Adj. net profit EPS (`) FY2009 10,630 6,625 4,005 37.7 1,661 15.6 2,345 22.1 449 4.2 1,895 17.8 164 2,058 254 12.4 1,803 3 (530) 1,277 18.8 FY2010 12,564 8,196 4,369 34.8 1,796 14.3 2,573 20.5 501 4.0 2,072 16.5 (55) 2,017 240 11.9 1,777 1 (476) 1,302 18.9 FY2011 16,034 10,914 5,120 31.9 2,371 14.8 2,749 17.1 498 3.1 2,251 14.0 26 2,277 485 21.3 1,791 (82) 1,710 24.5 FY2012E 19,641 13,579 6,063 30.9 2,689 13.7 3,374 17.2 580 3.0 2,794 14.2 90 2,885 721 25.0 2,164 12 2,175 31.0 FY2013E 23,308 16,383 6,926 29.7 2,746 11.8 4,180 17.9 667 2.9 3,513 15.1 225 3,738 860 23.0 2,878 13 2,892 41.3

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12

HCL Technologies | 4QFY2011 Result Update

Balance sheet (Consolidated, US GAAP)

Y/E June (` cr) Cash and cash equivalent Account receivables, net Unbilled receivables Deposit with banks Deposit (one year with HDFC ltd) Investment securities, available for sale Other current assets Total current assets Property and equipment, net Intangible assets, net Deposits with HDFC Ltd. Fixed deposits with banks Investment securities HTM Investment in equity investee Other assets Total assets Current liabilities Borrowings Other liabilities Total liabilities Minority interest Total stockholder equity Total liabilities and stock holder equity FY2009 FY2010 FY2011 FY2012E FY2013E 420 2,708 1,456 23 1,070 5,678 1,586 4,533 20 17 861 12,694 3,268 2,977 763 7,008 5,686 12,694 469 2,514 536 1,091 100 782 885 6,376 1,849 4,312 50 21 964 13,571 3,133 2,663 739 6,535 7,037 13,572 520 2,591 816 1,079 643 1,255 6,902 2,217 4,188 50 110 95 23 1,039 14,624 3,376 2,124 689 6,189 8,435 14,624 566 3,067 982 1,789 651 1,277 8,332 2,509 4,115 54 110 100 24 1,200 16,444 3,802 1,809 912 6,523 9,921 16,444 632 3,640 1,165 3,174 1,058 1,398 11,067 2,711 4,046 54 110 100 20 1,250 19,358 4,587 1,519 1,101 7,207 12,152 19,358

July 27, 2011

13

HCL Technologies | 4QFY2011 Result Update

Cash flow statement (Consolidated, US GAAP)

Y/E June (` cr) Pre tax profit from operations Depreciation Expenses (deferred)/written off Pre tax cash from operations Other income/prior period ad Net cash from operations Tax Cash profits (Inc)/dec in current assets Inc/(dec) in current liabilities Net trade working capital Cash flow from oper. actv. (Inc)/dec in fixed assets (Inc)/dec in intangibles (Inc)/dec in investments (Inc)/dec in minority interest (Inc)/dec in non-current liab. (Inc)/dec in non-current assets Cash flow from invest. actv. Inc/(dec) in debt Inc/(dec) in equity/premium Dividends Cash flow from financing actv. Cash generated/(utilised) Cash at start of the year Cash at end of the year FY2009 1,893 449 (573) 1,770 164 1,934 (254) 1,680 (1,429) 1,497 68 1,747 (609) (3,669) 491 (6) 168 (355) (3,980) 2,950 (145) (617) 2,188 (44) 465 420 FY2010 2,072 501 (564) 2,009 (55) 1,954 (240) 1,714 (156) (135) (290) 1,424 (652) 109 (528) (25) (103) (1,199) (314) 778 (640) (176) 48 420 469 FY2011 2,251 498 (172) 2,577 26 2,603 (485) 2,117 (727) 243 (484) 1,633 (797) 56 45 (50) (75) (821) (539) 394 (615) (761) 51 469 520 FY2012E 2,794 580 (62) 3,312 90 3,403 (721) 2,681 (665) 426 (239) 2,442 (800) 0 (729) 224 (161) (1,466) (315) (0) (615) (930) 46 520 566 FY2013E 3,513 667 (33) 4,148 225 4,373 (860) 3,513 (878) 785 (93) 3,420 (800) 0 (1,788) 188 (50) (2,449) (290) (0) (615) (905) 66 566 632

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HCL Technologies | 4QFY2011 Result Update

Key ratios
Y/E June Valuation ratio (x) P/E (on FDEPS) P/CEPS P/BVPS Dividend yield (%) EV/Sales EV/EBITDA EV/Total assets Per share data (`) EPS (Fully diluted) Cash EPS Dividend Book value Dupont analysis Tax retention ratio (PAT/PBT) Cost of debt (PBT/EBIT) EBIT margin (EBIT/Sales) Asset turnover ratio (Sales/Assets) Leverage ratio (Assets/Equity) Operating ROE Return ratios (%) RoCE (pre-tax) Angel RoIC RoE Turnover ratios (x) Asset turnover (fixed assets) Receivables days 2.2 79 1.8 76 2.2 59 2.5 57 2.9 57 14.9 17.6 22.5 15.3 18.7 18.5 15.4 18.3 20.3 17.0 20.9 21.9 18.1 24.4 23.8 0.9 1.1 0.2 0.8 2.2 31.7 0.9 1.0 0.2 0.9 1.9 25.2 0.8 1.0 0.1 1.1 1.7 21.2 0.8 1.0 0.1 1.2 1.7 21.8 0.8 1.1 0.2 1.2 1.6 23.7 18.8 25.5 8.0 83.9 18.9 26.2 8.0 102.2 24.5 31.8 8.0 121.4 31.0 39.6 8.0 142.7 41.3 51.2 9.0 174.8 26.7 19.7 6.0 1.6 3.4 15.4 2.8 26.6 19.2 4.9 1.6 2.8 13.7 2.6 20.5 15.8 4.1 1.6 2.2 12.6 2.4 16.2 12.7 3.5 1.6 1.7 10.0 2.0 12.2 9.8 2.9 1.8 1.4 7.5 1.6 FY2009 FY2010 FY2011 FY2012E FY2013E

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HCL Technologies | 4QFY2011 Result Update

Research Team Tel: 022 - 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

HCL Tech No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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