Sie sind auf Seite 1von 16

2QFY2012 Result Update | IT

January 17, 2012

HCL Technologies
Performance Highlights
(` cr) Net revenue EBITDA EBITDA margin (%) PAT 2QFY12 5,245 970 18.5 573 1QFY12 4,651 795 17.1 497 % chg (qoq) 12.8 22.1 141bp 15.2 2QFY11 3,888 635 16.3 400 % chg (yoy) 34.9 52.9 218bp 43.3

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 29,053 1.1 528/360 97,788 2 16,466 4,967 HCLT.BO HCLT@IN

`425 `520
12 Months

Source: Company, Angel Research

For 2QFY2012, HCL Technologies (HCL Tech) reported a modest set of numbers. The highlights of the result were the 4.9% qoq overall volume growth and 5.7% qoq onsite volume growth in core software services. The company signed 18 deals during the quarter, with total contract value of these deals being more than US$1bn. Management has indicated that deal bookings in CY2012 will be coming from deal renewals, which is indicated by TPI data according to which ~US$47bn of restructuring deals are coming for renewals in CY2012. HCL Tech has been a beneficiary of the return in demand for enterprise services, and we expect it to ride on the spending on discretionary services. We maintain our Buy rating on the stock. Quarterly highlights: For 2QFY2012, HCL Tech reported revenue of US$1,022mn, up 2.0% qoq, on the back of 4.9% qoq volume growth. In INR terms, revenue came in at `5,245cr, up by whopping 12.8% qoq, aided by INR depreciation. EBITDA and EBIT margins of the company expanded by 141bp and 156bp qoq to 18.5% and 15.8%, respectively, because of 260bp positive impact on account of INR depreciation during the quarter. PAT came in at `573cr, negatively affected by `76cr forex loss. Outlook and valuation: Management is witnessing a strong demand environment and has signed 18 multi-year, multi-million dollar deals during the quarter, excluding contract renewals. Total contract value of these deals exceeds US$1bn. We expect HCL Tech to be the outperformer among tier-I IT companies, with USD and INR revenue CAGR of 16.3% and 22.3%, respectively, over FY201113E, on the back of its higher-value services portfolio, which is set to address the current demand landscape. EBITDA and PAT are expected to grow at a 20.0% and 22.1% CAGR over FY201113E. We maintain our Buy rating on the stock with a target price of `520. 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 64.3 6.7 20.5 8.5

Abs. (%) Sensex HCL Tech

3m

1yr

3yr 76.6

(3.3) (12.8)

(3.2) (10.7) 260.9

FY2009 10,630 39.2 1,277 13.6 22.1 18.8 22.5 5.1 22.5 14.9 2.9 13.0

FY2010 12,564 18.2 1,310 2.6 20.5 19.0 22.3 4.2 18.6 15.3 2.4 11.5

FY2011 16,034 27.6 1,874 43.0 18.2 26.8 15.8 3.5 22.2 16.5 1.8 10.0

FY2012E 20,767 29.5 2,361 26.0 18.6 33.7 12.6 2.9 23.5 20.9 1.4 7.7

FY2013E 23,979 15.5 2,804 18.8 17.5 40.0 10.6 2.4 23.1 20.9 1.2 6.9

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 | 2QFY2012 Result Update

Exhibit 1: 2QFY2012 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

2QFY12 5,245 3,514 1,731 761 970 139 831 9 840 191 649 (76) 573 8.2 33.0 18.5 15.8 10.9

1QFY12 4,651 3,187 1,464 669 795 131 664 24 688 173 515 (18) 497 7.1 31.5 17.1 14.3 10.6

% chg (qoq) 12.8 10.3 18.2 13.7 22.1 6.5 25.1 22.1 10.6 25.9 323.5 15.2 15.3 152bp 141bp 156bp 27bp

2QFY11 3,888 2,661 1,227 592 635 124 511 5 516 103 413 (13) 400 5.8 31.6 16.3 13.1 10.3

% chg (yoy) 34.9 32.0 41.1 28.4 52.9 12.6 62.6 62.6 85.4 57.0 465.7 43.3 42.0 145bp 218bp 270bp 63bp

1HFY12 9,897 6,701 3,195 1,430 1,765 270 1,495 33 1,527 364 1,163 (94) 1,070 15.3 32.3 17.8 15.1 10.8

1HFY11 7,596 5,179 2,418 1,162 1,255 249 1,006 6 1,012 186 827 (79) 748 10.8 31.8 16.5 13.2 9.8

% chg (yoy) 30.3 29.4 32.2 23.0 40.6 8.6 48.5 50.9 96.2 40.7 18.8 43.0 41.7 46bp 131bp 186bp 94bp

Exhibit 2: 2QFY2012 Actual vs. Angel estimates


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

Actual 5,245 18.5 573

Estimate 5,263 19.6 629

Variation (%) (0.3) (114)bp (8.9)

INR depreciation brings in cheer


For 2QFY2012, HCL Tech reported revenue of US$1,022mn, up 2.0% qoq, on the back of 4.9% qoq volume growth. Cross-currency movement impacted the companys USD revenue by 1.7% qoq. Pricing declined by 1.0% qoq, but it is expected to remain flat going ahead. In constant currency (CC) terms, revenue grew by 3.7% qoq to US$1,038.9mn. HCL Techs revenue growth was led by modest volume growth of 4.6% in core software services; however, USD revenue of infrastructure services declined by 0.7% qoq in CC terms. Volume growth of 4.9% qoq in core software services was on account of 4.6% and 5.7% volume growth offshore and onsite, respectively.

January 17, 2012

HCL Technologies | 2QFY2012 Result Update

Exhibit 3: Volume growth trend (Effort wise)


8 7 6 5
(%)

7.1 6.7 5.6 5.6 4.9 3.7 4.9 4.0 3.0 3.0 4.6 5.7 4.9

4 3 2 1 0 2QFY11 3QFY11 Offshore 3.0

3.0

4QFY11 Onsite

1QFY12 Total

2QFY12

Source: Company, Angel Research

In INR terms, revenue came in at `5,245cr, up by whopping 12.8% qoq; higher growth as against USD revenue growth was due to qoq INR depreciation against USD. Core software services led the companys growth: During the quarter, core software services (contributed 72% to revenue) posted reasonable 3.8% qoq revenue growth (USD terms) to US$736.4mn, led by 4.9% qoq volume growth. In CC terms, revenue growth in core software services came in at 5.3% qoq. This was on the back of USD revenue growth of 6.5%, 4.0% and 5.4% qoq (CC terms) in enterprise application services (EAS, contributed 20.3% to revenue), engineering and R&D services (ERD, contributed 18.9% to revenue) and custom application services (contributed 32.8% to revenue). In EAS, the company is witnessing traction from areas like mobility, data analytics and cloud. Infrastructure services decline, a negative surprise: The infrastructure management services (IMS) segment (contributed 23.45 to revenue) reported a 2.9% qoq decline in its revenue (USD terms) to US$239.1mn. In CC terms, revenue of IMS declined by 0.7% qoq. Cross-currency movement severely impacted IMS revenue by 2.2%. Management indicated that this is basically due to softness in India business; globally IMS is doing well. The company has to stop few system integration projects in India due to sharp INR depreciation, which made these projects unviable for HCL Tech. The company is currently in the process of renegotiations for the above-mentioned contracts and expects to again start soon. Currently, the segment is witnessing continued demand traction for technology and operational transformation outsourcing as well as system integration. Continental Europe and emerging markets are focusing on reducing operations cost, which is driving transformational outsourcing. BPO services: The BPO segment reported almost flat qoq revenue growth with revenue coming at US$46.4mn. In CC terms, the segment reported 1.6% qoq growth in revenue. The demand environment is heating up as clients are looking at globalization of delivery capabilities, which is driving transformation and enterprise-wide cost efficiency. The company is continuously investing in building platforms for non voice-based businesses in this segment. Demand is seen in areas of cloud, mobility, social media and multi-tower end-to-end process data.
January 17, 2012

HCL Technologies | 2QFY2012 Result Update

Exhibit 4: 2QFY2012 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

2QFY12 736 259 35.1 144 19.6 127 17.3

1QFY12 709 238 33.6 128 18.0 109 15.4

% chg qoq 3.8 8.6 154bp 13.0 160bp 16.3 185bp

2QFY11 618 210 34.0 108 17.5 90 14.6

% chg yoy 19.2 23.2 115bp 33.5 210bp 40.9 265bp

239 69 28.7 46 19.2 38 15.9

246 68 27.5 45 18.1 37 15.0

(2.9) 1.5 124bp 3.1 113bp 3.0 91bp

197 53 27.0 36 18.0 29 14.5

21.4 29.4 176bp 29.3 117bp 33.2 141bp

46 10 21.1 (1) (2.2) (4) (7.5)

46 10 20.7 (1) (1.5) (3) (7.3)

(0.1) 2.1 46bp (65)bp (23)bp

50 10 19.6 (2) (4.8) (5) (10.9)

(6.2) 1.0 152bp 269bp 337bp

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


10 8 6 4
(%)

7.7 5.7 5.1 1.6 5.2

9.2

8.6 7.3 5.8

6.5

5.4 4.0 1.6

2 0 (2) (4) (6) (8)

1.7

2.5

3QFY11

(1.0)

4QFY11

(0.6) 1QFY12(1.3)

(0.7) 2QFY12

(5.7) EAS ERD Custom application IMS BPO services

Source: Company, Angel Research

January 17, 2012

HCL Technologies | 2QFY2012 Result Update

HCL Techs anchor industry segments, financial services (contributed 25.3% to revenue) and manufacturing (contributed 29.5% to revenue), continued their growth momentum and reported 6.1% and 4.6% qoq growth (CC terms) in revenue, respectively. In the financial services space, IT-related spend is coming from work related to regulatory compliance, efficiency gains, cost optimization and vendor churning. Demand in the manufacturing space is coming for business needs related to operational efficiency, cost reduction and product development. Also, in the manufacturing segment, pent-up demand is seen for transformation projects related to digital transformation, mobility and multi-channel commerce in the U.S. and Europe. The healthcare industry segment emerged as the companys primary growth driver, with its revenue growing by 16.9% qoq (CC terms). In addition, the retail and consumer product group (CPG) industry segment posted revenue growth of 7.8% qoq in CC terms. On the other hand, the energy, utilities and public sector (EPU), telecom and media, publishing and entertainment (MPE) segments posted a 15.8%, 3.1% and 2.2% qoq (CC terms) decline in their revenue, respectively. Management has indicated that EPU will rebound from the next quarter, but telecom will continue to witness some systemic softness in IT spending.

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


Growth by vertical (%) Financial services Manufacturing Telecom Retail and CPG MPE Healthcare EPU Others
Source: Company, Angel Research

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

1QFY12 2.1 8.2 (2.0) 12.0 0.4 1.6 23.1

2QFY12 6.1 4.6 (3.1) 7.8 (2.2) 16.9 (15.8) 8.0

During the quarter, HCL Tech reported growth across the U.S. and Europe, with revenue growing by 7.3% and 6.3% qoq, respectively. However, revenue from Rest of the World declined by 11.7% qoq (CC terms).

January 17, 2012

HCL Technologies | 2QFY2012 Result Update

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


21 18 15 12 9 6 3 0 (3) (6) (9) (12) 20.5

10.8 5.8 5.8 0.7 0.7 4.2 5.5 3.0 0.7 6.8 4.5 7.3 6.3

(%)

(11.7) 2QFY11 3QFY11 US 4QFY11 Europe 1QFY12 2QFY12 Rest of the world

Source: Company, Angel Research

Hiring spree continues


During the quarter, HCL Tech added 7,804 gross employees, of which 6,017 were lateral additions. The company added 2,556 net employees, taking its total employee base to 83,076. In the core software services segment, 3,635 gross and 1,353 net employees were added during the quarter, taking the segments total employee base to 54,624. Gross lateral employee addition in this segment stood robust at 1,854, which indicates that the company is witnessing a strong deal pipeline. Attrition rate for the core software services segment declined by 50bp qoq to 15.3% (LTM basis) during the quarter. The infrastructure services segment reported net addition of only 381 employees in 2QFY2012, taking the segments total employee base to 17,431. Gross addition in the segment stood at 1,296 employees, of which 1,290 were laterals, indicating just-in-time hiring strategy adopted by management. Attrition rate for this segment increased by 60bp qoq to 17.0% (LTM basis). The BPO segment, which was witnessing employee rationalization since the past one year, reported addition of 822 net employees, taking the segments total employee base to 11,021. The company added 2,873 gross employees (all laterals) in the BPO segment during the quarter. The quarterly offshore attrition rate for this segment declined by 240bp qoq to 6.1% during the quarter.

January 17, 2012

HCL Technologies | 2QFY2012 Result Update

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


2QFY11 Net additions Software services Infrastructure services BPO Total employees Software services Infrastructure services BPO
Source: Company, Angel Research

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

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

1QFY12 3,053 783 (362) 53,271 17,050 10,199

2QFY12 1,353 381 822 54,624 17,431 11,021

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

Utilization level, offshore including as well as excluding trainees declined by 10bp and 40bp qoq to 69.6% and 76.1%, respectively, in 2QFY2012. Also, utilization level-onsite declined marginally by 10bp qoq to 95.9%. Management indicated that, going ahead, utilization level (including trainees) will inch up as trainees hired couple of quarters back will start turning billable, which can be an important lever to improve margins.

Exhibit 9: Utilization trend (%)


100 95.9 96.5 96.2 96.0 95.9

90

(%)

80

75.0

76.3

76.1

76.5

76.1

70 70.1 60 2QFY11

71.9

72.5

69.7 1QFY12

69.6 2QFY12 Onsite

3QFY11

4QFY11

Offshore - Including trainees


Source: Company, Angel Research

Offshore - Excluding trainees

EBIT margin enhances


During 2QFY2012, HCL Techs EBITDA and EBIT margins improved by 141bp and 156bp qoq to 18.5% and 15.8%, respectively, because of INR depreciation. EBIT margin movement was because of the following factors: 1) 260bp positive impact due to INR depreciation; and 2) 106bp negative impact because of annual increments, milestone bonuses and SG&A investments.

January 17, 2012

HCL Technologies | 2QFY2012 Result Update

Exhibit 10: Margin profile


40 35 30
(%)

31.6

33.3

34.7 31.5

33.0

25 20 15 10 13.1 2QFY11 16.3 18.5

20.7 17.1 17.7

18.5

15.6 3QFY11 Gross margin 4QFY11 EBITDA margin

14.3 1QFY12

15.8 2QFY12

EBIT margin

Source: Company, Angel Research

Going ahead, in 3QFY2012, the company expects its margins to improve. For FY2012, the company expects its EBIT margin to remain flat yoy at 14.0% in CC terms. Segment wise, EBIT margin for core software services and infrastructure services increased by 185bp and 91bp qoq to 17.3% and 15.9%, respectively, in 2QFY2012. The BPO segment again managed to pull up its gross margin by 46bp qoq to 21.1%, but at the EBITDA and EBIT level, margins further decreased by 65bp and 23bp qoq, respectively.

Exhibit 11: BPO segment Margin trend


24 18 12 19.5 18.9 19.2 20.6 21.2

(%)

6 0 (6) (12) (18) 2QFY11 3QFY11 Gross margin 4QFY11 EBITDA margin 1QFY12 2QFY12 EBIT margin (11.0) (9.1) (8.1) (7.2) (4.9) (3.2) (1.9) (1.6) (2.1) (7.6)

Source: Company, Angel Research

January 17, 2012

HCL Technologies | 2QFY2012 Result Update

Client pyramid strengthens


During the quarter, HCL Tech enhanced its client pyramid with the addition of 57 new clients. The most remarkable development for the company during the quarter was the addition of two clients in the US$100mn plus revenue bracket. One client was moved to the higher revenue bracket of US$40mn-50mn from the US$30mn40mn revenue bracket. Also, the company added four new clients in each of the US$5mn-10mn and US$1mn-5mn revenue brackets. Active client base of the company increased to 516 in 2QFY2012 from 480 in 1QFY2012. The companys top clients also registered modest growth, with revenue from the top 5, top 10 and top 20 clients growing by 7.7%, 4.9% and 3.5% qoq (LTM basis), respectively. The company won 18 multi-year, multi-million dollar deals during the quarter. The total contract value of these deals exceed US$1bn. These deals span across all services lines and verticals.

Exhibit 12: Client pyramid


Particulars 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

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

1QFY12 480 66 214 56 42 14 12 2 8 1

2QFY12 516 57 218 60 42 19 11 3 6 3

Outlook and valuation


HCL Tech has recorded a 4.3% CQGR in its revenue over the past four quarters. This is primarily on the back of discretionary services such as ERD and custom applications coming back strongly for the company, recording a CQGR of 4.8% and 5.2% over OND201011, respectively. In addition, the companys anchor service line, infrastructure services maintained its growth momentum at a 5.0% CQGR over OND2010-11. Verticals such as financial services and manufacturing have proved to be the companys growth drivers. Also, geography wise, continental Europe has proved to be a strong spender vis--vis its peers because of a strong footprint gained in this geography post the acquisition of Axon. Management is witnessing a strong demand environment and has signed 18 multi-year, multi-million dollar deals during the quarter, excluding contract renewals. The total contract value of these deals exceeds US$1bn. Management maintained its stance that the deals are out of vendor-churn exercises rather than any incremental spending. However, we believe, in such a competitive scenario where all companies are eyeing the existing pool of deals, an aggressive 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 USD and INR revenue CAGR of 16.3% and 22.3%,
January 17, 2012

HCL Technologies | 2QFY2012 Result Update

respectively, over FY201113E, on the back of its higher-value services portfolio, which is set to address the current demand landscape. At the operating front, levers such as 1) managing SG&A, 2) expanding utilization levels and 3) turnaround in the BPO segment on account of strong growth are expected to improve the companys margins. Thus, we expect EBITDA to grow at a 20.0% CAGR over FY201113E. PAT, on the other hand, is expected to post a much higher CAGR of 22.1%, with improving profitability, forex gains on hedges and treasury gains. At the CMP of `425, the stock is trading at cheap valuations of 10.6x FY2013E EPS of `40.0. We value the company at 13x FY2013E EPS and give it a target price of `520. We maintain our Buy rating on the stock.

Exhibit 13: Key assumptions


FY2012 Revenue growth (USD) USD-INR rate (realized) Revenue growth (INR) EBITDA margin (%) EBIT margin (%) Tax rate (%) EPS growth (%)
Source: Company, Angel Research

FY2013 14.8 50.0 15.5 17.5 14.9 24.0 18.8

17.8 49.7 29.5 18.6 15.9 25.0 25.5

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


850 750 650 550

(`)

450 350 250 150 50

Nov-08

Sep-09

Feb-10

Price

19x

16x

13x

10x

May-11

Aug-07

Dec-10

Source: Company, Angel Research

January 17, 2012

Oct-11
6x

Jan-08

Jun-08

Apr-09

Jul-10

10

HCL Technologies | 2QFY2012 Result Update

Exhibit 15: Recommendation summary


Company HCL Tech Hexaware Infosys Infotech Enterprises KPIT Cummins Mahindra Satyam MindTree Mphasis NIIT^ Persistent TCS Tech Mahindra Wipro Reco Buy Accumulate Accumulate Neutral Accumulate Accumulate Neutral Neutral Buy Neutral Accumulate Accumulate Neutral CMP (`) 425 84 2,660 125 148 72 443 361 42 327 1,104 609 415 Tgt Price (`) 520 96 3,047 120 163 82 55 1,262 666 Upside (%) 22.4 14.4 14.5 (3.8) 10.3 13.9 30.5 14.3 9.4 Target P/E (x) 13.0 11.0 18.0 8.0 10.0 11.0 10.0 11.5 6.9 9.0 19.5 9.0 15.3 FY2013 EBITDA (%) 17.5 18.7 32.0 15.8 15.4 14.8 14.7 16.6 16.3 22.4 29.9 16.8 19.7 FY2013E P/E (x) 10.6 9.6 15.7 8.0 9.0 9.7 9.8 9.8 5.3 9.6 17.1 7.3 15.4 FY2011-13E EPS CAGR (%) 22.1 74.1 18.9 11.3 19.9 33.0 34.8 (3.1) 19.3 (1.1) 20.6 29.9 11.6 FY2013E RoCE (%) 20.9 21.4 25.8 15.6 19.5 11.7 20.3 14.0 11.0 20.0 32.1 14.6 14.6 FY2013E RoE (%) 23.1 19.8 23.8 12.9 16.9 13.8 16.4 14.2 15.6 14.0 33.3 20.0 20.0

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

January 17, 2012

11

HCL Technologies | 2QFY2012 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 10,749 5,285 33.0 2,371 14.8 2,914 18.2 498 3.1 2,416 15.1 26 2,441 485 19.9 1,956 (82) 1,874 26.8 FY2012E 20,767 13,917 6,850 33.0 2,993 14.4 3,857 18.6 562 2.7 3,295 15.9 30 3,325 831 25.0 2,494 (133) 2,361 33.7 FY2013E 23,979 16,458 7,520 31.4 3,327 13.9 4,193 17.5 620 2.6 3,572 14.9 10 3,583 860 24.0 2,723 81 2,804 40.0

January 17, 2012

12

HCL Technologies | 2QFY2012 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 13,571 520 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 14,624 370 3,584 993 769 458 1,385 7,560 2,741 4,137 36 78 68 23 1,108 15,750 3,198 1,884 608 5,689 10,060 15,750 420 4,139 1,120 871 519 1,599 8,668 2,942 4,085 40 89 77 23 1,202 17,127 3,204 1,222 577 5,002 12,124 17,127

January 17, 2012

13

HCL Technologies | 2QFY2012 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 ESOP charges Dividends Cash flow from financing actv. Cash generated/(utilised) Cash at start of the year Cash at end of the year FY2009 1,810 449 (530) 1,730 248 1,977 (254) 1,723 (1,429) 1,497 68 1,791 (609) (3,669) 491 (6) 168 (355) (3,980) 2,950 (145) (43) (617) 2,144 (45) 465 420 FY2010 1,908 501 (476) 1,934 117 2,051 (240) 1,810 (156) (135) (290) 1,520 (652) 109 (528) (25) (103) (1,199) (314) 770 (88) (640) (272) 48 420 469 FY2011 2,259 498 (82) 2,675 182 2,857 (485) 2,372 (727) 243 (484) 1,888 (797) 56 45 (50) (75) (821) (539) 229 (90) (615) (1,016) 51 469 520 FY2012E 3,131 562 (133) 3,560 194 3,754 (831) 2,922 (1,301) (178) (1,479) 1,443 (1,035) 568 (81) (69) (617) (241) (79) (656) (975) (149) 520 371 FY2013E 3,453 620 81 4,154 130 4,284 (860) 3,424 (896) 6 (890) 2,534 (770) (188) (31) (94) (1,083) (662) (0) (84) (656) (1,402) 49 371 420

January 17, 2012

14

HCL Technologies | 2QFY2012 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 2.7 63 2.9 63 14.9 17.6 22.5 15.3 18.8 18.6 16.5 19.9 22.2 20.9 23.6 23.5 20.9 23.6 23.1 0.9 1.1 0.2 0.8 2.2 31.7 0.9 1.0 0.2 0.9 1.9 25.4 0.8 1.0 0.2 1.1 1.7 23.2 0.7 1.0 0.2 1.3 1.6 24.8 0.8 1.0 0.1 1.4 1.4 22.5 18.8 25.5 8.0 83.9 19.0 26.3 8.0 102.2 26.8 34.1 8.0 121.4 33.7 42.1 8.0 144.8 40.0 49.3 9.0 174.4 22.5 16.7 5.1 1.9 2.9 13.0 2.4 22.3 16.1 4.2 1.9 2.4 11.5 2.2 15.8 12.4 3.5 1.9 1.8 10.0 2.0 12.6 10.1 2.9 1.9 1.4 7.7 1.9 10.6 8.6 2.4 2.1 1.2 6.9 1.7 FY2009 FY2010 FY2011 FY2012E FY2013E

January 17, 2012

15

HCL Technologies | 2QFY2012 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%)

January 17, 2012

16