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FINANCIAL ANALYSIS

HCL TECHNOLOGIES LTD

BY:RAVIPAL SINGH (44)

KNOW THE COMPANY


INDUSTRY FOUNDED HEADQUATERS CHAIRMAN CEO IT SERVICES 1976 NOIDA, INDIA SHIV NADAR VINEET NAYAR

REVENUE (in 2010) EMPLOYEES

US $2.6 BILLION
72000

SERVICES OFFERED
Engineering and R&D quality Services(ERS)

Enterprise Transformation Services(ETS)


Business Processing Outsourcing(BPO) Custom Application Services Enterprise Application Services(EAS) IT Infrastructure Management

INDUSTRIES SERVED
FINANCIAL SERVICES EDUCATION TELECOM RETAIL TRAVEL MANUFACTURING MEDIA & ENTERTAINMENT TRANSPORTATION & LOGISTICS ENERGY & UTILITIES

WHY ANALYZE?

The goal of Financial Analysis is to provide Economic Decision makers with useful information.

RATIO ANALYSIS
Calculations between different sets of data on the Annual report to determine the short-term Financial health and longterm Financial health of the firm.

LIQUIDITY RATIOS
A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

TYPES OF LIQUIDITY RATIOS


CURRENT RATIO The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months QUICK/ACID RATIO -The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. CASH RATIO - The ratio of a company's total cash and cash equivalents to its current liabilities. It can therefore determine if, and how quickly, the company can repay its short-term debt

CURRENT RATIO
YEAR CURRENT RATIO 2005 .81 2006 .99 2007 1.41 2008 1.12 2009 1.59

QUICK / ACID RATIO


YEAR QUICK RATIO 2005 0.8 2006 0.98 2007 1.39 2008 1.06 2009 1.71

CASH RATIO
YEAR CASH RATIO 2005 0.12 2006 0.09 2007 0.27 2008 0.26 2009 0.52

LEVERAGE RATIOS
Leverage ratios provide an indication of the long term solvency of the firm. Leverage ratios measure the extent to which the firm is using long term debt .

TYPES OF LEVERAGE RATIOS


DEBT EQUITY RATIO:-A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets LONG TERM DEBT EQUITY RATIO:- is another leverage ratio that compares a company's long term liabilities to its total shareholders equity INTERSEST COVERAGE RATIO:-A ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period .

DEBT EQUITY RATIO


YEAR CASH RATIO 2005 0.03 2006 0.01 2007 0.01 2008 0.01 2009 0.15

LONG TERM DEBT EQUITY RATIO


YEAR RATIO 2005 0.03 2006 0.01 2007 0.01 2008 0.01 2009 0.04

INTEREST COVERAGE RATIO


YEAR RATIO 2005 61.43 2006 62.16 2007 68.58 2008 62.07 2009 51.14

TURNOVER RATIOS
A measure of the number of times a company's inventory is replaced during a given time period. Turnover ratio is calculated as cost of goods sold divided by average inventory during the time period. A high turnover ratio is a sign that the company is producing and selling its goods or services very quickly.

TURNOVER RATIOS
TOTAL ASSESTS TURNOVER RATIO:-The total asset turnover represents the amount of revenue generated by a company as a result of its assets on hand. SHORT TERM ASSETS TURNOVER RATIO: represents the amount of revenue generated by a company as a result of its short term assets on hand. WORKING CAPITAL TURNOVER RATIO:-A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales DEBTORS TURNOVER RATIO:-in simple words its the average time which debtors take to pay .

TOTAL ASSET TURNOVER RATIO


YEAR RATIO 2005 0.5 2006 1.22 2007 1.13 2008 1.51 2009 1.25

SHORT TERM ASSET RATIO


YEAR RATIO 2005 2.53 2006 3.31 2007 3.13 2008 3.27 2009 2.73

WORKING CAPITALTURNOVER RATIO


YEAR RATIO 2005 -31.86 2006 -0.77 2007 56.75 2008 23.28 2009 166.69

DEBTORS TURNOVER RATIO


YEAR RATIO 2005 6.09 2006 6.37 2007 5.55 2008 5.45 2009 3.79

PROFITABILITY RATIOS
A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.

TYPES OF PROFITABILITY RATIOS


RETURN ON CAPITAL EMPLOYED RATIO:- is a measure of the returns a company derives from its capital. It is calculated as profit before interest and taxes divided by tangible capital employed. RETURN ON TOTAL ASSETS RATIO:- The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. GROSS PROFIT MARGIN RATIO:- The gross profit margin ratio tells us the profit a business makes on its cost of sales, or cost of goods sold OPERATING PROFIT MARGIN RATIO:-Operating profit margin indicates how effective a company is at controlling the costs and expenses associated with their normal business operations.

RETURN ON CAPITAL EMPLOYED RATIO


YEAR ROCE(%) 2005 10.63 2006 26.15 2007 22.35 2008 33.08 2009 32.39

RETURN ON TOTAL ASSETS RATIO


YEAR ROTA(%) 2005 89.59 2006 79.64 2007 51.61 2008 48.22 2009 52.04

GROSS PROFIT MARGIN RATIO


YEAR GPM(%) 2005 19.97 2006 22.12 2007 24.88 2008 21.86 2009 24.33

OPERATING PROFIT MARGIN RATIO


YEAR OPM(%) 2005 24.63 2006 26.69 2007 24.86 2008 26.58 2009 29.72

NET PROFIT MARGIN RATIO


YEAR NPM(%) 2005 22.36 2006 21 2007 29.11 2008 16.68 2009 20.63

MARKET VALUATION RATIOS

Market Value Ratios relate an observable market value, the stock price, to book values obtained from the firm's financial statements.

TYPES OF MARKET VALUATION RATIOS


EARNING PER SHARE RATIO:- It tells how much profit was generated on a per share basis. PRICE EARNING RATIO:-A valuation ratio of a company's current share price compared to its per share earnings. High P/E suggests that investors are expecting higher earnings growth in the future to a lower P/E.-share earnings. DIVIDENT PER SHARE RATIO:-. Dividend per share (DPS) is the total dividends paid out over an entire year divided by the number of outstanding ordinary shares issued. DIVIDENT PAYOUT RATIO:-The percentage of earnings paid to shareholders in dividends

EARNING PER SHARE RATIO


YEAR EPS 2005 10.31 2006 19.74 2007 16.6 2008 11.72 2009 14.88

PRICE EARNING RATIO


YEAR P/E 2005 18.29 2006 25.14 2007 27.50 2008 26.08 2009 29.43

DIVIDEND PER SHARE RATIO


YEAR DPS 2005 16 2006 16 2007 8 2008 9 2009 7

DIVIDENT PAYOUT RATIO


YEAR DPOR 2005 1.55 2006 0.81 2007 0.48 2008 0.77 2009 0.47

RECOMMENDATION
After examining the annual reports of HCLT of previous five years, we can say that HCLT has grown year by year and has improved it business. Even qualitative analysis suggests that HCLT has bagged several new projects viz in New Zealand and in Europe and also bagged some domestic projects and they are planning to expand their business. So it will be a wise decision to invest in HCLT. As HCLT is looking good in its IT business and it also looked strong in recession so it is advisable to invest in HCLT to get good returns and safety in investments.

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