HCL: Pioneers of Modern Computing

Building Technologies of the Future

BY:RAJIV SHAW(76) &

JACQUELINE VERONICA PAUL(99)

•At a time when India had a total of just 250 computers, Shiv Nadar, the founder of HCL, led a young team of eight people who passionately believed in the growth of the IT industry. That vision in 1976, born out of a Delhi “barsaati”, (akin to a garage start-up), resulted three and a half decades later into a global transformational technology enterprise.

•Hindustan Computers Limited3-decade-old enterprise, founded in 1976, is one of India's original IT garage startups. Over the years, HCL witnessed many firsts which legitimized its status as a pioneer in modern computing.

•HCL Enterprise is a 36-year-old leading Global Technology and IT enterprise, with USD 6 billion revenue, 88000 professionals and operations spanning 31 countries

HCL’S OVERVIEW

• 1st PHASE:Developed the first indigenous micro-computer at the same time as Apple and 3 years before IBM's PC – in 1978. This micro-computer virtually gave birth to the Indian computer industry.

• 2nd PHASE:Along with the swiftly growing software technology industry, HCL, which was hitherto known as the pioneer in modern computing made the advent into software development. HCL's R&D was spun off as HCL Technologies in 1997 to mark their advent into the software services arena.

• 3rd PHASE:Today, HCL sells more PCs in India than any other brand, runs Northern Ireland's largest BPO operation, and manages the network for Asia's largest stock exchange network apart from designing zero visibility landing systems to land the world's most popular airplane. And this it does across 31 countries and across 505 points of presence in India.

HISTORY OF HCL

SLITEHERING THROUGH YEARS• 1976-Hindustan Computers Limited was born• 1977-Forms distribution alliance with Toshiba for copiers and notebooks• 1978-Successfully ships in-house designed micro computers• 1980-Introduced Bit sliced,16-bit processor based microcomputer• 1983-Indegenously develops an RDBMS, a Networking OS and a client

Server architecture, at the same time as global IT peers.• 1986-Becomes the largest IT company in India.• 1988-Introduces fine grained multi-processor Unix-3 years ahead of “Sun”

and “HP”.• 1990-Data Quest marks HCL No.1 amongst top ten computer giants.• 1991-Entry into contract R & D.• 1994-Forges distribution alliance with Ericsson and Nokia.• 1997-HCL’s R & D spun-off as HCL Technologies marks advent into software

services.• 1999-Initial public offerings made by HCL technologies ltd.

• 2000-Large contracts won by Cisco, Bankers Trust, GTECH etc• 2001-Joint Venture with Deutsche Bank• 2002-Infrastructure services division launched to address emerging global needs.Software

businesses of HCL Infosystems and HCL Technologies emerged.

• 2003-HCL becomes the first company to cross the 100000 unit milestone in the Indian Desktop PC market.

• 2005-Joint Ventue with NEC,Japan.

• 2006-HCL Infosystems tied up with Apple for ipod distribution. HCL Technologies signs largest ever software services deal with DSG.

• 2007- HCL as an enterprise crossed the $4 billion watermark. HCL commences production in its ISO 14001 and ISO 9001:2000 certified-second manufacturing facility in Uttaranchal and thereafter winning several awards.

• 2008-Recognised as Britain’s Top Employer.Named in Worldbblu list for one of the most democratic workplaces.Ranked No 1 in traditional outsourcing. Aquisition of AXON group plc, largest indian aquisition.

• 2009-Joint Venture with Nokia and BSNL.

1976 - Making Dreams a Reality Hindustan Computers Ltd. is born.

1970s & 80s - The Pioneering Years Develops the first indigenous microcomputer at the same time as Apple and 3 years before IBM's PC in 1978.

This micro-computer virtually gavebirth to the Indian computer industry.

*Enters into JV with HP, Nokia and Perot Systems. *Launches India’s first Home Computer - “The BeanStalk”*Pioneers remote infrastructure management, now one of world’s best performing Infrastructure providers*HCL’s R&D is spun-off as HCL Technologies - marks advent into software services

Addressing end to end technology solutions in the Security & Surveillance

domainEmpowering space research and

oilfield exploration with High Performance Computing

Acquires AXON - the largest acquisition ever by an Indian IT company

Designs implantable medical devices for pain relief

Creates Flight Management systems for the world's most advanced aircraft

1970s & 80s - The Pioneering Years

1990s - Years of Consolidation

Building Technologies of the Future

Snapshot

Factors to SUCCESS STORY

Powerful Brand Image

Blended Solutions

Experienced Team

HCL’s Firsts

MISSION AND VISION

VISION

• "Together we create the enterprises of tomorrow“

MISSION• "To provide world-class information technology

solutions and services to enable our customers to serve their customers better"

HCL Group

HCL

HCL AXON

HCL Infosystems

HCL BPO

HCL InfiNet Ltd HCL ISD

HCL Security

HCL Technologies

HCL Management• Six young entrepreneurs leave their secure corporate

jobs with a dream that the microprocessor would change the world

• Six original promoters:Shiv Nadar, Ajai Chowdhury, D.S Puri, Subhash Arora, Yogesh Vaidya and Malhotra

• Today, HCL is a $6.2-billion global enterprise with over 90,000 professionals from diverse nationalities, who operate from 31 countries including over 505 points of presence in India.

HCL Technologies – The Magic of the Empowered Employee

• HCL Technologies provide global IT Services.

• Founded-12 November 1991

• Key people-Shiv Nadar(Chairman & CSO)Vineet Nayar (VC & CEO)

• A leading provider of business transformation, enterprise & custom applications, infrastructure management, business process outsourcing, and engineering services.

• HCL takes pride in its philosophy of ‘Employees First, Customers Second’ which empowers its 83,076 transformers to create real value for over 500 forward looking customers, seeking to shift paradigms and transform the way business is being done.

• HCL is a global technology enterprise and a name to reckon with, in the industry.

HCL Infosystems – On a Transformation Journey

• HCL Infosystems is into IT infrastructure Solutions.

• Ajai ChowdhryChairman - HCL InfosystemsPadma Bhushan Awardee, 2011

• HCL Infosystems Ltd, is India´s premier hardware, services and ICT systems integration company offering a wide spectrum of ICT products that includes Computing, Storage, Networking, Security, Telecom, Imaging and Retail.

• HCL Infosystems the first company in India to create special products for the rural market place. The whole objective was to eradicate the digital divide between urban and rural.

• HCL is a one-stop-shop for all the ICT requirements of an organization.

Partnerships: the Growth Drivers for HCL

HCL adorned with AWARDS AND RECOGNITIONS

• India's Most Preferred Personal Computer Brand by CNBC AWAAZ Consumer Award 2007

• India's 'No. 1 PC Vendor' consecutively for six years.HCL among the Top 3 IT companies for the last 3 years, DQ & IDC,Best Employer Survey, 'Best employer 2005' with Five Star Ratings Systems

• 'Top 50 in ET Top 500 Companies' Listings for 2006

• Top 21 companies in Business Standard 1000 Ranking 2006 • Top 50 Fastest Growing Technology Companies in India &

'Top 500 Fastest Growing Technology Companies in Asia Pacific' by 'Deloitte & Touche'

• 'The Most Responsive Company 2005' - IT Hardware

Category by The Economic Times - Avaya GlobalConnect • '7th IETE - Corporate Award 2005' for performance

excellence in the field of Computer & Telecommunications

Latest Updates…

*Declares HCL among world’s top 30 most influential companies and one of the world’s top five Emerging Companies to Watch

*Recognize HCL’s Employee First Philosophy as the world’s most modern management

*HCL is featured as a case study in a global bestseller

*HCL wins FT ArcelorMittal Boldness in Business Award

IBM and the other multinationals are becoming increasingly nervous about the fifth-biggest Indian outsourcer, HCL Technologies

*Shiv Nadar, Founder - HCL, receives the Padma Bhushan award, third highest civilian recognition bestowed by the President of India

*HCL ranked 3rd in India by Brand Equity’s Most TrustedBrands Survey 2010

*Harsh Chitale - Appointed as CEO, HCL Infosystems

*Shiv Nadar, Founder - HCL, conferred the

*DataQuest IT Lifetime Achievement Award,2010

*Shiv Nadar, Founder - HCL, declared the NewsX Businessman of the year 2010

*Shiv Nadar, Founder - HCL, conferred the ET Corporate Excellence Award for CSR for his outstanding philanthropic endeavours

Ajai Chowdhry, Founder - HCL, receives the Padma Bhushan award, third highest civilian recognition bestowed by the President of India

HCL’s Differentiation Strategy

HCL’s Business Model

• Americas • Brazil • Puerto Rico • USA • Mexico

• Europe • Belgium • Czech Republic • Finland • France • Germany • Italy • Netherlands • Poland • Sweden • Switzerland • UK • Norway • Denmark

Asia China Hong Kong India Israel Japan Malaysia Saudi Arabia Singapore UAE Qatar Indonesia

ANZ Australia New Zealand Africa South Africa

FINANCIAL ANALYSIS2007 2008 2009 2010 2011

Sales 3,768.62 4,615.39 4,675.09 5,078.76 6,794.48

Operating profit 929.45 941.79 1,208.09 1365.16 1516.37

EPS (Rs) 16.6 11.72 14.88 15.57 17.4

Net profit / loss 1,101.82 780.65 997.31 1056.58 1,198.28

Current ratio 1.41 1.12 1.83 2.24 2.09

Quick ratio 1.39 1.06 1.71 2.19 1.97

Debt equity ratio 0.01 0.01 0.14 0.28 0.17

Sales

12

34

5

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

Series1SALE

S

• HCL has witnessed considerable hike in its sale, thereby capturing a major market share.

• The rising geographical and product growth has led to this standard performance thereby earning a huge revenue at present.

• The sale hike is especially seen in UK and Asia due to high brand visibility and reasonable cost of its high quality products.

Operating Profit

1 2 3 4 50.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

Series1

OPE

RATI

NG

PRO

FIT

• It illustrates how efficiently the management of HCL used business operations to generate profit. This ratio also shows the success rate of the HCL managers. The formula for Operating Profit Margin is:

Operating Profit Margin = Earnings before Interest & Taxes / Sales

• HCL’s operating profit is seen to be rising as follows;

• The higher the HCL’s Operating Profit Margin, the better. This is because a higher Operating Profit Margin shows HCL can keep its costs under control. It means sales are increasing faster than costs, and HCL is in a relatively liquid position.

Earnings per share

1 2 3 4 50

2

4

6

8

10

12

14

16

18

20

Series1EPS

• Earnings per share generally is considered the single most important variable in determining a share's price.

• = Net annual earnings / Number of shares issued

• Increasing EPS is a desirable attribute of HCL• EPS growth here provides an indication of the

future prospects of HCL.• Investors assess share price and value based on

one share of stock, helps the company greatly in its financial stability. EPS of HCL is eye-catching income belonging to one share of stock leading to more potential investors. Unless we are buying entire companies. HCL’s increasing EPS is useful in forming opinions about the favourable value of equity investments.

Net Profit

1 2 3 4 50.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

Series1

NET

PRO

FIT

• HCL is seen to have steady profit growth rate.

• The average in a poll of 22 analysts indicates HCL would post 21% growth in net profit to INR5.67 billion.

• HCL is performing relatively well in the worl market and has the potential of optimally sufficing the target set by the company this year.

• A mature company like HCL finds it favourable to have a steady profit growth rather than instinctive hikes for its stability. Thereby paying their shareholders dividends on positive terms.

Current Ratio

1 2 3 4 50

0.5

1

1.5

2

2.5

Series1

CURR

ENT

RATI

O

• This ratio measures a company's ability to pay short-term obligations.

• =Current Assets/Current Liabilities• The rising current ratio, portrays HCL’s

capability of paying its obligations. HCL’s current ratio can give a sense of the efficiency of a HCL's operating cycle or its ability to turn its product into cash.

• Here we see that HCL has strived and maintained a favourable liquidity position to meet contingent threats as well as opportunities relative to its historical years.

Quick Ratio

1 2 3 4 50

0.5

1

1.5

2

2.5

Series1

QU

ICK

RATI

O

• It is an indicator of a company's ability to meet its short-term obligations, and therefore gives a sense of general financial strength.The formulae is-

• =(current assets - inventories)/current liabilities• The quick ratio analysis shows that HCL could

meet its current obligations with its readily convertible assets if sales should suddenly stop. The high ratio growth, determines the sound position of HCL.

• A high or increasing quick ratio of HCL indicates it is experiencing solid top-line growth, quickly converting receivables into cash, and easily is able to cover its financial obligations. HCL is thereby seen to have faster inventory turnover and cash conversion cycles.

Debt Equity Ratio

1 2 3 4 50

0.05

0.1

0.15

0.2

0.25

0.3

Series1

DEB

T EQ

UIT

Y RA

TIO

• The Debt/Equity ratio is a measure of a company’s reliance on debt. It is used as and indicator as to what proportion of equity and debt the company is using to fund its assets and is therefore calculated by-

• = Liabilities / Equity• Due to the rising growth and expansion the

HCL has adhered to lot of outside number along the years. Presently there is a fall compared to previous year. It simply means that HCL has used a lot of outside financing to finance their company, meaning a lot of the business’s expenses go towards repaying these loans.

Market Competitors

HCL’s market share

1234567

TCS Infosys Wipro HP Cognizant HCL IBM

SWOT Analysis

HCL

1) Vineet Nayar's deal-making capabilities has brought in incremental business higher than rivals.2) Customers like Boeing and Deutsche continue to give more business, Axon acquisition considered a silver bullet. 3) High brand image

1) Overly aggressive acquisition brings risks of additional staff in high-cost geographies.

2) Profit margin lowest among all India-based vendors, back-office business still in transition.

1) Sacrificing margins should help gain more business.

2) Best positioned to rival TCS in terms of scale.

3) European market

1) High-risk contracts could affect cash flow and dent profit.2) Post-Nayar leadership issue

can be a tricky to solve.3) Global IT giants

Strengths Weakness

Opportunities Threats

Recent Success NEWS…………

• 15TH April , 2012(The Economic Times)-Naysayers to India’s fourth largest software giant must be eating a humble pie as HCL Tech’s latest quarterly figures beat analysts’ estimates, once again.

• 9TH April,2012(Data Quest)-HCL continues to have a good run in Europe

• 30th March,2012(Business Standards)-HCL ranked No.1 in Customer Satisfaction audit over the globe

and more to come………………

FUTURE TARGETS

SOCIAL

•The company has plans to target public sector projects to fuel future growth.•HCL targets to translate holistic understanding into actions based on our values and collective wisdom,adhering to corporate governance.

GL

OBAL

•HCL has underlined its position as a 'Socially Responsible Business' by announcing a series of initiatives around building Glocal Centres of Excellence (GCoE) with the aim of creating 10,000 jobs in the US and Europe.

•Interested in British companies with a strong continental European footprint ,going for M&A plans.

TECH

NOLO

GY

•Introducing world-class telecom,imaging,digital lifestyle solutions with eco-fr•Cheapest high quality IT accessories.•HCL Technologies plans capex of $230 million for FY12 through its recent projects.

CSR initiativesPublic Health

Foundation of India

•HCL acts as a think tank on policy issues related to health systems to establish standards in public health education

Community Support Programs

•HCL works with NGO's Udayan, cry for social up-liftment of underprivileged children

Concert Series

•Started in 1998 it provides a platform to up coming young Indian classical artists to express their talent

ConcertIndian School of Business

•ISB symbolizes the vision of establishing a world class business school in India offering to large number of bright students in the region.

Advantages of HCL

Touching lives

• From aeronautics to life sciences, HCL touches millions of people through technology across the world everyday

Future proofing the World

• One of the pioneers in modern computing , our expertise spans globally and we make a difference.

Conclusion• The TIME magazine has referred to HCL as an

"intellectual clean room where its employees could imagine endless possibilities". The fact is, over the last thirty years that HCL has been operational, the company has stood by its values and core philosophy.

• HCL believes that strong corporate governance practices should be integral to all activities of its Group Companies to ensure efficient conduct of the affairs of the Companies, while upholding the core values of transparency, integrity, honesty, and accountability.

• Thereby great entrepreneurial existence and win-win relationship driven culture continues to guide HCL in all its endeavors towards success.

Bibliography

• http://www.hcl.in• http://www.hclinfosystems.in• http://investment.contify.com• http://dqindia.ciol.com• http://www.moneycontrol.com• http://www.realtimenews.in• Business Standards

HCL –technology that touches life