hcltech 3q fy13

7/28/2019 HCLTech 3Q FY13

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Please refer to important disclosures at the end of this report 1

(` cr) Consl. 3QFY13 2QFY13 % chg (qoq) 3QFY12 % chg (yoy)Net revenue 6,425 6,274 2.4 5,216 23.2EBITDA 1,276 1,244 2.5 818 56.0

EBITDA margin (%) 19.9 19.8 2bp 15.7 418bp

PAT 1,040 965 7.8 603 72.5Source: Company, Angel Research

For 3QFY2013, HCL Technologies (HCL Tech) reported yet another set of healthy

results, beating our as well as market expectations on all fronts. HCL Tech won

over US$1bn multi-year, multi-million dollar deals during the quarter, thus

sustaining its momentum of signing ~US$1bn+ total contract value (TCV) worth

of deals, over the past few quarters. The strong set of results from HCL Tech for

3QFY2013 shrug off any concerns regarding the health of the Indian IT industry,

which were raised due to weak quarterly results by Infosys. HCL Techs

Management sounded confident of sustaining revenue growth within the top-tier

league. We maintain our Buy rating on the stock.Quarterly highlights: For 3QFY2013, HCL Tech reported revenue ofUS$1,191mn, up 3.2% qoq, on the back of a whopping 9.0% qoq USD revenue

growth in constant currency (CC) terms in its infrastructure services business,

though volume growth in core software services stood muted at 0.4% qoq. During

the quarter, HCL Techs EBITDA margin declined by 18bp qoq to 22.4%, while

the EBIT margin remained almost flat qoq at 19.9%. PAT stood tall at `1,040, up

7.8% qoq, aided by forex gain of `23cr vs a `13cr loss in 2QFY2013.

Outlook and valuation: The company is witnessing a healthy demandenvironment and has been able to win over US$1bn multi-year, multi-million

dollar deals this quarter, thus sustaining its momentum of signing ~US$1bn+

TCV worth of deals, over the past few quarters. The Management maintained that

the deals are out of vendor-churn exercises rather than on any incremental

spending. However, we believe, in such a competitive scenario where all the

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 12.8% and 15.3%,

respectively, over FY201215. We value the company at 14x FY2014E EPS andgive it a target price of `863.We maintain our Buy rating on the stock.Key financials (Consolidated, US GAAP)Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015ENet sales 16,034 21,031 25,444 28,633 32,216% chg 27.6 31.2 21.0 12.5 12.5

Net profit 1,710 2,526 3,845 4,033 4,343% chg 30.5 47.8 52.2 4.9 7.7

EBITDA margin (%) 17.1 19.1 22.3 21.5 20.7

EPS (`) 24.5 36.0 54.6 57.3 61.7P/E (x) 30.7 20.8 13.8 13.1 12.2

P/BV (x) 6.2 4.9 3.8 3.1 2.6

RoE (%) 20.3 23.5 28.1 24.0 21.5

RoCE (%) 15.4 18.3 23.9 22.2 20.6

EV/Sales (x) 3.2 2.4 1.9 1.6 1.4

EV/EBITDA (x) 18.9 12.8 8.6 7.6 6.7

Source: Company, Angel Research

BUYCMP `751

Target Price `863

Investment Period 12 Months

Stock Info

Sector

Net debt (` cr) (2,684)

Bloomberg Code

Shareholding Pattern (%)

Promoters 62.1

MF / Banks / Indian Fls 8.4

FII / NRIs / OCBs 21.8

Indian Public / Others 7.7

Abs. (%) 3m 1yr 3yr

Sensex (6.2) 7.9 6.5

HCL Tech 6.8 56.2 113.2

IT

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

Face Value (`)

BSE Sensex

Nifty

Reuters Code

2

18,731

5,689

HCLT.BO

HCLT@IN

51,379

0.8

807/454

120,859

Ankita Somani+91 22 3935 7800 Ext: 6819

[email protected]

HCL TechnologiesPerformance Highlights

3QFY2013 Result Update | IT

April 17, 2013


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HCL Technologies | 3QFY2013 Result Update

April 17, 2013 2

Exhibit 1:3QFY2013 performance (Consolidated, US GAAP)

Y/E June (` cr) 3QFY13 2QFY13 % chg (qoq) 3QFY12 % chg (yoy) 9MFY13 9MFY12 % chg (yoy)Net revenue 6,425 6,274 2.4 5,216 23.2 18,789 15,112 24.3Cost of revenue 4,113 4,026 2.2 3,518 16.9 12,085 10,219 18.3Gross profit 2,312 2,248 2.9 1,698 36.2 6,704 4,893 37.0SG&A expense 872 831 5.0 739 18.1 2,498 2,169 15.2

EBITDA 1,439 1,417 1.6 959 50.1 4,207 2,724 54.4Dep. and amortization 163 172 (5.1) 141 15.7 504 412 22.6

EBIT 1,276 1,244 2.5 818 56.0 3,702 2,313 60.1

Other income 66 28 23 129 55

PBT 1,342 1,272 5.4 841 59.6 3,832 2,368 61.8

Income tax 325 295 10.1 202 61.2 892 566 57.7

PAT 1,017 977 4.0 639 59.1 2,940 1,803 63.1Forex gain/(loss) 23 (13) (284.8) (36) (163.6) (50) (130) (61.4)

Adjusted PAT 1,040 965 7.8 603 72.5 2,889 1,672 72.8EPS 14.8 13.7 8.0 8.6 71.9 41.0 23.9 71.7

Gross margin (%) 36.0 35.8 16bp 32.5 343bp 35.7 32.4 330bp

EBITDA margin (%) 22.4 22.6 (18)bp 18.4 401bp 22.4 18.0 436bp

EBIT margin (%) 19.9 19.8 2bp 15.7 418bp 19.7 15.3 440bp

PAT margin (%) 16.0 15.3 71bp 11.5 451bp 15.3 11.0 425bp


Exhibit 2:3QFY2013 Actual vs Angel estimates

(` cr) Actual Estimate Variation (%)Net revenue 6,425 6,432 (0.1)

EBITDA margin (%) 22.4 22.3 12bp

PAT 1,040 916 13.5


Outperformance yet again

For 3QFY2013, HCL Tech reported a revenue of US$1,191mn, up 3.2% qoq, on

the back of a whopping 9.0% qoq USD revenue growth in CC terms in its

infrastructure services business and 0.4% qoq volume growth in its core software

services business. Cross-currency movement impacted the companys revenue by

0.6% qoq. In CC terms, the revenue grew by 3.8% qoq to US$1,198mn.

The volume growth of 0.4% qoq in core software services was on account of a

0.4% qoq offshore and 0.3% qoq onsite volume growth. HCL Tech won over

US$1bn multi-year, multi-million dollar deals this quarter, thus sustaining its

momentum of signing ~US$1bn+ TCV worth of deals, over the past few quarters,

which is commendable. In INR terms, revenue came in at `6,425cr, up 2.4% qoq.


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April 17, 2013 3

Exhibit 3:Volume growth trend (Effort wise) Software Services


Core software services post modest revenue growth: During the quarter, coresoftware services (contributed 65.8% to revenue) posted a 1.0% qoq revenue

growth (USD terms) to US$783mn, led by 0.4% qoq volume growth. In CC terms,

the revenue growth in core software services came in at 1.7% qoq. This was due to

a decline and challenges seen in discretionary spending, which majorly impacted

the engineering and R&D services (ERD; contributed 17.1% to revenue) and custom

application services enterprise (contributed 29.7% to revenue) revenues, which

grew merely by 0.8% and 0.6% qoq, respectively in CC terms. Enterprise

application services (EAS), which has been witnessing a decline in revenues since

the past couple of quarters, reported a 4.4% qoq growth in USD revenue in CCterms during 3QFY2013. The Management indicated that clients are taking

decisions on discretionary spending on a quarterly basis, rather than giving a

longer term visibility. Projects related to global consolidation and deployment

remain the companys focus for core ERP implementation work.

Infrastructure services emerges as the primary growth driver: The infrastructuremanagement services (IMS) segment (contributed 29.9% to revenue) again

reported a whopping 8.6% qoq increase in revenue (USD terms) to US$356mn. In

CC terms, the revenue of IMS grew by 9.0% qoq. The Management indicated that

IMS is doing well globally. Currently, the segment is witnessing continued demand

traction from the re-bid market with more than 75% of the TCV coming from it.

The Management attributes signing up of large multi-year transformational deals

in the segment to changing customer business models, and to the trend of putting

in place enterprise class infrastructures.

BPO services posted tepid growth: The business process outsourcing (BPO)segment posted a mere 0.7% qoq increase in revenue to US$51mn. In CC terms,

the segment reported a 2.4% qoq growth in revenue. Since 3QFY2012, the BPO

business has entered the EBITDA and EBIT positive zone. The demand environment

is heating up as clients are looking at globalization of delivery capabilities, which is

enabling them in driving transformation and achieving 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.

5.4

0.5

3.8

0.4 0.4

(3.7)

5.7

(1.2)

0.4 0.3

2.9

1.82.5

0.4 0.4

(4)

(2)

0

2

4

6

3QFY12 4QFY12 1QFY13 2QFY13 3QFY13

(%)

Offshore Onsite Total


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April 17, 2013 4

Exhibit 4:3QFY2013 performance (Segment wise)

(US$ mn) 3QFY13 2QFY13 % chg qoq 3QFY12 % chg yoySOFTWARE SERVICES

Revenue 783 775 1.0 747 4.8Gross profit 301 297 1.3 258 16.9

Gross margin (%) 38.5 38.3 12bp 34.5 396bp

EBITDA 183 184 (0.9) 145 25.8

EBITDA margin (%) 23.3 23.8 (45)bp 19.4 389bpEBIT 166 166 0.2 128 30.0

EBIT margin (%) 21.2 21.4 (17)bp 17.1 410bp

INFRASTRUCTURE SERVICESRevenue 356 328 8.6 251 41.6Gross profit 110 100 10.3 69 58.7


EBITDA 78 70 10.9 45 74.7

EBITDA margin (%) 21.9 21.5 47bp 17.8 415bpEBIT 67 60 11.6 36 85.4

EBIT margin (%) 18.9 18.4 52bp 14.4 446bp

BPO SERVICESRevenue 51 51 0.6 49 3.8Gross profit 17 17 3.6 14 22.1


EBITDA 6 6 1.7 3 114.3

EBITDA margin (%) 11.7 11.6 13bp 5.7 603bpEBIT 3 3 3.4 0

EBIT margin (%) 5.8 5.7 16bp 0.4 544bp


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


4.8

(2.0)(1.3)

4.43.9

0.3 0.50.8

2.3 1.6 1.7

0.6

9.2

10.3 10.09.0

(2.0)

4.8

0.7

2.4

(4)

(2)

0

2

4

6

8

10

12

4QFY12 1QFY13 2QFY13 3QFY13

(%)

EAS ERD Custom application IMS BPO services


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April 17, 2013 5

Industry segment wise, the companys anchor industry vertical manufacturing

(contributed 28.4% to revenue) maintained its growth momentum and reported a

strong 7.8% qoq growth in revenues in CC terms. The demand in the

manufacturing space is coming for business needs related to operationalefficiency, cost reduction and product development. The energy and public utilities

(EPU) industry vertical emerged as the primary growth driver for the company,

posting a 14.8% qoq growth in revenues in CC terms. Financial services

(contributed 25.0% to revenue) continued with its growth momentum and reported

a 1.0% qoq growth in CC terms. In the financial services space, the company is

witnessing tighter budgets from the US and European geographies with focus on

cost reduction through RTB strategy. Some amount of discretionary spends in the

financial services space are coming in directed towards customer experience

management. Telecom, which is one of the non-performing industry vertical in

terms of IT spending since the past two years, has been witnessing volatile revenue

growth. During 3QFY2013, revenues from the telecom vertical grew by 4.7% qoq(CC terms). The media, publishing and entertainment (MPE) and healthcare

industry verticals posted 1.4% and 1.6% qoq decline in USD revenue (CC terms),

respectively.

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

Growth by vertical (%) 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13Financial services (4.1) 5.2 3.6 10.1 1.0

Manufacturing 0.6 1.6 - 2.0 7.8

Telecom 10.0 (2.8) (3.2) (2.2) 4.7

Retail and CPG (0.3) 4.2 10.2 0.7 2.9

MPE 6.5 4.4 7.3 4.2 (1.4)

Healthcare 8.1 22.9 14.6 2.6 (1.6)

EPU 7.6 13.1 (1.7) 4.7 14.8


During the quarter, HCL Tech reported growth in developed geographies with

revenues from the US and Europe growing by 3.6% and 6.3% qoq (CC terms),

respectively. The revenue from rest of the world (RoW) remained flat qoq. The

Management indicated that since the past 5-6 quarters, the sales force of the

company has increasingly been focused towards the US and Europe geographies.


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April 17, 2013 6

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


Hiring and utilization

During the quarter, HCL Techs employee base reduced by 791 employees due to

employee rationalization program going on in the BPO business segment and

companys efforts to bring in fungibility of employees in enterprise application

services. The companys total employee base currently stands at 84,403. The

company witnessed an addition of 5,146 gross employees, out of which 5,022

were lateral additions.

In the core software services segment, 1,259 gross employees were added but ona net level, the employee base got reduced by 1,638 employees, taking the total

employee base to 52,305. Almost all the gross additions done by the company in

this segment were lateral employee additions (which stood at 1,255). The attrition

rate for the core software services segment increased by 70bp qoq to 14.3% (last

twelve month [LTM] basis), during the quarter.

The infrastructure services segment reported a net addition of 638 employees in

3QFY2013, taking the segments total employee base to 21,921. The gross

addition in the segment stood at 1,674 employees, of which 1,554 were laterals,

indicating that the company is witnessing a robust deal pipeline. The attrition rate

for this segment inched up by 20bp qoq to 14.0% (LTM basis).

The BPO segment, which has been witnessing employee rationalization since the

past four quarters, added 209 net employees, taking the segments total employee

base to 10,177. The company added 2,213 gross employees (all laterals) in the

BPO segment during the quarter. The quarterly offshore attrition rate for this

segment declined to 7.9% during the quarter from 8.7% in 2QFY2013.

(1.0)

2.7

4.0

3.43.6

4.6

7.1

2.7

4.2

6.3

8.8

6.9

(0.8)- 0.1

(3)

0

3

6

9

12


(%)

US Europe Rest of the world


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April 17, 2013 7

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

3QFY12 4QFY12 1QFY13 2QFY13 3QFY13Net additionsSoftware services 79 744 (181) (1,323) (1,638)Infrastructure services 340 1,457 1,127 928 638

BPO (1,031) (346) 70 254 209

Total employeesSoftware services 54,703 57,592 55,266 53,943 52,305

Infrastructure services 17,771 19,228 20,355 21,283 21,921

BPO 9,990 9,644 9,714 9,968 10,177


The utilization level offshore, including as well as excluding trainees, improved

substantially by 340bp and 240bp qoq to 79.0% and 80.0%, respectively, led by

reduction in overall employee base. The onsite utilization level declined slightly, by

30bp qoq to 97.0%.

Exhibit 9:Utilization trend (%)


Operating margin almost flat

The operating margin has always been a concern for HCL Tech; however the

Managements focus to improve it, is now paying off. The company has been able

to increase its operating margin in the last four quarters. During 3QFY2013, its

EBITDA margin declined by just 18bp qoq, to 22.4%, while it rose significantly by

400bp, on a yoy basis. The EBIT margin remained almost flat qoq at 19.9%. The

factors affecting EBIT margin of HCL Tech during 3QFY2013 were: 1) an 11bp

qoq negative impact due to exchange, 2) 39bp qoq gain from increase in

utilization level, 3) 7bp qoq gain from efficiencies and 4) 33bp negative impact

due to higher SG&A spends.

72.2 72.474.2

75.6

79.0

79.0

75.177.4 77.6

80.0

94.495.7 95.3

97.3 97.0

60

70

80

90

100


(%)

Offshore - Including trainees Offshore -Excluding trainees Ons ite


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April 17, 2013 8

Exhibit 10:Margin profile


Exhibit 11:BPO segment Margin trend


Client pyramid

During the quarter, HCL Tech enhanced its client pyramid with an addition of 37

new clients. The company added one client in the US$20mn-30mn revenuebracket. Nine clients were added in the US$5mn-10mn revenue bracket. The

active client base of the company increased to 547 from 544 in 2QFY2013. The

companys top clients registered a lower-than-companys average growth, with

revenue from the top 5, top 10 and top 20 clients growing by 1.5%, 2.8% and

2.0% qoq (LTM basis, CC terms), respectively.

32.5

35.2 35.2 35.8 36.0

18.4

22.0 22.2 22.6 22.4

15.7

19.4 19.4 19.8 19.9

10

15

20

25

30

35

40


(%)

Gross margin EBITDA margin EBIT margin

28.329.7 29.8

32.4 33.4

5.6 6.8

9.211.5 11.6

0.5 1.82.3 5.7

5.9

0

6

12

18

24

30

36


(%)

Gross margin EBITDA margin EBIT margin


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April 17, 2013 9

Exhibit 12:Client pyramid

Particulars 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13Active client relationship 516 536 536 544 547

New client relationship 52 50 38 39 37US$1mn5mn 234 233 228 240 235

US$5mn10mn 60 68 75 80 89

US$10mn20mn 48 51 49 48 47

US$20mn30mn 19 20 20 21 22

US$30mn40mn 11 11 15 14 14

US$40mn50mn 4 4 4 5 5

US$50mn100mn 6 5 5 5 5

US$100mn plus 4 5 5 5 5


Outlook and valuation

HCL Tech has recorded an ~3% CQGR in its revenue over the past eight quarters.

This is primarily on the back of infrastructure management services and custom

application services maintaining their growth momentum and growing at par or

higher than the companys average growth rate. Verticals such as manufacturing,

financial services and retail have proved to be the companys growth drivers.

Geography wise, continental Europe has proved to be a strong spender vis--vis its

peers; HCL Tech has a strong footprint in this geography post the acquisition of

Axon.

The company announced the appointment of Mr Anant Gupta as the Chief

Executive Officer of the company with effect from January 17, 2013. Under his

leadership, the company has been able to win over US$1bn multi-year,

multi-million dollar deals this quarter, thus sustaining its momentum of signing

~US$1bn+ TCV worth of deals, over the past few quarters. The Management

maintained that the deals are out of vendor-churn exercises rather than on any

incremental spending. However, we believe, in such a competitive scenario where

all the 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. The Management sounded confident of sustaining

revenue growth within the top-tier league along with maintaining operatingmargins (excluding currency) through operational levers such as utilization, higher

off-shoring of revenues and growth leverage. The company has been focusing a

lot of effort on the US and Europe geographies to chase the rebid opportunity. The

companys recent win ratios of ~50% drive confidence on sustaining revenue

growth momentum, going ahead. We expect HCL Tech to be the outperformer

among tier-I IT companies, with USD and INR revenue CAGR of 12.8% and

15.3%, respectively, over FY201215, on the back of its higher-value services

portfolio, which is set to address the current demand landscape.

On the operating front, the company considerably expanded its EBITDA margin to

22.4% in 3QFY2013. The Management indicated that the company remainsfocused on sustaining its EBIT margin in the range of 18-19% in the near term

along with volume growth. We expect the EBIT and PAT to post a 19.1% and

19.6% CAGR over FY2012-15.


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April 17, 2013 10

At the current market price of `751, the stock is trading at 13.1x FY2014E and

12.2x FY2015E EPS of `57.3 and `61.7, respectively. We value the company at14x FY2014E EPS and give it a target price of `863.We maintain Buy rating onthe stock.Exhibit 13:Key assumptions

FY2013 FY2014 FY2015Revenue growth (USD) 13.0 13.0 12.5

USD-INR rate (realized) 54.2 54.0 54.0

Revenue growth (INR) 21.0 12.5 12.5

EBITDA margin (%) 22.3 21.5 20.7

EBIT margin (%) 19.6 18.9 18.2

Tax rate (%) 23.7 26.5 27.0

EPS growth (%) 51.5 5.0 7.7


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


50

150

250350

450

550

650

750

850

950

1050

Aug-07 Apr-08 Dec-08 Aug-09 Apr-10 Dec-10 Aug-11 Apr-12 Dec-12

(`)

Price 19x 16x 13x 10x 6x


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April 17, 2013 11

Exhibit 15:Recommendation summary

Company Reco CMP Tgt Price Upside FY2015E FY2015E FY2012-15E FY2015E FY2015E(`) (`) (%) EBITDA (%) P/E (x) EPS CAGR (%) EV/Sales (x) RoE (%)

HCL Tech Buy 751 863 15.0 20.7 12.2 19.6 1.4 21.5Hexaware Buy 89 105 18.5 19.2 7.6 9.5 0.9 22.1

Infosys Accumulate 2,282 2,465 8.0 27.7 12.5 7.9 2.0 19.3

Infotech Enterprises Buy 167 196 17.0 18.5 7.7 14.5 0.4 13.1

KPIT Cummins Buy 97 130 34.6 15.2 6.7 21.8 0.5 18.8

Mahindra Satyam Buy 110 143 30.2 19.1 9.2 2.3 0.9 20.1

MindTree Accumulate 858 926 7.9 19.4 9.3 19.9 0.8 18.8

Mphasis Accumulate 359 395 10.2 17.4 8.6 3.3 0.6 13.6

NIIT^ Buy 23 30 30.4 9.1 4.3 (7.1) 0.1 11.9

Persistent Accumulate 547 602 10.1 24.6 9.1 19.3 0.9 16.8

TCS Accumulate 1,459 1,624 11.3 28.1 16.6 17.3 3.2 27.4

Tech Mahindra Buy 956 1,230 28.7 18.1 8.3 10.7 1.4 19.1

Wipro Buy 375 450 20.0 19.5 11.9 11.6 1.3 17.6

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

Company Background

HCL Tech is India's fifth largest IT services company, with over 84,000 employees

catering to more than 540 clients. The company's service offerings include

enterprise application services (EAS), custom applications, engineering and

research and development (ERD) and infrastructure management services (IMS). In

December 2008, HCL Tech acquired UK-based SAP consulting company - Axon,which now contributes ~10% to its consolidated revenue.


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April 17, 2013 12

Profit and loss statement (Consolidated, US GAAP)

Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015ENet sales 16,034 21,031 25,444 28,633 32,216Cost of revenues 10,914 14,056 16,382 19,024 21,838

Gross profit 5,120 6,975 9,062 9,609 10,378% of net sales 31.9 33.2 35.6 33.6 32.2

SG&A expenses 2,371 2,950 3,381 3,455 3,701

% of net sales 14.8 14.0 13.3 12.1 11.5

EBITDA 2,749 4,025 5,680 6,154 6,677% of net sales 17.1 19.1 22.3 21.5 20.7

Dep. and amortization 498 564 684 735 822

% of net sales 3.1 2.7 2.7 2.6 2.6

EBIT 2,251 3,461 4,996 5,420 5,854% of net sales 14.0 16.5 19.6 18.9 18.2

Other income, net 26 71 143 7 95

Profit before tax 2,277 3,532 5,139 5,427 5,949

Provision for tax 485 818 1,219 1,438 1,606

% of PBT 21.3 23.2 23.7 26.5 27.0

PAT 1,791 2,714 3,920 3,989 4,343Share from equity invst. - - - - -

Forex loss (82) (188) (75) 44 -

Adj. net profit 1,710 2,526 3,845 4,033 4,343EPS (`) 24.5 36.0 54.6 57.3 61.7


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April 17, 2013 13

Balance sheet (Consolidated, US GAAP)

Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015ECash and cash equivalent 520 667 915 1,255 1,678

Account receivables, net 2,591 3,836 3,890 4,377 4,925Unbilled receivables 816 1,508 1,394 1,569 1,765

Deposit with banks 1,079 1,282 1,898 2,604 3,481

Deposit (one year with HDFC ltd) - 50 50 50 50

Investment securities, available for sale 643 546 1,131 1,551 2,074

Other current assets 1,255 1,521 1,654 1,861 2,094

Total current assets 6,902 9,410 10,931 13,267 16,067Property and equipment, net 2,217 2,478 2,611 2,694 2,689

Intangible assets, net 4,188 4,940 4,940 4,940 4,940

Deposits with HDFC Ltd. 50 50 88 121 161

Fixed deposits with banks 110 110 194 266 355

Investment securities HTM 95 95 167 229 306

Investment in equity investee 23 40 8 53 53

Other assets 1,039 1,805 1,926 2,881 3,880

Total assets 14,624 18,928 20,864 24,451 28,453Current liabilities 3,376 4,939 4,743 5,395 6,129

Borrowings 2,124 1,922 1,219 866 514

Other liabilities 689 1,335 1,233 1,403 1,594

Total liabilities 6,189 8,196 7,196 7,664 8,237Minority interest - - - - -

Total stockholder equity 8,435 10,731 13,668 16,787 20,216

Total liabilities and stock holder equity 14,624 18,928 20,864 24,451 28,453


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April 17, 2013 14

Cash flow statement (Consolidated, US GAAP)

Y/E June (` cr) FY2011 FY2012 FY2013E FY2014E FY2015EPre tax profit from operations 2,094 3,299 4,870 5,328 5,816

Depreciation 498 564 684 735 822Expenses (deferred)/written off (82) (188) (75) 44 -

Pre tax cash from operations 2,510 3,675 5,479 6,107 6,638

Other income/prior period ad 183 233 269 99 134

Net cash from operations 2,693 3,908 5,748 6,206 6,771

Tax (485) (818) (1,219) (1,438) (1,606)

Cash profits 2,207 3,090 4,529 4,768 5,165(Inc)/dec in current assets (727) (2,204) (73) (870) (977)

Inc/(dec) in current liabilities 243 1,563 (196) 652 735

Net trade working capital (484) (641) (269) (218) (242)

Cash flow from oper. actv. 1,724 2,449 4,260 4,550 4,923(Inc)/dec in fixed assets (797) (778) (770) (770) (770)

(Inc)/dec in intangibles 56 (799) (47) (48) (47)

(Inc)/dec in investments 45 (173) (1,362) (1,339) (1,608)

(Inc)/dec in minority interest - - - - -

Inc/(dec) in non-current liab. (50) 646 (101) 169 191

(Inc)/dec in non-current assets (75) (766) (121) (955) (999)

Cash flow from invest. actv. (821) (1,871) (2,402) (2,943) (3,233)Inc/(dec) in debt (539) (202) (703) (353) (353)

Inc/(dec) in equity/premium 394 497 - - -

ESOP charges (90) (71) (84) (91) (91)

Dividends (615) (655) (824) (824) (824)

Cash flow from financing actv. (851) (431) (1,611) (1,267) (1,267)Cash generated/(utilized) 51 147 247 340 423Cash at start of the year 469 520 667 915 1,255

Cash at end of the year 520 667 915 1,255 1,678


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April 17, 2013 15

Key ratios

Y/E June FY2011 FY2012 FY2013E FY2014E FY2015EValuation ratio (x)P/E (on FDEPS) 30.7 20.8 13.8 13.1 12.2

P/CEPS 23.7 16.9 11.5 10.9 10.1

P/BVPS 6.2 4.9 3.8 3.1 2.6

Dividend yield (%) 1.1 1.1 1.2 1.3 1.5

EV/Sales 3.2 2.4 1.9 1.6 1.4

EV/EBITDA 18.9 12.8 8.6 7.6 6.7

EV/Total assets 3.5 2.7 2.3 1.9 1.6

Per share data (`)EPS (Fully diluted) 24.5 36.0 54.6 57.3 61.7

Cash EPS 31.8 44.5 65.2 68.6 74.3

Dividend 8.0 8.0 9.0 10.0 11.0

Book value 121 154 197 242 291

Dupont analysisTax retention ratio (PAT/PBT) 0.8 0.8 0.8 0.7 0.7

Cost of debt (PBT/EBIT) 1.0 1.0 1.0 1.0 1.0

EBIT margin (EBIT/Sales) 0.1 0.2 0.2 0.2 0.2

Asset turnover ratio (Sales/Assets) 1.1 1.1 1.2 1.2 1.1

Leverage ratio (Assets/Equity) 1.7 1.8 1.5 1.5 1.4

Operating ROE 21.2 25.3 28.7 23.8 21.5

Return ratios (%)RoCE (pre-tax) 15.4 18.3 23.9 22.2 20.6

Angel RoIC 18.6 21.5 30.4 29.5 28.8RoE 20.3 23.5 28.1 24.0 21.5

Turnover ratios (x)Asset turnover (fixed assets) 2.2 2.5 2.7 2.8 2.8

Receivables days 58 56 56 56 56


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Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement HCL Tech

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

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

hcltech 3q fy13

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