3QFY2013 Result Update | IT

April 17, 2013

HCL Technologies
Performance Highlights
(` cr) Consl. Net revenue EBITDA EBITDA margin (%) PAT 3QFY13 6,425 1,276 19.9 1,040 2QFY13 6,274 1,244 19.8 965 % chg (qoq) 2.4 2.5 2bp 7.8 3QFY12 5,216 818 15.7 603 % chg (yoy) 23.2 56.0 418bp 72.5

BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code IT 51,379 (2,684) 0.8 807/454 120,859 2 18,731 5,689 HCLT.BO HCLT@IN

`751 `863
12 Months

Source: 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 of US$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 demand environment 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 and give it a target price of `863. We maintain our Buy rating on the stock. 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) FY2011 16,034 27.6 1,710 30.5 17.1 24.5 30.7 6.2 20.3 15.4 3.2 18.9 FY2012 21,031 31.2 2,526 47.8 19.1 36.0 20.8 4.9 23.5 18.3 2.4 12.8 FY2013E 25,444 21.0 3,845 52.2 22.3 54.6 13.8 3.8 28.1 23.9 1.9 8.6 FY2014E 28,633 12.5 4,033 4.9 21.5 57.3 13.1 3.1 24.0 22.2 1.6 7.6 FY2015E 32,216 12.5 4,343 7.7 20.7 61.7 12.2 2.6 21.5 20.6 1.4 6.7

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 62.1 8.4 21.8 7.7

Abs. (%) Sensex HCL Tech

3m (6.2) 6.8

1yr 7.9 56.2

3yr 6.5 113.2

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

Source: Company, Angel Research

Please refer to important disclosures at the end of this report

HCL Technologies | 3QFY2013 Result Update

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

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

3QFY13 6,425 4,113 2,312 872 1,439 163 1,276 66 1,342 325 1,017 23 1,040 14.8 36.0 22.4 19.9 16.0

2QFY13 6,274 4,026 2,248 831 1,417 172 1,244 28 1,272 295 977 (13) 965 13.7 35.8 22.6 19.8 15.3

% chg (qoq) 2.4 2.2 2.9 5.0 1.6 (5.1) 2.5 5.4 10.1 4.0 (284.8) 7.8 8.0 16bp (18)bp 2bp 71bp

3QFY12 5,216 3,518 1,698 739 959 141 818 23 841 202 639 (36) 603 8.6 32.5 18.4 15.7 11.5

% chg (yoy) 23.2 16.9 36.2 18.1 50.1 15.7 56.0 59.6 61.2 59.1 (163.6) 72.5 71.9 343bp 401bp 418bp 451bp

9MFY13 18,789 12,085 6,704 2,498 4,207 504 3,702 129 3,832 892 2,940 (50) 2,889 41.0 35.7 22.4 19.7 15.3

9MFY12 15,112 10,219 4,893 2,169 2,724 412 2,313 55 2,368 566 1,803 (130) 1,672 23.9 32.4 18.0 15.3 11.0

% chg (yoy) 24.3 18.3 37.0 15.2 54.4 22.6 60.1 61.8 57.7 63.1 (61.4) 72.8 71.7 330bp 436bp 440bp 425bp

Exhibit 2: 3QFY2013 Actual vs Angel estimates

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

Actual 6,425 22.4 1,040

Estimate 6,432 22.3 916

Variation (%) (0.1) 12bp 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.

April 17, 2013

HCL Technologies | 3QFY2013 Result Update

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

6 4 2
(%)

5.4

5.7 3.8 2.9 1.8 0.5 0.4 0.4 0.4 1QFY13 (1.2) 2QFY13 0.4 0.3 0.4 2.5

0 3QFY12 (2) (4) 4QFY12

3QFY13

(3.7)

Offshore

Onsite

Total

Source: Company, Angel Research

Core software services post modest revenue growth: During the quarter, core software 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 CC terms 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 infrastructure management 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.

April 17, 2013

HCL Technologies | 3QFY2013 Result Update

Exhibit 4: 3QFY2013 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

3QFY13 783 301 38.5 183 23.3 166 21.2

2QFY13 775 297 38.3 184 23.8 166 21.4

% chg qoq 1.0 1.3 12bp (0.9) (45)bp 0.2 (17)bp

3QFY12 747 258 34.5 145 19.4 128 17.1

% chg yoy 4.8 16.9 396bp 25.8 389bp 30.0 410bp

356 110 30.9 78 21.9 67 18.9

328 100 30.4 70 21.5 60 18.4

8.6 10.3 49bp 10.9 47bp 11.6 52bp

251 69 27.6 45 17.8 36 14.4

41.6 58.7 332bp 74.7 415bp 85.4 446bp

51 17 33.3 6 11.7 3 5.8

51 17 32.4 6 11.6 3 5.7

0.6 3.6 98bp 1.7 13bp 3.4 16bp

49 14 28.3 3 5.7 0 0.4

3.8 22.1 499bp 114.3 603bp 544bp

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

12 10 8 6 4.8 4.8 3.9 2.3 1.6 0.3 4QFY12 EAS 1QFY13 (2.0) ERD 1.7 0.5 (1.3) 2QFY13 IMS 0.7 4.4 2.4 0.8 0.6 9.2 10.3 10.0

9.0

(%)

4 2 0 (2) (4)

(2.0)

3QFY13 BPO services

Custom application

Source: Company, Angel Research

April 17, 2013

HCL Technologies | 3QFY2013 Result Update

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 operational efficiency, 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 (%) Financial services Manufacturing Telecom Retail and CPG MPE Healthcare EPU
Source: Company, Angel Research

3QFY12 (4.1) 0.6 10.0 (0.3) 6.5 8.1 7.6

4QFY12 5.2 1.6 (2.8) 4.2 4.4 22.9 13.1

1QFY13 3.6 (3.2) 10.2 7.3 14.6 (1.7)

2QFY13 10.1 2.0 (2.2) 0.7 4.2 2.6 4.7

3QFY13 1.0 7.8 4.7 2.9 (1.4) (1.6) 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.

April 17, 2013

HCL Technologies | 3QFY2013 Result Update

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

12 9 6 8.8 7.1 4.6 6.9 4.0 4.2 3.4 3.6 6.3

(%)
3

2.7 0 (3) 3QFY12 4QFY12 US

Source: Company, Angel Research

2.7 (0.8) 1QFY13 Europe

(1.0) 2QFY13 0.1 3QFY13

Rest of the world

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 on a 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.

April 17, 2013

HCL Technologies | 3QFY2013 Result Update

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

3QFY12 Net additions Software services Infrastructure services BPO Total employees Software services Infrastructure services BPO
Source: Company, Angel Research

4QFY12 744 1,457 (346) 57,592 19,228 9,644

1QFY13 (181) 1,127 70 55,266 20,355 9,714

2QFY13 (1,323) 928 254 53,943 21,283 9,968

3QFY13 (1,638) 638 209 52,305 21,921 10,177

79 340 (1,031) 54,703 17,771 9,990

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 (%)

100 94.4 79.0 75.1 95.7 95.3 97.3 97.0

90

(%)

80

77.4

77.6 75.6

80.0 79.0

70

72.2

72.4

74.2

60 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 Onsite Offshore - Including trainees

Source: Company, Angel Research

Offshore - Excluding trainees

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.

April 17, 2013

HCL Technologies | 3QFY2013 Result Update

Exhibit 10: Margin profile

40 35 30 32.5 35.2 35.2 35.8 36.0

(%)

25 20 15 10 3QFY12 18.4

22.0

22.2

22.6

22.4

19.4 15.7 4QFY12 Gross margin

Source: Company, Angel Research

19.4

19.8

19.9

1QFY13 EBITDA margin

2QFY13

3QFY13

EBIT margin

Exhibit 11: BPO segment Margin trend

36 30 24 28.3 29.7 29.8 32.4 33.4

(%)

18 12 6 0 5.6 0.5 3QFY12 9.2 2.3 1QFY13 EBITDA margin 11.5 11.6

6.8 1.8 4QFY12 Gross margin

5.7 2QFY13

5.9 3QFY13

EBIT margin

Source: Company, Angel Research

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 revenue bracket. 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.

April 17, 2013

HCL Technologies | 3QFY2013 Result Update

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

3QFY12 516 52 234 60 48 19 11 4 6 4

4QFY12 536 50 233 68 51 20 11 4 5 5

1QFY13 536 38 228 75 49 20 15 4 5 5

2QFY13 544 39 240 80 48 21 14 5 5 5

3QFY13 547 37 235 89 47 22 14 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 operating margins (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 remains focused 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.
April 17, 2013

HCL Technologies | 3QFY2013 Result Update

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 at 14x FY2014E EPS and give it a target price of `863. We maintain Buy rating on the stock.

Exhibit 13: Key assumptions

FY2013 Revenue growth (USD) USD-INR rate (realized) Revenue growth (INR) EBITDA margin (%) EBIT margin (%) Tax rate (%) EPS growth (%)
Source: Company, Angel Research

FY2014 13.0 54.0 12.5 21.5 18.9 26.5 5.0

FY2015 12.5 54.0 12.5 20.7 18.2 27.0 7.7

13.0 54.2 21.0 22.3 19.6 23.7 51.5

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

1050 950 850 750 650 550 450 350 250 150 50 Aug-07 Apr-08 Price Dec-08 Aug-09 19x Apr-10 16x Dec-10 Aug-11 13x Apr-12 10x Dec-12 6x

Source: Company, Angel Research

April 17, 2013

(` )

10

HCL Technologies | 3QFY2013 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 Buy Accumulate Buy Buy Buy Accumulate Accumulate Buy Accumulate Accumulate Buy Buy CMP (`) 751 89 2,282 167 97 110 858 359 23 547 1,459 956 375 Tgt Price (`) 863 105 2,465 196 130 143 926 395 30 602 1,624 1,230 450 Upside (%) 15.0 18.5 8.0 17.0 34.6 30.2 7.9 10.2 30.4 10.1 11.3 28.7 20.0 FY2015E EBITDA (%) 20.7 19.2 27.7 18.5 15.2 19.1 19.4 17.4 9.1 24.6 28.1 18.1 19.5 FY2015E P/E (x) 12.2 7.6 12.5 7.7 6.7 9.2 9.3 8.6 4.3 9.1 16.6 8.3 11.9 FY2012-15E EPS CAGR (%) 19.6 9.5 7.9 14.5 21.8 2.3 19.9 3.3 (7.1) 19.3 17.3 10.7 11.6 FY2015E EV/Sales (x) 1.4 0.9 2.0 0.4 0.5 0.9 0.8 0.6 0.1 0.9 3.2 1.4 1.3 FY2015E RoE (%) 21.5 22.1 19.3 13.1 18.8 20.1 18.8 13.6 11.9 16.8 27.4 19.1 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.

April 17, 2013

11

HCL Technologies | 3QFY2013 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 (`) 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 FY2012 21,031 14,056 6,975 33.2 2,950 14.0 4,025 19.1 564 2.7 3,461 16.5 71 3,532 818 23.2 2,714 (188) 2,526 36.0 FY2013E 25,444 16,382 9,062 35.6 3,381 13.3 5,680 22.3 684 2.7 4,996 19.6 143 5,139 1,219 23.7 3,920 (75) 3,845 54.6 FY2014E 28,633 19,024 9,609 33.6 3,455 12.1 6,154 21.5 735 2.6 5,420 18.9 7 5,427 1,438 26.5 3,989 44 4,033 57.3 FY2015E 32,216 21,838 10,378 32.2 3,701 11.5 6,677 20.7 822 2.6 5,854 18.2 95 5,949 1,606 27.0 4,343 4,343 61.7

April 17, 2013

12

HCL Technologies | 3QFY2013 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 FY2011 FY2012 FY2013E FY2014E FY2015E 520 2,591 816 1,079 643 1,255 6,902 2,217 4,188 50 110 95 23 1,039 3,376 2,124 689 6,189 667 3,836 1,508 1,282 50 546 1,521 9,410 2,478 4,940 50 110 95 40 1,805 4,939 1,922 1,335 8,196 915 3,890 1,394 1,898 50 1,131 1,654 10,931 2,611 4,940 88 194 167 8 1,926 20,864 4,743 1,219 1,233 7,196 13,668 20,864 1,255 4,377 1,569 2,604 50 1,551 1,861 13,267 2,694 4,940 121 266 229 53 2,881 24,451 5,395 866 1,403 7,664 16,787 24,451 1,678 4,925 1,765 3,481 50 2,074 2,094 16,067 2,689 4,940 161 355 306 53 3,880 28,453 6,129 514 1,594 8,237 20,216 28,453

14,624 18,928

8,435 10,731 14,624 18,928

April 17, 2013

13

HCL Technologies | 3QFY2013 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/(utilized) Cash at start of the year Cash at end of the year FY2011 2,094 498 (82) 2,510 183 2,693 (485) 2,207 (727) 243 (484) 1,724 (797) 56 45 (50) (75) (821) (539) 394 (90) (615) (851) 51 469 520 FY2012 FY2013E FY2014E FY2015E 3,299 564 (188) 3,675 233 3,908 (818) 3,090 (2,204) 1,563 (641) 2,449 (778) (799) (173) 646 (766) (1,871) (202) 497 (71) (655) (431) 147 520 667 4,870 684 (75) 5,479 269 5,748 (1,219) 4,529 (73) (196) (269) 4,260 (770) (47) (1,362) (101) (121) (2,402) (703) (84) (824) (1,611) 247 667 915 5,328 735 44 6,107 99 6,206 (1,438) 4,768 (870) 652 (218) 4,550 (770) (48) (1,339) 169 (955) (2,943) (353) (91) (824) (1,267) 340 915 1,255 5,816 822 6,638 134 6,771 (1,606) 5,165 (977) 735 (242) 4,923 (770) (47) (1,608) 191 (999) (3,233) (353) (91) (824) (1,267) 423 1,255 1,678

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HCL Technologies | 3QFY2013 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 58 2.5 56 2.7 56 2.8 56 2.8 56 15.4 18.6 20.3 18.3 21.5 23.5 23.9 30.4 28.1 22.2 29.5 24.0 20.6 28.8 21.5 0.8 1.0 0.1 1.1 1.7 21.2 0.8 1.0 0.2 1.1 1.8 25.3 0.8 1.0 0.2 1.2 1.5 28.7 0.7 1.0 0.2 1.2 1.5 23.8 0.7 1.0 0.2 1.1 1.4 21.5 24.5 31.8 8.0 121 36.0 44.5 8.0 154 54.6 65.2 9.0 197 57.3 68.6 10.0 242 61.7 74.3 11.0 291 30.7 23.7 6.2 1.1 3.2 18.9 3.5 20.8 16.9 4.9 1.1 2.4 12.8 2.7 13.8 11.5 3.8 1.2 1.9 8.6 2.3 13.1 10.9 3.1 1.3 1.6 7.6 1.9 12.2 10.1 2.6 1.5 1.4 6.7 1.6 FY2011 FY2012 FY2013E FY2014E FY2015E

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HCL Technologies | 3QFY2013 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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