GICS Industry: IT Services l Sub Industry: IT Consulting & Other Services l Website: www.hcltech.

com

HCL Technologies Ltd

Key Stock Indicators
NSE Ticker: Bloomberg Ticker: Face value / Share: Div. Yield (%): HCLTECH HCLT: IN 2.0 0.8 CMP (as on 03 Feb 2011 Rs/Share): 52-weekrange up to 03 Feb 2011 (rs) (H/L): Market Cap as on 03 Feb 2011 (Rs Mn): Enterprise Value as on 03 Feb 2011 (Rs Mn): Div. Yield (%): 0.0 491.1 510.85/337.15 333,947 345,386 Shares outstanding (mn): Free Float (%): Average daily volumes (12 months): Beta (2 year): 680.0 35.2 921,271 0.9

HCL Technologies Limited (HCLT) was incorporated in 1991 as HCL Overseas Ltd; the name change was undertaken in 1999. HCLT is one of the leading Indian IT services companies, offering a wide range of services including enterprise application services (EAS), engineering and research and development services (ERS), custom applications, remote infrastructure management services (RIMS), and business process outsourcing (BPO). It caters to various industry verticals, including financial services, manufacturing, telecom, retail, life sciences, media and entertainment, and energy and utilities. It employed over 64,000 people, as of June 30, 2010. KEY HIGHLIGHTS Diversified portfolio of IT services HCLT offers a range of world-class products and end-to-end business solutions in keeping with the changing market conditions for various industry segments. HCL is continuously investing and energising its customer application services (CAS), EAS, RIMS and ERS, businesses that are high growth in nature. In addition, the company offers BPO services, which include front-office and back-office support in areas such as operations management, business generation, management support and platform-based services. EAS contributed 22% to FY10 revenues, while CAS accounted for 29%, RIMS 22%, ERS 19% and BPO 6%. Revenues are also spread in terms of verticals: Manufacturing contributed 27%, financial services 25%, telecom 11%, retail 8%, healthcare 8% and media 6% and balance, ~15%. Acquired two companies in FY10 HCLT acquired 2 companies during FY10: UCS Solutions Holding (Pty) Limited in August 2009 and RKV Technologies in March 2010. In view of new business prospects, the company has set up step down subsidiaries in Denmark, viz HCL Technologies Denmark ApS, and in Norway, viz HCL Technologies Norway AS. During FY10, the company also set up a branch office in the USA. As on June 30, 2010, the company has 56 subsidiaries. The acquisition of AXON in December 2008 helped HCLT to strengthen its EAS business segment, which accounted for 22% of revenue in FY10 (from 18% in FY09).

Key Financial Indicators

Revenue (Rs mn) EBITDA margins (%) PAT (Rs mn) PAT margins(%) Gearing (x) EPS (Rs/share) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x) n.m. : Not meaningful Jun-08 75,705.4 21.2 10,379.4 13.7 15.6 16.3 4.2 38.2 26.0 9.9 Jun-09 102,336.9 20.3 12,995.9 12.7 2.5 19.4 9.6 10.3 52.0 50.1 6.5 Jun-10 121,421.6 16.0 12,590.0 10.4 1.0 18.5 26.5 12.0 37.6 63.1 17.7

Shareholding (As on December 31, 2010)

FII 22% DII 6% Others 8%

Promoter 64%

KEY RISKS

Adverse movement in foreign exchange rate the company derives over 90% of revenue in foreign currencies Weak economies of key markets such as the US and Europe Anti-outsourcing legislation

Indexed price chart

(index) 160 140 120 100 80 60 40 20 0 Nov-10 Apr-10 Mar-10 May-10 Dec-10 Aug-10 Feb-10 Sep-10 Jun-10 Oct-10 Jul-10 ('000) 8000 7000 6000 5000 4000 3000 2000 1000 0 Jan-11 NIFTY

Stock Performances vis--vis market

Returns (%) YTD HCLTECH NIFTY
Note: 1) YTD returns are since Jul 01, 2010 to Feb 03, 2011. 2) 1-m, 3-m and 12-m returns are up to Feb 03, 2011.

1-m 8 -10

3-m 21 -10

12-m 41 12

35 5

Volumes (RHS)

HCLTECH

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HCL Technologies Ltd

BACKGROUND
Incorporated in 1991, HCLT is one of the leading global IT services company in India. The company has a unique model, focusing on verticals and horizontals as equal endto-end entities. In case of horizontals, HCL is investing and energising its EAS, RIMS and ERS businesses. On the verticals front, the company has a diversified portfolio with a focus on building micro-verticalised domain competency. HCLT leverages its extensive global offshore infrastructure and network of offices in 26 countries to provide multiservice delivery around the globe in key industry verticals including financial services, manufacturing, aerospace and defence, telecom, retail and consumer packaged goods, life sciences & healthcare, media & entertainment, travel, transportation & logistics, automotive, government, energy & utilities.

COMPETITIVE POSITION
Peer Comparison

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m: Not meaningful

HCL Technologies Ltd Jun-10 121,421.6 16.0 12,590.0 10.4 1.0 18.5 26.5 12.0 37.6 63.1 17.7

Infosys Technologies Ltd Mar-10 227,650.0 34.6 62,660.0 27.5 109.5 28.2 8.0 40.2 31.6 20.9

Wipro Ltd Mar-10 272,687.0 22.0 46,495.0 17.1 0.5 31.7 13.8 5.0 35.4 45.2 10.5

Tata Consultancy Services Ltd Tech Mahindra Ltd Mar-10 Mar-10 301,130.0 46,348.0 29.2 24.6 70,916.3 7,032.0 23.6 15.2 0.5 36.2 57.5 32.6 11.1 15.2 2.7 59.9 30.1 51.5 29.0 25.8 7.9

FINANCIAL PROFILE
Top-line increased significantly, but operating margin declined in FY10

Key Financial Indicators Units Revenue Rs million Per cent Rs million Per cent Per cent Per cent Per cent Times Per cent Per cent EBITDA margins PAT PAT margins Revenue growth EBITDA growth PAT growth Gearing RoCE RoE

Jun-08
75,705.4 21.2 10,379.4 13.7 24.6 29.2 -21.6 0.0 38.2 26.0

Jun-09
102,336.9 20.3 12,995.9 12.7 35.2 29.3 25.2 2.5 52.0 50.1

Jun-10
121,421.6 16.0 12,590.0 10.4 18.6 -6.2 -3.1 1.0 37.6 63.1

HCLT posted net sales of over Rs 121 billion (bn) in FY10 (refers to the year ended June 30, 2010), registering a growth of more than 18% over the previous year. This was underpinned by the strengthening of its capabilities in the infrastructure services segment, coupled with the increased scale of EAS. Among the three segments, (software services, infrastructure services and BPO services) revenues from infrastructure services registered highest growth rate, at 65.1%. The operating margin fell by 430 basis points from 20.3% in FY09 to 16% in FY10. The margin was adversely affected in FY09 and FY10 due to currency fluctuations and losses on forward contracts. Exports accounted for about 90% of the total revenues in FY10. Decline in PAT was lower than the decline in EBITDA largely on account of forex gains.

INDUSTRY PROFILE
IT services Indian IT services revenues are estimated to be around $34 billion in 2009-10, registering a CAGR of 20 per cent from 2004-05 to 2009-10. During the same period, IT services exports, which accounted for 80 per cent of the revenues, are estimated to have grown at a CAGR of 22 per cent to $27 billion in 2009-10. The industry is highly dependent on the US and UK markets, which contribute to around 75 per cent of export revenues. With IT services deriving a large portion of its revenues from exports, the sector`s profitability is highly correlated to foreign exchange movements. An appreciating rupee is thus a key risk factor. Also, as human resource is the main input in IT services, issues related to non-availability of skilled labor, attrition and wage inflation would also impact Indian IT players. IT enabled services ITeS is a term used to describe a range of IT-intensive processes and services, which includes business process outsourcing (BPO) and knowledge process outsourcing (KPO), provided from a distant location and delivered over telecom networks. The Indian ITeS industry grew at a healthy CAGR growth of 30 per cent over 2003-04 to 2008-09, driven by demand from developed economies like USA and UK. However, the y-o-y revenue growth had significantly declined to 7 per cent in 2009-10 and is estimated at $ 14.6 billion .The slowdown was a result of weak demand from key markets, protectionist measures by developed countries, and delay in decision making cycles during the downturn. The revival in the global economy, along with the continuing maturity of the offshore global delivery models, process innovation and inherent need of clients to reduce costs would continue to propel export growth.

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HCL Technologies Ltd

ANNUAL RESULTS
Income Statement (Rs million ) Net Sales Operating Income EBITDA EBITDA Margin Depreciation Interest Other Income PBT PAT PAT Margin No. of shares (Mn No.) Earnings per share (EPS) Cash flow (Rs million ) Pre-tax profit Total tax paid Depreciation Change in working capital Cash flow from operating activities Capital Expenditure Investments and others Balance sheet (Rs million ) Equity share capital Reserves and surplus Tangible net worth Deferred tax liablity:|asset| Long-term debt Short-term-debt Total debt Current liabilities Total provisions Total liabilities Gross block Net fixed assets Investments Current assets Receivables Inventories Cash Total assets Ratio Jun-08 11,820.6 -3,247.0 2,988.4 7,144.3 18,706.3 -7,384.4 1,767.9 Jun-09 16,020.6 -4,944.3 3,754.7 -937.1 13,893.9 -42,622.6 13,366.0 Jun-10 14,635.0 -1,325.8 4,181.1 -4,955.6 12,534.7 -4,851.3 -8,913.6 Revenue growth (%) EBITDA growth(%) PAT growth(%) EBITDA margins(%) Tax rate (%) PAT margins (%) Dividend payout (%) Dividend per share (Rs) BV (Rs) Return on Equity (%) Return on capital employed (%) Gearing (x) Interest coverage (x) Debt/EBITDA (x) Asset turnover (x) Current ratio (x) Gross current assets (days) Jun-08 24.6 29.2 -21.6 21.2 17.6 13.7 57.7 9.0 59.6 26.0 38.2 0.0 5.2 0.0 3.8 Jun-09 35.2 29.3 25.2 20.3 22.6 12.7 36.1 7.0 18.1 50.1 52.0 2.5 5.9 1.5 4.0 Jun-10 18.6 -6.2 -3.1 16.0 18.1 10.4 21.5 4.0 40.8 63.1 37.6 1.0 9.7 1.4 3.8

Jun-08 75,627.8 75,705.4 16,044.4 21.2 2,988.4 3,056.7 1,821.3 11,796.5 10,379.4 13.7 666.4 15.6

Jun-09 102,294.1 102,336.9 20,752.3 20.3 3,754.7 3,515.4 2,538.4 16,060.1 12,995.9 12.7 670.3 19.4

Jun-10 121,362.9 121,421.6 19,471.7 16.0 4,181.1 1,999.7 1,344.1 14,724.3 12,590.0 10.4 678.8 18.5

Jun-08 1,349.8 38,365.7 39,715.5 -2,685.1 173.9 376.2 550.1 20,297.6 4,404.8 62,282.9 21,957.7 13,426.1 13,769.4 35,087.4 19,098.5 706.9 10,112.4 62,282.9

Jun-09 1,345.2 10,813.6 12,158.8 -4,565.2 743.8 29,418.4 30,162.2 32,780.0 4,455.8 74,991.6 29,160.4 17,155.7 403.4 57,432.5 27,213.2 1,695.6 18,987.0 74,991.6

Jun-10 1,377.7 26,342.5 27,720.2 -3,756.7 21,493.1 5,749.3 27,242.4 29,799.3 4,079.7 85,084.9 34,128.6 19,919.9 9,317.0 55,848.0 30,538.6 651.7 15,803.7 85,084.9

Cash flow from investing activities Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries)

-5,616.5 410.4 -218.5 -7,002.6 -2,773.4

-29,256.6 639.2 29,612.1 -5,483.2 -530.8

-13,764.9 1,676.2 -2,919.8 -3,156.0 2,446.5

Cash flow from financing activities Change in cash position Opening cash Closing cash
n.m : Not meaningful;

-9,584.1 3,505.7 6,606.7 10,112.4

24,237.3 8,874.6 10,112.4 18,987.0

-1,953.1 -3,183.3 18,987.0 15,803.7

1.9
168

0.9
202

1.6
167

QUARTERLY RESULTS

Profit and loss account (Rs million) No of Months Revenue EBITDA Interest Depreciation PBT PAT Sep-10 3 15,403.4 3,203.4 262.9 734.3 2,206.2 1,948.8 100.0 20.8 1.7 4.8 14.3 12.7 % of Rev Sep-09 3 12,951.9 4,287.8 152.3 684.5 3,451.0 3,007.5 100.0 33.1 1.2 5.3 26.6 23.2 % of Rev Jun-10 3 13,682.5 3,485.8 254.5 734.3 2,497.0 2,378.2 100.0 25.5 1.9 5.4 18.2 17.4 % of Rev

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HCL Technologies Ltd

FOCUS CHARTS & TABLES
Rs mn 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Dec-07

Quarterly sales & y-o-y growth

Dec-07

Dec-08

Dec-09

Sep-08

Sep-09

Mar-08

Mar-09

Dec-08

Dec-09

Sep-08

Sep-09

Mar-08

Mar-09

Mar-10

Sep-10

Jun-08

Jun-09

Jun-10

Sales

Sales growth y-o-y (RHS)

Net Profit

Net profit growth y-o-y (RHS)

Rs/share 7 6 5 4 3 2 1 0 -1 Dec-07 Dec-08

EPS

Per cent 45 40 35 30 25 20 15 10 5 0 -5 Dec-07 Mar-08 Dec-09 Sep-09 Mar-10 Sep-10 Jun-09 Jun-10

Movement in operating and net margins

Dec-08

Dec-09

Jun-08

Jun-09

Mar-10

Sep-10

Jun-08

Jun-09

Jun-10

Per cent 35 30 25 20 15 10 5 0 -5 -10 -15 -20

Rs mn 5,000 4,000 3,000 2,000 1,000 0 -1,000

Quarterly PAT & y-o-y growth

Per cent 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 -200

Sep-08

Sep-09

Jun-10

Mar-09

Mar-08

Sep-08

Jun-08

Mar-09

OPM

NPM

Shareholding Pattern (Per cent) Mar 2010 Jun 2010 Promoter 68.1 65.3 FII 19.9 21.3 DII 4.6 5.3 Others 7.5 8.2

Sep 2010 65.2 21.0 5.7 8.1

Dec 2010 64.8 21.6 5.8 7.8

Board of Directors Director Name Shi va pra s a d Siva s ubra ma nia m Na da r (Mr.) Robi n Ann Abra ms (Dr.) Subroto Bha tta cha rya (Mr.) Aja i Chowdhry (Mr.) Ama l Ga ngul i (Mr.) Probir Cha ndra Sen (Mr.)

Designation Executive Cha i rma n & Ma na gi ng Director, Promoter-Director Non-Executive Di rector Non-Executive Di rector Non-Executive Di rector Non-Executive Di rector Non-Executive Di rector

Ra ma na Thiruma ni la yur Si ta pa ti Non-Executive Di rector Subra ma ni a n (Mr.) Vineet Na ya r (Mr.)

Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please contact 'Client Servicing' at +91-22-33423561, or via e-mail: clientservicing@crisil.com.

Wholetime Di rector, Vice Cha i rma n

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Mar-10

Sep-10