HCL Technologies 16 January 2021

Institutional Equities

Reuters: HCLT.BO; Bloomberg: HCLT IN Tepid 4Q guidance not different from that of Infosys’; Products look up BUY HCL Technologies (HCLT) delivered above-guidance revenue growth and margins for 3QFY21. Revenue grew by 3.5% CC QoQ (guidance was 1.5-2.5%) and EBIT margin came in at 22.9%, which Sector: Information Technology was an outsized beat versus our estimate of 21%. The 1-month run-up of ~16% in the stock price was likely factoring in a bigger beat, especially after superlative 3Q of TCS and Infosys. The 2-3% CMP: Rs990 QoQ guidance of 4Q (including 1% from DWS acquisition) was a tad disappointing in the context of high expectations, but in line with the 0-2% implied guidance of Infosys. TCV growth of 13% (all Target Price: Rs1,163 of it net new) is in line with that of TCS (total TCV), but tepid compared to scorching 10x growth shown by Infosys (net new). The tepid guidance for 4Q seems likely due to seasonality of Upside: 17% products. HCLT is optimistic about demand and expects accelerated order bookings in the coming quarters. Among the big positives in 3Q included 25% growth in Mode-2 (Digital business) and Girish Pai 13% growth in the July-December 2020 of the products & platforms business (the first comparable Head of Research period on a YoY basis post IBM product purchase). The latter in our view is very important as [email protected]

general market expectation was for a flat growth or decline pre-pandemic. HCLT management stated that the next 5 years for the industry will be better than the last 5 and believes that it will be +91-22-6273 8017

among the growth leaders. We believe that HCLT will be an outsized beneficiary of the digital infrastructure build out that has been catalyzed by the pandemic and which will likely be a 3-5 year Key Data opportunity. Industry believes that only 20% of Global-3000 infrastructure has likely moved to the

cloud with another 60% likely within the next 3-5 years. HCLT has the highest leverage to this Current Shares O/S (mn) 2,713.7 opportunity among the Indian IT Services players with what we estimate to be a 30% revenue Mkt Cap6 (Rsbn/US$bn) 2,686/36.8 exposure. Digital foundation opportunity (as HCLT calls it) has been flagged off by multiple players, including TCS (first wave of its three wave narrative) and Accenture (through creation of a 52 Wk H / L (Rs) 1,099/375 ‘Cloud First’ unit). Also, some of the products acquired from IBM focused on E-commerce, Daily Vol. (3M NSE Avg.) 8,667,205 Security and Collaboration, including Commerce, Appscan, Big Fix and Connections are likely seeing significant traction. We believe that street will attribute a greater value to its products business compared to pre-pandemic days when it was accorded a significant negative value, Price Performance (%) leading to HCLT trading at a significant discount to its peers. We have held a different view (Call 1 M 6 M 1 Yr Option). Post 3QFY21, we have tweaked our estimates modestly. We have raised our effective tax rate a tad, impacting earnings. We have also raised our target PE multiple for HCLT consequent to HCL Technologies 11.8 57.7 66.8 the target PE multiple upgrade for our sector benchmark TCS (26.25x versus 25x earlier). However, Nifty Index 4.9 32.4 16.8 we continue to keep the discount to TCS’ target PE multiple constant at 25%. This leads us to the target price of Rs1163 (19.7x FY23EPS). We retain our ‘Buy’ rating. We believe that the strong Source: Bloombergt growth in the products business could lead to PE discount to TCS narrowing significantly.

3QFY21 Result Result Update 3QFY21 Products business is seeing good traction: While all products have seen growth (YoY) in 3Q, there are some products growing significantly faster than others. HCLT indicated good interest in e-Commerce, security and low-code-no-code related products. HCLT says that it is quite confident about products being a growth business and believes that many of them are mission critical and also very sticky. In terms of synergies, HCLT indicated a win of US$30mn in 3Q for providing services on top of a product that it sold to a customer. Booking momentum was very strong for the Products business. Net new TCV of deals grew at 2.5x YoY (US$91mn). With momentum being seen in this part of the business, HCLT indicated that it may invest a bit more in SGA and that could lead to lower EBIT margin for a few quarters segment.

Y/E March (Rsmn) 3QFY20 2QFY21 3QFY21 YoY (%) QoQ (%) 3QFY21E Dev (%) Net Sales (USD mn) 2,543 2,507 2,617 2.9 4.4 2,579 1.5 Net Sales 181,350 185,940 193,020 6.4 3.8 190,100 1.5 Employee Costs 111,760 109,290 111,940 0.2 2.4 113,703 (1.6) % of Sales 61.6 58.8 58.0 - - 59.8 - SG&A 24,890 27,140 26,650 7.1 (1.8) 27,140 (1.8) % of Sales 13.7 14.6 13.8 - - 14.3 - Depreciation and Amortisation 8,000 9,350 10,270 28.4 9.8 9,314 10.3 % of Sales 4.4 5.0 5.3 - - 4.9 - EBIT 36,700 40,160 44,160 20.3 10.0 39,944 10.6 EBIT Margin (%) 20.2 21.6 22.9 - - 21.0 - Other Income 540 1,390 1,240 129.6 (10.8) 1,390 (10.8) Forex Gain/(Loss) 130 (30) 20 - - 0.0 - PBT 37,370 41,520 45,420 21.5 9.4 41,334 9.9 Provision for Tax 6,910 9,990 5,440 (21.3) (45.5) 7,440 (26.9) Effective Tax Rate 18.5 24.1 12.0 - - 18.0 - Minority share in Profit / Loss 80 110 160 - - 110.0 - PAT (Reported) 30,380 31,420 39,820 31.1 26.7 33,784 17.9 NPM (%) 16.8 16.9 20.6 - - 17.8 - Source: Company, Nirmal Bang Institutional Equities Research

Institutional Equities

Exhibit 1: Key financials Y/E March (Rsmn) FY19 FY20 FY21E FY22E FY23E Revenue (Rsmn) 604,280 706,780 753,693 867,144 977,785 YoY Growth (%) 19.5 17.0 6.6 15.1 12.8 EBIT (Rsmn) 118,210 138,530 162,078 180,532 202,498 EBIT (%) 19.6 19.6 21.5 20.8 20.7 Adj. PAT (Rsmn) 101,230 110,620 137,645 142,258 160,319 YoY Growth (%) 15.3 9.3 24.4 3.4 12.7 FDEPS (Rs) 36.8 40.8 50.7 52.4 59.1 ROE (%) 25.8 23.7 24.0 21.0 20.4 ROCE (%) 27.4 25.2 24.3 24.0 23.8 Pre Tax ROIC (%) 36.3 33.3 32.7 33.6 35.8 P/E(x) 26.9 24.3 19.5 18.9 16.8 P/BV (x) 6.5 5.2 4.3 3.7 3.2 Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 2: Change in our estimates New Old % Change

FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E

INR/USD 74.2 75.2 76.8 74.2 75.2 76.8 0.0 - - USD Revenue (USD mn) 10,161 11,528 12,738 10,075 11,514 12,704 0.9 0.1 0.3 Revenue (Rsmn) 753,693 867,144 977,785 747,222 866,108 975,203 0.9 0.1 0.3 EBIT (Rsmn) 162,078 180,532 202,498 155,265 178,361 199,934 4.4 1.2 1.3 EBIT Margin (%) 21.5 20.8 20.7 20.8 20.6 20.5 - - - PAT (Rsmn) 137,645 142,258 160,319 127,179 146,237 165,119 8.2 (2.7) (2.9) FDEPS (Rs) 50.7 52.4 59.1 46.9 53.9 60.8 8.2 (2.7) (2.9) Source: Company, Nirmal Bang Institutional Equities Research

2 HCL Technologies

Institutional Equities

Our view on the Indian IT services sector: In our sector updates of 6th September 2020 (Rising monetary and digital tides lifting most boats), 28th September 2020 (Medium term commentary turning more positive)and 28 December 2020(Looks stronger near term; Raising target prices), we upgraded our view to ‘neutral’ on the sector from a ‘cautious’ one held for the last many years on the back of both higher earnings and higher target PE multiples. The earnings uplift(~2x of the growth seen in FY15-FY20 timeframe) is coming from an expectation of 400-600bps pick-up in organic revenue growth over FY21-FY23 against the one seen in the FY15-FY20 timeframe (6-8% organic USD terms) along with an improvement in margins. The revenue acceleration is coming from increased overall spending on IT, increased spending on Digital by clients and a move towards greater outsourcing (driven by lack of internal talent), and which in our view will likely be compressed in a shorter period of time than was expected in the past. The demand uplift is more widespread than seen in the past and is a ‘rising-tide-lifting-most-boats’ kind of situation. Reasons for change in customer behavior, in our view are: (1) Strong need for digital transformation, not only to structurally cut costs, but also to deliver contact-less consumer and employee experiences, driven by the nature of the pandemic. Based on the commentary from customers, software companies and IT services vendors, we believe that digital demand has been pulled forward from the future. (2) quick and unprecedented ‘whatever-it-takes’ monetary and fiscal actions in the US and Europe that likely eliminated tail risks to economic recovery and reduced risk aversion among corporates. While customer P&Ls and cash flows saw pain, credit market conditions significantly eased up with investment grade and junk bond yields more than halving from their pandemic peak as the US Federal Reserve stepped into the credit markets directly. Corporate America binged on cheap debt. These monetary conditions could last, we believe, for at least 12-24 months if not longer. The changed view on margins has been driven by business model changes that the pandemic has induced, which we think are structurally positive. These involve higher offshoring, lower subcontractor cost, structurally lower travel and marketing costs. Also, we see accelerated employee pyramid reshaping that could control cost increases. We see WFH/WFA expanding the talent pool in a material way in the long term, leading to lesser pressure on talent costs. Higher PE multiples are driven by (1) an upward shift in the revenue and earnings growth trajectory (2) lower interest rates globally and domestically (3) valuation exuberance (irrational!?) in the enterprise technology space in the US and (4) constrained domestic investment choices. While there could be a growth spike in FY22 after a modest dip in FY21 (lower than anticipated), we see organic revenue growth in FY23 being only a tad lower than that of FY22. We are yet to take a concrete view on a ‘stronger for longer’ (beyond FY23) situation. Why not a sell: (1) We see earnings acceleration over FY21-FY23 due to faster revenue growth and a higher margin trajectory. (2) Current exuberance (irrational!?) in enterprise tech valuations in the US likely rubbing off on Indian IT services. (3) a situation where double-digit revenue growth could stretch beyond FY23. (4) lower for longer interest rates globally could keep PE multiples elevated.

Why not a buy: (1) PE multiples are already at 10–12-year highs and partly reflect the turnaround in fundamentals over FY21-FY23. (2) Adverse impact on US corporate profits in 2021 and beyond (leading to cut back in spending) due to higher taxation if new US President Joe Biden is able to push them through. (3) Likely slower organic growth in the medium term as spends are pulled forward. Growth could settle into mid- single digit territory in USD terms beyond a point in time. (4) A likely deflation in enterprise tech valuations in the US.

Valuation and stock calls: TCS continues to be our sector benchmark as it has the strongest position in the industry. With enterprise tech sector in the US going through a bout of exuberance currently, an overshoot on the upside is not entirely ruled out. We back our higher PE multiples with (1) expectation of earnings acceleration over FY21-FY23 against FY17-FY20 on revenue expansion (2) lower for longer interest rates globally and likely in India too that could keep PE multiples elevated (3) potential for good return of capital to investors due to strong cash flows. We have benchmarked all other coverage companies with respect to TCS. While historically we have not liked mid-tier IT companies due to their significant client, geographic and vertical concentration risks and weaker capabilities, we believe they could be beneficiaries in the next 24 months of robust demand. We believe vendor consolidation risks are lower due to this. We also think that some of them are undergoing a structural change for the better under new managements, which could set them up for better growth, margins and PE multiples.

3 HCL Technologies

Institutional Equities

Exhibit 3: Vertical-based USD and CC, QoQ and YoY growth in 3QFY21 Contribution to CC Growth- CC Growth- USD Growth- USD Growth- Verticals Revenue (%) QoQ(%) YoY(%) QoQ(%) YoY(%) Financial Services 21.4 -0.4 -0.5 1.1 1.9 Manufacturing 18.1 5.6 -13.1 6.7 -11.3 Life Sciences & Healthcare 13.6 0.0 13.3 0.7 14.7 Public Services 10.4 0.5 -3.4 1.5 -1.8 Retail & CPG 10.5 3.7 3.0 5.4 4.9 Telecom 8.3 12.1 -7.0 12.5 -5.1 Technology & Services 17.8 6.8 20.2 7.4 21.3 Total 100 3.5 1.1 4.4 2.9

Source: Nirmal Bang Institutional Equities Research

Exhibit 4: Geography-based USD and CC, QoQ and YoY growth in 3QFY21 Contribution to CC Growth- CC Growth- USD Growth- USD Growth- Geographies Revenue QoQ(%) YoY(%) QoQ(%) YoY(%) Americas 62.5 3.2 2.2 3.4 2.4 Europe 29.5 6.3 -1.0 8.4 3.9 Rest of the World (RoW) 8.0 -4.5 0.1 -1.8 2.9 Total 100 3.5 1.1 4.4 2.9 Source: Nirmal Bang Institutional Equities Research

Exhibit 5: Segment wide revenue analysis Revenue QoQ Growth YoY Growth Mode Revenue Mix EBIT Margin (in US$Mn) (in CC) (in CC) IT and Business Services 1842 70.4 21.0 2.70 1.10 Engineering and R&D Services 406 15.5 24.5 2.50 -5.10 Products & Platforms 369 14.1 30.6 8.30 9.30 Total 2617 100 22.9 3.5 1.1 Source: Nirmal Bang Institutional Equities Research

Exhibit 6: Mode1, Mode 2, Mode 3 revenues, growth and margins for 3QFY21 Mode Revenue (in US$Mn) Revenue Mix EBIT Margin QoQ Growth (in CC) YoY Growth (in CC) Mode 1 1596 61.0 21.4 0.10 -6.00 Mode 2 594 22.7 22.0 10.90 25.00 Mode 3 427 16.3 29.7 7.10 3.50 Total 2617 100 22.9 3.5 1.1 Source: Nirmal Bang Institutional Equities Research

Exhibit 7: Cashflow performance over the quarters Mode 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 CY20 Operating Cash Flow (US$ mn) 709 521 819 643 684 2,667 Free Cash Flow (US$ mn) 657 452 757 578 621 2,407 Operating cash Flow/Net Income (%) 166 121 211 151 126 150 Net Cash (US$ mn) 1,101 1,359 1,329 1,826 2,202 2,202

Source: Nirmal Bang Institutional Equities Research

4 HCL Technologies

Institutional Equities

3QFY21 Conference Call Highlights  Revenue growth: In CC terms, revenue grew by 3.5% QoQ (1.1% YoY), above our estimate of 2.5%. HCLT crossed the US$10bn mark in revenue in CY20, which is a pivotal milestone for the company. In USD terms, revenue increased by 2.9% YoY and 4.4% QoQ. On a CC basis, geography-wise, QoQ growth was driven primarily by Europe (up 6.3%) and Americas (up 3.2%). 'Rest of the world' category did not fare well with a negative growth of 4.5%. HCLT stated that growth is mainly due to robust momentum in Mode 2 and Mode 3 businesses, led by digital, cloud and products & platform segments. The strategic investments made by the company over the years, including unique ecosystem constructs with all cloud hyperscalers, organic and inorganic investments in a broad-based IP and Platforms portfolio and an integrated and differentiated enterprise digital transformation value proposition have aided revenue growth. HCLT stated that the pricing environment continues to be competitive but stable. However, higher demand is helping the company to close deals faster.  4Q revenue guidance is a touch soft: HCLT upped its revenue growth guidance for 4QFY21 from an earlier 1.5-2.5% to 2-3% in CC terms. This includes contribution from its recently acquired Australian IT firm DWS (1%). So, the organic growth works out to 1%-2%, which may be seen as weak. However, we are not sure whether the company is being conservative. The company attributed this to a seasonal dip that it is likely to see in the Mode-3 business, for which the Jan-March quarter is seasonally the weakest quarter. Mode-3 revenue had seen a 1% decline QoQ in 4QFY20 vs. 3QFY20.  Margin was a big +ve surprise: 3QFY21 EBIT margin at 22.9% significantly beat our estimate of 21%, up 130bps QoQ and 270bps YoY. This is the company’s highest margin recorded in the last 5 years despite implementing wage hikes during the quarter. The 130bps increase in margin QoQ has been driven by 180bps on the positive side, offset by 50bps due to wage hikes. On the positive side, there was (1) SG&A leverage (net of higher depreciation and amortization) – 50bps (2) reversals in the provisions for bad debts - ~40bps (3) shift of work offshore – 50bps (4) revenue catch-up, particularly in the Mode-2 service sales and also in the ERS segment – 40bps.  Margin guidance indicates a sharp QoQ dip in 4Q: HCLT upped its operating margin guidance for FY21 from the initial 20-21% to 21-21.5%. According to us, that implies 21% EBIT margin in 4QFY21, which is down 190bps QoQ. According to the company, this dip is going to be due to 80-90bps from the second round of salary hikes, likely dip in Mode-3 revenue leading to a slightly adverse revenue mix (from a margin perspective) and greater investment in the Mode-3 business on the sales & marketing front, which could mean that it could inherently be a lower margin business in 4Q. Besides, there could be some pull-back in utilization that the company is planning and also possibly some adverse impact on margin from the DWS acquisition.  Vertical break-up: 5 of the 7 verticals demonstrated growth, led by Media and Telecom. On a QoQ CC basis, Telecom grew 12.1% while Retail & CPG reported 3.7% growth. Life Sciences & Healthcare reported flat growth rate while Public Services witnessed 0.5% growth. Technology & Services industry recorded a 6.8% growth and Manufacturing grew 5.6%. Overall, financial vertical’s contribution to the overall sales fell QoQ to 21.4% in 3QFY21 vs. 22.1% in 2QFY21 and 21.6% in 3QFY20. The management stated that while growth reported for the Financial Services vertical looks weak, the underlying numbers are very strong and HCLT is bullish on the Financial Services vertical. The contribution from Manufacturing rose to 18.1% from 17.3% QoQ, but was lower YoY (20.9%). The contribution from Telecom also improved QoQ but fell YoY. HCLT has won a lot of deals in the Life Sciences & Healthcare vertical over the last 6-9 months. Its clients are mainly involved in pharmaceuticals or production of medical devices. Going forward, HCLT sees Technology & Services and Life Sciences & Healthcare doing very well. Manufacturing has been affected by Covid but it is expected to start bouncing back, especially after vaccines restore some element of normalcy over the next 3-6 months. Media & Entertainment should also start opening up once normalisation happens.  Mode 2 and Mode 3 outlook positive: Mode-2 and Mode-3’s combined contribution to the revenue stood at 39% in 3QFY21 against 36.7% in 2QFY21. Mode 2 grew by 25% YoY and Mode 3 grew by 3.5% YoY in CC terms. QoQ, Mode-2 EBIT margin improved by 230bps but Mode-3 margin remained largely flat. Mode 2 was a prime driver of growth, led by good traction witnessed in cloud native and digital programs.  Segment update: ITBS grew by 2.7% QoQ in CC terms, driven by acceleration in digital transformation. ER&D services also saw great traction, up 2.5% QoQ in CC terms. HCLT stated that the ITBS and P&P segments are above the pre-Covid peak. The P&P segment grew by 8.3% QoQ and 9.3% YoY. Since the close of the large IBM product business, the 6-month (July-December 2020) growth rate for the Products business is 13.4% - the fastest growing business for the company and also the industry. HCLT won over 700 customer footprints where a customer purchased or deployed a product for the first time.

5 HCL Technologies

Institutional Equities

 Deal wins: HCLT witnessed broad-based growth, signing 13 transformational deals during the quarter, led by key industry verticals - Life Sciences & Healthcare, Technology and Financial Services. Broad-based growth has been driven by Mode 2 services and the Products & Platforms business. Overall bookings were up 13% YoY. HCLT stated that it is seeing strong growth in Europe, especially in Continental Europe. The management stated that HCLT has built a very strong ecosystem of hyperscalers and was the earliest to set up for AWS, Google, MS, IBM and all of these are feeding into transformational programs. It was stated that the technology sector is in the midst of a massive digitization wave, with more global enterprises embracing digital transformation to address the disruption in these unprecedented times.

Other key highlights  Top client contribution: Top five clients contributed ~13.5% to HCLT’s revenue while the contribution of top 10 and top 20 clients stood at 21% and 30.9%, respectively in 3QFY21. Growth seems to have been driven more by non-top 5 clients.  Client addition: Strong client addition continued (on YoY basis) in 3QFY21. HCLT’s total clients stood at 1,442 at the end of the quarter. On a YoY basis, US$1mn+ clients went up by 102, US$5mn+ clients went up by 10 and US$10mn+ clients went up by 6. HCLT added 3 clients in the US$20mn+ bucket and lost 1 client in the US$50mn+ bucket. The US$100mn+ client bucket remained flat YoY. On a QoQ basis, HCLT seems to have lost 51 clients and 5 clients in the US$1mn+ bucket and US$5mn+ bucket, respectively. This seems to be affected by the reclassification of divisions and acquired entities under the parent company. HCLT added 1 client in the US$10mn+ bucket, 6 clients in the US$20mn+ bucket, 2 clients in the US$50mn+ bucket and 1 client in the US$100mn+ bucket.  Strong Headcount is likely over the next two quarters: HCLT added ~6,597 employees during the quarter, taking its overall full-time employee count to 159,682. The company stated that in line with its strategy to ensure a safe ‘return to office’, a calibrated plan based on vaccine availability and government guidelines by geography is being evaluated. This strategy will be supported by the implementation of innovative technology solutions to ensure a safe and secure workplace, in line with global best practices and Covid-19 guidelines. HCLT’s localisation in the US has increased by ~300bps and is at 69.8%. The company will continue to maintain this strategy going forward. The management stated that as it was difficult to hire freshers during the first two quarters of FY21 due to the pandemic, it has hired ~4000 freshers in 3QFY21. It plans to add a further 5,000 freshers to the workforce. HCLT stated that it would add ~20,000 more people to its workforce over the next 4-6 months, including both laterals and freshers. The management stated that work-from-home will continue but some employees will go to office as per business requirements.  Reskilling drives up internal fulfilment: HCLT stated that its training hours have gone up by 81% in this quarter, which has resulted in an increase of internal fulfilment by 10%. The company’s internal fulfilment rate has increased by 10% in the quarter to 60%.  Attrition rate: The attrition rate was at an all-time low of 10.2% vs. 12.2% in 2QFY21 and 16.8% in 3QFY20. HCLT stated that the attrition might inch up in the coming quarters as markets open up and demand for skills rise.  Strong cash position: DSO was lower at 61 days against 66 days in 3QFY20 and flat QoQ. OCF was US$684mn for the quarter (126% of net income) and FCF was US$621mn (115% of net income).  Dividend payout: HCLT announced an interim dividend of Rs4 per share. HCLT has reported very robust cash flows in the last few quarters (see Exhibit 18). This combined with the fact that the payment due to IBM is behind it has led the company to increase quarterly dividend to Rs4 per share. This was Rs2 per share previously. Considering the 1:1 bonus issue in December 2019, the regular payout per quarter has gone up 4x. In terms of the capital allocation policy, the management stated that it is looking for the best interest of the shareholders. The net takeout for an investor is better when the share price increases as capital gains tax is much lower than tax on dividend and buyback. .

6 HCL Technologies

Institutional Equities

Exhibit 8: USD revenue growth (QoQ &YoY)

(%) (%) 20 18.4 8 6.5 6.4 6 4.0 4.1 4.9 5.2 14.6 14.5 13.9 3.2 14.1 12.8 15.0 3.4 4.0 3.7 3.1 15 12.2 4 2.5 15.5 14.514.3 2 3.8 4.4 13.7 11.8 3.13.5 3.0 2.1 3.5 10 12.8 11.5 11.9 11.7 0.0 2.3 2.3 11.4 11.4 10.8 0 1.9 1.41.3 1.91.3 0.8 0.5 9.59.3 10.0 9.0 8.8 -2 0.0 5 7.7 6.5 2.9 -4 5.1 0 -6 0.8 -8 -0.3 -7.4

(5) -10

4QFY13 3QFY14 4QFY14 3QFY15 4QFY15 3QFY16 1QFY17 3QFY17 4QFY17 1QFY18 3QFY18 4QFY18 1QFY19 3QFY19 4QFY19 1QFY20 3QFY20 4QFY20 1QFY21 3QFY21 1QFY14 2QFY14 1QFY15 2QFY15 1QFY16 2QFY16 2QFY17 2QFY18 2QFY19 2QFY20 2QFY21

4QFY13 1QFY14 2QFY14 3QFY14 1QFY15 3QFY15 1QFY16 2QFY16 3QFY16 1QFY17 2QFY17 3QFY17 1QFY18 3QFY18 1QFY19 2QFY19 3QFY19 4QFY19 2QFY20 4QFY20 2QFY21 3QFY21 4QFY14 2QFY15 4QFY15 4QFY17 2QFY18 4QFY18 1QFY20 3QFY20 1QFY21 US$ revenue growth (YoY) US$ revenue growth (QoQ) Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 9: SG&A spending declined in 3QFY21 Exhibit 10: Proportion of fixed-price contracts increases

(%) (%) 61.8 63.2 61.6 59.8 60.4 60.861.6 62.0 63.3 63.7 63.5 66.5 67.8 68.3 66.7 67.4 68.4 17 16.5 16.4 100 90 16 80 15.0 14.8 15 15.5 14.6 70 14.0 60 14 13.714.6 14.3 14.3 13.4 13.0 13.5 14.3 50 13 12.8 12.8 13.8 40 12.1 11.8 11.7 12.7 11.812.011.9 30 12 12.5 12.7 12.3 12.3 12.1 20 12.0 11.8 11.7 10 11 11.6 11.2 11.1 0

FY05 FY07 FY08 FY10 FY11 FY12 FY14 FY06 FY09 FY13

3QFY17 4QFY17 1QFY18 3QFY18 1QFY19 2QFY19 3QFY19 4QFY19 2QFY20 4QFY20 1QFY21 2QFY21 3QFY21 2QFY18 4QFY18 1QFY20 3QFY20

1QFY15 3QFY15 4QFY15 2QFY16 3QFY16 3QFY17 4QFY17 2QFY18 3QFY18 1QFY19 2QFY19 4QFY19 1QFY20 4QFY20 1QFY21 3QFY21 2QFY15 1QFY16 1QFY17 2QFY17 1QFY18 4QFY18 3QFY19 2QFY20 3QFY20 2QFY21 SG&A as % of sales T&M Fixed-Price Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 11: Attrition rate dips 200bps QoQ (%) 20 18.6 19 17.9 17.8 17.3 17.317.7 18 16.9 16.9 16.6 16.5 16.7 16.9 16.8 17 16.4 17.8 16.3 16.1 16.2 16.3 17.0 16 16.9 15.7 16.6 16.3 14.6 15 16.2 15.5 14.9 15.2 14 13 12.2 12 10.2 11

4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY21 2QFY21 3QFY21 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 Attrition Source: Company, Nirmal Bang Institutional Equities Research

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Institutional Equities

Exhibit 12: QoQ CC revenue growth declines after rising Exhibit 13: Overall revenue increases YoY CC sharply in 2QFY21 (%) (%) 8 25

6 6.0 20 20.5 6.0 3.3 3.5 4 2.8 5.6 2.6 4.5 13.5 3.8 15 12.8 3.3 4.2 16.112.2 11.2 16.4 2 3.0 3.0 0.8 15.317 2.7 13.8 2.1 10 13 0 1.2 0.9 11.2 10.6 10.5 8.2 8.5 (2) 5 1

1.1

2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 4QFY20 1QFY21 2QFY21 3QFY21 3QFY18 4QFY18 2QFY20 3QFY20 (4) 1QFY17 -0.4 0 (6)

(5)

1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 3QFY21 (8) 2QFY21 -7.2 CC QoQ Growth CC YoY Growth Source: Company, Nirmal Bang 4nstitutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 12: BFSI CC YoY growth improves Exhibit 15: Manufacturing declines further YOY CC (%) (%) 25 35 26.7 19.2 30 20 25 21.0 27.4 26.0 17.1 28.3 27.0 11.7 20 15 21.9 10.6 15 10.4 21.3 13.4 14.2 10 13.8 10 5 12.2 5.6 6.7 9.4 8.5 0 5 8.8 1.5 (5) 1.5 -0.5 4.3 (10) -3.9 -3.9 -13.1 0 2.9 -2.5 -8.3 2.0 2.3 (15) 0.1 0.9 -11.5

(5) -1.4 (20)

1QFY17 2QFY17 4QFY17 1QFY18 2QFY18 3QFY18 1QFY19 2QFY19 4QFY19 1QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY17 4QFY18 3QFY19 2QFY20 3QFY21

1QFY17 3QFY17 4QFY17 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 2QFY20 3QFY20 1QFY21 2QFY21 3QFY21 2QFY17 1QFY18 1QFY20 4QFY20 Manufacturing CC YoY growth Financial Services CC YoY… Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 16: Life sciences and Healthcare continues to show Exhibit 17: Telecom, Media declined YOY CC growth (YoY) CC (%) (%) 30 50

25 28.2 40 40.3 30 34.3 20 23.4 33.4 20 14.2 19.8 13.3 10.8 28.2 15 18.1 16.3 6.0 10.6 9.7 10 16.0 7.19.2 -4.4 10 -2.7 0 -6.8 8.2 -7.0 10.5 5.8 3.4 -8.8 9.9 9.0 3.4 -0.1 5 (10) -2.6 -3.2 -0.8 -6.3 5.0

0 3.5 3.8 (20)

1QFY17 2QFY17 4QFY17 1QFY18 2QFY18 3QFY18 1QFY19 2QFY19 3QFY19 4QFY19 2QFY20 3QFY20 1QFY21 2QFY21 3QFY21 3QFY17 4QFY18 1QFY20 4QFY20

2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 4QFY20 1QFY21 2QFY21 3QFY21 1QFY17 3QFY18 4QFY18 2QFY20 3QFY20 Lifesciences & Healthcare CC… Telecommunications, Media… Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

8 HCL Technologies

Institutional Equities

Exhibit 18: OCF/Net income trend in the last few quarters (%) 250 211 200 151 150 126 114 121 166121 152 100 74 123 112 100 102 85 79 68 50 78 78 81

2QFY17 3QFY17 4QFY17 1QFY18 3QFY18 4QFY18 2QFY19 3QFY19 1QFY20 2QFY20 3QFY20 4QFY20 2QFY21 3QFY21 1QFY17 2QFY18 1QFY19 4QFY19 1QFY21 OCF/Net income (%) Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 19: Quarterly snapshot Year to 31 March (Rsmn) 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 INR/USD 67.50 70.80 71.48 70.00 71.50 70.30 73.74 73.10 75.69 74.14 73.80 USD Revenue (USD mn) 2,055 2,099 2,202 2,278 2,364 2,486 2,543 2,543 2,356 2,507 2,617 INR Revenue 138,780 148,610 156,990 159,900 164,250 175,280 181,350 185,900 178,410 185,940 193,020 Gross margin 47,720 52,720 55,470 55,690 55,050 64,670 69,590 74,390 71,130 76,650 81,080 EBITDA 32,260 34,990 36,470 35,970 34,000 41,030 44,700 47,200 45,660 49,510 54,430 EBIT 27,300 29,660 30,860 30,390 28,050 34,970 36,700 38,810 36,605 40,160 44,160 Other income 2,960 2,520 1,050 1,520 1,280 (30) 670 (130) 2,055 1,360 1,260 PBT 30,260 32,180 31,910 31,910 29,330 34,940 37,370 38,680 38,660 41,520 45,420 Tax 6,220 6,780 5,800 6,230 7,130 8,350 6,910 7,070 9,285 9,990 5,440 PAT 24,040 25,400 26,110 25,680 22,200 26,510 30,380 31,530 29,250 31,420 39,820 EPS 8.6 9.1 9.6 9.5 8.2 9.8 11.2 11.6 10.8 11.6 14.7 YoY growth (%)

USD Revenue 9.0 8.8 10.8 11.8 15.0 18.4 15.5 11.7 -0.3 0.8 2.9 INR Revenue 14.2 19.5 22.6 21.3 18.4 17.9 15.5 16.3 8.6 6.1 6.4 Gross Profit 16.6 24.8 26.2 20.6 15.4 22.7 25.5 33.6 29.2 18.5 16.5 EBITDA 20.3 26.8 23.0 18.5 5.4 17.3 22.6 31.2 34.3 20.7 21.8 EBIT 11.7 21.0 23.0 17.7 2.7 17.9 18.9 27.7 30.5 14.8 20.3 Net Profit 10.7 16.1 19.0 15.2 -7.7 4.4 16.4 22.8 31.8 18.5 31.1 QoQ growth (%)

USD Revenue 0.8 2.1 4.9 3.5 3.8 5.2 2.3 0.0 -7.4 6.4 4.4 INR Revenue 5.3 7.1 5.6 1.9 2.7 6.7 3.5 2.5 -4.0 4.2 3.8 EBITDA 6.3 8.5 4.2 -1.4 -5.5 20.7 8.9 5.6 -3.3 8.4 9.9 EBIT 5.7 8.6 4.0 -1.5 -7.7 24.7 4.9 5.7 -5.7 9.7 10.0 Net Profit 7.9 5.7 2.8 -1.6 -13.6 19.4 14.6 3.8 -7.2 7.4 26.7 Margins (%)

Gross Margin 34.4 35.5 35.3 34.8 33.5 36.9 38.4 40.0 39.9 41.2 42.0 EBITDA 23.2 23.5 23.2 22.5 20.7 23.4 24.6 25.4 25.6 26.6 28.2 EBIT 19.7 20.0 19.7 19.0 17.1 20.0 20.2 20.9 20.5 21.6 22.9 PAT 17.3 17.1 16.6 16.1 13.5 15.1 16.8 17.0 16.4 16.9 20.6 SGA 11.1 11.9 12.1 12.3 12.8 13.5 13.7 14.6 14.3 14.6 13.8 Source: Company, Nirmal Bang Institutional Equities Research

9 HCL Technologies

Institutional Equities

Exhibit 20: Key metrics 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21

P& L (Rsmn)

Revenues 148,610 156,990 159,900 164,250 175,280 181,350 185,900 178,410 185,940 193,020 EBITDA 34,990 36,470 35,970 34,000 41,030 44,700 47,200 45,660 49,510 54,430 PAT 25,400 26,110 25,680 22,200 26,510 30,380 31,530 29,250 31,420 39,820 Vertical Mix (%)

Banking, FS & Insurance (BFSI) 23.0 21.6 21.1 20.3 20.4 21.6 21.1 22.4 22.1 21.4 Hi-tech - Manufacturing 18.0 17.7 17.5 19.9 18.7 21.0 20.7 18.1 17.7 18.1 Telecom 7.2 9.2 8.6 8.0 8.0 9.0 8.3 7.6 7.7 8.3 Retail & CPG 10.0 10.2 10.0 9.5 9.1 10.3 10.2 10.0 10.4 10.5 Life Sciences 12.9 13.0 13.0 12.8 12.6 12.2 12.5 13.7 14.1 13.6 Energy-Utilities-Public Sector 10.7 9.7 11.1 10.5 9.5 10.9 11.1 11.0 10.7 10.4 Others 18.0 18.7 18.7 18.9 21.7 15.1 16.2 17.2 17.3 17.8 Geographical Mix (%)

US 65.8 64.4 62.9 67.7 67.9 62.8 63.5 63.7 63.1 62.5 Europe 26.8 28.2 29.7 25.9 25.7 29.2 28.7 28.3 28.4 29.5 Asia pacific 7.4 7.3 7.4 6.3 6.4 8.0 7.8 8.0 8.5 8.0 Project Type (%)

T&M 38.2 36.7 36.3 36.5 33.5 32.2 31.7 33.3 32.6 31.6 Fixed-Price 61.8 63.3 63.7 63.5 66.5 67.8 68.3 66.7 67.4 68.4 Utilization (%) (including Trainees) 86.7 86.8 85.4 ------Clients Concentration (%)

Top 5 Client 17.3 17.4 17.0 16.6 16.5 15.2 15.1 13.9 13.7 13.5 Top 10 Client 24.8 24.8 24.1 23.9 24.0 22.4 22.0 20.9 20.9 21.0 Top 20 Client 34.2 34.1 33.4 34.2 34.6 33.0 32.1 30.8 30.6 30.9 Number of Client

No. of USD1 mn+ Clients 575 597 623 633 667 712 791 848 865 814 No. of USD5 mn+ Clients 269 276 283 293 299 302 308 320 317 312 No. of USD10 mn+ Clients 165 164 166 172 171 167 171 173 172 173 No. of USD20 mn+ Clients 90 95 95 93 93 94 96 93 91 97 No. of USD30 mn+ Clients 0 0 0 0 0 0 0 0 0 0 No. of USD40 mn+ Clients 0 0 0 0 0 0 0 0 0 0 No. of USD50 mn+ Clients 31 29 29 29 30 32 30 29 29 31 No. of USD100 mn+ Clients 9 10 10 12 13 15 15 15 14 15 No. of clients 0 0 0 0 0 0 0 0 0 0

Employees 127,875 132,328 137,965 143,900 147,123 149,173 150,423 150,287 153,085 159,682 Attrition (%) 17.0 17.8 17.7 17.3 16.9 16.8 16.3 14.6 12.2 10.2 *Hitech& Manufacturing Services has been split into different heads, namely:(1) Manufacturing (2) Technology & Services from 1QFY19.The same has been updated for 1QFY18, 4QFY18 & 1QFY19 Source: Company, Nirmal Bang Institutional Equities Research

10 HCL Technologies

Institutional Equities

Exhibit 21: YoY and QoQ performance on various parameters QoQ Growth (%) 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 Geography-wise

US 5 (1) 6 4 3 1 12 5 (5) 1 (7) 5 3 Europe 2 7 (6) (3) 10 9 (10) 4 16 (1.7) (8.7) 6.8 8.4 Asia pacific (4) 10 (11) 1 3 5 (12) 7 28 (3) (5) 13 (2) Total 3 3 1 2 5 4 4 5 2 (0) (7) 6 4 Non-US 0 8 (7) (2) 9 8 (10) 5 19 (2) (8) 8 6 Vertical Wise Banking, FS & Insurance (BFSI) 1 4 (4) (1) (1) 1 (0) 6 8 (2) (2) 5 1 Hi-tech - Manufacturing 6 (46) (4) 0 3 2 18 (1) 15 (1) (19) 4 7 Telecom (3) 3 (1) 1 34 (3) (3) 5 15 (8) (15) 8 13 Retail 6 3 (4) 12 7 1 (1) 1 16 (1) (9) 11 5 Life Sciences 3 1 12 3 6 3 2 4 (1) 2 2 10 1 Energy-Utilities-Public Sector (1) 7 (0) 4 (5) 18 (2) (5) 17 2 (8) 4 1 Others (Technology & Services) - - 9 1 9 3 5 21 (29) 7 (2) 7 7 Client Concentration Top 5 clients 8 6 5 4 6 1 1 5 (6) (1) (15) 5 3 Top 10 clients 6 4 4 3 5 1 3 6 (4) (2) (12) 6 5 Top 20 clients 4 3 2 2 5 1 6 6 (2) (3) (11) 6 5

YoY Growth (%) Geography-wise

US 17 10 12 15 12 14 21 22 13 13 (6) (6) 2 Europe 10 21 12 0 9 11 6 14 20 8 9 11 4 Asia pacific 6 (2) (17) (5) 2 (3) (3) 2 27 18 27 34 3 Total 14 12 9 9 11 12 15 18 16 12 (0) 1 3 Non-US 9 15 4 (1) 7 8 4 11 21 10 12 16 4 Vertical Wise

Banking, FS & Insurance (BFSI) 15 16 4 0 (3) (6) (2) 5 16 12 10 9 2 Hi-tech - Manufacturing 23 (38) (4) (45) (46) 2 25 23 37 32 (9) (5) (11) Telecom (5) (1) 1 (1) 38 30 26 32 13 8 (5) (3) (5) Retail 18 17 4 17 18 16 20 8 17 14 5 15 5 Life Sciences 11 12 18 20 23 26 15 16 8 7 7 13 15 Energy-Utilities-Public Sector 4 2 3 10 5 17 15 5 30 12 4 14 (2) Others (Technology & Services) (100) 4611 40 - - 24 19 43 (7) (3) (9) (20) 21 Client Concentration

Top 5 clients 27 24 29 25 22 17 12 13 1 (1) (17) (16) (9) Top 10 clients 23 21 20 18 17 13 12 15 4 2 (13) (12) (4) Top 20 clients 20 15 13 12 13 11 15 20 12 7 (10) (11) (4) *Hitech& Manufacturing Services have been split into different heads, namely:(1) Manufacturing (2) Technology & Services from 1QFY19. Source: Company, Nirmal Bang Institutional Equities Research

11 HCL Technologies

Institutional Equities

Exhibit 22: P/E charts

(Rs) (x) 1200 19

1000 17 15 800 13 600 11 400 9

200 7

0 5

10 11 12 14 16 18 13 15 17

11 12 13 14 15 18 10 16 17

15 16 18 20 17 19 21

15 18 19 20 21 16 17

11 13 14 20 12

12 13 14 20 11

11 13 15 16 17 18 12 14 19

12 13 14 15 18 19 11 16 17

19 20 20

10 12 14 16 17 18 11 13 15

19 20

11 12 13 14 17 18 10 15 16

------

- - - - -

------

- - -

------

- - -

------

Jul

Oct Apr Oct

Jun Jun Jun Jan Jun Jun Jan

Jun Jun Jun Jan Jan Jun Jun

Mar Mar Mar Mar Mar

Feb Feb Feb Feb

Aug Nov Aug Aug Nov Aug Nov Sep Dec Dec Sep Dec Nov Aug Nov Sep Dec Sep

Aug Nov Aug Nov Aug Nov Aug Nov Sep Dec Sep Dec Aug Nov Dec Sep Dec Sep

May May May May

May May May May Price 5 10 15 20 P/E Mean 1SD -1sd Source: Bloomberg, Nirmal Bang Institutional Equities Research

Exhibit 23: P/E (discount)/premium of HCL Tech to TCS

30 20 10 0 (10) (20) (30) (40) (50) (60)

(70)

11 12 13 14

19 20 20

10 11 12 13 13 14 14 15 15 16 17 18 10 11 12 16 17 18

15 16 17 18 20 21 19

11 12 20 13 14

16 17 18 19 15

- - - -

- - -

------

- - - -

- - - - -

Jul

Oct Oct Apr

Jun Jun Jun Jun Jan Jan Jun

Feb Feb Feb Feb Mar Mar Mar Mar Mar

Nov Nov Nov Dec Dec Dec Nov Nov Dec

Aug Aug Aug Aug Sep Sep Aug Sep Sep

May May May May

HCL Tech 1 Yr Forward P/E Discount to TCS -25 Source: Bloomberg, Nirmal Bang Institutional Equities Research

12 HCL Technologies

Institutional Equities

Financials Exhibit 24: Income statement Exhibit 25: Cash flow Y/E March (Rsmn) FY19 FY20 FY21E FY22E FY23E Y/E March (Rsmn) FY19 FY20 FY21E FY22E FY23E Average INR/USD 69.9 72.2 74.2 75.2 76.8 EBIT 118,210 138,530 162,078 180,532 202,498 Net Sales (USD mn) 8,633 9,936 10,161 11,528 12,738 (Inc.)/Dec. in Working Capital (23,150) 50,160 (55,776) (11,968) (10,062) YoY Growth (%) 10.1 15.1 2.3 13.5 10.5 Cash flow from Operations 95,060 188,690 106,302 168,564 192,436 INR Net Sales 604,280 706,780 753,693 867,144 977,785 YoY Growth (%) 19.5 17.0 6.6 15.1 12.8 Other Income 8,050 1,790 5,915 6,206 7,865 Cost of Sales & Services 392,680 443,080 446,691 524,918 597,890 Depreciation & Amortisation 21,480 28,400 39,015 41,929 42,841 Gross Margin 211,600 263,700 307,003 342,226 379,895 Tax Paid (25,030) (29,460) (29,792) (43,841) (49,405) % of sales 35.0 37.3 40.7 39.5 38.9 Dividends Paid 20,310 19,551 37,991 43,419 43,419 SG&A 71,910 96,770 105,910 119,765 134,556 Net Cash from Operations 119,870 208,971 159,430 216,278 237,156 % of sales 11.9 13.7 14.1 13.8 13.8 Capital Expenditure (60,536) (150,090) (35,005) (49,702) (50,613) EBITDA 139,690 166,930 201,093 222,461 245,339 Net Cash after Capex 59,334 58,881 124,425 166,577 186,543 % of sales 23.1 23.6 26.7 25.7 25.1 Inc./(dec.) in Debt 35,489 35,780 (26,790) (20,000) (5,510) Depreciation and Amortization 21,480 28,400 39,015 41,929 42,841 Depreciation and Amortization 3.6 4.0 5.2 4.8 4.4 (Inc.)/Dec. in Investments 12,285 (58,880) (27,200) (63,349) (97,129) EBIT(as % of sales) 118,210 138,530 162,078 180,532 202,498 Equity Issue/(Buyback) (40,000) 0 0 0 0 % of sales 19.6 19.6 21.5 20.8 20.7 Cash from Financial Activities 10,292 29,301 27,453 23,628 23,006 Other income (net) (incl forex 8,050 1,790 5,915 6,206 7,865 Others (27,275) (99,042) (141,758) (190,205) (209,549) gain/loss) PBT 126,260 140,320 167,993 186,738 210,363 Opening Cash 16,939 59,290 48,430 58,550 58,550 Provision for tax 25,030 29,460 29,792 43,841 49,405 Closing Cash 59,290 48,430 58,550 58,550 58,550 Effective tax rate (%) 19.8 21.0 17.7 23.5 23.5 Change in Cash 42,351 (10,860) 10,120 - - Minority Interest 0 0 0 0 0 Net profit 101,230 110,620 137,645 142,258 160,319 Source: Company, Nirmal Bang Institutional Equities Research -Growth (%) 15.3 9.3 24.4 3.4 12.7 -Net profit margin (%) 16.8 15.7 18.3 16.4 16.4 Source: Company, Nirmal Bang Institutional Equities Research Exhibit 27: Key ratios Exhibit 26: Balance sheet Y/E March (Rsmn) FY19 FY20 FY21E FY22E FY23E Y/E March (Rsmn) FY19 FY20 FY21E FY22E FY23E Per Share (Rs) Equity capital 1,356 1,356 1,356 1,356 1,356 EPS 36.8 40.8 50.7 52.4 59.1 Minority Interest 4,540 5,280 5,410 5,410 5,410 FDEPS 36.8 40.8 50.7 52.4 59.1 Reserves & surplus 416,344 515,514 627,725 726,564 843,464 Dividend Per Share 6.1 6.0 14.0 16.0 16.0 Net worth 422,240 516,870 629,081 727,920 844,820 Dividend Yield (%) 0.6 0.6 1.4 1.6 1.6 Other liabilities 15,380 25,480 27,485 31,735 35,309 Book Value 152 190 232 268 311 Total loans 39,860 50,920 25,510 5,510 0 Dividend Payout Ratio (excl DDT) 16.6 14.7 27.6 30.5 27.1 Lease Liabilites - 24,720 23,340 23,340 23,340 Return ratios (%) Total liabilities 477,480 623,270 710,826 793,915 908,878 RoE 25.8 23.7 24.0 21.0 20.4 Intangible assets 176,950 294,210 0 0 0 RoCE 27.4 25.2 24.3 24.0 23.8 Net block 58,010 62,440 352,640 360,412 368,184 Pre Tax ROIC (%) 36.3 33.3 32.7 33.6 35.8 Investments 3,900 380 370 370 370 Tunover Ratios Other non-Current assets 52,930 64,650 66,916 77,263 85,963 Asset Turnover Ratio 1.0 0.8 0.9 0.9 0.9 (FD,etc) Debtors 146,100 177,720 176,691 204,012 226,984 Debtor Days (incl. unbilled Rev) 88 92 86 86 85 Cash & bank balance 59,290 48,430 58,550 58,550 58,550 Working Capital Cycle Days 43 11 37 38 37 Other Current assets 91,780 158,090 189,141 251,250 347,337 Valuation ratios (x) Right of use assets - 26,240 24,710 24,710 24,710 PER 26.9 24.3 19.5 18.9 16.8 Total Current assets 297,170 410,480 449,092 538,523 657,580 P/BV 6.5 5.2 4.3 3.7 3.2 Total Current liabilities 111,480 208,890 158,192 182,653 203,219 EV/EBTDA 18.7 15.6 12.7 11.1 9.7 Net Current assets 185,690 201,590 290,900 355,870 454,362 EV/Sales 4.3 3.7 3.4 2.9 2.4 Total assets 477,480 623,270 710,826 793,915 908,878 M-cap/Sales 4.4 3.8 3.6 3.1 2.7 Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research * Note: All the ratios are annualised using a factor of 4/3 for comparison purposes Note: Till FY16, the YE is June and March from FY17 onwards Note: For FY16 the numbers are for a 9th month period till 31 March

13 HCL Technologies

Institutional Equities

Rating track Date Rating Market price (Rs) Target price (Rs) 13 April 2015 Accumulate 959 1,013 22 April 2015 Accumulate 895 1,014 4 August 2015 Accumulate 938 1,008 1 October 2015 Accumulate 982 991 5 October 2015 Accumulate 859 991 20 October 2015 Buy 859 989 8 January 2016 Under Review 828 - 20 January 2016 Under Review 841 - 14 March 2016 Sell 824 737 29 April 2016 Sell 799 719 4 August 2016 Sell 826 745 24 October 2016 Sell 832 718 10 January 2017 Sell 838 712 25 January 2017 Sell 849 718 14 February 2017 Sell 827 740 12 May 2017 Sell 839 743 21 June 2017 Sell 854 713 28 July 2017 Sell 899 764 28 September 2017 Sell 874 744 26October 2017 Sell 903 763 26 December 2017 Under Review 887 - 22 January 2018 Under Review 958 - 17 March 2018 Accumulate 968 1,048 16 April 2018 Accumulate 991 1,048 3 May 2018 Accumulate 1,001 1,041 3 July 2018 Buy 926 1,131 30 July 2018 Buy 963 1,172 5 October 2018 Buy 1,081 1,281 24 October 2018 Buy 952 1,277 11 December 2018 Buy 942 1,329 27 December 2018 Accumulate 942 1,072 7 January 2019 Accumulate 932 958 30 January 2019 Accumulate 988 1,054 19 March 2019 Accumulate 1,012 1,076 10 May 2019 Accumulate 1,139 1,090 13 August 2019 Accumulate 1,083 1,127 23 August 2019 Accumulate 1,026 1,150 24 October 2019 Accumulate 1,102 1,153 13 November 2019 Accumulate 1146 1,153 2 January 2020* Under Review 572 - 20 January 2020 Under Review 601 - 31 March 2020 Accumulate 433 483 8 May 2020 Accumulate 512 535 9 July 2020 Under Review 588 - 20 July 2020 Under Review 628 - 6 September 2020 Buy 701 881 28 September 2020 Buy 828 958 18 October 2020 Buy 827 1,053 29 December 2020 Buy 922 1,141 16 January 2021 Buy 990 1,163 * Post 1:1 Bonus Issue

14 HCL Technologies

Institutional Equities

DISCLOSURES

This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) for private circulation. NBEPL is a registered Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration no. INH000001436. NBEPL is also a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments.

NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets.

NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of this research report.

NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other benefits from the company covered by Analyst or third party in connection with the research report. Analyst has not served as an officer, director or employee of Subject Company and NBEPL / analyst has not been engaged in market making activity of the subject company.

Analyst Certification: I, Girish Pai, research analyst, the author of this report, hereby certify that the views expressed in this research report accurately reflects my personal views about the subject securities, issuers, products, sectors or industries. It is also certified that no part of the compensation of the analyst was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst is principally responsible for the preparation of this research report and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.

15 HCL Technologies

Institutional Equities

Disclaimer Stock Ratings Absolute Returns BUY > 15% ACCUMULATE -5% to15% SELL < -5% This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. NBEPL is not soliciting any action based upon it. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any such transaction. In preparing this research, we did not take into account the investment objectives, financial situation and particular needs of the reader. This research has been prepared for the general use of the clients of NBEPL and must not be copied, either in whole or in part, or distributed or redistributed to any other person in any form. If you are not the intended recipient you must not use or disclose the information in this research in any way. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. NBEPL will not treat recipients as customers by virtue of their receiving this report. This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject NBEPL & its group companies to registration or licensing requirements within such jurisdictions. The report is based on the information obtained from sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up-to-date and it should not be relied upon as such. We accept no obligation to correct or update the information or opinions in it. NBEPL or any of its affiliates or employees 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. NBEPL or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations. This information is subject to change without any prior notice. NBEPL reserves its absolute discretion and right to make or refrain from making modifications and alterations to this statement from time to time. Nevertheless, NBEPL is committed to providing independent and transparent recommendations to its clients, and would be happy to provide information in response to specific client queries. Before making an investment decision on the basis of this research, the reader needs to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances. There are risks involved in securities trading. The price of securities can and does fluctuate, and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. Opinions expressed are subject to change without any notice. Neither the company nor the director or the employees of NBEPL accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. Here it may be noted that neither NBEPL, nor its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profit that may arise from or in connection with the use of the information contained in this report. Copyright of this document vests exclusively with NBEPL. Our reports are also available on our website www.nirmalbang.com Access all our reports on Bloomberg, Thomson Reuters and Factset.

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Girish Pai Head of Research [email protected] +91 22 6273 8017 / 18

Dealing Ravi Jagtiani Dealing Desk [email protected] +91 22 6273 8230, +91 22 6636 8833

Michael Pillai Dealing Desk [email protected] +91 22 6273 8102/8103, +91 22 6636 8830

Nirmal Bang Equities Pvt. Ltd. Correspondence Address B-2, 301/302, Marathon Innova, Nr. Peninsula Corporate Park, Lower Parel (W), Mumbai-400013. Board No. : 91 22 6273 8000/1; Fax. : 022 6273 8010

16 HCL Technologies