Fundamental Analysis of HCL Tech: A Comprehensive Financial Overview

HCL Technologies (HCL Tech) stands as one of India’s leading IT services companies, known for its innovative solutions and global reach. With a rich history of technological advancements, HCL Tech has consistently demonstrated strong financial performance. In this article, we delve into the fundamental analysis of HCL Tech, providing a detailed overview of its financial standing, including sales, net profit, operating profit, and key financial ratios.

Take a closer look at the balance sheet dashboard below as we walk through it step by step to gain a deeper understanding of the key financial insights.

Current Position and History

Founded in 1976, HCL Tech has grown into a global IT services company, with a presence in over 50 countries. The company has a strong track record of delivering value to its clients through a combination of technical expertise, innovation, and a deep understanding of various industries. Over the years, HCL Tech has continued to expand its service offerings, ensuring a robust financial performance.

Sales, Net Profit & Operating Profit

HCL Tech has consistently shown impressive growth in sales, net profit, and operating profit. From March 2018 to March 2025, the company has maintained a positive trajectory in these financial metrics. Sales are projected to reach ₹1,22,678.8 Cr by March 2025, with a net profit of ₹17,273.65 Cr. The operating profit is expected to be ₹26,864.56 Cr, reflecting the company’s strong operational efficiency.

Operating Profit Margin (OPM)

The Operating Profit Margin of HCL Tech has remained relatively stable, with minor fluctuations. It peaked at 26.60% in March 2021 but is projected to slightly decrease to 21.94% by March 2025. This indicates that while the company remains profitable, there might be challenges in maintaining its margin at the peak levels observed in previous years.

Earnings Per Share (EPS)

HCL Tech’s Earnings Per Share (EPS) has shown a steady increase, moving from ₹31.32 in March 2018 to an anticipated ₹61.79 by March 2025. This consistent growth in EPS underscores the company’s ability to generate higher profits for its shareholders over time.

Return on Equity (ROE)

The Return on Equity (ROE) for HCL Tech has experienced some variability, with a low of 18.64% in March 2021 and a projected ROE of 22.31% by March 2025. This trend suggests that HCL Tech has effectively managed its equity base, ensuring a solid return for its investors.

Asset Distribution

As of the most recent financial data, HCL Tech’s asset distribution presents a well-balanced and diversified portfolio. The company’s total assets stand at ₹56,698 Cr, showcasing a strong foundation for its operations and future growth. Here’s a detailed breakdown:

• Fixed Assets (₹35,063 Cr):
  This represents HCL Tech’s long-term investments in properties, plants, and equipment. The substantial allocation toward fixed assets signifies the company’s commitment to maintaining and expanding its operational infrastructure. These assets play a crucial role in ensuring the sustainability of HCL Tech’s service delivery and technological capabilities.
• Investments (₹7,137 Cr):
  HCL Tech has made significant investments in various ventures, contributing to its financial stability. These investments provide the company with additional revenue streams and help diversify its risk. Strategic investments have positioned HCL Tech to benefit from the growth of related industries, both domestically and globally.
• Other Assets (₹14,390 Cr):
  This category includes various intangible and tangible assets, such as patents, goodwill, and deferred tax assets. These assets contribute to HCL Tech’s competitive edge in innovation and technological advancements. The company’s intellectual property and strong market presence are vital for its sustained profitability.
• Capital Work in Progress (CWIP) (₹108 Cr):
  CWIP represents ongoing projects and developments that are yet to be completed. This indicates that HCL Tech is continually investing in its infrastructure and technological capabilities, ensuring future growth. Although smaller in comparison to other asset categories, CWIP signals future expansion and innovation.

Liability Distribution

On the liabilities front, HCL Tech’s prudent financial management is reflected in its liability distribution, totaling ₹98,006 Cr. The breakdown is as follows:

• Reserves (₹67,720 Cr):
  HCL Tech’s reserves represent the retained earnings and accumulated profits that the company has set aside over the years. These reserves provide a cushion against economic downturns and ensure that the company has sufficient capital for reinvestment in its growth strategies.
• Other Liabilities (₹24,985 Cr):
  This segment includes obligations such as trade payables, deferred tax liabilities, and provisions for contingencies. These liabilities reflect the company’s operational commitments and obligations to vendors, contractors, and other stakeholders. HCL Tech’s ability to manage these liabilities effectively is crucial to its smooth operational flow.
• Borrowings (₹5,758 Cr):
  Borrowings make up a relatively smaller portion of HCL Tech’s liabilities. This low level of debt indicates the company’s financial prudence and its ability to finance its operations and expansions primarily through its earnings rather than heavy reliance on external debt.
• Equity Capital (₹543 Cr):
  HCL Tech’s equity capital represents the value of the company’s issued shares. It indicates the ownership value held by the shareholders and plays a significant role in HCL Tech’s overall market valuation. The equity capital remains a small yet vital component of the company’s liabilities structure.

Now checkout the performance of HECLTECH stock starting from 2018 to till date

Conclusion

HCL Tech’s financial performance continues to reflect its strength in the IT sector. With consistent growth in sales, net profit, and EPS, coupled with a robust asset base, the company is well-positioned for sustained growth. While there are slight fluctuations in the Operating Profit Margin and ROE, HCL Tech’s overall financial health remains solid.

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