Stock @ ₹1,674 | P/E 26x | ROE 25.2% | FY25 PAT ₹17,399 Cr
Alt Title: HCLTech to AI: “I too am a future company” — Markets: “Okay boomer.”
1. 🧠 At a Glance
HCLTech is India’s third-largest IT services firm, best known for its R&D, infra mgmt, and massive dividend payouts that would make LIC blush. While TCS and Infosys fight over premium clients, HCL builds efficient backend plumbing — and cashes out. Add 20+ AI tie-ups this year and you get a low-beta, cash-gushing boomer tech stock in GenAI makeup.
2. 🎬 Introduction with Hook
In a world where every IT stock is either “pivoting to AI” or “trapped in legacy,” HCLTech is doing both. It’s been slinging code since 1999, printing stable cash flows, and now launching buzzwordy partnerships faster than you can say “OpenAI.”
But here’s the kicker: despite 20+ press releases on AI, topline is growing at 10% and margins are… consistent. So, are investors staring at a dividend ETF disguised as a tech company?
3. 💼 WTF Do They Even Do? (Business Model)
- Core offerings:
- IT Services (Infra + Apps)
- Engineering R&D (ER&D)
- Digital transformation + GenAI
- Products & Platforms (e.g., DRYiCE, BigFix, Domino)
- Geography Split:
- North America: ~60%
- Europe: ~25%
- India + RoW: ~15%
- Clients: Over 1,100 active clients, including 250+ Fortune 500
- AI Angle: OpenAI, Microsoft, AMD, Nvidia, UiPath, Cisco, SAP collabs — basically the Avengers of buzzword bingo.
4. 📊 Financials Overview – Profit, Margins, ROE, Growth
| Metric | FY23 | FY24 | FY25 | Trend |
|---|---|---|---|---|
| Revenue | ₹1.01 Lakh Cr | ₹1.10 Lakh Cr | ₹1.17 Lakh Cr | +15% in 2 yrs |
| Net Profit | ₹14,845 Cr | ₹15,710 Cr | ₹17,399 Cr | Steady climb |
| EBITDA Margin | 22% | 22% | 22% | Consistent |
| ROE | 24.5% | 25.2% | 25.2% | Efficient af |
| 5Y Sales CAGR | 11% | 5Y PAT CAGR | 10% |
📦 Growth? Meh.
💰 Consistency? Chef’s kiss.
🧾 Dividend? 94% payout — literally tech FD.
5. 🔍 Valuation – Is It Cheap, Meh, or Crack?
- P/E: 26.1x
- P/B: 6.52x
- Dividend Yield: 3.2% (best among top 5 ITs)
- FCF Yield: Healthy (~4.5%)
- EV/EBITDA: 15–16x (in-line)
Not cheap, not expensive — just like their cloud migration slides.
Value lies in dividends, not dramatic upside.
🎯 Fair Value Range (FY26E EPS ₹72–75):
- Bear Case (P/E 20x): ₹1,450
- Base Case (P/E 24x): ₹1,725
- Bull Case (P/E 28x): ₹2,100
FV depends on GenAI monetization showing up outside press releases.
6. 🍿 What’s Cooking – News, Triggers, Drama
- 🧠 OpenAI partnership: Multi-year, integrating GenAI across solutions
- 💻 Microsoft, AMD, Nvidia, Cisco: Strategic alliances
- 🌍 Volvo, Just Energy, E.ON, ASISA: Client wins across sectors
- 🧮 SSE, SAP, UiPath collabs: Stacking tech buzzwords
- 📅 Upcoming Results: 14 July 2025
🔮 Trigger to watch: How much of this AI hype translates to ER&D + Digital revenue bump
7. 📉 Balance Sheet – How Much Debt, How Many Dreams?
| Item | FY23 | FY24 | FY25 |
|---|---|---|---|
| Equity | ₹543 Cr | ₹543 Cr | ₹543 Cr |
| Reserves | ₹64,862 Cr | ₹67,720 Cr | ₹69,112 Cr |
| Borrowings | ₹4,794 Cr | ₹5,758 Cr | ₹6,276 Cr |
| Cash & Inv | ₹12,600+ Cr (est) | Mostly short-term & FDs |
🧾 Debt/Equity < 0.1
Basically, a balance sheet Warren Buffett would nod at while sipping Cherry Coke.
8. 💵 Cash Flow – Sab Number Game Hai
| Metric | FY24 | FY25 |
|---|---|---|
| CFO | ₹22,448 Cr | ₹22,261 Cr |
| FCF | ~₹18,000 Cr est. | Very strong |
| Capex | ~₹4,000 Cr | |
| Dividends Paid | ₹15,464 Cr | (94% payout!) |
| Net Cash | Declined a bit due to dividend tsunami |
🪙 Cash cow behaving like an IT-sector LIC: pays everything out, then presses Ctrl+C Ctrl+V on infra deals.
9. 📐 Ratios – Sexy or Stressy?
| Ratio | Value | Comment |
|---|---|---|
| ROE | 25.2% | Efficient capital usage |
| ROCE | 32% | Strong |
| OPM | 22% | Stable |
| Working Capital Days | 51 | ✅ |
| Debtor Days | 61 (down from 85) | Improving |
| Dividend Payout | 94% | 💸💸💸 |
10. 🧾 P&L Breakdown – Show Me the Money
| Segment | FY25E Revenue | % Share |
|---|---|---|
| IT Services | ₹70K+ Cr | 60%+ |
| ER&D | ₹20K+ Cr | 17% |
| Products/Platforms | ₹15K Cr est | 13–15% |
AI/Cloud is bundled across — unclear breakout
Biggest revenue churn = BFSI, Healthcare, Manufacturing
11. 🥊 Peer Comparison – Who Else in the Game?
| Company | P/E | ROE | OPM | FY25 PAT | FY25 Sales | Comment |
|---|---|---|---|---|---|---|
| TCS | 25.2x | 52% | 26.4% | ₹48,519 Cr | ₹2.55L Cr | King Kong of IT |
| Infosys | 25.6x | 28.8% | 24% | ₹26,516 Cr | ₹1.63L Cr | Legacy power |
| HCLTech | 26.1x | 25.2% | 22% | ₹17,399 Cr | ₹1.17L Cr | Dividend Lord |
| Wipro | 21.4x | 16.6% | 20.2% | ₹13,089 Cr | ₹89K Cr | Reformed underdog |
| TechM | 40x | 14.6% | 13.1% | ₹3,950 Cr | ₹53K Cr | Margin rehab |
| LTIMindtree | 34x | 21.5% | 17.1% | ₹4,598 Cr | ₹38K Cr | Midcap innovator |
| Persistent | 66x | 24.1% | 17.2% | ₹1,357 Cr | ₹12K Cr | Premium DNA |
🎯 Verdict:
- Best dividend = HCLTech
- Best margins = TCS
- Best P/E = Wipro
- Best growth = Persistent (but costs like Zomato Prime)
12. 🧑💼 Miscellaneous – Shareholding, Promoters
- Promoter Holding: 60.82%
- FIIs: 19.15% (increasing steadily)
- DIIs: 15.44%
- Retail: 4.37%
- Shareholders: 8.8 Lakh+
- No pledging, stable structure
- 40+ partnerships in past 12 months — someone’s quarterly OKRs were intense.
13. 🧑⚖️ EduInvesting Verdict™
HCLTech is your corporate uncle — practical, loaded, non-controversial, and always sending you ₹10K for Diwali.
It’s not a startup, not a hypergrowth rocket, not “cool.”
But it gives you 94% of profits as dividend and partners with everyone in AI like a desperate MBA student networking on LinkedIn.
Do you buy it for explosive growth? No.
Do you buy it for consistency and cash? Hell yes.
FV Range (FY26E EPS ₹72–75 x P/E 20–28): ₹1,450–₹2,100
Anything below ₹1,550 = value. Anything above ₹2,000 = growth priced in.
✍️ Written by Prashant | 📅 July 10, 2025
Tags: HCL Technologies, IT Stocks, Dividend Yield, OpenAI Partnership, AI in India, Infra Outsourcing, Infosys vs HCLTech, TCS Peers, Tech Stock Valuation, EduInvesting IT Sector
