Jagan Institute of Management Studies

3, Institutional Area, Sector-5, Rohini, Delhi – 110085

Final Project Report

on

“Analysis on Financial Statements of HCL”

By

Faizal Saifi

FA22017

PGDM (2022-2024)

Under Supervision of

Mrs. Deepti Kakkar Ma’am

Presented in Partial Fulfillment of the Requirements of

Post Graduate Diploma in Management

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3, Institutional Area, Sector-5, Rohini, Delhi – 110085

STUDENT’S DECLARATION

I declare that the Report on “Analysis on Financial Statements of HCL” is an original work done
by me in accordance with the guidelines prescribed by the Dean’s office for preparation of Final
Project Report and the work has not been submitted anywhere else for review.

I understand that if the content of the work is found to be plagiarized at any time of its evaluation,
my report can be rejected and disciplinary action may be initiated against me.

Faizal Saifi

FA22017

PGDM Batch 22-24

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3, Institutional Area, Sector-5, Rohini, Delhi – 110085

Acknowledgement

This project report has been made possible through the direct co-operation and guidance of various
people for whom I wish to express my appreciation and gratitude.

First of all, I would like to express my sincere gratitude to our college that has given me an
opportunity and special thanks to my mentor, Professor Deepti Ma’am who have always provided
me guidance whenever needed. I would also like to extend my gratitude to Dean of PGDM
department, Dr. Pratima Daipuria for the same. Last but not the least I offer my sincere thanks to
my family and friends for their encouragement.

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Table of Contents
Page No.

Cover and Title page………………………………………………………………………...1

Student’s Declaration ……………………………………………………………………….2

Acknowledgement …………………………………………………………………………..3

Executive Summary ………………………………………………………………...………5

Chapter1: Introduction

1.1 Introduction of Financial Statements…………………………………………………6-7

1.2 Overview of the Company ………………………….………………………………8-9

Chapter 2: Research Methodology ……………..………….…………………………..10-11

Chapter 3: Conceptual Background …………………………………………………....12-15

Chapter 4: Data Analysis and Findings …………………………………………….......16-29

Chapter 5: Discussion and Conclusion ………………………………………………….30

Chapter 6: Recommendations …………………………………………………………...31

References ………………………………………………………………………………...32

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Executive Summary

The Project entitled ‘Analysis of Financial Statements of HCL’ The main purpose of this study
is to analyze the performance of the company. The Financial statement analysis is done for the
period of 5 years i.e. (2019-2023)

HCL, a leading global technology company, has shown robust financial performance in the
analyzed period. The analysis is done on the basis of different type of financial ratios to have a
clear picture of the trend and effectiveness of the company.

For this research work secondary data has been collected from Company’s Annual Reports and
Money Control website.

The aim of the Financial Statement Analysis is to assess the company's profitability, liquidity,
solvency, and efficiency over a specific period. This evaluation helps in gauging how effectively
the company generates profits, manages its resources, and utilizes its assets.

The company has demonstrated consistent revenue growth over the past few years, driven by
strong demand for its IT services and solutions across various industries and geographies. The
company has maintained healthy profitability margins, with a stable gross profit margin indicating
efficient cost management and a net profit margin reflecting effective operational performance.

HCL's balance sheet reveals a strong financial position, characterized by ample liquidity,
manageable debt levels, and steady cash flow generation, providing a solid foundation for future
growth initiatives and strategic investments.

In conclusion, HCL's financial statement analysis reflects a fundamentally sound and resilient
business, poised for continued growth and value creation for its stakeholders amidst evolving
market dynamics and competitive pressures.

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3, Institutional Area, Sector-5, Rohini, Delhi – 110085

Chapter 1: Introduction

1.1) Introduction to Financial Statements:

Financial statements are formal record of the financial activities of a business, person or other
entity and provide an overview of a business or person's financial condition in both short and long
term. They give an accurate picture of a company's condition and operating results in a condensed
form. Financial statements are used as a management tool primarily by company executive and
investor's in assessing the overall position and operating results of the company. Analysis and
Interpretation of financial statements help in determining the liquidity position long term solvency,
financial viability and profitability of a firm.

Ratio analysis shows whether the company is improving or deteriorating in past years. Moreover,
comparison of different aspects of all the firms can be done effectively with this. It helps the clients
to decide in which firm the risk is less or in which one they should invest so that maximum benefit
can be earned. So before investing in companies one has to carefully study its financial condition
and worthiness. An attempt has been carried out in this project to analyze and interpret the financial
statements of a company.

The analysis of financial statements is a process of evaluating relationship between component

parts of financial statements to obtain a better understanding of the firm’s position and
performance.

USERS OF FINANCIAL STATMENTS

INTERNAL USERS EXTERNAL USERS

Owners Investors
Management Lenders
Employees Suppliers
Customers
Taxation authorities
Government
Other users

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The three main financial statements are:

➢ Income statement: The income statement provides an overview of revenues, expenses,

net income and earnings per share
➢ Balance sheet: The balance sheet provides an overview of assets, liabilities and
stockholders’ equity as a snapshot in time.
➢ Cash flow statement: It's a financial statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents.

Importance of Financial Statement Analysis:

• The most important benefit of financial statement analysis is that it provides an idea to the
investors about deciding on investing their funds in a particular company.
• Investors use financial statements to estimate the intrinsic value of a company and
determine whether its stock is undervalued or overvalued.
• Management uses financial statements to analyze the company's performance, identify
areas of improvement, and make strategic decisions.
• Financial statements help in setting budgets, forecasting future financial performance, and
planning capital expenditures.
• Financial statements are essential for regulatory compliance and reporting requirements
• Financial statements of the previous years can be compared and the trend regarding various
expenses, purchases, sales, gross profits and net profit etc. can be ascertained. Value of
assets and liabilities can be compared and the future prospects of the business can be
envisaged.

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1.2 Overview of the Company

HCL Technologies is an Indian multinational information technology (IT) services and consulting
company headquartered in Noida, Uttar Pradesh, India. It is a subsidiary of HCL Enterprise. HCL
offers services including IT consulting, enterprise transformation, remote infrastructure
management, engineering, research and development, and business process outsourcing (BPO).

Established in 1976, HCL has grown to become one of the leading IT services companies globally,
with operations in over 50 countries. It has a diverse client base spanning various industry such as
banking, financial services, healthcare, manufacturing, retail, and telecommunications.

HCL offers a comprehensive range of IT services, including Application Development and

Maintenance, Infrastructure Management, Engineering and R&D Services, Digital Process
Operations, Cybersecurity, Cloud Consulting, and more.

HCL helps its clients in digital transformation initiatives by leveraging emerging technologies such
as Artificial Intelligence, Internet of Things, Blockchain, and Data Analytics.

It serves a diverse clientele, including Fortune 500 companies, multinational corporations,

government agencies, and small to medium-sized enterprises (SMEs). Its clients span across
industries such as technology, financial services, healthcare, retail, manufacturing, and
telecommunications.

Company is committed to corporate social responsibility (CSR) initiatives focused on education,

healthcare, environment conservation, and community development. Its CSR programs aim to
make a positive impact on society and promote sustainable development.

HCL has received numerous awards and accolades for its technological innovation, corporate
governance, employee engagement, and CSR initiatives. These recognitions highlight the
company's commitment to excellence and leadership in the IT services industry.

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Also, it has demonstrated strong financial performance over the years, with consistent revenue
growth and profitability. The company's financial results are regularly disclosed through quarterly
and annual reports, providing transparency to investors and stakeholders.

HCL Technologies offers a diverse range of products and solutions across various segments of the
IT industry. Some of its key product offerings include:

• DRYice: This is HCL's AI-powered automation platform that enables organizations to

automate and streamline their IT and business processes. DRYiCE offers solutions for IT
operations, cybersecurity, and service management.
• HCL Commerce: Formerly known as IBM WebSphere Commerce, HCL Commerce is a
comprehensive e-commerce platform that helps businesses create engaging digital
experiences, optimize operations, and drive sales across multiple channels.
• HCL Leap: This is a digital transformation platform that helps enterprises modernize their
legacy systems, accelerate application development, and leverage cloud-native
technologies to drive innovation and agility.
• HCL Software: HCL Software is a portfolio of enterprise software products covering
areas such as collaboration, customer experience, marketing automation, and application
development. This includes products like HCL Notes (formerly IBM Notes), HCL
Sametime, and HCL BigFix.
• HCL Appscan: This is a leading application security testing platform that helps
organizations identify and remediate security vulnerabilities in their web and mobile
applications to protect against cyber threats.
• HCL Workload Automation: This is an intelligent workload automation solution that
helps businesses automate and orchestrate their IT processes, workflows, and tasks across
hybrid cloud environments for improved efficiency and reliability.
• HCL Connections: This is a social collaboration platform that enables organizations to
connect, engage, and collaborate with employees, partners, and customers in a secure and
scalable environment.

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3, Institutional Area, Sector-5, Rohini, Delhi – 110085

Chapter 2: Research Methodology

2.1 Research problem

• The study intends to provide a financial analysis of HCL Tech. based on the company’s
published annual reports. Specifically, the study will address the Analysis of the Financial
Statements for the period of 2019-2023 based on different Ratios.

2.2 Objectives of the Research

• To analyze the financial performance of the HCL Tech.

• To study on the short term and long-term financial position of the firm.
• To make recommendation based on the analysis of financial statement.

2.3 Sources of Data

• The data used for the study is secondary data which is collected from the Annual Reports
of the company and Money Control website.

2.4 Data collection

• Secondary data has been used for this research. The study considers the period of 5 years
from (2019-2023)

2.5 Tools and Techniques

• Statistical tools such as MS Excel used for data visualization through Bar Graphs

Financial Ratio Analysis:

• Liquidity Ratio
• Profitability ratio
• Turnover ratio
• Solvency ratio

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2.6 Limitations of the study

Financial analysis is a powerful mechanism of determining financial strengths and weaknesses of

a firm but, the analysis is based on the information available in the financial statements.

But, as we know nothing is as pure as it seems, this project also has some constraints. The main
limitations are as follows:

• Financial analysis is based on historical costs.

• Financial analysis is based upon only monetary information and non-monetary factors are
ignored.
• The impact of price level chances, windows-dressing of financial statements, changes in
accounting policies
• As the financial statements are prepared on the basis of a going concern, it does not give
exact position.
• Changes in accounting procedure by a firm may often make financial analysis misleading.

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3, Institutional Area, Sector-5, Rohini, Delhi – 110085

Chapter 3: Conceptual Background

Techniques of financial statement analysis:

• Ratio analysis – Ratio analysis is a technique of analysis, comparison and interpretation

of financial statement. It is a process through which various ratio are calculated and, on
that basis, conclusions are drawn which become the base of managerial decision.
• Vertical analysis: Vertical analysis involves expressing each line item in a financial
statement as a percentage of a base item, typically total revenue or total assets. This helps
in understanding the relative composition of various components within the financial
statements.
• Horizontal analysis: Horizontal analysis, also known as trend analysis, involves
comparing financial data across multiple periods to identify trends, patterns, and changes
over time. It helps in assessing the company's performance and identifying areas of
improvement or concern.
• Common-size financial statements: Common-size financial statements express each line
item as a percentage of total revenue (for income statement) or total assets (for balance
sheet). This standardization facilitates comparison across companies of different sizes and
industries.
• Comparative analysis: Comparative analysis involves comparing a company's financial
performance and ratios with those of its industry peers, competitors, or benchmarks. It
provides insights into the company's relative position within the industry and identifies
areas of strength or weakness.

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Types of Ratio used for Analysis:

1.) Liquidity ratios

1.1 Current ratio = Current Assets / Current liabilities

The current ratio measures a company's ability to pay off its short-term liabilities (debts due
within one year) with its short-term assets. A higher current ratio indicates better liquidity and
a lower risk of defaulting on short-term obligations.

1.2 Quick Ratio = Current Assets – Inventory / Current Liabilities

The quick ratio provides insight into a company's ability to meet short-term obligations using
its most liquid assets

2.) Solvency ratio

2.1 Debt Equity Ratio = Debt/Equity

This ratio measures the proportion of a company's financing that comes from debt compared
to equity. A higher ratio indicates higher financial leverage and greater reliance on debt
financing, which can increase financial risk.

2.2 Debt to Capital Ratio = Total Debt / Total Debt + Shareholder’s Equity

This ratio measures the proportion of a company's capital that is financed by debt. It provides
a broader perspective on the company's capital structure by including both debt and equity.

2.3 Interest coverage ratio = EBITDA / Interest Expense

This ratio indicates a company's ability to cover its interest expenses with its operating income.
A higher interest coverage ratio suggests that the company is more capable of meeting its
interest obligations from its earnings, indicating lower financial risk.

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2.4 Debt to Assets ratio = Total Debt / Total Asset

This ratio measures the proportion of a company's assets that are financed by debt. A higher
debt-to-asset ratio indicates higher financial risk and implies that a significant portion of the
company's assets are funded by debt

3.) Profitability ratio

3.1 Return on equity = Net Income / Shareholders' Equity X 100

ROE measures a company's profitability relative to its shareholders' equity. It shows how
effectively a company is using shareholders' equity to generate profit. A higher ROE indicates
better profitability and efficient use of equity capital.

3.2 Net Profit Margin= Net Profit / Sales X 100

Net profit margin measures the percentage of revenue that translates into profit after accounting
for all expenses, including taxes and interest. It indicates the company's efficiency in managing
its expenses and generating profit from its operations

3.3 Profit Before Tax Margin = PBT / Sales X 100

The profit before tax ratio measures the percentage of revenue that remains as profit before
taxes. It provides insight into the company's ability to generate profit from its core operations
before considering tax expenses.

3.4 Return on capital employed = EBIT / Capital Employed X 100

ROCE measures the efficiency with which a company utilizes its capital to generate profit. It
considers both debt and equity financing. A higher ROCE indicates better utilization of capital
and higher profitability relative to the total capital employed.

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4.) Turnover Ratio

4.1 Accounts Receivable Turnover Ratio = Net Credit Sales / Average Account Receivable

This ratio measures how efficiently a company is collecting payments from customers for
credit sales. A higher accounts receivable turnover ratio indicates that the company is
collecting payments quickly, which is favorable as it reduces the risk of bad debts and improves
cash flow.

4.2 Assets Turnover Ratio = Total Revenue / Average Fixed Assets

The asset turnover ratio measures how efficiently a company is utilizing its assets to generate
revenue. A higher asset turnover ratio indicates that the company is generating more revenue
per unit of assets, which is favorable as it demonstrates efficient asset utilization.

4.3 Working Capital Turnover Ratio = Total revenue / Net Working Capital

This ratio measures how effectively a company is utilizing its working capital to generate
revenue. A higher working capital turnover ratio indicates that the company is generating more
revenue per unit of working capital, which is favorable as it suggests efficient use of resources.

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Chapter 4: Data Analysis and Findings

In the findings and data analysis section of financial statement analysis, there is a comprehensive
approach to assess the financial performance and position of HCL over the analyzed period. The
analysis revealed several key insights into the HCL’s financial health. As, several parameters have
been considered while doing the data analysis part. Because to rely on any one factor in this type
of things is not wise.

So, Financial statements have been considered for the period of 5 years, where different Ratios
like Liquidity Ratio, Profitability Ratio, Solvency Ratio, Turnover Ratio are considered with Trend
analysis, comparison with industry benchmark. So, with the help of these tools and techniques the
risk analysis and performance of the company shows a clear picture which help an investor to
understand the company and then invest the money as every investor is different. The company's
strengths and weaknesses based on the analysis of its financial statements were discussed and areas
where the company excels or faces challenges, such as strong revenue growth, improving profit
margins, or high levels of debt also being interpreted.

So, in this chapter which is core of the project, detailed comparison is given backed by the graph
chart of different ratios. So that one can have a clear picture and can do the easy analysis while
looking at those charts and figure.

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1. Current Ratio = Current Assets / Current liabilities

Year Current Assets (INR cr.) Current Liabilities (INR cr.) Ratio

2019 29722 12299 2.42

2020 38420 23730 1.62

2021 43051 17383 2.48

2022 48041 18775 2.56

2023 53577 21431 2.50

Current Ratio
3.00 2.56
2.42 2.48 2.50
2.50
2.00 1.62
1.50
1.00
0.50
0.00
2019 2020 2021 2022 2023

Ratio

HCL's current ratio fluctuated but generally remained healthy from 2019 to 2023, indicating its
ability to meet short-term liabilities. The dip in 2020 to 1.62 might have signaled temporary
liquidity strain, but the subsequent rise in 2021 and 2022, reaching 2.48 and 2.56 respectively,
showcases improved financial stability. Despite a slight decline in 2023 to 2.50, the overall trend
suggests effective management of short-term finances and reinforces confidence in HCL's
financial health.
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2. Quick Ratio = Current Assets – Inventories / Current Liabilities

Year Quick assets (INR cr.) Current Liabilities (INR cr.) Ratio

2019 29631 12299 2.41

2020 38329 23730 1.62

2021 42957 17383 2.47

2022 47880 18775 2.55

2023 53349 21431 2.49

Quick Ratio
3.00 2.55
2.41 2.47 2.49
2.50
2.00 1.62
1.50
1.00
0.50
0.00
2019 2020 2021 2022 2023

Ratio

HCL's quick ratio, reflecting its ability to meet short-term liabilities with highly liquid assets,
showed a generally positive trend from 2019 to 2023. Despite a temporary dip in 2020 to 1.62, the
ratio consistently improved thereafter, reaching 2.49 in 2023. This upward trend suggests effective
management of liquidity and financial strength, indicating the company's overall sound financial
position.

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3. Return on equity = Net Income / Shareholders' Equity

Year Net Income (INR cr.) Shareholder’s Fund (INR cr.) Return %

2019 10120 41366 24%

2020 11057 51267 22%

2021 11169 59913 19%

2022 13524 61914 22%

2023 14845 65405 23%

Return on Equity
30%
24%
25% 22% 22% 23%
19%
20%
15%
10%
5%
0%
2019 2020 2021 2022 2023

Return %

HCL's return on equity (ROE) remained relatively strong over the years, ranging from 19% to
24%, with a consistent performance compared to industry benchmarks. Despite a slight dip in
2021, the company's ROE rebounded and even surpassed industry averages in some years. This
indicates efficient utilization of shareholder equity to generate profits, reflecting HCL's solid
financial performance and competitive position within its industry.

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4. Net Profit Margin = Net Profit / Sales X 100

Year Net Profit (INR cr.) Sales (INR cr.) Return %

2019 10120 60427 17%

2020 11057 70676 16%

2021 11169 75379 15%

2022 13524 85651 16%

2023 14845 101456 15%

Net Profit Margin

17% 17%
17%
16% 16% 16%
16%
15%
15% 15%
15%
14%
14%
2019 2020 2021 2022 2023

Return %

HCL's net profit margin has remained relatively stable, ranging from 15% to 17% from 2019 to
2023. While the margins stayed consistent, they remained slightly above or in line with industry
benchmarks, indicating efficient cost management and profitability despite economic fluctuations.
This performance suggests HCL's ability to maintain healthy profitability levels within the
competitive IT sector.

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5. Profit Before Tax Margin = PBT / Sales X 100

Year PBT (INR cr.) Sales (INR cr.) Return %

2019 12622 60427 21%

2020 13980 70676 20%

2021 15853 75379 21%

2022 16952 85651 20%

2023 19488 101456 19%

PBT Margin
22% 21%
21%
21%
21%
20% 20% 20%
20% 19%
19%
19%
18%
2019 2020 2021 2022 2023

Return %

HCL's profit before tax margin has shown stability, hovering around 19% to 21% from 2019 to
2023. Although there was a slight decrease in 2023, the margins have generally remained
consistent. Compared to industry benchmarks, HCL's margins appear to be slightly above the
average for the IT sector, indicating strong operational efficiency and effective cost management.
This suggests that HCL is maintaining a solid financial performance relative to its industry peers.

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6. Return On capital employed = EBIT / Capital Employed X 100

Year EBIT (INR cr.) Capital Employed (INR cr.) Return %

2019 12796 46173 28%

2020 14485 59022 25%

2021 16364 68642 24%

2022 17271 70166 25%

2023 19841 70987 28%

Return on Capital Employed

29% 28%
28%
28%
27%
26%
25% 25%
25%
24%
24%
23%
22%
21%
2019 2020 2021 2022 2023

Return %

HCL's return on capital employed (ROCE) has exhibited a generally strong and stable trend over
the past five years, ranging from 24% to 28%. This consistent performance suggests efficient
utilization of capital resources to generate profits. Potential reasons for this include effective
operational management, strategic investments in high-return projects, and prudent capital
allocation strategies.

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7. Debt Equity Ratio = Debt / Equity

Year Debt (INR cr.) Equity (INR cr.) Ratio

2019 3701 41366 0.09

2020 4693 51267 0.09

2021 3828 59913 0.06

2022 3985 61914 0.06

2023 2251 65405 0.03

Debt to Equity Ratio

0.10 0.09 0.09

0.08 0.06
0.06
0.06
0.03
0.04
0.02
0.00
2019 2020 2021 2022 2023

Ratio

HCL's debt to equity ratio has shown a declining trend from 2019 to 2023, indicating a decreasing
reliance on debt financing relative to equity. This trend suggests prudent financial management
and a conservative approach to leverage, which can enhance the company's financial stability and
flexibility. An ideal debt to equity ratio varies across industries, but generally, a lower ratio is
preferable as it indicates lower financial risk and less dependency on borrowed funds for
operations.
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8. Debt to Capital Ratio = Total Debt / Total Debt + Shareholder’s Equity

Total Debt +
Year Total Debt (INR cr.) Shareholder’s Equity
Ratio
(INR cr.)
2019 3701 45067 0.08

2020 4693 55960 0.08

2021 3828 63741 0.06

2022 3985 65899 0.06

2023 2251 67656 0.03

Debt to Capital Ratio

0.10
0.08 0.08
0.08
0.06 0.06
0.06

0.04 0.03

0.02

0.00
2019 2020 2021 2022 2023

Ratio

HCL's debt to capital ratio has steadily decreased from 0.08 in 2019 to 0.03 in 2023, signaling a
prudent approach to managing its capital structure. This decline indicates a reduced reliance on
debt financing relative to the total capital employed by the company. Ideally, a lower debt to capital
ratio suggests a healthier financial position, as it reflects a balanced mix of debt and equity
financing. HCL's decreasing ratio reflects a positive trend towards maintaining financial stability
and minimizing risk exposure.

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9. Interest coverage ratio = EBITDA / Interest Expense

Year EBITDA (INR cr.) Interest Expense (INR cr.) %

2019 12796 174 73.5%

2020 14485 505 28.7%

2021 16364 511 32%

2022 17271 319 54.1%

2023 19841 353 56.2%

Interest Coverage Ratio

80.0 73.5
70.0
54.1 56.2
60.0
50.0
40.0 32.0
28.7
30.0
20.0
10.0
0.0
2019 2020 2021 2022 2023

HCL's interest coverage ratio has exhibited variability but showed an upward trend from 2019 to
2023, ranging from 28.7% to 73.5%. This improvement suggests enhanced ability to cover interest
expenses with earnings, potentially resulting from increased profitability or decreased interest
obligations. A higher interest coverage ratio indicates a company's stronger financial health and
reduced risk of default on debt payments.

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10. Debt to Assets ratio = Total Debt / Total Asset

Year Total Debt (INR cr.) Total Asset (INR cr.) Ratio

2019 2977 58575 0.05

2020 2848 82906 0.03

2021 3828 86194 0.04

2022 3923 89033 0.04

2023 2111 93411 0.02

Debt to Asset Ratio

0.06
0.05
0.05 0.04 0.04
0.04 0.03
0.03 0.02
0.02
0.01
0.00
2019 2020 2021 2022 2023

HCL's debt to asset ratio has consistently decreased from 0.05 in 2019 to 0.02 in 2023, indicating
a prudent management strategy in financing its operations. This decline suggests a reduced reliance
on debt financing relative to its total assets over the years. Ideally, a lower debt to asset ratio
signifies a stronger financial position and reduced risk, as it indicates a smaller portion of the
company's assets being financed by debt.

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11. Accounts Receivable Turnover Ratio = Net Credit Sales / Average Account Receivable

Average Account
Year Net Credit Sales (INR cr.) Receivable (INR cr.)
Ratio

2019 60427 12918 4.68

2020 70676 13897 5.09

2021 75379 17167 4.39

2022 85651 23088 3.71

2023 101456 25506 3.98

Account Receivable Turnover Ratio

6.00 5.09
4.68 4.39
5.00
3.71 3.98
4.00
3.00
2.00
1.00
0.00
2019 2020 2021 2022 2023

Ratio

HCL's accounts receivable turnover ratio has exhibited variability from 2019 to 2023, fluctuating
between 3.71 times and 5.09 times. This ratio reflects how efficiently the company collects
payments from customers within a given period. While a higher ratio suggests faster collections,
the decreasing trend in HCL's turnover ratio may indicate challenges or changes in customer
payment behaviors. It's important for HCL to analyze its credit policies and collection processes
to optimize efficiency and maintain healthy cash flow.
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12. Assets Turnover Ratio = Total Revenue / Average Fixed Assets

Year Total Revenue (INR cr.) Average Fixed Assets (INR cr.) Ratio

2019 60427 17899 3.38

2020 70676 21000 3.37

2021 75379 19027 3.96

2022 85651 16940 5.06

2023 101456 16092 6.30

Asset Turnover Ratio

7.00 6.30
6.00 5.06
5.00 3.96
4.00 3.38 3.37
3.00
2.00
1.00
0.00
2019 2020 2021 2022 2023

Ratio

HCL's asset turnover ratio has fluctuated from 3.37 times to 6.30 times between 2019 and 2023.
This metric gauge how efficiently the company generates revenue from its assets, with higher
values indicating better asset utilization. The increasing trend in HCL's ratio suggests
improvements in operational efficiency or strategic initiatives enhancing revenue generation
relative to its asset base. HCL's upward trajectory reflects positive momentum in optimizing asset
utilization and driving revenue growth.

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13.Working Capital Turnover Ratio = Total revenue / Net Working Capital

Year Total revenue (INR cr.) Net Working Capital (INR cr.) Ratio

2019 60427 17423 3.47

2020 70676 14690 4.81

2021 75379 25668 2.94

2022 85651 29266 2.93

2023 101456 32146 3.16

Working Capital Turnover Ratio

6.00
4.81
5.00
4.00 3.47
2.94 2.93 3.16
3.00
2.00
1.00
0.00
2019 2020 2021 2022 2023

Ratio

HCL's working capital turnover ratio has seen fluctuations between 2.93 times and 4.81 times from
2019 to 2023. These changes may reflect shifts in operational efficiency, investment decisions, or
market influences affecting working capital management. A higher ratio typically signifies more
effective use of working capital in revenue generation, indicating improved efficiency.

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 Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi – 110085

Chapter 5: Discussion and Conclusion

The conclusion of the study based upon the different Financial Ratios plays a crucial role in
understanding the company’s performance over the years.

For investors, HCL presents an attractive investment opportunity. The consistent profitability
ratios, such as profit margins and return on equity, signal strong performance and value creation
potential. Additionally, the improving asset turnover ratio indicates that HCL is effectively
utilizing its assets to generate revenue, enhancing investor confidence in the company's ability to
drive growth and returns over the long term.

From a management standpoint, the financial statement analysis offers valuable insights into areas
of strength and areas for improvement. The robust liquidity ratios reflect sound working capital
management, providing management with confidence in the company's ability to meet short-term
obligations and capitalize on strategic opportunities. Moreover, the declining debt-related ratios
underscore effective debt management strategies, reducing financial risk and enhancing the
company's financial flexibility.

Overall, the financial statement analysis positions HCL as a well-managed company with a strong
financial foundation. Investors can be reassured by its consistent profitability and operational
efficiency, while management can leverage these insights to drive continued growth and value
creation. However, it's essential for both investors and management to remain vigilant and adaptive
to market dynamics to sustain and build upon HCL's financial strength in the dynamic IT
landscape.

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 Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi – 110085

Chapter 6: Recommendations

After all the analyses, there are some recommendations that I would like to give:

So, according to my understanding,

• HCL should prioritize optimizing its working capital management to enhance efficiency
and cash flow. Streamlining inventory processes, negotiating favorable supplier terms, and
implementing stricter credit policies could help reduce accounts receivable turnover times
and minimize reliance on short-term borrowing.
• Additionally, while HCL has maintained consistent profitability, diversifying revenue
streams could reduce dependence on existing sources and mitigate market volatility risks.
Exploring new markets or services and fostering partnerships for technological innovation
can aid in this diversification effort.
• Continued investment in research and development will be crucial for HCL to stay ahead
of industry trends and maintain competitiveness. Allocating resources to develop new
products/services and nurturing partnerships with technology leaders will leverage
emerging technologies effectively.
• Further emphasis on cost management and operational efficiency will maximize
profitability and support long-term growth. Identifying and rectifying operational
inefficiencies and optimizing resource allocation will enhance productivity.
• Lastly, transparent communication with stakeholders is vital for building trust and
confidence in HCL's financial health and strategic direction. Clear and proactive
engagement with investors, employees, and customers will foster strong relationships and
support sustained success.

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 Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi – 110085

References

Books & Readings

• Title - Financial Ratios and Financial Statement Analysis

Authors- Jagadish R. Raiyani, R. B. Bhatasna
Websites

• HCL Annual Reports- https://www.hcltech.com/investor-relations/annual-report

• Moneycontrol-https://www.moneycontrol.com/financials/hcltechnologies/balance-
sheetVI/HCL02#HCL02

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