HCL Technologies: Embedded growth - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

HCL Technologies: Embedded growth

Jan 2, 2001

A brief recap: HCL Tech is organised into four groups, the technology development group, application engineering services, software engineering services and networking services. The technology development group is into developing solutions for embedded systems. As the name suggests the embedded software is integrated into hardware so that the devices become live i.e. the devices can communicate with other devices, or take some decisions. The opportunity in this area is tremendous. One of the technologies everybody is talking of today is Bluetooth. Using Bluetooth will enable devices to communicate with each other. The future is that people will have their own private networks of desktops, laptops, PDAs and TVs. All these devices will be able to communicate with each other and exchange data.

The growth potential is tremendous for the simple reason that for the end user embedded technologies and applications would mean a lot of convenience. The concept for the future is a networked home wherein not only all the electronic consumer devices are networked with each other but they are also connected to the Internet. Therefore, sitting thousands of miles away one could monitor if the refrigerator is working properly – online diagnostics.

Technology Development, Networking Services and Software Product Development services contributed 68% of the revenues in FY00. The other high technology areas that HCL tech is into include digital signal processing, WAP (wireless application protocol), network processors, Gigabit Ethernet and ATM (asynchronous transfer mode) technologies.

One of the most positive factors is the company’s commitment to technology. It has created technology “cradles” that identify and foster emerging technology. About 9% of the company’s manpower is focused on diverse technology cradles in the areas of Blue tooth, WAP, and xml (extended mark up language).

  HCL Tech Infosys Wipro Hughes
P/E (x) 38 66 106 58

If we compare HCL to other software companies that have interest in technology it’s valuation is quite low. One of the reasons could be its low revenue growth rate of 28% in FY00. This growth rate could go up due to burgeoning need for embedded and telecommunications software. Also the other growth driver will be its income from investments into other companies. The other income figure was Rs 538 m (up 505 %) in FY00.

The business model of the company differs from other software companies. The company intends to grow its bottomline through inorganic growth. For the purpose, the company has evolved a 'Technology Market Acquisition Strategy' to forge strategic partnerships with select technology funds .In FY00 the company has invested Rs 394 m (17% of its cash profits) in five technology funds having a combined corpus of $1-$1.5 bn. The revenues from these investments will start reflecting in its bottomline only after 1-2 years.

For 1QFY01 its operating margin was 29%, which is comparable with the best in the industry. Its technology focus will give it the edge that will ensure its growth and profitability.

Equitymaster requests your view! Post a comment on "HCL Technologies: Embedded growth". Click here!


More Views on News

HCL TECHNOLOGIES 2020-21 Annual Report Analysis (Annual Result Update)

Oct 20, 2021 | Updated on Oct 20, 2021

Here's an analysis of the annual report of HCL TECHNOLOGIES for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of HCL TECHNOLOGIES. Also includes updates on the valuation of HCL TECHNOLOGIES.

HCL TECHNOLOGIES Announces Quarterly Results (2QFY22); Net Profit Up 3.7% (Quarterly Result Update)

Oct 18, 2021 | Updated on Oct 18, 2021

For the quarter ended September 2021, HCL TECHNOLOGIES has posted a net profit of Rs 33 bn (up 3.7% YoY). Sales on the other hand came in at Rs 207 bn (up 11.1% YoY). Read on for a complete analysis of HCL TECHNOLOGIES's quarterly results.

HCL Technologies Slips 2% After June Quarter Results (Views On News)

Jul 20, 2021

The company's results have missed street estimates for the second consecutive quarter.

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 2, 2021 01:13 PM


  • Track your investment in HCL TECHNOLOGIES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks