HCL Infosystems

Part of the HCL group, 58% stake owned by HCL Corp, Shiv Nadar and related entities.
Earlier was focused on Hardware (Tablets, PCs, Laptops), Distribution of Enterprise & Consumer products (mainly Nokia Handsets) and Systems Integration.

Hardware business was unable to compete with low cost scale manufacturers, and systems integration division faced execution challenges given large PSU client base where decision making ground to a halt in 2009-11

Has been undergoing a prolonged restructuring exercise. This has seen a complete change in management team (Harsh Chitale, earlier MD, left in September 2014 followed by several other key personnel and has since been replaced with Premkumar Seshadri and other experienced industry hands).

About 1,600 crore of receivables from PSUs are yet to be liquidated and appear to be reducing by about INR 200 cr a quarter, profitability here fluctuates dramatically quarter on quarter. Management suggests another 18months are needed to eliminate these receivables.

Hardware inventories are obsolete and have mostly been liquidated.

The two growth engines of the company going forward are:

  1. Distribution
    Consumer distribution
    The company has a strong distribution channel reach in Urban, Tier I,II and III cities/towns. Apart from distribution, value added services such as servicing, repairs, etc are performed on behalf of OEMs. Currently, this division is dominated by Telecom products of Microsoft (erstwhile Nokia), with some limited (though growing contribution) from consumer electricals and home appliances). Recent client wins include Lenovo and Dell.
    Enterprise distribution
    Here the company offers technical pre sales consulting, and distributes servers, storage and other enterprise hardware.
    The overall distribution division brought in INR 5,400 crs revenues for the y.e. June 2014 at a margin of ~1.6%. Most of this is consumer telecom. This may decrease in FY15 owing to restructuring in Microsoft Phone products.

Consumer services
This includes back end services provided to consumers on behalf of partner OEMs.
Enterprise services
This includes solutions around S4N (Servers, Storage, Security, Software and Networks), infrastructure management, data management, break fix services, etc. The company provides these mainly to Indian entities with some overseas clientele (e.g. Govt of Singapore)
This division brough in revenues of INR 720 cr in FY14 at an 8.3% EBIT margin and is likely to grow to atleast 800 cr by June 15 driven by strong growth in Enterprise solutions.

3.Other divisions:
HCL Care - Operates HCL Touch outlets facilitating walk in repairs of consumer electronics. ~300 outlets pan India
HCL Learning - Provides content based online learning solutions to schools, colleges, students studying for entrance exams, etc. Tries to operate on an asset light basis.

Investment case

  • Experienced management team could aggressively leverage existing distribution network to push new OEM products and increase turnover. Reddington has a turnover which is 6x HCL-I’s, although this does include substantial export sales
  • Asset light nature of core distribution and services businesses distribution business has a negative working capital cycle with no inventory/receivables risk0
  • Scope to cross sell enterprise services to hardware customers and vice versa
  • Overhang from PSU receivables should steadily reduce, such clients (BSNL/MTNL) are said to honour payments albeit with a delay. Once this is resolved,
  • Distressed valuation of <16% sales, and <1x book after reducing goodwill


  • Pace and profitability of receivables liquidation is unpredictable. This could impact quarterly earnings and reflect in market price for some time.
  • Limited velocity of windows phone sales. However, the company could at some point end it’s exclusive arrangement with Microsoft and push other more popular OEMs’ handsets/products.
  • There appear to be limited differentiators w.r.t. the services business and the company has to compete with the Wipros, Infosys and Mindtrees of the world. However management is experienced in this area and the HCL parentage could help it scale up to some extent from a low base.
  • Learning division also appears to enjoy limited differentiation, however this has broken even and could entail some optionality.
  • Timeline for turnaround execution is unknown and management is not very forthcoming in terms of what scale they aspire to grow the business to. However they appear to be executing silently with strategic tie ups being announced every quarter (most recent being Dell)

Your views appreciated. Please excuse any inaccuracies in the above note.

Disclosure: Currently invested and evaluating addition/hold.


Yesterday Radhakishan Damani bought HCL infosystems. His investment arm, Derive Investments, bought 28,56,747 shares on the NSE at Rs. 48.90 each and 11,63,680 shares on the BSE at Rs. 49.85 each. By the end of the day, Radhakishan Damani had pocketed 40,20,427 shares by shelling out about Rs. 19 crore.

Disc: Not invested.

Source: http://rakesh-jhunjhunwala.in/radhakishan-damani-prof-shivanand-mankekar-latest-portfolio-hcl-infosystems-to-put-a-contrarian-buy-on-small-cap-turnaround-stock-60-upside-left/

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This is a stock which is held by two investing world legends…RK Damani and Prof Shivanand manekar…recommended by another tech investor Ramesh Damani…has won the contract for adhar database from Govt of India…and now its showing turnaround signs on Monthly, weekly and daily charts. Its a good investment opportunity…riding the shoulders of giants.

Look at this as a turnaround story…and hold it for a long time …


i only see Some Gopi shivkishan Damani holding 1.3% shares in Jun 16 , and 1.8% as of Dec 15.
Don’t see his name in Mar16.
Cant see name of RK Damani in public shareholding.

There is some underlying business transformation going on in this company…the technical on a host of systems have turned bullish…looks like huge accumulation is going on at the present levels…wont be surprised to see the stock rise hugely from the present level…

…not invested as I am not able to find out anything substantial about the change in fundamentals…

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Mr. Gopi Damani … is Brother of Mr. Radha Kishan Damani … many a times Mr. R K Damani buys shares in his own name or firm name or else in Mr Gopi’s name … may be its just to avoid Tax or as some say Mr Gopi name is for goodluck !!

HCL infosystems has rallied by about 27% and is now around 52…but those invested may hold on…this is just the start of the bull run in this stock…as why the stock is rallying, we will know when the price is around 70-80…

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To keep things in perspective, please do consider the note in the below link -


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The company has made losses in Q2 …the result was not so good …as anticipated…i think t may take atleast 2 more quarters for the company to turn around…in Q3, the most we can expect is a lesser loss…

Meanwhile…Waystowealth has given HCL INFO as a Diwali technical pick…with targets of around 110 to 150…the same as indicated by the use of Andrews pitchfork technique in the above chart…

In the coming days, it will be quite a surprise if the stock goes below 48-50 levels…after a gap of 3-6 weeks, the uptrend may resume…


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Mam, your technical analysis won’t work unless the company post good numbers and show a turn-around. What is your opinion about the NRHM scam where their name is involved and blacklisting of the company by Department of Posts [DOP]? You can see business of Reddington and it is a very high capex business without any moat. Even if this completely transforms into a distribution business based model, a turnaround looks bleak from the current scenario. I think it will be better to exit if the company don’t make a turnaround or reduce the losses drastically after 2 quarters from here.

You are absolutely right. Without any fundamental analysis to back up, technical analysis is just lines on a chart.

Insofar as HCL info is concerned, its the other way round…they are trying to scale down the distribution business and becime more of a service softeare solutions provider.

I think i will post a detailed writeup…to give an ifea of the changing fundamentals of HCL info…


it seems that the company is still struggling


There is one old article about why smart guys accumulating


Though it’s old ( Sep 2015 ) worth viewing it

Disruption in Financial Services: Nandan Nilekani at TiE LeapFrog


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anyone who understands their business model? how does aadhar data gets monetised?

Hcl info is showing tremendous strength in this falling market…congrats to those invested in this stock…stock appears to be headed towards much higher levels…and the reason will be known after sometime…

Still not clearly able to figure out what is changing fundamentally and why big guys are accumulating.