HCL Tech has taken a slightly different path compared to traditional Indian IT companies which are more service oriented. HCL did a large acquisition from IBM products business a couple of years ago which the market disliked. Here are some interesting insights as to how the product business segment is performing (link):
- Products and platform business (IP investment) grew at 9% YOY in Q3FY21. Products business will be more lumpy in nature compared to services
- EBITDA margin (which is closer to cash generation of company) came at ~29% for Q3FY21 and 27% for the YTD
- Last 6 month YOY growth for IBM product business that was acquired is ~13% (one of the fastest growing business verticals for HCL and across the industry)
- Industry growth over the next 5 years will be higher than what it was in the last 5 years
- Services part of the industry will probably grow in double digits in FY22; not sure of the products business yet as they have only 2 quarters of history after the initial one year completion
Disclosure: Invested (position size here)