HCL Technologies Ltd Fireside Chat Hosted by Macquarie Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ravi Menon - Macquarie Research - Analyst : CVK, I think what I've discussed most of the investors is HCL Tech's Infrastructure Management Services business and whether and how cloud adoption impacts it. Let me first ask you whether there is any reduction in the need for infrastructure management services if a client adopts public cloud? And then let's try to follow that up whether peers trying to catch up in data center deals, what should them tell us about the attractiveness of this market? If it's still an attractive market why is this an attractive market?

Question: Ravi Menon - Macquarie Research - Analyst : And you've been -- you being the market leader in infrastructure services, you said that you're the market leader. But given your market share, would it be very high, broadly, how much would this be?

Question: Ravi Menon - Macquarie Research - Analyst : Thanks, CVK. And the perception has been that HCL lacks peers and application services. Do you think that this perception is true or was true? And could you go back to the historical reasons why this could have happened? And then could we take up whether the digital transformation opportunity is a good time to catch up in applications?

Question: Ravi Menon - Macquarie Research - Analyst : Very good. And do you think that this technology change is a good time to catch up because credentials matter less? Is that why you've chosen to accelerate your focus on applications now?

Question: Ravi Menon - Macquarie Research - Analyst : You spoke of how you paid one acquisition, but I think that you've not made too many to help your buildup in digital. And you start to do that organically and your instant allocated capital to the acquisition of IBM products, I think this was an interesting choice that people have thought of

Question: Ravi Menon - Macquarie Research - Analyst : If you think that the product acquisition has been successful, why not actually go in and acquire something that's an established and fast-growing product right now?

Question: Ravi Menon - Macquarie Research - Analyst : So I need to mentioned this, I mean I think something along the lines of what you've done was Actian taken that... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 04, 2022 / NTS, MQG.AX - HCL Technologies Ltd Fireside Chat Hosted by Macquarie

Question: Ravi Menon - Macquarie Research - Analyst : The R&D portfolio, that's growing faster than app and infra. You did say that HCL has a 40-year history in engineering services. So -- but why is the R&D growing now faster than applications and infra? And what specific parts of the portfolio are growing? And how sustainable is this?

Question: Ravi Menon - Macquarie Research - Analyst : I think one -- so you had mentioned that your senior management team, you've seen extremely good retention. Can you try to quantify this?

Question: Ravi Menon - Macquarie Research - Analyst : You spoke about attrition. So I think we should move on to talking about people. I think I had been under the impression that a large part of the hires that you did last year where 12 standard graduates, correct me if I'm wrong. And how has your experience been anywhere with hiring 12 standard graduates?

Question: Ravi Menon - Macquarie Research - Analyst : And we have also heard that HCL is the only firm among the large Indian service providers that actually charges people for training. Can you correct that impression?

Question: Ravi Menon - Macquarie Research - Analyst : And when we talk about attrition, I think we've always had this impression that growth and margins go hand in hand. I mean it's been very rare that we have good growth and then we can't actually get margins. But now with the pressure on the lateral hiring market, it doesn't seem to be the case, right? So is there a sweet spot where you can balance between growth and margins now? And do you see this as a more or less permanent shift? Or should we think about this as something that's temporary, and we will go back to where growth actually means better margins as well?

Question: Ravi Menon - Macquarie Research - Analyst : Now we'll take a few questions that have come up. One is not sure about but it says, HCL scores poorly on privacy and data security, and MSCI, ESG puts HCL in the first of the fourth quartile with low rating. What does the company done to enhance its privacy and data security? Are there any trainings or security policies or infrastructure?

Question: Ravi Menon - Macquarie Research - Analyst : Could you spell out the -- you said that according to a particular report right now? Who did you say is the benchmark that we should look at?

Question: Ravi Menon - Macquarie Research - Analyst : Okay. I think the next question is not factually right because it is about the company's attrition rates and saying that 23% over 2018 to '20, it is higher than the industry average of approximately 14% in FY '21. I think they are probably not in the right time frame because '21, I think everybody's attrition was low because of COVID era. But overall, though, I mean, how are you thinking about attrition? What are you trying to reduce?

Question: Ravi Menon - Macquarie Research - Analyst : And your headcount -- your disclosed personnel count does not actually in pure contract...

Question: Ravi Menon - Macquarie Research - Analyst : And the next question is about -- there was an investigational report that unless HCL was underpaying foreign workers on HMB. Is there any update? Or do you have a response?

Question: Ravi Menon - Macquarie Research - Analyst : Next one is about your client focus. I think there are so many questions that are coming up, sorry, it's scrolling past me. Let me take this one. Clients are focusing on cost takeout and infrastructure services will probably face a little bit more pricing pressure. And do you think -- first of all, do you agree with that statement? And how can we mitigate that?

Question: Ravi Menon - Macquarie Research - Analyst : And that is one of the questions here. That even though there is a supply shortage, why can't IT services firms take up pricing? I think it's not only for new business or even for the existing contracts, which are coming up for renewal. Can we actually take up prices given the current environment?

Question: Ravi Menon - Macquarie Research - Analyst : And do you think that now is the supply of talent building up faster than demand? Are we near the end of this supply shortage? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 04, 2022 / NTS, MQG.AX - HCL Technologies Ltd Fireside Chat Hosted by Macquarie

Question: Ravi Menon - Macquarie Research - Analyst : And do you think that would change at all if there is a U.S. recession?

Question: Ravi Menon - Macquarie Research - Analyst : And why not divest in IP installed base or like more products, et cetera? I think we -- and you answered that partly. I think there's a follow-up with that. Do you envisage HCL creating products organically, which can become 100 million-plus on their own?

Question: Ravi Menon - Macquarie Research - Analyst : And how can we differentiate ourselves in the new spend areas and what is our go-to-market in Horizon 2 and Horizon 3 spends? And are we trying to be leaders here in these areas?

Question: Ravi Menon - Macquarie Research - Analyst : Yes. I think we saw one of the examples, one of the case studies during analyst meet of T-Mobile how you guys played a role there?

Question: Ravi Menon - Macquarie Research - Analyst : So what were your expectations at the time of acquisition of the product business from IBM? And where have we reached? And how you made significant changes to these products, which are distinguished?

Question: Ravi Menon - Macquarie Research - Analyst : Question, not growth that many larger firms and smaller firms have been able to grow faster than us. And what do we need to fix to become industry leaders on growth as we used to be?

Question: Ravi Menon - Macquarie Research - Analyst : I think there is some...

Question: Ravi Menon - Macquarie Research - Analyst : First question, it's probably that it's framed differently, but it's a question about the margins. Again, the deals that we signed would have been not really anticipating the high talent costs. How do we make the correction to the framework to ensure that new business will get us to 19%, 20% EBITDA?

Question: Ravi Menon - Macquarie Research - Analyst : We can hear you.

Question: Ravi Menon - Macquarie Research - Analyst : I think the next question on SaaS. Do you think that SaaS offerings can be better than your products? I think that's a confusion about the license model I think . It can be a SaaS. Maybe you can explain that better than I can.

Question: Ravi Menon - Macquarie Research - Analyst : If you look at the gross margin change, I mean no, I think I'm not sure -- I think this is about a bit promptly, that its margins are down almost 600 basis points in the last 6 quarters. Do you think that this shows a lack of pricing pressure, and we've not been able to get price hikes?

Question: Ravi Menon - Macquarie Research - Analyst : How should we think about the -- talk about recession? I mean do you think that -- when you're talking to clients, are you seeing (inaudible) about spending? Are you seeing them start to, at least, talk about putting some programs on hold? Or are you starting to see any signs that people may be turning very cautious?

Question: Ravi Menon - Macquarie Research - Analyst : With the -- talk about the U.S. recession, do you think that clients are turning more cautious now? And are they starting to talk about putting any programs on pause?

Question: Ravi Menon - Macquarie Research - Analyst : And I think that -- let me clarify. We are also talking about no changes, too. So people are actually putting pause on beyond new programs, right? Anything that's really in flight, what is happening right now. No one's talking about cutting any of that?

Question: Ravi Menon - Macquarie Research - Analyst : And if Europe actually has a recession, do you think that visibility in the R&D and bullish outlook for that segment, will that change?

Question: Ravi Menon - Macquarie Research - Analyst : We'll take one last question here. I think it's a funny one. What would be the one thing that you'd like to change for HCL right now, and possibly HCL 5 years from now?

Question: Ravi Menon - Macquarie Research - Analyst : Thank you so much, and we are at the top of the hour. Thanks so much again, CVK. Thank you, everyone, for joining us. Have a good night and have a good day. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 04, 2022 / NTS, MQG.AX - HCL Technologies Ltd Fireside Chat Hosted by Macquarie