The HCL Technologies that Shiv Nadar built—and grew

Over 45 years, HCL Co-founder Shiv Nadar steered the company to the top tier of Indian IT exporters, overtaking contemporary Azim Premji’s Wipro.

Shiv Nadar, Co-founder of HCL Technologies, stepped down as Chief Strategy Officer and Managing Director on July 19, 2021. He will continue as Chairman Emeritus and Strategic Advisor to the Board of Directors.

HCL has performed remarkably well compared to its peers under the leadership of Nadar.

A close look at HCL Technologies’ market performance, relative to its industry-peers: Tata Consultancy Services (TCS), Infosys, and Wipro, and the S&P BSE Information Technology (BSE IT) index reveals that HCL Tech has been an outperformer.

From $3.35 billion at the end of September 2005, HCL Technologies’ market capitalisation has grown 10.7 times to over $35.9 billion in July 2021 (the average of daily market capitalisation from July 1 to 19).

In rebased terms, the value of 1,000 would have grown to 10,745 in case of HCL Technologies, in comparison to 8,939 for the BSE IT index. In the case of TCS, Infosys and Wipro, the 1,000 would have grown to 10,133, 5,822, and 3,342 in the same period.

While HCL Technologies went in for an initial public offering (IPO) towards the end of 1999, and got listed on January 10 that year, the reason to review the sector-peer performance from September 2005 is owing to the availability of the index’s data from September 16 that year.

What started as a computer hardware garage-startup is now an information technology (IT) company with annual revenue of $10 billion.

Nadar has long been regarded as a pioneer in the Indian IT space.

Under Nadar, HCL Technologies revenue has recorded a compounded annual growth rate (CAGR) of 21.44 percent, over the past 21 financial years, from $177 million in 1999-2000 to nearly $10.5 billion in 2020-21.

However, he didn’t start with the idea of an IT services business.

Nadar and his colleagues from Delhi Cloth and General Mills sowed the seeds of Hindustan Computers Limited in 1976, aiming to sell personal computers.

To put this vision in perspective, consider this: Only a year before, Microsoft had released its first product, the programming language BASIC, for a version of personal computer released that year. Apple launched its first product, a desktop computer, Apple 1, in 1976.

It was only after the availability of microprocessors in the early 1970s that personal computers could be thought of as affordable goods in the world.

Nadar was far ahead of his time. He has led the company to achieve many firsts. 

With protectionist measures in place in India, multinational firm IBM left India in 1977. It paved the way for ventures like HCL to grow in the market.

A year later, the firm introduced India’s first 8-bit microprocessor-based computer.

HCL also forayed into developing software. He led the company to develop India’s indigenous relational database management system and a networking operating system in 1983.

What we know today as HCL Technologies was the Research and Development division of HCL Enterprise for the growth of the IT industry in India. The company expanded its business to overseas markets, providing software services to its foreign clients, transforming itself into a software services company. 

The company’s operating profit grew at a CAGR of 17.27 percent from $102 million in 1999-2000 to around $2.9 billion in 2020-21. As for the operating profit margins, the decade ended 2010 witnessed average margins of around 28.3 percent, while the eleven fiscals from 2010-11 to 2020-21 saw margins averaging at around 23.8 percent.

While HCL Tech has been on a profitable journey under Nadar, the lower operating margins can be attributed to the scale-effect. The increase in top-line is a function of increase in the firm’s efforts. In the service sector, it means more employees and more employee costs.

Nadar’s legacy as an active top manager was to constantly grow HCL in new technology areas, as it did in remote infrastructure management, and engineering R&D in the past decade. He steered the company to the top tier of Indian IT exporters, overtaking contemporary Azim Premji’s Wipro.

HCL Technologies, under C Vijayakumar as Managing Director, will take forward that growth mindset and hunger.


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