SECTOR UPDATE 19 FEB 2019

IT Sector Update

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Indian IT : ‘Hit Refresh’ Indian IT has ‘hit refresh’ with reinvention across multiple tech cycles and is now tuned to the all-encompassing and ubiquitous ‘Digital’ shift. Initial success in transitioning to a new business model is evident in growth leadership vs. global peers (who led the cycle). We believe that even as digital portfolio and industry penetration is maturing, Indian IT’s investments (re-skilling, platforms & partnerships, acquisitions) will open up a larger addressable market with better pricing power.

In this note, we recount hits and misses in 3QFY19 for Indian IT and review our thesis on the sector. Both revenue and margin were in-line vs. est. at an aggregate level. Revenue grew 2.2% QoQ (highest 3Q since FY14) and EBIT margins were flat. Within tier-1 IT, INFY and TechM posted relative revenue beat while LTI, Zensar & Sonata delivered rev beat within tier-2 IT. Margin outperformance was visible in Wipro, Persistent and Sonata while prominent misses on margins included eClerx and Zensar.

Key positives for the sector include (1) Rapid pivot to digital (32% YoY in 3Q), (2) Robust deal trends (hitting new highs in deal bookings and pipeline), (3) Strong hiring momentum indicative of demand buoyancy, and (4) Revival in core vertical (BFSI), albeit captive pressure looms. While positives outweigh concerns, potential risks lurk in the form of (1) Slowdown in core geography (US) and worsening macros impacting tech spend (digital becoming non-discretionary is an offset), (2) Brexit

repercussions, (3) Margin challenge from talent supply crunch and captives driving up wages and sub-contracting spike, and (4) Regulatory policy changes in visas (mitigated by higher localisation). Key Highlights Deal flows continue to strengthen, with (1) Strong

industry-wide indicators (from ISG, DXC, Capgemini), (2) TCS’ TCV increased 20% over 1Q-2Q rate, gains vs. Accenture, (3) INFY’s large deal bookings at USD 1.57bn (50% of FY18 TCV), (3) Highest ever deal bookings (ex-renewals) by HCLT and Hexaware (USD 100mn+ net-new).

Guidance/outlook provided by management reflects continued strength with no signs of macro weakness ‘yet’. The notable increases in guidance came from INFY, HCLT and LTTS. Digital continues to rise with improving margin supported by pricing and digital spend becoming more non-discretionary. TCS’ scale and growth leadership in digital continues.

Operating efficiencies (automation), pyramid rationalisation and pricing (in digital services) are strong offsets to margin headwinds from greater localisation and the tight US tech labour market. Tier-2 IT (PSYS, Mphasis, LTI, LTTS) are less prone to Brexit repercussions on portfolio composition (ceteris paribus).

TCS and INFY outperformed on client metrics (>USD100/10mn buckets). Headcount adds continue to accelerate with 70k increase in 9MFY19 as compared to 87k over FY17-18 for tier-1, with uptick in onsite hiring and escalating sub-contracting.

Top picks: TCS, Mphasis, L&T Tech, Zensar and Majesco

Company CMP (Rs) RECO TP

(Rs)

TCS 1,970 BUY 2,430 Infosys 741 BUY 830 Wipro 376 NEU 330 HCL Tech 1,046 BUY 1,260 TechM 803 BUY 880 LTI 1,748 BUY 2,240 Mphasis 1,041 BUY 1,390 Mindtree 869 BUY 1,140 LTT 1,467 BUY 2,030 Hexaware 353 BUY 470 Cyient 611 BUY 790 Persistent 640 BUY 815 eClerx 986 NEU 1,035 Zensar 206 BUY 300 Sonata 326 BUY 466 Intellect 152 BUY 300 Majesco 450 BUY 761

Apurva Prasad apurva.prasad@hdfcsec.com +91-22-6171-7327

Amit Chandra amit.chandra@hdfcsec.com +91-22-6171-7345

Akshay Ramnani akshay.ramnani@hdfcsec.com +91-22-6171-7334

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IT Sector Valuation Universe

Company MCap (USD bn)

MCap (Rs bn)

CMP (Rs)

TP (Rs) RECO

P/E (x) EPS (Rs) RoE (%) EPS CAGR% FY19-21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E

TCS 103.3 7,393 1,970 2,430 BUY 28.6 23.4 21.0 18.9 68.8 84.1 93.8 104.2 30.1 36.2 38.1 39.2 11.3 Infosys 45.0 3,224 741 830 BUY 21.9 20.1 18.0 16.2 33.9 36.8 41.2 45.7 24.5 22.5 23.6 24.0 11.4 Wipro 23.7 1,696 376 330 NEU 21.2 18.7 16.6 15.8 17.7 20.0 22.6 23.8 16.5 18.1 17.8 16.7 8.9 HCL Tech 20.3 1,457 1,046 1,260 BUY 16.2 13.9 12.4 11.6 64.7 75.1 84.2 90.0 25.3 26.3 25.9 24.2 9.5 Tech Mahindra 10.0 719 803 880 BUY 18.9 16.5 14.8 13.4 42.5 48.8 54.4 59.8 21.5 21.6 21.0 20.3 10.7 Tier-1 IT Median 21.2 18.7 16.6 15.8 24.5 22.5 23.6 24.0 10.7

L&T Infotech 4.2 301 1,748 2,240 BUY 26.1 20.0 19.0 16.5 67.0 87.4 92.2 105.9 33.2 35.3 30.7 29.6 10.1 Mphasis 2.8 201 1,041 1,390 BUY 22.9 17.9 15.3 12.8 45.4 58.1 68.2 81.5 14.6 20.5 23.3 24.1 18.5 L&T Tech 2.1 152 1,467 2,030 BUY 32.1 22.1 19.5 15.0 45.7 66.5 75.3 97.7 27.7 31.9 29.8 31.8 21.2 Mindtree 2.0 142 869 1,140 BUY 28.4 19.6 16.5 14.7 30.5 44.3 52.5 59.0 20.5 25.5 25.1 24.3 15.5 Hexaware * 1.5 105 353 470 BUY 21.0 18.0 15.5 13.5 16.8 19.6 22.8 26.2 26.6 26.5 26.9 27.3 15.6 Cyient 1.0 69 611 790 BUY 15.8 15.6 13.4 12.1 38.6 39.2 45.5 50.7 18.1 17.9 18.9 19.0 13.7 Tata Elxsi# 0.7 54 859 1,050 NR 22.3 18.3 16.8 14.1 38.5 46.9 51.3 61.1 37.0 35.1 31.1 30.4 14.1 Zensar 0.7 47 206 300 BUY 19.4 15.3 12.3 10.5 10.6 13.4 16.7 19.5 15.1 16.8 18.1 18.3 20.4 Persistent 0.7 51 640 815 BUY 15.9 14.2 12.4 10.7 40.4 44.9 51.8 59.8 16.0 16.0 16.8 17.0 15.3 eClerx 0.5 38 986 1,035 NEU 13.9 16.8 13.7 12.2 70.8 58.7 71.9 80.9 22.4 18.3 21.1 22.2 17.4 Sonata 0.5 34 326 466 BUY 17.6 13.7 12.3 10.9 18.6 23.8 26.6 30.0 31.0 35.4 34.9 34.8 12.4 Intellect 0.3 19 152 300 BUY NM 20.4 13.0 9.1 3.7 7.5 11.7 16.7 6.5 10.3 14.0 17.1 49.4 Majesco 0.2 13 450 761 BUY NM 20.3 14.9 12.3 (1.5) 22.2 30.2 36.5 NM 11.3 14.9 18.4 28.2 HGS# 0.2 12 595 695 NR 6.2 7.6 6.8 6.1 96.5 77.8 87.3 97.5 14.3 10.5 10.8 11.0 12.0 Tier-2 IT Median 19.4 17.9 13.7 12.2 18.1 18.3 21.1 22.2 15.6 Global Peers Accenture 101.7 NA NA NA NR 25.1 22.0 20.2 18.5 6.3 7.2 7.9 8.6 42.0 37.7 35.0 31.1 9.0 Cognizant 42.4 NA NA NA NR 29.1 20.4 16.5 15.0 2.5 3.6 4.5 4.9 14.1 19.0 20.9 20.6 16.7 DXC Tech. 17.6 NA NA NA NR 10.8 7.9 7.1 6.4 6.0 8.3 9.2 10.3 13.8 16.1 19.6 20.3 11.5 Capgemini 19.3 NA NA NA NR 21.5 24.1 15.5 14.2 5.4 5.0 7.5 8.1 11.5 10.1 13.2 13.5 30.1 Atos 10.0 NA NA NA NR 14.5 10.2 9.1 8.5 6.4 9.3 10.3 11.0 13.4 16.4 19.2 18.6 9.6 Global Peers Median 21.5 20.4 15.5 14.2 6.0 7.2 7.9 8.6 13.8 16.4 19.6 20.3 11.5

Source: Bloomberg, HDFC sec Inst Research, #Fair Value, *Dec YE, USD terms for Global peers and EPS CAGR in EUR terms for Capgemini, Atos, Estimates based on USD-INR at 72

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IT Sector P/E and EPS Growth Matrix

Source: HDFC sec Inst Research, Note: Size of Bubble represents M-cap

Top midcap picks LTTS, Mphasis and Zensar in top quartile of EPS growth in the sector Our EPS est. ahead of consensus by 1-2% for TCS, INFY, HCLT and by 8-13% for Mphasis, LTTS, Hexaware

INFY

Wipro

HCLT

TechM

L&T Infotech

MphasisHexaware

Mindtree

L&T Tech

Cyient

Tata Elxsi

TCS

Persistent

eClerx

ZensarSonata

10

12

14

16

18

20

22

24

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

FY 2

0E P

/E

EPS CAGR FY19-21E

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Stock Performance (%) Stock 1M 3M 6M 1Yr 3Yr CAGR 5Yr CAGR Nifty Index (2.4) (0.4) (7.2) 1.8 14.0 11.7 Nifty IT Index 5.1 8.2 3.5 25.9 13.5 9.6

TCS 3.7 4.4 (2.1) 34.4 19.4 13.1 Infosys 1.9 14.5 4.2 33.2 10.2 10.3 Wipro 8.5 15.1 34.1 29.1 11.5 6.2 HCL Tech 8.3 2.4 4.3 11.7 7.4 7.2 Tech Mahindra 13.3 10.4 16.8 37.5 23.7 12.3 L&T Infotech (3.3) 6.8 (5.4) 18.7 NA NA Mphasis 19.5 9.2 (12.3) 20.7 32.9 21.2 L&T Technology (10.6) (3.4) (8.8) 5.1 NA NA Mindtree (2.1) 3.7 (15.6) 21.8 7.4 16.6 Hexaware 8.6 14.2 (27.6) 5.9 15.5 17.3 Cyient (0.1) (6.6) (17.3) 0.2 13.5 12.0 Tata Elxsi^ (10.8) (10.7) (40.0) (14.3) (3.6) 29.1 Zensar (12.5) (14.8) (25.1) 13.9 6.2 21.4 Persistent 16.2 15.9 (26.6) (16.3) (0.3) 5.1 eClerx (8.7) (13.7) (11.3) (25.7) (9.3) 1.7 Sonata 6.6 (1.5) (10.5) (2.7) 34.0 48.2 Intellect (29.9) (37.0) (40.3) (17.2) (5.5) NA Majesco (9.6) (8.2) (13.6) (8.1) (2.5) NA HGS^ (7.7) (13.5) (23.4) (31.8) 15.1 (0.3) Global Peers*^ Accenture 5.8 (3.5) (3.4) (2.1) 17.4 14.0 Cognizant 8.5 4.6 (2.6) (9.1) 9.5 8.0 Capgemini 5.6 (1.0) (8.4) (2.7) 10.3 13.6 Source: Bloomberg, HDFC sec Inst Research, *USD/Local currency terms, ^ Not Rated

Recent underperformance of LTTS and Zensar provides good entry/accumulation opportunity

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Strong deal trends Demand environment buoyancy is indicative from

strong deal trends, as companies posted record deal wins with an improvement in deal pipeline. TCS posted robust deal bookings (USD 5.9bn at 20% increase over 1Q-2Q rate and steady duration) & indicated strong deal pipeline. TCS’ deal TCV share vs. Accenture outsourcing has improved from 46% to 58% over the past three quarters.

Some of the key wins in 3Q for TCS included regulatory and compliance deal (German investment bank), Digital transformation program (Brazilian bank), Automation deal (Australian utilities-3yrs), Platform-led deal (Canadian Insurer) and BaNCS (MUFG, Japan).

Large deal bookings for INFY were strong at USD 1.57bn (~50% of FY18 TCV) from 14 deals, of which 30% large deal TCV was net-new. Key wins for INFY included in BFSI (QNB) and E&U (Citizen Energy Group).

Large global peers such as Capgemini also posted record deal bookings in Dec-qtr with TCV at USD 3.9bn and strong growth in deal pipeline at 11% YoY.

For HCLT, deal bookings (ex-renewals) were ‘highest-ever’, 9MFY19 deal bookings (ex-renewals) were up 40% YoY. Large deals were from BFSI and TME verticals and HCLT’s deal pipeline also at its ‘highest ever’.

Large peer DXC Technologies also posted robust deal bookings in Dec-qtr with TCV of USD 5.7bn led by sharp increase in its IMS bookings TCV at USD 3.4bn.

TechM booked TCV of USD 440mn, with USD 240in in communication segment and USD 200mn in enterprise segment. While TCV addition was soft for Mphasis, there was strong growth in new client addition.

LTTS won deals with TCV of USD 80mn incremental over 3 years. Hexaware posted its largest ever net new deal (>USD 100mn) in Dec-qtr with large deal in the Nordics.

Mphasis’ YTD growth in its Direct International deal bookings was up 11.2% YoY. Zensar continued to accelerate on deal bookings with TCV of USD 200mn in 3Q (USD 500mn for 9MFY19 vs USD 600mn for FY18.

TCS continues to gain share in deal bookings vs. Accenture Highest ever deal bookings (ex-renewals) for HCLT and Hexaware Deal bookings by DXC, Capgemini, ISG data reflect broad momentum

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Digital-led growth

Digital is becoming more mainstream as projects continue to move from pilot stage to production stage. Digital continues to scale up rapidly for the sector and has grown at 7 to 10% CQGR over the past year and contributed ~32% of rev on aggregate basis (TCS, INFY, Wipro, TechM, LTI, Mindtree, Persistent, Zensar).

TCS has led the sector in terms of growth and scale in digital with 10.6% CQGR (8.2% QoQ in 3Q). Wipro and INFY’s digital revenue has grown at 7.8% and 7% CQGR respectively with 3Q growth at 6.0/3.9% QoQ.

Cognizant highlighted greater pricing strength based on strong demand and tight supply of tech talent. We observe that the level of total job openings in US is at the highest level (7.3mn) as per BLS data. Cognizant’s digital revenue grew >25% YoY and Capgemini’s digital (45% of rev) grew >20% YoY CC.

Cloud, Cyber security, Analytics are driving spends in digital for INFY. Wipro’s growth in digital is led by BFSI and Retail verticals. Among the tier-2 IT, LTI, Mindtree and Zensar have grown digital at 7.3/7.3/8.0% CQGR.

Mindtree’s growth in digital was driven by cloud/analytics. 81% of Mphasis’ TCV in Direct International were in Digital/Newgen services. Legacy services at an aggregate basis declined 0.8% QoQ.

On YoY basis, growth in digital stood at 32% YoY for the sector with TCS leading at 49% YoY, followed by Wipro and INFY at 35% and 31% YoY respectively. Within tier-2 IT, growth in digital was led by Zensar, LTI and Mindtree which grew at 36/32/32% YoY respectively.

Digital (32% of rev) grew 32% YoY in 3Q with companies growing their digital between 7 to 10% CQGR over last year TCS leads scale and growth in digital Pricing power in digital and increasing deal size supporting growth

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Positive guidance On client budgets, HCLT’s commentary was more

upbeat on digital becoming less discretionary as compared to TCS/INFY. Global peers such as Capgemini and Cognizant also alluded to no negative impact seen from macro economic situation.

Uptick in deal flow resulted in guidance increase for companies such as INFY, HCLT, LTTS while TCS, LTI maintained its growth outlook. TCS’ growth has accelerated from 6.2% YoY to 12.1% YoY (its strongest YoY cc growth in 14-qtrs) over the past year and we expect double-digit trajectory to sustain ahead.

INFY increased guidance from 6 to 8% CC YoY to 8.5 to 9% CC. HCLT increased its organic guidance from 5% to 6% (overall guidance increased from mid-point of 9.5 - 11.5% range to ‘top-end’ of the range). On client budgets, INFY and LTI indicated to flat budgets

with continued shift in budget from run the business spend to change the business spend.

Large global peer Capgemini (EUR 13.2bn rev) has guided for 5.5 to 8% CC YoY growth for CY19 (8.1% YoY in CY18 with 6.2% organic). Cognizant (USD 16.1bn rev) guided for 7 to 9% CC YoY for CY19 as compared to 8.5% CC YoY registered in CY18.

Wipro’s soft guidance for 4Q (strong seasonally for the company) was 0-2% QoQ on growth issues in HPS and Mfg vertical.

Hexaware provided organic revenue guidance of 12 to 14% for CY19E.

LTTS increased its guidance from >21% to >24% for FY19E revenue growth, however impact from a large Hi-tech account expected to hit FY20E revenue by ~4% and guided for ‘mid-teens’ organic growth for FY20E.

Guidance increase by INFY, HCLT and LTTS for FY19E Commentary from Cognizant, Capgemini also alluding to no negative impact from macros

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Margin stress

Despite 7% INR depreciation over last 2 years, margins have been flat. Increased hiring including onsite expansion and higher sub-contracting have impacted margin, which is expected to rationalize over the medium term.

Utilisation was impacted by 3Q seasonality as well as accelerated hiring. Operating efficiencies (automation), pyramid rationalization and pricing (in digital services) continue to be strong offsets to margin headwinds of greater localization and tight US tech labour market. Currently HCLT and Wipro have higher localisation at 62% and 65% in US respectively.

We reckon that utilizations and transition to steady state of large deals will support margins ahead. In 3Q, Wipro and TechM have outperformed in terms of margin performance vs. peers within tier-1 IT. HCLT maintained its EBIT margin guidance of 19.5 to 20.5%.

Within tier-2 IT, Persistent and Cyient outperformed on operational improvement, while eClerx and Zensar disappointed on margins.

Geo trends NorthAm revenue has grown at 2.1% CQGR and HCLT

has led the growth at 3% CQGR among tier-1 IT, TCS/INFY growth has been at 1.9/2.0% CQGR over the past year.

On a QoQ basis in 3Q, TECHM and HCLT led the growth in NorthAm at 4.4/2.7%. Among tier-2 IT, Mindtree, LTI and LTTS have led the growth in NorthAm at 5.4/4.1/4.9% CQGR.

TCS has outperformed in Europe geography, while Wipro, TechM have lagged. HCLT’s sharp growth in Europe geo was supported by large deals and consolidation of H&D International.

Within tier-2 IT, Mphasis and Hexaware led the growth in Europe geography. Europe contributes ~18% to revenue for tier-2 IT as compared to ~27% for tier-1 IT.

Adverse impact on Brexit/’No-deal’ Brexit can potentially have a larger bearing on tier-1, based on the larger exposure. INFY exhibited higher than usual impact of furlough in Europe towards the end of the quarter.

Zensar divested its loss making RoW business for a consideration of Rs 0.26bn (0.4x 1HFY19 annualised revenue).

Wipro, TechM, Cyient, Persistent outperformed on margins Tier-2 IT have lower exposure to UK/Europe and therefore are relatively insulated from Brexit repercussions

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Client metrics

Broadly, top-10 accounts have grown in-line with company average. Top-10 accounts of Wipro and Mphasis have outperformed and have led their growth with 2.4/4.8% CQGR over the past year.

Large account metrics continued to exhibit strength. TCS and INFY posted strongest increase in >USD 100mn client bucket over the past year with TCS and INFY adding 11 and 3 accounts to >USD 100mn as compared to 1 each for Wipro/HCLT.

INFY and TCS also led the growth in >USD 10mn client bucket with growth of 2.4% and 2% CQGR respectively, while Wipro was soft at 0.6% CQGR.

LTI added 17 new logos with 2 from F-500, while T-5 performance was soft in 3Q.

Service-line trends ADM led the growth in Wipro, Mphasis, Mindtree,

Zensar and Sonata. Wipro’s application services has grown at 3.6% CQGR as compared to 0.9% CQGR at an aggregate level. Mphasis’ growth in ADM stood at 5-6% CQGR as compared to aggregate growth of 3% over the past year.

Hexaware and Mindtree led growth in IMS at 14/6.9% CQGR, HCLT's IMS has rebounded supported by large deals. DXC Tech’s IMS revenue surged 3.7% QoQ to USD 3bn in Dec-qtr and also recorded strong deal bookings.

KPIT and LTTS led growth in ER&D, HCLT led growth within tier-1 supported by its Mode-3 business.

Vertical performance Within BFSI, Wipro has been the outperformer with

3.4% CQGR over the past year as compared to 1.7/1.6/-0.7/1.2% CQGR for TCS/INFY/HCLT/TechM.

TCS’ BFSI accelerated to 8.6% YoY in 3Q as compared to 6.1% YoY in 2Q with BFS driven growth in NorthAm and Insurance driven growth in Europe. INFY’s growth in BFSI was driven by ramp up of new accounts and on Finacle.

HCLT’s BFSI was impacted by 2 large accounts which is expected to moderate ahead. LTI’s growth in BFS is driven by its wealth management segment and its has also acquired Nielsen+Partner (N+P), Germany based implementation partner for Temenos in EMEA and APAC for EUR 28mn (EV/rev of 3.2x) to augment its BFS practice.

In the retail & CPG vertical, growth was led by HCLT and INFY at 4.2% and 2.3% CQGR. Within tier-2 IT, Mindtree led the growth in Retail & CPG vertical at 2.9% CQGR.

Volatility in crude prices can moderate growth in the oil & gas vertical, which has been a big growth driver for TCS, Wipro, LTI. TCS and INFY’s E&U vertical as grown at 3.2% and 3.7% CQGR respectively over the past year.

TCS and INFY have led the >USD 100/10mn account metrics Strong recovery in IMS performance for HCLT as well as larger peer DXC Tech, deal flow reflecting momentum Wipro outperforming in BFSI vs. peers led by its Digital practice Volatility in crude can impact E&U growth which has been strong growth driver for TCS, Wipro, LTI

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Hiring acceleration Headcount has has accelerated with an uptick in

hiring. 9MFY19 increase in headcount by 70k as compared to 87k increase over FY17-18 for tier-1 IT. IT sector (coverage universe) headcount increased by 2.1/9.3% QoQ/YoY in 3Q with flat growth in revenue productivity.

Among tier-1 IT, INFY and TECHM posted the strongest increase in headcount growth at 3.6/2.9%, QoQ respectively, while revenue productivity increase was the highest for HCLT.

Among tier-2 IT, LTI and LTTS posted the strongest headcount additions at 4.1/5.5% CQGR over the past year. Mphasis and Cyient posted highest increase in revenue productivity over the past year.

There has been a strong revival in hiring including onsite local hiring. The shortage of tech talent onsite can lead to supply crunch and wage inflationary risk to the sector. Also the strong increase in sub-contracting is attributable to the shortfall in tech supply.

As per LinkedIn data (Workforce Report), hiring increase and wage increase was led by Software & IT services in Dec-18 and Jan-19 as compared to other industries. Job openings are also at the highest level indicative of the high demand-tight supply scenario.

This is also reflected in increase in attrition as there’s sharp demand from captives.

Persistent announced Christopher O’Connor as CEO, who joins from IBM and was earlier leading its IoT business.

INFY, TECHM posted highest growth in headcount while HCLT, Mphasis, Cyient posted higher growth in revenue productivity Elevated sub-contracting resulting from shortage of tech talent and strong demand environment

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Performance Dashboard IT Sector Revenue Performance

Company Revenue (USD mn) 3QFY19 QoQ (%)

3QFY19 YoY (%)

9MFY19 YoY (%)

TCS 5,250 0.7% 9.7% 9.9% INFY 2,987 2.3% 8.4% 7.4% Wipro 2,047 1.8% 3.7% 2.9%

HCLT 2,201 4.9% 10.8% 9.6% TechM 1,261 3.5% 4.3% 5.0% Tier-1 IT 2.1% 8.1% 7.8%

L&T Infotech 347 5.6% 18.2% 20.9% Mphasis 283 2.6% 12.4% 14.1%

Hexaware 176 3.0% 12.8% 11.4% Mindtree 251 2.1% 17.4% 19.1% L&T Tech 186 4.8% 23.0% 27.2% Cyient 165 -2.2% 8.6% 11.7%

Tata Elxsi 57 -1.8% 5.9% 9.2% Persistent 121 2.2% -1.4% 2.6% eClerx 50 0.4% 2.7% 2.3%

Zensar 144 4.1% 17.2% 17.2%

KPIT Tech 149 -2.3% 5.5% 8.3% Sonata* 41 4.3% 9.1% 10.5% HGS 174 4.9% 9.7% 14.2%

Intellect 52 -3.4% 25.4% 25.1% Majesco 35 3.7% 11.1% 14.3% Tier-2 IT 2.5% 13.3% 15.0% IT sector Aggregate 2.2% 8.8% 8.7%

Source: Company, HDFC sec Inst Research, * IITS

TCS led the growth on 9M YoY basis supported by strong digital traction and BFSI revival

HCLT posted highest sequential increase supported by organic (IMS large deal ramp) and inorganic (~1%)

LTI’s growth traction driven by ramp up of 2 large deals won in 1Q-2Q

Organic growth of 3.6% and Graphene contribution of 1.2%

Zensar’s growth driven by sustained recovery in Cloud & Infra services (+16.9% QoQ, 17% of rev) and ramp-up in large deal wins

Intellect growth is driven by 79% YoY (9MFY19) rise in Licence revenue. Order book remains healthy at Rs 13.8bn

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IT Sector Margin Performance

Company Margin % 3QFY19 QoQ (bps)

3QFY19 YoY (bps)

9MFY19 YoY (bps)

TCS 27.0 (88) 19 110

INFY 25.3 (71) (179) (110)

Wipro 21.9 198 130 (50)

HCLT 23.2 (31) 9 86

TechM 19.3 50 300 363

Tier-1 IT 24.5 (22) 26 59

L&T Infotech 20.6 4 352 333

Mphasis 16.8 (61) 26 155

Hexaware 15.3 (142) (60) (66)

Mindtree 15.9 48 80 250

L&T Tech 18.4 28 303 256

Cyient 14.7 103 19 (43)

Tata Elxsi 25.4 (111) (167) 174

Persistent 19.7 252 234 224

eClerx 18.8 (459) (783) (706)

Zensar 10.8 (204) (261) 48

KPIT Tech 11.5 (208) 67 246

Sonata* 28.4 (217) 182 189

HGS 8.7 37 (300) (378)

Intellect 10.3 26 439 154

Majesco 11.0 9 648 903

Tier-2 IT 16.1 (1) 80 128

IT sector Aggregate 23.4 (19) 28 62 Source: Company, HDFC sec Inst Research, * IITS

Wipro’s margin expansion supported by operational benefits and lower G&A%

Services margin expanded 100bps to 16.3% and DLM margins expanded 30bps on client rationalisation

PSYS’ margin improvement on higher offshoring (large accounts), better mix (Appian, Salesforce), IP rev and utilisation

260bps Gross% decline on investments in onshore delivery and 200bps decline on higher SG&A% (including facility expansion in Pune)

Majesco’s margin expansion led by higher contribution from cloud subscription revenue (12% of rev, ~70% GM)

TechM’s margin has expanded 727bps for the last seven quarters led by operational efficiencies and higher utilisation

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Digital Revenue Performance

Company Digital revenue (USD mn) 3QFY19 QoQ (%) 4-qtr CQGR (%) YoY (%)

TCS 1,580 8.2% 10.6% 49.4%

INFY 941 3.9% 7.0% 30.9%

Wipro 679 6.0% 7.8% 35.0%

TechM 415 10.0% NA NA

LTI 128 5.6% 7.3% 32.5%

Mindtree 124 5.0% 7.3% 32.3%

Persistent 28 6.4% 0.7% 2.7%

Zensar 65 5.8% 8.0% 36.0%

Sonata* 14 5.0% 4.7% 20.1%

Source: Company, HDFC sec Inst Research, * IITS Legacy Revenue Performance

Company Legacy revenue (USD mn) 3QFY19 QoQ (%) 4-qtr CQGR (%) YoY (%)

TCS 3,670 -2.3% -0.4% -1.6%

INFY 2,046 1.5% 0.1% 0.5%

Wipro 1,367 -2.4% -2.5% -9.5%

TechM 845 0.6% NA NA

LTI 219 5.6% 2.7% 11.1%

Mindtree 127 -0.7% 1.4% 5.6%

Persistent 93 1.0% -0.6% -2.5%

Zensar 79 2.7% 1.3% 5.4%

Sonata* 26 1.2% 0.3% 1.1% Source: Company, HDFC sec Inst Research, * IITS

TCS’ scale and growth leadership in Digital

Wipro’s growth in digital driven by BFSI and Retail & CPG verticals with pricing premium

Wipro witnessing maximum compression in legacy vs. peers

Enterprise-led growth in Digital for TechM

Zensar’s legacy drop has stabilised supported by IMS

IT : SECTOR UPDATE

Page | 14

Headcount & Productivity

Companies Total Headcount (Nos) Headcount Growth Revenue/employee

3QFY19 QoQ (%)

3QFY19 YoY (%)

3QFY19 QoQ (%)

3QFY19 YoY (%)

TCS 417,929 1.7% 6.9% -1.0% 2.6%

INFY 225,501 3.6% 11.8% -1.3% -3.0%

Wipro 172,379 0.5% 8.5% -0.3% -6.3%

HCLT 134,290 1.7% 12.6% 3.2% -1.6%

TechM 121,842 2.9% 5.7% 0.6% -1.4%

LTI 27,513 4.2% 17.6% 1.4% 0.5%

Mphasis 24,215 3.1% 8.7% -0.6% 3.3%

Hexaware 16,205 1.0% 18.2% 2.0% -4.6%

Mindtree 19,908 2.6% 15.7% -0.5% 1.4%

L&T Tech 14,777 8.8% 23.8% -3.6% -0.6%

Cyient 15,193 1.0% 5.1% -3.2% 3.4%

Persistent 9,530 2.5% 4.6% -0.2% -5.7%

eClerx 9,520 -0.7% 4.7% 1.1% -2.0%

Zensar 9,813 3.5% 14.1% 0.5% 2.7%

KPIT Tech 13,584 3.2% 11.2% -5.3% -5.1%

Sonata* 3,812 3.6% 15.7% 0.7% -5.7% Source: Company, HDFC sec Inst Research, * IITS

Growth leadership in revenue productivity based on increase in product & platform (Mode-3) share

INFY posted strongest growth in headcount addition with 18.7k Gross adds and 7.7k Net adds in 3Q

IT : SECTOR UPDATE

Page | 15

IT Sector: Actual Vs Estimates in 3QFY19 Company

Estimates Actuals Variance (%)

Revenue EBITDA% APAT Revenue EBITDA% APAT Revenue EBITDA (bps) APAT

TCS 5,287 27.0 81.38 5,250 27.0 81.21 (0.7) (0) (0.2)

Infosys 2,946 26.0 40.38 2,987 25.3 39.26 1.4 (74) (2.8)

Wipro 2,060 19.8 23.00 2,047 21.9 25.10 (0.7) 202 9.1

HCLT 2,183 23.9 25.87 2,201 23.2 26.11 0.8 (65) 0.9

Tech M. 1,244 19.0 10.94 1,261 19.2 12.03 1.4 19 10.0

L&T Infotech 341 20.0 3.46 347 20.6 3.76 1.8 67 8.5

Mphasis 281 16.7 2.50 283 16.8 2.78 0.7 0 11.2

Mindtree 252 15.6 1.88 251 15.6 1.62 (0.6) 2 (13.7)

Hexaware 177 15.9 1.62 176 15.2 1.23 (0.7) (71) (23.8)

L&T Tech 185 18.2 1.78 186 18.2 1.86 0.8 (3) 4.6

Cyient 168 14.1 1.22 165 15.1 0.92 (1.9) 99 (24.3)

Persistent 121 17.0 0.90 121 19.8 0.92 0.0 276 1.9

Zensar 140 13.7 0.90 144 10.6 0.55 2.5 (310) (38.6)

eClerx 51 25.5 0.71 50 19.4 0.39 (1.8) (601) (44.5)

Sonata* 40 10.3 0.64 41 11.8 0.52 2.3 152 (18.6)

Intellect 52 9.5 0.24 52 10.8 0.13 (0.6) 126 (44.3)

HGS 165 7.1 0.38 165 6.7 0.37 5.0 161 (3.3)

Majesco 35 11.8 0.22 35 12.0 0.18 (0.9) 19 (18.4)

IT Aggregate 15,730 23.2 198.02 15,770 23.4 198.96 0.2 14 0.5

Tier-1 IT 13,721 24.5 181.57 13,746 24.5 183.71 0.2 6 1.2

Tier-2 IT 2,009 15.5 16.45 2,024 15.6 15.24 0.7 12 (7.3)

Source: Company, HDFC sec Inst Research, * IITS

E&U, Manufacturing & BFSI verticals led growth

Wipro’s margin expansion was led by portfolio rationalisation, higher utilisation and lower G&A cost

Zensar’s margin impacted on cost related to large deal transition and higher sub-contracting

Sonata’s IITS business margin expansion led by up-tick in IP-led business and operational efficiencies

APAT miss largely on forex loss

IT : SECTOR UPDATE

Page | 16

Verticals Performance Dashboard TCS (3QFY19) % of Rev 9MFY19

YoY% 4Qtr CQGR USD mn

BFSI 30.8% 5.8% 1.7% 1,617 Regional Markets & Others 18.7% 14.5% 4.2% 982 Retail & CPG 16.5% 12.4% 2.0% 866 Life Sciences & Healthcare 7.6% 14.0% 3.4% 399 Technology & Services 7.6% 5.6% 1.3% 399 Manufacturing 7.2% 6.9% 1.3% 378 Communication & Media 6.9% 7.8% 1.6% 362 Energy & Utilities 4.7% 22.3% 3.5% 247 Total 100.0% 9.9% 2.3% 5,250

Infosys (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Financial services 32.5% 4.8% 1.8% 971 Retail 16.4% 10.4% 2.3% 490 ENU 12.8% 15.1% 3.7% 382 Communication 11.9% 5.8% 0.9% 355 Manufacturing 10.1% 11.5% 3.5% 302 Hi Tech 7.3% 10.0% 2.4% 218 Life Sciences 6.2% 3.3% 0.6% 185 Others 2.8% -9.7% -1.4% 84 Total 100.0% 7.5% 2.0% 2,987

Wipro (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

BFSI 31.4% 14.3% 3.6% 643 Consumer Business Unit 15.6% 6.1% 1.7% 319 Health Business Unit 13.1% -5.9% -1.3% 268 ENU and Utilities 13.0% -0.2% 1.5% 266 Technology 13.0% 0.4% -1.5% 266 Manufacturing 8.1% -4.8% -1.2% 166 Communications 5.8% -11.0% -1.9% 119 Total 100.0% 2.9% 0.9% 2,047

HCLT (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Manufacturing 36.3% 14.3% 3.6% 799 BFSI 21.6% 6.1% 1.7% 476 Life Sciences and Healthcare 13.0% -5.9% -1.3% 286 Public Services 9.7% -0.2% 1.5% 214 TME 9.2% 0.4% -1.5% 203 Retail & CPG 10.2% -4.8% -1.2% 225 Total 100.0% 2.9% 0.9% 2,201

Tech Mahindra (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Telecom (A) 41.1% -2.5% 0.0% 518 Enterprise (B) 58.9% 10.9% 1.8% 743 Manufacturing (B1) 20.5% 11.1% 2.9% 258 TME (B2) 7.0% 1.8% 1.2% 88 BFSI(B3) 13.4% 26.6% 1.3% 169 Retail, Transport & Logistics (B4) 6.7% -4.0% -0.4% 84 Others (B5) 11.3% 22.6% 2.9% 142 Total (A+B) 100.0% 5.0% 1.1% 1,261

LTI (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

BFS 29.2% 34.0% 6.2% 101 Insurance 17.9% 7.7% 2.1% 62 Manufacturing 15.7% 13.4% 1.8% 54 Energy & Utilities 10.9% 7.7% 2.0% 38 CPG, Retail & Pharma 10.6% 35.4% 8.0% 37 Hi-Tech, Media & Ent 11.3% 27.1% 5.9% 39 Others 4.6% 20.3% 4.3% 16 Total 100.0% 20.9% 4.3% 347

IT : SECTOR UPDATE

Page | 17

Mphasis (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

HP channel 29.0% 24.0% 5.8% 82

Direct International 67.4% 10.9% 1.9% 190

Others 3.6% 5.8% 2.1% 10

Total 100.0% 14.1% 3.0% 283

Hexaware (4QCY18) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

BFS 42.1% 8.2% 1.7% 74 Manufacturing, Consumer 29.0% 17.9% 5.0% 51 Insurance and Healthcare 19.1% 25.4% 6.6% 34 Travel & Transportation 9.9% -9.1% -1.8% 17 Total 100.0% 11.4% 3.1% 176

Mindtree (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Manufacturing, CPG & Retail 22.3% 15.2% 2.9% 56

BFSI 21.7% 6.0% 0.7% 55

Technology, Media and Services 39.4% 25.1% 6.0% 99

Travel & Transportation 16.7% 32.4% 6.4% 42

Total 100.0% 19.1% 4.1% 251

LTTS (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Transportation 31.7% 24.7% 6.0% 59 Industrial Products 20.2% 10.3% 3.3% 38 Telecom & Hi-tech 27.0% 43.6% 4.5% 50 Process Industry 14.4% 36.4% 8.7% 27 Medical Devices 6.7% 21.8% 5.3% 12 Total 100% 27% 5.3% 186

Cyient (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Aerospace and Defense 34.3% 6.2% 0.5% 50 Communications 23.4% 24.2% 1.6% 34 Utilities & Geospatial 15.0% 7.9% -1.7% 22 Transportation 12.0% 31.3% 1.5% 17 Industrial, Energy & Natural Resources 8.6% 3.0% 0.8% 12

Semiconductor 4.7% 10.6% 7.0% 7 Medical and Consumer Electronics 2.0% 20.2% 0.8% 3 Total 100.0% 12.9% 0.8% 145

Persistent (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Services 41.9% -0.3% -0.3% 51 Digital 22.9% 11.3% 0.7% 28 Alliance 29.4% 8.5% -0.5% 36 Accelerite 5.8% -26.8% -3.1% 7 Total 100.0% 2.6% -0.3% 121

Sonata (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

OPD 27.0% 5.5% 1.3% 11 TTL 28.0% 11.9% 2.2% 11 CPG & Retail 26.0% 10.2% 1.2% 11 Others 19.0% 16.8% 5.1% 8 Total 100.0% 10.5% 2.2% 41

Majesco (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Property & Casualty 67.4% 3.2% -0.1% 24 Life & Annuity 31.8% 62.1% 5.4% 11 Non-Insurance 0.8% -39.8% -2.5% 0 Total 100.0% 14.4% 1.4% 35

Zensar (3QFY19) % of Rev 9MFY19 YoY% 4Qtr CQGR USD mn

Manufacturing (A+B) 51% 15.7% 3.7% 73 Hi Tech (A) 38% 24.9% 6.8% 54 Mfg (B) 13% -3.4% -3.1% 19 Retail and Consumer Services 21% -2.0% -2.2% 30 Financial Services (C+D) 24% 35.8% 8.3% 35 Insurance ( C) 19% 49.1% 9.7% 27 Banking (D) 5% 0.3% 3.8% 8 Emerging (E) 4% 236.9% 48.5% 6 Total (A+B+C+D+E) 100% 17.2% 4.0% 114

IT : SECTOR UPDATE

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Services Performance Dashboard Infosys (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

Services (A) 94.5% 7.7% 2.0% 2,823 Digital (A1) 29.3% 30.0% 7.0% 875 Core (A2) 65.2% 0.3% 0.1% 1,948 Products & platforms (B) 5.5% 3.5% 2.5% 164 Digital (B1) 2.2% 29.0% 5.9% 66 Core (B2) 3.3% -8.1% 0.6% 99 Total Revenue (A+B) 100.0% 7.4% 2.0% 2,987 Digital (A1+B1) 31.5% 29.9% 7.0% 941 Core (A2+B2) 68.5% -0.1% 0.1% 2,046

Tech Mahindra (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

IT Services 91.7% 4.1% 0.9% 1,154 BPO 8.3% 15.9% 2.2% 105 Total 100.0% 5.0% 1.0% 1,260

Mphasis (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

Application Maintenance 35.8% 11.2% 5.0% 101 Application Development 29.8% 29.4% 6.2% 84 IMS 12.7% 17.7% 1.9% 36 Knowledge Processes 7.4% -7.1% -6.4% 21 Service / Technical Help Desk 6.7% 20.5% -0.1% 19 Transaction Processing Service 6.2% 4.6% -0.1% 18 Customer Service 1.1% -17.1% -3.4% 3 License Income 0.2% -36.4% -18.1% 1 Total 100.0% 14.1% 3.0% 283

Wipro (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

Modern Application Services (ADM) 45.6% 3.4% 3.6% 933 Cloud and Infrastructure Services (IMS) 25.0% -3.2% 1.7% 512 Digital Operations and Platforms (BPO) 14.7% 9.5% -1.3% 301 Data, Analytics and AI 7.6% 7.7% 1.5% 156 Industrial & Engineering Services (ER&D) 7.1% 6.2% -1.5% 145 Total 100.0% 2.9% 0.9% 2,047

HCLT (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

IMS 37.5% 5.7% 3.1% 825 Application Services 32.1% 0.9% 0.1% 706 ER&D Services 25.5% 22.1% 3.9% 561 BPO 5.0% 57.1% 10.4% 109 Total 100.0% 9.6% 2.6% 2,201

LTI (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

ADM 30.9% 12.4% 2.1% 107 Enterprise Solutions 27.9% 30.6% 5.7% 97 IMS 11.4% 23.5% 5.7% 40 Analytics, AI & Cognitive 11.3% 30.2% 5.5% 39 Testing 7.8% 10.0% 2.7% 27 Enterprise Integration & Mobility 7.6% 34.4% 7.6% 26 Platform Based Solutions 3.2% 3.3% 2.0% 11 Total 100.0% 20.9% 4.3% 347

IT : SECTOR UPDATE

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Hexaware (4QCY18) % of Rev 9MCY19 YoY%

4Qtr CQGR USD mn

ADM 35.1% 9.0% 1.6% 62 Quality Assurance and Testing 17.5% 0.8% 0.3% 31 BI & Analytics 17.5% 51.0% 14.0% 31 Enterprise Solutions 13.1% 10.0% 1.7% 23 RIMS 9.5% -1.9% -0.2% 17 BPO 7.3% 13.5% 4.1% 13 Total 100.0% 11.4% 3.1% 176

Cyient (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

Services 87.5% 7.4% 0.8% 145 DLM 12.5% 54.5% 14.1% 21 Total 100.0% 11.7% 2.1% 165

Majesco (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

Cloud 41.7% 52.3% 10.9% 15 Professional Services 35.3% -16.4% -6.7% 12 Support 20.0% 43.8% 11.4% 7 License 2.9% 66.2% 4.4% 1 Total 100.0% 14.4% 2.7% 35

Sonata (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

ADM 25.0% 21.6% 4.4% 10 AX 20.0% 14.1% 2.2% 8 Testing 17.0% 0.7% -0.6% 7 IMS 16.0% 4.2% 0.7% 7 BI 8.0% 15.4% 2.2% 3 E-commerce 6.0% 31.0% 7.0% 2 ERP 4.0% -4.9% 2.2% 2 Rezopia/Mobility/Cloud 4.0% -12.8% 2.2% 2 Total 100.0% 10.5% 2.2% 41

Mindtree (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

ADM 50.7% 19.8% 4.4% 128 IMS 23.4% 27.9% 6.9% 59 Independent Testing 12.8% 27.3% 4.5% 32 Package Implementation 9.0% -0.4% -1.6% 23 Consulting 3.2% 1.3% -1.4% 8 IP Led Revenue 0.8% -11.4% 2.1% 2 Total 100.0% 19.1% 4.1% 251

Zensar (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

Digital & Application Services (DAS) (A+B) 83% 19.8% 4.1% 119

Digital Services (A) 40% 33.6% 7.3% 57

Core Application Services (B) 43% 9.9% 1.5% 62 Cloud and Infrastructure Services (CIS) (C+D+E) 17% 5.5% 4.0% 25

Third Party Maintenance (MVS) ( C ) 5% 2.3% -0.6% 6

IMS Services (D+E) 13% 7.1% 5.9% 18

Cloud, Digital Led next gen CIS (D) 5% 93.7% 14.2% 7

Core Infrastructure Services (E) 7% -22.6% 1.6% 11

Total (CIS+DAS) 100% 17.3% 4.0% 144

Persistent (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

ISV 39.8% 1.7% 0.5% 48 Enterprise 35.2% 5.6% 0.0% 43 IP driven 25.0% -0.1% -2.1% 30 Total 100.0% 2.5% -0.4% 121

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Geography Performance Dashboard TCS (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

Americas 53.2% 7.4% 1.9% 2,793 North America 51.2% 7.7% 1.9% 2,688 Latin America 2.0% -0.2% -0.1% 105 Europe 29.6% 19.7% 4.1% 1,554 UK 15.5% 21.9% 4.8% 814 Continental Europe 14.1% 17.4% 3.5% 740 India 5.7% -4.0% -0.2% 299 Asia-Pacific 9.4% 9.1% 2.1% 494 Middle East and Africa 2.1% -3.6% -1.0% 110 Total 100% 9.9% 2.3% 5250

Infosys (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

North America 60.4% 6.6% 2.0% 1,804 Europe 24.2% 11.2% 1.8% 723 India 2.6% -16.3% -1.5% 78 Rest of the World 12.8% 10.6% 3.3% 382 Total 100.0% 7.4% 2.0% 2,987

Tech Mahindra (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

Americas 47.4% 7.7% 1.3% 598 Europe 28.9% 3.7% 0.3% 364 Rest of the World 23.7% 1.4% 1.5% 299 Total 100.0% 5.0% 1.1% 1,261

Mphasis (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

Americas 78.3% 13.0% 2.3% 221 EMEA 11.2% 31.6% 6.6% 32 India 5.6% 4.9% -0.4% 16 RoW 4.9% 8.5% 10.9% 14 Total 100.0% 14.1% 3.0% 283

Hexaware (4QCY18) % of Rev 9MCY19 YoY%

4Qtr CQGR USD mn

Americas 76.9% 8.5% 2.8% 135 Europe 13.0% 25.5% 4.9% 23 Asia-Pacific 10.1% 18.9% 2.8% 18 Total 100.0% 11.4% 3.1% 176

Mindtree (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

US 73.4% 26.6% 5.4% 185 Europe 18.7% 5.7% 1.3% 47 India 3.6% 23.4% 7.5% 9 Rest of the World 4.2% -18.4% -5.5% 11 Total 100.0% 19.1% 4.1% 251

Wipro (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

Americas 57.1% 5.8% 2.3% 1,169 Europe 25.5% 3.5% 0.0% 522 APAC & Other Emerging Markets 17.4% -6.3% -1.8% 356 Total 100.0% 2.9% 0.9% 2,047

HCLT (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

Americas 64.5% 13.1% 3.0% 1,419 Europe 28.3% 6.9% 2.2% 622 Rest of the World 7.3% -7.0% 0.6% 161 Total 100.0% 9.6% 2.6% 2,201

LTI (3QFY19) % of Rev 9MFY19

YoY% 4Qtr

CQGR USD mn

North America 66.8% 17.7% 4.1% 232 Europe 16.7% 17.0% 2.3% 58 RoW 8.8% 68.8% 12.9% 31 India 7.8% 18.3% 2.4% 27 Total 100.0% 20.9% 4.3% 347

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LTTS (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

North America 57.8% 19.2% 4.9% 107 Europe 16.2% 30.9% 3.7% 30 India 14.4% 59.2% 11.4% 27 Rest of the World 11.6% 35.6% 3.2% 22 Total 100.0% 27.2% 5.3% 186

Persistent (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

North Americas 83.7% -0.4% -0.6% 101 Europe 7.6% 28.2% 0.7% 9 RoW 8.7% 10.3% 0.8% 11 Total 100.0% 2.6% -0.3% 121

Zensar (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

North Americas 76% 19.8% 5.0% 109 Europe 14% 19.6% 5.6% 21 Africa 8% 9.9% 0.3% 12 RoW 1% -27.8% -17.8% 2 Total 100.0% 17.2% 4.0% 144

Majesco (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

North America 83% 11.6% 1.2% 29 UK 10% 48.9% 23.5% 3 Others 8% 25.2% 2.7% 3 RoW 100.0% 14.4% 2.7% 35

Cyient (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

North America 58.2% 10.5% 2.2% 84

Europe, ME, Africa 24.1% 2.8% -2.6% 35

Asia Pacific 17.7% 5.2% 1.6% 26

Total 100.0% 7.4% 0.8% 145

Eclerx (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

North America 64.3% -0.8% 0.5% 32 Europe 28.9% 6.9% 1.6% 15 RoW 6.8% 14.5% -1.6% 3 Total 100.0% 2.3% 0.7% 50

Sonata (3QFY19) % of Rev 9MFY19 YoY%

4Qtr CQGR USD mn

USA 56% 8.0% 0.9% 23 Europe 32% 25.7% 6.6% 13 RoW 12% -7.8% -1.7% 5 RoW 100.0% 10.5% 2.2% 41

IT : SECTOR UPDATE

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TCS' Deal Bookings (TCV) Has Improved Significantly TCS vs. Accenture Outsourcing Deal Bookings

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Significant Acceleration In Infosys’ Large Deal Wins Mindtree Total TCV Trend

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

TCS has gained market share vs. Accenture in deal bookings INFY posted record wins by large deal TCV in 2Q-3Q

4.9 4.9

5.9

80%

85%

90%

95%

100%

105%

110%

115%

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

1QFY19 2QFY19 3QFY19

TCS' Deal Bookings (TCV) % of Revenue - RHSUSD bn

5.8 4.7 4.3

4.9 4.9 5.9

-

2.0

4.0

6.0

8.0

10.0

12.0

1QFY19 2QFY19 3QFY19

Accenture Outsourcing TCV TCS TCV WinsUSD bn

3.9 3.5

3.1

4.7

-0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

FY16 FY17 FY18 9MFY19

USD bn

605

717 713

833

106%

108%

110%

112%

114%

116%

118%

120%

122%

124%

400

500

600

700

800

900

9MFY16 9MFY17 9MFY18 9MFY19

Mindtree's Deal Bookings (TCV) % of Revenue - RHSUSD mn

IT : SECTOR UPDATE

Page | 23

Hexaware Net New Deal Wins Trend Global ACV Has Grown At A 8-Qtr CQGR of 3.7%

Source: Company, HDFC sec Inst Research Source: ISG, HDFC sec Inst Research

IT Sector QoQ USD Revenue Growth Trend, Strong Performance in Seasonally Weak Qtr

IT Sector YoY USD Revenue Growth Trend, Healthy Deal Wins Provides Growth Visibility

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Hexaware booked its largest net-new win with TCV >USD 100mn in Nordics IT sector revenue grew at its fastest 3Q sequential rate in five years at 2.2%

120 153 178 210

24.7%

29.1% 29.3%31.0%

15%

17%

19%

21%

23%

25%

27%

29%

31%

33%

50

70

90

110

130

150

170

190

210

230

CY15 CY16 CY17 CY18

Hexaware's net-new Deal Bookings (TCV)% of Total Revenue - RHS

USD mn

9.2 9.310.6

9.6 9.9 10.411.3

12.511.7 12.3

-15%-10%-5%0%5%10%15%20%25%30%35%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

3QCY

16

4QCY

16

1QCY

17

2QCY

17

3QCY

17

4QCY

17

1QCY

18

2QCY

18

3QCY

18

4QCY

18

Global ACV (USD bn) YoY % - RHSUSD bn

1.4%

0.3%

1.8%

2.4%

3.1%

1.7%

3.2%

0.8%

2.4%2.2%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

6.6% 6.6% 6.8%6.1%

7.8%

9.2%

10.7%

9.0%8.3%

8.8%

3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0%11.0%12.0%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

IT : SECTOR UPDATE

Page | 24

USD Revenue Growth Trend Tier-1 IT QoQ USD Revenue Growth Trend Tier-2 IT YoY

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Tier-2 IT QoQ USD Revenue Growth Trend Tier-2 IT YoY USD Revenue Growth Trend

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Tier-1 IT grew 2.1/8.1% QoQ/YoY and tier-2 IT posted 2.5/13.3% QoQ/YoY in 3Q

1.4%

0.3%

1.9%

2.3%

2.8%

1.3%

2.9%

0.5%

2.4%2.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

6.7% 6.7% 7.0%

5.9%

7.5%

8.6%

9.7%

7.8%7.3%

8.1%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

2.0%

0.8%1.5%

3.0%

4.6%

3.7%

5.0%

2.7% 2.5% 2.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

5.9% 5.8% 5.6%

7.4%

10.2%

13.4%

17.4% 17.1%

14.7%13.3%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

IT : SECTOR UPDATE

Page | 25

IT Sector Margin Trend (%) EBITDA Margin Performance in 3QFY19 (QoQ bps)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

IT Sector Margin Performance Trend (QoQ bps) IT Sector Margin Performance Trend (YoY bps)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Margins were flat sequentially at -19bps QoQ despite headwinds of cross currency and weak seasonality Persistent and Wipro outperformed on margins, while eClerx, KPIT and Zensar lagged in operational performance

23.1 23.3 22.7

21.7 22.7 23.1 22.8 22.4

23.6 23.4

15.0

17.0

19.0

21.0

23.0

25.0

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

%

38 22

(56)

(100)

96

40

(28) (41)

117

(19)

(150)

(100)

(50)

-

50

100

150

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

bps

(91)

(35)

(89) (95)

(37)(19)

8

67 87

28

(150)

(100)

(50)

-

50

100

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

bps

(459

)

(208

)

(204

)

(142

) (88) (71)

(61) (3

1)

4 28

48

50 10

3 198 25

2

(500)(400)(300)(200)(100)

-100 200 300

eCle

rx

KPIT

Zens

ar

Hex

awar

e

TCS

INFY

Mph

asis

HCL

T LTI

LTTS

Min

dtre

e

Tech

M

Cyie

nt

Wip

ro

Pers

iste

nt

IT : SECTOR UPDATE

Page | 26

INR Depreciation In Last Four Quarters Has Supported Margins

Tier-1 IT 4-Qtr CQGR In Europe, TCS Outperforms While Wipro And TechM Lags

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Tier-2 IT Europe Performance (4-Qtr CQGR), Hexaware and Mphasis Has Outperformed

Europe Revenue Mix (%)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

TCS, Mphasis and Hexaware outperformed in Europe geo growth Tier-2 IT relatively insulated from Brexit repercussions based on lower concentration from Europe geo

67.0 67.5 66.9

64.5 64.3 64.7 64.3

67.0

70.0

72.1

-5%-4%-3%-2%-1%0%1%2%3%4%5%

60.0

62.0

64.0

66.0

68.0

70.0

72.0

74.0

2QFY

17

3QFY

17

4QFY

17

1QFY

18

2QFY

18

3QFY

18

4QFY

18

1QFY

19

2QFY

19

3QFY

19

USD-INR QoQ % - RHSRs

0.0%

0.3%

1.8%2.2% 2.4%

4.1%

-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%

Wip

ro

Tech

M

INFY

HCL

T

Tier

-1 A

gg TCS

0.7%1.3% 1.6%

2.3% 2.7%3.6% 3.7%

4.9%

6.6%

8.8%

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

10.0%

Pers

iste

nt

Min

dtre

e

eCle

rx LTI

Cyie

nt

Tier

-2 IT

Agg

LTTS

Hex

awar

e

Mph

asis

KPIT

8%

11%

13% 16

%

17% 19

% 24% 26%

26% 28

%

29%

29%

30%

39%

0%5%

10%15%20%25%30%35%40%45%

Pers

iste

nt

Mph

asis

Hex

awar

e

LTTS LT

I

Min

dtre

e

INFY

Wip

ro

KPIT

HCL

T

Tech

M

eCle

rx

TCS

Cyie

nt

IT : SECTOR UPDATE

Page | 27

NorthAm Rev Mix (%) Tier-1 IT NorthAm Geography 4-Qtr CQGR (%)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Tier-2 IT NorthAm Revenue Performance (4-Qtr CQGR)

IT Sector NorthAm Performance (9MFY19 YoY %)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

HCLT has outperformed growth in NorthAm geo vs. peers Among tier-2 IT, Mindtree and Zensar have outperformed growth in NorthAm geo

47.4

%53

.2%

56.0

%57

.1%

57.8

%58

.2%

60.4

%64

.3%

64.5

%66

.8%

73.4

%76

.0%

76.9

%78

.3%

82.6

%83

.7%

0%10%20%30%40%50%60%70%80%90%

Tech

MTC

SSo

nata

Wip

roLT

TSCy

ient

Info

sys

Ecle

rxH

CL T LTI

Min

dtre

eZe

nsar

Hex

awar

eM

phas

isM

ajes

coPe

rsis

tent

1.3%

1.9% 2.0% 2.

0% 2.1%

3.0%

0%

1%

1%

2%

2%

3%

3%

4%

Tech

M

TCS

Wip

ro

Info

sys

Tier

-1 IT

HCL

T

-0.6

%

0.5% 0.

9% 1.2%

2.2% 2.3% 2.

8%

4.1%

4.9% 5.0% 5.

4%

-1%

0%

1%

2%

3%

4%

5%

6%

Pers

iste

nt

Ecle

rx

Sona

ta

Maj

esco

Cyie

nt

Mph

asis

Hex

awar

e

LTI

LTTS

Zens

ar

Min

dtre

e

-0.8

%-0

.4%

5.8% 6.

6% 7.4% 7.7%

8.0% 8.5% 10

.5%

11.6

%13

.0%

13.1

% 17.7

%19

.2%

19.8

%26

.6%

-5%

0%

5%

10%

15%

20%

25%

30%

Ecle

rxPe

rsis

tent

Wip

roIn

fosy

sTC

STe

chM

Sona

taH

exaw

are

Cyie

ntM

ajes

coM

phas

isH

CL T LT

ILT

TSZe

nsar

Min

dtre

e

IT : SECTOR UPDATE

Page | 28

Tier-1 IT BFSI 4-Qtr CQGR (%), Wipro Is leading vs Peers

Top-10 Client 4-Qtr CQGR, Wipro & Mphasis Are Outperformers

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Tier-1 IT USD 100mn+ Client Metrics USD 100mn+ Client Nos. Growth (4-Qtr CQGR %)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Significant outperformance of Wipro vs. peers in BFSI vertical TCS and INFY posted strongest increase in >USD 100mn client bucket over the past year with TCS and INFY adding 11 and 3 accounts to >USD 100mn as compared to 1 each for Wipro/HCLT

-0.7

% 0.4%

1.2% 1.3% 1.

6% 1.7%

3.4%

-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

HCL

T

CTSH

Tech

M

Tier

-1 A

gg

INFY TC

S

Wip

ro

-1.0

%

-0.7

%

-0.2

% 0.5%

2.0% 2.

4% 2.6% 2.

9% 3.0%

3.8% 4.

3% 4.8%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Cyie

nt

Pers

iste

nt

Tech

M

eCle

rx

INFY

Hex

awar

e

HCL

T

Wip

ro LTI

LTTS

Min

dtre

e

Mph

asis

37 38 40 44 45

20 20 24 23 23 9 8

8 9 10 9 8 9 9 10

-10 20 30 40 50 60 70 80 90

100

3QFY18 4QFY18 1QFY19 2QFY19 3QFY19

TCS INFY Wipro HCLTNos

5.0%

3.6%

2.7% 2.7%

4.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

TCS

INFY

Wip

ro

HCL

T

Aggr

egat

e

IT : SECTOR UPDATE

Page | 29

Tier-1 IT USD 10mn+ Client Metrics USD 10mn+ Client Nos. Growth (4-Qtr CQGR %)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

IMS 4-Qtr CQGR Performance ER&D 4-Qtr CQGR Performance

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Strong shift from >USD 50mn bucket to higher bucket Hexaware and Mindtree led growth in IMS, HCLT's IMS has rebounded supported by large deals KPIT and LTTS led growth in ER&D, HCLT led growth in tier-1 supported by its Mode-3 business

337 350 355 365 370

198 198 200 205 214

167 171 171 177 171 156 160 162 165 164 83 85 86 86 88

-

200

400

600

800

1,000

3QFY18 4QFY18 1QFY19 2QFY19 3QFY19

TCS INFY Wipro HCLT TechMNos2.4%

2.0%

0.6%

1.3%1.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

TCS

INFY

Wip

ro

HCL

T

Tech

M

-1.3% 1.9%3.1%

5.7%6.9%

14.0%

-4%-2%0%2%4%6%8%

10%12%14%16%

Wip

ro

Mph

asis

HCL

T LTI

Min

dtre

e

Hex

awar

e

0.8%1.3%

2.2%

3.4%3.9%

5.3%

7.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Cyie

nt

Wip

ro

Tata

Elx

si

Aggr

egat

e

HCL

T

LTTS

KPIT

IT : SECTOR UPDATE

Page | 30

Retail & CPG Vertical 4-Qtr CQGR (%) Energy & Utilities Vertical 4-Qtr CQGR (%)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

TCS, INFY outperformance in E&U vertical, HCLT outperformed in Retail & CPG

-0.4%

1.7%2.0% 2.3%

2.9%

4.2%

-1%

0%

1%

2%

3%

4%

5%

Tech

M

Wip

ro

TCS

INFY

Min

dtre

e

HCL

T

1.3%1.5%

2.0%

3.5%3.7%

0%

1%

1%

2%

2%

3%

3%

4%

4%

HCL

T

Wip

ro LTI

TCS

INFY

IT : SECTOR UPDATE

Page | 31

Valuation Charts NIFTY IT Index Valuation Trend (P/E 1-yr fwd) IT Index Valuation Trend vs NIFTY

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research

IT Index Valuation and Earnings Growth Trend Indian IT Valuations Trend vs. Accenture (P/E 1-yr fwd)

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research

5

10

15

20

25

Feb-

09

Feb-

10

Feb-

11

Feb-

12

Feb-

13

Feb-

14

Feb-

15

Feb-

16

Feb-

17

Feb-

18

NIFTY IT Index Median+1 SD -1 SD

-30%-20%-10%0%10%20%30%40%50%

0

5

10

15

20

25

Feb-

09Se

p-09

Apr-

10No

v-10

Jun-

11Ja

n-12

Aug-

12M

ar-1

3O

ct-1

3M

ay-1

4De

c-14

Jul- 1

5Fe

b-16

Sep-

16Ap

r -17

Nov-

17Ju

n-18

Jan-

19

(P/E) Prem/ (Disc) to NIFTY IT Index P/E

-10%

0%

10%

20%

30%

40%

50%

5

10

15

20

25

Feb-

10Au

g-10

Feb-

11Au

g-11

Feb-

12Au

g-12

Feb-

13Au

g-13

Feb-

14Au

g-14

Feb-

15Au

g-15

Feb-

16Au

g -16

Feb-

17Au

g-17

Feb-

18Au

g-18

Feb-

19

(P/E)

IT Index EPS Growth (%) IT Index P/E (x)AVG P/E (x) AVG EPS growth (%)

5

10

15

20

25

Feb-

09

Sep-

09

Apr-

10

Nov

-10

Jun-

11

Jan-

12

Aug-

12

Mar

-13

Oct

-13

May

-14

Dec

-14

Jul-1

5

Feb-

16

Sep -

16

Apr-

17

Nov

-17

Jun-

18

Jan-

19

IT Index Accenture

IT index valuations currently at ~3% premium to NIFTY vs. historical premium of ~8% IT Index has de-rated by ~8% from the Sep-18 highs and trades at its 5-yr avg. valuations (16.5x)

IT : SECTOR UPDATE

Page | 32

IT Sector EV/EBITDA (x) Trend IT Sector P/B (x) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research TCS P/E (1-yr fwd) Trend Infosys P/E (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research

Continuity in double-digit growth to support TCS’ premium valuations TCS off 15% from peak valuations vs. INFY off 5% from peak valuations, both at ~10% above historical valuations

5

7

9

11

13

15

Feb-

09

Feb-

10

Feb-

11

Feb-

12

Feb-

13

Feb-

14

Feb-

15

Feb-

16

Feb-

17

Feb-

18

Feb-

19

EV/EBITDA (1Yr Fwd) AVG

2

3

4

5

6

Feb-

09

Feb-

10

Feb-

11

Feb-

12

Feb-

13

Feb-

14

Feb-

15

Feb-

16

Feb-

17

Feb-

18

Feb-

19

P/B (1Yr Fwd) AVG

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

15

17

19

21

23

25

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

350 400 450 500 550 600 650 700 750 800

12

13

14

15

16

17

18

19

20

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E )P/E (1-yr fwd) AVG P/E (x) Price

IT : SECTOR UPDATE

Page | 33

Wipro P/E (1-yr fwd) Trend HCL Tech P/E (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research Tech Mahindra P/E (1-yr fwd) Trend L&T Infotech P/E (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research

Revival in HCLT’s organic growth expected to continue and support re-rating

200 220 240 260 280 300 320 340 360 380 400

11

12

13

14

15

16

17

18

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E) P/E (1-yr fwd) AVG P/E (x) Price

650 700 750 800 850 900 950 1,000 1,050 1,100 1,150

11

12

13

14

15

16

17

18

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

350 400 450 500 550 600 650 700 750 800 850

10111213141516171819

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

-

500

1,000

1,500

2,000

2,500

10

12

14

16

18

20

22

24

Jan-

17

Mar

-17

May

-17

Jul-1

7

Sep-

17

Nov

-17

Jan-

18

Mar

-18

May

-18

Jul-1

8

Sep-

18

Nov

-18

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

IT : SECTOR UPDATE

Page | 34

Mphasis P/E (1-yr fwd) Trend Mindtree P/E (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research L&T Technology P/E (1-yr fwd) Trend Hexaware P/E (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research

Mphasis’ outperformance expected to continue supported by growth visibility Recent correction in LTTS provides strong entry/accumulation opportunity, despite the OFS overhang

-

200

400

600

800

1,000

1,200

1,400

7

9

11

13

15

17

19

21

23

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

300 400 500 600 700 800 900 1,000 1,100 1,200 1,300

7

12

17

22

27

32

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

-200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

10121416182022242628

Jan-

17

Apr-

17

Jul-1

7

Oct

-17

Jan-

18

Apr-

18

Jul-1

8

Oct

-18

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

100 150 200 250 300 350 400 450 500 550

5

10

15

20

25

30

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

IT : SECTOR UPDATE

Page | 35

Cyient P/E (1-yr fwd) Trend Persistent P/E (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research eClerx P/E (1-yr fwd) Trend Zensar P/E (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research

300

400

500

600

700

800

900

1,000

7

12

17

22

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

400

500

600

700

800

900

9

11

13

15

17

19

21

23

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

700 800 900 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700

10

11

12

13

14

15

16

17

18

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

50

100

150

200

250

300

350

579

11131517192123

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

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Sonata P/E (1-yr fwd) Trend Intellect EV/Revenue (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research Majesco EV/Revenue (1-yr fwd) Trend

Source: Bloomberg, HDFC sec Inst Research

-50 100 150 200 250 300 350 400 450

02468

1012141618

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(P/E)P/E (1-yr fwd) AVG P/E (x) Price

-

50

100

150

200

250

300

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

(Rs)(EV/R)EV/Rev (1-yr fwd) AVG EV/Rev (x)

Price

-100 200 300 400 500 600 700 800

0.20.40.60.81.01.21.41.61.82.0

Jan-

16

Apr-

16

Jul-1

6

Oct

-16

Jan-

17

Apr-

17

Jul-1

7

Oct

-17

Jan-

18

Apr-

18

Jul-1

8

Oct

-18

Jan-

19

(Rs)(EV/R)

EV/Rev (1-yr fwd) AVG EV/Rev (x)Price

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Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12-month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12-month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12-month period Disclosure: We, Apurva Prasad, MBA, Amit Chandra, MBA & Akshay Ramnani, CA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. 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