- HCL's FY19 annual report highlighted a continued focus on inorganic growth to expand the product portfolio. This resulted in higher capital intensity and thus a reduction in the return ratios (RoCE down 750bp to 24.8% over FY15-19).

- Around 54% of operating cash flow (INR356.6b) over FY15-19 was utilized for capex (INR118.7b; mainly for acquisitions of IPRs) and business takeovers (INR72.5b), leading to high intangibles (INR85.3b, 20.6% of NW) and goodwill (INR90.6b, 21.9% of NW).

- HCL's estimate of useful life for amortization of IPRs (over 5-15 years) was higher than peers TCS (2-5 years) and IBM (over 1-5/7 years). While EBIDTA was up 23.8% to INR139.3b in FY19, its conversion to cash flows declined to 83% (FY18: 95%) as the cash conversion cycle elongated from 64 days in FY18 to 68 days in FY19.

- This was primarily due to a decline in advance from customers to 1 day (FY18: 5 days). A comparison of HCL with peers suggests that it has generated a higher RoE (26.0%) than Infosys (23.7%) and Wipro (17.2%) but lower than TCS (36.0%).

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