Financial Daily from THE HINDU group of publications
Wednesday, Oct 26, 2005
Corporate Results - Software
HCL Tech net up 68 pc; keeps growth forecast
Large deal strategy pays off; $50-m clients in fold
Mr Shiv Nadar (right), Chairman & CEO, HCL Technologies, and Mr Vineet Nayar, President, addressing a press conference in the Capital on Tuesday. - - Ramesh Sharma
New Delhi , Oct. 25
HCL Technologies on Tuesday posted a 68.3-per cent increase in net income, excluding `other income' at Rs 152.1 crore in the quarter ended September 30 from Rs 90.4 crore in the year-ago period. It has stuck to its strong growth forecast as it signed three new multi-year deals of over $50 million each.
The net income, including income from treasury operations, as per US GAAP, was up only 3.45 per cent to Rs 167.5 crore during the quarter compared to Rs 161.9 crore in the corresponding period previous year. Unrealised gains from treasury investments stood at about Rs 50.6 crore on September, and could not be recognised till redeemed.
Seen in dollar terms, the net income (excluding income from treasury operations) stood at $34.5 million, up 76.1 per cent from $19.62 million in the corresponding period previous year. The difference in the growth rates in rupee and dollar terms, is due to exchange rate fluctuation witnessed during the period.
During the quarter, gross revenues of HCL - which is pursuing a `large deal' strategy rose to Rs 970.7 crore against Rs 782 crore in the year-ago quarter. However, sequentially, the gross margin fell to 37.3 per cent from 37.9 per cent due to record staff additions. The company added 2,195 employees in July-September, its largest-ever staff addition in a quarter, taking the total employee strength to 26,285.
The company hopes the offshore utilisation would pick up as new orders start getting executed.
"Our transformation initiatives have reached an inflection point, and are beginning to show results with major client wins substantiating our growth strategy. We remain on track in meeting our goal to become a truly global technology and IT services company," Mr Shiv Nadar, Chairman and CEO of HCL Technologies, said at a conference.
The company stuck to its forecast announced in August.
Large deal strategy: During the quarter, HCL Tech clinched three multi-year contracts worth more than $50 million each, including one order worth over $100 million from a global telecom company for telecom support services. It also bagged a deal from a large global bank to help them in the process of application consolidation and application performance optimisation. The third win is from a global software product company which aims to bring transformation in infrastructure management, application consolidation operations and drive decisions on new technology adoption.
"We are trying to increase the size of large customers. Going forward, there will be reduction in number of customers we do business with," said Mr Vineet Nayar, President of HCL Technologies.
Segment-wise performance: The back office business grew 44 per cent year-on-year with improved profitability, and 900 people were added in the quarter.
It plans to add a record 1,500 people in the next quarter to BPO operations, ramping up business across India, Northern Ireland and Malaysia.
In dollar terms, revenues from infrastructure business grew 67.2 per cent, while revenues from software services rose 22.4 per cent.
"BPO business is showing a fairly strong momentum year-on-year, while the margins have risen sharply in infrastructure business. In software, the margins are stable to somewhat negative in the short-term, but we will be able to hold the margins for the full year," said Mr S.L. Narayanan, Corporate Vice-President Finance, HCL Technologies.
The board of directors has declared an interim dividend of Rs 4 per share (200 per cent on a equity share of face value of Rs 2).
HCL Technologies shares on BSE closed at Rs 472.35 today, up by 4.76 per cent.
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