HCL Tech July-September profit up 3.1 per cent at Rs 331 cr

The good numbers from HCL come shortly after the country's second largest IT firm, Infosys, came out with positive results for the July-September period on the back of good sales volumes. Infosys Technologies had last week posted a 13.2 per cent rise in net profit for the July-September quarter and raised its forecast for the fiscal year.
However, the numbers failed to cheer the stock market as shares of HCL Technologies closed at Rs 425.85, down by 3.01 per cent on the BSE.

"All cylinders across the world are firing (for HCL)," HCL CEO Vineet Nayar said announcing the first quarter results of the company.

The strong numbers came amid a reduction in the company's forex losses to USD 14.2 million during the review period from USD 29.5 million in the April-June quarter of 2010.
All of HCL's business verticals and operating geographies registered a positive growth during the period.

Revenue for the July-September quarter, the first quarter as per HCL Tech's accounting year, stood at Rs 3,708.1 crore, up by 21.9 per cent compared to Rs 3,042.5 crore in the corresponding period last year.

"The growth is broad-based. In the last 10 quarters, this is for the first time that all the verticals have registered a positive growth," Nayar, who is also the Vice Chairman of the company, said.

Of all the seven verticals in which the company operates, three verticals -- retail and CPG (13 per cent), healthcare (11.7 per cent) and financial services (10 per cent) -- registered a double-digit growth.

Across geographies also, the company registered positive growth.Revenues from the US grew 2.8 per cent this quarter.

"America is taking a deep breath... America is buying on hope that the recession will go away," Nayar said, adding, however, "Europe is buying of fear."
European revenue in the September quarter was up 18.2 per cent. "In Europe, people are focused on reducing costs exactly as we saw it post-recession in America," Nayar said.

Revenue from the rest of the world, including Asia, South Africa and the Middle East, grew by 19.8 per cent.

"HCL Technologies results once again validate the strong traction in volumes for leading Indian IT companies. EBIDTA margins were lower than expected, which was slightly disappointing," Dipen Shah, Senior Vice President - PCG Research, Kotak Securities, said.
EBITDA margins, which measure the extent to which operating expenses use up revenue, fell to 16.3 per cent in the quarter under review from 22.7 per cent a year earlier.
EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins were hit due to a staff wage hike and increased bench strength.

Net profit was sequentially down 1.6 per cent. The sequential drop was mainly due to the hike in wages announced by the company during the quarter.Besides rewarding employees with higher wages, the company also announced a 50 per cent increase in dividends per share.

HCL Tech declared a dividend of Rs 1.50 per share for the quarter.The company added 48 new clients in the July-September quarter, taking its total number of active clients to 426, compared to 408 at the end of June.

It added 5,661 employees on a net basis in the just-ended quarter, taking its staff strength to 70,218 at the end of September.

This is the second consecutive quarter that the company has hired over 5,000 people. The hiring was mainly in anticipation of strong business opportunities that HCL sees in future.

However, in the next quarter, hiring will not be at the same level.HCL Technologies Chairman Shiv Nadar said HCL will invest in emerging technologies and business areas, while capitalising on existing business opportunities at the same time.

On HCL's BPO business, Nayar said the BPO business will continue to make losses every quarter for the next five quarters.However, HCL will continue to invest in re-jigging and investing in its BPO business, he said.