HCL Q4 Net up 41.6% on robust contract renewals, infra sevices
New Delhi: IT firm HCL Technologies on Wednesday reported a 41.6 percent increase in fourth quarter consolidated net profit, helped by strong momentum in contract renewals and growth in infrastructure service offerings.
The country's fourth largest software services exporter also said it will raise investment limit for foreign institutional investors (FIIs) in the firm to 49 percent from 30 percent, subject to government approval.
The company's net profit rose to Rs 1,209.6 crore for the fourth quarter ended June 30, 2013 from Rs 854.1 crore in the year-ago period. Consolidated revenues rose by 17.3 percent to Rs 6,944.2 crore in the April-June period as against Rs 5,919.1 crore in the same period of previous year.
HCL follows the July-June fiscal.
HCL Technologies CEO Anant Gupta said: "There is a large momentum in market on the re-bids side. There has been tremendous growth in financial services and manufacturing, while, the life sciences, healthcare and public services has witnessed significant growth."
Outsourcing market continues to pay dividend. Apart from telecom, which is relatively skewed, other sectors have performed well. Both the US and Europe have performed well for the company, he added.
The firm also said it has appointed Roshni Nadar Malhotra, the daughter of its founder Shiv Nadar, as non-Executive Director.
The strong results posted by HCL Technologies is in line with its those posted by bigger rivals Tata Consultancy Services, Infosys and Wipro, who also beat market expectations earlier this month.
"An exceptional growth of 22 percent during the financial year has propelled HCL’s revenue past the Rs 25,000 crore milestone. HCL continues to lead the industry in profitable growth, with seven successive quarters of Net Income Margin expansion, having reported 62 percent growth in Net Income this year," Gupta said.
For the year ended June 30, 2013, its net profit rose by 62.3 percent to Rs 4,098.9 crore against Rs 2,526 crore in previous year. Revenues rose by 22.4 percent to Rs 25,733.7 crore against Rs 21,031.2 crore.
"Backed by another strong quarter, we closed our financial year on a positive note. Our Net Income Margin expanded by 400 bps and touched a five year high of 16 percent," HCL Technologies CFO Anil Chanana said.
"There is nothing specific about the move. We are doing this as it allows for a much larger share of participation," Gupta told PTI when asked about the company's move to rise investment limit for FIIs.
The company said it will give a wage hike of 8 percent for offshore employees and 3 percent for onshore staff.
In US dollars, HCL reported a 37.3 percent rise in net profit at USD 213.8 million for the fourth quarter against USD 155.8 million in the corresponding quarter. Its revenues rose by 13.7 percent at USD 1.23 billion from USD 1.08 billion.
HCL's cash and cash equivalents, investments and borrowings at the end of June 2013 stood at USD 847 million.
Americas was the top revenue generating region for the firm in terms of geographies, followed by Europe and Rest of The World.
In terms of verticals, manufacturing was the top earner followed by financial services, life sciences & healthcare, retail & CPG, telecom and public services, among others.
On the deal pipeline, Gupta said: "Data centre business is growing and the future driver will be work place services. The renewal market continues to be very strong. Deal renewals are strong, which is a positive sign. We are positive about the market going forward."
Deal momentum in certain services is looking up. US and Europe will continue to be the momentum markets, he added.
"There are elements of discretionary (spending), which are increasing. If you look at public services space and life science and healthcare space, I think in both these areas you will see an increase in spending," he said.
On the changing dynamics of client spending, Channa said: "Most clients are looking at higher optimisation of spend. It is resulting in us reacting by going into transformation-led deals where we are trying to bundle multiple deals to the client at the same time."
On capital expenditure, Gupta said: "Basically, they will be project-based capital expenditure. Over the last 2 years we have expanded to about 18 countries. So, it is an ongoing process."
When asked about whether the company hopes to surpass Infosys as the third largest IT services exporter, Gupta said the market is big enough for everyone without referring to any firm in particular.
"I think the market has enough room for businesses to grow. I think for different service clients the benchmark for competition will be different and it will vary," he added.
On the rupee volatility, Chanana said volatility is not good for anyone.
The company added one USD 50 million client and three USD 40 million clients during the April-June quarter taking its total active clients to 549 as of June 2013. Its new client relationships during the April-June quarter stood at 36.
Net employee additions during the quarter stood at 686, taking its total employee headcount as of June 30, 2013 to 85,505.