HCL Tech Q1 Net up 63.8%; sequential revenue growth disappoints
New Delhi: Posting a better-than-expected performance, IT services firm HCL Technologies today reported a 63.8 percent increase in consolidated net profit for the quarter ended September 30, 2013, aided by a weak rupee and encouraging macro-economic trends.
India's fourth largest software services exporter's net profit rose to Rs 1,416 crore in the first quarter from Rs 864 crore in the year-ago period.
Consolidated revenues grew 31.2 percent to Rs 7,961 crore in the July-September quarter this fiscal from Rs 6,069 crore in the same quarter of last fiscal.
The firm follows July-June as the fiscal year.
Commenting on the performance, HCL Technologies Chairman and Chief Strategy Officer Shiv Nadar said: "Against the backdrop of encouraging macro-economic trends, these results cement HCL's position as a company with a strong and differentiated business model."
However, market analysts said that sequentially a below expected performance by the Noida-based firm on revenue front compared to rivals, TCS and Infosys, disappointed investors.
Compared to a TCS's sequential revenue growth of 5.4 percent in US dollar terms and Infosys's 3.8 percent, HCL's revenues rose by 3.5 percent quarter-on-quarter.
Reacting to results, HCL technologies shares fell 0.03 percent to Rs 1,160 apiece in early trade. By 1455 hours, its scrips were trading down by 5.74 percent at Rs 1,093.80 from its previous BSE close.
In dollar terms, net profits rose by 42.8 percent to USD 225.6 million in the first quarter of the current fiscal against USD 158 million in the year-ago period. Revenues rose by 14.1 percent to USD 1.27 billion during the review period from USD 1.11 billion in the corresponding quarter last fiscal.
"HCL continues to strengthen its position in the momentum markets of the industry with Europe crossing a milestone run rate of USD 1.5 billion reflecting a very healthy 23.6 percent growth y-o-y," HCL Technologies President and CEO Anant Gupta said here.
The year-on-year growth of 42.8 percent in net income and 14.1 percent in revenues continues the 8 successive quarter of HCL's story of profitable growth, he added.
"The results reflects our strategy on both the momentum and emerging momentum markets. In momentum market, significant growth in financial services and manufacturing segment and in emerging momentum markets, which are life sciences, healthcare and public services, continue to drive," Gupta said.
"From a deal win perspective, we booked over USD one billion this year. Nine transformational deals, which are a significant mix of integrated deals between applications and infrastructure, driving the growth," he said.
Deal wins were led by manufacturing, financial services, life sciences & healthcare and public services, with the US and Europe continuing to drive wins during the quarter.
HCL Technologies added 11 clients during July-September, taking its total clients to 838. Most additions - six were in USD 20 million bracket, followed by 3 in USD 10 million and one each in USD 40 million and USD 100 million, it said.
The company's net income margin rose to 17.8 percent helped by 300 basis points (250 on the back of rupee depreciation and the rest on efficiency gains in business operations).
On currency impact, HCL technologies CFO Anil Chanana said: "Currency did play a good part in expanding our margins, particularly in the first quarter. Efficiencies also helped us is expanding margins. Wage hikes took away 50 basis points."
For the year ended September 30, 2013, HCL Technologies had cash and cash equivalents of USD 96.8 million compared to USD 123.3 million at the end of June 30, 2013.
Chanana said HCL is expanding its facilities, about 16-17 globally, creating 31,000 seats, majorly over three campuses in India -- Noida, Bangalore and Chennai.
"Consolidation is helping us to cut down operating costs. It also includes consolidating small facilities. It started last year and is expected to be over by end-2015," he added.
Besides, HCL is also expanding its near-shore Mexico facility to cater to clients in the North American market.
HCL Technologies added 1,691 employees during September quarter, taking the total headcount to 87,196.
About 18 percent of its employees are outside India. The firm expects to increase this to 22 percent in the next two years.
Analysts said the better-than-expected performance for July-September quarter by TCS, Infosys and HCL Technologies signals an accelerated spending by clients.
On HCL, they said its quarter-on-quarter growth is a bit disappointing, but, the year-on-year rise is commendable.
Angel Broking Research Analyst (IT) Ankita Somani said: "For Q1 FY'2014, HCL Tech marginally disappointed on revenue front, but exceeded expectations considerably on operational performance as well as on the overall bottomline front."