HCL Tech Q3 profit up 72% at Rs 331.8 cr

Higher manpower utilisation rate, a change in business mix in favour of onsite work and efficient management of its selling, general and administration (SG&A) expenses helped HCL Technologies ward off the rising rupee effect to post a consolidated (unaudited) net income of Rs 331.8 crore for the third quarter ended March 31, 2007.

This is an increase of 72 per cent over the corresponding previous quarter (Rs 192.50 crore) and 15.9 per cent sequentially (Rs 286 crore). The company's revenues stood at Rs 1,577 crore, up 40.6 per cent (year-on-year) and 7.6 per cent sequentially. Operating margins (EBITDA before non-cash charge) stood at Rs 366.7 crore, up 46.8 per cent year-on-year and 13.2 per cent over the previous quarter.

An appreciation of 1.55 per cent in the rupee from January 31 to March 31 has affected its margins (including BPO) by 69 basis points. For FY07, the company has increased its forward cover for the full year to $516 million (around Rs 2,250 crore).

The US contributed 54.3 per cent of its total revenues (down from 57.3 per cent in last quarter), while Europe contributed to 29.63 per cent. Custom applications (35.8 per cent) and engineering and R&D services (23.3 per cent) continue to dominate its service offerings while infrastructure (13.8 per cent), BPO services (13.7 per cent) and enterprise application services (13.2 per cent) are its other business streams.

This year, the company expects a 12-15 per cent rise in offshore (in India) salaries and 3-5 per cent increase in onsite (international) salaries. It has made 5,000 offers so far.

HCL Technologies President Vineet Nayar said the company added 1,832 employees during the quarter, taking the total headcount to 40,149. The company has signed five deals in the range of $25-50 million each and one valued at over $50 million.

Of these, four are in the high-tech and manufacturing space and two in financial services. The company also added 26 new clients this year.

HCL BPO, the business process outsourcing arm of HCL Technology, reported revenues of $49.7 million (around Rs 220 crore) for this quarter, up 41.8 per cent from the previous comparable period and 18.4 per cent sequentially. EBITDA (before non-cash charge) was reported to be $13.2 million, up 74.9 per cent year-on-year and 37 per cent sequentially. HCL BPO Operations Head Ranjit Narsimhan said, "Our strategy of moving up the value chain and focussing on improving operational efficiencies is paying off."

On the issue of Esops, Nayar said, the company would not offer stock options till the fringe benefit tax issue was sorted out. The company's attrition rate has gone down from around 19 per cent last year to about 17 per cent. HCL BPO has reported an attrition of about 19 per cent. The company plans to add 3,000 employees next quarter.