Beating street expectations, HCL Technologies, the country’s fourth largest software exporter, today reported a 34.2 per cent increase in net profit, at Rs399.7 crore, for the quarter ended December 31, 2010, when compared with the corresponding quarter last year, narrowing its forex losses and bagging more outsourcing deals.
The good quarterly numbers gave a strong signal to the market, indicating sustained spending on outsourcing services by clients. Terming as dynamic the demand environment for outsourcing services, Vineet Nayar, CEO, said: “We continued to register impressive win ratios and superior customer acquisitions, with 50-plus transformational deals signed during the year.” Of the 50-plus deals, 17 were multi-year, multi-million dollar ones.
Revenues grew by 27.8 per cent at Rs3,888.4 crore during the October-December quarter, when compared with the corresponding period last year. HCL’s revenue growth was supported by a 6.1 per cent rise in business volume, better than the volume growth reported by larger rivals Tata Consultancy and Infosys Technologies. Infosys reported volume growth of 3.1 per cent, while TCS’ volume growth was 5.7 per cent in the third quarter. Sequentially (on a trailing quarter basis), HCL reported net profit growth of 20.7 per cent and revenue growth of 4.9 per cent.
Dipen Shah, senior vice president (PCG research), Kotak Securities, said: “HCLT results are above estimates. While revenues were marginally higher than our estimates, margins improved more than what we had assumed. HCLT has brought in more consistency in IT services.”
HCL’s margin on Ebitda (earnings before interest, tax, depreciation and amortisation) in the just-ended quarter dipped to 16.3 per cent from 21.1 per cent a year earlier, but remained flat on a quarter on quarter basis.
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Foreign exchange losses narrowed to Rs13.4 crore this quarter, compared to Rs126.1 crore in the corresponding period last year.
HCL said all its service offerings, including infrastructure services, engineering and R&D services, reported positive growth. However, the company’s business process outsourcing unit continued to make losses. “The BPO business needs to be transformed into business services. We expect this to continue making losses for the next four quarters, till Jan-March 2012,” Nayar said.
All divisions reported good growth, with retail and CPG at 15.5 per cent, energy & utilities and public sector at 13.2 per cent and healthcare reporting 7.4 per cent growth. HCL gets over half its revenue from the US. It saw the highest growth coming from regions outside the US and Europe. These two regions grew 5.8 and 7.2 per cent, respectively, while the rest of the world, which includes Asia-Pacific and Africa, grew by 14.6 per cent, sequentially.
Nayar said the company would continue to focus on emerging markets, which were growing faster than the traditional Europe and US ones.
The company added 2,049 employees (net additions), taking headcount to 72,267 at the end of December. The attrition rate was up at 17.2 per cent, from 16.7 per cent in the previous quarter.
Nayar said the company would continue to make just-in-time hiring. “We will make lateral hires as and when required. Going forward, our focus would be more on utilisation than hiring.”
He said the company was planning to maintain the number of freshers at 20 per cent of its overall work force, which is why it would not go for aggressive campus hiring.
The company has declared a dividend of Rs2 per share. The EBIT margin (earning before interest and taxes) increased to 13.1 per cent during the quarter from 12.9 per cent in the September quarter. The company plans to increase the EBIT margins to 15 per cent by June.