Buoyed by higher order bookings and deal wins, HCL Technologies on Wednesday reported a better-than-expected 28.7 per cent rise in third-quarter net profit to Rs 603 crore, compared to a year ago.
Revenue for the three months to March rose 26 per cent to Rs 5,216 crore. The country’s fourth-largest software exporter follows a June-July financial year. On a quarter-on-quarter (q-o-q) basis, net profit grew by 5.2 per cent, while revenue slipped by 0.6 per cent. The company reported an earnings before interest and tax margin of 15.7 per cent.
After the weak outlook painted by Infosys Technologies last week, HCL’s numbers boosted market sentiments. While the Bombay Stock Exchange information technology (IT) index closed marginally higher, shares in HCL closed three per cent up at Rs 495.55. The strong quarterly numbers also show Infosys, India’s second-largest IT company, is at risk of losing its bellwether status.
“The management (of HCL) sounded cautious, but not as much as other large peers were sounding, which signals that the situation out there is not that bleak,” said Ankita Somani, an analyst at Angel Broking.
Contrary to the lacklustre performance by Infosys, HCL said it booked orders worth $1.5 billion in the January-March quarter, indicating the demand for IT outsourcing services had not dried up. In the last six months, HCL won orders worth $2.5 billion and 88 per cent of these deals came from the world’s top 2,000 companies.
“This is the biggest ever quarter in terms of bookings in our history. Our ability to book high-quality customers in turbulent times is the result of the strategy that we followed,” said Vineet Nayar, HCL Technologies’ chief executive officer.
“The way we are looking at our strategy is that being a $4-billion company, we have limited investments to make and if we can make each one of those investments count, then we can still grow in this turbulent time,” he said.
The company said most of the large deals came from the vendor consolidation exercise going on across the globe, leading to vendor churn. However, it said it was competing with global rivals such as IBM and Accenture in the vendor churn space, and not eating into the pie of Indian players.
Another highlight of the quarter was the business process outsourcing arm, which made profits after almost six quarters.
According to Barclays, “HCL continues its trend of outperformance with strong March quarter results. Coming on the back of weak commentary by Infosys, we believe these results establish HCL as a stable growth company and are a huge positive.”
| THE NEW BELLWEATHER? HCL Technologies’ performance vis-a-vis Infosys Technologies’ in the March quarter | ||||||
| Revenue | PAT | |||||
| Company | March Quarter (cr) | YoY (%) |
QoQ (%)
| March Quarter (cr) | YoY (%) | QoQ (%) |
| Infosys | 8,852 | 22.1 | -4.8 | 2,316 | 27.4 | -2.4 |
| HCL Tech | 5,215 | 25.0 | -0.6 | 602 | 28.7 | 5.2 |
Europe continued to be a growth driver for HCL. It grew by 5.5 per cent, compared to the last quarter. Rest of the world grew by 11.4 per cent. Its business in the Americas saw a drop of one per cent.
The company’s infrastructure services division, after some glitches in the previous quarter, was back on track, registering a 5.2 per cent q-o-q growth. The enterprise application services business grew by 4.3 per cent. But the banking, financial services and insurance (BFSI) business saw a 2.9 per cent drop in growth. The company termed it a “quarterly aberration”.
Infosys had reported a 4.6 per cent drop in March quarter revenue from the BFSI vertical due to few “ramp-downs” and delay in projects.
“In the US, we have seen a change of approach by two of our clients. Those are not project cancellation, but they have broken those into six-month projects,” said Steve Cardell, president, enterprise application services, HCL Technologies. He said it was an indication that some clients were showing nervousness while going in for long-term projects.
Dipen Shah, head of fundamental research at Kotak Securities, said HCL’s results were almost in line with expectations. He, however, said, “There are concerns like de-growth in BFSI and US geography in constant currency terms. Even the employee strength reduced q-o-q.”
HCL had a headcount of 82,464 at the end of March, compared to 83,076 at the end of December 2011.
