BackTCS, HCL Tech numbers bode well for sector
In the March quarter, the net profit of TCS and HCL Technologies rose 24.9% and 72.6%, respectively
Premium(Priyanka Parashar/MInt)
Mumbai/New Delhi: Tata Consultancy Services Ltd (TCS), India’s biggest software services company by revenue, and fourth-ranked HCL Technologies Ltd reported higher profit and revenue for the quarter ended March as they won more work from overseas clients.
TCS said fourth quarter net profit rose 24.9% from a year earlier to ₹ 3,615.64 crore in the three months on a 23.8% increase in revenue to ₹ 16,430 crore.
HCL Technologies’ net profit rose 72.6% in the March quarter to ₹ 1,040 crore on a 23.2% increase in revenue to ₹ 6,425 crore.
The results, and the positive outlook of the companies’ management, pleased analysts and served to allay the disappointment delivered last week by Infosys Ltd, India’s second largest computer services firm, which failed to meet its fiscal 2013 revenue forecast. Third-ranked Wipro Ltd will declare its earnings on 19 April.
The strong set of earnings also calmed worries of slowing demand for India’s $100 billion (around ₹ 5.4 trillion) information technology (IT) sector as a whole.
CLSA Asia-Pacific Markets’ analysts wrote in a post-results note to clients on Wednesday that “contrary to our initial expectation of a sector-wide demand upswing, heterogeneity in performance" remains the theme in India’s IT industry in 2013.
CLSA analysts said TCS had reported “yet another solid quarter". Its 3.1% sequential growth in dollar revenue was “spread fairly across industry verticals", and 4.4% volume growth and stable margins point to the company maintaining leadership in the sector, the analysts said.
TCS announced its results after the close of stock market trading. The stock fell 1.73% to ₹ 1,459.20 on BSE while the benchmark Sensex lost 0.07% to 18,731.16 points. HCL Technologies declined 1.51% to ₹ 751.15. The IT index lost 1.14% to 5,917.90 points.
TCS, which added 52 clients in the March quarter, reported earnings that met analyst expectations. It had been expected to post a net profit of ₹ 3,610 crore, based on the median of 43 analysts’ estimates compiled by Bloomberg.
Compared with the December quarter, TCS’s net profit grew 1.86% in the three months to March while revenue rose 2.24%.
“Looking ahead, our deal pipeline is strong. Deal closures are happening. We see traction both in running business and discretionary spends," said N. Chandrasekaran, managing director and chief executive officer of TCS. “We are positive about all sectors. Europe is a focus area, both organically and (for) inorganic growth."
The upbeat remarks contrasted with the outlook of Infosys, which predicted revenue growth of 6-10% for the current fiscal year, lower than software industry lobby group Nasscom’s 12-14% growth estimate. Investors punished Infosys on 12 April, with its stock tumbling 21%, its biggest decline since 2003.
HCL Technologies won more than $1 billion in large multi-year deals. Out of these, 90% are from the “re-bid" market, the company said in a statement, referring to the renewal of existing business.
Chief executive officer Anant Gupta said non-discretionary spending and the renewal market were still driving growth, with clients being cautious on discretionary spending.
“HCL has delivered yet another solid quarter," Joshi wrote. “Everything points towards a healthy business momentum for now."
“Infosys’s poor quarter and guidance had raised some doubts on industry-wide demand. HCL’s performance and deal signings should somewhat allay those fears and support the sector sentiment," the report said.
Gautam Sinha Roy, vice-president (equities) at Motilal Oswal Securities Ltd, said HCL Technologies had “continued its strong results track record" in the March quarter with its dollar revenue growth of 3.2% that was in line with expectations and Ebitda (earnings before interest, tax, depreciation and amortization) margins at 22.4%.
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