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HCL Tech Dec quarter net falls more than forecast

HCL Tech Dec quarter net falls more than forecast
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First Published: Mon, Jan 25 2010. 02 29 PM IST
Updated: Mon, Jan 25 2010. 02 29 PM IST
New Delhi: Software services firm HCL Technologies Ltd on Monday missed forecasts with quarterly profit dragged down a fifth by declining other income, forex losses and higher costs.
The results were out of sync with street-topping performances at larger peers like sector leader Tata Consultancy Services, No. 2 Infosys Technologies and Wipro and sent shares down as much as 6.5% on the day.
India’s $60 billion outsourcing industry has seen a pick up as the global economic recovery boosts demand for IT services, giving investors confidence to expect a solid recovery.
HCL, amongst India’s top five IT firms, echoed the sentiments, with its chief executive expecting more business coming his way as the trend of increased outsourcing becomes more pronounced towards the middle of next year.
“There is a glimmer of hope, wherever you read, of the economic recovery coming back,” Vineet Nayar told a news conference. “With that background, CEOs are ready to make some investments ... largely in discretionary spend.”
As firms looked to cut costs, “there is more emphasis towards outsourcing, offshoring,” Nayar said. “We have suddenly seen a jump in January-Februay-March quarter on the deals being negotiated.”
Research firm Gartner has forecast global IT spending to rise by 4.6% to $3.4 trillion in 2010, reversing a similar decline in the past year. HCL won 12 deals during the quarter, but Nayar did not say how many deals could be signed in the March quarter.
Rupee, costs pinch
For its fiscal second quarter, HCL reported a net income of Rs297 crore under US accounting norms, down from Rs373 crore a year ago. A poll of 16 analysts by Reuters, on average, had expected net income of Rs305 crore.
Revenue rose 22.8% to Rs3,033 crore, in line with analysts’ mean forecast of Rs3,036 crore.
Chief financial officer Anil Chanana said 70 basis points were shaved off core margins by the rupee’s rise, while a wage hike during the quarter chopped off a further 130 basis points.
IT firms are fretting over the firming rupee, which rose over 3% in the December quarter and which analysts say is set for a 4% climb in 2010.
Over half of IT sales is billed in dollars and a strong rupee means a dip in rupee-revenue.
Chanana also said the firm would repay its $130 million net debt over the next two quarters.
Shares in HCL, which the market values at over $5.5 billion, had climbed 9.3% during the December quarter, underperforming the sector’s 13.5% increase. The broader market rose 2% during the period.
By 2:02 pm, they were trading 5.9% down at Rs360.50 in a weak Mumbai market.
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First Published: Mon, Jan 25 2010. 02 29 PM IST