New Delhi: HCL Infosystems Ltd posted a 11% decline in net profit in January-March, trailing estimates, as the computer-maker said it failed to convert backlog into sales at its system integration (SI) business and expected the trend to continue.
“During the quarter, the system integration business was adversely impacted by the delays in the decision making in various government and public sector undertaking-led projects,” chief executive Harsh Chitale said in a statement.
The segment posted sales of Rs898 crore, compared with sales of Rs960 crore in the year-ago quarter.
Earlier, the company said profit for January-March fell 11% to Rs532.8 million, while net sales dropped slightly to Rs2,730 crore.
A Reuters poll of brokerages had forecast net profit of Rs593 million for the quarter.
The company said that sharp decline in the revenue recognition in the high margin SI business did suppress profits of the company for the quarter and warned this may continue over a few quarters.
HCL Info also started a programme to “re-align the organization to drive cost and working capital efficiencies,” which are expected to add to profit and cash flow over the next 12-15 months.
“Company is now carrying a significant order book of long term contracts where revenue would be recognized over 5-10 years based on periodic or transaction-based billing,” HCL said.
However, it added that these contracts will take time to reflect in financial performance as they have a billing gestation period spread over next 2-3 quarters.
HCL Info shares, valued at close to Rs2,500 crore, were mostly flat at Rs109.7 on the National Stock Exchange.