Bangalore: HCL Technologies Ltd, India’s fourth-largest software firm, on Thursday denied any wrongdoing in its European operations and said rumours about a large outsourcing contract getting cancelled in the region were baseless.
Analysts at some brokerages based in Mumbai and executives at rival technology companies had raised concerns on alleged “unethical practices” at HCL’s European operations and speculated that the company could lose a large order from European drugmaker AstraZeneca Plc.
On Thursday morning, Sandeep Muthangi, an analyst with IIFL Capital, said Rajeev Sawhney, the former head of HCL’s Europe operations who quit in December, denied these as “baseless rumours”.
“Since I knew this ex-head of Europe who has allegedly made the comment, I asked him about it today. He dismissed this rumour as being ‘ridiculous’ and is aghast at the baseless allegations,” said Muthangi in his note on Thursday morning.
Over the past 12 months, HCL has signed outsourcing contracts worth over $1 billion in Europe, including a large deal with AstraZeneca.
“This speculation is absolutely baseless. There is no accounting issue, no order cancellation and no unethical practice at HCL Tech,” IIFL’s Muthangi cited HCL Technologies chief financial officer Anil Chanana in his report.
Chanana and HCL Technologies’ spokesperson did not respond to an email query sent on Thursday morning.
To be sure, analysts have questioned HCL’s aggression in going for risky, long-term outsourcing contracts in the past but allegations of unethical practices were never talked about so openly.
For instance, after HCL Technologies announced its December-quarter earnings last week, some analysts questioned the company’s financials and operational issues.
“While deals signed in the quarter is impressive on face value, more disclosures are required on quality of the deals—nature of work and timeframe of execution—to help us put the numbers into context,” analysts at Kotak Institutional Equities Research said in their 17 January note.
“For example, an existing relationship converted into a longer tenure contract would lead to incremental TCV (total contract value); however, utility of such TCVs would be limited if there is no increase in annualized billing,” the Kotak analysts said.
Over the past nine months, four HCL Technologies top executives have quit—Sawhney as Europe head, Pradeep Nair as the healthcare business head, Virender Aggarwal as president of emerging markets, and Animesh Parihar as the global delivery head at Axon Group Plc, which HCL acquired in 2008.
Last week, HCL Technologies chief executive Vineet Nayar said he will step down in July. “Mr Nayar has built an excellent client-facing team that includes some serious heavy hitters. Retention of the team will be critical in continuation of strong performance,” the Kotak analysts said in their report.
HCL Technologies shares were marginally down, by 0.69%, at Rs.672 at noon on BSE on Thursday.