HCL’s profit up 58% in March quarter

HCL’s profit up 58% in March quarter

Bangalore: Technology firm HCL Technologies Ltd joined its larger peers by reporting a profit of Rs344 crore in the three months to 31 March, a 58% jump over a year ago, as orders from clients in the US and Asia-Pacific surged.

The shares of India’s fourth largest software company rose 8.32% to Rs374.10 each at the Bombay Stock Exchange after the results were announced on Wednesday. The benchmark Sensex index was little changed.

HCL saw revenue grow 7.5% to Rs3,076 crore in its third quarter, beating market expectations. The firm follows a July-June accounting year.

Last week, Infosys Technologies Ltd forecast 16-18% growth in dollar revenue as customers, who had tightened budgets during the economic downturn, were investing in technology solutions for growth. Tata Consultancy Services Ltd, the country’s largest information technology (IT) vendor, said it was winning large outsourcing deals from all its markets. Both firms posted a higher-than- expected quarterly results.

“It (HCL) has seen large volume growth, 9.2%, better than the other two big firms. The deal pipeline looks strong," said Rohit Anand, an IT analyst at PINC Securities, a Mumbai-based brokerage. “The infrastructure services growth of 16.3% sequentially has led the overall growth."

HCL earns one-fifth of its revenue from infrastructure services business or managing customers’ assets remotely from locations such as India.

It won 13 new clients in the March quarter, including contracts from Vodafone Plc and Malaysian Airline System Bhd.

Business from Europe grew the lowest at 1.4% over the previous quarter, but HCL saw business growth of 9.6% from US clients and 7.9% in the Asia-Pacific region.

“We have been able to expand our operating margins in IT services by 130 basis points (bps) year-on-year, and 40 bps quarter-on-quarter in spite of a difficult global currency market," chief financial officer Anil Chanana said in a statement. One basis point is one-hundreth of a percentage point.

Although operating margins were at 33.7%, HCL saw revenue from its back-office arm decline 6.4%.

HCL added a net of 2,500 people on its rolls and said it intended to induct an additional 5,000 this year and hike wages in July.

“We will certainly look at our compensation structure to make it competitive," Chanana said. “We will go for wage hikes as the industry is bouncing back and deals are back on track."

“Net profits were higher than estimates because of reduced depreciation costs and lowerthan-expected forex loss," Dipen Shah, senior vice-president, research, at domestic brokerage Kotak Securities Ltd, said in a statement.

“The (stock) valuation was a bit attractive. It was trading at lower levels than its peers. So investors picked the stock," said an IT analyst at a local brokerage in Mumbai, who did not want to be named, citing company policy.

PTI contributed to this story.