The Hindu Business Line : HCL Tech Q4 net drops; guidance upbeat

Mr Shiv Nadar, Chairman & CEO, HCL Technologies, flanked by Mr Vineet Nayar (left), President, and Mr Ranjit Narasimhan, President & COO, HCL BPO Division, at a press conference in the Capital on Tuesday. -- Kamal Narang

New Delhi , Aug. 23

SERVICES company HCL Technologies today posted a 19.3 per cent year-on-year decline in consolidated net income for the fourth quarter ended June 30, 2005 at Rs 161.9 crore, even as it expects revenues and profits to grow 30-40 per cent over the next three years.

"We expect the topline and EBITDA (earnings before interest, tax, depreciation and amortisation) to grow 30-40 per cent in the next three years. Also, after three years we expect 10 customers to provide more than $100 million each in annual revenue. Our visibility has improved substantially," HCL Technologies Chairman and CEO, Mr Shiv Nadar, said at a conference here.

HCL currently has one customer, Deustche Bank, which outsources software services worth over $100 million annually.

The company's revenues jumped 25.7 per cent to Rs 927.57 crore from Rs 738.21 crore in the corresponding period previous year, while gross margins increased to 37.9 per cent as against 37.5 per cent. Gross revenues rose 27.2 per cent to Rs 3,322.9 crore.

EBITDA (before forex gains) showed 23.6 per cent growth to Rs 211.1 crore(Rs 170.7 crore). The company has declared a final dividend of 200 per cent of the face value of each share. During the previous three quarters, the company declared interim dividends of Rs 4 per share. HCL Technologies Vice President (Finance), Mr S.L. Narayanan, said the fourth-quarter consolidated net profit fell mainly due to `reclassification of other income'.

"The interest income of Rs 38 crore, which was booked in the last quarter of June 2003, was subsequently found to be correctly recognisable only in the next year. And this year we have certain gains in the treasury, about $6.7 million (Rs 30 crore), which have not been redeemed. The interest has been accumulated and reinvested in the scheme and only upon redemption will we be able to recognise that income. That happens in August, 2005," he added. Compared sequentially, HCL's net income rose three per cent from Rs 157.25 crore notched in the quarter ended March 2005.

China plans

Mr Nadar further said that the company was finalising its plans for China.

"China is an attractive market for us in terms of delivery model and collaboration model. We are looking at China not just as an offshore development centre but beyond it," Mr Vineet Nayar, President, HCL Technologies said. The company added 2,056 employees in the April-June 2005 quarter, taking the total to 24,090. Mr Nadar said that the company was planning to increase the headcount to 60,000 people but did not give a timeframe.

The company, which currently has $450 million cash (between treasury and cash in bank), is also aggressively scouting for acquisitions. "We are keen on acquisitions. We do not have limitations of size as we have the funds and access to funds. We will look at capability-related companies for filling gaps and balancing out supply and demand. We will also look at acquisitions for output-related pricing," Mr Nadar said. The capability related buyouts could be in hardware design and prototyping, and in the upper end of semiconductor design, he said.

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HCL Tech Q4 net drops; guidance upbeat — Have funds, will buy, says Shiv Nadar