The Hindu Business Line : HCL Tech net rises 22.7% in Q3

HCL Technologies today posted a 22.7 per cent increase in its consolidated net income for the third quarter ended March 2006 to Rs 192.9 crore compared to Rs 157.3 crore in the year-ago period, although the year-on year growth fell short of market expectations.

As per US GAAP, HCL Technologies' consolidated revenues were up 30.7 per cent to Rs 1,122 crore (about $250 million), as the company broke into the billion dollar `run rate' league on an annualised basis.

"The billion dollar revenue rate is a clear outcome of the many large client wins we have witnessed over the last few quarters — a vindication of our transformation initiatives that have created a strong value for our clients,"

HCL Technologies Chairman and CEO, Mr Shiv Nadar, said at a conference here.

During the quarter, the EBIDTA margin stood at 22.3 per cent against 22.8 per cent in the corresponding period of the previous year and 22.5 per cent in second quarter of the current fiscal.

"There was an overall impact of 30 basis point, but in the case of the software business, the margins improved 60 basis points. There was some decline on the BPO side as certain grants available to us had run their full course. We expect the margins to remain stable," Mr S. L. Narayanan, Corporate Vice-President (Finance), HCL Technologies, said.

The software segment contributed revenues to the tune of Rs 834.8 crore during the third quarter of the FY06, an increase of 28.6 per cent against Rs 649.4 crore in the same period previous year.

The BPO revenues rose 21.3 per cent to Rs 156.5 crore up from Rs 129 crore in the year-ago period, while the revenues from infrastructure management were up 58 per cent to Rs 130.7 crore.

Among the large deals the company signed during the year was an agreement with Britain's top electric retailer DSG International Plc.

Asked about the status of the proposed mega deal in insurance space, that which HCL had earlier indicated it might sign during the quarter, Mr Nadar said, "It is still being negotiated. These multi-year contracts are generally complex, so it is taking longer."

"The Q3 performance in the BPO space has been consistent with our projections," Mr Ranjit Narasimhan, head of HCL's BPO operations said. The company hired 359 people during the quarter for new BPO contracts.

During the quarter, the company divested its entire portfolio of investments held since year 2000 in some Venture Capital Funds. These investments, which had a current carrying value of $18.27 million, were sold for a gross consideration of $20.38 million, resulting in a gain of $1.50 million.

The divestment also frees HCL of all future financial commitments towards uncalled capital, amounting to $8.40 million.

The company managed to bring down employee attrition levels to 12 per cent and expects to hire around 1,700 employees keeping up the momentum of the last quarter.

The company has also taken foreign exchange cover for $464 million at the end of March, at an average exchange rate of Rs 44.50 Rupees per dollar.

HCL Tech shares closed at Rs 602.30 per share on the BSE, compared to Rs 651.15 per share in the previous close.

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