The Hindu Business Line : HCL Tech Q2 net profit rises 16.3%

New Delhi, Jan. 17 IT services company HCL Technologies Ltd on Thursday posted a 16.3 per cent year-on-year rise in consolidated net profit at Rs 332.9 crore for the second quarter ended December 2007, as the company logged volume growth and increase in billing rates.

In rupee terms, its revenue was up 24 per cent year-on-year at Rs 1,816.6 crore while the sequential growth was pegged at 6.3 per cent. In dollar terms, the revenue at $461 million was up 39.2 per cent year-on-year and 7.4 per cent sequentially, while the net profit at $84.5 million was up 30.6 per cent over corresponding period of the previous year and 9.1 per cent over the first quarter.

Collaboration

“In 2005, we initiated a strategy for value centricity, and going forward we will focus on collaborative transformation for creating higher value. We will collaborate with vendors in product development, go to market and with customers in creating intellectual property,” Mr Vineet Nayar, CEO of HCL Technologies, said at a conference.

HCL, which added 29 new clients during the quarter, saw gross margin improvement at 38 per cent compared to 37 per cent in the first quarter and 37.8 per cent in the year-ago period. “We were able to offset the impact of rupee appreciation through efficiency gains, hedging and improved realisations,” Mr Anil Chanana, Executive Vice-President (Finance), said.

Its quarterly EBITDA were marginally higher at 21.4 per cent compared with 21.3 per cent in the first quarter ended September 30, but fell from 22.1 per cent a year earlier.

The company said that Asia Pacific and Europe led growth from a geography perspective this quarter, with 12.2 per cent and 9.1 per cent compounded quarterly growth rate over the last four quarters. “The US region too has been growing well with a quarter-on-quarter growth of 8.9 per cent. Amongst service lines, infrastructure services, engineering, R&D services and custom application services witnessed accelerated growth. Continuing the trend over the last two quarters, the fastest growth among verticals was recorded in life sciences, financial services and telecom,” Mr Nayar said.

Impact on margins

Asked about the outlook on margins, Mr Nayar said, “If the dollar stays at its current level, given the 10 per cent appreciation of the rupee, we expect an overall margin impact of 400 basis points for the fiscal year (ending June 30), of which we will earn back 300 basis points through efficiencies and price hikes, and output based pricing. So, in the worst case scenario, we will lose 100 basis points due to the rupee.”

As of December 2007, the company bought forward covers worth $2.3 billion spread over the next 10 quarters.

Revenue from the consolidated IT services (core software and infrastructure services) grew 24.9 per cent year-on-year during the second quarter to Rs 1,598.2 crore. Its business process outsourcing services revenue grew 17.5 per cent on year to Rs 218.4 crore, but was down from Rs 219.8 crore in the previous quarter, mainly on account of a loss of a customer. The company registered 2,312 net additions in headcount increasing the total number of its employees to 48,000 at the end of December.

The shares of HCL Tech were down 0.28 per cent on the BSE at Rs 267.60, over the previous close of Rs 268.35.

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