The Hindu Business Line : HCL Q4 net down 71% on forex losses

Opening score: Mr Shiv Nadar (right), Chairman and Chief Strategy Officer, HCL Technologies Ltd, and Mr Vineet Nayar, CEO, at a press conference in the Capital on Friday. —

Our Bureau

New Delhi, Aug 1 India’s fifth largest IT services exporter HCL Technologies Ltd on Friday posted about 71 per cent drop in its consolidated net income for the fourth quarter ended June 2008 to Rs 141 crore, hit by a foreign exchange loss on account of a weaker rupee.

The company recorded foreign an exchange loss of Rs 300 crore in the just-concluded quarter, compared to a gain of Rs 250 crore in the year-ago period. Export-oriented software companies — the likes of TCS, Infosys, Wipro and Satyam amongst others — hedge their foreign currency revenue against losses from any appreciation in the rupee, but the local currency has lost nearly 7.3 per cent against the greenback in the just-concluded quarter.

net income

HCL Tech’s net income (before foreign exchange losses) stood at Rs 440.9 crore during the quarter, a whopping 87 per cent higher than the corresponding period of the previous year. Its revenue rose 34.5 per cent year-on-year to Rs 2168 .8 crore for the quarter ended June 2008.

“After 8.4 per cent, 7.4 per cent, 5.2 per cent of sequential growth, we have now achieved a quarter-on-quarter growth of 3.9 per cent (in dollar terms), which has been mostly volume driven. This is the fifth consecutive quarter of margin expansion. The EBITDA margins are higher at 23.4 per cent against 21.6 per cent in the year-ago period on the back of higher utilisation, business growth from higher margin order, and productivity kicking into larger orders,” said Mr Vineet Nayar, CEO of HCL Technologies, who has now been appointed to the Board of the company.

Commenting on the forex losses, HCL’s Executive Vice President, Finance, Mr Anil Chanana said, “HCL has adopted a policy of hedging its business from currency fluctuation through long-term forex covers given the fact that it focuses on long-term annuity based contracts. In the last three years, HCL has booked under the head ‘other income’, a cumulative foreign exchange gain of $0.4 million. The FY08 forex loss was based on average marked-to-market rate of Rs 44.21 to a dollar as on June 30, 2008.”

The company has outstanding covers of $2 billion as on June 2008. For the full year FY08, the net income (before forex loss) stood at Rs 1,431.2 crore, up 39.4 per cent over the corresponding period the previous year, while the revenue at Rs 7,639.4 crore was 26.6 per cent higher than the year-ago period.

IT services revenue

Revenue from consolidated IT services (core software and infrastructure services) rose 28.6 per cent to Rs 6,731.6 crore during FY08, while the BPO services revenue was up 13.7 per cent to Rs 907.8 crore.

Mr Nayar said that the in the wake of a slowdown in the US, many companies were looking at increased outsourcing to reduce costs. “The opening score this year is that the number of deals in the pipeline is much better,” he said.