If ever there was a case of concerns overdone, it has to be the case of expectations of currency playing havoc on HCL Technologies’(HCL) December quarter numbers.

For, the company has delivered not just strong sequential growth in revenues, but also leads the charts for the quarter when compared to peers by quite a distance.

Not surprisingly, the stock rallied a 9 per cent in trade on Friday and may soon bridge the rather unjustified valuation gap with peers such as Infosys and Wipro despite putting up a much stronger show.

Growth across key segments and service lines, traction across the Americas and Europe and reasonable quality of client additions characterized the performance of the company during the quarter.

In the December period HCL’s revenues grew a healthy 4 per cent sequentially in dollar terms, while net profits rose 7 per cent. In comparison, TCS’s revenue was virtually unchanged, while Infosys and Wipro witnessed a growth of 0.8 per cent and 1.3 per cent respectively in their toplines.

Despite the Euro’s volatile movement, which reduced realizations, HCL has still managed to put up a strong show.

All-round performance:

For HCL revenues from key segments such as manufacturing, lifesciences, public services and retail grew at 7.3-19.3 per cent sequentially in dollar terms. Financial services though slipped a bit, though mostly due to currency volatility. Most service lines grew in line or faster than the overall company’s revenue rate.

Again, while revenues from the US grew at 6 per cent sequentially, Europe witnessed a 2.1 per cent growth(7.2 per cent in constant currency) as a weak Euro hurt realizations.

HCL has thus delivered broad-based growth and has also been able to tap into discretionary spends of clients.

In the $50 million bucket, the company added one customer, while in the $10-40 million categories, there were 10 clients added.

Attrition has continued on the declining path at 16.4 per cent, while a utilization of 82.9 per cent still gives scope for improvement vis-à-vis Infosys and TCS.

Bridging the gap

HCL appears to be well placed to match the trade body Nasscom’s predicted growth rate of 13 per cent(lower end of estimate) for the industry in FY15. While Wipro and Infosys are likely to fall well short of this figure, TCS too may not find it easy to grow revenues at a rate faster than the industry.

With consistent performance over the years, HCL looks all set to match, if not exceed, the trailing valuation multiples of 17-19 times commanded by Infosys and Wipro.

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