HCL Tech’s Q1 net soars 78% on big ticket deals

S. Ronendra Singh New Delhi | Updated on March 12, 2018 Published on October 17, 2012


Vineet Nayar, Vice-Chairman & CEO, HCL Technologies. (file photo)

IT firm eyes $40-b worth of contracts in the October-December quarter

HCL Technologies on Wednesday reported yet another quarter of good results combined with an upbeat outlook, even as some of its rival companies struggle in a tough market.

The company reported a net profit of Rs 885 crore for the first quarter ended September 30, up 78 per cent compared with Rs 497 crore in the corresponding period last year.

Revenues during the quarter also rose by 31 per cent to Rs 6,091 crore from Rs 4,651 crore in the same period last year.

“Increased wins in Fortune 500 accounts have resulted in America and Europe geographies growing at 34 per cent and 37 per cent,YoY, respectively,'” Vineet Nayar, Vice-Chairman and Chief Executive Officer, HCL Technologies, said. HCL bagged five deals worth over $100 million each in the first quarter compared to just one such deal in the corresponding period last year.

He said according to the TPI report, there is an opportunity of $60-70 billion of renewal market (deals) for IT industry every year and many deals will happen till 2014. TPI is part of the US-based Information Services Group, which offers technology insights and market intelligence.

Nayar said HCL Tech will eye $40 billion-worth contracts coming up for renewal in the October-December quarter this year.

There are more opportunities coming up from Europe and the US as they are also opening up to outsourcing.

US elections

However, he also cautioned that IT budgets of customers are expected to be flat or negative in the near future and said discretionary spends would depend on a company’s performance. When asked if the US Presidential elections next month would have any impact, he said that HCL does not expect any significant impact and the company has been hiring people in the US.

The company had earlier announced hiring 10,000 people in the US and Europe till 2015. It has already hired around 5,500 employees till now in both regions.

The US and Europe contributed 57 per cent and 28 per cent, respectively, to overall revenue during the quarter. Rest of the world contributed 15 per cent.

Wage hike

The company won 12 multi-year, multi-million dollar deals in the quarter across manufacturing, financial services and consumer services. The company added 1,016 employees in the quarter leading to a total head count of 85,335 employees by September end.

The company that counts July to June as fiscal year had given wage hikes of 8 per cent for offshore and 2 per cent to onshore employees during the quarter.

Analysts also were positive about the country’s fourth largest IT company and are expecting the growth momentum to continue.

“The company had guided for a 200 basis points dip in operating margins owing to the annual increments to be given away during the quarter. But the operating margins came in at 22.2 per cent that expanded by 20 bps sequentially in first quarter,” Rajni Ghildiyal, Senior Analyst of Asit C. Mehta Investments Intermediates, said.

She said the average salary per employee has increased by a meagre 1.6 per cent quarter-on-quarter. However, she said the complete impact of wage hikes is not incorporated in the current quarter results and expects the impact of wage hike to flow in second quarter results.

“HCL Tech’s results gave a positive surprise on the margins front. Revenues matched up to expectations. Maturing of large projects and increased off-shore contribution from the same helped margins sustain despite salary hikes,” Dipen Shah, Head - Private Client Group Research, Kotak Securities, said.


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Published on October 17, 2012
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