Stock Fundamentals

Short Takes: Solid show by HCL Tech

BL RESEARCH BUREAU | Updated on October 19, 2013 Published on October 19, 2013


IT major HCL Technologies posted a healthy 14 per cent growth in revenues sequentially (3.5 per cent in dollar terms) to Rs 7,961 crore in the September quarter. Key segments such as financial services, manufacturing, and life sciences and healthcare grew between 5.6 and 6.8 per cent. Infrastructure management services business grew at a robust 8.7 per cent, while other services clocked a below 2 per cent growth rate.

Increase in the share of fixed price contracts, which offer higher margins, to 54.7 per cent helped revenue growth. Higher sales growth from the top 20 clients also boosted overall performance. The company also added one client in the $100-million category. Geographically, the US and Europe grew robustly at 4 per cent and 2.6 per cent respectively. A revival in spends in the US and Europe bodes well for the company.

Rupee, petrochemicals help RIL

Reliance Industries’ profit in the September quarter was up a marginal 1.5 per cent on a year-on-year basis. Profits from the refining, and oil and gas exploration segments were down 10 per cent and 59 per cent respectively. It was the 44 per cent profit growth in the petrochemicals business made up for the weak performance in the other segments.

Besides higher volumes, the petrochemicals business was also boosted by a weak rupee.

The weak rupee also helped lessen the impact of the 19 per cent fall in gross refining margins (GRMs) to $7.7 a barrel. In rupee terms, fall in operating profit in the refining segment was restricted to 10 per cent.

The exploration business took a hit on account of the continued fall in output from the KG-D6 fields. With the government planning to not allow price hike on the output from the fields, the outlook does not appear bright for the domestic gas business. Theinternational gas business though looks promising — the company’s shale gas output in the US grew over 30 per cent in the September quarter. The benefit of this although not reflected in September quarter standalone results, will show in the annual consolidated results.

HDFC Bank skips a beat

HDFC Bank’s net profit grew 27 per cent year-on-year in the September quarter, missing its usual 30 per cent mark in the past. The RBI’s liquidity tightening measures has contributed to the decade low profit growth.

Also, the bank took a conservative approach by accounting for the mark-to-market losses on its investments in government securities fully, in the September quarter itself, instead of amortising it.

The bank’s loan book growth was 16 per cent, compared to the 17.9 per cent growth in the banking sector. This is in contrast to the past when HDFC has outperformed the sector’s loan growth by 6 to 10 percentage points. One reason is that the bank grew its corporate loan book selectively due to the increase in cost of funds. Also, on the retail front, the bank did not buy back home loans from parent HDFC, impacting overall loan growth by 1 to 1.5 per cent. The bank expects buy backs to resume in the coming quarters.

Net interest margin declined by 30 basis points compared with the June quarter.

With only 20 per cent of the bank’s loans on a floating basis, the bank was unable to completely offset the higher costs, despite a 20 basis points increase in its base rate in August.

However, the situation should improve with liquidity easing. Also, the $350-million FCNR deposits raised under the RBI’s special swap facility, at about 8.25 per cent, will help lower the cost of funds.

The bank’s gross non-performing assets deteriorated to 1.09 per cent of loans. Still, this is one of the best among private players.

Published on October 19, 2013
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