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HCL Tech quarterly net grows 63.8% in better-than-expected performance

Posting a better-than-expected performance, IT services firm HCL Technologies on Thursday reported a 63.8 per cent increase in consolidated net profit for the quarter ended 30 September, 2013, aided by a weak rupee and encouraging macro-economic trends.
India's fourth largest software services exporter's net profit rose to Rs 1,416 crore in the first quarter from Rs 864 crore in the year-ago period.

Consolidated revenues grew 31.2 per cent to Rs 7,961 crore in the July-September quarter this fiscal from Rs 6,069 crore in the same quarter of last fiscal.The firm follows July-June as the fiscal year.

Commenting on the performance, HCL Technologies chairman and chief strategy officer Shiv Nadar said: 'Against the backdrop of encouraging macro-economic trends, these results cement HCL's position as a company with a strong and differentiated business model.'

However, market analysts said that sequentially a below expected performance by the Noida-based firm on revenue front compared to rivals, TCS and Infosys, disappointed investors.

Compared to a Tata consultancy Services’ (TCS) sequential revenue growth of 5.4 per cent in US dollar terms and Infosys's 3.8 per cent, HCL's revenues rose by 3.5 per cent quarter-on-quarter.

In dollar terms, net profits rose by 42.8 per cent to $225.6 million in the first quarter of the current fiscal against $158 million in the year-ago period. Revenues rose by 14.1 per cent to $1.27 billion during the review period from $1.11 billion in the corresponding quarter last fiscal.
'HCL continues to strengthen its position in the momentum markets of the industry with Europe crossing a milestone run rate of $1.5 billion reflecting a very healthy 23.6 per cent growth y-o-y,' HCL Technologies President and CEO Anant Gupta said here.

The year-on-year growth of 42.8 per cent in net income and 14.1 per cent in revenues continues the 8 successive quarter of HCL's story of profitable growth, he added.

'The results reflects our strategy on both the momentum and emerging momentum markets. In momentum market, significant growth in financial services and manufacturing segment and in emerging momentum markets, which are life sciences, healthcare and public services, continue to drive,' Gupta said.

'From a deal win perspective, we booked over one billion dollar this year. Nine transformational deals, which are a significant mix of integrated deals between applications and infrastructure, driving the growth,' he said.

Deal wins were led by manufacturing, financial services, life sciences & healthcare and public services, with the US and Europe continuing to drive wins during the quarter.

HCL Technologies added 11 clients during July-September, taking its total clients to 838. Most additions - six were in $20 million bracket, followed by 3 in $10 million and one each in $40 million and $100 million, it said.
The company's net income margin rose to 17.8 per cent helped by 300 basis points (250 on the back of rupee depreciation and the rest on efficiency gains in business operations).

On currency impact, HCL technologies CFO Anil Chanana said: 'Currency did play a good part in expanding our margins, particularly in the first quarter. Efficiencies also helped us in expanding margins. Wage hikes took away 50 basis points.'
For the quarter ended 30 September, 2013, HCL Technologies had cash and cash equivalents of $96.8 million compared to $123.3 million at the end of 30 June, 2013.

Chanana said HCL is expanding its facilities, about 16-17 globally, creating 31,000 seats, majorly over three campuses in India -- Noida, Bangalore and Chennai.

'Consolidation is helping us to cut down operating costs.It also includes consolidating small facilities. It started last year and is expected to be over by end-2015,' he added.

Besides, HCL is also expanding its near-shore Mexico facility to cater to clients in the North American market.HCL Technologies added 1,691 employees during September quarter, taking the total headcount to 87,196.

About 18 per cent of its employees are outside India. The firm expects to increase this to 22 per cent in the next two years.
Analysts said the better-than-expected performance for July-September quarter by TCS, Infosys and HCL Technologies signals an accelerated spending by clients.

On HCL, they said its quarter-on-quarter growth is a bit disappointing but the year-on-year rise is commendable.Angel Broking Research Analyst (IT) Ankita Somani said: 'For Q1 FY'2014, HCL Tech marginally disappointed on revenue front, but exceeded expectations considerably on operational performance as well as on the overall bottomline front.'
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