The company goes for restructuring to have greater control over the operational and financial performance
IT hardware and system integration company HCL Infosystems on Tuesday said it would spin off three of its business lines—hardware, learning and services—into separate units to create a leaner structure and have greater control over the operational and financial performance of each business units.
After a meeting on January 14, 2013, the Board of Directors has approved alignment of these business lines along three subsidiaries with the objective of providing focused management orientation and create leaner organisation for the hardware solutions business, the Noida-based company said in a statement.
The company's board has approved transfer of hardware solutions business to wholly-owned subsidiary HCL System Integration Ltd, the statement said. The hardware solutions vertical includes personal computers, tablets and system integration business.
After the company saw profit erosion in the computing business in Q1 and Q2 of FY 2012 due to foreign currency fluctuation and Thailand floods, there was buzz that HCL Info may altogether exit the hardware business. However, the company had time and again denied this.
The company further said that the learning business will be transferred to its subsidiary, HCL Learning Ltd, while the services business will go to a subsidiary called HCL Care Ltd.
The learning subsidiary will encompass HCL's offerings on DigiSchool, learning content, vocational training and test preparation, while the services subsidiary will focus on services business including support services, managed services and office automation services. The board has also approved merger of HCL Infocom, a wholly-owned subsidiary, with HCL Infosystems.
"Different businesses of the company are at various stages of business lifecycle maturity. Some of the new growth businesses are at stages of infancy requiring investments and capabilities acquisition, while the more mature businesses need re-tooling to be prepared for the changing business environment," the company said.
The company is yet to announce the heads for these subsidiaries.
HCL Infosystems said it had appointed consultants to advise on the matter of restructuring. Besides, a committee has also been appointed to take necessary actions for obtaining requisite approvals.
In the July-September 2012 quarter, the company's standalone net profit had dipped over 84 per cent to Rs 2.54 crore when compared with the year ago period. Net sales in the reported quarter stood at Rs 2,341.68 crore, down nearly 13 per cent on YoY basis.
Computer system and other related products and services vertical accounted for about 28 per cent of its overall revenues in the quarter while Communications and Office Automation business contributed the rest.
The shares of the company closed at Rs 41.00, an increase of 4.86 per cent over Monday's close at the end of the day's trading on the Bombay Stock Exchange.
Drivers for restructuring
* Focused management orientation to each of the businesses
* Greater visibility on the operational and financial performance of each business
* Higher degree of independence as well as accountability for each of the business segments
* Opportunities for strategic partnership for growth of the business
* To address talent and funding needs of these different businesses more effectively
After they together paid Rs 12 lakh to settle charges related to alleged delay in amending insider trading norms