HCL Tech profits up marginally

Strong client additions, growth across segments also helped company post revenue of Rs 10,341 crore

Information technology (IT) services firm HCL Technologies set better growth prospects for the year ahead, riding on higher order pipeline across its offerings. It would also focus on improved margins with delivery of new-generation technologies.

“The second half of the year continues to look good in terms of deal, especially re-bids,” said Anant Gupta, president and chief executive. An estimated $50 billion worth of deals would come for re-bidding in 2016-17, he said, quoting analyst reports.

Indian outsourcing firms bid for such contracts when global clients float tenders. Global firms, under pressure to cut costs and improve performance, look for the lowest bidder who can deliver value.

“The broad-based business wins, across service lines and industry verticals were driven by our next-generation offerings. Thus, on the back of strong order book, the company expects the second half of FY16 to be better than the first,” Sarabjit Kour Nangra, vice-president (research for IT) at Angel Broking, said in a note. The firm had met analyst expectations

HCL reported a marginal growth of 0.2 per cent in December quarter (its second quarter) profits to Rs 1,920 crore and 11.4 per cent growth in revenue to Rs 10,341 crore. HCL follows the July-June financial year. In the same quarter last year, HCL had reported profits of Rs 1,915 crore on revenue of Rs 9,283 crore.

“We have seen broad-based growth across sectors and business lines. Our investments and focus on BEYONDigital, Next-Gen ITO and IoT WoRKS are enabling us to stay ahead of the curve and achieve a healthy business growth and financial performance,” Gupta said.

He added the company had signed eight transformational engagements during this quarter, with more than $1 billion of total contract value. In dollar terms, the company’s net profit declined 5.4 per cent to $290.8 million in the reported quarter, while revenues grew 5.1 per cent to $1.56 billion.

Anil Chanana, chief financial officer, said the firm’s performance in the quarter continues to reflect the return from the investments that it has been making. “The return on equity for  2015 at 29 per cent has been amongst the best in the industry. We saw a 60 basis point expansion in margins,” he said.

The company is also expanding its presence in China to cater to its clients that have a manufacturing presence in the country.

On the impact of Chennai floods, Chanana declined to share details. “We managed the situation well with the business continuity and disaster management kicking in. We were able to keep the impact at a minimal,” he said, adding that it has about 30,000 employees in Chennai.

Asked about the impact of the increased visa costs, Gupta said the move will not have a big impact. “Our dependence (on H-1B visa) is negligible. So, it doesn't bother us. We have always hired more locals,” he added.

Total headcount stood at 103,696 at the end of December 2015, with gross additions at 6,234. However, on a net level, the headcount was lower by 1,875 people compared to the September quarter. The attrition for IT services on LTM basis stood at 16.7 per cent.

Growth according to Chanana was led by life sciences and healthcare at 27.7 per cent, telecommunications, media, publishing and entertainment at 23.6 per cent, public services at 17.8 per cent, retail and CPG at 12.6 per cent, manufacturing at 12.3 per cent and financial services at 10.1 per cent in constant currency.

“Engineering and R&D services revenue jumped 23 percent, Business Services grew 23.9 percent, Infrastructure Services at 16.4 per cent, and Application Services at 6.4 percent,” Chanana added.