HCL Tech gains after acquiring Volvo's external IT business

HCL Technologies gained 0.38% to Rs 860.45 at 14:15 IST on BSE after Volvo Group divested external IT business and outsourced IT infrastructure operations to HCL Tech.

The company made announcement during market hours today, 20 October 2015.

Meanwhile, the S&P BSE Sensex was down 29.28 points or 0.11% at 27,335.64.

On BSE, so far 1.15 lakh shares were traded in the counter as against average daily volume of 1.56 lakh shares in the past one quarter.

Shares of IT company hit a high of Rs 866.50 and a low of Rs 849 so far during the day. The stock had hit a record high of Rs 1,058.20 on 11 March 2015. The stock had hit a 52-week low of Rs 725.18 on 15 December 2014.

The stock had underperformed the market over the past one month till 19 October 2015, dropping 9.85% compared with Sensex's 4.37% rise. The scrip had also underperformed the market in past one quarter, sliding 10.32% as against Sensex's 3.86% fall.

The large-cap company has an equity capital of Rs 281.25 crore. Face value per share is Rs 2.

HCL Technologies said it has entered into a letter of intent with the Volvo Group for undertaking an outsourcing engagement for its IT infrastructure and operations services. The contract tenure is for five years. The total value of the contract was not disclosed. In addition, HCL Technologies would be acquiring from the Volvo Group, its external IT business relating to provision of IT infrastructure, mainframe services and application operation services for an all cash consideration of SEK 1.1 billion ($138 million). The transaction is to be closed during the second quarter of 2016 and will provide both cost savings and a capital gain. Volvo Group derived revenue of SEK 1.6 billion ($190 million) from external customers during the last twelve months from its external IT business. The deal would be subject to the parties entering into binding agreements and the regulatory approvals.

The Volvo Group and HCL have signed a letter of intent, awaiting the signing of the final contract. Approximately 2,600 Volvo personnel globally will be affected by the transaction. They will be given the offer to move over to HCL Technologies and will continue to work closely with their colleagues in Volvo's IT services division.

HCL Technologies' consolidated net profit fell 3.2% to Rs 1726 crore on 3.3% rise in revenue to Rs 10097 crore in Q1 September 2015 over Q4 June 2015.

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