HCL Infosystems net profit dips by 11%

Information Technology hardware manufacturer HCL Infosystems on Thursday reported a 11 per cent decline in its net profit to Rs 53.28 crore for the quarter ended March 31 as it failed to convert the order backlog in the government projects into revenues.

The revenues of the company declined by three per cent to Rs 2,730 crore during January-March quarter.

The company said its system integration (SI) business got adversely impacted by the delays in the decision making in various government and public sector undertakings (PSUs).

“Sharp decline in the revenue recognition in the high margin SI business did suppress profits of the company for the quarter,” HCL Infosystems said adding that this trend may continue over a few quarters. System Integration (SI) business opened the quarter with a healthy backlog. During the quarter, the company also bagged additional orders of about Rs 750 crore for SI works.

The distribution business also experienced a significant decline in sales and profits with a leading telecom brand in the company’s portfolio recording a dip in revenues.

HCL Info has started a programme to re-align the organisation to drive cost and working capital efficiencies, which are expected to add to profit and cash-flow over the next 12-15 months.

"The company is now carrying a significant order book of long-term contracts where revenue would be recognized over 5-10 years based on periodic or transaction-based billing," HCL said. It, however, added that these contracts would take time to reflect in financial performance as they have a billing gestation period spread over the next two-three quarters.

The board has proposed an interim dividend of Rs 2 per share on the face value of Rs 2 each for the financial year 2010-11.