HCL Results: Better than Expectation

| Published: Thursday, April 21, 2011, 10:25 [IST]

Mumbai, Apr 20: HCL Technologies, the fourth largest software services firm in India, informed the exchange of its result. It turned out to be better than what analysts had expected.

According to the results, net profit for the company increased by 26.37% rise year-on-year, meanwhile the same was up by 16.03% sequentially. (Data from BSE)

After the results, the shares of the company reached a 11-year high of Rs 522.35 on intra-day. The BSE IT index was up 1.6 per cent.

At the time of writing this (12.59 p.m.) the stock was up 7.60 per cent at Rs 511.75.

HCL's business grew by 81% outside of Europe and the Americas, according to its press release. All its service offerings also showed strong growth of 34-43 per cent.

The total headcount reached 73,420. Net employee addition for the period was 1,153.

HCL also stated that it bought software assets from Citibank International during Jan-March for $26 million, from which revenues are expected to come from the middle of its fourth quarter this year.

HCL, in a statement said that as part of this deal, it is also taking over 41 employees from Citi and an "assured revenue stream" of $135 million spread over 10 years.

After Infosys, the No.2 IT player in India, gave forecasts that clients are spending less, led many to believe that the sector's growth can be under threat.

Jan-March is a seasonally weak quarter, as clients generally finalise their budgets for the next fiscal during this period, leading to a spurt in spending in the first two quarters of the upcoming fiscal year.

Depreciation of rupee against dollar also helped make up the dip in utilisation rates and perhaps assisted the HCL's core operating margins for the period. Their operating margins improved by about 1 percentage point from December quarter to 17.3 per cent.

Indian software companies get most of their revenue in foreign currency. Some of this risk is hedged but since most of their costs being in rupees, currency appreciation puts to pressure margins.

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