HCL Tech Q4 Net Jumps 53.7%; Sees Strong Growth Ahead
NEW DELHI Buoyed by strong growth in application and infrastructure services, India's fourth largest IT solutions firm HCL Technologies Thursday reported a 53.7 per cent surge in its consolidated net profit to Rs 1,834 crore for the fourth quarter ended June 30, 2014.
The company, which follows a July-June quarter, had posted a net profit of Rs 1,193 crore in the year-ago period. Consolidated revenues of the Noida-based firm rose 20.7 per cent to Rs 8,424 crore in the April-June quarter as against Rs 6,980 crore in the same period last year.
"The traction in application and infrastructure services has been strong. It was a strong year for us, we crossed the USD 5 billion revenue milestone and have further evolved the key building blocks to deliver next generation propositions to customers," HCL Technologies CEO Anant Gupta told reporters.
He added that backed by the solid performance, HCL Technologies remains confident in its ability to continue delivering industry leading growth.
In US dollar terms, HCL Technologies reported a 44.2 per cent rise in net profit for the June quarter to USD 305.4 million, while revenues rose 14.6 per cent to USD 1.4 billion.
Application services revenue grew 7.9 per cent year-on -year in dollar terms, while that from infrastructure services moved up 25.6 per cent for the June 2014 quarter compared to the same period last year.
"HCL Technologies Q4 FY14 results were above our estimates on all front. We like the company's performance in software vertical. However, ability to maintain its margin post software vertical revenue expansion remains the watchable going-ahead," Research IndiaNivesh Securities Head Daljeet S Kohli said.
For the full year ended June 30, 2014, its net profit moved up 58.3 per cent to Rs 6,369 crore as against Rs 4,023 crore in the previous fiscal. Revenues rose 27.8 per cent to Rs 32,917 crore during the year as compared with Rs 25,758 crore in FY 2012-13.
HCL said it has signed over 50 transformational engagements with more than USD 5-billion Total Contract Value (TCV) during FY 2013-14.
The company's scrip was trading at Rs 1553.60 apiece in late afternoon trade, 2.74 per cent below yesterday's close on the BSE.
"While the broad numbers look healthy and the HCL Tech management looks happy on the outside, the investors are questioning the lopsided growth, i.e heavy reliance on few pillars like infrastructure management services, chosen verticals and geographies," Greyhound Research CEO and Chief Analyst Sanchit Vir Gogia said.
Talking about growth in quarter ahead, Gupta said there are significant opportunities in the European region as well as in the US market.
"Our pipeline is stronger today than it was at the same time last year. Europe has significant opportunities and there is huge potential in the US too. In RoW, Australia is witnessing good traction," he added.
Americas accounted for 57 per cent of the company's revenues, followed by Europe at 30.5 per cent and Rest of World (RoW) at 12.5 per cent.
The firm said it added one client in USD 100-million plus (deal size) category, four clients in the over USD 50-million and 16 clients in more than USD 20 million segment.
Gupta said the company is witnessing good demand for digital services as well as engineering and R&D services.
"We are increasing our focus on security as cyber threats are on the rise and enterprises are concerned. Security will have a big role to play as Big Data grows and the ecosystem of Internet of Things and Machine to Machine communication grows further," he said.
The firm added 8,442 people (gross) and 1,501 people (net) during the quarter to take its total headcount to 91,691. Its rate of attrition remained unchanged at 16.9 per cent.
Asked about wage hikes, Gupta said onsite employees will be given an increment of 3 per cent, while offshore ones will get 7 per cent increase.
"Our promotion cycle is staggered and begins this month. We expect the total impact of hikes to be about 180 basis points," he added.
HCL's cash and cash equivalents, investments and borrowings at the end of June 2014 stood at Rs 1,020.6 crore. "The superior operating performance has been accompanied by efficient working capital management including DSO (days sales outstanding), high conversion of profits into cash and return on equity at historic high of 36 per cent," HCL Technologies CFO Anil Chanana said.
He added that the company will invest 3-3.5 per cent of its revenue on capital expenditure to upgrade and expand delivery centres and other operational requirements. The company announced dividend of Rs 12 per share, its 46th consecutive quarter of dividend payout.