HCL hits low-margin barrier in India

Written by Kirtika Suneja | New Delhi | Updated: Apr 23 2012, 08:58am hrs
A robust deal pipeline from its European clients made HCL Technologies post better than expected growth in revenues and profits for the last quarter. However, the company is struggling to find its ground in the Indian market, which it says is a low margin trajectory.

Despite getting lower margins from its India business, HCL Technologies focus is on strategic clients in India across verticals like financial services and government where it is signing both local deals and managing the India footprint of its global clients. While Americas contribute 56.7% to the firms revenues and Europes share is at 27.6%, revenues from rest of the world stand at 15.7%. Indias share, according to analysts, in this is close to 5%.

The firm is offering enterprise application services (EAS) to 20 customers in India and business process outsourcing (BPO) services to less than 5% of its global clients here.

We are sharply focussed on India though it is a low margin trajectory almost one-third of global margins. Most of the deals are in government purchases and financial services and we dont have many solutions for this market, said Vineet Nayar, vice-chairman and CEO of HCL Technologies.

The company won orders worth $2.5 billion over the last six months, and 88% of these were from the worlds top 2,000 companies. Besides, it won multi-year transformation deals worth over $1.5 billion (excluding contract renewals), the highest in the firms history, from 14 customers this quarter. Almost 70% of the deals are new accounts for HCL. Financial services lead in verticals with 46% share, while Europe leads in geographies with 51% share.

In its BPO business, the strategic clients in India are being serviced by a team of less than 100 people and HCL Technologies is mulling an India-to-India segment to cater to this market.

We want to retain the India business at the same level because it is a very price competitive market. We have local deals along with the global clients who are serviced from our facilities in Noida and Chennai, added Rahul Singh, president, HCL business services.

Same is the case with HCL Technologies fast growing EAS segment where president (EAS) Steve Cardell says that the margins differ by half as compared with the global clients.