HCL Tech profit flat as core business slows; stock tanks

Written by FE Online | Bangalore | Updated: Oct 18 2014, 06:26am hrs
Indias fourth-largest IT services exporter, HCL Technologies, posted flat net profit growth in the quarter ended September, hit by lack of momentum at its core infrastructure services business and cross-currency movement. HCL reported a net profit of $307 million for the September quarter, up a mere 0.6%, as it failed to meet Street expectations. Revenue during the period grew 1.9% to $1,433 million. The company follows the July to June fiscal.

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Following the announcement, the HCL scrip slid 9.09% on the BSE to close at Rs 1505.55. However, the company also said that it had signed 15 business engagements worth over $1 billion during the quarter.

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HCL Technologies CEO Ananth Gupta said, Going forward, our investments will continue in the three strategic markets of ITO, engineering services outsourcing and the emerging digitalisation space which will enable a continued

balanced business portfolio performance for the

company.

In rupee terms, net profit grew 2.1% sequentially to Rs 1,873 crore while revenue rose to Rs 8,735 crore with growth of 3.7%.

The operating margin took a hit with a decline of 120 basis points sequentially to touch 25.1%. The impact was due to wage hikes and a contraction in the utilisation rate.

HCLs results were below estimates. Revenues disappointed with constant currency growth of 3.2%. Ebidta margin also came in slightly below expectations, Kotak Securities Head Private Client Group Research Dipen Shah said.

In terms of geographies, Americas grew 5.7% sequentially while Europe dipped marginally, by 0.3%. The company said that in coming quarters, strong growth will continue to come from the two geographies, which account for over 80% of the companys turnover.

In terms of verticals, the retail & CPG segment recorded the highest sequential growth of 14.3%.

The company added 11,631 employees on a gross basis during the September quarter, taking the total headcount to 95,522. It also gave wage hikes to the tune of 2-3% onsite and 5-7% offsite during the quarter, which had a 80 basis point impact.

There will be a further impact of about 130 bps in the next quarter as the

total impact of the wage hike kicks in, HCL Technologies CFO Anil Chanana said.

Meanwhile, the board of directors of the company declared an interim dividend of Rs 6 per equity share. The payment date of the dividend will be November 3, 2014.