The company’s margins were impacted by investments in technology and an increase in cost structure, it said
India’s fourth largest IT services exporter HCL Technologies on Monday posted a 5.9% sequential rise in net profit to Rs 1,783 crore for the June quarter, though the operating profit margin dropped 1.2%, impacting its stock price by almost 6%.
HCL’s margins were impacted by various investments in technology and an increase in cost structure, the company said. Revenue rose sequentially by 5.5% to Rs 9,777 crore, boosted by overall demand for services like infrastructure outsourcing and R&D services.
CEO and president Anant Gupta said it has signed 58 deals worth over $5 billion in total contract value in FY15. The company follows the July-June fiscal. In dollar terms, quarterly revenue stood at $1.5 billion, up 3.2% sequentially and the net profit was at $279 million, rising 3.1%.
For the fiscal, infrastructure services, the mainstay of HCL Technologies’ business, exceeded revenue of $2 billion.
The engineering and R&D services crossed $1 billion in revenue.
However, earnings before interest and tax (EBIT) declined by 2.8% on a sequential basis for the quarter to $308.7 million and also fell on y-o-y basis to 9.4%. The EBITDA margin fell by 1.2% sequentially to 21.3% at the end of the June quarter.
On HCL results, Dipen Shah, head of private client group research, Kotak Securities, said, “HCL Technologies’ results were lower than expectations, both on the revenues and margins front. There was a significant miss on the margin front. The relatively higher utilization rates coupled with the need to increase sales, marketing investments and investing in emerging businesses may continue to impact profitability in the short-term.”
Reacting to these numbers, HCL Technologies’ scrip fell by 5.94% on the BSE on Monday to touch Rs 937.40 per share.
HCL Technologies’ result mirrors the trend witnessed in the Indian IT services industry which saw a rise in revenues but a dip on profits, which is largely due to pricing pressure, wage increase and currency fluctuations.
HCL Technologies also reported full-year numbers, with consolidated revenue rising by 12.6% to Rs 37,061 crore and net profit rising by 13.9% to Rs 7,254 crore. In US dollars, revenue rose 11.1% for the fiscal to $5.9 billion, while net profit was $1.1 billion recording a rise of 12.2%.
Employee headcount at the end of the June quarter stood at 106,107 though attrition level rose to 16.5% as compared to 16.2% in the sequential quarter.