The country's fourth largest software and services company HCL Technologies on Tuesday reported a 10.3% increase in net profits for the October-December quarter...
The country’s fourth largest software and services company HCL Technologies on Tuesday reported a 10.3% increase in net profits for the October-December quarter at $291 million compared with the previous quarter, helped by high-margin internet-enabled digital technology services. Its profits for the July-September quarter were at $263.7 million.
During the fiscal second quarter, the company’s revenue increased 1.4% from a quarter earlier to $1.56 billion from $1.55 billion, the Noida-based company said in its earnings statement. HCL Technologies follows a July-June fiscal calendar. “As part of HCL’s 21st Century Enterprise blueprint, our investments and focus on BEYONDigital, Next-Gen ITO, and IoT WoRKS is enabling us to stay ahead of the curve and achieve a healthy business growth and financial performance,” said Anant Gupta, chief executive of HCL Technologies.
The better earnings came in despite the impact of floods in Chennai, which hurt its operations during the quarter, he said. “Our resilient business models, robust business continuity and disaster recovery practices, coupled with tremendous support from all our clients and employees helped us face the challenge extremely well,” Gupta said.
Internet-enabled and digital business boosted the company’s Ebidta margin to 21.5% during the latest quarter from 20.7% in the previous quarter, and 25% during the same period a year earlier.
HCL Technologies earnings follows the country’s top two software and services firms Tata Consultancy Services, and Infosys, which reported their earnings earlier this month. TCS’ net profit declined 0.9% from the previous quarter while Infosys said its net profits increased 1.97% sequentially. The two companies said their profits were also helped by digital businesses.
Profits were also boosted by the company’s strategy to move more of its contracts to managed services and fixed price contracts and have less reliance on time and material contracts. During the quarter through December, HCL Technologies managed services and fixed price contracts were at 57% of its total contracts compared to 56.2% of contracts in the quarter through September, while its time and material contracts declined to 43% from 43.8%. HCL Technologies’ sales grew during the quarter because of a “broad-based growth across all revenue segments” driven by infrastructure services which grew to 35.5% from 35.1% a quarter earlier; and business services that expanded to 5.5% of the revenue mix from 5.3% the previous quarter. However, its application services mix remained flat sequentially at 40.4%, while its engineering, and research & development services contracted to 18.6% from 19.2% of its services mix.
Among industry verticals, growth came in from public services at 10.6%; retail, and consumer product goods at 9.5%; and telecommunications, media publishing and entertainment at 9.7%. These three verticals had 10%, 8.8%, and 9.6% of revenue contribution, respectively, during the last quarter. Revenue from financial services and manufacturing declined to 25.9% from 26.1%; and 31.5% from 32.5% quarter-on-quarter. Among geographies, HCL Technologies got 61% of its revenue during the quarter from the US, while the region contributed about 58.7% during the past quarter. Europe and the rest of the world contributed 29.9%, and 9.1% of its revenue, compared to 31.7%, and 9.6% during the quarter earlier.