HCL Q1 net dives 59% as forex losses weigh

NEW DELHI: HCL Technologies, the country’s fifth-largest IT services firm, on Friday posted a 58.8% sequential and 71% year-on-year decline in net profit for the quarter ended June 30, 2008 at Rs 141 crore, on the back of a forex loss of nearly Rs 300 crore. Consolidated revenue for the quarter grew 11.5% sequentially and 34.5% y-o-y to Rs 2,168.8 crore on the back of volume growth, largely in the US and Europe.

The company declared a 150% dividend for the quarter. HCL Technologies also announced the appointment of CEO Vineet Nayar to its board of directors, effective August 1.

During the quarter, the company’s EBITDA (earnings before interest, tax, depreciation and amortisation) grew 17.4% sequentially and 46.3% y-o-y to Rs 508.4 crore. Operating margins improved to 23.4%, against 21.6% in the same quarter last year, as utilisation rates improved. Utilisation levels improved to 73.9% at the end of the quarter, against 71.3% at March-end. The company won deals worth $310 million during the quarter.

HCL Technologies reported a forex loss of Rs 299.9 crore during the quarter as the rupee dipped over 7% against the dollar. Of this, Rs 133.4 crore was due to unwinding of forex covers during the quarter and another Rs 38.7 crore was cash loss. The remaining Rs 127.7 crore was mark-to-market forex loss. HCL had reported a forex gain of Rs 250.4 crore in the same quarter last year. “We look at forex covers as a long-term strategy. Over the past three years, we have made a net forex gain of $0.4 million,” said Mr Nayar.

For the year ended June 30, 2008, the company’s net profit declined 16.9% to Rs 1,124.8 crore. Consolidated revenue for the year stood at Rs 7,639.4 crore, a growth of 26.6% over FY07. EBITDA for the year grew 26.7% to Rs 1,693.9 crore. Operating margins for the year remained flat at 22.2%. The tech firm signed deals worth $1 billion during the financial year.

Forex loss for the year stood at Rs 306.7 crore, against a gain of Rs 328.1 crore last year. HCL now has a forex cover of $2 billion for the next seven quarters.

“The year has been great for HCL Technologies. US revenues crossed $1 billion while Europe crossed $500 million. Among verticals, financial services and manufacturing crossed $500 million each in revenues,” HCL Technologies chairman & chief strategy officer, Shiv Nadar said.

US improved its contribution to HCL Technologies’ revenues to 57.4% at the end of June, against 55.9% in the previous quarter. The growth in US was led by financial services, lifesciences and manufacturing verticals. Europe accounted for 29.1% of revenues, while Asia-Pacific made up for 13.5%.

Hi-tech manufacturing became the largest contributor to HCL’s revenues this year with a 30.7% contribution. The vertical accounted for 28.7% of revenues last year as did financial services, which now accounts for 27.3%.

Consolidated IT services, including software and infrastructure services, registered a revenue growth of 28.6% during the year while BPO services revenues grew 13.7%.

“We are trying to break the linearity in BPO services by focussing on platform-based BPO and outcome-based pricing, the results of which will be seen in the next few quarters,” said HCL BPO chief executive, Ranjit Narsimhan.

The tech company also improved its revenue mix according to contract-type. Fixed-price contracts, which offer a greater scope to increase margins, accounted for 35% of HCL’s contracts, against 30% last year.

“Going forward, we expect margins to remain intact and utilisation at the same levels,” Mr Nayar said. The firm crossed the 50,000-employee mark and had 50,741 employees at the end of June. It has earmarked $150 million as capex for 2009. The company is setting up 16,000 more seats in SEZs in Noida, Chennai and Bangalore.
thanks to :- economictimes.indiatimes.com