HCL Tech does it again: Q3 numbers beat the street

Naysayers to India’s fourth largest software giant must be eating a humble pie as HCL Tech’s latest quarterly figures beat analysts’ estimates, once again.

In yet another sign that its highly proclaimed and much wondered about philosophy of ‘employees first, customers second’ is no fad, the New Delhi-headquartered HCL Technology has delivered its third quarter numbers that once again outperform the street’s expectations by significant margins. HCL Tech’s latest result, however, vindicate market analysts’ view that ‘Infosys is no more a benchmark for the Indian IT sector.’

During the third quarter ended March 2011 (the company follows July 1 - June 30 financial year), HCL Tech’s revenue grew 32% YoY to Rs. 4,138 crore; the revenue growth was up 6.4% on a sequential or Q-o-Q basis. The company’s operating profit (EBIT) jumped 17.3% y-o-y to Rs. 597 crore. The biggest surprise, however, was the growth in net income, which crossed $ 100 mn/quarter milestone to reach Rs. 468 crore, which is a jump of 33% y-o-y and 17.1% q-o-q. The street-beating performance comes despite the fact that Jan-March is a seasonally weak quarter as clients remain busy with finalizing budgets for the next financial year. The company also added 1,153 (net additions) to take its total headcount to 73,420. 

The robust performance was led by the buoyant IT Services business segment which grew by 6.2% sequentially. HCL Tech also signed 11 transformational deals across service lines, verticals and geographies, during the said quarter. Top 10 clients accounted for a fourth of the firm’s consolidated revenue, while repeat business too remained stable at 94.5%, during the quarter. 

In terms of revenues by vertical, Financial Services and Manufacturing accounted for over half (54%) of the total revenues during the quarter while in terms of Geography mix, the company successfully trimmed exposure to the US and Europe while the share of the Rest of the World jumped. 

Revenues from onsite software services stood at 27.1% while the rest was accounted for by offshore services, though utilization rate (offshore, including trainees) was lower at 71.9% during the March’11 quarter vs. 76.2% in the same quarter a year ago. In another negative, in the IT Services, the attrition rate too jumped to 17% against about 14% in the same quarter of the previous financial year.  However, in the BPO business segment, attrition rate (offshore) nearly halved to 11% from 20.3%, during the same period.

“We continue to expand market share backed by a second sequential quarter of revenue growth of 30%+ YoY along with expansion in margins. HCL’s focus on forward investment in key markets and transformation services is paying rich dividends,” said Vineet Nayar, Vice Chairman and CEO, HCL Technologies. The company’s operating margins expanded by 130 basis points (bps) to 14.4%, during the January-March quarter of FY 2011.

So, is HCL Tech going to be the new poster boy of Indian IT? Lets wait for the results of the two biggies, TCS and Wipro, and the challenger, Cognizant.

Source: Company

Looks like it’s going to be a summer of battles for supremacy at India’s $60bn technology sector.

Amy, Chief Editor