HCL Technologies has posted 50 per cent rise in net profit for the three-month period ended September, and struck a bullish note for the ongoing December quarter citing a slew of contracts that are slated for renewal.
The consolidated net profit in July-September, the first quarter of fiscal 2012, stood at Rs 497 crore. It was Rs 331 crore in the year-ago period. HCL follows a July-June financial year.
The revenue stood at Rs 4651.3 crore, a growth of 25 per cent – yet the markets were disappointed.
The results came a day after TCS's below-par performance. TCS had reported 6.1 per cent increase in net profit, its performance muted by reduced pricing on contracts, forex fluctuation and higher costs.
HCL Technologies CEO, Mr Vineet Nayar, said that the macro economic indicators had not hit business sentiments. Instead, he cited sourcing advisory firm TPI's estimates that $8 billion worth of contracts will be restructured in the marketplace between October and December. HCL believes that many of these re-negotiated contracts will come from Europe.
“It will be mother of all battles being fought in terms of deal restructuring… The macro indicators continue to be troublesome in the US, Europe, Japan and China, but significant opportunities are being created,” he said.
Cash reward for staff
The management's positive commentary and even a decision to reward employees and shareholders on achieving a ‘billion dollar quarter' milestone could not talk up the streets. To celebrate its revenue milestone, HCL is handing out cash reward to its employees – the takeaway ranges from cash equivalent of five to ten shares. The board has also declared an interim dividend of Rs 4 per equity share of Rs 2 face value. This pay-out includes a ‘one-time special milestone dividend'.
HCL shares closed 8.6 per cent lower on the BSE on Tuesday, at Rs 401.15.
HCL's business volume (a measure of person months billed) grew 5.1 per cent, against four per cent in June quarter and 4.8 per cent in March quarter. The earnings margin before interest, tax, depreciation and amortization was lower at 17.1 per cent from 18.5 per cent in the preceding three months.
“There was a negative impact of 250 basis points on account of the recent wage hike and 50 basis points due to Selling, General and Administrative expenses. But we have been able to partly offset those and hence the final impact is reduced to only 150 basis points,” said the HCL CFO, Mr Anil Chanana.
Mr Nayar said that HCL will keep its margin at 14 per cent, excluding any effects of currency fluctuations.