Business

HCL first quarter net declines 8.2%

‘Lower profit on account of certain cost items’

HCL Technologies on Wednesday posted a decline of 8.2% in its net profit to ₹2,230 crore for the first quarter ended June 30, 2019, even as revenue rose 18.3% to ₹16,427 crore, compared with the same quarter last year.

The IT major, which is ‘cautiously optimistic’ about the growth this fiscal, maintained its revenue guidance of 14-16% in constant currency terms for FY19-20.

As per Indian Accounting Standards (Ind-AS), HCL Technologies’ net profit stood at ₹2,431 crore in the year-ago period, while revenue stood at ₹13,878 crore in the same quarter last year.

“We have started FY20 on a very, very strong note with continued revenue momentum. We posted double-digit quarterly year-on-year growth of 17% in constant currency [according to US GAAP accounting standards]. To give you a historic perspective, the last time we posted a 17% year-on-year growth was in 2011. In terms of incremental revenue added, it comes close to $100 million, which is the highest-ever incremental revenue that we have produced,” HCL Technologies president and CEO C. Vijayakumar said, announcing the results.

Asked about the decline in profit, HCL Technologies CFO Prateek Aggarwal said the lower profit was in line with the guidance that the company had given in the last quarter.

“Part of the reason is we had already invested in certain [aspects such as] sales and other direct costs as well... the HCL software deal [with IBM] was expected to be closed by June 1; instead, it closed July 1. But pretty much for the whole quarter, we were carrying the cost in anticipation of deal closure and the revenue was not there to start with,” he added.

In December last year, HCL Technologies had inked an agreement to acquire select IBM software products for ₹12,252 crore (about $1.8 billion), including earn outs of ₹1,035 crore ($150 million).

Mr. Aggarwal added that the revenues from the IBM deal will flow in from July-September quarter. “For the full year, revenue is expected to be about $625 million... which comes to about $150 million (a quarter) but there is seasonality to that with December being the highest quarter,” he added.

On the outlook for the future, Mr. Vijayakumar said, “Looking forward, the macro environment remains a bit volatile in the light of the interest rates and some of the tariff situations that we're seeing and reading all the time. We remain positive on the trajectory of the technology spend. We continue to make strategic investments so that we are continuing to grow, deliver an industry leading growth...on an ongoing basis.”

He added, “If we look at our run rate, we would already exceed the guidance... however, we are a little bit cautious because there's so many things happening in the world which can impact some clients and which could have some further impact on some business coming slowly for us.The So we are remaining cautiously optimistic.”

The board has declared a dividend of ₹2 per share.

The company added 16,332 people (gross) and 5,935 people (net) during the quarter to take its total head count to 1,43,900 at the end of the June 2019 quarter.

The company has started the process of giving salaries hikes to employees from July onwards. On-site employees will get wage hikes of 2-3%, while offshore employees will get an increase of 6-7%.

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Printable version | Jul 14, 2020 7:11:42 AM | https://www.thehindu.com/business/hcl-first-quarter-net-declines-82/article28872232.ece

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