HCL Tech registers marginal increase in Q2 net

Circuit EC/New Delhi

Nadar says a squeeze on margins and falling billing rates have caused profits to slide

HCL Technologies posted a mere one percent growth in its net profit of Rs 125.6 crore for the quarter ended December 31, 2001 as compared to Rs 124 crore in the corresponding period last fiscal. Gross revenue increased by 17 percent to Rs 401.3 crore in the second quarter from Rs 342.3 crore of the corresponding quarter previous year. The direct cost of the company climbed 26 percent in the reporting quarter to Rs 218.4 crore from Rs 173.2 crore of the same period last year.

HCL Technologies also lowered its revenue and profit projection for the entire financial year ending June 2002. The company is now confident of achieving a revenue of Rs 1,660 crore with a profit of Rs 505 crore as compared to its earlier projections of Rs 1,750 crore revenue and Rs 575 crore profit. This would mean that the company expects to grow its revenue by 18 percent and profit by a mere 3 percent in the current fiscal against last financial year.

According to company chairman and chief executive Shiv Nadar, revenue and profit growth had slowed down because of billing pressures and squeezed margins. “The margins have dropped by 2 percent in the second quarter as compared to first quarter this year and the downward trend is expected to continue for the calendar year 2002,” he said.

“Market conditions remain competitive and challenging. Also, the recovery of IT spends that was anticipated to set in by October last year has been delayed. However, a silver lining is that it has promoted several large organisations to explore outsourcing.,” he said.

The company has taken several de-risking initiatives and started focusing on new practice areas such as enterprise application implementation and integration services in CRM, ERP and SCM, storage and security space. “The three acquisitions were also part of de-risking exercise to enter into financial domain and business process outsourcing. We are also entering into avionics and CAD/CAM areas,” said Nadar. “I would like to mention that the company is making progress in entering into new strategic partnerships which would result into higher growth in revenue and bottomline.”