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HCL Tech Q2 net soars 68.4%, shares jump

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IT major HCL Technologies has reported higher than expected profit for the October to December quarter underscoring the trend that the worst might be behind India's $100 billion outsourcing industry.

India's fourth-largest software services provider said net profit for its fiscal second quarter ending December 2012 jumped to Rs 965 crore indicating a 68.4 per cent growth year-on-year. HCL Tech had reported net profit of Rs 573 crore in the year ago period. Brokers polled by NDTV Profit had estimated net profit to decline marginally to Rs 825 crore on the back of wage hike and higher sales and marketing expenses.

U.S. dollar sales were up 3.6 per cent sequentially to $1154 million against $1114 million and were above estimates of $1148 million.

The biggest surprise was on the margin front. HCL Tech's operating margins were at 19.8 per cent against estimates of 18 per cent. Most analysts had expected HCL Tech to report a dip in margins on account of wage hikes, but the beat came on account of higher utilization, which jumped 140 basis points quarter-on-quarter. Lower selling, general and administrative expenses also added to the margins.

HCL Tech shares rose as much as 7 per cent to a 12-year high on Thursday after its October-December earnings beat estimates

"Our growth this quarter was driven by Infrastructure and Financial Services, both growing in excess of 10 percent sequentially," new Chief Executive Anant Gupta said in a statement. That augurs well for outsourcing spending as financial clients are among the largest spenders globally on technology.

Infrastructure refers to managing large banks of computer servers, networks and the software they run on.

HCL Technologies, whose customers include Freescale Semiconductor and Finmeccanica, won six large contracts during the quarter, according to the statement. The company also added 2,118 employees in the three months to December.

Sales rose 19.6 percent to Rs 6,274 crore, ahead of analysts' estimate of Rs 6,236 crore.

HCL Tech joins Infosys and Tata Consultancy Services in signalling an outsourcing pickup.

Infosys, India's No. 2 software services provider, on January 11 beat expectations for the December quarter and unexpectedly raised its dollar-terms revenue forecast for the fiscal year ending March 31. Tata Consultancy also beat forecasts, on December 14, and said it was "very confident" heading into the new year.

Third-ranked Wipro reports its earnings on Friday.


(With inputs from Reuters)

Story first published on: January 17, 2013 09:26 (IST)

Tags: HCL Tech, Infosys, TCS, Wipro


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