HCL Tech Q2 PAT rises 68% at Rs 965 crore

Beating analysts’ expectations, HCL Technologies reported net profit of Rs 965 crore for the second quarter of 2012-13 (financial year July-June), up 68.5 per cent year-on-year. Q2 revenue stood at Rs 6,274 crore, up 19.6 per cent Y-o-Y and 3 per cent Q-o-Q.

In a key management overhaul, Anant Gupta has been elevated to the position of president and CEO. Vineet Nayar, the earlier CEO, would continue in his additional role as vice-chairman. Company officials denied market rumours that Nayar may leave the HCL post July, during the earnings call on Thursday. He would continue to be vice-chairman and drive business relationships with key clients, they added.

Shiv Nadar, chairman and chief strategy officer of HCL Technologies said, “Vineet Nayar will continue as the vice-chairman and joint managing director of the company till July 2013 and as vice-chairman thereafter. Meanwhile, calendar 2012 has been an exceptional year for HCL. While the entire industry saw a very difficult year, HCL fired on all cylinders. Our revenues grew 13 per cent, profits grew 41 per cent and operating margin expanded by 360 bps (during calendar 2012).”

The company has performed above analysts’ predictions and better than its peers on most key parameters. In dollar terms, revenue stood at $1,154 million, up 13 per cent year-on-year and 3.6 per cent quarter-on-quarter. Net income was at $177 million, up 59.1 per cent Y-o-Y and 9.7 per cent Q-o-Q.

Ankita Somani, research analyst – IT at Angel Broking, said, “HCL Tech once again reported healthy set of results, beating our as well as market expectations on all fronts. The dollar revenues grew by 3.6 per cent Q-o-Q, led by quarterly volume growth of 3 per cent, which is ahead of its larger peers. HCL Tech, with end-to-end IT capabilities and a strong client mining ability, is clearly emerging as a front runner and outperforming many of its peers companies. Operating margin of this company has always been a concern and now management’s focus to improve this has been paying off and despite giving wage hikes HCL Tech reported 40 basis points quarterly expansion in earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin at 22.6 per cent, which is commendable. It has displayed an industry-leading growth trajectory and has a strong position in one of the fastest growing service vertical of infrastructure management services. We continue to be positive on the stock.”

During the December quarter, the company sequentially grew by 3.6 per cent, the highest over the last five quarters. HCL has been improving its net margin for five straight quarters now and for Q2 it reached 15.4 per cent.

According to Anil Chanana, chief financial officer of HCL, “We have continued to demonstrate industry leading growth with superior returns to our shareholders. The annualised return on equity this quarter has been at 35 per cent. The cash generation backed by higher profitability and efficient working capital management continued to be robust. During the six months ended December 31, 2012, the operating cash flow to net income has been 95 per cent while the free cash flow to Ebitda has been more than 50 per cent. This quarter HCL completes 10 straight years of quarterly dividend payouts.

The company has announced dividend of Rs 2 per share. On the employee front, it ended the quarter with a headcount of 85,194. HCL Technologies’ stock price ended Thursday at Rs 703.30, 4.31 per cent higher than the previous day’s close.

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