Dalal Street Investment Journal

HCL Technologies: Keeping Up With Growth

HCL Technologies (HCLT) has reported a good set of numbers for the second quarter of FY14 (company has June as fiscal closing). Its revenue registered a growth of 2.8% to Rs 8184 crore on a sequential basis and its net income posted a growth of 5.7% in the same period to touch Rs 1496 crore. In dollar terms too, it exhibited a good jump in its topline and bottomline, which increased to USD 1321 million (up 4% QoQ) and USD 242 million (up 7.1% QoQ) respectively.

Net income margin improved to 18.3% from 17.8% in Q1FY14 primarily due to reduction in forex losses that have come down from USD 37.7 million in Q1FY14 to USD 25.5 million in Q2FY14.

Business vertical wise, revenue contribution has remained almost the same from all verticals of the company. The Financial Services vertical, which is one of the largest revenue contributors (25.9%), has shown a 0.1% decline on a sequential basis. Whereas, in this period the contribution of other verticals like manufacturing, public services and retail has gone up by 0.3%, 0.4% and 0.3% to 33.6%, 9.2% and 8.6% of the total revenues respectively. This shows that the company is moving to other verticals for more new opportunities rather than a single traditional vertical.

HCLT’s major export market America contributed to 56.9% of its overall revenues. This has decreased from 57.2% it did in the September quarter. The European market contributed to about 31.3% of its revenue and the remaining 11.8% came in from the rest of world. The improvement in revenue contribution from Europe shows that, the company is trying to explore the European market on a larger scale and reduce its dependency on the American market.

Also, HCLT has added more new clients during this period. The company is not only adding new clients, it is also retaining the existing clients, which has led to an increase in the revenue contribution from existing clients to 96.6% in Q2FY14 from 95.1% on sequential basis.