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HCL Tech: An overall good performance - Views on News from Equitymaster

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HCL Tech: An overall good performance
Jan 17, 2012

HCL Technologies Ltd (HCL Tech) has announced the second quarter results of financial year 2011-2012, ends June 2012 (2QFY12). The company has reported a 12.8% quarter-on-quarter (QoQ) growth in sales and a 15.3% QoQ increase in net profits. Here is our analysis of the results.

Performance summary
  • Net sales grew by 12.8% QoQ in 2QFY12 (The company has a June year ending). This was driven by the growth across all service offerings and geographies except Asia Pacific region which reported a decline of 6.9% QoQ during the quarter. The company witnessed a 3.7% QoQ growth in revenues in constant currency during the quarter. For the half year ended December 2011 (1HFY12), sales grew by 30.3% Year-on-Year (YoY).
  • Operating margins increased by 1.4% QoQ to 18.5% during the quarter as compared to 17.1% seen during the previous quarter (quarter ended September 2011, 1QFY12). This was mainly due to lower direct costs which offset the marginal increase in 'Selling, General and Administration' expenses (both as a percentage of sales). For 1HFY12, margins expanded by 1.5% YoY as compared to the same period last year.
  • Added 2,556 (net) employees during the quarter. Total employee base at the end of December 2011 was 83,076. Attrition rate came down to 15.7% as compared to 15.9% seen at the end of the previous quarter (1QFY12).
  • Net profit grew by 15.3% QoQ during the quarter. This was largely on account of higher margins at operating levels which offset the effects of higher forex loss during the quarter. Effective tax rate was also lower at 25.0% as compared to 25.8% seen during 1QFY12. For 1HFY12, net income increased by 46.3% YoY.
  • Added 57 new clients during the quarter. The total number of active clients at the end of December 2011 was 516.
  • Proposed an interim dividend of Rs 2 per share (yield of 0.5%). Including this, total interim dividend for 1HFY12 is Rs 6 per share (yield of 1.4%).

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