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HCL Tech: Improved performance

Jan 18, 2006

HCL Technologies announced its results for the second quarter ending December 2005 (the company’s financial year ends in June). For 2QFY06, revenues grew at a decent 8.6% sequentially, driven mainly by the software services business. Infrastructure management also saw a highly impressive performance. BPO revenues, however, grew at a subdued pace sequentially. Operating margins expanded due to savings on direct costs. Due mainly to this as well as a rise in other income despite a forex loss, bottomline growth was almost at par with topline growth. Since the figures for the half-year are not yet available, we have not included them in our analysis.

Financial performance (US GAAP consolidated): A snapshot…
(Rs m) 1QFY06 2QFY06 Change
Sales 9,707 10,542 8.6%
Expenditure 7,549 8,165 8.2%
Operating profit (EBDIT) 2,158 2,377 10.1%
Operating profit margin (%) 22.2% 22.5%  
Other income 124 144 16.1%
Depreciation 447 493 10.3%
Profit before tax 1,835 2,028 10.5%
Tax 169 203 20.1%
Minority interest & income of equity investee 9 (13)  
Extraordinary income - -  
Profit after tax/(loss) 1,675 1,812 8.2%
Net profit margin (%) 17.3% 17.2%  
No. of shares 320.0 320.0  
Diluted earnings per share* (Rs)   20.9  
P/E ratio (x)*   27.7  
* On a trailing 12-month basis      

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