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HCL Tech: Closing the year on a strong note - Views on News from Equitymaster

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HCL Tech: Closing the year on a strong note
Jul 26, 2012

HCL Technologies Ltd (HCL Tech) has announced the fourth quarter results (4QFY12) of financial year 2011-2012, (year ending June). The company has reported a 13.5% quarter-on-quarter (QoQ) growth in sales and a 41.8% QoQ increase in net profits. Here is our analysis of the results.

Performance summary
  • Consolidated net sales grew by 13.5% QoQ in 4QFY12 (The company has a June year ending). Besides a good sequential growth in its core business, the growth was well aided by steep rupee depreciation during the quarter. For the year ended June 2012 (FY12), sales grew by 31.2% Year-0n-Year (YoY).
  • The growth in revenues was 4.6% QoQ on constant currency basis. In terms of US dollar revenues, the growth in sales was 3.0% QoQ during the quarter. For FY12, the growth in sales was 17.1% YoY, in terms of US dollar.
  • Operating margins expanded by 3.6% QoQ to 22.0% during the quarter as compared to 18.4% seen during the previous quarter (quarter ended March 2012, 3QFY12). This was mainly due to lower direct costs as well as lower ‘Selling, General and Administration’ expenses (both as a percentage of sales). For FY12, margins expanded by 2.0% YoY as compared to the same period last year.
  • Net profit grew by a huge 41.8% QoQ during the quarter. Besides margin expansion at operating levels, it was also aided by lower effective tax rate during the quarter. The effective tax rate was 22.8% during the quarter as compared to 25.1% seen during 3QFY12. For FY12, net income increased by 47.8% YoY.
  • Total employee count grew sequentially by 1,855 during the quarter. This was mainly due to a net addition of 2,201 in the head count of the IT Services. Total employee base at the end of June 2012 was 84,319. In IT services business, attrition rate came down to 14.0% as compared to 15.0% seen at the end of the previous quarter (3QFY12).
  • Added 70 new clients during the quarter. The total number of active clients at the end of June 2012 was sequentially flat at 467.
  • Proposed a final dividend of Rs 4 per share (yield of 0.8%). Including this, total dividend for FY12 is Rs 12 per share (yield of 2.3%).

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