HCL's profit growth driven by inorganic growth - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

HCL's profit growth driven by inorganic growth

Aug 11, 2000

HCL Technologies, the leader in front end emerging technologies of Internet, e-commerce and networking services reported a YoY growth of 162% in its net profits to Rs 2.1 bn in FY00. The bottomline growth was propelled by more than 500% jump in the other income and significant reduction in the interest cost. However the company's topline increased at a slower rate of 28%.

(Rs m) FY99 FY00 Change
Sales 7,245 9,256 27.8%
Other Income 89 538 504.5%
Expenditure 6,120 7,127 16.5%
Operating Profit (EBDIT) 1,125 2,129 89.2%
Operating Profit Margin (%) 15.5% 23.0%  
Interest 96 34 -64.6%
Depreciation 306 314 2.6%
Profit before Tax 812 2,319 185.6%
Tax 28 263 839.3%
Profit after Tax/(Loss) 784 2,056 162.2%
Net profit margin (%) 10.8% 22.2%  
No. of Shares (eoy) (m) 124 140  
Diluted number of shares 140 140  
Diluted Earnings per share* 5.61 14.71  
*(annualised)      

The business model of the company differs from other software companies. The company intends to grow its bottomline through inorganic growth. For the purpose, the company has evolved a 'Technology Market Acquisition Strategy' to forge strategic partnerships with select technology funds. The company will offer technology start up kits to customers of these funds and will retain option of equity investment in these start ups. During the year the company has invested Rs 394 m ( 17% of its cash profits) in five technology funds having a combined corpus of $1-$1.5 bn. The revenues from this investments will start reflecting in its bottomline only after 1-2 years.

Internet and e-commerce revenues contributed 41% of total revenues, 34% came from technology development services and the balance from networking. The company's offshore work has increased to 63% of total revenues from 49% in FY99. Nevertheless the operating margins of the company are comparatively low due to 55% increase in the marketing expenses.

The company derives 71% of its revenues from North America and 72% repeat business from existing clients. Further revenues from top 5 customers account for 19% of total sales. In future the company plans to focus on the European and Asia Pacific market which has immense growth potential.

The stock gets a valuation of 69 times its FY00 earnings at a price of Rs 1,010. It has been observed that those IT companies which are at the high end of value chain with excellent clientele and marketing & distribution network commands a P/E in the range of 80-100 times. HCL is one of these software companies. Its future valuations will depend on its ability to successfully unlock the value of its investments which will enable it to double its profits every year.

Equitymaster requests your view! Post a comment on "HCL's profit growth driven by inorganic growth". Click here!

  

More Views on News

HCL TECHNOLOGIES Announces Quarterly Results (3QFY21); Net Profit Up 35.1% (Quarterly Result Update)

Jan 18, 2021 | Updated on Jan 18, 2021

For the quarter ended December 2020, HCL TECHNOLOGIES has posted a net profit of Rs 40 bn (up 35.1% YoY). Sales on the other hand came in at Rs 193 bn (up 6.4% YoY). Read on for a complete analysis of HCL TECHNOLOGIES's quarterly results.

HCL TECHNOLOGIES 2019-20 Annual Report Analysis (Annual Result Update)

Dec 29, 2020 | Updated on Dec 29, 2020

Here's an analysis of the annual report of HCL TECHNOLOGIES for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of HCL TECHNOLOGIES. Also includes updates on the valuation of HCL TECHNOLOGIES.

HCL TECHNOLOGIES Announces Quarterly Results (4QFY20); Net Profit Up 24.4% (Quarterly Result Update)

May 7, 2020 | Updated on May 7, 2020

For the quarter ended March 2020, HCL TECHNOLOGIES has posted a net profit of Rs 32 bn (up 24.4% YoY). Sales on the other hand came in at Rs 186 bn (up 16.2% YoY). Read on for a complete analysis of HCL TECHNOLOGIES's quarterly results.

HCL TECHNOLOGIES 2018-19 Annual Report Analysis (Annual Result Update)

Sep 9, 2019 | Updated on Sep 9, 2019

Here's an analysis of the annual report of HCL TECHNOLOGIES for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of HCL TECHNOLOGIES. Also includes updates on the valuation of HCL TECHNOLOGIES.

More Views on News

Most Popular

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

A Stock with 700% Return Potential Comes with Additional Payoffs (Profit Hunter)

Apr 15, 2021

Narayana Murthy was one of the first unicorn founders to get the backing of this entity...

11x Bankruptcy to Bluechip Stock: A Rare India Revival Story (Profit Hunter)

Apr 16, 2021

There is no stopping this 11-bagger stock from significant upside.

Top 3 Nifty ETFs to Buy Now (Fast Profits Daily)

Apr 20, 2021

In this video I tell you the three Nifty ETFs I think are the best.

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

HCL TECHNOLOGIES SHARE PRICE


Apr 20, 2021 (Close)

TRACK HCL TECHNOLOGIES

  • Track your investment in HCL TECHNOLOGIES with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON HCL TECHNOLOGIES

HCL TECHNOLOGIES 5-YR ANALYSIS

COMPARE HCL TECHNOLOGIES WITH

MARKET STATS