HCL Tech, the fourth largest software company in the country, has announced an encouraging 16% topline growth in FY02. Bottomline has however, disappointed with an 11% dip, on account of a Rs 612 m write off for doubtful debts and markdown in investments.
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In the fourth quarter, the company has reported a 6% growth in its topline, which was mainly from a 6.3% sequential growth in volumes. Topline growth has been restricted due to a sequential 0.8% fall in its billing rates. Of the total revenues, organic growth was 6% sequentially, while its inorganic businesses have grown by 27%. The inorganic businesses contributed 16% to the total revenues in the fourth quarter. Extraordinary provisions for doubtful debts and write down of investments have pruned profits by 47% sequentially.
On a stand alone basis, the company has reported a 6% sequential growth in revenues. Growth in the fourth quarter has been significant considering a de-growth in the previous two quarters. HCL Tech has been able to increase its revenues from the end user applications business. This segment now contributes 27% of the total revenues.
Operating margins of the company on a consolidated basis, have declined considerably in FY02. The margins have fallen by 500 basis points to 26%. There has been a significant increase in the company's direct costs, up by 26%. This could mainly be attributed to an increase in employee costs, as the company has increased its total strength by 518 during the full year (total employees - 6,463). The company has also reported a 21% increase in its selling, general and administrative expenses.
HCL Tech's revenues from its equity investments, which forms a major part of its post tax income has reduced considerably. The income from this avenue (included in other income) has gone down by 24%. The company's bottomline has also been severely affected by a Rs 612 m provision for bad and doubtful debts and mark down in investments.
At the current market price of Rs 205 the stock is trading at 14x its FY02 earnings.
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