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HCL Tech: A good start to the year

Oct 17, 2013

HCL Technologies Ltd (HCL Tech) announced its first quarter (1QFY14) of financial year 2013-2014 (the company has a June year ending). The company reported a 14.1% QoQ growth in sales and an 18.7% QoQ increase in net profits. Here is our analysis of the results.

Performance summary
  • Consolidated net sales grew by 14.1% QoQ in 1QFY14 (The company has a June year ending).
  • The growth in revenues was 3.6% QoQ in constant currency terms.
  • Operating profits grew by 29.5% QoQ while the margin improved to 26.3% as compared to 23.5% in the last quarter (4QFY13). This was due to slower growth in employee expenses and selling, general & administrative (SG&A) expenses compared to the growth in sales.
  • The net profit grew by a slower pace of 18.8% QoQ compared to the operating profits, due to a forex loss of Rs 2,360 m.
  • Net employee count increased sequentially by 1,533 during the quarter. Total employee base at the end of September 2013 was 87,196. Attrition in the IT services business increased from 14.9% in 4QFY13 to 16.1% in 1QFY14. However, attrition in the BPO services business decreased from 6.9% in 4QFY13 to 6.5% in 1QFY14.
  • The percentage of repeat business from existing clients increased from 94% to 95.1% QoQ.
  • The company declared an interim dividend of Rs 2 per share (dividend yield of 0.2%)

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