HCL Technologies (HCL Tech.) has bagged contracts worth Rs 7.5 bn from two US-based companies. This is one of the single largest export orders bagged by an Indian company. This was reported by a leading financial daily.
HCL Tech. has bagged two orders - a Rs 4.4 bn order from GITECH, and a Rs 3.2 bn order from KLA Tencor. This is one of the largest export deals in the country. While the former is in the online lottery business, the latter is into yield management and process control services.
HCL Tech. has adopted a novel strategy to garner sustained revenues from these two businesses. It is working with these companies on a business strategy envisaging share options being granted by HCL Tech. for incremental business. Over a period of five years, the two companies will acquire 3.5% equity stake in the company, provided there is a minimum revenue of Rs 7.5 bn.
The current transaction (of Rs 7.5 bn) is expected to boost the company's earnings per share (EPS) by Rs 4 per annum. Its EPS currently stands at Rs 15.
HCL Tech. plans to acquire future businesses on these lines. This move will ensure a steady flow of business for the company. In the short run, it will also ensure a degree of client loyalty and will insulate HCL Tech.'s business from competition. But if the company has to keep on offering stake to its clients, it may have to dilute equity over a period of time. Moreover, if this strategy is successful, there is nothing to stop its competitors from adopting it, in which case the company with the better performing stock will bag the juicer orders.
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