HCL Misses Analyst Boat, Keeps Digital Agenda Alive
With declined profits, HCL Technologies has missed analyst expectations this quarter.
In the first quarter 2016 results, it reported a consolidated profit of Rs 1,726 crore, a sequential decline of 3.2 percent while the revenue rose to 3.3 percent to Rs 10,097 crore.
In September, HCL had intimated that revenue growth was likely to be tepid due to adverse currency impact, client specific issue (provision of $20 million). Back then, HCL had announced HCL Technologies announced the launch of a new Digital Service Exchange platform enabled by ServiceNow software to provide Service Integration and Management (SIAM) capabilities to enterprises allowing them to request and receive business services efficiently across their organizations.
“The 21st century enterprises will need to be extremely agile to deliver best in class united experience to its users. Enterprises therefore need an on-Demand access to a pool of dynamically configurable set of smart business services,” said Kalyan Kumar, Senior Vice President & Chief Technologist - ITO, HCL Technologies
The company is also banking on the opportunities arising from emerging technologies like IoT and the need to transform business models to adapt to the digital age. Adapting to the changing needs of new-age customers, it is making an effort at evolving its business models.
“There are remarkable shifts going on in the world that are changing the way business is done. HCL’s 21st Century Enterprise blueprint is at the forefront of this redefinition and is providing enterprises a definitive roadmap to transform their business models to adapt to the digital age; a fact reflected in our ground-breaking engagements with several forward-looking organizations,” said Shiv Nadar, Chairman & Chief Strategy Officer, HCL Technologies Ltd.
Whether the new initiative yield results is not easy to guess at this point in time because HCL’s revenue growth was lower than that reported by Infosys and TCS in the same quarter. The net profit of Infosys at the end of the second quarter stood at $599 million while the revenue was $2.3 billion
Dipen Shah, Head of Private Client Group Research, Kotak Securities:
“HCLT’s results were lower than expectations. The CC revenue growth of 1.2% came in below estimates and was lower than the growth reported by Infosys and TCS. IMS, the growth driver for HCLT revenues, reported a 0.9% growth in CC terms. We maintain that, the competition in IMS market is set to intensify with several players now focusing more on this segment. The margins reflect profitability challenges faced by HCLT in a bid to sustain high growth. We have been cautious on the profitability levels of HCLT. We will watch out for the improvement in growth rates in future quarters.”
HCL’s new dedicated BEYONDigital Business Unit is building digitalization capabilities across its engineering design, modern applications along with infrastructure and operations. This is resulting in a differentiated market position impacting business outcomes across the front, middle and back office of forward looking Fortune500/Global1000 enterprises
HCL has also appointed Thomas Sieber as an Additional Director on the Board of the Company with effect from October 17, 2015 to hold office as an Independent Director.
“We have started FY16 on a strong footing with LTM revenue growth of 15% YoY in constant currency. Our investments in BEYONDigital, Next-Gen ITO and IoT offerings is reflected in our healthy bookings and deal pipeline and continues to demonstrate our ability to incubate blue ocean ideas and build them to be market leaders,” said Anant Gupta, President & CEO, HCL Technologies Ltd.
“Vertical growth is led by lifescinces and healthcare at 28.1%, telecom, media and entertainment at 19.6%,” said Anant Gupta.
HCL has won a deal from a multi-national Communication Technology & Services firm to provide Research & Development Services for its Next-generation IP & Datacenter cloud platforms.
“Continued focus on investments has allowed us to be differentiated and maintain the deal win momentum. The overall metrics continue to look healthy with ROE at 31% and Net Income to Cash conversion at 87%, on LTM basis,” said Anil Chanana, CFO, HCL Technologies.
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