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HCL Tech Q2 results far below forecast

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CIOL Bureau
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Shailendra Bhatnagar

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NEW DELHI: Leading information technology firm HCL Technologies Ltd. reported

before market hours on Tuesday results for the October-December quarter that

were far below market expectations.

It shares fell in opening trading, by as much as 2.7 per cent to a low of Rs

244. The stock was added to the 30-issue Bombay Stock Exchange index earlier

this month.

New Delhi-based HCL Technologies, which reports results under US GAAP

standards, said second-quarter net profit rose just 1.3 per cent on year -- to

Rs 1.26 billion from 1.24 billion in the same period a year earlier.

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Gross revenue rose 17.2 per cent to Rs 4.01 billion.

Performance measured under Indian GAAP standards was worse. Second-quarter

net profit fell 12 per cent on year, to Rs 1.01 billion, on a total income of

2.13 billion, down 1.8 per cent. Still company chairman Shiv Nadar said in a

statement: "Despite challenging market conditions, HCL Tech has posted

promising results." He gave no financial guidance for the year ahead.

The firm, India's fifth-largest software exporter, said it had a stock-based

sales incentive or a non-cash charge of Rs 25 million in the second quarter

compared with Rs 56 million in the year earlier period.

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Second-quarter profit rose 28.3 per cent from the preceding three months when

earnings were depressed by a Rs 240 million provision for doubtful debts and a

fall in the value of investments. The net income performance fell below the

estimates of two analysts who based their projections on the US GAAP format.

"The net income is lower than my estimates," Chetan Shah, analyst

at Quantum Securities, told Reuters. "But the top line has performed well.

Clearly there is pressure on margins." Tejas Barfiwala, an analyst at

Khandwala Securities who forecast net profit of Rs 1.487 billion, said:

"The net income is below my estimate."

And he added: "It remains to be seen whether there is any revision for

the full-year profit." According to the median in a Reuters poll of

brokerages, net profit was expected to rise 18.92 per cent to Rs 1.301 billion,

on revenue of 3.9 billion rupees, up 13.9 per cent from a year earlier.

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The poll assumed the December 2000 profit at Rs 1.094 billion that excluded

gains during the period of 146 million rupees from the sale of equity

investments. HCL Technologies, which specializes in networking and high-end

technology work, said it added 22 clients during the second quarter, which

included seven Fortune 500 companies. Some of the customers were Serena Software

Inc and Exult Inc.

The company also said it added five new client dedicated development centers

during the quarter. Its total manpower stood at 5,634, with 4,613 billable

engineers on the rolls.

(C) Reuters Limited.

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