HCL Technologies Q2 net seen up 105-134%

Santosh Menon

NEW DELHI: Indian information technology firm HCL Technologies is likely to

report a 105-134 per cent jump in its second-quarter net profit, aided by

improved margins from its growing offshore business, analysts said on Thursday.

The company, which makes high-end engineering software for global

corporations, is due to announce results for the quarter ended December 2000 on

Friday.

"We are expecting a 134 per cent jump in net profit. A lower base could

be one factor, but the main story is going to be that of improved margins,"

Chetan Shah, technology analyst at DBS Securities, told Reuters.

DBS expects HCL Technologies to post a second-quarter profit of Rs 1.04

billion ($22.39 million), up from Rs 446.70 million a year earlier.

The brokerage expected the firm's net revenue to rise 68 per cent to Rs 3.45

billion from Rs 2.05 billion a year earlier.

Anil Tewari, Hong Kong-based analyst at Goldman Sachs, said he expected the

firm's bottomline to grow 105-107 per cent and topline by 50-55 per cent in the

second quarter.

Goldman, which has the stock in its recommended list, has forecast the firm's

second-quarter net income at $21.2 million and revenues at $73 million.

The leading Indian technology company posted a net profit of Rs 960 million

for the first quarter, up 164 per cent from Rs 360 million in the year-ago

period.

Improved margins



Analysts said the company's focus on boosting offshore business had helped it
improve margins in successive quarters.

Offshore revenues or revenues from servicing overseas clients from its

centers in India grew 60 per cent to $41 million in the first quarter from $26

million in the year-ago period.

Onsite revenues totalled $28 million in the first quarter, up from $18

million in the year-ago period.

"Margins have been improving steadily as costs are lower in the offshore

business. We expect operating profit margins to rise to 29 per cent this quarter

(second quarter) from 21.8 per cent in December 1999," said Shah at DBS.

HCL Technologies counts such major companies as Cisco Systems, RSA Security,

NTT Data and EXE Technologies among its 286 clients.

Eye on contracts



Analysts said the market was keenly awaiting details on the company's order book
for any evidence of the expected slowdown in technology spending by top global

corporations.

The top five, 10 and 20 customers of HCL Technologies account for 23, 35 and

46 per cent of its revenues respectively.

"We are waiting to hear the quality of their contracts and the size of

their pipeline going forward," Tewari said.

Analysts said they expected the firm to announce details of some large orders

bagged by it during the second quarter.

HCL Technologies shares on Wednesday fell 0.5 per cent to Rs 613.70 on the

Bombay Stock Exchange.

The stock has risen over 16 per cent since the start of the month mainly on

anticipation of good results.

At Wednesday's close of Rs 613.70, the stock is down 56 per cent from its

record closing high of Rs 1,412.28 hit on February 21 last year, but up 37 per

cent from its October 11, 52-week closing low of Rs 447.33.

(C) Reuters Limited 2001.