/ciol/media/agency_attachments/c0E28gS06GM3VmrXNw5G.png)
Follow UsNEW DELHI: HCL Technologies is expected to announce on Thursday growth in its earnings, which had slowed sharply last quarter due to spending cuts by some key global clients and a drop in other income.
Estimates of year-on-year growth in net income during the January-March quarter range between 59 to 93 per cent, sharply lower than the 177 per cent jump reported by the firm in the previous quarter.
"We are expecting a net income of Rs 1.075 billion ($22.95 million), up 65 per cent year-on-year. We have forecast net sales of Rs 3.55 billion, up 51 per cent," Chetan Shah, software analyst at DBS Securities in Bombay, told Reuters. HCL Technologies, which reports its results under the US accounting format, posted net income of Rs 654 million during the January-March quarter of 2000.
Cazenove & Co in a recent research report forecast HCL's net profit for the recent January-March quarter at $24 million and sales at $75 million, up 59 and 38 per cent, respectively. Priya Rohira at Bombay-based brokerage Pranav Securities expected net income to rise 93 per cent to Rs 1.265 billion and sales to rise 62 per cent to Rs 3.85 billion. During the company's second quarter ended December, HCL Technologies reported a net income of Rs 1.24 billion, up from Rs 448 million a year earlier.
Lower other income
Shah said the lower forecasts were based on a drop in other income and higher tax payouts. He said HCL's interest income would be lower and added that gains from foreign exchange fluctuations would not be much. DBS forecast other income at Rs 174 million, down from Rs 264 million in the second quarter and Rs 181 million in the year-earlier period.
Analysts say the fall in other income will actually prompt a quarter-on-quarter decline in net income. Margins were expected to improve, reflecting the growing size of its offshore business.
"On a year-on-year basis, operating profit margins should rise about five percentage points. But over the preceding quarter, there won't be much rise," said Shah of DBS. Offshore revenue, or revenue from servicing overseas clients from its centres in India, accounted for 63 per cent of total revenue in the second quarter.
Slowdown
Analysts said HCL Technologies could be hit by the ongoing global technology slowdown, forcing some of its top global customers to cut spending. Its top five account for 23 per cent of its revenue, and the top 10 customers for 35 per cent.
"HCL Technologies has substantial billings from global telecom firms. Some of that could be hit given the problems in this space," an analyst with a European brokerage said. "Firms like HCL are vulnerable in times of slowdown as many corporations tend to cut down research and development spending," an analyst at an American brokerage said. "But its order book and its long-term relations should help it weather the storm."
Analysts said new client additions could get hit, although HCL Technologies reported it bagged clients such as NCR Corporation, Vitesse Semiconductor Corporation and Toshiba during the January-March quarter. HCL Technologies counts several global companies such as Cisco Systems, NTT Data and EXE Technologies among its over 300 customers worldwide.
Shares of HCL Technologies ended 10.06 per cent higher at Rs 264.25 on the Bombay Stock Exchange on Tuesday. The stock has lost 99 per cent since the start of the year, in line with the steep drop in values of software shares across the board.
(1$ = 46.83 rupees).
(C) Reuters Limited 2001.