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HCL Tech sees outsourcing rise from mid-03

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CIOL Bureau
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NEW DELHI : HCL Technologies, India's fifth-largest software services exporter, which posted a sharp fall in April-June net profit on Friday, said business would grow substantially from mid-2003 as global firms increase outsourcing. "Governments and corporates are under cost pressure everywhere," HCL Chairman Shiv Nadar told a news conference.



"And that cost pressure is going to drive more work to Indian companies from English-speaking countries, which I believe will start gathering momentum some time in middle of next year." HCL, which develops software for Cisco Systems, its largest client, and General Motors, also said it would benefit from a trend of companies reducing their vendor base and favoring only established players.



"Revenue from our top 20 customers in the last quarter has grown 16 percent," said HCL's chief financial officer, Arun Duggal. "These clients want to have fewer but stronger vendors." But while HCL had jacked up the number of engineers working for Cisco, the No 1 maker of equipment that directs Internet traffic, by 50 to 680, pressure on manpower billing rates remained, it said.



"Existing customers are going through difficult days and they say you have to reduce the cost base," Nadar said, noting that HCL, which used to charge premium prices, was now paid almost on par with other developers as technology budgets shrunk. But while rates were still falling, the pace had slowed, the company said.



"From a 2.5 to three percent sequential decline in billing rates, that figure is now down to 0.8 percent," S L Narayanan, vice-president of finance, told Reuters. Earlier, HCL reported its fourth-quarter net income dived a much-sharper-than-expected 48 percent to Rs 689.8 million ($14.2 million) due to an extraordinary provision of 367.3 million against doubtful debts and a mark-down in investments.



But gross revenue rose 17 percent on year to 4.32 billion rupees, bettering estimates. A Reuters poll of 10 brokerages, released in July, had forecast net profit of 1.19 billion rupees on revenue of 4.24 billion.



Shares of HCL, which reports results under U.S. accounting standards, which dropped 4.7 percent after the results, rebounded on hopes of strong foreign fund inflows in the tech sector to close up 0.72 percent at Rs 203.55. (US$1 = Rs 48.51)



© Reuters

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