HCL Technologies’ net income seen doubling

NEW DELHI: Leading Indian information technology company HCL Technologies is

expected to announce on Tuesday its earnings for the past year to June 30 almost

doubled, helped by the high margins of its "offshore" business,

analysts said on Monday.

Its "offshore" business consists of projects it executes in India

for overseas clients.

The New Delhi-based company, which develops high-end technologies for global

companies, issued a profit guidance in June saying it expected net income for

July-June to top Rs 4.8 billion ($101.89 million), up 97 per cent from 2.433

billion a year earlier.

HCL Technologies is India's fifth-largest software services exporter and is

the last among the frontline technology companies to report its results.

"There won't be any surprises. They should be able to meet the guidance

figure," Guranath Muldapur, telecoms analyst at Khandwala Securities in

Mumbai, told Reuters.

Muldapur expects the company, which reports its results under the US GAAP

format, to report a net income of 4.816 billion rupees, almost the same as the

company's estimate, on sales of 14.07 billion. Cazenove & Co forecast a

lower full-year net income of Rs 4.71 billion, up 93 per cent, on sales of

14.075 million. Analyst Priya Rohira at Pranav Securities forecast net profit to

double to Rs 4.865 billion and net sales to rise 51.7 per cent to 14.045

billion.

Cazenove expected net income for the April-June fourth quarter at 1.268

billion on sales of 3.813 billion.

Pranav's Rohira estimated a 6.75 per cent growth in net profit on a

quarter-on-quarter basis and a 6.0 per cent rise in sales.

A Reuters poll of 12 brokerages forecast the firm's fourth quarter net profit

at a median Rs 1.32 billion up 60.63 per cent from a year earlier. Net sales

were seen rising 38.07 per cent to Rs 3.79 billion. In January-March, net income

rose 96 per cent to Rs 1.29 billion.

Better margins



Analysts said they expected the company's operating profit margin to improve,
helped by its efforts to increase offshore business.

"I expect full-year operating profit margins to improve to 30.69 per

cent from 22.99 last year," Pranav's Rohira said. Offshore revenue, or

revenue from servicing overseas clients from its centers in India, accounted for

65 per cent of total revenue in the third quarter.

HCL Technologies said it expects its offshore revenue to account for 70 per

cent of total revenue in the fourth quarter.

Slowdown to bite



Although HCL Technologies has been unscathed so far by a slowdown in worldwide
technology spending, analysts said they expected the company to face the pinch

in the first quarter of its current financial year. "Everybody will be

waiting to see what kind of a profit guidance the company gives this time,"

said Rohira of Pranav Securities.

Also closely watched will be the number of new clients it added in the fourth

quarter, analysts said.

HCL Technologies, whose clients include Cisco Systems, NTT Data and EXE

Technologies, added 28 new clients in the third quarter, taking its total to

332. On Monday, shares of HCL Technologies ended 2.76 per cent higher at 290.25

rupees on the Bombay Stock Exchange. The BSE benchmark index ended 0.14 per cent

higher.

(C) Reuters Limited 2001.