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BW Businessworld

HCL Q3 Profit Beats F'cast, Shares Rally

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HCL Technologies reported a better-than-expected 28 per cent rise in quarterly profit, powered by outsourcing contracts from its global customers that wanted to cut operational costs in an uncertain global economy.

The company and bigger rival Infosys are part of India's Rs 514,000 crore information technology and back-office services sector that earns about 70 per cent of its revenue from exports to the United States and Europe.

HCL, India's fourth-largest software services exporter, won more than Rs 12,850 crore of orders over the last six months and 88 per cent of these were from the world's top 2,000 companies, Chief Executive Vineet Nayar said in a statement.

"The situation is not as bleak as what people thought it is ... HCL's results indicate as much," said P Phani Sekhar, a fund manager at Angel Broking Ltd's portfolio management services.

Consolidated net profit for the fiscal third quarter ended March 31 rose to Rs 600 crore from Rs 468 crore a year earlier, HCL said on Wednesday.

Sales rose 26 per cent to Rs 5216 crore. HCL follows a July-June fiscal year.

Analysts had forecast a net profit of Rs 574 crore for the company, whose customers include Xerox Corp and Readers Digest Association Inc, according to Thomson Reuters Starmine data.

Shares in HCL Technologies, valued at about Rs  33,410 crore, rose as much as 5.7 per cent in a Mumbai market that was up 0.9 per cent.

Sekhar said earnings from sector leader Tata Consultancy Services due on Monday and third-ranked Wipro two days later would provide a better picture about the outlook for the sector.

Global rivals of Indian companies such as IBM and Accenture have posted earnings that were above expectations.

However, Infosys last week missed its revenue guidance for the March quarter, and provided a worse-than-expected forecast for the year ending March 2013.

"I believe Infosys is being very conservative because last year they missed their guidance. Eventually the sector is likely to grow at what Nasscom has estimated, and Infosys may also come around to that figure," Sekhar said.

The National Association of Software and Service Companies (Nasscom), the Indian IT industry lobby, estimates the sector would grow at 11-14 per cent in the year ending March 2013.