Though HCL has put up a sloppy performance for the full year and fourth quarter ended June, its June quarter results show a sequential improvement. Income for the full year ended June was Rs 856.56 crore, up by just about 3 per cent over the previous corresponding year income of Rs 832.56 crore. Its total spending went up by 12 per cent to Rs 454.61 crore (Rs 405.77 crore) resulting in a 6 per cent drop in the net profits.
Income from operations was down by 0.15 per cent to Rs 723.42 crore (Rs 724.50 crore). With many of HCL’s large clients being affected by the global slowdown, revenue growth was hit.
Falling revenues corresponding to a proportionately higher rise in operational costs squeezed margins badly, resulting in the operating profits falling by 13 per cent to Rs 320.42 crore (Rs 367.48 crore), while the OPM shrank to 44 per cent from 51 per cent during the previous corresponding year.
Other income at Rs 133.14 crore was up 23 per cent over the previous corresponding year income of Rs 108.06 crore while the interest cost was negligible. Depreciation went up 57 per cent to Rs 35.47 crore (Rs 22.53 crore). Before tax profits dwindled 8 per cent over last year to Rs 417.89 crore (Rs 453.01 crore).
With a tax provision of Rs 15.94 crore (Rs 26.22 crore) down 39 per cent over the last year the company reported a net profit of Rs 401.95 crore (Rs 426.79 crore) down 6 per cent over the same period last year.
HCL’s quarterly performance has hardly been encouraging. Income from operations has shown an erratic trend and was up just about 3 per cent over the previous corresponding period during the fourth quarter ended June at Rs 193.63 crore (Rs 188.63 crore) after having registered a negative growth during the preceding two quarters on a year-on-year basis.
However, thanks to falling other income (66 per cent fall to Rs 15.27 crore in both corresponding and sequential basis) total income fell by 10 per cent and PAT declined by 11 per cent sequentially.
The stock currently trading at Rs 210 discounting its June quarter annualised EPS of Rs 12.60 by 17 times and full year’s EPS by 15 times. The market is enthused by HCL’s turnaround. However, over the next few quarters, profits may fall due to both organic reason (billing pressure) and inorganic reasons (its myriad investments going bad).