Nagging problems persist in the sector
R Chandrasekaran
One of the leading India’s software exporter HCL Technologies produced a contrasting performance in the March quarter than its rival Infosys delivered a couple of days back. While the results were cheered by investors by lifting its stock higher immediately after announcement (though it closed in the red), it has somewhat cooled the fears of investors on IT stocks.
However, the underlining threat on outlook continues to remain on IT sector given the fact that HCL Technology has put off the induction of more than a thousand engineering graduates and cut down its staff in the software services segment.
The fourth biggest software solution provider from India announced a 73 percent jump in profit to Rs.10.4 billion from Rs.6 billion in the year-ago quarter driven by new orders and improved margins. Top line witnessed 23.2 percent upside to Rs.64.25 billion over the last year. Sequentially too, revenues rose 2.4 percent.
Commenting on the quarterly results, the company’s chairman and Chief Strategy Officer Shiv Nadar said, “HCL’s sustained growth momentum has been possible because of our uncompromising focus on some strong value fundamentals.” Its president and CEO Anant Gupta added, “Our net margins have improved for six straight quarters and are up by 51.5% along with a robust 14.6% USD constant currency growth for the twelve month period ended 31st March 2013.”
HCL was one of the rival companies that Infosys had to face. Its winning of 37 new clients assumes significance in the difficult market conditions, where Infosys is struggling. This could probably indicate that Infosys growth concern is more of its own problem than the industry.
However, the underlining concern still remains for the IT sector. HCL failed to provide its plan on hiring and also indicate the fate of joining dates of more than 6K engineering graduates, who are waiting in the wings. Its human resource head has reportedly said that it has accelerated hiring during the past few weeks in the infrastructure vertical.
The company’s headcount witnessed a fall of 791 at the end of the March quarter due to 1,638 employees’ reduction in the software services, which was partly offset by infrastructure hiring of 638.
The budget cut in the U.S. and the visa problems will also continue to be major thorns for the IT companies to produce strong growth. None-the-less, the results of HCL Technologies only indicate that the worries on IT sector will not be as big as feared and that the companies cannot escape from the impact. However, how the IT companies manage to keep the unfavorable impact limited remains to be seen.
To contact the author, e-mail: rchandrasekaran@americanbazaaronline.com