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HCL Tech, Wipro maintain upbeat earnings momentum

For HCL Tech, dollar revenue grew at $1.36 billion during the March quarter, while Wipro recorded revenue of $1.72 billion

Debojyoti Ghosh
Published: Apr 18, 2014 07:43:51 AM IST
Updated: Apr 17, 2014 08:48:56 PM IST
HCL Tech, Wipro maintain upbeat earnings momentum

Riding on its steroid growth, HCL Technologies on Thursday outpaced larger rivals TCS, Infosys and Wipro in sequential dollar-revenue growth during the quarter stretching from January to March. The Noida-headquartered IT firm posted a 3 percent quarterly rise in dollar-revenue growth leading the top-tier IT pack followed by Bangalore-based Wipro at 2.5 percent indicating buoyancy in outsourcing demand in mature markets.

India’s largest software-services exporter TCS recorded a top-line growth of 1.9 percent during the March quarter, while its closest rival Infosys posted a 0.4 percent sequential decline in dollar-revenue hit by sluggish business in its retail, consumer packaged goods (CPG) and high-tech verticals.

Both HCL Technologies and Wipro maintained the upbeat earnings momentum set by its larger peers earlier this week. For HCL Tech, dollar revenue grew at $1.36 billion during the March quarter, while Wipro recorded revenue of $1.72 billion. The Azim Premji-led company Wipro has maintained its growth momentum over the last three quarters, indicating that the IT major's turnaround measures have started to yield results.  

In rupee terms, Wipro recorded a year-on-year growth of 41 percent in net income for the March quarter. The IT-services exporter posted profit of Rs 2,230 crore during the period. For Fiscal 2013-14, Wipro recorded revenue from IT services at $6.61 billion a year-on-year increase of 6.4 percent.  

“The steady improvement in global economy, coupled with the exciting pace of technological advancements, presents us with opportunities to create innovative solutions to help our customers differentiate, compete and succeed in their respective markets,” Chairman Azim Premji noted in a statement.

During the December earnings, Wipro projected its March quarter revenue to be in the range of $1.71-1.75 billion.

In the January-March quarter HCL Tech reported net profit of Rs1,624 crore, up 8.5 percent sequentially, while it rose 59 percent year-on-year backed by strong operational performance. Revenue during the quarter stood at Rs 8,349 crore.

Brokerage houses tracking the sector expected HCL Tech and Wipro to lead among the top-four software-services players in terms of sequential dollar-revenue growth.

Ankita Somani, IT analyst, Angel Broking pointed our that HCL Tech's top-line growth was led by a "strong 5 percent" sequential dollar-revenue growth in infrastructure management services (IMS)."HCL Tech came out with better than expected set of results largely on all fronts, signalling the likelihood of a stronger year ahead," she says.

Among the leading Indian IT players, HCL Tech is the only company to follow July-June financial year.

During the March quarter, operating margin for HCL Tech stood at 24.7 percent, a 100 basis points sequential jump, while Wipro’s IT services operating margin expanded by 150 basis points sequentially to 24.5 percent.  

"HCL Tech’s EBIT margin has grown by more than 400 basis points on a y-on-y basis which is a creditable task. Historically, operating margin has been a concern for HCL Tech but it has shrug off all that by consistently posting higher operating margin since last seven quarters," noted Somani.

Among the top-tier Indian IT players, TCS’ operating margin was highest during the January-March stretch at 29.1 percent followed by Infosys at 25.48 percent.

For the April-June quarter, Wipro expects revenue from IT services to be between $1,715 million and $ 1,755 million, projecting an almost flat to 2 percent sequential growth in topline.

Wipro announced its results after market hours on Thursday. Shares of Wipro closed at Rs 585.55, up 2.39 percent, while HCL Tech ended 1.06 percent higher at Rs 1,424.30 on the Bombay Stock Exchange on Thursday. The sensitive index, Sensex, ended the day up 1.58 percent.

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