HCL Technologies warns of tepid Q1 revenue

MUMBAI: HCL Technologies, India’s fourth-largest information technology services company, has forecast tepid revenue growth for its July-September quarter as it weathers the impact of fluctuating currencies, a client specific issue and uneven revenue growth. In a filing with the BSE, HCL said dollar revenues would be hurt by 80 basis points because of a sharp depreciation of multiple currencies against the dollar. Currencies such as the euro and the British pound have weakened with respect to the US dollar over the last month as volatility in global markets takes a toll.

Revenue growth in the quarter would also be affected due to longer ramp up periods in complex infrastructure management contracts. Large complex deals in infrastructure management often see IT companies investing in the deals before they begin accruing revenue and profits. Infrastructure management service (IMS) is HCL Tech’s biggest business.

HCL Tech also said it was considering reserving $20 million in the quarter due to differences with a public sector customer. "In one of the multi-million multi-year custom application development projects being executed for one of the customers in the public services vertical by HCL Tech, certain differences have arisen with reference to program objectives," HCL Tech said in the filing. The filing added that the company was in the process of disengaging with the customer.

The trouble in the public services vertical is worrying for HCL, which was counting on growing business from that sector. Experts have said that Indian IT firms will have to look to crack the public sector business as they look to grow in a slowing market, EThas previously reported. IT spending by governments worldwide is close to $500 billion, according to Gartner, with regions such as the US and the UK factoring as the largest spenders.

Analysts are taking a wait-andwatch approach as there are few details on the impact. "Since the exact impact is not ascertained as of now, we are not changing our numbers and will wait for more clarity on the issue. However, we believe in the worst case scenario, the impact would be around 5-6% on EPS in FY16," Sarabjit Kour Nangra, analyst with Angel Broking, said in a note.