HCL Tech Q1 surprise boost from bigger margins, deals

The Indian software services provider posted a 78 percent on-year jump in net profit, with larger contract wins and margins, sending shares to highest levels in 12 years.

India’s fourth-largest software services provider, HCL Technologies, beat market expectations with its first quarter results which sent shares to its highest level in over 12 years.

In its results Wednesday,  the company said net profit rose 78 percent to 8.85 billion rupees (US$167 million) for the three months ended September. This beat the forecast of 8 billion rupees by analysts polled by Thomson Reuters. HCL's revenue for the same period grew 31 percent increase to 60.9 billion rupees (US$1.15 billion).

The better results were partly due to an improved operating margin, which grew by 5.1 percentage points from last year to 22.1 percent. The company attributed this to improved productivity and better pricing.

"[Our performance] this quarter reiterates the fact that robust revenue growth can be achieved profitably. Increased wins in Fortune 500 accounts have resulted in Americas and Europe geographies growing at 34 percent and 37 percent year-on-year respectively”, said Vineet Nayar, vice chairman and CEO of HCL Technologies.

HCL won 12 multi-year, multi-million dollar orders during the quarter, according to its statement.

The results sent shares higher by 3.8 per cent in Wednesday trade to touch a new 12-year high of 606.9 rupees per shares.

Its earnings are in contrast with the country's number two provider, Infosys, which gave a muted outlook last Friday in its results announcement, citing the continued global economic uncertainty . Industry leader Tata Consultancy is due to report its earnings on Friday.