HCL Technologies focuses on international business

Bangalore: Leading IT company HCL Technologies, is focusing on its international business. Currently HCL's global business accounts for just 15-20 per cent of its revenues but is expected to grow significantly over the coming year.

The company has added several global clients over the last few quarters including AMD, NCR, Extreme Networks, Sun America and Nike, all of which are growing significantly. As a result of this, HCL feels its margins will grow substantially as international business dealings offer higher margins than domestic business.

HCL reported disappointing quarter results in fiscal 2003-04 due to lower growth in software services and slower ramp-up in the enterprise space than peer companies.

However, the software services business of HCL is looking up in the R&D segment, which has become a strong growth driver for all offshore companies in this segment. The company remains weak on the enterprise side compared to the larger players and lags behind the industry.

Though HCL's joint ventures with Deutsche Bank AG and the US-based Jones Apparel — DSL Software and HCL Jones Technologies respectively — have done well over the last few years, the company is not signing enough new customers. Analysts expect that the company will grow the software business at 4- per cent each quarter, lower than the larger players in the sector.

The BPO business saw a sharp growth in the third quarter of fiscal 2003-04 with a jump to positive profit. The management expects margins in the core software services business to increase as it achieves scale efficiencies and continues cutting costs.

Further, the company is focusing on increasing margins by investing in profitable entities and ventures like HCL Jones.

HCL Technologies has announced intentions of buying out the remaining 49 percent stake in DSL Software from Deutsche Bank in an all-stock deal in September 2004. The company had a huge additional income of Rs465 million including foreign exchange income of Rs163 million. This led to a sharp jump in net profit by 43 per cent.

The company still has un-realised gains of over Rs400 million on books. It added an additional 1,718 employees including 682 in the software business and 922 people in the BPO business as well as 26 new clients. The company has 454 active clients. HCL Technologies has US$17 million of investments in venture funds (VCs) in its books.