Third Ace From HCL Stables

After

HCL Infosystems and NIIT, it is now the turn of HCL Technologies

to make waves in the Indian stock markets. It might turn out to

be the third ace from the HCL group's stables.

Creating expertise

in emerging technologies and aggressive marketing has been the hallmark

of the HCL group. While it has had its share of controversies, the

entrepreneurial spirit among its employees and senior management

is unparalleled across the Indian IT sector. Despite its strengths,

the group does not enjoy a premium in valuations compared to some

of its rivals which are younger and much smaller. This is primarily

because of a less than average record in customer services. While

these have undergone a change for the better over the years, some

old prejudices remain with the customers as well as the financial

community.

As the group

moves away from its past and into top gear, mistakes of the past

if repeated could have a disastrous impact on its global ambitions.

Thus, despite the group's formidable strengths in internet and networking-key

opportunity areas for the new millenium-its weaknesses constrict

the growth of the HCL brand equity as well as its valuations in

the stock markets.

Despite all

this, the current euphoria over IT stocks and the overall strengths

of the group make the markets look expectantly at the Delhi-based

HCL Technologies' public issue of 1.42 million shares priced between

Rs500 and Rs580 per share, which will follow its book building offer.

HCL Technologies provides software services with expertise in internet

and networking. The company has a presence in 14 countries.

Background:

Global from the early days



HCL Technologies (HCL) was formed in November 1991 as HCL Overseas.
In July 1994, it was renamed as HCL Consulting and recently to HCL

Technologies. The company started its business in the onsite market

through HCL Technologies America Inc in the US. HCL Technologies

America was acquired in 1995 by HCL. It then took over the assets

and employees of the research and development division of its group

company HCL Infosystems in 1996. In 1999, HCL then acquired US-based

Intellicent, enhancing an initial 60% stake. The company today has

a strong international presence with 13 subsidiaries spread in all

over the globe. It also has seven software development centers.





HCL was promoted by Shiv Nadar who is acknowledged as a visionary
entrepreneur. Nadar is also the founder of HCL Infosystems and NIIT,

both listed on the major stock exchanges in India. HCL had revenues

of Rs275.73 crore and net profit of Rs100.97 crore for the year

ended June 1999.

Operations:

Across emerging areas



HCL is an integrated player in the software segment providing a
range of software services. The company provides services in the

area of technology development, application engineering, software

engineering and networking. It has moved at an incredible pace to

expand its activities to almost all the major global IT markets.

The company currently has 24 offices in 14 countries.

HCL has created

a niche for itself in providing services in the area of networking

and internet-related services, making up 27% of its total revenues

in June 1999. The company provides internet and ecommerce services

using technologies like CORBA, DOM and Java. Networking is another

focus area of the company wherein it provides consultancy, planning,

and integration and migration services. It has made strong inroads

into the telecom segment. HCL's other services include product re-engineering,

re-development and maintenance services. It reported a turnover

of Rs275.73 crore in June 1999 against Rs124.24 crore in June 1998.

The company earns a major share of revenue from the US market-73%

in 1999, up from 71% 1998.

HCL's consolidated

revenues in June 1999 stood at approximately Rs690 crore, up 40%

over the June 1998 figure. Out of this, revenues from Europe and

Asia Pacific stood at Rs120 crore whereas the balance was achieved

from its services in the US.

HCL has set

up seven offshore development centers in India. These centers are

based in Noida, Gurgaon, Ambattur and Chennai, all with communication

links with global offices. HCL, directly and through its subsidiaries,

has seven subsidiaries in Europe, four in the Asia Pacific region,

three in the US and one in India. The company has a total of 24

sales and marketing offices in these countries that provide round

the clock services to its clients. The company's clients include

Toshiba, Bankers Trust, Alcatel, Southern California Edison and

VDO Mannesmann among others.

Apart from the

acquisition of Intelicent Inc, a provider of IT consulting services,

HCL also bought the 50% stake that Perot Systems held in HCL Perot

Systems. This has enabled HCL to spread its business offerings.

HCL Perot Systems has five offices in North America, Europe and

Asia Pacific, and two development centers in India. HCL's subsidiary

in India, HCL Comnet (India), provides networking services.

The company's

overall employee strength, including that of its subsidiaries stood

at 2,534 in June 1999. Out of these, 1,687 are based in India, 648

in the US, 125 in Asia Pacific and 74 in Europe. Out of the total

employees, 2,051 were engineers. The company follows a stringent

recruitment policy and provides extensive training to its employees

in the emerging technologies.

Projects:

Expanding horizons