HCL INFOSYSTEMS: Indian Tiger

Ajai Chowdhry
chairman & CEO


TS Purushothaman chief operating officer

JV Ramamurthy president & CEO

If year 2003-04 was the period of creating clear demarcation between the two
HCL group companies, FY 2004-05 was the year of consolidation of domestic
business across four segments-digital home, desktop, server and security
solutions.

Besides riding high on the growing domestic IT and telecom market, HCL
Infosystems (HCLI) also cashed in on the convergence wave, introduced new
products to plug into various gaps and price points, launched new range of
servers, introduced PC financing and showed unmatched aggression to pip rivals
to the post. The result: HCLI managed to outperform the industry growth and
emerge as the market leader in the desktop PC segment-shipping over 4.75 lakh
units and cornering 13.7% of the market.

HIGHLIGHTS

Crossed $1 bn; topped desktop PCs with 14% units share


Implemented a Rs
146 cr BSNL internet backbone network

Strong understanding of the distribution business in India


2000 strong sales and services network, meeting domestic market needs


Core IT business now far second to Nokia handset distribution business
(68% of revenue)


Lower brand equity in high value server business

l Start-up Year:
1976 l Products & Services: PCs, servers, storage systems, managed network services, infrastructure services, facilities management, SI, ISP, PCs, networking and office automation products and services l Branches:
300 l Dealer Outlets: over 2,000 l Address: E-4, 5 & 6, Sector 11, Noida-201301
l Tel: 2520977 l Fax: 2525383
l Website: www.hclinfosystems.com

Overall, revenues from computer systems and other related products showed
strong y-o-y growth of 27% during the JFM 2005 quarter, as compared to 10%
growth previous fiscal. The segment now contributes 26.7% of the company’s
total revenues. Internet and related business grew at a lower pace, chipping in
0.5%. The year also saw its Frontline business grow stronger, bringing in close
to 25% of the total revenues.

With Toshiba refusing to launch any product for the lower end of the notebook
market, the year saw HCLI plugging this gap with its own brand which accounted
for 13% of its total notebook sales of 23K. The company also benefited from
large orders from some PSU clients; it commissioned the country’s largest
Internet backbone network for BSNL worth Rs 146 crore.

The company had its share of problems as well. Despite a fall in excise duty
from 2% in Q1 ’04 to 0.5% in Q1 ’05, a jump in the total cost of sales dented
the company’s margins. Besides, the company has been facing pressure on
realizations due to stiff competition from unorganized and MNC players.

Interestingly, India’s largest PC manufacturer has, over the years, emerged
as more of a telecom distribution compay with its IT-to-handsets ratio shifting
from 62:38 in 2002-03 to 32:68 in 2004-05, making it more of a telecom
distribution company than a PC vendor.

The 92% growth in the office automation and telecom (OAT) business-from Rs
2,468 crore in 2003-04 to Rs 4,733 crore during the current fiscal-has once
again been the major revenue driver for company. Minus the OAT business this
growth drops to 41% or Rs 2,203 crore in revenue terms.

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