HCL INFOSYSTEMS: Indian Tiger

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.