HCL Infosystems: The Home Run

In the year when India's domestic market growth caught up with exports growth, HCL Infosystems (HCLI) hived off its services business, excluding hardware services, to HCL Technologies

(HCLT).

Further, it also handed over its small BPO business to HCLT's eServe subsidiary. So HCLI is now has products, and services sales, aimed at the domestic market. While it will manage hardware-related business on its own, HCLT will handle software and applications development. HCLT will execute the services projects, even for the domestic market. HCLI retains only hardware-related services such as maintenance and facilities management.

However, 61% of India's largest PC maker's revenues came from its telecom and OA business: Nokia handset sales recorded a 188% y-o-y growth. This also means a drastic shift in HCLI's IT-to-telecom ratio from 62:38 to 39:61. The Nokia business also meant that HCL Infinet's revenue, which is higher than the rest of HCLI's topline, helped push up total revenues to Rs 4,027 crore. Remove the handsets business, as we have done, and revenue drops to Rs 1,559

crore.

The company scored nearly as well in its “core” PC-business, though. HCLI continues to be the PC market-leader, and often the price leader. Its PC unit sales went up by 78 %, though revenue from there was only 21%. Presence in the hardware requires huge inventories that increase costs. With HCLI further targeting supplies, and with no supportive government policy in sight, costs of sales could go up even more. Nevertheless, the share-market's confidence in HCLI has been ramping up. From Rs 80 in April 2003, it crossed Rs 761 on March 15, 2004, before closing at Rs 664 on March 31, 2004.

To sharpen its handsets sales focus, HCLI transferred its OA (office automation) division to HCL Infinet, its 100% (networking) subsidiary. With this, the company now has two focused business units-HCLI, which will concentrate on IT products (and related services), and HCL Infinet, which will focus on the rapidly growing communications and OA areas. HCLI is now ready to ramp up to face domestic demand in PCs and handsets.