HCL Infosystems: Waiting to Soar High

HCL Infosystems is a total IT solution provider with its service offerings
spanning manufacture of PCs, servers, high-end storage products to software
services. In the domestic market, HCL is engaged in the manufacture of desktop
computers and high-end servers and is a leader in the organized desktop
computers segment. HCL’s other services in the domestic market include SAP
Implementation, AMC, facilities management, network management and consulting,
call center consulting and help desk services. HCL’s subsidiary HCL Infinet is
an ISP and provides complete solutions in the Internet arena to its clients. HCL
Infinet has set-up a Technical call center in Delhi and is looking at expanding
its services in this segment.

F A C T S H E E T

Website: www.hclinfosystems.com E - 4, 5 & 6, Sector XI, Noida - 201 301 (UP)  Tel: 011-91-4526518, 4526519, 4526993 Fax: 011-91-4525196 Area of specialization: Manufacture of desktop PC’s, servers and other hardware, systems integration and software services Revenues (June 2001): Rs 1162.30 crore Offices: India, US, UK, Australia, Singapore, Malaysia Listing (stock exchanges): Bombay, Delhi, Kolkata, Chennai, Kanpur and NSE Face Value: Rs 10 per share Current Market Price: Rs 129 per share 52 Week High/Low: 168/45 BSE Code: 500179 NSE Code: HCL-INSYS

In the export market, HCL focuses on providing customized software solutions,
application development and maintenance, e-business solutions and enterprise
solutions that include ERP, SCM, CRM, and Enterprise Application Integration.

In the full year ended June 2001, HCL reported revenues of Rs. 1162.30 crore
and net profit of Rs. 58.35 crore, which were up by 3% and down by 20%
respectively. In the third quarter ended March 2002, the company reported
revenues of Rs. 351.37 crore, up by 5% over the corresponding quarter last year.
The net however slumped 43% to Rs. 10.28 crore.

Generally, the revenues form sale of hardware peaks in the quarter ended
March. HCL’s revenues from the sale of products and related services stood at
Rs. 336.05 crore. These accounted for 96% of the total revenues compared to
approximately 92-93% in the past two quarters. The company witnessed sharp
decline in operating margins as most of the sales took place within the
Government and PSU segments. HCL sales from corporates witnessed a slowdown and
it expects some improvement in the next two quarters. Nevertheless, the margins
are expected to remain subdued in hardware, which forms the major part of its
revenue constituent.

On the other hand, HCL’s foray into software services has failed to take
off as is evident from the revenue growth and margins from this segment. The
company reported revenues of Rs. 18.54 crore in the first quarter ended
September 2001, which declined to Rs. 17.88 crore in the second quarter and Rs.
15.32 crore in the third quarter. Operating margins fluctuated from 12% in the
first quarter to 17% in the second quarter and just 6% in the third quarter.

Going ahead, the company is betting on improvement in sales from the finance
and banking industry. The company’s technical call center, set up by its
subsidiary HCL Infinet currently operates at 130 seats capacity and is expected
to increase over the next few quarters. In services, the company closed a few
orders in SAP implementation and development projects.

Sushanto Mitra is the founder
of Technology Capital Partners

The views reflected here are of the author and not of this publication. No
liability is accepted for losses based on the information presented heref