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HCL Technologies' profit beats estimates on software product demand

India's fourth-largest software exporter sticks to annual growth forecast

HCL Technologies has been investing heavily in several home-grown software platforms and spent up to $1.5 billion in acquisitions. (Photo by Ken Kobayashi)

MUMBAI (NewsRise) -- HCL Technologies reported a better-than-expected 16% rise in second-quarter net profit and maintained its annual growth forecast on the back of strong demand for its software products and services.

Consolidated net profit in the quarter ended in September stood at 25.40 billion rupees ($345 million), India's fourth-largest software exporter said in a statement on Tuesday. Revenue grew about 20% to 148.6 billion rupees. Analysts were expecting the company to report a net profit of 24.33 billion rupees, according to a Bloomberg poll.

The company, backed by billionaire Shiv Nadar, maintained its dollar revenue growth forecast of 9.5% to 11.5%, barring currency fluctuations, in the fiscal year that began in April.

The growth was led by infrastructure services, engineering and research and development unit, and next-generation digital services, C. Vijayakumar, president and chief executive of HCL Technologies, said in the statement on Wednesday. Revenue from product engineering and intellectual property platforms business touched an annual run-rate of $1 billion, he said.

"We remain confident of retaining this growth trajectory going forward," Vijayakumar said, adding that the company remains "positive" about the future growth momentum and predicted revenue growth "in the mid-point of the guidance."

Revenue from the products and platform business grew more than 10% in the quarter.

HCL has been growing faster than some of its larger rivals thanks to the string of acquisitions and partnerships it struck in the past two years to offset the weakness in its core information technology business.

The company has been investing heavily in several home-grown software platforms and spent up to $1.5 billion in acquisitions and to create intellectual property partnerships with International Business Machines and DXC Technology.

Meanwhile, core software infrastructure management business, which HCL pioneered among its peers and accounts for more than a third of its revenue, showed signs of rebound with a 4.4% increase in the quarter. The segment has been contending with a slowdown amid clients' increasing demand for internet-based technology solutions such as cloud computing and artificial intelligence.

Earlier this month, India's largest outsourcing company Tata Consultancy Services reported a strong second-quarter profit and maintained its confidence in reporting double-digit revenue growth this fiscal year amid surging digital orders.

Second-ranked Infosys also maintained its growth forecast for this fiscal year amid rising investments in new digital technologies and large deal wins.

To be sure, the sense of optimism in the Indian outsourcing industry contrasts the stance of larger global rival Accenture, which last month gave a weaker-than-expected growth forecast citing macroeconomic challenges. Information technology industry is heading towards a challenging economic climate caused by Britain's imminent exit from the European Union and a searing global trade war.

Ahead of the results, HCL's shares fell 2.8% in Mumbai trading, while the benchmark S&P BSE Sensex closed down 0.8%.

--Dhanya Ann Thoppil

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