HCL Tech Q3 net falls 36 pct; shares tumble

Employees at a call centre provide service support to international customers in Bangalore in this March 2004 file photo. HCL Technologies Ltd's March quarter profit fell by more than a third, hit by forex losses, dragging the shares down more than 13 percent.

NEW DELHI (Reuters) - HCL Technologies Ltd's March quarter profit fell by more than a third, hit by forex losses, dragging the shares down more than 13 percent.

HCL, one of India's top five software exporters, said the "market conditions (were) very tough", with pressure on prices and with fewer deals coming in.

"New deal flow into the funnel is slowing ... because the economic situation is becoming worse and worse," Chief Executive Vineet Nayar told a news conference. "Pricing pressure is indeed there."

India's export-driven outsourcing companies have thrived for years by bagging contracts from overseas clients, but the economic slowdown and turmoil in the global financial sector have halted the sector's scorching pace of growth.

The top three firms, Tata Consultancy Services, Infosys Technologies and Wipro have been downbeat about forecasts for the financial year that began on April 1.

Shares in HCL fell over 13 percent in opening deals, before trimming losses to close 9.7 percent lower at 125.05 rupees. The broader index was down 0.74 percent and the sectoral index was up 0.1 percent on the day.

RESULTS

Profit at HCL fell to 2.18 billion rupees in the quarter to March, from 3.43 billion rupees a year ago, under US accounting standards. Revenue rose by a half to 28.62 billion rupees.

Forex loses came in at 2.01 billion rupees in the quarter, HCL said, compared with gains in the year-ago period, as the firm hedged against a gain in the rupee, which in fact fell 4 percent in the three months to March.

The firm has hedged $1.3 billion at 41 rupees to the dollar. Nayar said the firm would look at unwinding the hedges "if an opportunity (came) up." He did not elaborate.

HCL won 11 contracts worth $250 million in the quarter.

AXON DEAL

HCL, which bought British software firm Axon in December, would repay the $585 million loan it took to finance the deal through cash it has and by raising fresh debt, executive vice president for finance, Anil Chanana said.

The short-term loan matures in December.

Axon's integration was progressing as scheduled and the bulk would be completed by June, officials said. Six of the 11 deals signed in the quarter had an Axon component in them, and 25 new deals HCL was pursuing would potentially also have Axon services, they said.