HCL Infosystems’ Negative Turnaround

HCL Infosystems announced its Q4FY13 numbers on May 10, 2013. The results of HCL Infosystems have been very disappointing. The stock is currently trading lower by more than 3%.

In Q4FY13, revenues of HCL Infosystems declined by 25.09% to Rs 1869.84 crore from Rs 2496.16 crore in Q4FY12. Segment-wise revenues of HCL Infosystems cannot be compared directly since the company has undergone restructuring of its segment accounting to match its operational model.

Prior to Q4FY13, HCL Infosystems operated under the primary segments of ‘Computer Systems and Other Related Products and Services’ and ‘Telecommunication and Office Automation’. From Q4FY13, its segments would consist of Hardware Products and Solutions Business (comprising of Hardware Solutions Business, Computing Products Manufacturing Facility and Channel Business), Services Business, Learning Business and Distribution Business.

Along with a setback on the revenue front, HCL Infosystems’ margins too declined considerably. In Q4FY13, it posted an operating loss of Rs 19.47 crore as compared to an operating profit of Rs 31.26 crore in Q4FY12. The same trend was seen in the earnings of HCL Infosystems. In Q4FY13, the company posted a net loss of Rs 14.96 crore as compared to a net profit of Rs 20.02 crore in Q4FY12.

It’s clear that the figures for HCL Infosystems are disappointing. The company has not only lowered on its topline but has also negatively turned around. We had a negative outlook on the hardware industry and on HCL Infosystems. In accordance to this we had asked investors to stay away from this space. We maintain that recommendation considering the negative outlook that the company holds.