HCL Infosystems Reports Revenue of Rs. 106 Crore in Q1 FY21

HCL Infosystems today announced its financial results for the quarter ended June 30th, 2020.

Q1 FY21 Business Highlights:

- Q1 FY21 revenue was at Rs.106 Crore vs. Rs. 228 Crore in Q4FY20
- Systems Integration and Solutions business reported revenue of Rs. 36 Crore in Q1 FY21 vs Rs.40 Crore in Q4 FY20
- Distribution business revenue for Q1 FY21 stood at Rs. 70 Crore vs Rs. 188 Crore in Q4 FY20
- Enterprise Distribution revenue registered revenue of Rs. 33 Crore in Q1 FY21 vs. Rs.142 Crore in Q4 FY20
- Consumer Distribution registered revenue of Rs. 37 Crore in Q1 FY21 vs. Rs.46 Crore in Q4 FY20
- Loss before interest, tax and exceptional items (from continuing operations) was Rs. 21.2 Crore in Q1 FY21 versus Rs. 47.3 Crore in Q4 FY20

Dr. Nikhil Sinha, Chairman Board of Directors, HCL Infosystems Ltd., commenting on the results' said, "During the quarter we continued to focus on initiatives to reduce the company's debt and business losses by optimizing our businesses. Accordingly, we have been scaling down our Consumer and Enterprise Distribution businesses, which has resulted in the decline in revenues in the quarter.

Our System Integration and Solutions business continued to focus on execution of existing contracts and collection of receivables from customers."

Restructuring of the Company

The Board of Directors of HCL Infosystems Limited, in its meeting held today approved the merger of HCL Learning Limited and Digilife Distribution and Marketing Services Limited (DDMS), wholly owned subsidiaries of the Company, with HCL Infosystems Limited.

The proposed merger is for the purpose of simplifying the group structure. As part of the ongoing rationalization of the business, the learning business and the distribution business are being scaled down. As a result, separate entities for these businesses, i.e. HCL Learning Limited for learning business and DDMS for distribution business, are no longer required. The proposed merger is subject to approval of the shareholders of HCL Infosystems Limited and such other regulatory approvals as may be required in this regard.

Since, the aforesaid Scheme is subject to approval from concerned regulatory authorities which is considered to be substantive, the accounting effect of the above Scheme has not been considered in these financial results.

Divestments of Property

In accordance with the divestment strategy of the company, HCL Infosystems Board in its meeting held today approved the sale / surrender of immovable properties of HCL Infosystems Limited. The sale / surrender will take place as and when an appropriate buyer is identified. These properties are lying vacant / partially vacant, as the Company is not utilizing / fully utilizing these properties after scale down of its operations and change in its business requirements, though the Company continues to incur cost on maintenance of these properties. The proceeds from the sale / surrender of these properties will be used to pay off part of the Company's debts and to reduce its finance cost. The proposed sales(s) are subject to approval of the shareholders and lenders of the Company and such other approval as may be required in this regard.

Business Update

Distribution Business:

The Distribution Business reported revenue of Rs. 70 Crore in Q1 FY21 versus Rs. 188 Crore in the preceding quarter. The decline in revenue has continued in the quarter due to the company's plan to downsize the business. This plan has been implemented since the beginning of this calendar year after the Board received the advice of a reputed independent consultancy firm about the prospects for this business. It was then recommended and decided that the distribution business be gradually downsized as it was becoming financially untenable.

Enterprise Distribution registered revenue of Rs. 33 Crore in Q1 FY21 versus Rs. 142 Crore in Q4FY20. Revenue from the direct business which provides technology solutions to customers directly was the main contributor.

Consumer Distribution reported revenue of Rs. 37 Crore in the quarter. The distribution of Nokia handsets of HMD Global as well as Microsoft's Surface range of products contributed to the revenue of Consumer Distribution in the quarter.

System Integration (SI) & Solutions Business:

The SI and Solutions business registered revenue of Rs. 36 Crore in Q1 FY21. The business continued to focus on project completion and the collection of receivables from customers. During the quarter, the business made a collection of Rs. 38 Crore. As on 30th June 2020, the order book position of the business stood at Rs. 382 Crore.

As stated in our earlier communications, we continue to face inordinate delays with certain customer acceptances and payments, especially in the Power Sector. We are constantly engaging with customers for expediting the resolution of outstanding issues and settlement of the payables, but the progress has been very slow.

Shares of HCL INFOSYSTEMS LTD. was last trading in BSE at Rs.9 as compared to the previous close of Rs. 8.92. The total number of shares traded during the day was 43988 in over 120 trades.

The stock hit an intraday high of Rs. 9 and intraday low of 8.8. The net turnover during the day was Rs. 393519.

Source : Equity Bulls

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