Sales teams at HCL Technologies and HCL Infosystems, owned by Shiv Nadar-promoted HCL Corporation, have started working more closely than ever before and pitching jointly for new technology service contracts in India and the Middle East, reviving talk of a possible integration. At least three people familiar with the development told ET that HCL Infosystems is working towards the goal of merging its system integration and services business with HCL Technologies.
“Client details have been shared and the sales teams at HCL Technologies are reaching out to HCL Infosystems’ clients, presenting as one integrated entity,” said a senior executive at HCL Technologies. According to another person close to the development, the promoters are waiting for the right time before making a public announcement, but that the “message has been conveyed to the senior management”.
HCL Technologies said it does not comment on rumours. Rothin Bhattacharyya, executive vice president for corporate development at HCL Infosystems, said in an emailed statement that no integration plan is currently under the consideration of the HCL board.
According to Bhattacharyya, collaboration between information technology services companies is a common industry practice.
“There are many complementarities between HCL Infosystems and HCL Technologies in terms of our services offerings, industry domain capabilities and geographical presence. These collaborations are governed by agreements and the transactions are reported and reviewed as related party transactions in the respective audit committees,” Bhattacharyya said.
HCL Technologies, with sales of Rs 25,734 crore in the year to June 30, is focused primarily on the US, Europe and Asia-Pacific markets while HCL Infosystems has Rs 9,295 crore in revenue, mostly from Indian and Middle Eastern clients.
A bulk of the latter’s revenues comes from selling computing hardware to government and by acting as a national distributor for mobile phones, computers, laptops and printers.
Earlier this year, HCL Infosystems separated its hardware sales-linked system integration business, pure services, hardware distribution and education sector businesses and hived them off into separate subsidiaries. “Looking at the India business of other large IT firms, where the margins are low, if such an integration takes place there is the possibility of margin dilution, but this would strengthen HCL Technologies’ domestic presence and add to its revenues,” said Pratik Gandhi of IDBI Capital, who did not have knowledge of any merger plan.
System integration and services revenue together make up about Rs 1,300 crore and it has an order book of around Rs 4,000 crore. HCL Infosystems is the managed services provider for the unique identification programme Aadhar, where it will offer services to banks, hospitals and others to verify a person’s identity using Aadhar credentials, including biometric data.
Separately, HCL Corporation, the holding company for both the group companies, has been raising its stake in HCL Infosystems. From about 50% in December, the promoter holding has gone up to 56% in June and since then, it has been consistently buying in small quantities from the open market.