Friday, April 26, 2013

HCL to get impacted by delayed joining dates of freshers?

HCL has been deferring joining dates of freshers, it hired at various campuses across the country. Some of these offers were made as far back as august-september - 2011. With no sign of joining letters students have taken to protests to press for joining. Now what can students do. Its tough these days for freshers to get hired. Rationally they should be be reskillling/upskilling themselves to get a better shot at being hired. But no one or atleast many do not want to pay for training and keep living in hope that they will get hired and trained by companies. Its a chicken and egg problem.

"Short Term Gain, Long Term Pain"

Anyways, HCL did it to make sure that its utilization rates improve and that it can show improved margins. Afterall growth is slow for the industry (although HCL is doing better than most). Over the last few quarters, HCL has surprised the street with higher profits riding on margin improvement and its share price has increased. However, they miss out on one important point. At some point HCL would need to hire freshers, to improve its cost pyramid. However, if I am an excellent student, the kind that HCL would want to hire, I would be wary of appearing for interview because I do not know if HCL would honor its offer letter. What stops its from deferring joining dates again. I would not be surprised if many campuses, especially the good ones, shut their gates to HCL this year. 

What prevents this bad karma spilling over to lateral hiring market. People would start demanding a premium to join HCL as it would increasingly be seen as not being friendly to new hires. 

This from a company that says 'employees first'. What message do HCL's customers get from this regarding management's integrity? 

What's good in the short term, may turn out bad for them in the long run? Anyone who's done DCF knows that for companies a large proportion of value comes from the long term. Will the new management at HCL wake up and do something to prevent value deterioration. 

Effect of this is already being felt in the stock market by HCL in the last few days. Despite tremendous improvement in profits (up 70%) this year, HCL stock is down over 10%. They are trading at a less than 12 times profit/share run-rate  

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