Bankruptcy not to affect outsourcing deal: HCL Tech

New-Delhi based IT services provider, HCL Technologies — which signed a $350 million (around Rs 1,700 crore) seven-year IT operations and management deal with Reader’s Digest Association (RDA) in March this year — says RDA’s filing for bankruptcy, under Chapter 11 of the US Bankruptcy Code, will not affect the deal.

“It is business as usual and it (HCL Tech) continues to support RDA and does not see any impact on itself as of now,” the IT firm said in a Bombay Stock Exchange (BSE) filing today. The Chapter 11 filing will apply only to RDA’s US businesses. Its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be hit.

“HCL is at the very core of our global operations, and we value the relationship today and going forward. Our underlying business operations are strong, and we are undertaking this initiative with the banks so we can significantly cut our debt and free cash for use in building our business. Our creditors are supportive and are working to ensure a smooth process with no disruptions to business operations,” said Albert Perruzza, senior vice-president (IT), Global Operations and Business Redesign for RDA, in a statement.

“At this point of time, the nature of the bankruptcy is unknown. We don’t know to what extent the restructuring will happen. It could be segmentation or realigning the existing business for RDA. So, there might not be an immediate impact on HCL Tech,” said Sabyasachi Satapathy, Partner at Tholons Advisory. Analysts tracking the stock markets corroborated that bankruptcy doesn’t mean that the entire business is lost and that many parts of the business are insured. “So, it is difficult to comment on the loss of business for HCL,” said an analyst.