HCL Technologies pips peers in Q3 sequential revenue growth

15 Jan , 2022 By : monika singh

New Delhi | Mumbai: HCL Technologies NSE 0.22 % Ltd. grew the fastest among India’s large IT firms in the third quarter, benefiting from a surge in deals from customers globally.

On Friday, the Noida-based company said its revenue grew 7.6% sequentially in dollar terms, its fastest growth in 12 years, in the seasonally weak October-December quarter. On the same metric, the revenue of Infosys NSE 1.72 % Ltd., Tata Consultancy Services Ltd. and Wipro NSE -1.53 % Ltd.—all of which reported quarterly results on Wednesday—expanded by 7%, 4% and 2.3%, respectively.

However, HCL Technologies’ net profit fell 13.6% year-on-year to Rs 3,442 crore as the company had recorded a one-time tax benefit of $60 million in the December 2020 quarter. The company said it saw lower utilisation of its engineers in the past three months, when increments and increased hiring and retention costs also weighed on results. Revenue from operations rose 15.7% over the year-ago period to Rs 22,331 crore, led by strong growth in digital engineering and R&D offerings, cloud transformation and application modernisation deals.

The company is confident of posting double-digit revenue growth and EBIT (earnings before interest and tax) margin at 19-21% in the fiscal ending March 31, 2022. The company does not give an exact range of expected revenue growth.

The performance has exceeded expectations, the growth has been broad-based and there is momentum across all verticals, Chief Executive Officer C. Vijayakumar said.

“The demand environment is very robust, everyone is leveraging technology intensely to thrive and revive and transform their businesses. Customers are also optimising their costs and reinvesting the savings for much better business impact. And we have a good mix of deals from both these areas,” he said.
On Friday, shares of HCL Technologies rose 0.32% to Rs 1,337.55 apiece on the BSE while the benchmark S&P BSE Sensex ended the day 0.02% higher at 61,223.03 points. The quarterly results were declared after market hours.

New Business Wins
The products & platforms segment delivered 24.5% sequential growth, driven by significant traction in HCL Digital Experience and HCL Commerce products, Chief Financial Officer Prateek Aggarwal said during the post-earnings call.

The company reported $2.1-billion worth of new deal wins, 64% higher compared to a year ago, the management said. Total contract value in services was $1.97 billion, up 63% year-on-year, enabled by eight net new large deal wins. In products, the TCV stood at $167 million (70% growth YoY), helped by eight net new large deals and a significant number of smaller deals.

Hiring & Attrition
HCL Technologies, which has so far hired 15,787 freshers out of the planned 20,000-22,000 for FY22, expects to double the quantum of freshers’ hiring in FY23. The company plans to bring on board 2,000 US graduates over the next 2-3 years, where it has already achieved almost 72% local hiring.

Around 3% of the company’s employees are working from offices at present and the number is expected to remain low during the March quarter due to health concerns, Chief HR Officer Apparao VV said.

HCL Technologies reported a headcount of 197,777 at the end of the December quarter, with a net addition of 10,143 employees. Attrition was 19.8%. The management said that attrition would remain high in the short term.
Analysts’ take
“We believe the strong new deal wins, healthy deal pipeline, robust net hiring, and investments in digital capabilities would help HCL Tech accelerate its revenue growth in FY23,” Ashis Dash, a research analyst at Sharekhan by BNP Paribas, wrote in note to clients.

Earlier this week, TCS, Infosys and Wipro also gave upbeat commentary on the demand environment. The three Indian IT firms also reported their highest attrition in three years during the quarter, as they saw their employees being snapped up by rivals as well as global companies and startups that are benefiting from the rise in technology spending worldwide.

Acquisition in Hungary

On Friday, HCL Technologies announced the acquisition of Budapest-based Starschema, a provider of data engineering services, for $42.5 million. The acquisition will bolster the Indian company’s digital engineering expertise and increase its presence in Central and Eastern Europe.