HCL Tech posts fastest revenue growth in 12 yrs, net profit falls
HCL Technologies Ltd on Friday reported a dollar revenue growth of 7.6% sequentially in constant currency to $2.97 billion for the December quarter, the fastest in almost 12 years, boosted by new deal wins and acceleration in clients’ digital spending.
In comparison, HCL’s closest rival, Wipro Ltd’s dollar revenue grew 3% sequentially in constant currency to $2.64 billion during the quarter.
HCL also recorded strong order bookings, with a total contract value (TCV) of new deal wins worth $2.13 billion, a 64% growth from a year earlier.
The Noida-based software services company posted a net profit of ₹3,442 crore in the three months ended 31 December, a decline of 13.6% from a year earlier when it had a one-time gain of lower tax expense. Profit beat Bloomberg consensus estimate of ₹3,374 crore.
December quarter revenue rose 15.7% from the year-ago period to ₹22,331 crore on the back of strong performance led by its digital business or ‘Mode 2’, which grew 30.2% from a year earlier in constant currency. Analysts estimated quarterly revenue of ₹21,630 crore.
HCL Technologies does not provide a formal revenue growth forecast but said it is optimistic about demand in the fiscal fourth quarter. It also retained its operating margin forecast of 19-21%.
“Our future looks bright as we had a very strong net new booking of $2.1 billion, a 64% year-on-year increase. We also added more than 10,000 to our employee strength this quarter. I believe we continue to be in a vantage position to address sustained demand momentum as our investments on strategic priorities such as digital, cloud and engineering capabilities and our talent development plans are showing strong returns," said C. Vijayakumar, chief executive officer and managing director of HCL Technologies.
He said companies globally are undergoing a fundamental change in the wake of digital analytics, cloud, internet of things (IoT), and automation, and HCL believes its “blend of services and products enables clients to achieve transformation guided by the framework of the company’s Mode 1-2-3 strategy."
HCL’s attrition rate for the December quarter increased to 19.8% from 15.7% in the preceding three months, indicating continued strong demand for technology professionals in the industry. The high attrition rate is expected to slow gradually from this quarter onwards across the industry.
The company added 10,143 employees last quarter, increasing the total headcount to 197,777.
“HCL reported growth in the past four years, with rapid increases in innovation-related revenue (Mode 2 and Mode 3 in its terms) coupled with an increase in transformational services. It now recognizes the significant opportunities in the mid-market space and is starting to exploit this market using its industrialized service catalogue. This may help HCL win new deals in all markets. However, attrition rates remain a more significant concern as is the case with all other providers," said D.D. Mishra, senior director analyst, Gartner.
HCL Technologies declared its earnings after market hours on Friday. Ahead of the results, the shares rose 0.32% to ₹1,337.55 on BSE.