In a recent earnings conference for the quarter ending on September 30, HCL Technologies (HCLTech) CEO C Vijayakumar discussed the company’s performance and outlook. Despite the prevailing market conditions, HCLTech anticipates robust growth in the third and fourth quarters of the fiscal year.
Key Highlights –
1) Financial Performance
In Q2, HCLTech reported a year-on-year net profit growth of 9.92 percent. Sequentially, net profit increased by 8.55 per cent. Consolidated revenue for the quarter grew by 8 per cent year-over-year to Rs 26,672 crore. The company also improved its EBIT margin by over 150 basis points quarter-over-quarter.
2) Sector-wise Growth
The company experienced substantial growth in various sectors, with Retail and Consumer Packaged Goods (CPG) growing by 7.5 per cent quarter-over-quarter (QoQ) in constant currency, and telecom and media showing a 6.2 per cent QoQ growth in constant currency, a notable improvement from the previous quarter. Financial services and life sciences sectors also demonstrated strong growth.
3) Strong Deal Wins
HCLTech reported a remarkable total contract value (TCV) increase of $3.96 billion during the quarter, primarily driven by the $2.1-billion Verizon deal in the previous quarter. It marked a substantial jump from the $1.56 billion in the last quarter, signifying a significant increase of 150 per cent quarterly and 67 per cent year-over-year.
4) Large Deal Wins
HCLTech secured 16 large deals during the quarter, including 10 in services and six in software. It bodes well for the company’s growth prospects.
5) Strategic Acquisitions
The acquisition of the German automotive engineering services provider ASAP Group has been completed and is expected to contribute to revenue growth in the current quarter. This acquisition aligns with HCLTech’s strategy to diversify its service offerings.
6) Market Sentiment
While HCLTech has shown resilience and gained market share in cost optimization and transformation deals, discretionary spending remains subdued. The company had anticipated a more significant recovery in technology spending at the beginning of the year, but it has yet to materialize as expected.
7) Guidance and Performance
Despite strong performance and beating analysts’ estimates on crucial metrics, HCLTech revised its full-year revenue growth guidance from 6-8 per cent to 5-6 per cent in constant currency terms for the fiscal year 2024. However, it maintained its full-year operating margin guidance of 18-19 per cent.
8) Workforce Expansion
HCLTech plans to onboard 10,000 freshers in the fiscal year 2024 despite a slowing net headcount addition.
Summary
HCLTech faces a challenging market environment with restrained discretionary spending. However, the company’s strong deal wins and sector-wise growth provide optimism for the coming quarters. HCLTech asserts its commitment to strategic acquisitions and confidently adjusts its revenue growth guidance for the fiscal year, showcasing its resilience and adaptability in the face of uncertainty.