HCL Technology’s profit up 4%, beats the Street

Revenue for the September quarter was up 11.1% from the year-ago period ₹20,655 crore, driven by the strong performance of its digital business or ‘Mode 2’, which grew 36.3% year-on-year (YoY) in constant currency. Consensus Bloomberg forecast expected revenue ₹20,982.70 crores.

The Noida-based IT services company retained its FY22 guidance of double-digit growth in constant currency on the back of a positive demand environment and a strong deal pipeline. It provides a directional revenue guidance only. It also maintained its Ebit margin guidance in the range of 19-21%. Ebit means earnings before interest and taxes.

Dollar revenue for the second quarter grew 3.5% sequentially to $2.8 billion in constant currency, driven by new deal wins and customers’ digital agenda. It struck 14 new large deals worth $2.3 billion in the telecom, life sciences and healthcare and manufacturing verticals in the September quarter.

In comparison, HCL’s nearest rival Wipro Ltd.’s dollar revenue grew 8.1% sequentially to $2.58 billion in constant currency, surpassing the $10 billion milestone of annual revenue run rate.

“We delivered a healthy performance this quarter, marked by strong growth in our services portfolio led by our digital business, engineering and cloud services. We have had impressive customer additions across categories, reflecting the strong demand and relevance of our offerings across all of our customer groups. Our strong pipeline and continued strong employee ramp up bodes well for the momentum of our business,” said C Vijayakumar, Chief Executive Officer and Managing Director, HCL Technologies.

Ebit margin for the September quarter narrowed to 19% from 19.6% in the previous quarter due to a decline in revenue across products and platforms.

Analysts believe that HCL has continued its growth momentum at the expected levels. “HCL has a strong vertical focus and offerings around retail, healthcare and oil & gas. The customers associated with HCL leverage its capabilities to drive experience and results. HCL’s focus on client-specific requirements and DevOps capability are the differentiating factors for outsourcing deals. However, HCL will need to transition rapidly to improve its digital revenue growth,” said DD Mishra, senior research director at Gartner.

The attrition rate for the second quarter increased from 11.8% to 15.7% sequentially, reflecting strong demand for technology professionals in the industry. According to Apparao VV, Chief Human Resource Officer, HCL Technologies, the high attrition rate is expected to continue almost till the fourth quarter, when it is likely to subside.

The company announced its earnings after the close of the market on Thursday. Before its results, the stock closed down 1.17% ₹1,250.90 on BSE.