HCLTech Revenue Growth Guidance Raised To 13.5-14.5%; Q2 Profit Up 7%

IT services major HCL Technologies on Wednesday raised its full-year revenue growth guidance to 13.5-14.5 per cent, from 12-14 per cent on a constant currency basis, citing strong order bookings and pipeline. This after it reported a consolidated net profit of Rs 3,489 crore for Q2FY23, an increase of 7.09 per cent year-on-year (YoY) on the back of new order wins.

The revenue of the IT firm grew 19.5 per cent to Rs 24,686 crore, against Rs 20,655 crore a year ago. Its services business grew 18.9 per cent YoY, led by strong demand for cloud, engineering, and digital services, the IT major said. The services revenue is expected to grow 16–17 per cent YoY in FY23, according to the company’s guidance.

On a sequential basis, HCL’s net profit saw a 6.3 per cent increase from Rs 3,283 crore in the previous quarter. The revenue jumped 5.2 per cent against Rs 23,464 crore in Q1 FY23.

“HCLTech has delivered yet another solid performance this quarter. This is a validation of the strategic choices we made and the effectiveness of our operational framework. Our bookings have been very strong, at $2.4 billion in the last quarter. It includes 11 large deals in services and products. The bookings grew 6 per cent on a total contract value. We have won a mega deal this quarter, but it will start showing its impact on revenue only in FY24,” said C Vijayakumar, CEO and managing director, HCL Tech.

The company’s earnings before interest and taxes (Ebit) margin contracted by 1 percentage point over the same period a year ago. The margin for the quarter stood at 18 per cent.

High level of inflation across the countries, followed by central banks across the world simultaneously raising interest rates, has increased the risk of a global recession. The international monetary fund (IMF) has forecast global growth to slow from 6.0 per cent in 2021 to 3.2 per cent in 2022 and 2.7 per cent in 2023.

“Even a concern of recession is actually enabling a lot more transformation deals from our clients. A lot of our customers preparing for a slowdown are accelerating digital transformation. As a result, our deal pipeline across the sized deals is at the highest level,” Vijaykumar said. He added that the demand for tech services continued to be very high.

Prateek Aggarwal, chief financial officer, HCLTech said: “We have significantly improved Ebit margins sequentially, led by operating leverage and efficiencies, despite the impact of salary increments for the largest section of our people. Our H1 growth and deal wins led us to increase our revenue guidance to 16 per cent-17 per cent for services, and 13.5 per cent-14.5 per cent at the company level, reflecting of our strong growth visibility.”

The company has reported a net addition of 8,359 employees in the quarter. The headcount now stands at 219,325. The attrition rate in the IT services business remained high at 23.8 per cent in last 12 months (LTM). Q1 FY23 attrition too was at 23.8 per cent and the management was confident that attrition will come down.

HCLTech management too had a similar take on moonlighting as peers, and said its an ethical issue.

"There are requirements around confidentiality, non solicitation, non compete…we expect our employees to honour those commitments that are contractually made, so dual employment while working at HCL is not what we support,” said Ramachandran Sundararajan, chief people officer, HCLTech.