HCL Technologies Q1 Results: Profit Jumps Nearly Threefold; Margin Expands

Employees walk through the deserted HCL Technologies Ltd. Jigani campus in Bengaluru, India. (Photographer: Samyukta Lakshmi/Bloomberg)

HCL Technologies Q1 Results: Profit Jumps Nearly Threefold; Margin Expands

HCL Technologies Ltd.’s quarterly profit surged, meeting estimates, aided by cloud and digital transformation deals as businesses continued to move online during the Covid-19 pandemic.

Net profit of the software services provider jumped nearly threefold over the preceding quarter to Rs 3,205 crore in the April-June period, according to an exchange filing. That compares with the Rs 3,245-crore consensus estimate of analysts tracked by Bloomberg.

The company’s revenue increased 2% sequentially to Rs 20,068 crore. Analysts had pegged the top line at Rs 20,346 crore.

Q1 highlights (quarter-on-quarter)

  • Revenue in dollar terms rose 0.9% to $2,720 million, against the $2,729-million estimate.

  • Margin expanded to 19.6% from 16.70%.

  • EBIT rose 20% to Rs 3,934 crore.

  • IT and business services revenue rose 0.3% to $1,947 million.

  • Engineering and R&D services revenue increased 4.3% to $417 million.

  • Products & platforms revenue was down 1% to $355 million.

HCL Tech has maintained its revenue and EBIT margin guidance for the ongoing fiscal. It expects revenue to grow in double digits in constant currency in FY22, while EBIT margin is forecast to be between 19.0% and 21.0%.

The company has won eight large services deals and four significant product deals across the industry verticals of oil and gas, financial services and technology in the April-June quarter.

“We posted 11.7% year-on-year revenue growth in constant currency and 29% YoY growth in Mode 2 services in constant currency headlined by cloud and digital transformation deals,” C Vijayakumar, chief executive officer at HCL Tech, said in the filing. “We remain very confident of a good quarter-on-quarter growth for the rest of this year, enabled by 37% YoY growth in bookings and 7,500+ net hiring this quarter.”

  • IT services attrition (on last 12 months basis) stood at 11.8% versus 14.6% a year earlier and 9.9% as of March 2021.

  • Total headcount at 1.76 lakh; net addition of 7,522 employees during the reported quarter.

“The drop in attrition was due to increased employee engagement initiatives and large-scale upskilling programmes.”

The board has also declared an interim dividend of Rs 6 per equity share for the financial year ended March 2022.

HCL Tech’s peers Tata Consultancy Services Ltd., Infosys Ltd. and Wipro Ltd., too, saw their revenue rise in the quarter ended June, aided by deal wins. While Infosys’ and Wipro’s net profit increased during the quarter, TCS’ bottom line fell 2.5%.

Shares of HCL Tech closed 0.31% lower before the results were announced compared with a 1.07% fall in Nifty 50.

Shiv Nadar Steps Down

HCL Tech's Shiv Nadar has resigned as the Managing Director as well as the Director of the company effective July 19. However, he has been appointed as chairman emeritus and strategic advisor to the board for a term of five years with effect from July 20.

Nadar is one of the pioneers of the computing and IT industry in India. He founded the HCL Group in 1976.

"Shiv Nadar on completing 76 years of age has tendered his resignation as the Managing Director as well as the Director of the company with effect from close of business hours on July 19, 2021," the company said in an exchange filing.

The software services provider has meanwhile appointed C Vijayakumar, President and Chief Executive Officer, as the Managing Director for a term of five years with effect from July 20, 2021..

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