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Q3 Results: HCL Tech’s Profit Rises Despite Currency Headwinds

HCL Tech’s net profit rose 2.8 percent sequentially to Rs 2,605 crore.

C Vijayakumar, chief executive officer of HCL Technologies Ltd. (Photographer: Simon Dawson/Bloomberg)
C Vijayakumar, chief executive officer of HCL Technologies Ltd. (Photographer: Simon Dawson/Bloomberg)

HCL Technologies Ltd.’s quarterly profit met estimates despite facing cross-currency headwinds.

Net profit rose 2.8 percent sequentially to Rs 2,605 crore in the quarter ended December, the software services provider said in an exchange filing. Analysts tracked by Bloomberg had pegged the number at Rs 2,541 crore.

Revenue in constant currency terms rose 5.6 percent to Rs 15,699 crore for the quarter compared with a Rs 15,541-crore estimate. Revenue in dollar terms stood at $2.2 billion, 4.9 percent higher than the previous quarter. The company expects its sales to grow between 9.5 percent and 11.5 percent in constant currency terms for the full year. In dollar terms, that translates to 7.9-9.9 percent.

C Vijayakumar, the president and chief executive officer of the company, said he saw no impact of the U.S government’s shutdown on the business, adding the demand environment continues to look positive. “Our revenues grew 5.6 percent sequentially in constant currency, reflecting strong execution across our entire suite of services and products.”

Its earnings before interest and tax rose nearly 4 percent sequentially to Rs 3,036 crore. That fell short of the Rs 3,102-crore estimate. Margin for the quarter contracted 40 basis points to 19.3 percent. Analysts had expected the margin to contract 50-70 basis points because of cross-currency headwinds. The company’s Chief Financial Officer Prateek Aggarwal said at the earnings press conference that the dip in its operating margin was “largely driven” by some wage increments during the quarter.

“The fact remains that when you have such a huge 5.6 percent quarterly growth, it will come with a little bit of cost as well,” he said later in a conversation with BloombergQuint.

HCL maintained its margin guidance at 19.5-20.5 percent for the financial year 2018-19. The company signed a $1.8-billion deal with International Business Machines Corp. during the quarter. That, the management had told BloombergQuint, was as a “logical step” for direct client access, customer contracts and for building strong sales and marketing organisation in many geographies.

HCL Tech’s shares closed 1 percent higher ahead of the earnings announcement compared with a 0.74 percent rise in the Nifty IT Index.

Q3 Results: HCL Tech’s Profit Rises Despite Currency Headwinds

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