HCL Technologies June quarter profit rises 14.8% to Rs2,047 crore

Revenue at Rs11,336 cr, up 15.9% from Rs9,777 cr a year ago; firm expects 12-14% revenue growth in the ongoing fiscal


On constant currency basis, HCL Tech’s revenues were up 11.2% year-on-year. The company earlier followed the July-June fiscal but has now moved to the April-March cycle as mandated by the Companies Act. Photo: Ramesh Pathania/Mint
On constant currency basis, HCL Tech’s revenues were up 11.2% year-on-year. The company earlier followed the July-June fiscal but has now moved to the April-March cycle as mandated by the Companies Act. Photo: Ramesh Pathania/Mint

New Delhi: HCL Technologies Ltd, the country’s fourth largest IT firm, saw its June quarter consolidated net profit rise by 14.8% to Rs.2,047 crore on account of broad-based growth across service offerings, and it expects 12-14% revenue growth in the ongoing fiscal.

The Noida-based firm, which posted a net profit of Rs.1,783 crore in the year-ago quarter, has resumed its practice of presenting a revenue outlook for the new fiscal after 12 years.

For the reported quarter, HCL Tech’s revenues grew 15.9% to Rs.11,336 crore, from Rs.9,777 crore in the year-ago period, as per US GAAP accounting norms. For fiscal 2017, it expects its top line to grow 12-14% without fluctuation in currencies, higher than industry body Nasscom’s outlook of a 10-12% rise in the IT industry’s export revenues for the fiscal.

In dollar terms, the company’s net profit grew 9.5% to $305.2 million, while revenues rose 10% to $1.69 billion compared to the year-ago period. In constant currency terms, HCL Tech’s revenues were up 11.2% year-on-year in the June quarter.

A Bloomberg poll of 31 analysts had estimated a consolidated net profit of Rs.1,892.7 crore on revenue of Rs.11,222.5 crore.

“It has been a very good quarter. We have started with a very good performance, with 6% revenue growth quarter-on-quarter in constant currency terms,” HCL Technologies president and CEO Anant Gupta told reporters.

He added that the growth momentum is broad-based, encompassing all sectors and service lines, propelled by the firm’s focus on new technologies and a robust business model.

Reacting to results, the company’s shares closed at Rs.825.90 apiece, up 3.16% from their previous close on BSE.

“For Q1 FY17, the company posted numbers better than expected, on all fronts,” Sarabjit Kour Nangra, vice-president of research at Angel Broking, said.

HCL Technologies’ deal with Volvo’s IT services division in February added over $40 million to the June quarter revenue, up 6.5% from the previous quarter.

HCL Technologies earlier followed a July-June fiscal year, but has now moved to the April-March cycle as mandated by the Companies Act.

Asked about the reason for resuming its practice of giving a revenue outlook, chief financial officer Anil Chanana said the company wanted to give a “lead indicator for the markets to take a view of the company” and its performance.

In dollar terms, the constant currency guidance translates to 11.2-13.2%, while the expected operating margin range for fiscal 2017 is 19.5-20.5%.

With the at-best rate of 13.2%, HCL expects to grow dollar revenue at the fastest pace among all home-grown technology firms, beating even Cognizant Technology Solutions Corp., which expects an at-best growth of 13%, a guidance which will be put to the test when it declares its earnings on Friday.

Infosys Ltd expects to grow at 12.3%, while Wipro Ltd and Tata Consultancy Services Ltd do not give yearly guidances.

Chief operating officer C. Vijay Kumar said growth in the June quarter was propelled by next-generation integrated offerings and security services.

“Our differentiated offerings in the core services, strong execution and the effectiveness of DryICE Autonomics platform has helped us deliver an Ebit (earnings before interest and tax) growth of 12.7% quarterly year-on-year in USD terms,” he said.

Sanchit Vir Gogia, chief analyst and chief executive at Greyhound Research, said HCL Tech “stands out” on two accounts: “One, the company is using the new-age approach of coopetition (cooperation with competition) and has formed ties with the likes of other IT services company such as CSC and IBM. Interestingly, the CSC-HCL duo has set up CelentriFinTech, a joint venture focused exclusively on banking customers. Two, the company is investing in digital transformation speciality areas like Internet of Things and has partnered with IBM to set up an incubation centre in Noida. What is commendable is that they have taken digital transformation beyond the concept stage, integrating the digital transformation offerings as part of its traditional deals.”

The company said it signed 13 “transformational” deals this quarter, across service lines and industry verticals. The broad-based business wins were driven by next–generation integrated offerings—Next–Gen ITO, BEYONDigital and IoT WoRKS—reflecting investments in Internet of Things, digital technologies, cloud, automation and artificial intelligence.

“We are encouraged by the overall Q1 FY17 performance. We have been able to maintain our margins led by increased adoption of automation and higher offshoring. Our layered hedging policy allowed us to manage significant currency volatility this quarter and post exchange gains. A consistent performance of working capital management together with efficient capital allocation has resulted in return on equity at 28%”, said Chanana.

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