HCL Q3 profit rises 7.8% to Rs2,070 crore

HCL Technologies consolidated net profit rises 7.8% to Rs2,070 crore for the third quarter ended 31 December 2016, as compared to Rs1,920 crore reported in the year-ago period


HCL’s revenue in Q3 FY17 stood at Rs11,814 crore—a jump of 14.2% on year-on-year basis and 2.6% rise on quarter-on-quarter basis, as against Rs10,341 crore in the same quarter of 2015-16. Photo: Ramesh Pathania/Mint
HCL’s revenue in Q3 FY17 stood at Rs11,814 crore—a jump of 14.2% on year-on-year basis and 2.6% rise on quarter-on-quarter basis, as against Rs10,341 crore in the same quarter of 2015-16. Photo: Ramesh Pathania/Mint

New Delhi: HCL Technologies on Tuesday reported a 7.8% rise in consolidated net profit at Rs2,070 crore for the third quarter ended December 31, 2016, as compared to Rs1,920 crore reported in the year-ago period.

On a quarterly basis, the net income rose by 2.8%.

The company’s revenue in Q3 FY17 stood at Rs 11,814 crore—a jump of 14.2% on year-on-year basis and 2.6% rise on quarter-on-quarter basis, as against Rs10,341 crore in the same quarter of 2015-16.

“We continue our robust financial performance with a revenue growth of 3% QoQ and 13.8% YoY in constant currency terms. The richness in our offerings coupled with our Mode 1-2-3 growth strategy is helping us gain a higher share of our clients’ wallet reflected in the increasing revenue contribution from our Top 5, Top 10 and Top 20 customers. Our revenues from fixed price /managed services contracts increased from 61.3% to 63.2% this quarter further strengthening our success in outcome based business model,” said C. Vijayakumar, president and chief executive officer, HCL Technologies Ltd.

In other financial highlights, the company saw broad-based growth across verticals driven by public services at 24.1%, retail and consumer packaged goods at 22.7%, lifesciences & healthcare at 14.0%, manufacturing at 11.2%, telecommunications, media, publishing and entertainment at 9.7%, and financial services at 5.4% .

HCL Tech translated its revenue guidance for the current fiscal to 10-12%% in US dollar terms based on December 31 , 2016, exchange rates, as against the earlier guidance at 12-14%. “We expect our FY’17 revenues to be in the middle of this range,” according to the company.

The acquisitions and IP-led partnerships announced after 30 September, 2016, are likely to additionally contribute 0.6% to 1.0% in revenues depending upon the date of consummation of the geometric deal.

The company also reported that nine transformational deals were signed this quarter, across service lines, industry verticals and geographies.

Anshoo Nandwaani, vice-president & principal analyst, Greyhound Research said, “The appointment of C. Vijayakumar in the last quarter is proving to be a good move for HCL Tech. HCL is going through a change and he is bringing in fresh perspectives in the way their deals are being constructed.

There are clear efforts to modernize existing traditional infrastructure contracts (the ones with lower margins) and increase the use of digital technologies.”

“While the company has managed to come out in good stead this quarter, sustaining this growth momentum, particularly amidst the realms of uncertainty in key markets like the US and the UK, will require both back-breaking work and innovative approaches towards IP development, automation and local/remote delivery to ensure non-linear growth,” Nandwaani added.

The Noida-based company also reported broad-based growth across all revenue segments with the Americas and Europe growing by 15% and 10.56%, respectively, year-on-year.

“At present, across all Indian IT Services providers, the digital revenues for IT services broadly range between 10 to 15%. Although HCL’s current digital revenues are smallish, compared to other Indian IT Services providers HCL’s thrust on Internet of Things (IoT) is impressive and significant. Further, at a time when IoT is growing in a big way, having expertise in embedded systems is an added strength for HCL Tech,” said Nandwaani.

However, experts warn that with a growing protectionist sentiment globally, Indian IT service providers, including HCL Technologies, face a bumpy road ahead.

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