HCL poised to replace Wipro as No. 3 IT firm

HCL expects its dollar revenue to grow by as much as 12.5% in the current fiscal, implying it will race past Wipro

Varun Sood
Updated2 May 2018
HCL Technologies’s rise has come on the back of years of underperformance by Wipro. Photo: Mint
HCL Technologies’s rise has come on the back of years of underperformance by Wipro. Photo: Mint

Bengaluru: HCL Technologies Ltd is set to surpass Wipro Ltd to become India’s third biggest software services provider in the three months to 30 June, marking the first change in the pecking order of the country’s $167 billion information technology outsourcing industry in six years.

Billionaire Shiv Nadar-led HCL Technologies expects its dollar revenue to grow by as much as 12.5% in the current financial year, implying that the company will race past Azim Premji-led Wipro.

HCL Technologies’s rise has come on the back of years of underperformance by Wipro. Until a few years ago, both companies used to generate significant business from managing data centres or offering infrastructure services to their clients. That revenue disappeared with the rise of cloud computing or offerings of computing power by the hour by firms such as Amazon Web Services.

To mitigate this, HCL Technologies has invested over $1.3 billion over the past two years in licensing intellectual properties (IPs) from companies and then building products around them for clients. This has proved financially lucrative for the company in the short run.

Noida-based HCL Technologies reported 2.5% sequential dollar revenue growth in the quarter ended March to end with $2.038 billion in revenue, a mere $24 million less than Wipro’s $2.062 billion.

Wipro does not provide full-year revenue forecast but expects its quarterly revenue to be between a decline of 2% and growth of 0.2% in constant currency terms in the April-June period from the preceding quarter. If Wipro manages to retain its revenue in constant currency terms and gains from favourable currency movements, it will mean reporting at best 1% dollar revenue growth, according to Mint’s calculations.

HCL Technologies does not provide a quarterly revenue outlook but the management expects dollar revenue to grow between 10.5% and 12.5% in 2018-19. Based on its full-year forecast, HCL Technologies expects its dollar revenue to grow between 2.4% and 3.2% in the April-June period, according to Mint’s calculations. HCL Technologies’s revenue in the June quarter will total $2.087 billion if the company grows at the lower end, or 2.4%, sequentially, which will be more than Wipro’s $2.082 billion in revenue at the end of the June quarter.

Mint reported on 11 January that HCL Technologies may overtake Wipro in 2018-19.

In 2012, Nasdaq-listed Cognizant Technology Solutions Corp. edged past Infosys Ltd in quarterly revenue. The Teaneck, New Jersey-based company, which has most of its employees in India, finally ended that year with more revenue than Bengaluru-based Infosys.

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