HCL retains revenue guidance, net up 2.4%

HCL Technologies Ltd has maintained its 12-14% revenue growth guidance in constant currency for FY23 on the back of strong demand for digital transformation in key markets. The company also left its earnings before interest and taxes (EBIT) margin guidance unchanged at 18-20%.

The Noida-based information technology (IT) services company posted net profit of ₹3,283 crore in the June quarter, up 2.4% from a year ago, but below Bloomberg consensus estimates of ₹3,322 crore. However, the company’s net profit was down 8.6% quarter-to-quarter, while revenue increased 3.8% in the same period.

June quarter revenue rose 17% from a year ago to ₹23,464 crore, in line with the Bloomberg estimates of ₹23,409 crore, driven by digital engineering and application services.

The company’s dollar revenue for the June quarter grew 15.6% annually in constant currency to $3.02 billion, boosted by new deal wins and acceleration in clients’ digital agenda.

“Our services business continues to have robust growth momentum driven by our digital engineering and digital application services with cloud adoption being a horizontal theme across all services and verticals,” said C. Vijayakumar, chief executive officer and managing director, HCL Technologies.

“Our new bookings grew 23.4% year-on-year supported by a good mix of large and mid-sized deals, and our pipeline remains near record high. Our operating margin came in at 17%. We have put in place the right measures that will improve our profitability going forward,” he added.

Indian IT services companies, which have seen robust demand for cloud and digital services during the last two years of the pandemic, may see a slowdown if clients cut IT budgets due to fears of a recession in key markets such as the US and Europe. Analysts said the peak of revenue growth may be behind for Indian IT firms, and growth may start softening by the second half of this fiscal year.

Attrition rate during the quarter rose to 23.8% from 11.8% in the previous year and 21.9% in the preceding three months, indicating that demand for tech talent continues to outpace supply. Though there are early signs of attrition levels declining, it is not going to come down immediately, Apparao V.V., chief human resources officer, said during the earnings call.

The company made a net addition of 2,089 employees during the first quarter, taking the headcount to 210,966 as of 30 June.

“Results indicate that cloud is one of the prominent growth drivers for HCL for this quarter, and it will continue for the near term as Gartner forecasts worldwide public cloud services to grow 22.0% (constant currency) in 2022. The talent war continues for the service provider as it reported 23.8% attrition, their highest in the last couple of quarters,” said Naveen Mishra, senior director analyst, Gartner.

HCL Technologies declared its earnings after market hours on Tuesday. Ahead of the results its shares closed at ₹928.05 on the BSE, down 1.63%.