Guiding for Q4, the company said it expects revenue to grow 2-3% sequentially in constant currency terms which includes contribution from its recently acquired Australian IT firm DWS and EBIT
HCL Technologies Ltd posted robust quarterly earnings, in line with its peers that have seen their businesses flourish as they exploited a global boom in digital services due to covid.
India’s third-largest software services company by revenue posted a profit of ₹3,982 crore in the three months ended 31 December, a 26.7% increase from the previous quarter, and 31.1% from the year earlier. Profit exceeded the ₹3,138 crore consensus estimate in a Bloomberg survey of 19 analysts.
Revenue grew 3.8% to ₹19,302 crore in the December quarter from ₹18,594 crore in the preceding quarter. Revenue grew 3.5% sequentially in constant currency terms. The Noida-based company posted earnings before interest and tax (Ebit) margin of 22.9% in the quarter under review.
The strong performance prompted HCL Tech to lift its revenue forecast for the March quarter. It expects revenue during the quarter to grow 2-3% in constant currency terms, up from its previous estimate of 1.5-2.5%. This would include a contribution from the recently acquired Australian IT firm DWS. HCL also forecast an Ebit margin of 21-21.5% for FY21.
“This solid performance was driven by a robust momentum in our Mode 2 and Mode 3 businesses led by digital, cloud and products and platform segments," said C. Vijayakumar, president and chief executive, HCL Tech. “Our results reflect the success of the strategic investments we have made over the years."
Dollar revenue grew 3.6% from a year earlier in constant currency to cross $10 billion in the December quarter, helped by new deal wins and demand for digital services.
“I am also delighted to share that we crossed $10 billion in revenues in 2020. This is a pivotal milestone for us as a company," Vijayakumar said.
HCL Tech signed 13 deals in the December quarter, led by key industry verticals such as life sciences and healthcare, public services (energy and utilities) and manufacturing. Bets in new technologies fuelled growth in Mode 2 (digital) as well as products and platforms. Revenue from the digital business jumped 25% from a year earlier in the third quarter, and 10.9% sequentially, in constant currency.
“The technology sector is in the midst of a massive digitization wave, with more global enterprises embracing digital transformation to address the disruption of these unprecedented times. Technology has been a key enabler during the pandemic, and as we stand at the cusp of the next phase of technological innovation, it is vital that we draw inspiration from each other’s strengths and offer back our own to create a positive impact," said Shiv Nadar, founder and chief strategy officer, HCL.
The attrition rate, on a trailing 12-month basis, improved 6.67 percentage points to 10.2% in the fiscal third quarter. The company added 6,597 workers in the quarter, increasing its total headcount to 159,682 people as of 31 December, said Apparao V.V., chief human resources officer.
Jyoti Roy of Angel Broking said HCL Tech’s 4.4% q-o-q growth in dollar terms was ahead of his estimates. “The management has increased their revenue growth guidance for Q4 to 2-3% in constant currency terms. While the numbers were marginally ahead of our estimates in terms of revenue growth, the expansion in margins despite wage hikes was a pleasant surprise. We continue to remain positive on HCL Tech and have a target price of ₹1,180 on the stock," he said.
Shares of HCL fell 3.7% to ₹989.4 on BSE, underperforming a 1.1% decline in the benchmark Sensex.