IBM products help HCL fastest growth among five largest IT firms.2 min read . Updated: 09 May 2019, 10:51 PM IST
- Noida-based HCL Tech expects to grow at 16% in constant currency terms in 2019-2020
- At the heart of HCL’s industry-leading growth is the revenue from products it bought from IBM over the last year
NEW DELHI : HCL Technologies Ltd on Thursday announced a 3.5% sequential increase in its dollar revenue for the January-March quarter, the highest among large companies in India’s $167 billion information technology (IT) outsourcing sector.
Noida-based HCL Tech expects to grow at 16% in constant currency terms in 2019-2020, faster than Infosys Ltd and Cognizant, which expect to grow 9.5% and 5.1%, respectively. Tata Consultancy Services Ltd does not provide a growth outlook while Wipro Ltd only offers a quarterly revenue growth outlook.
At the heart of HCL’s industry-leading growth is the revenue from products it bought from IBM over the last year. As much as $300 million, or 38% of the $794 million, in incremental revenue added by HCL last year was from these products.
The company also bought seven more products from IBM in the March quarter, details of which it has chosen not to share.
HCL Tech’s dollar revenue improved 3.5% sequentially to $2.28 billion in the quarter, while in constant currency terms, the company’s revenue rose 3.3% on a sequential basis.
Net profit was at $364 million in the March quarter, as it did at the end of December quarter.
A Bloomberg poll of 27 analysts expected HCL Technologies to report a net profit of $368.04 million (Rs2,552.7 crore) on revenue of $2.3 billion (Rs15,926.6 crore).
“I’m very happy with the outstanding performance delivered by us during this quarter," said C. Vijayakumar, chief executive officer, HCL Technologies. “We are in a very good spot and I believe this year will be a good year for us and for the industry"
“While revenue in 4Q along with FY20E revenue guidance was healthy, the higher-than-expected 4Q margin decline and 100 bps lower margin guidance for FY20E are negatives and reflect major cost pressures ahead, which necessitate sustained revenue growth in order to offset," Harit Shah, analyst with brokerage Reliance Securities, wrote in a note, post company declaring its earnings.
Billionaire Shiv Nadar-led HCL Tech’s performance in the March quarter was better than its larger rival, Cognizant Technology Solutions Corp, which saw its revenue decline from the preceding quarter. HCL’s show was also better than its Bengaluru-based rivals, Infosys Ltd, Wipro Ltd and TCS, which reported 2.4%, 1.4% and 2.8% sequential dollar revenue growth, respectively.
In the year ended March 2019, HCL grew 10.1% to end with $8.63 billion in revenue, faster than Cognizant, Infosys, Wipro and TCS.
HCL’s products and services division, which has been set up after the company spent $3.02 billion in building up its software product business since the firm stitched its first intellectual property partnership in August 2016, now accounts for 11.4% of company’s revenue or $982 million at the end of March 2019.