HCL Tech’s PAT up 19% in Dec quarter | Mint
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Business News/ Companies / Company Results/  HCL Tech’s PAT up 19% in Dec quarter
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HCL Tech’s PAT up 19% in Dec quarter

HCL Tech, along with its peers, reported a steep drop in attrition from 23.8% in Q2 to 21.7%, but higher than 19.8% seen in Q3FY22

HCL’s dollar revenue rose 5.3% sequentially to $3,244 million, beating analyst expectations of 2.7-3.4% growth.Premium
HCL’s dollar revenue rose 5.3% sequentially to $3,244 million, beating analyst expectations of 2.7-3.4% growth.

HCL Tech posted a 19% rise in net profit in the December quarter to 4,096 crore, up from 3,442 crore in the year ago, growing at a faster clip than peers Infosys and TCS. HCL also announced a dividend of 10 a share. Q3 FY22 is the 80th straight quarter for the tech major, announcing a dividend payout.

HCL, however, trimmed the upper end of services revenues and EBIT margin guidance by 50 basis points, each. EBIT is earnings before interest and taxes. The company’s revenue guidance for FY23 now stands at 13.5-14% against the earlier 13.5-14.5%. Its services revenue growth for FY23 is expected to be at 16-16.5%, while the EBIT margin guidance narrowed to 18-18.5%. In contrast, Infosys raised its revenue growth guidance for FY23 to 16-16.5% from 15-16% in its Q3 financial review note published on Thursday.

Brokerages Jefferies India and BNP Paribas forecast a status quo in the IT major’s FY23 revenue and EBIT margin guidance.

HCL Tech, along with its peers, reported a steep drop in attrition from 23.8% in Q2 to 21.7%, but higher than 19.8% seen in Q3FY22.

“The quarterly results are strong on a standalone basis, but maximum growth has come from products and platforms, signifying volatile growth. Growth based solely on this vertical may not be sustainable in the long run," Omkar Tanksale, vice-president, equities research at Axis Securities, said.

The products and platforms vertical refers to software services licensed by an IT services firm from the likes of Microsoft and IBM, to offer as a service to clients. HCL’s quarter remains resilient otherwise, thanks to strong deal win — a trend that was also reflected in Infosys’ December quarter earnings, he added.

Infosys posted a 280 basis-point fall in Q3 attrition to 24.3%. One basis point is equivalent to 0.01%.

Ruchi Mukhija, vice-president at financial services and research firm Elara Capital, concurred with Tanksale.

HCL’s growth in the products and platforms vertical was more than double of what analysts expected, she said, but warned that more deal wins in HCL’s figures reflect that revenue and new deals are spread across the entire year, rather than a larger number of short-term deals. “This could lead to some weakness in the company revenue in the immediate future," she added.

HCL’s rupee revenue for the December quarter rose 19.6% to 26,700 crore compared to 22,331 crore a year ago, primarily led by a 15.3% y-o-y rise in the IT and business services vertical, which accounts for nearly 70% of overall revenue.

Its dollar revenue rose 5.3% sequentially to $3,244 million, beating analyst expectations of 2.7-3.4% growth. On a like-to-like basis, dollar revenue was 9% in the year ago.

According to a statement by HCL, it won 17 large deals with a total contract value or orderbook at $2.3 billion in Q3 , up 10% from a year earlier. “We delivered a strong performance this quarter across all key metrics such as revenue, margin, booking and people," said HCL Tech managing director and CEO C. Vijayakumar.

Our strong revenue growth of 13.1% YoY constant currency is led by our services business which grew 15.4% YoY CC; and strong revenue growth of 5.0% QoQ CC is led by HCLSoftware. Our margins at 19.6% this quarter, increased 60 basis points YoY. The booking growth (deals) was led by IT operating model transformation, cloud adoption and large vendor consolidation deals. We are confident to deliver industry leading growth over the medium term supercharged by our positioning, our strong propositions and our passionate people,"

Operationally, EBIT (earnings before interest and taxes) rose 22.8% to 5,228 crore. Margin, too, saw an expansion of 60 basis points from 19% to 19.6% y-o-y.

EBIT margin, however, has risen 165 basis points on a quarter-on-quarter basis, owing to rupee depreciation and higher performance in services business.

“Revenue at 26,700 crore is up 19.6% YoY, on the back of strong services business growth of 22% YoY. During the quarter, we crossed important milestones of 5,000 crore and 4,000 crore for EBIT and PAT respectively for the very first time. Profitability was at all-time high with EBIT up 22.8% YoY and PAT at 4,096 crore (up 19% YoY). Return on invested capital (RoIC) stands at solid 30% and 37+% for the company and services business, respectively," said Prateek Aggarwal, chief financial officer of HCL Tech.

The company claims to have net added 2,945 employees this quarter, taking the total headcount to 2.22 lakh employees.

Shares of HCL Tech ended Thursday session at 1,071.90 per share, up 1.62% against BSE IT index’s gain of 0.39%.

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Published: 12 Jan 2023, 09:37 PM IST
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