HCL Tech will keep hiring to meet 5.5% growth guidance, says CEO Vijayakumar

HCL Tech CEO C. Vijayakumar says the ramp-up of existing telecom deals will continue, while the company is already seeing some positive traction in tech. (Bloomberg)
HCL Tech CEO C. Vijayakumar says the ramp-up of existing telecom deals will continue, while the company is already seeing some positive traction in tech. (Bloomberg)

Summary

  • Alongside being the top-performing firm of India’s top four IT companies this quarter, HCL was also the only one to add net new employees

On Friday, HCL Technologies Ltd, India’s third-largest information technology (IT) services company, reported a 12.5% sequential rise in net profit. Alongside being the top-performing firm of India’s top four IT companies this quarter, HCL was also the only one to add net new employees. In an interview with Mint, managing director (MD) and chief executive officer (CEO) C. Vijayakumar said HCL Technologies will continue its hiring momentum through the entire calendar year to maintain its revenue growth guidance. Growth is being fuelled by the company’s existing mega telecom deal with American telecom firm Verizon, a new focus on automotive technologies through its acquisition of Germany’s ASAP Group, and increasing recurring revenue from its software business. HCL will also focus on Europe as a geography, where its revenue is expected to be bolstered by focusing on the automotive sector in the upcoming quarters. Edited excerpts:

HCL Technologies was the sole top-four IT firm to increase headcount in Q3. Would you continue to hire next quarter?

You need people to continue delivering 5.5% growth. We’re continuing to hire, and our net additions are positive. We’ll see the hiring momentum continue into Q4 and beyond. Our services have also grown 3.1%, and all of this requires the right talent to execute. We’re also executing a very large deal through the previous quarter, and that will also add to the headcount numbers.

This includes freshers as well as mid- and senior-level hirings. Our fresher hiring momentum will continue, while lateral hiring will take place as required.

What will push your growth next quarter?

We should see broad-based traction. Financial services, telecom and tech will do well, while others should also see at least some growth in the last quarter of the year.

Are you underlining the telecom vertical because of your existing deals?

The ramp-up of existing telecom deals will continue, and we’re already seeing some positive traction in tech. Our engineering research and development (ER&D) vertical has been growing in the past two quarters, and we expect it to grow this quarter as well.

Your Europe revenue also shows an uptick. Are you expanding there?

Europe revenue was strong in the December quarter through our acquisition of German automotive engineering firm ASAP. This is helping us focus on automotive engineering, which is clearly a big growth area for us. Europe has a lot of big automotive companies, so that will be a big growth driver for us.

Will automotive be an area of focus for you in the coming quarter?

Yes, absolutely.

The number of $1 million-sized clients is declining sequentially. Are you focusing more on larger deals only?

This is a technicality, showcasing a last-12-months (LTM) number. Every year, a set of clients gives us software licensing business. You can always see some aberrations there—this is primarily because of that.

Subscription and support revenue is also growing. What is the contributing factor for this?

Our software business is becoming much more stable. If you have a lot of perpetual licences, a lot of peaks would happen. That peak is now becoming more stable, since subscription revenues, by nature, get repeated every year or every three years.

Usually, December is the seasonal peak quarter for subscription and support, and a lot of customers renew their software licences in Western countries. The same was visible in December last year. We managed to grow 5% year on year, which implies strong growth in software and product businesses. We have close to 15,000 customers across the world for our software vertical.

Is the generative AI (artificial intelligence) upskilling move complete?

We’re continuing with organization-wide training, and close to 50,000 employees have already been trained. This momentum will also continue.

Do you expect generative AI to translate to substantial business this calendar year?

This would be related to a lot of surrounding areas of generative AI, and gen AI opportunities should be considered as the tip of the iceberg. A lot of surrounding services around data, cloud, AI stack and cybersecurity are where many business opportunities will come. It’s difficult to quantify now, but the opportunity is big.

Do you expect regulatory compliances to be a challenge for your clients to work through?

This isn’t a challenge, I feel. We’ve already worked with strong data and privacy regulations, such as the General Data Protection Regulation in Europe that has been there for a long time now. Similar regulations continue to be put in place across various countries, and we’re quite comfortable in being compliant and ensuring compliance.

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