HCL Technologies Quarterly Results: The first quarter earnings season has kickstarted with Tata Consultancy Services (TCS) releasing its Q1FY25 results becoming the first among the IT companies to declare earnings on June 11. Today, HCL Technologies released its fiscal first quarter earnings with profit at Rs 4257 crore, up 20.5 per cent in comparison to Rs 3534 crore during the first quarter of FY24. It posted revenue from operations at Rs 28,057 crore, up 6.7 per cent as against Rs 26,296 crore recorded during the first quarter of previous financial year. The company EBIT stood at Rs 4795 crore.
Earlier in April, HCL Tech had reported a profit drop of 8.4 per cent to Rs 3,986 crore in the fourth quarter ended March as compared to Rs 4,350 crore for the quarter ended December. HCLTech’s revenue was also flat at Rs 28,499 crore, compared with the sequential third quarter, while it rose 7.1 per cent rise on a y-o-y basis from Rs 26,606 crore posted during the same quarter last year.
“In 2024, buyers of IT services will maintain caution regarding discretionary spending and prioritize achieving strong business results. Enterprises will proceed cautiously with new project commitments in the first half of 2024, anticipating accelerated spending in the latter part of the year. While the long-term outlook for the IT sector remains positive, the short-term performance is currently being impacted by their conservative approach. This has slightly impacted HCLTech’s quarterly result. But we are optimistic regarding their growth as it has a strong business pipeline. Their global presence, understanding of markets, readiness to adopt new technologies, customer focus, digital transformation capabilities, and robust sales and development teams contribute to HCLTech’ s consistent growth. They cater to a range of industries, providing lift-and-optimize migration and managed services to large, global clients. HCLTech remains committed to its vision focused on digital foundations and business engineering, following a "cloud smart" approach. In addition, HCLTech is making increased investments in core digital infrastructure capabilities for delivering industry-aligned outcomes, focusing on sustainability, and driving operational efficiencies. All these attributes have enabled them to grow and establish themselves as a strong partner.”
HCL Tech expects FY25 annual revenue to grow between 3 per cent and 5 per cent. The company also expects services revenue growth to be between 3 per cent and 5 per cent YoY in CC and EBIT margin to be between 18.0 per cent and 19 per cent.
Total People Count: 219,401
Net addition: (8,080)
Reduction in headcount due to divestiture: (7,398)
Added 1,078 freshers
LTM Attrition at 12.8% (down from 16.3% in Q1 of last year)
“HCLTech delivered an INR revenue growth of 6.7% YoY, healthy given the global environment. EBIT margins came in at 17.1%, steady on YoY basis. We delivered PAT of Rs 4,257 crore for the quarter, which translates to YoY growth of 20.4%. Our cashflow generation remains robust with LTM FCF at Rs 21,637 crore, 133% of PAT and 88% of EBITDA. We remain committed to improving our capital efficiency and are pleased to report Last Twelve Month (LTM) ROIC for the company is up 350 bps YoY at 34.6% and for Services business is up 476 bps YoY at 42.8%.”
The Board of Directors at HCL Tech declared an interim dividend of Rs 12 per equity share of Rs 2 each of the company for the Financial Year 2024-25. “The Record date of July 23, 2024 fixed for the payment of the aforesaid interim dividend has been confirmed by the Board of Directors. The payment date of the said interim dividend shall be August 1, 2024,” the company said in a regulatory filing.
C Vijayakumar, CEO & Managing Director, HCLTech, said, “We are pleased to report another quarter of industry leading performance with 5.6 per cent YoY revenue growth on a constant currency basis. Our Q1 Revenue and EBIT performance was slightly better than our expectations. We clocked in $2B TCV of new business Bookings. We are confident of decent growth in the coming quarters, positioning us well to deliver our revenue guidance for the year as clients continue to spend on GenAI and other emerging technologies.”
HCL Technologies on Friday recorded its fiscal first quarter profit at Rs 4257 crore, up 20.5 per cent in comparison to Rs 3534 crore during the first quarter of FY24. It posted revenue from operations at Rs 28,057 crore, up 6.7 per cent as against Rs 26,296 crore recorded during the first quarter of previous financial year. The company EBIT stood at Rs 4795 crore.
Manish Chowdhury, Head of Research, StoxBox, said, “We believe that HCL Tech’s revenue may see a decline in Q1FY25, primarily driven by the productivity gain passed back to a large number of clients and the early offshoring of one of the large contracts in the BFSI space (indicated in the last quarter), which could correspondingly impact margins during the quarter. However, despite near-term headwinds, HCL’s leadership in infrastructure/engineering services, higher application portfolio, steady margin and healthy cash flow remain intact. Furthermore, management’s commentary on the demand environment would be a key thing to watch out for.”
Oriental Hotels on Friday posted its fiscal first quarter profit at Rs 1.63 crore, down 81.5 per cent in comparison to Rs 8.83 crore during the first quarter of previous fiscal year. It posted revenue from operations at Rs 81.97 crore, down 11.5 per cent on-year as against Rs 92.59 crore during the same period last year.
TCS noted a tad better than expected operating performance in Q1, said a report by Emkay Global. “Despite broad-based revenue growth, healthy deal wins, and strong pipeline, the management refrained from commenting on growth sustainability, considering the near-term demand volatility caused by weakness in discretionary spending and unabated pressure from the sudden pause/deferment of projects by clients amid macro uncertainty. The management reiterated FY25 revenue growth being better than that in FY24. We largely retain FY24-27E earnings,” said analysts at Emkay Global/
TCS’ revenue grew 1.9 per cent QoQ to USD7.51bn, slightly surpassing expectations and largely backed by higher than estimated revenue contribution from the BSNL deal. EBITM fell by 130bps QoQ to 24.7 per cent due to wage hike. Deal wins moderated sequentially owing to timing of deal closures, but remained healthy at USD8.3bn.
TCS announced an interim dividend of Rs 10. On an average the company has had a steady record of paying dividends and in FY24 it closed the year with an annual dividend of Rs 73/share. For the past 5 years, the company has been paying dividends to investors steadily.
Puravankara Ltd on Friday announced that it has achieved quarterly customer collections from the real estate business of Rs 965 crore in Q1FY25 compared to Rs 696 crore in Q1FY24, up 39 per centYoY. Further, it said that the quarterly sales value reached Rs 1128 crore in Q1FY25 as against Rs 1126 crore in Q1FY24.
Ashish Puravankara, Managing Director, Puravankara Ltd, said, “We remain focused on replenishing our land bank and have added 3.25 msft in this quarter, comprising of a 7.26-acre land parcel in Bengaluru, a 12.77 acre land parcel in Ghodbunder road, Thane and have also bought out the landowner share of 0.83 msft in three projects by Provident in Goa and Bengaluru. This quarter, we have achieved collections of Rs 965 crores and pre-sales of Rs 1,128 crores from sustenance sales. We will continue to focus on ensuring our planned launches for FY25.”
While revenue growth started recovering in Q4FY24, Q1FY25 performance suggests that growth has now started broadening, said BNP Paribas. “Management remained cautious about calling out a demand recovery, but was confident of a revenue-growth pickup in FY25, driven by a recovery in BFSI and North America. TCS’ AI and GenAI deal pipeline has now stretched to USD1.5b (USD900m last quarter) and it is executing 270 projects (200 earlier), which is encouraging. With recovery visible in key verticals and geographies, and confidence in driving margin through pyramid rationalisation, productivity gains and utilisation, we see TCS delivering strong earnings growth and benefiting from an overall demand recovery,” said Kumar Rakesh, Analyst – IT & Auto, BNP Paribas
“We tweak our FY25-27E estimates to bake in 1QFY25 results and management commentary,” he added.
Biswajit Maity, Sr Principal Analyst, Gartner, said, “With moderate growth of 2.2% this quarter, TCS managed its fiscal situation well despite macroeconomic uncertainties. Several factors contributed to TCS's growth, including its vision, execution ability, consulting and transformation capabilities, and customer centricity.”
Gartner believes that TCS will continue to be a strategic partner to clients as its strategy aligns with market expectations and clients' digital transformation goals. Biswajit Maity further added that the new CEO's focus on client centricity has brought renewed excitement and urgency to this concept at TCS. “It's encouraging to see that TCS's involvement in innovation and thought leadership projects, such as design thinking workshops and innovation days, has fostered trust-based relationships with its existing clients. Given the business pipeline, we are optimistic about growth in the upcoming quarters,” he said.
TCS reported an increase on the hiring front during Q1. The company said that its headcount increased by 5,452 sequentially, ending the April-June period with a total headcount of 606,998. The firm ended FY24 with 13,249 fewer employees compared to FY23. TCS’ attrition rate in Q1 eased to 12.1 per cent from 12.5 per cent in the March quarter.
For the quarter ended June 31, 2024, TCS recorded a total contract value of $8.3 billion, posting a decline both on-year and sequentially. Its total contract value for Q1 was 18.6 per cent lower from the $10.2 billion in the year-ago period and 37 per cent down from the previous quarter.
On Thursday, IT major Tata Consultancy Services (TCS) announced its quarter earnings and reported a 9 per cent year-on-year growth in its June quarter at Rs 12,040 crore, compared to Rs 11,120 crore profit reported in the same quarter last year. It posted revenue from operations at Rs 62,613 crore for the April-June period, up 5.4 per cent on-year.
Nomura report said that HCL Tech is expected to retain its FY25F revenue growth guidance of 3-5 per cent in cc. “We expect cc decline of 2 per cent QoQ due to annual productivity benefits to clients on renewals and offshoring of a large contract. We expect the impact of State Street BPO business divestment to hit in 2Q. We expect 60bp margin contraction QoQ driven by impact from annual productivity benefit to clients partly offset by offshoring tailwind,” it said.
“We expect a mixed operating performance for our coverage universe. Amongst large caps, we expect the strongest revenue growth at +2.5% q-q (in constant currency or cc terms) from Infosys and the weakest at -2% q-q in cc from HCL Tech. In mid-caps, we expect the strongest revenue growth of +5% q-q in cc from Persistent and the weakest from LTTS at -2%. Barring TCS (impacted by salary hikes) and HCL Tech (impacted by seasonal factors), we expect margins to remain stable to improve across our coverage universe,” stated an analysis report by Nomura.
Per analysts at BNP Paribas, key monitorables from the quarter results of HCL Tech will be update on Q2FY25 performance that management earlier expected to be weak; commentary on confidence in H2FY25 recovery to meet guidance; any signs of deal booking recovery; FY25 revenue and margin outlook; hiring plans; investments in GenAI partnerships and solutions; and timeline of large deal win ramp-ups and pipeline.
Analysts at Prabhudas Lilladher said that Q1 margins for HCL Tech are likely to remain modest (median +20 bps QoQ), on account of: 1) higher quantum of visa cost due to upward revision in the US H-1B visa fee, 2) missing operating leverage due to weak growth, 3) upfront costs attributed to large deal ramp-ups, and 4) rollout of variable pay for select names.
Per analysts at Anand Rathi, deal wins during the quarter remained steady. In Q1, HCL Tech won two deals from Apobank and SBI, while TCS and Infosys won one each from Burgan Bank and Commerzbank respectively, it said.
The analysis report by Anand Rathi said that HCL Tech is going through a slow H1 FY25 as the company focused on higher offshoring and productivity gain passthroughs in Q1. This, it added, will be followed by an impact from State Street JV in Q2. “Therefore, growth is largely going to be seen in H2 only, leading to overall lower estimates for FY25,” it said.
Brokerage firms like Prabhudas Lilladher, InCred Equities, BNP Paribas, among others gave the following estimates for HCL Tech June quarter earnings:
Prabhudas Lilladher
Revenue: Rs 28.03 thousand crore
PAT: Rs 3770.00 crore
EBIT: Rs 4740.00 crore
InCred Equities
Revenue: Rs 26.30 thousand crore
EBIT: Rs 4460.00 crore
Profit: Rs 3534.00 crore
BNP Paribas
Revenue: Rs 28.07 thousand crore
EBIT: Rs 4757.50 crore
Net income: Rs 3877.30 crore
Anand Rathi
Sales: Rs 28.07 thousand crore
EBIT: Rs 4609.00 crore
Net Income: Rs 3566.60 crore
PBT: Rs 4840.40 crore
Nomura
Revenue: Rs 27.98 thousand crore
EBIT margin: 17.0%
HCL Technologies is expected to report a growth of 6 per cent in its net profit for the June quarter. Profit is estimated at Rs 3,745 crore according to average estimates of four brokerages.
According to analysts, HCL Tech is expected to report a decline of 2 per cent sequentially in its revenue in the June quarter on the back of a combination of annual productivity pass-backs to clients and planned ramp-downs in IT services. The average of five brokerage firms expect HCLTech’s revenue to fall to Rs 27,866 crore in April-June from Rs 28,499 crore in March quarter.
After TCS, HCL Tech is all set to report its earnings for the June quarter today. The IT major is expected to report a 2 per cent quarter-on-quarter decline in its revenue in the June quarter on the back of a combination of annual productivity pass-backs to clients and planned ramp-downs in IT services.