HCL Tech Q3 net profit up 13% at Rs 2,944 cr; revises outlook on strong pipeline

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January 17, 2020 10:02 PM

The company had registered a net profit of Rs 2,605 crore in the year-ago period as per Indian Accounting Standards.

HCL Tech Q3 net profit, IT services revenue growth, HCL Software, Google, IBM software productsHCL Technologies’ board has declared a dividend of Rs 2 per share.

IT major HCL Technologies on Friday posted a 13 per cent rise in its consolidated net profit at Rs 2,944 crore for the December 2019 quarter and said it expects to clock up to 17 per cent growth in FY20 revenue on the back of pipeline being at a “historic peak”.

The company had registered a net profit of Rs 2,605 crore in the year-ago period as per Indian Accounting Standards. Its revenue from operations grew 15.5 per cent to Rs 18,135 crore in the quarter under review, from Rs 15,699 crore in the year-ago period.

“We have once again delivered a great quarter…this quarter, we have crossed an annualised run rate of USD 10 billion. Our pipeline stands at an all-time high, we are expecting a higher conversion of this pipeline to booking in this quarter,” HCL Technologies President and CEO C Vijayakumar told reporters here.

The company’s CFO Prateek Aggarwal said the company has narrowed its revenue growth outlook to 16.5-17 per cent for 2019-20 in constant currency terms, from its previous forecast of 15-17 per cent topline growth in constant currency terms.

“We had earlier guided to a wider range of about 15-17 per cent but now that we have only one quarter to go and we have better visibility, we have narrowed down the range…it is coming from both sides – organic and inorganic,” he added.

Compared to HCL Technologies’ performance, Wipro had posted 2.2 per cent growth in its IT services revenue (USD 2.09 billion). It expects its March quarter IT services revenue growth to be flat to 2 per cent. HCL Technologies’ larger rival Infosys – which announced its results last week – had also revised its revenue guidance for the fiscal to 10-10.5 per cent topline growth helped by double digit growth year-to-date.

India’s largest IT services company Tata Consultancy Services announced its results on Friday. Posting a 6.7 per cent rise in topline in December 2019 quarter, the Mumbai-based company said it had closed deals worth USD 6 billion during the said quarter. However, TCS also made it clear that it will not be able to notch a double-digit revenue growth in FY20.

For HCL Technologies, the strong performance of HCL Software was driving growth for the Products and Platform segment of the company. “Inorganic guidance was 5-6 per cent earlier and that is now at 6 per cent. For organic, which we had said would be 10-11 per cent, now we are revising to 10.5-11 per cent,” Vijayakumar explained.

In December 2018, HCL Technologies had inked an agreement to acquire select IBM software products for Rs 12,252 crore (about USD 1.8 billion), including earnouts of Rs 1,035 crore (USD 150 million). The company closed the deal on June 30, 2019.

Vijayakumar said during the December 2019 quarter, the company had entered into a preferred business partnership with Google. “We have established Google cloud business unit and we look forward to winning a lot more cloud opportunities with the addition of Google as an ecosystem partner for us,” he added.

Talking about the demand environment, Vijayakumar said the pipeline is at “historic peak”. “So I am very optimistic about overall demand environment. There could be some verticals where there could be some kind of softness but broadly across it’s very good. The pipeline is fairly robust in the US, Europe in line with our revenue contributions. So overall (we are) very positive about the overall demand environment,” he added.

HCL Technologies’ board has declared a dividend of Rs 2 per share. Vijayakumar said on a year-year basis, five of the seven verticals posted double-digit growth, while life sciences and healthcare delivered a high-single digit y-o-y growth.

He said growth was led by manufacturing at 38.1 per cent y-o-y, energy, utility and public services at 31.3 per cent, retail CPG at 16.9 per cent, financial services at 16.8 per cent, and telecom and media at 13.6 per cent.

In terms of geographies, the US, Europe and Rest of World (RoW) experienced double digit growth on a y-o-y basis in constant currency. RoW lead the growth with 27.3 per cent y-o-y growth in constant currency. In dollar terms, the net profit grew 17.2 per cent to USD 426.5 million for the December 2019 quarter, while revenue surged by 15.5 per cent to USD 2.5 billion as compared to the year-ago period, as per the US Generally Accepted Accounting Principles.

The company added 11,502 employees (gross) during the quarter to take its total head count to 1,49,173 at the end of the December 2019 quarter. Attrition on last 12-month basis stood at 16.8 per cent. The results were announced after trading hours. Shares of the company on Friday closed at Rs 598.8 apiece, up marginally from their previous close on the BSE.

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