HCL Tech Q3 net up 31 pc to Rs 3,982 crore; confident of further acceleration in biz momentum

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Updated: Jan 15, 2021 5:56 PM

Major Indian IT firms -- Tata Consultancy Services, Infosys and Wipro -- have seen growth in business and foresee strong deal pipelines in the near future.

hcl technologies, hcl technologies q3 resultsDuring the quarter, HCL Technologies signed 13 transformational deals across industry verticals, including Life Sciences and Healthcare, Technology and Financial Services.

HCL Technologies on Friday posted a 31.1 per cent rise in its December quarter net profit at Rs 3,982 crore on the back of strong momentum in its digital, products and platform segment, and exuded confidence in clocking further acceleration in bookings in the coming quarters.

The IT services major, which had registered a net profit of Rs 3,037 crore in the year-ago period, has also crossed the USD 10 billion revenue milestone in CY2020.

HCL Tech’s revenue grew 6.4 per cent to Rs 19,302 crore in the quarter under review, from Rs 18,135 crore in the year-ago period (as per US GAAP).

The company recorded revenue growth at 3.5 per cent quarter-on-quarter in constant currency, beating its own estimate of 1.5-2.5 per cent growth for the December quarter.

HCL Tech has now revised its sequential revenue growth guidance to 2-3 per cent (including DWS contribution) in constant currency from its previous estimate of 1.5-2.5 per cent increase quarter-on-quarter for the March 2021 quarter.

HCL Tech has completed the acquisition of Australian IT solutions firm DWS earlier this month.

“The calendar year 2021 has started on a very strong financial note. Our strategic bets continue to deliver outstanding results as reflected in our sequential revenue growth of 3.5 per cent in constant currency and 4.4 per cent in US dollars,” HCL Technologies President and CEO C Vijayakumar said.

The company continues to see a strong pipeline and remains confident of “even further acceleration of bookings in the coming quarters”, he added.

“Looking ahead, a combination of a strong pipeline, good order booking gives us a lot of optimism about the growth trajectory. I strongly believe that we are uniquely differentiated through a combination of solutions and services…” he said.

HCL Technologies’ revenue has crossed USD 10 billion milestone in CY20, delivering 3.6 per cent year-on-year growth in constant currency.

Vijayakumar said the July-December period of FY21 — which constitutes the first two comparison quarters since the closure of the IBM deal — registered a y-o-y growth of 13.4 per cent.

HCL Tech had acquired select IBM software products for Rs 12,252 crore (about USD 1.8 billion).

“While it is early days, this is the fastest growing business from a year-on-year perspective for HCL and probably in the industry as well… Our geographic performance was led by Europe… In terms of verticals, five of the seven verticals showed good positive growth momentum. It was led by media and telecom,” he added.

On a sequential basis, net profit was 26.7 per cent higher from Rs 3,142 crore, while topline was higher by 3.8 per cent from Rs 18,594 crore in September 2020 quarter.

Vijayakumar said the uptick in net income was on account of lower tax expense, primarily due to reversal of tax provisions related to prior years, and a couple of other factors.

The Board of Directors has declared an interim dividend of Rs 4 per equity share for the financial year 2020-21. Shares of HCL Technologies settled at Rs 989.40 apiece, down 3.73 per cent from the previous close on BSE.

“We expect increase in FY2021-23E earnings for HCL Tech factoring in current quarter outperformance, upward revision of guidance and consistent mega deal wins,” Sharekhan by BNP Paribas Head of Research Sanjeev Hota said.

At the beginning of FY21, IT companies had expressed concerns around the impact of COVID-19 pandemic as businesses globally were impacted by lockdowns in various countries. However, the last few months have seen an acceleration in adoption of digital solutions as clients turned to technology to ensure business continuity.

Major Indian IT firms — Tata Consultancy Services, Infosys and Wipro — have seen growth in business and foresee strong deal pipelines in the near future.

TCS reported a 4.1 per cent quarter-on-quarter revenue growth — its strongest third quarter growth in nine years — on the back of healthy deal closures. Its topline rose 5.4 per cent to Rs 42,015 crore in the December 2020 quarter over the corresponding period last fiscal, while net profit was up 7.2 per cent to Rs 8,701 crore in the reported quarter.

Infosys posted a 16.6 per cent rise in consolidated net profit at Rs 5,197 crore, while revenue was up 12.3 per cent to Rs 25,927 crore for the December 2020 quarter over the year-ago period.

Wipro had registered about 21 per cent increase in net profit at Rs 2,968 crore, while its revenue from operations grew nearly 1.3 per cent to Rs 15,670 crore in the third quarter of FY21 over year-ago period. Its IT services revenue grew 3.9 per cent sequentially to USD 2.07 billion.

During the quarter, HCL Technologies signed 13 transformational deals across industry verticals, including Life Sciences and Healthcare, Technology and Financial Services. The company saw broad-based growth driven by Digital (Mode 2) and Products and Platforms (Mode 3).

“The (growth) momentum is going to continue, it’s going to accelerate in this quarter, and probably even subsequently. We’ve had good bookings, we had 13 transformational deals, the booking increased 13 per cent year on year compared to same quarter last year.

“And this type of deals are across different geographies, across many verticals. We still continue to see a strong pipeline and I believe that bookings will accelerate in this quarter,” Vijayakumar said.

At the end of December 2020 quarter, HCL Technologies had 159,682 employees with net addition of 6,597 people, while attrition for IT services (on last 12 month basis) was at 10.2 per cent.

“Our localisation in the US has gone up by almost 300 basis points, we have 69.8 per cent now. Though there was a bit of a difficulty in hiring freshers during quarter 1 and 2, we accelerated our fresher hiring and in the December quarter, we added 4,022 freshers, which has brought our onboarding of freshers to 6,480 by December, and we plan to add another 5,000 in in March quarter,” HCL Technologies Chief Human Resources Officer Apparao VV said.

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