Where did HCL Technologies Q1 growth came from? CEO Anant Gupta reveals all

By: |
New Delhi | August 04, 2016 6:38 AM

Our journey on local talent has been long. Our dependency on H1B visas is one of the lowest in the industry at 50%.

HCL Technologies chief executive Anant Gupta explains to FEs R Jai Krishna the reasons behind better earnings, focus on high-margin fixed-price and managed services contracts, impact of Brexit, and US Presidential Polls. Excerpts:

Can you explain us how HCL Technologies outperformed its industry peers by a 6.3% sequential profit growth?

Our repeat customers contributed 96% of revenue up from 93.2%. Growth came from non-linear models such as fixed-price and managed services which had a significant contribution of 61% of revenue during the quarter, qualifying our margin story. We have had 13 new client wins during the quarter, especially for our NextGen ITO and IoT solutions. Renewal is strong, and we continue to see that as a strong area.

For the first time in 12-years, HCL Technologies has given a earnings forecast of 12-14% for the fiscal. What is the rationale behind giving a forecast and what makes you confident?
We are just being honest with people. There is a lot of negative sentiment in the technology sector, which we don’t see from our lens. The forecast is based on the prospects we see, the conversations we had with clients, and we see the market robust. We continue to see success in the rebid market. Our obsession with client relationships is very, very strong. With increased adoption of DryIce and fixed-price and managed services model we are able to retain our margins, which is helped by business models around automation, and offshoring.

Europe is the second-biggest market by revenue for HCL Technologies. How do you see the impact on your business because of Britain’s decision to exit from European Council?

Its little too early to comment on the impact of Brexit. Our GBP exposure is at 8%. Historically we have invested in local talent and delivery for onshore and nearshore. We have not overtly invested for a specific market. We are confident on Europe, our exposure to GBP is quite limited. We see a bit of resilience or a little bit of comfort. Anything new could also give us more opportunity, including engaging with clients with new rules of business.

As the US heads for the Presidential polls, there has been a heated debate on H1B visas. What is the impact on HCL Technologies, and how do you plan to counter it.
Our journey on local talent has been long. Our dependency on H1B visas is one of the lowest in the industry at 50%. We are increasing our localisation of talent in US. Out of the 18 centres opened outside India in the last four years, at least five are in US.

What has been the contribution from your Volvo acquisition, and what is the status of the Geometric acquisition?
Volvo is the largest contribution during the quarter at $40 million. Geometric, it is still in the works. Competition Commission of India has approved it, and we will be filing in the courts.

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