HCL Tech Q3 Net Up 31% To Rs. 3,982 crore; Confident Of Further Acceleration In Business In Coming Qtrs

On Friday, HCL Technologies reported a 31.1% increase in its net profit of Rs. 3,982 crore (US$ 545.02 million) in its December quarter on the account of high momentum in its digital, goods and platform segment, and imparts confidence in turning more acceleration in reservations in the coming quarters.

The key IT services, which posted a net profit of Rs. 3,037 crore (US$ 415.68 million) in the year-ago period, have also crossed the CY2020 revenue mark of USD 10 billion.

In the quarter under review, HCL Tech's revenues increased 6.4% to Rs. 19,302 crore (US$ 2.64 billion), from Rs. 18,135 crore (US$ 2.48 billion) in the year-ago period (as per US GAAP).

The business reported revenue growth in constant currency at 3.5% quarter-on-quarter, exceeding its own forecast for the December quarter of 1.5-2.5% growth.

HCL Tech has now updated its sequential revenue growth guidance in constant currency to 2-3% (including DWS contribution) from its previous forecast of an improvement of 1.5-2.5% quarter-on-quarter for the quarter of March 2021.

HCL Technologies President and CEO, Mr. C Vijayakumar said, “On a very strong financial note, the calendar year 2021 has begun. As reflected in our sequential sales improvement of 3.5% in constant currency and 4.4% in US dollars, our strategic investments continue to produce positive outcomes.”

He added that the company continues to see a solid pipeline and remains optimistic of 'much more booking acceleration in the coming quarters'.

He said, “Looking forward, good order booking, a combination of a solid backlog, gives us a lot of hope about the development trajectory. I firmly believe that, through a mix of solutions and services, we are fundamentally distinct.”

In CY20, the revenue of HCL Technologies surpassed USD 10 billion, delivering constant currency growth of 3.6% year-on-year.

Mr. Vijayakumar said, “The FY2 duration of July-December, which comprises the first two quarters of comparison since the conclusion of the IBM contract, registered a 13.4% y-o-y improvement.”

Selected IBM software products for Rs. 12,252 crore (US$ 1.68 billion) were acquired by HCL Tech (about USD 1.8 billion).

He said, “Although it is early days, from a year-on-year perspective, this is the fastest growing sector for HCL and possibly even in the industry. Europe led our geographical results... Five of the seven verticals displayed strong positive growth momentum with respect to verticals. The media and telecommunications were in charge.”

Net profit was 26.7% higher from Rs. 3,142 crore (US$ 430.05 million) on a sequential basis, while the topline was 3.8% higher from Rs. 18,594 crore (US$ 2.54 billion) in the quarter of September 2020.

Mr. Vijayakumar said, “The increase in net income was attributed to lower tax expenses, mostly due to the reversal of the tax laws relating to previous years and a few other factors.”

An interim dividend of Rs. 4 (US$ 0.055) per share of equity has been announced by the Board of Directors for the 2020-21 financial year. HCL Technologies' shares were trading at Rs. 1,011.1 (US$ 13.84) per unit, down 1.62% from the previous BSE close.

Sharekhan by BNP Paribas Head of Research, Mr. Sanjeev Hota said, “Impressive quarterly results were announced by HCL Tech, beating our forecasts on all fronts. Revenue in constant currencies increased by 3.5% q-o-q, led by solid growth in all of its segments (especially in products and platforms segment)... In the current quarter results, we expect an improvement in FY2021-23E earnings for HCL Tech factoring, upward revision of guidance and consistent mega deal wins.”

13 transformational deals across industry verticals, including life sciences and healthcare, technology and financial services, were signed by HCL Technologies during the quarter. Digital (Mode 2) and products and platforms have driven broad-based growth for the group (Mode 3).

HCL Technologies had 159,682 workforce at the end of the December 2020 quarter, with a net addition of 6,597 employees.

HCL Technologies Chief Human Resources Officer, Mr. Apparao VV said, “Our U.S. location has risen by almost 300 basis points, and we now have 69.8%. While it was a bit difficult to recruit freshers during quarters 1 and 2, we accelerated our fresher recruiting and we recruited 4,022 freshers in the December quarter, which took our freshers on board to 6,480 by December, and we intend to add another 5,000 in the March quarter.”

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.