HCL Tech Q2 profit rises 18.5% to Rs 3,142 crore, outperforms projections

HCL Technologies posted a strong set of numbers as it outperformed the mid-quarter revenue growth update on account of performances driven by digital transformation and cloud businesses.

In the quarter ended Q2FY21, the company, on Friday, reported a net profit of Rs 3,142 crore, up 18.5 per cent year on year (YoY) and up 7.4 per cent on a sequential basis.

Dollar revenues stood at $2,507 million, a 4.5 per cent rise in constant currency terms over the previous quarter. This exceeded the 3.5 per cent quarter-on-quarter growth the Noida-headquartered company declared last month. The firm’s revenues grew 4.2 per cent YoY to Rs 18,594 crore during this period and 6.1 per cent sequentially. The operating margin of the IT services provider improved 110 basis points sequentially to 21.6 per cent in the July-September period—a 22-quarter high.

“This growth momentum was driven by our continued leadership in digital transformation and cloud businesses and strong stability in the products and platforms segment, all of which continue to open diverse growth avenues for us,” said C Vijayakumar, president, and CEO, HCL Technologies. “Our investments over the last few years in next-gen technologies have held us in good stead during these difficult times and position us strongly to leverage the emerging market opportunities.”

The company stuck to its FY21 guidance of 1.5- 2.5 per cent growth in revenue for the remaining quarters while it upgraded the operating margin guidance to be between 20 per cent and 21 per cent for the ongoing financial year. This is a 50 basis point increase on both upper and lower limits.

The numbers were a tad higher than the street expectations. HSBC, in a brokerage report, expected the revenue to come in at Rs 18,510.9 crore, up 3.8 per cent QoQ and 5.6 per cent YoY. Net profit was pegged to grow 0.3 per cent QoQ and 10.5 per cent YoY at Rs 2,934.8 crore.

In Q2 FY21, HCL Technologies signed 15 transformational net new deals, led by key industry verticals including life sciences and healthcare, public services (energy & utilities), and manufacturing. The bookings have increased 35 per cent QoQ while pipeline grew 20 per cent, Vijaykumar added.

All the verticals registered a sequential growth in the second quarter. Like its most of its peers, life sciences was the vertical that led growth, up 8.6 per cent sequentially. Manufacturing and public services, despite the Covid-19 impact, showed a meagre 1.5 per cent and 0.2 per growth respectively. However, on a YoY basis, except life sciences, retail and CPG and Technology, other segments still witnessed a decline.

Attrition in the three months fell 240 basis points to 12.2 per cent when compared to the previous quarter. The headcount stood at 153,085, up 2,798 employees on a quarter-on-quarter basis.

The management said salary hikes will be rolled out with effect from October for select employees up to E3 levels (freshers to senior managers) and from January 2021 for the rest. “This is only a one-quarter lag from regular increment cycle we give regularly. It will be in the same range as given last year—the average hikes were 6 per cent for offshore and 2.5 per cent for onsite,” said Apparao VV, chief human resource officer, HCL Technologies.