HCL does not expect coronavirus outbreak to dent its Q4 numbers much

HCL doesn’t expect much impact from virus in Q4

HCL Technologies, the country’s third-largest information technology (IT) services firm, says it does not expect a significant impact in this quarter from the Covid-19 pandemic, which has disrupted businesses globally.

“Our exposure to the more impacted verticals is not significant. Booking during this quarter has largely been on track as a significant part of closures happened in January,” HCL said.

HCL says its business model is a mix of recurring product revenues, managed services and discretionary spending-led professional services. “From a vertical perspective, our exposure to verticals like oil and gas, travel and hospitality, and high-end retail is in single digits,” the company said.

Aviation, travel and tourism, and hospitality have been among the hardest-hit business verticals, since most countries have completely stopped air travel and people have been asked to stay at home as much as possible. As a result, the hotels and hospitality sector has suffered — a big name like Marriott International says it has been hit worse than the September 2001 (9/11) and Great Depression events combined.

Oil and gas as a sector has also suffered. “The outbreak has contributed to a dampened demand for oil, resulting in plummeting prices and production declines, especially in the wake of the Russia-Opec (the Organization of the Petroleum Exporting Countries) price war. As we move forward, then, the energy sector expects to face two headwinds: managing the issues of the health emergency all sectors face, and simultaneously coping with a low oil-price scenario, lower demand and the need to shore up revenue and manage debt obligations,” consultancy PwC recently said.

HCL says its investment in risk management systems and processes is helping it minimise the short-term impact from the closures enforced because of Covid-19. And, that the company is adequately prepared for the medium term, if things gets worse. “We are also confident our business model will help us to emerge stronger in the longer term, as it has been built for resilience during tough times,” it added.

IT firms like HCL had started putting travel restrictions in place since February, when the novel coronavirus began spreading in China and outward. The Government of India stopped all international flights from March 23, and extended the ban to domestic air travel a few days later.
 

Companies have put in measures to ensure their employees work from home but IT companies have got an exception for some of their staffers, providing essential services to clients. “As of today, 76 per cent of our India-based employees and 92 per cent of our employees in other geographies are enabled to work from home. In certain geographies, a limited set of our employees are working from our offices, wherever it is permissible by the government and local authorities...we have not witnessed any outages or major disruption in operations with this newer format of work from home delivery,” HCL said on Monday.