HCL Tech posts double-digit revenue growth on healthy rise in IT sector

HCL Technologies' earnings for Q2 of FY19 met street estimates with the IT services firm on Tuesday posting double digit revenue growth, mainly driven by healthy rise in technology & services, and life sciences & healthcare verticals.

The company, which pipped Bengaluru-based rival Wipro in the first quarter to emerge as the third largest player in Indian IT industry space in quarterly revenue terms, remained optimistic about maintaining the growth momentum in the second half of this fiscal, despite the third quarter traditionally being weak one due to lesser work days.

In the quarter ended September 30, 2018, HCL Technologies’ posted 19.5 per cent rise in revenue at Rs 148.61 billion on year-on-year basis. Revenue grew by 7.1 per cent QoQ. In dollar terms, revenue for the July-September quarter was at $2.09 billion, up 8.9 per cent YoY and 2.1 per cent sequentially.

On constant currency basis, the growth in revenue was 10.5 per cent YoY and three per cent in sequential terms.

As compared to HCL, market leader Tata Consultancy Services' revenue in constant currency term rose by 11.5 per cent and that of Infosys grew by 8.1 per cent on YoY basis.

In the quarter ended September, HCL reported a 16.1 per cent rise in its net profit at Rs 25.40 billion over the same period last year backed by good momentum in the deal space. On a sequential quarter basis, the net profit grew 5.7 per cent.

The Noida-headquartered company was able to beat the street estimates in both revenue and net profit fronts. According to Bloomberg estimates, revenue was projected to be at Rs 147.48 billion for Q2 of FY19, while net profit was estimated at Rs 24.33 billion.

However, despite the revenue upside, the IT services firm maintained its guidance between 9.5 to 11.5 per cent in constant currency terms for FY19. Its operating margin guidance also remained unchanged at 19.5 to 20.5 per cent for the ongoing fiscal.

"We continue to deliver strong and consistent QoQ revenue and margin growth performance. This quarter, we posted three per cent revenue growth in constant currency (terms) fuelled by global infrastructure services, engineering and R&D and Mode 2 next-gen services," said C Vijayakumar, president & CEO at HCL Technologies.  

"Our Mode 3 revenue achieved the billion-dollar annual run-rate milestone. We remain confident of retaining this growth trajectory going forward."

While under Mode 1 services, HCL delivers core services in areas of applications, infrastructure, engineering and R&D and business Services; Mode 2 constitutes company's digital offerings. The company has classified its Intellectual Property-led services under Mode 3.

The company said it had achieved $1 billion Mode 3 revenue on annual run rate basis, reflecting its investment in IPs started to provide revenue upside to the firm. During the second quarter, HCL signed 17 transformational deals across Mode 1 and 2 services.

Operating margin of the firm improved 20 basis points sequentially to 19.9 per cent enjoying the benefits of depreciating rupee.

Among verticals, HCL saw a broad based growth during the quarter with its technology & services vertical growing at 36.3 per cent YoY, while its life sciences & healthcare division saw a growth of 19.8 per cent. Revenue from financial services, and retail & CPG vertical rose 2.3 per cent and 19.2 per cent respectively. Global infrastructure services saw a 3.3 per cent sequential growth in constant currency term.

By the end of September quarter, attrition level for the firm increased 80 basis points sequentially on LTM (last twelve month) basis. The IT services firm witnessed a net addition of 3,754 employees during the quarter with overall employee count going up to 127,875 at the end of second quarter.

Roshni Nadar Malhotra appointed vice-chairman  

HCL Technologies on Tuesday announced the appointment of Roshni Nadar Malhotra, the daughter of the company's founder and Chairman Shiv Nadar, as the vice-chairman of the board of directors of the company. She, however, will continue to be the non-executive director at the company. An MBA from the Kellogg Graduate School of Management, Malhotra since April 2009 has been serving as the CEO at HCL Corporation, the holding company that owns both HCL Technologies as well as HCL Infosystems. - BS Reporter