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

HCL Technologies has posted a strong set of numbers, outperforming the mid-quarter revenue growth guidance on the back of digital transformation and cloud businesses. The company has also announced salary hikes for all employees in two tranches.

In the second-quarter result announced on Friday, the company reported a net profit of Rs 3,142 crore, up 18.5 per cent from the same period in FY20. The net profit rose 7.4 per cent on a sequential basis. 

The board declared an interim dividend of Rs 4 per equity share, fixing October 24 as the record date for payment.

The firm’s revenues grew 4.2 per cent to Rs 18,594 crore year on year 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. 

All IT firms have seen an uptick in margins in Q2 due to greater cost optimisation measures and savings in employee costs. Tata Consultancy Services leads with 26.2 per cent among the top four players.

Dollar revenues stood at $2,507 million, a 4.5 per cent rise in constant currency terms over the previous quarter, ahead of 3.5 per cent quarter-on-quarter growth guidance the Noida-headquartered company declared last month. The revenue growth in constant currency terms for TCS stood at 4.8 per cent and 4 per cent in the case of Infosys.

C Vijayakumar, president and CEO, HCL Technologies, said: "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 as it upgraded the operating margin guidance to 20-21 per cent for the ongoing financial year. This is a 50 basis point increase on both upper and lower limits. 

Infosys, HCL Tech’s closest rival, also revised the revenue growth guidance upwards to 2-3 per cent in constant currency terms for FY21.

Brokerage firm Sharekhan termed the quarterly results as "strong" as it beat the estimates on all fronts. EBIT margin improving, led by moderation in sequential employee expenses and the signing of 15 transformative deals reaffirmed the buy call on the stock, said Sanjeev Hota, head of research, Sharekhan.

The numbers were a tad higher than 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.

Hikes from October

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 would 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.

The company said it would go ahead with 12,000 fresh hires, of which around 9,000 will be onboarded in the October-March period.