HCL Technologies Q2 profit rises 3.9%, hirings highest in 24 quarters

Information technology (IT) services firm HCL Technologies (HCL Tech) on Thursday reported 3.9 per cent profit in the second quarter (Q2) ended September. The IT firm's forecast for double-digit constant currency growth in the current financial year remains unchanged.
 
HCL said its Q2 revenue was Rs 20,655 crore, up 2.9 per cent sequentially, and 11.1 per cent year-on-year.  Net income for the quarter was Rs 3,265 crore, a rise of 1.6 per cent quarter-on-quarter, and 3.9 per cent annually.
 
The firm continues to expect 2021-22 (FY22) revenue to grow in double digits in constant currency, while earnings before interest and tax (EBIT) margin is expected to be between 19 and 21 per cent for FY22. EBIT margin in the September quarter fell 0.4 per cent to 19 per cent.

 

Prateek Aggarwal, chief financial officer, HCL Tech, attributed the fall to a seasonally weak quarter for its products and platforms business and some deals getting deferred. The IT firm's board also approved a payout policy that entails investor payouts of not less than 75 per cent of net income cumulatively over five years - FY22 to 2025-26.
 
The total contract value of new deal wins in Q2 rose to $2.245 billion, from $1.67 billion in the previous quarter. This was enabled by 14 net new large deal wins.
 
“We believe the upward demand trajectory will continue. Enterprises will continue to invest in modernisation, Cloud journey, and digital transformation for the next few quarters. Customers are going to revalidate the proof points and double down on some of the initiatives which are giving them the right returns. We see it as a good mid-term trend - the overall growth trajectory and the demand situation," said  C Vijayakumar, chief executive officer and managing director, HCL Tech, at a post-earnings conference call.

 
Hiring continued, with a net addition of 11,135 people during the quarter - the highest in the last 24 quarters.  HCL Tech added one $100-million client during the quarter, 12 clients over $50 million, 18 clients over $20 million, $10 million-plus clients up by 18, and 12 clients worth over $5 million.
 
Like its peers, attrition at HCL Tech rose sequentially. In Q2, attrition was at 15.7 per cent, up from 11.8 per cent in the previous quarter, on a 12-month basis. The total headcount at HCL Tech is now at 187,634. "We added 5,779 freshers this quarter, which is an addition to the 3,444 we added last quarter. We expect to hit the 20,000-22,000-freshers target (in FY22), or maybe even breach it,” said Apparao V V, chief HR officer, HCL Tech.

 
He added that attrition is likely to plateau by the December quarter, and the fourth quarter is likely to see better numbers on attrition.
 
"We rolled out increments after nine months to our junior management starting July 1, which is 7-8 per cent at offshore and 3-4.5 per cent at onsite. For senior leaders, it will be from October 1," added Apparao.
 
HCL Tech's board further approved a change to its existing long-term incentive programme to include restricted stock unit (RSU) grants as part of the compensation mix, subject to shareholder approval.
 
The programme will include 3,000 senior leaders, and is expected to help employee retention. The technology (tech) industry sees high attrition and talent crunch, even as industries struggle to find people skilled in new tech.

 
The company will move from 100 per cent cash awards to a mix of 70 per cent cash, 30 per cent RSUs for the grants it will offer later this calendar year.