HCL Tech reports 16.3% rise in net income in Q3FY20 to Rs 3,037 cr

HCL Technologies, the country’s third-largest information technology services firm, reported a 16.3 per cent annual rise in net income in the quarter ended December 31, 2019, (Q3) of financial year 2019-20 (FY20) to Rs 3,037 crore.

The company’s profit before tax in the December-ended quarter was Rs 2,991 crore. 

The Noida-based company raised its full-year revenue forecast to a growth of 16.5-17 per cent from 15-17 per cent in constant currency range earlier.

“At the year-to-date mark, we are at about 17.8 per cent in terms of year to date, nine months cumulative organic growth year-on-year (YoY),” said Prateek Aggarwal, chief financial officer at HCL Technologies. 

“We had earlier guided to a wider range of about 15-17%, but now that we have only one quarter to go and we have better visibility, we have narrowed down the range... it is coming from both sides... inorganic guideline was 5-6 per cent that is now at 6 per cent. In organic (business), which we had said would be 10-11 per cent, we are now revising to 10.5-11 per cent,” he added.

On Friday, HCL Tech reported a 15.5 per cent rise in annual revenue in constant currency to Rs 18,135 crore. On a sequential basis, revenue in Q3, rose 3.5 per cent while net income rose 14.6 per cent.

“I am pleased to announce that this quarter we have crossed an annualised run rate of $10 billion... on the back of good booking in H1 (first half), this quarter we experienced dip in booking as some client decisions have taken longer than expected.

Our pipeline stands at an all-time high. We are expecting a higher conversion of this pipeline to booking in this quarter. This quarter we closed successful completion of Sankalp. This will give us a little more momentum in the semiconductor business," said HCL Technologies CEO C Vijayakumar.

He added that the longer decision cycles were not reflective of the larger demand environment.

“The best way we define demand environment is to look at our pipeline. Our pipeline is at historic peak so I am very optimistic about overall demand environment. There could be some verticals where there could be some kind of softness. The pipeline is fairly robust in US, Europe in line with our revenue contributions. So, overall, very positive about the overall demand environment,” Vijayakumar added.

He further said the company was “cautiously optimistic” about the financial services business, in contrast to rival Wipro’s commentary, which saw a dip in banking, financial services and insurance because of furloughs in Q3, but expects demand to pick up in the current quarter.

Rival Tata Consultancy Services, which also announced Q3 numbers on Friday, reported a double-digit revenue growth during the period, led by BFSI (banking, financial services and insurance) and digital segments.

HCL Software, a new unit of HCL Products & Platforms, which became operational in Q2, helped the business grow 16.8 per cent sequentially in constant currency. The business has onboarded 4,600 customers across all geographies.

Among geographies, Americas fell 0.1 per cent sequentially, considering Q3 is traditionally slow because of furloughs and the holiday season. Revenue from Europe rose 5 per cent sequentially, while Rest of the World rose 10.6 per cent sequentially, led by business from Australia and Singapore.

The firm also completed wage hikes during the quarter. The top performers were awarded a hike of 10-12 per cent, while the average for the rest of the employees was 3-4 per cent, said Apparao VV, its chief human resource officer. He added that over 67 per cent employees in the US were locals. Attrition remained nearly constant at 16.8 per cent sequentially.

HCL Technologies signed 12 transformational deals in the quarter, led by hi-tech, manufacturing and financial services businesses.

Financial services, manufacturing and technology and services were the top verticals during the quarter.