HCL Tech shows better-than-expected Q3 results, net up 19% to Rs 2,611 cr

HCL is expected to overtake the third-largest IT services firm Wipro in revenue terms in FY19

Information technology (IT) services company HCL Technologies (HCLT) on Tuesday delivered better-than-expected financial numbers in the third quarter (Q3) ended December 31, 2018, and exuded strong faith to end the year with double-digit revenue growth.

In the quarter under review, the Noida-headquartered company’s net profit at Rs 2,611 crore grew 19 per cent on a year-on-year basis, while sequentially, growth was 2.8 per cent. Revenue in the quarter came in at Rs 15,699 crore, a rise of 22.6 per cent over the corresponding period last year and 5.6 per cent sequentially. 

The sequential growth clocked by the company during the quarter was the highest among the other large industry peers. During the same period, industry leader Tata Consultancy Services posted a quarter-on-quarter revenue growth of 2.43 per cent, while for Infosys and Wipro, the number stood at 3.8 per cent and 3.6 per cent, respectively.

A Bloomberg estimate, based on consensus analysts’ poll, had expected HCLT’s net income at Rs 2,541 crore and revenue at Rs 15,514 crore. 

“We had the highest bookings this quarter, driven by financial services, technology services vertical, and manufacturing vertical. This is the second quarter in this fiscal year, where we are seeing the highest bookings,” said C Vijayakumar, president and chief executive officer of HCLT. 

“With the confidence in the bookings we’ve had and with the demand environment, we feel confident of delivering towards the higher end of our guidance,” added Vijayakumar.

For 2018-19 (FY19), HCLT maintained its revenue growth forecast of 9.5-11.5 per cent in constant currency terms. The company had earlier said it was expecting revenue growth for the fiscal year to come in towards the middle range of this growth forecast. 

In dollar terms, revenue came in at $2,202 million, up 5.6 per cent sequentially and 13 per cent annually on a constant currency basis. Net income was $364 million, up 2.1 per cent sequentially and 7 per cent over last year.

However, the operating profit margin of the company in Q3 declined 30 basis points to 19.6 per cent over the previous quarter on currency headwinds and wage hikes, though it was well within its forecast range of 19.5 per cent to 20.5 per cent.

With this, HCLT is expected to overtake the third-largest IT services firm Wipro in revenue terms in FY19. On a nine-month basis, HCLT’s revenue of $6.353 billion is already $240 million higher than that of Wipro’s.  

“HCLT delivered impressive revenue growth for the quarter, with 5.9 per cent constant currency growth. However, margin performance was a tad below estimates,” said Sanjeev Hota, AVP Research at Sharekhan.

The company’s growth in Q3 was led by technology and services vertical, which grew 7.5 per cent, while manufacturing, retail and consumer packaged goods segments grew 3.9 per cent and 8.4 per cent, respectively. Revenues from financial services vertical saw a marginal decline of 0.6 per cent on a sequential quarter basis.