'We maintain a double-digit growth outlook,' says HCL Tech CEO

HCL Technologies to focus on its Mode-2 and Mode-3 offerings, demand remains robust

HCL Technologies (HCL Tech) continues to focus on its Mode 2 and 3 offerings, says C VIJAYAKUMAR, chief executive officer and managing director. In conversation with Neha Alawadhi, he talks about the need for investing and grooming the right kind of talent as demand remains robust. Edited excerpts:

The first-quarter numbers missed analyst expectations. Do you see this as seasonal? Or are you happy with where you are right now?

I would have expected it to be a little more, maybe 70-80 basis points, more growth really. But we felt some impact because we had allowed people to go on pandemic leave. This was in addition to all the leaves employees had — a little extra benefit we gave. That had an impact on billing. But the overall outlook is impressive. Our bookings increased 37 per cent. Our hiring is robust. We maintain a double-digit growth outlook. 

Mode 1 (traditional) revenue was down this quarter. Are there any specific reasons you are calling out for that?

Some of them are probably transitioning from a traditional work mode to a more Mode 2 (digital and new-age business) style. Maybe customers will move from on-premise to Cloud, for example.  Mode 2 is where maximum growth has been witnessed — 29 per cent year-on-year (YoY).

Given that demand is fairly healthy, do you see supply-side constraints?

Yes, there is a lot of demand for talent. Everybody wants to hire from the same talent pool. You have to put in extra effort to find the right talent. We are also focusing significantly on hiring freshers. We are hiring 22,000 freshers this financial year. That is going to help us address some of the supply-side restrictions, although it may not immediately give us relief. But six to nine months down the line, it will be useful. We have also hired freshers in the past and they are slowly getting into billing.

What is the larger plan around products and platforms and engineering research and development (ERD) segments?

On products and platforms, our focus is to find organic growth. This portfolio has 75 per cent of the products where the revenue is growing. There is strong market attraction for the products — 25 per cent is declining revenue or we are discontinuing products. We want to see how to increase overall growth. With time, growth portfolio will increase in size and so will growth profile. 

On ERD, I think this quarter was brilliant, with 4.4-per cent growth. We are the largest ERD services provider. Technology and telecommunications, aerospace and industrial manufacturing, and automotive have also done well. I see green shoots of spending; I feel confident that ERD will continue to do well. 

Overall, what is the long-term plan with Mode 2 and 3 (products and platforms)?

Mode 2 should continue to grow well. The current growth rates can be easily sustained. In Mode 3, YoY growth is what you should see. There could be some decline quarter-on-quarter. It has grown 6 per cent YoY. We expect a low single-digit growth in products and platforms this year. But as the proportion of growth products increases from 75 to maybe 90 or even 100 per cent, you will see strong growth in this segment as well.