Expect strong growth from Q2, says HCLTech CEO & MD C Vijayakumar

Will continue to grow in the US, says C Vijayakumar

C Vijayakumar, chief executive officer and managing director, HCLTech, had earlier said the firm’s positioning as a “challenger” was what was helping it grow in the US and in BFSI (banking, financial services, and insurance) when larger peers were facing headwinds in the region.

This “challenger” positioning is perhaps working for the information-technology services giant as it announced its first-quarter FY25 results.

The company reported the US geography grew 8 per cent year-on-year (Y-o-Y) though the firm witnessed its BFSI vertical decline by 1.3 per cent due to the divestiture of its stake in State Street.

Growth in the US is important because it is the largest geography for the industry. This growth is also impressive as two of its largest players have seen it tapering. 

Accenture reported revenue growth of 1 per cent in North America on a Y-o-Y basis for its recently announced third quarter.

And HCLTech’s largest Indian peer, Tata Consultancy Services (TCS), reported that revenue from the US declined 1.1 per cent in Q1 FY25. “All verticals except financial services will grow, and the impact of divestment would be visible. And for Q2 we have given some kind of outlook and Q3 is going to be a seasonally strong quarter for our software business. So, I think these are the underlying factors that will help us achieve the guidance that we’ve given,” said Vijayakumar in a post-results interaction with Business Standard.

The Noida-based firm clocked Rs 4,257 crore as its profits for Q1FY25 at 20.4 per cent Y-o-Y growth, and has maintained a revenue guidance of 3-5 per cent for the year.

The firm is anticipating strong performance across all major verticals for the remaining part of the financial year.

Unlike TCS, which did not call out on growth, HCLTech is confident that growth will be back from Q2 onwards.

“We’ve given an outlook for Q2, and it is well known that Q3 will be a seasonally strong quarter,” added Vijayakumar.

Vijayakumar expressed optimism on HCLTech’s continued growth in the Americas in the year.

“It’s part of our guidance. We will continue to grow in both the US and the rest of the world,” he said.

However, concern on the macro environment continues to show in the management commentary.

Like TCS, HCLTech reiterated it did not expect discretionary expenditure to go up.

Vijayakumar said macro factors such as inflation and interest cost were affecting the environment, and he did not see discretionary spending going up in the year.

“It varies from industry to industry and geography to geography. You can say broadly some macro aspects, like inflation and interest costs, are the ones which probably are holding back,” he said.

The company announced a total contract value at $1.96 billion, up 25 per cent Y-o-Y, but declined 14 per cent sequentially.

The company has underlined its focus on Generative Artificial Intelligence (GenAI) skills with plans to train and upskill around 100,000 of its staffers in the related skills in FY25.

Vijayakumar said: “Everyone in the company needs to get trained because in whatever job they are doing, they will have to leverage some of the AI tools. Irrespective of what you are doing, you will have to use some GenAI tools.”

The firm has over 200 Proof of Concepts (PoC) for GenAI in the works and ready to scale.

But for an enterprise-level scaling up of these POCs, enterprises need to get their data landscape streamlined, said Vijayakumar.