HCLTech net slips 11.3% QoQ, maintains FY24 revenue growth guidance at 6-8%

HCLTech has maintained its revenue growth guidance of 6-8 per cent in constant currency terms for FY24, on the back of a stable deal pipeline amid a cautious macroeconomic environment. The Ebit (earnings before interest and taxes) margin guidance for FY24 also remained unchanged at 18-19 per cent.   

The Noida-based IT services major posted a net profit of Rs 3,534 crore for the first quarter ended June 30, 2023, up 7.6 per cent from a year ago but down 11.3 per cent QoQ (quarter-on-quarter), slightly below consensus Bloomberg estimate of Rs 3,843 crore.     

The revenue for the June quarter was up 12.1 per cent from the year-ago period to Rs 26,296 crore below consensus Bloomberg estimate that pegged the revenue at Rs 26,895 crore. On a sequential basis, revenue declined 1.2 per cent due to softness in the engineering and R&D services business, which declined 5.2 per cent QoQ.  

The company’s dollar revenue for the June quarter grew 6.3 per cent annually in constant currency terms to $3.2 billion, driven by new deal wins and acceleration in clients’ digital agenda. It signed 18 large deals, of which seven were in services and 11 in software. Total contract value (TCV) of new deal wins stood at $1.6 billion. 

“In Q1, our revenue and people strength sequentially moderated in line with the demand environment…We experienced double-digit YoY growth in our largest verticals – financial services, manufacturing, and life sciences and health care, fuelled by large deals. These large deals helped offset cuts in client discretionary spends in these verticals,” said C Vijayakumar, CEO and MD, HCLTech.

Indian IT services companies in general are seeing a slowdown in discretionary spending as clients turn cautious due to the uncertain macro-economic environment and rising inflation in its key markets, such as the US and Europe. Analysts have pointed out that the Covid pandemic-induced peak of revenue growth may be behind for Indian IT firms.

The attrition rate for the June quarter reduced to 16.3 per cent from 23.8 per cent in the previous year and 19.5 per cent in the preceding three months, indicating a gradual downtrend during the course of the financial year.

The company saw a net reduction of 2,506 employees during the first quarter, taking total headcount to 223,438 as on June 30. The management said during the earnings call that it “consciously decided” not to backfill some of the positions. HCLTech has also decided to defer annual reviews by a quarter, Ramachandran Sundararajan, chief people officer, said.    

HCLTech declared its earnings after market hours on Wednesday. Ahead of its results, the shares closed down 0.74 per cent at Rs 1,106.50 apiece on the BSE.