 "HCLTech Q3 net profit up 5.5%, lower end of revenue forecast raised")
HCLTech, the country’s third-largest information-technology (IT) services firm, had net profits of Rs 4,591 crore in the third quarter (October-December) of FY25.
Profits were up 5.5 per cent year-on-year (Y-o-Y) and 8.4 per cent sequentially. Revenue for the quarter, at Rs 29,890 crore, was up 5 per cent Y-o-Y and 3.5 per cent sequentially.
The Noida-headquartered major upped the lower end of its FY25 revenue growth guidance to the range of 4.5-5 per cent. In the second quarter of FY25, the firm had provided a revenue guidance of 3.5-5 per cent. The guidance now includes the impact of the acquisition of HPE’s Communication Technology Group assets.
HCLTech’s Q2 performance was a miss compared to the Bloomberg estimates. Bloomberg had estimated revenue to be at Rs 30,035.8 crore and net profits Rs 4,613.9 crore.
The total contract value (TCV) for the third quarter came in at $2.1 billion. In Q2FY25 the company had a TCV of $2.2 billion.
On demand, C Vijayakumar, chief executive officer and managing director, said: “Last quarter we did call out that there is some pickup in demand and there are green shoots in the BFSI (banking, financial services, and insurance) and tech verticals. Our financial services have grown sequentially. The tech vertical too has grown. Overall across verticals we have seen continuing improvement from what we saw in last quarter.” He, however, did caution that there could be some changes in the global business environment.
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“How that changes or affects the spending environment and client priorities is something into which we do not have any insight,” he added.
The company continued to grow its business in North America and Europe. North America grew 6.2 per cent Y-o-Y, and Europe 2.6 per cent.
The growth driver for the quarter was telecommunications, media, publishing and entertainment, which grew 33 per cent Y-o-Y. This was followed by retail and consumer packaged goods (17.2 per cent), and technology and services (7.6 per cent). Though BFSI fell 1.4 per cent, it was better than the drop in Q2 at 4.5 per cent.
“The company raised the lower end of the guidance for FY25 to 4.5-5 per cent from 3.5-5 per cent while keeping the margin guidance unchanged. While the performance is healthy, the commentary on discretionary spend would be the key monitorable. The Q3 performance and revised guidance reflect the company is on track to deliver industry-leading growth among Tier-I IT companies for FY25. We have a ‘buy’ rating on the stock,” said Shaji Nair, research analyst, capital market strategy, Mirae Asset Sharekhan.
Growth was led by IT and business services, up 5.8 per cent Y-o-Y, whereas HCLSoftware was down 2.1 per cent. Engineering and research and development (ER&D) was up 1.1 per cent annually. The operating margins came in at 19.5 per cent for the quarter. They had an impact of 80 basis points owing to wage hikes.
Project Ascend, which has been launched to bring in operational efficiencies, has been progressing well, and has brought in an improvement of 100 basis points.
HCLTech added its FY26 campus hiring would be higher than in FY25. So far the company has taken in over 6,000 freshers from campuses, and in the fourth quarter it will add about 1,000.
The company had a net addition of 2,134 employees at the end of the December quarter. During the quarter HCLTech added 2,014 freshers.
In Q2 FY25 the company had a headcount decline of 780. This has come down from the 8,080 in Q1 FY25.
IT major marks 25 years of listing with special dividend of Rs 6/share HCLTech’s board has declared the fourth interim dividend of Rs 18 per equity share of Rs 2 each for FY25, including a special dividend of Rs 6 per share to celebrate 25 years of the IT major’s public listing. In a regulatory filing, it stated that the record date for the interim dividend is January 17, 2025, and the payment date is January 24. Over a period of 25 years, the company’s employee strength has grown from fewer than 3,000 to 220,755 as of December 31, 2024. Revenue increased from $166 million in the year ending June 8, 1999, to $13.8 billion in the 12 months ending December 31, 2024, reflecting a CAGR of 1.9 per cent.