HCL Tech Q4 2021-22 earnings results, Gartner

HCL Technologies Ltd, a top-tier IT services provider in the country, on April 21 reported 226 percent growth in its consolidated profit after tax (PAT) at Rs 3,593 crore, compared to Rs 1,102 crore reported in the corresponding quarter a year ago. Due to the impact of deferred tax credit and the one-time milestone bonus paid during Q4FY21, the adjusted net profit during the same period last year stood at Rs 2,962 crore.

The adjusted profit after tax for the quarter grew 21.3 percent year-on-year.

Sequentially, the profit rose by 4.4 percent from Rs 3,442 crore reported in the quarter ended December 2021.

Revenues
The consolidated revenues of the Noida-based IT company witnessed a growth of 15 percent at Rs 22,597 crore as against Rs 19,642 crore reported in the year-ago period. On a sequential basis, revenues increased 1.2 percent in comparison with Rs 22,331 crore reported during the previous quarter.

The growth in revenues for the quarter was aided by the IT services and ERD (Engineering and Research & Development) business while HCL’s P&P (Products & Platforms) business witnessed a decline due to seasonality.

For the full-year period from April – March, PAT increased by 21.1 percent to Rs 13,499 crore compared to a profit of Rs 11,145 crore reported in the previous financial year.

Consolidated revenues at Rs 85,651 crore have risen by 13.6 percent compared to Rs 75,379 crore recorded in FY21.

“We have delivered yet another stellar quarter in our Services business, where the revenue is up 5.0 percent QoQ & up 17.5 percent YoY in constant currency”, said C Vijayakumar, Chief Executive Officer & Managing Director. “Over the last three quarters, our Services business has been consistently growing organically at 5 percent and higher, delivering one of the highest CQGR in the industry.”

Our overall growth on YoY basis stands at 12.7 percent, which is better than the guidance led by strong momentum in Digital, Cloud and Engineering services, Vijaykumar added.

Revenue in dollar terms for the quarter were recorded at $ 2,993 million with a YoY growth of 11 percent and a sequential growth of 0.5 percent. In CC, revenue was up 13.3 percent YoY and by 1.1 percent on quarter.

For the full year, dollar revenues for the company jumped 12.8 percent YoY while the CC revenues increased 12.7 percent on year.

Revenue by verticals & geographies
Services revenue for the full year crossed the $10-billion milestone, registering a growth of 14.9 percent YoY in CC for FY’22.

During the quarter, HCL’s services business grew at 5 percent QoQ in CC and by 17.5 percent on year (CC), with a CQGR of 5.2 percent for 3 consecutive quarters.

Its Engineering and R&D Services grew at 23.7 percent on year and by 3.9 percent QoQ CC during the quarter and was driven by traction in digital engineering and IoT (Internet of Things) Works.

The IT and Business Services during the quarter grew at healthy 16.2 percent on year and 5.2 on quarter (CC), driven by acceleration in cloud transformation and application and data modernization.

All the business verticals of the company returned robust growth during the year and growth momentum was led by Telecom, Media, Publishing & Entertainment which grew by 20.2 percent on year, Lifesciences & Healthcare vertical witnessed a YoY growth of 18.5 percent, Manufacturing grew by 16.6 percent on year, Technology & Services by 14.3 percent on year, and Financial Services witnessed a growth of 10.2 percent on year.

In terms of geographies, growth was led by Europe which grew 13.6 percent, Americas growth was 13 percent and Rest of World returned a growth of 15 percent.

Margins
The company was able to improve upon its adjusted EBIT (earnings before interest and tax) margins, both for the quarter as well as full year on a YoY basis.

EBIT margins for the quarter stood at 18 percent, a growth of 1.5 percent on year but a decline of 4.4 percent on quarter.

For the full year, the company achieved an EBIT margin of 18.9 percent which is a growth of 0.2 percent from last year.

Net margin for the quarter came in at 15.9 percent, growing by 24 percent (adjusted) on year and by 4.4 percent on quarter.

The full year net margins were registered at 15.8 percent with a growth of 4.3 (adjusted) percent compared to last year.

Client Additions
The company saw strong client addition across all categories during the year. It managed to add 1 client in $100 million+ category, 8 clients were added in $50 million+ bucket, $20 million+ category was up by 22 clients, 30 clients were added in $10 million+ basket. $5 million+ category saw 31 clients being added to it while 73 new clients were added in $ 1 million+ basket.

Deal TCV
The TCV (total contract value) of new deal wins for FY22 stood at $8,308 million, an on-year growth of 14 percent.

For the quarter, the new deal TCVs stood at $2,260 million at a sequential growth of 6 percent. There were 10 net new deal wins during the quarter, of which, 6 are new large services deals amounting to a TCV of $2,216 million. There were 4 large product deal wins amounting to a TCV of $54 million apart from a significant number of smaller deals.

Human Resource
The total employee count for the company stood at 208,877 employees with a net hiring of 11,000 employees globally for the quarter and 39,900 for the full year. Twenty three thousand entry-level freshers were hired by the company during the year and women constitute 28 percent of the global workforce for the company.

Localization in the U.S. stood at 70.9 percent, in Europe at 80.5 percent and APAC and rest of the world (excluding India) was at 88.9 percent.

The attrition on LTM (last twelve month) basis jumped to 21.9 percent as compared to 19.8 percent during the December quarter and 9.9 percent in the corresponding quarter last year.

Dividend
HCL Technologies declared an interim dividend of Rs 18/- per equity share of Rs.2/- each with a record date of April 29, 2022. The said dividend will be paid on May 11, 2022.

“Our board is happy to announce a dividend of Rs 18 per share for the quarter, taking the payout for the year to Rs 44 per share for the year, 88.4 percent of EPS, higher than guided range of 75 percent”, said Prateek Aggarwal, Chief Financial Officer.

FY23 Guidance
The company has given a guidance of 12 to 14 percent growth in revenues for FY23 and expects to achieve the EBIT margins of 18 to 20 percent.

The HCL stock closed Rs 9.8 or 0.9 percent up at Rs 1,099.20 at the National Stock Exchange on April 21. It generated returns of 14.35 percent in the past year while the stock is down 5.9 percent in the past one month.

HCL’s growth is an outcome of its understanding of the market. It’s industry cloud offerings cater to a wide spectrum of industry verticals and are aligned with the customer’s current requirements. The SME market, in particular, can gain a lot from these offerings. The organization is focussed on tapping the SME market and has crafted solutions that speak to the needs of these SMEs. Additionally, HCL has created the HCL Startup Ecosystem Innovation Platform & Program to enable an ecosystem of innovative startups, Venture capitalists, academicians, etc. While on a growth track, HCL will have to be cautious about the current skills shortage that the industry is battling with. That can be one of the significant obstacles in the future. – DD Mishra, Senior Director Analyst, Gartner
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