HCL Technologies does better than most rivals in Q4; revenue rises 16%

India’s third-largest IT services firm HCL Technologies’ March quarter earnings growth exceeded that of its peers, and the company said it did not see a long-term impact from the Covid-19 pandemic.

Like some of its peers, the Noida-based company did not provide a full-year guidance given the current global uncertainties, but said it saw only a short-term impact from the Covid-19 pandemic.

The short-term impact, said Chief Executive C Vijayakumar would include “volume-based billing impact where customers have shut some plants and have some staff on furlough…There is some deferral of discretionary spend, new project decision making is slowing down and there are price discounts and payment term extensions on the demand side”. He said the medium- and long-term prospects of a business like HCL would grow stronger.

HCL’s performance is in contrast to larger rivals TCS and Infosys, whose annual revenue growth fell short of double digits in constant currency terms. HCL’s revenue for the quarter rose 2.5 percent sequentially to Rs 18,590 crore and 16.3 percent annually. Net income was up 3.8 percent sequentially and 22.8 percent annually at Rs 3,154 crore. In constant currency terms, revenue was up 0.8 percent quarter-on-quarter and 13.5 percent on an annual basis.

dollar terms, revenue was flat sequentially at $2.5 billion, and up 11.7 percent annually. Net income was up 1.2 percent quarter-on-quarter and 18.4 percent year-on-year at $431 million. The growth in Q4 was largely fuelled by what HCL calls its mode-2 offerings, which include digital, cloud, cybersecurity, and Internet of Things.

HCL signed 14 transformational deals in Q4 led by telecom, retail, and CPG, manufacturing and financial services, and Vijayakumar said the firm saw record bookings in Q4 in spite of the slowdown towards the last few days of the quarter.

For the full year, the company posted revenue of $9.93 billion, a growth of 16.7 percent in constant currency, slightly above its own projection of 16.5-17 percent. Net income for the year was $1.55 billion, a growth of up 7.8 percent annually. EBIT margin was 19.6 percent for FY20, exceeding HCL’s guided range of 19- 19.5 percent. EBIT margin during the March ended quarter was 20.9 percent.

In terms of its employees, Vijayakumar said: “There will be no Covid-related redundancies, our employees continue to be our most important stakeholders.”

HCL said it activated its COVID-19 business continuity plan at the end of January, right after the first case of the novel coronavirus was reported outside of China, and now has 96 percent of its employees working from home and another 2.5 percent employees working from HCL or client locations.

Attrition in Q4 fell slightly to 16.3 percent from 16.8 percent in the previous quarter.

―Business Standard