HCL Tech profit rises 6.8%; increases revenue guidance to 13.5-14.5%

India’s third largest software company increased its revenue growth guidance to 13.5-14.5% for FY23 compared to 12-14%, led by confidence in deal wins. It narrowed its operating margin guidance to 18-19% from 18-20% for FY23. The company also shared guidance for its services revenue which is expected to grow 16%–17% YoY in Constant Currency.

Revenue grew 19.5% on year to Rs 24,686 crore, beating analysts’ estimates, on the back of growth in engineering, research & development services and IT services.

On a sequential basis, net profit was up 6.3% while revenue was up 5.2%.

The company’s operating margin for the July-September quarter stood at 18% up by 100 basis points over the last quarter. Margin growth was led by better utilisation, pricing improvement, currency tailwinds and an improvement in employee pyramid, said the management.

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Attrition for the quarter stood flat at 23.8% reported last quarter. The company stated that quarterly annualised attrition is down significantly.

The board has declared an interim dividend of Rs 10 per equity share.

“It is still too early to comment on customer budgets,” C Vijayakumar, managing director of HCL Technologies Ltd, said in a statement. “Customers continue to prioritise mission critical work that we are doing. We feel confident that many of these programs will continue to remain important. At a macro level, we think tech spend will continue to stay robust,” he added.

“Our H1 growth and deal wins lead us to increase our revenue guidance to 16%-17% for Services and 13.5%-14.5% at company level, reflective of our strong growth visibility,” said Prateek Aggarwal, CFO, HCLTech.

The company announced the appointment of Rahul Singh as the chief operating officer – corporate functions, who was elevated from the role of president of global financial services for a decade. Ramachadran Sundararajan has been elevated to chief people officer from his role as HR Head- Americas and global GTM HR Leader. Chief human resources officer VV Apparao has been elevated to chief delivery officer for new vista locations.

The company reported a reduction in employee expenses as a share of revenue at 54.6% during the quarter compared to 55.3% last quarter.

HCLTech had called out a slowdown in manufacturing and retail CPG verticals during Q1 itself.

On Monday, India’s largest IT services company by revenue
Tata Consultancy Services beat street estimates for Q2, reporting net profit of Rs 10,431 crore and revenue at Rs 55,309 crore. Its attrition rose to 21.5% while operating margins grew to 24% from 23.1% in the previous quarter led by currency tailwinds. The company indicated that the “environment is challenging” and “requires all of us to be vigilant” as there are increasing signs of caution during their interactions with the clients.

HCLTech’s headcount for the second quarter stood at 219,325 with a net hiring of 8,359 over the previous quarter. Last quarter, the company had added 2,089 employees. The company added 10,339 freshers during the quarter in line with previously announced plans. During Q1, it had added 6023 freshers.

HCL Technologies reported total contract value (TCV) worth $ 2.38 billion compared to $2.05 billion last quarter. The company reported 11 large deals during the quarter.