Takeaways: HCL’s strong deal wins may help mask tepid topline show

The Noida-based IT services major reported a 1.7 per cent sequential growth in consolidated net profit to Rs. 3,259 crore and a 2.9 per cent rise in consolidated revenues to Rs. 20,655 crore.

“In the months ahead, we will further accelerate our actions and investments in emerging technologies, people and ESG to build a stronger and better future together,” said Roshni Nadar Malhotra, chairperson at HCL Technologies said in a press statement.

That said, here are the major takeaways from the company’s Q2 earnings:


Strong deals win momentum

HCL Technologies said that it won 14 large deals worth $2.3 billion in the reported quarter as against $1.7 billion worth of deals won in the previous quarter. The deal wins were greater than Infosys’ $2.15 billion in the September quarter.

Our robust pipeline and continued strong employee ramp up augurs well for our business momentum going forward”, said C Vijayakumar, chief executive officer and managing director, HCL Technologies. The strong deal wins may help make the lower-than-expected topline growth in the quarter more palatable for investors.

Margin pressure is here to stay

HCL Technologies acknowledged that average costs in the company are inching higher because of the damaging effects of the ongoing talent crunch in the industry. The company reported earnings before interest and tax margin of 19 per cent for the reported quarter, which was below expectations. Yet, the company managed to remain between its guided band of 19-21 per cent for the full financial year.


Attrition burden may ease

saw attrition rate in the quarter spike to 15.7 per cent from 11.8 per cent in the previous quarter despite undertaking wage hikes in July at the junior management level. The company said that it will at least hire 22,000 freshers in the current financial year and hopes to see some easing in the attrition rate from the March quarter onwards.

On this front, HCL Tech’s commentary is more favourable than its peers like Infosys and TCS, who have indicated a high attrition rate to last for few more quarters.


New dividend policy a sweetener

HCL Tech has decided to revamp its capital allocation policy in the current quarter by agreeing to payout at least 75 per cent of its net income in dividends over next five years. The company said that it will pay Rs 10 per share dividend in the coming quarters as well to make up for the mid-year change in policy.