HCLTech Q3 net profit rises 6.2% to Rs 4,350 crore, beats estimates
C Vijayakumar, CEO & MD, HCLTech
If one could draw an analogy from cricket to describe the HCLTech Q3 FY24 performance, the company has hit a six as it defied expectations on revenue and net profit and performed better than its other larger peers in a generally softer quarter for the IT sector.
The company’s revenue for the quarter grew 6.5 per cent Year-on-Year to Rs 28,446 crore, and on a quarter-on-quarter basis, the growth was up 6.7 per cent. This is one of the highest revenue growths since the Q3 of FY21. HCLTech’s Q3 performance beat Bloomberg’s estimates on both revenue and net profit. According to the Bloomberg estimates, revenue was expected to be at Rs 28,154 and profit after tax at Rs 4,182 crore.
The company revised its FY24 revenue growth guidance to 5-5.5 per cent, from its earlier 5-6 per cent. It reduced its upper end of revenue growth. HCLTech, the third largest IT services company, reported a net profit of Rs 4,350 crore, up 6.2 per cent year-on-year, and was up 13.5 per cent sequentially.
The company’s software unit drew the growth with 5 per cent Y-o-Y and 32 per cent Q-o-Q, followed by its engineering and research and development services, which grew 3.6 per cent Y-o-Y and 8.7 per cent sequentially. The firm’s IT and business services grew 1.9 per cent sequentially.
Compared to its competition, HCLTech’s performance was the best. The TCV for the quarter came in at $1.92 billion, down 51.5 per cent from $3.96 billion registered in Q2 FY24.
C Vijayakumar, CEO and managing director, HCLTech said: “While we still do not see an uptick in discretionary spends, it remains pretty similar to what it was in the last quarter. There is still a portion of tech spending that is looking resilient such as cloud migration, SAP core and data modernisation, cyber security and advanced analytics.”
Elaborating on Q4 FY24, he said: “We expect good growth in the services business and we will have a seasonality impact in our software business. Given this, we expect our FY24 revenue guidance to be in the range of 5 per cent and 5.5 per cent.”
In terms of growth driver, HCLTech saw its Y-oY growth being driven by BFSI by 12.9 per cent, telecommunication, media, publishing & entertainment by 8.3 per cent, retail & CPG by 11.7 per cent and manufacturing by 5.8 per cent. On a sequential basis, the BFSI segment was down 1.3 per cent due to furloughs.
At a time when the US market has been slow for TCS, Infosys and Wipro, HCLTech reported a growth of 3.1 per cent constant currency sequentially and 6.7 per cent Y-o-Y. Similarly, Europe grew 5 per cent sequentially on a constant currency basis. However, the rest of the world was down 5.3 per cent Q-o-Q and 7.5 per cent Y-o-Y.
On generative AI, Vijayakumar said the company had 31 deals but the majority were in the sub $1 million range. “We’re seeing a lot of programmes, most of them are pilots which are being implemented. We are seeing some success on the pilots that we’ve implemented,” he said.
“In this quarter, we had 30+ GenAI-specific orders that we won which are all under execution. While the real scale-up will happen over a period of time, more than GenAI, the need to adopt GenAI in a very effective manner is driving significant spending in the data landscape. So it’s the surround spend that enables GenAI – that’s where the opportunity is,” he added.
Unlike its other larger peers, HCLTech did a better job in growth, as its software business is strong in Q3, which is normally a softer quarter for the IT sector. Additionally, HCLTech unlike its peers made a net addition of 3,617 employees taking its headcount to 224,756. The company also added 3,818 freshers. It also brought down its attrition to 12.8 per cent, from 14.2 per cent in Q2 FY24.
First Published: Jan 12 2024 | 9:54 PM IST