Revenues and margins declined sequentially. The company’s EBIT came at Rs. 4,795 crore, down 4.4% QoQ & up 7.5% YoY.
Following the Tata Consultancy Services (TCS) earnings Thursday, several technology stocks surged to lifetime highs Friday, and were at the forefront of the stellar showing of the broader stock indices. TCS led the pack of five technology companies, including HCLTech, that were the top five Nifty gainers.
HCLTech’s consolidated revenue stood at Rs 28,057 crore, rising 6.7% from a year earlier and down 1.6% sequentially. The Noida-based firm attributed it to a “seasonally weak quarter” and just like its larger peer Tata Consultancy Services (TCS), the company signalled that discretionary spend is unlikely to be very different from the last fiscal.
ETtech“Although some actions show that things could have bottomed out, I do not want to take that call because there have been so many false starts in the last year to when the recovery will happen,” C Vijayakumar, CEO and MD, of HCLTech said.
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Operating margin contracted to 17.1% from 17.6% in the March quarter. HCLTech had given a revenue guidance of 3-5% for FY25, and maintained margin guidance at 18-19% for the current fiscal, unchanged from FY24. Vijayakumar expects to meet the margin guidance saying the company generally sees higher margins in Q3, which will offset the slow growth seen in early part of this fiscal.
Giving an outlook he said “We expect to grow in Q2 with all verticals and geographies seeing a sequential growth except financial services. We shall have the planned impact of State Street divestiture on revenue in Q2 and including that impact, we remain comfortable with a full year revenue and margin guidance as clients spend on GenAI and other emerging technologies are seeing some traction.”
Non-core income
HCLTech’s divestment of its UK subsidiary to its joint venture partner State Street International Holdings led to the other income gain of $70 million. For the same reason, the company saw its headcount falling by 8,080 in the June quarter, which was otherwise flat excluding the divestment impact.
During the first quarter, the company won bookings worth $1.96 billion, against $2.3 billion in the previous quarter. The company has conducted about 200 proof of concepts in GenAI and several of them are getting expanded into actual work for clients to scale, said Vijayakumar.
Prateek Aggarwal, chief financial officer, HCLTech, said, “Our cash flow generation remains robust with the last twelve months free cash flow at Rs 21,637 crore, 133% of PAT and 88% of EBITDA.”
The Board also declared an interim dividend of Rs 12 per equity share for the fiscal 2024-25.
On Frday, HCLTech shares closed 3.2% higher at Rs 1560.40 apiece on a 0.8% rise in BSE Sensex. HCLTech’s results were announced after market close.
On Thursday, its larger peer Tata Consultancy Services (TCS) reported a 3.16% drop quarter-on-quarter and an increase of 8.7% year-on-year in consolidated net profit at Rs 12,040 crore in the June quarter of fiscal 2025. The drop was largely due to the impact of the wage hikes. The company’s revenues increased 2.25% sequentially to Rs 62,613 crore, above market expectations.
BFSI outlook
Speaking about the financial services sector, which constitutes the largest chunk for the $250 billion software services export industry, Vijayakumar said: “We continue to see a lot of cost optimization deals, and we continue to see modernization and technology transformation kinds of opportunities which will result in significant efficiencies for customers. There are a couple of transformation projects as well. Of course, Q2 will be a declining quarter for financial services because of the State Street divestment. But after that, we expect to see growth in this vertical.”
The Noida-based IT major’s total headcount as on June end stood at 219,401. It had increased its net headcount in the previous quarter by 2,725. The company said that it plans to hire about 10,000 freshers from the colleges this year.
