HCL Technologies Q1 revenue up 18%, net profit down 8%

Indian IT services firm HCL Technologies reported an 18% increase in revenue for the first quarter ended June 30, 2019 while net profit declined 8%.

The company reported a revenue of Rs 16,427 crore compared to Rs 13,878 crore for the corresponding period last year. Chief executive officer C Vijaykumar said this was the highest revenue growth in a quarter on a yearly basis since 2011.

Sequentially, the company reported revenue growth of 2.73%. It had reported a revenue of Rs 15,990 crore for the quarter ended March this year.

“We have started FY20 on a very strong note with our quarterly revenue growth of 4.2% QoQ and 17% YoY in constant currency. With our current momentum, we aspire to register an industry leading organic growth in FY20,” Vijaykumar said, adding that volatile macro-economic conditions might affect the revenue of the full fiscal year.

The company reported a net income of Rs 2,230 crore compared to Rs 2,431 crore for the same period the previous year. Sequentially, the company reported a decline of 12.54%; it had reported a net income of Rs 2,530 crore for the quarter ended March this year. 

Explaining the decline, Vijaykumar said that margins “were muted in line with our investment strategy to leverage future growth opportunities.” 

The CEO was hinting at the IBM products acquisition that the company had announced in December last year. 

Chief financial officer Prateek Aggarwal added that onsite hiring and low margins on the engineering services and research and development business also had an impact on profit margins. 

HCL expects the software products that it acquired from IBM and integrated them into a new business division called HCL Software under its products and platforms segment will bring an incremental revenue of $625 million over the next twelve months. 

In terms of segments, the company reported revenue growth of 18.1%, 13.3% and 15.2% for IT and business services, engineering and R&D services and products and platforms, respectively, on a constant currency basis. 

Aggarwal said the company has invested over $3 billion in its products and platforms business over the last few years.

He also said the company’s mode 2 services grew 38.3% year-on-year. HCL breaks up its solutions and services as mode 1, mode 2 and mode 3 under its business segments.

While mode 1 covers core services such as applications and infrastructure, mode 2 consists of next-gen services like digital analytics, IoT, cloud and cybersecurity. Mode 3 represents the products and platforms segment.

HCL Technologies added 16,332 employees for the quarter as opposed to 12,558 for the same period last year, and trained over 6,500 people in digital skills. 

The attrition rate was higher at 17.3% as against 16.3% for the same period last year. Sequentially, attrition was down marginally with the company reporting 17.7% for the quarter ended March this year.

Talking about salary hikes, which will be reflected in the next quarter, offshore employees can expect an average of 6-7% and onsite employees in the range of 2-3%, an official statement said.

On the localisation front, the company said that 70% of its workforce in the US are local hires with total strength being over 19,000.