HCL revenue rises 1% in constant currency, Q1 profit up 32%

Information technology (IT) services firm HCL Technologies on Friday reported a marginal growth in revenue at 1% in constant currency during the first quarter of the financial year 2020-21 ended June 30, as compared to the Q1 of FY 20. 

The Noida-headquartered company has projected a growth of 1.5-2.5% quarter-on-quarter for this financial year.

HCL reported a net profit of Rs 2,925 crore for the first quarter, a growth of 31.7% year-on-year. However, this represents a marginal drop of 7.3% sequentially. The Shiv Nadar-founded company has also reported revenue at Rs 17,841 crores, up by 8.6% y-o-y, while also representing a decline of 4% Q-o-Q.

The company board has appointed Nadar’s daughter, Roshni Nadar Malhotra, who is currently the non-executive director, as the chairperson of the board with effect immediately. 

Nadar will continue to be in his other positions at the company.

The IT services firm is expecting its operating margin to be between 19.5-20.5% during the current financial year, only slightly lower than bigger rivals such as Tata Consultancy Services (TCS)  and Infosys. The 20.5% margin the company reported during the quarter was 3.5% higher than during the same period of last year.

“Covid-19 has pushed businesses to accept the pandemic as a catalyst for change and look at building agility and resilience into every level of their organisation. We are helping customers embrace digital transformation and innovation to emerge stronger in this new normal by leveraging digital momentum and sustainable business practices,” Nadar, managing director and chief strategy officer at HCL, said in a statement.

The company’s performance was strongly aided by its products and platforms division, which reported a 77% growth year-on-year. Last year, HCL closed its acquisition of select IBM software products. 

The company CEO C Vijayakumar said that HCL has signed 11 net new large transformational deals north of $30- $40 million in value, led by key industry verticals including telecommunication, financial services, manufacturing, life sciences and healthcare. He added that the new total contract value bookings are higher compared to the same quarter of last year.

“The adverse conditions during this quarter had an anticipated negative impact on our revenue. But the worst is behind us. The resilience of our operating model helped us deliver good operating margins and cashflows. We also renewed several large deals during the quarter. We are seeing a robust demand environment and a strong pipeline which gives us confidence in our growth trajectory going forward,” Vijayakumar added.

While the company’s IT services division did see a fairly steep fall of over 7% Q-o-Q in revenue, which happened partly due to Covid-19, and some of the decline because of increase in offshoring, which consequently boosted the company’s margin. The company saw lower demand in engineering services and energy as well.

Read: Covid-19 induced tech boost to help IT firms power through crisis: Motilal

HCL said that customers looking at digitalisation, cloud migration, cybersecurity, hybrid cloud and application modernisation for business continuity have helped the company gain more contracts despite the pandemic. It added that retail companies have seen a 300% increase in spending on ecommerce enablement.

The country’s third-largest software exporter said that it will not provide increments to employees this year due to the pandemic. Its net cash stood at $1.3 billion after making a payment of $0.8 billion for the acquisition of IBM products. 

Credit rating agency ICRA had projected a 3% drop in revenues for IT services firms for the financial year as Covid-19 pandemic has hurt demand, the Mumbai-based financial institution said.