HCL Tech retains FY23 revenue guidance at 12-14%, Q1 net profit up 2.4%

HCL Technologies Ltd has maintained its revenue growth guidance of 12-14% in constant currency for FY23 on the back of strong demand for digital transformation in its key markets. The EBIT margin guidance for FY23 also has been unchanged at 18-20%.

The Noida-based IT services major posted a net profit of ₹3,283 crore for the June quarter, up 2.4% from a year ago, below consensus Bloomberg estimates of ₹3,322 crore.

The revenue for the June quarter was up 17% from the year-ago period to ₹23,464 crore in line with Consensus Bloomberg estimates that pegged the revenues at ₹23,409 crore, driven by the digital engineering and application services.

The company’s dollar revenue for the June quarter grew 15.6% annually in constant currency to $3.02 billion, boosted by new deal wins and acceleration in clients’ digital agenda.

“Our services business continues to have robust growth momentum driven by our digital engineering and digital application services with cloud adoption being a horizontal theme across all services and verticals,” said C. Vijayakumar, chief executive officer and managing director, HCL Technologies Ltd. “Our new bookings grew 23.4% YoY supported by a good mix of large and mid-sized deals and our pipeline remains near record high. Our operating margin came in at 17.0%. We have put in place the right measures that will improve our profitability going forward,” he said.

Indian IT services companies which have seen robust demand for cloud and digital services during the last two years of the pandemic, may see a slowdown if clients cut IT budgets due to fears of a possible recession in key markets of the US and Europe. Analysts have pointed out that the peak of revenue growth may be behind for Indian IT firms and growth may start softening by the second half of this fiscal.

The attrition rate for the June quarter increased to 23.8% from 11.8% in the previous year and 21.9% in the preceding three months indicating the demand for technology talent continues to outpace the supply. While “green shoots” of low attrition levels are visible, it is not going to come down immediately, Apparao VV, chief human resources officer, told reporters during the earnings call.

The company made a net addition of 2,089 employees during the first quarter taking the total headcount to 210,966 as of 30 June.

“Results indicate that cloud is one of the prominent growth drivers for HCL this quarter and it will continue for near term as Gartner forecasts worldwide public cloud services to grow by 22.0% in (constant currency) 2022. The talent war continues for the service provider as HCL reports 23.8% attrition this time, their highest in the last couple of quarters,” said Naveen Mishra, senior director analyst, Gartner.

HCL Technologies declared its earnings after market hours on Tuesday. Ahead of its results, the shares closed down 1.63% at ₹928.05 on the BSE.