HCL Tech posts double-digit revenue growth

HCL Technologies’ earnings for Q2 of FY19 met Street estimates with the IT services firm on Tuesday posting double-digit revenue growth. This was mainly driven by technology, services, and life sciences as well as healthcare verticals.

The company, which pipped Bengaluru-based rival Wipro in the first quarter to emerge as the third largest player in the Indian IT industry space in quarterly revenue terms, remained optimistic about maintaining the growth momentum in the second half of this fiscal. This is despite the third quarter traditionally being a weak one due to lesser work days. In the quarter ended September 30, 2018, HCL Technologies posted 19.5 per cent rise in revenue at ~148.61 billion on year-on-year basis. On a sequential basis, revenue grew by 7.1 per cent. In dollar term, revenue for the July-September quarter was at $2.09 billion, a growth of 8.9 per cent YoY and 2.1 per cent in sequential terms.

On constant currency basis, the growth in revenue was 10.5 per cent YoY and three per cent sequentially.

As compared to HCL, market leader Tata Consultancy Services revenue in constant currency terms rose by 11.5 per cent and that of Infosys grew by 8.1 per cent on YoY basis. In the quarter ended September, HCL reported a 16.1 per cent rise in its net profit at ~25.40 billion over the same period last year, backed by good momentum in the deal space. On a sequential quarter basis, the net profit grew 5.7 per cent.

The Noida-headquartered firm was able to beat Street estimates in both revenue and net profit fronts. According to Bloomberg estimates, revenue was projected to be at ~147.48 billion for Q2 of FY19, while net profit was estimated at ~24.33 billion.

However, despite the revenue upside, the IT services firm maintained its guidance between 9.5 to 11.5 per cent in constant currency terms for FY19. Its operating margin guidance also remained unchanged at 19.5 to 20.5 per cent for the ongoing fiscal. “We continue to deliver strong and consistent QoQ revenue and margin growth performance. This quarter, we posted three per cent revenue growth in constant currency (terms) fuelled by global infrastructure services, engineering and R&D as well as Mode 2 next-gen services,” said C Vijayakumar, president & CEO at HCL Technologies. “Our Mode 3 revenue achieved the billion-dollar annual run-rate milestone. We remain confident of retaining this growth trajectory,” he added.

While under Mode 1, HCL delivers core services in areas of applications, infrastructure, engineering, R&D and business Services; Mode 2 constitutes the company’s digital offerings. The company has classified its intellectual property-led services under Mode 3. The company said it had achieved $1 billion Mode 3 revenue on an annual run rate basis, reflecting that its investment in IPs started to provide revenue upside to the firm. During the second quarter, HCL signed 17 transformational deals across Mode 1 and 2 services. Operating margin of the firm improved 20 basis points sequentially to 19.9 per cent, enjoying benefits of the depreciating rupee.

Among verticals, HCL saw a broadbased growth during the quarter with its technology & services vertical growing at 36.3 per cent YoY, while its life sciences and healthcare division saw a growth of 19.8 per cent.