HCL Tech profit up 18.5%, salary hike in 2 tranches

Business Standard - - FRONT PAGE - SAI ISHWAR Mumbai, 16 Oc­to­ber

HCL Tech­nolo­gies has posted a strong set of num­bers, out­per­form­ing the mid-quar­ter rev­enue growth guid­ance on the back of dig­i­tal trans­for­ma­tion and cloud busi­nesses. The com­pany has also an­nounced salary hikes for all em­ploy­ees in two tranches.

In the sec­ond-quar­ter re­sult an­nounced on Fri­day, the com­pany re­ported a net profit of ~3,142 crore, up 18.5 per cent from the same pe­riod in FY20. The net profit rose 7.4 per cent on a se­quen­tial ba­sis.

The board de­clared an in­terim div­i­dend of ~4 per eq­uity share, fix­ing Oc­to­ber 24 as the record date for pay­ment.

The firm’s rev­enues grew 4.2 per cent to ~18,594 crore year on year and 6.1 per cent se­quen­tially. The op­er­at­ing mar­gin of the IT ser­vices provider im­proved 110 ba­sis points se­quen­tially to 21.6 per cent in the Ju­lySeptem­ber pe­riod— a 22-quar­ter high. ▶

All IT firms have seen an uptick in mar­gins in Q2 due to greater cost op­ti­mi­sa­tion mea­sures and sav­ings in em­ployee costs. Tata Con­sul­tancy Ser­vices leads with 26.2 per cent among the top four play­ers.

Dol­lar rev­enues stood at $2,507 mil­lion, a 4.5 per cent rise in con­stant cur­rency terms over the pre­vi­ous quar­ter, ahead of 3.5 per cent quar­teron-quar­ter growth guid­ance the Noida-head­quar­tered com­pany de­clared last month. The rev­enue growth in con­stant cur­rency terms for TCS stood at 4.8 per cent and 4 per cent in the case of In­fosys.

C Vi­jayaku­mar, pres­i­dent and CEO, HCL Tech­nolo­gies, said: "Our in­vest­ments over the last few years in next-gen tech­nolo­gies have held us in good stead dur­ing th­ese difficult times and po­si­tion us strongly to lever­age the emerg­ing mar­ket op­por­tu­ni­ties.”

The com­pany stuck to its FY21 guid­ance of 1.5-2.5 per cent growth in rev­enue for the re­main­ing quar­ters as it up­graded the op­er­at­ing mar­gin guid­ance to 20-21 per cent for the on­go­ing fi­nan­cial year. This is a 50 ba­sis point in­crease on both up­per and lower lim­its.

In­fosys, HCL Tech’s clos­est ri­val, also re­vised the rev­enue growth guid­ance up­wards to 2-3 per cent in con­stant cur­rency terms for FY21.

Bro­ker­age firm Sharekhan termed the quar­terly re­sults as "strong" as it beat the es­ti­mates on all fronts. EBIT mar­gin im­prov­ing, led by mod­er­a­tion in se­quen­tial em­ployee ex­penses and the sign­ing of 15 trans­for­ma­tive deals reaf­firmed the buy call on the stock, said San­jeev Hota, head of re­search, Sharekhan.

The num­bers were a tad higher than Street ex­pec­ta­tions. HSBC, in a bro­ker­age re­port, ex­pected the rev­enue to come in at ~18,510.9 crore, up 3.8 per cent QOQ and 5.6 per cent YOY. Net profit was pegged to grow 0.3 per cent QOQ and 10.5 per cent YOY at ~2,934.8 crore.

Hikes from Oc­to­ber: HCL

At­tri­tion in the three months fell 240 ba­sis points to 12.2 per cent when com­pared to the pre­vi­ous quar­ter. The head­count stood at 153,085, up 2,798 em­ploy­ees on a quar­ter-on­quar­ter ba­sis.

The man­age­ment said salary hikes would be rolled out with ef­fect from Oc­to­ber for select em­ploy­ees up to E3 lev­els (fresh­ers to se­nior man­agers) and from Jan­uary 2021 for the rest. "This is only a onequar­ter lag from reg­u­lar in­cre­ment cy­cle we give reg­u­larly. It will be in the same range as given last year—the av­er­age hikes were 6 per cent for off­shore and 2.5 per cent for on­site,’’ said Ap­pa­rao VV, chief hu­man re­source of­fi­cer, HCL Tech­nolo­gies.

The com­pany said it would go ahead with 12,000 fresh hires, of which around 9,000 will be on­boarded in the Oc­to­ber-march pe­riod.

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