HCL puts up a strong show, yet again

Rajalakshmi Nirmal BL Research Bureau | Updated on January 12, 2018



Margins expand on benefits from automation

For the second quarter in a row, HCL Technologies has outperformed its peers. All large deal wins over the last one year have started to pay off, fuelling top-line growth. Year-on-year growth in revenues stood at 13.8 per cent, up from 12.8 per cent in the September quarter and 9.3 per cent in the same quarter last year.

Sequential revenue growth was 3 per cent in constant currency terms, the highest among peers. Among verticals, the large ones- manufacturing and financial services, did well. They recorded a growth of 8.3 per cent and 4.5 per cent sequentially (in constant currency).

The company has maintained its revenue growth guidance for the full year at 12-14 per cent. It has indicated that it may end the fiscal with growth in the middle of this range. This is heartening, given that most other IT biggies have expressed concerns over slowing growth and revised their guidance down. Infosys, for instance, reduced its revenue growth guidance for the third time this December quarter to 8.4-8.8 per cent (in constant currency).

The actual growth may be even higher for HCL Tech as the guidance does not include contributions from Geometric and IP led partnerships which may contribute about 0.6-1 per cent to revenues according to the company. The acquisitions may be integrated with the company from the March quarter.

HCL Tech added one new client in the $100 million plus bucket and five new clients in the $50 million plus bucket. It signed up nine transformational deals across service lines, verticals and geographies.

The company’s operating profit margin continued to improve, thanks to its automation platform- DryICE. The margins stood at 22.3 per cent, up from 21.8 per cent in the September quarter and 21.5 per cent in the same quarter last year.

The infrastructure services segment (contributing 35 per cent to revenue) which registered a strong performance in the first half of the year recorded a sequential growth (in constant currency) of only 2.1 per cent in the December quarter, down from 4.4 per cent in the September quarter and 16.5 per cent in the June quarter.

Among verticals, life sciences and retail which constitute a fifth of revenues, recorded poor performance. Sequential revenue growth (in constant currency) dropped 2.9 per cent in the life sciences segment and 6.9 per cent in the retail segment.

Of the various geographies, though, Europe registered a growth of 6.8 per cent sequentially. The US recorded a growth of only 1.7 per cent versus 5.5 per cent in the September quarter.

Published on January 24, 2017

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