News Analysis

Europe operations boost HCL Tech’s revenues

Vivek Ananth BL Research Bureau | Updated on January 17, 2020 Published on January 17, 2020

A view of HCL campus in Chennai. File photo   -  The Hindu

Buoyed by revenue growth from its European operations, HCL Technologies posted an 8.6 per cent sequential rise in consolidated profit at ₹2,944 crore for the quarter ended December 31, 2019. It was also helped by a 16.8 per cent sequential revenue growth in dollar terms of its products and platforms segment.

Even though revenues from the US region shrunk 0.2 per cent (in dollar terms), the company managed to post a 3.5 per cent sequentially rise in revenues at ₹18,135 crore helped by Europe and rest of the world regions.

The effect of the conclusion of some IBM suite of products in the previous quarter continue to boost the company’s revenue growth. HCL Tech had expected a little over $600 million in additional annual revenue at 50 per cent earnings before interest margins from the acquisition of the IBM products.

On the margin front, the company posted EBIT margins of 20.2 per cent compared to 20 per cent in the quarter ended June 30, 2019, helped by a 5.2 per cent sequential fall in outsourcing costs to ₹2,675 crore.

The company has managed to reduce the number of days sales outstanding to 66 days from 70 days in the previous quarter — which means the company is converting its sales billed to customers into cash quickly.

Guidance upgrade

For the second consecutive quarter, HCL Tech raised its yearly revenue growth guidance in constant currency terms. This time it raised the lower end of its guidance. The new constant currency revenue growth guidance for 2019-20 over 2018-19 is 16.5 to 17 per cent. The company expects inorganic growth in revenue, or revenues from companies that it has acquired, at 6 per cent.

The company has also raised the lower end of its EBIT margin guidance band for the current financial year to 19-19.5 per cent from 18.5-19.5 per cent. In the previous quarter, the company had raised its constant currency revenue growth guidance to 15-17 per cent from 14-16 per cent.

Verticals

Except for financial services and lifesciences & healthcare, all other verticals posted positive revenue growth in sequential terms. Manufacturing, retail & CPG and telecom, media, publishing & entertainment verticals grew at a fair clip during the quarter in dollar terms at 7.9 per cent, 4.5 per cent and 9.7 per cent, respectively.

Published on January 17, 2020
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