HCL Tech lowers revenue guidance for FY23 to 13.5-14%, Q3 revenue and profit growth beat expectations

• HCL Tech lowered its revenue growth guidance for FY23 to 13.5-14% in constant currency terms, from 13.5-14.5% that it issued in Q2.
  
• In dollar terms, its revenue grew 5.3% sequentially, while in constant currency terms, its revenue growth came in at 5%.
  
• HCL Tech also declared an interim dividend of ₹10 per share.
  

Indian IT services company HCL Tech lowered its revenue growth guidance for FY23 to 13.5-14% in constant currency terms, as it declared its third quarter earnings on Thursday.

In the second quarter of FY23, the company guided a full-year revenue growth of 13.5-14.5%.

In dollar terms, its Q3 revenues grew 5.3% sequentially while in constant currency terms, its revenue growth came in at 5%, which is at the upper end of analyst expectations of 2.8-5% growth.

The Noida-based company reported a 19.6% year-on-year growth in its revenue to ₹26,700 crore, while its net profit grew 19% YoY to ₹4,096 crore, beating analyst expectations.

“We are enthused with the overall well-rounded Q3 performance. Revenue at ₹26,700 crore is up 19.6% YoY, on the back of strong services business growth of 22% YoY. During the quarter, we crossed important milestones of ₹5,000 crore and ₹4,000 crore for earnings before interest and taxes (EBIT), and profit after tax (PAT) respectively for the very first time,” said Prateek Aggarwal, chief financial officer, HCL Tech.

Its operating margin also improved to 19.6% during the quarter, from 18% in the previous quarter, and 19% a year ago during the same period.

HCL Tech also declared an interim dividend of ₹10 per share, with the record date set as January 20, and payment date as February 1, 2023. The company noted that this is its 80th consecutive quarter of dividend payment.

Here’s HCL Tech’s latest quarter at a glance:


Source: Company reports

Deal wins driven by vendor consolidation, cloud adoption and IT transformation

HCL Tech reported large deal wins during the quarter with a total contract value of $2.35 billion, up 10% year-on-year. The company said its wins were driven by large vendor consolidation deals, cloud adoption and IT transformation services.

“Our unique position as the only IT service provider globally to be rated as a leader in all six Gartner IT Services Magic Quadrants is being acknowledged by the market evident from the strong new deal bookings this quarter of $2.35 billion, up 10% YoY,” said C Vijayakumar, CEO and MD, HCL Tech.

Most of the deal wins of the company were in the over $1 million segment, with the addition of 47 new clients. The over $100 million segment remained unchanged, while there were three new clients in the over $50 million segment. The company also added 9 new clients in the over $5 million segment during the quarter.

Despite the economic concerns in European markets, HCL Tech reported an increase in revenue contribution from the region.


Source: Company reports

In terms of verticals, the financial services and retail segments reported a decline, while technology and services was nearly flat.


Source: Company reports

HCL Tech’s hiring drops 65% sequentially

The IT services company’s net employee additions stood at 2,945 in the September to December period. It came down sharply from 8,359 in the previous quarter. With this, the company's total headcount stands at 2.22 lakh.

Adding to it, the attrition rate also cooled down at 21.7% in Q3 as against 23.8% in Q2. The company added 5,892 freshers to its roster, down from 10,339 freshers in Q2.

Its peers, Infosys and TCS, also reported a decline in attrition rates in Q3. However, while Infosys added 1,627 employees to its headcount, TCS reported a decline of 2,197 employees in Q3.

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