Revenue grew 19.5% on year to Rs 24,686 crore, above forecasts, led by strong growth across services business and increased focus on engineering, research and development offerings.
Net profit was up 6.3% sequentially, while revenue climbed 5.2%.
The company increased revenue growth guidance to 13.5-14.5% for the ongoing fiscal year compared to 12-14% earlier, led by prospects of further deal wins.
HCLTech chief C Vijayakumar said though there was some slowdown in discretionary spending, that has not been significant.
“Even the concern of a recession is actually enabling a lot more transformation deals from our clients. A lot of our customers who are preparing for some kind of a slowdown are accelerating some of the projects that they wanted to do,” he said.
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Vijayakumar, however, said it was still “too early” to comment on customer budgets.
“Customers continue to prioritise mission-critical work that we are doing. We feel confident that many of these programs will continue to remain important. At a macro level, we think tech spend will continue to stay robust,” he added.
The company’s operating margin for the July-September quarter was 18%, up 100 basis points over the sequential quarter despite the impact of wage hikes. Margin growth was led by better utilisation, pricing improvement, currency tailwinds and an improved employee pyramid, it said.
Prateek Aggarwal, chief financial officer of HCLTech, said margin improvement was led by better realization from customers, both from existing renewals and renegotiations and new deals that were signed in the last one year.
India’s third largest software services provider by revenue, however, narrowed its operating margin guidance to 18-19% from 18-20% for FY23, due to existing cost pressures.
The company also shared, for the first time, guidance for its services revenue, which is expected to grow 16%–17% year on year in constant currency terms.
“…Our H1 growth and deal wins lead us to increase our revenue guidance to 16%-17% for services and 13.5%-14.5% at company level, reflective of our strong growth visibility,” Aggarwal said.
The HCLTech board declared a second interim dividend of Rs 10 per equity share for the current fiscal year.
Attrition rates
Attrition for the quarter was flat at 23.8%. The company said quarterly annualised attrition was down significantly and expected it to further reduce in the next few quarters.
HCLTech also said it did not support ‘moonlighting’ by employees.
“There are requirements around confidentiality, non-solicitation, non-compete…we expect our employees to honour those commitments that are contractually made, so dual employment while working at HCL is not what we support,” said Ramachandran Sundararajan, chief people officer, HCLTech.
He said HCLTech had deferred the annual compensation review for top management by a quarter. The company has, however, rolled out wage hikes during the second quarter for the remaining 98% of its employees.
Headcount for the second quarter stood at 219,325 with a net hiring of 8,359 over the previous quarter.
Last quarter, the company had added 2,089 employees.
The company
added 10,339 freshers during the quarter, in line with previously announced plans. During the first quarter, it had added 6,023 freshers.
The company said it was encouraging employees to return to office thrice a week and had seen footfalls go up over the past three months but has not made it mandatory.
HCLTech also reported a reduction in employee expenses as a share of revenue, at 54.6% during the quarter, compared to 55.3% last quarter.
The company had called out a slowdown in manufacturing and retail Consumer Packaged Goods verticals during the first quarter. However, the management said it does not foresee any slowdown even in critical projects across large transformation programmes.
HCLTech’s products and platform business saw a dip of 7.8% in constant currency sequentially due to a seasonally weak quarter.
“Services business constant currency revenue growth was strong at 5.3% q-o-q and TCV also pick-up with growth of 16% q-o-q to $2.3 billion. CC Revenue guidance revised upward to 13.5%-14.5% (versus 12-14% earlier) is positive while revision in EBIT margin to 18-19% from 18-20% is broadly on expected lines given supply side pressures,” wrote Sanjeev Hota, head of research, Sharekhan by BNP Paribas.
The company reported a new deal total contract value (TCV) worth $2.38 billion compared to $2.05 billion last quarter. It reported 11 large deals during the quarter.
The TCV includes one mega deal of a customer it added to its portfolio through a prior acquisition, the company said.
The company’s focus on new vista locations, it said, would mean that headcount in those regions will grow 10% higher than traditional locations.
“From a talent supply point of view, there has been an easing of the demand. So, as a result, we don’t see the same level of pressure in terms of compensation negotiations,” Sundararajan said, on the issue of margin pressure from high salary costs.
Meanwhile, the company announced the appointment of Rahul Singh as its chief operating officer – corporate functions. He has been elevated from the role of president of global financial services.
Sundararajan has been elevated to chief people officer from his previous role as HR head- Americas and global GTM HR leader.
Chief human resources officer VV Apparao has been elevated to chief delivery officer for nearshore business.
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