HCLTech Q1 profit misses estimates; stock falls 2%

Shares of tech major HCLTech Ltd dropped 1.87% to ₹1,089.30 on the Bombay Stock Exchange (BSE) a day after the Noida-based IT services company announced its April-June quarterly financial results, which missed Street estiamtes. The stock opened a gap-down in early trade at ₹1,096 against the previous session close of ₹1,110.05 and surged to an intra-day high of ₹1,105.40. At the current share price, HCL Tech's m-cap stands at 2,97,689.06 core.

HCL Tech has reported an 8% rise in consolidated net profit to ₹3,534 crore during Q1 FY24, but it missed industry estimates. Analysts had projected the IT services major to report Q1 profit at ₹3,750-3,850 crore. The company's Q1 FY24 revenue grew 12.1% YoY to ₹26,296 crore, while revenue in constant currency surged 6.3% YoY. HCL's revenue from operations dipped 1.2% on a QoQ basis. Earnings before interest and taxes surged 11.7% to ₹4,460 crore, while it was down 7.8% on a QoQ basis.

HCLTech says it has retained FY24 revenue guidance at 6-8% in constant currency, while services revenue growth is expected to be between 6.5%-8.5% YoY in constant currency. The EBIT margin is expected to be 18-19%. HCLTech has announced a dividend of ₹10 per equity share, its 82nd consecutive quarter of dividend pay-out.

“In Q1 FY24, our revenue and people strength sequentially moderated in line with the demand environment. We delivered a 6.3% YoY growth in constant currency. We experienced strong growth in our largest verticals—Financial Services, Manufacturing, and Life Sciences and Healthcare—fueled by large deals. These large deals helped offset cuts in client discretionary spending in these verticals. We are expecting other verticals to pick up as well shortly. This, combined with the strength of our record-high pipeline, enables us to maintain our guidance for the year,” said C Vijayakumar, CEO and MD, HCLTech.

In terms of geographical mix, while Europe and the Middle East (EMEA) grew 10.5% YoY (CC), Americas revenue grew 7.3%. Industry vertical growth was led by manufacturing at 16.5% YoY (CC) and financial services at 14.4% YoY (CC).

"HCLTech delivered 12.1% YoY revenue growth in INR this quarter, with services growing at 12.9% YoY in INR. We have demonstrated healthy client addition with $100 million clients up by three and $50 million clients up by six on a YoY basis. Our EBIT margin remains stable on YoY basis," said Prateek Aggarwal, chief financial officer, HCLTech.

Like its peers, HCLTech has also outlined its focus on emerging technologies in AI and generative AI. From chip design and data centre optimisation to AI applications and models, HCL claims to have over 70 projects in the pipeline — from proof of concept (POC) to implementations.

During Q1 FY24, HCLTech won 18 large deals — 7 in services and 11 in software, translating into a total cumulated value of new deal wins of $1.565 billion. "The deal pipeline is at an all-time high and grew 17.7% QoQ and 26.2% YoY."

Total headcount at HCLTech as of June 31, 2023, stood at 2,23,438, with a net addition of -2,506. It added 1,597 freshers in the quarter, and the last 12 months' attrition rate stood at 16.3%, down 7.5% year-on-year basis.