HCL Tech Surpasses Expectations in Q3; Dalal Street Reacts to Strong Performance

In a notable turn of events, HCL Technologies has exceeded market expectations with its third-quarter results, showcasing robust growth in both net profit and revenue. The IT services giant reported a consolidated net profit surge of 13.5% sequentially, reaching Rs 4,350 crore, while its revenue witnessed an impressive nearly 7% growth, amounting to Rs 28,446 crore for the December quarter.

The exceptional performance was primarily attributed to strong growth in the services and software business segments. HCL Tech’s CEO, C Vijayakumar, expressed confidence in the company’s ability to maintain growth momentum despite uncertainties in the demand environment. The CEO highlighted the key factors contributing to this momentum, including the business mix, skilled workforce, and a focus on delivering innovation and hyper-automation to clients.

Key Takeaways for Dalal Street Investors:

1. PAT/Revenue Growth:

• Net profit rose 13.5% sequentially to Rs 4,350 crore.
• Revenue grew nearly 7% to Rs 28,446 crore.
• Both figures surpassed analysts’ expectations.

2. Guidance Adjustment:

• HCL Tech revised its guidance for constant currency revenue growth in FY24 to 5.0-5.5%, down from the previous range of 5-6%.
• The revision included revenue recognition from the recently acquired ASAP Holding.

3. Interim Dividend:

• The board recommended an interim dividend payout of Rs 12 per share.
• The record date for the dividend payout is set for January 20.

4. Deal Wins:

• HCL Tech secured deals worth $1.9 billion in Q3, with significant wins in both services and software sectors.
• Confidence remains high in sustaining growth momentum.

5. Margin Performance:

• Consolidated operating margin expanded 130 basis points sequentially to 19.8%.
• Operating margin guidance for the full year retained at 18-19%.

6. Employee Matrix/Attrition:

• HCL Tech reported a net addition of 3,617 employees in Q3, contrasting the trend observed in some other IT majors.
• The total headcount reached 2,24,756 as of December-end.
• Attrition levels decreased to 12.8% on an LTM basis, marking a fourth consecutive quarter of decline.

Dalal Street investors are likely to closely monitor HCL Tech’s strategic moves and financial outlook following this strong quarterly performance, with a particular focus on how the company navigates the evolving market dynamics in the coming months.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Arihant Webtech)