HCL Tech Q1 net profit up 2.4% but misses estimates

IT services company HCL Technologies on July 12 reported a 2.4 percent year-on-year (YoY) rise in net profit at Rs 3,283 crore for the first quarter ended June 30, 2022.

In the corresponding quarter last year, the company posted a net profit of Rs 3,213 crore. CNBC-TV18 Polls had predicted a profit of Rs 3,297 crore for the quarter under review.

Total income stood at Rs 23,464 crore during the period under review, up 17 percent against Rs 22,597 crore in the corresponding period of the preceding fiscal.

For Q1 of FY23, the company reported an attrition rate of 23.8 percent against 11.8 percent in the corresponding quarter last year. In the March quarter, HCL had said the rate of attrition was at 21.9 percent.

For Q1, the total contract value (TCV) of new deal wins stood at $2,054 million, registering 23.4 percent YoY growth, of which services' TCV stood at $1,950 million, enabled by seven net new large services deal wins. The products' TCV stood at $104 million enabled by nine net new large product deal wins.

The company recorded strong client addition across all categories on a YoY basis:

$100 million-plus clients, up by 3

$50 million-plus clients, up by 5

$20 million-plus clients, up by 23

$10 million-plus clients, up by 35

$5 million-plus clients, up by 27

$1 million-plus clients, up by 63.

The total headcount of the company stood at 210,966, up 19.5 percent YoY. HCL Tech's board has declared an interim dividend of Rs 10 per equity share of Rs 2 each for the financial year 2022-23.

"As technology becomes central to lives and businesses, HCL is accelerating the digital transformation journeys of its clients. We continue to pursue our growth strategy with a sense of purpose and responsibility toward our stakeholders and communities," said Roshni Nadar Malhotra, Chairperson, HCL Technologies Ltd.

C. Vijayakumar, CEO and Managing Director, HCL Technologies Ltd, said the company started FY23 on a strong note with an overall growth of 2.7 percent QoQ and 15.6 percent YoY in constant currency.

"Our services business continues to have robust growth momentum, growing at 2.3 percent QoQ and 19.0 percent YoY in constant currency, driven by our digital engineering and digital application services with cloud adoption being a horizontal theme across all services and verticals," he said.

"Our new bookings grew 23.4 percent YoY supported by a good mix of large and mid-sized deals and our pipeline remains near-record high. Our operating margin came in at 17.0 percent. We have put in place the right measures that will improve our profitability going forward," he added.

Prateek Aggarwal, the chief financial officer of HCL Technologies Ltd said the key highlight of the quarter is the stellar growth in services at 19 percent YoY in CC.

"Products & platforms was 1.4 percent up YoY in CC, excluding the divested/discontinued business. Our cash generation continues to be robust at Operating Cash Flow (OCF) of $2,013 million and free cash flow (FCF) of $1,762 million, on LTM basis, with OCF /NI at 112 percent," he said.

The results came after the close of the market hours. Shares of HCL Technologies ended at Rs 928.05, down by Rs 15.35, or 1.63 percent on the BSE.