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HCL Tech confident of double-digit growth in FY22, management bets on strong deal pipeline

We continue to be confident of the full year’s performance, which we had committed of double-digit growth and we remain positive on that, said C Vijayakumar, MD and CEO, HCL Tech.

HCL Tech's Q1FY22 earnings came in below street expectations. The company has seen a second consecutive quarter of revenue miss due to execution capabilities getting hit by the second Covid wave. The IT Company reported a 9.9 percent rise in consolidated net profit to Rs 3,214 crore for the quarter ended June 30, 2021. Noida-based company's revenue grew 12.5 percent to Rs 20,068 crore in the quarter under review, from Rs 17,841 crore in the corresponding period last year.
C Vijayakumar, CEO & MD, and Prateek Aggarwal, Chief Financial Officer of HCL Technologies, in an interview with CNBC-TV18, shared details of the quarterly performance and the business outlook.
Vijayakumar said, the demand environment continues to be robust and from our company perspective we came a little less than our expectations primarily because of the second Covid wave and also since we have a lot of concentration in NCR. That is the main reason why we came in a little below expectations. However, a lot of this will get recovered in Q2 and therefore we continue to be confident of the full year’s performance, which we had committed of double-digit growth and we remain positive on that, he added.
When asked whether double-digit growth meant it would be in mid-teens, Vijayakumar said, “I don’t think it is mid-teens because when we gave a double-digit growth guidance, we had certain bookings and certain pipeline in view. Also, a lot of growth is dependent on the type of deals.” Some deals, where you have significant amount of people transfer, you tend to get revenue upfront and then it tapers down in subsequent years. Whereas, the nature of deals we won, a lot of them have to be built organically by hiring more talent, on-boarding them into new engagement and that takes a little time to ramp up, he specified, while adding that fresher hiring could be more than the current guidance of 20,000-22,000.
“I am pretty sure, Q2 and the rest of the year is going to see a very handsome quarter-on-quarter growth,” said the new MD and CEO of the company.
Talking about deal wins, Aggarwal said, “It would be incorrect to compare deal wins on a quarter-to- quarter basis. As far as HCL Tech is concerned, we have seen over the last 2-3 years that the March quarter is the maximum quarter. There is some seasonality, so the right way to compare is to the same quarter last year and that is 37 percent growth, even versus the year before that is a handsome growth of the same proportion.”
“The basic thing is the market is strong and our deal pipeline continues to be strong and that is giving us the confidence that we will meet our guidance given at the beginning of the financial year,” said Aggarwal, adding that it is 2.8 percent cumulative quarterly growth rate (CQGR) that is required to meet 10 percent. “We will hopefully do a little better than that and that is giving us the confidence to maintain the guidance,” he told CNBC-TV18.
HCL Technologies said its co-founder Shiv Nadar has stepped down as managing director of the company with effect from July 19, 2021. Nadar will continue as the company's Chairman emeritus and strategic advisor to the board.
For the full interview, watch the accompanying video.