HCLTech Q2 results: Net profit rises 9.8% to ₹3,832 cr

Net profit of HCL Technologies rose 9.8% year-on-year to ₹3,832 crore for the quarter ended September compared with ₹3,489 crore in the same quarter last fiscal.

Consolidated revenue of the Noida-headquartered IT company grew 8% year-on-year to ₹26,672 crore as against ₹24,686 in the year-ago period.

EBIT margins in the second quarter rose to 18.5%, an increase of 50 basis points year-on-year and 154 bps quarter-on-quarter. The software firm expects operating margin within the stated guidance of 18-19% in the ongoing fiscal.

"One of the big highlights for the quarter is our operating margins. We recorded an 18.5% operating margin. This margin improvement is primarily through driving efficiencies in our managed services engagement through automation and AI capabilities," HCLTech managing director and CEO C Vijayakumar says at the company's earnings conference.

For FY24, HCLTech has given a guidance of 5-6% on a constant currency basis. This includes revenue from the recent acquisition of German automotive engineering services provider ASAP. "The environment is quite volatile. So it's quite difficult to take a call from a long-term perspective," says Vijayakumar.

The total contract value of new deal wins stood at $4 billion, a 154% growth on a quarter-on-quarter basis and a 67% growth on a year-on-year basis.

"First half of FY24 has been soft. We expect a very strong second half. Discretionary spending is still very soft. We have not seen the discretionary spend pick up like we anticipated. But the bookings we have done in the last quarter, some of them will convert into revenue. That followed by a large deal acquisition, we will deliver solid growth in Q3 and Q4," says Vijayakumar. In August, HCLTech signed a $2.1-billion deal with Verizon Business to provide managed network services to its global enterprise customers.

The IT company significantly reduced its dependence on subcontractors. "We also controlled some of the discretionary spends on travel during the quarter which has delivered an exceptional margin performance," says Vijayakumar.

Attrition continues to trend down at 14.2% in Q2 FY24 from 23.8% in the same quarter last year. The company's workforce stood at 2,21,139, a decline of 2,299 employees. "Every quarter we moderate our headcount based on a number of things. Demand is one part of it and attrition is another significant part of it," says Ramachandran Sundararajan, chief people officer, HCLTech.

On pay revision, Sundararajan says 90% of the employees will get a salary hike this year. "Last quarter, we took two decisions. We said our middle and senior managers will skip the pay revision cycle this year. The second decision that we took is that we will review it for the rest of our colleagues in this quarter. We will go ahead with the pay revision for 90% of its employees," he says.

The company declared an interim dividend of ₹12 per share for the second quarter.