After Wipro, there has been a change of guard at another tech major. Roshni Nadar Malhotra took over as chairperson of HCL Technologies on Friday after her father Shiv Nadar, who was chairman of the company, decided to step down. Shiv Nadar, however, would continue to the managing director, with the designation, chief strategy officer, the tech major said while announcing its results for the first quarter of FY21.
Roshni Nadar Malhotra, who was earlier non-executive director at HCL Technologies and vice chairperson of the HCL Technologies board, is the executive director and CEO of HCL Corporation, and a trustee of the Shiv Nadar Foundation.
Shiv Nadar, who started his career as a management trainee at DCM, set up HCL in the 1970s in a Delhi barsati (a single room the terrace, like an attic), along with five of his DCM colleagues. Starting off as a hardware manufacturer, HCL evolved into a software services organisation.
“He (Shiv Nadar) is an institution in himself who has built many other great institutions… This took guts, intellect, passion, and perseverance. There is only one of his kind that is why I call him the Shahenshah of the tech world,” said former HCL Technologies CEO Vineet Nayar.
In the first full quarter affected by the Covid-19 pandemic, HCL Technologies posted a 31.7% year-on-year rise in net profit at ₹2,925 crore. It reported revenue of ₹17,841 crore for the quarter ended June 30, up 8.6% over the previous year. Earnings before interest and tax (EBIT) was ₹3,660 crore, with an EBIT margin of 20.5%.
However, the pandemic had left its dent. When compared to the previous quarter, HCL’s net profit fell 7.3%, while its revenue declined 4%. Ebitda fell 3.3% over the previous quarter to ₹4,566 crore; year-on-year, it was up 34.3%. EBIT was down 5.7% over the previous quarter. In dollar terms, revenue was flat at $2,356 million, up 0.3% year-on-year. In constant currency terms, it was up 1% from the year-ago period. HCL Tech’s shares closed at ₹623.45 on the BSE, down 0.67% from the previous close.
“The adverse conditions during this quarter had an anticipated negative impact on our revenue. I am happy to report that the resilience of our operating model helped us deliver stellar operating margins and cashflows. We had healthy bookings enabled by 11 new transformational deal wins. We also renewed several large deals during the quarter,” said C. Vijayakumar, president & CEO, HCL Technologies.
While all geographies saw a contraction in growth sequentially, Americas grew 1.2% over the previous year, while the Rest of the World grew 4%; year-on-year growth in Europe was flat. Thanks to the Covid-19 crisis, all segments saw a decline in revenue on a quarter-on-quarter basis.
Despite the pandemic, HCL resumed the practice of providing annual guidance. For the next three quarters, it expects a 1.5%-2.5% rise in revenue in constant currency turns. For the whole of FY21, it expects operating margin to be between 19.5% and 20.5%.
The company also announced a dividend of ₹2 a share. “HCL’s margin resilience and cash generation prowess were highlighted this quarter, despite the Covid-led impact to the top line… We generated operating cash flow (OCF) of $819 million and Free Cash Flow (FCF) of $757 million, being 212% and 196% respectively of net income; FCF came in more than double the quarterly average last financial year. Consequently, we closed the quarter with gross cash of $1.95 billion and net cash of $1.33 billion,” said Prateek Aggarwal, CFO, HCL Technologies.
Total headcount rose to 150,287 as of June 30, against 143,900 in the year-ago period. And IT Services attrition fell to 14.6%, down 270 basis points year-on year. Like its peers Wipro and Infosys, HCL Technologies has also decided to not give employee salary increments, it was reported.
“We are living in unprecedented times where organisations and people across geographies are dealing with challenges related to the pandemic. However, this has also pushed businesses to accept the pandemic as a catalyst for change and look at building agility and resilience into every level of their organisation. HCL, along with its partners, is helping customers embrace digital transformation and innovation to emerge stronger in this new normal. I am confident that, with decisive action leveraging digital momentum and sustainable business practices, we will together emerge as stronger entities,” Shiv Nadar said.