Shares of HCL Technologies (HCLTech) rose as much as 3% in intraday trade on Friday after the Noida-headquartered IT services firm reported a 10% jump in its second-quarter profit, beating analyst estimates.

The HCLTech stock opened at ₹1,211 against its previous closing price of ₹1,223.75 on the National Stock Exchange (NSE). The counter rose 3% to hit an intraday high of ₹1,266.50 apiece on the NSE. The software services company's market cap stood at ₹3.37 lakh crore.

The increase in HCLTech share price comes despite the company slashing its revenue growth guidance for the current fiscal. For 2023-24, HCLTech's revenue growth guidance is expected to be between 5% and 6% on a constant currency basis. This includes revenue from the recent acquisition of German automotive engineering services provider ASAP. In Q1, HCLTech had retained its FY24 revenue guidance at 6-8%.

"The environment is quite volatile. So it's quite difficult to take a call from a long-term perspective. We are focused on executing this financial year," HCL Tech managing director and CEO C Vijayakumar says at the company's post-earnings press conference.

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

EBIT margin rose to 18.5% in the second quarter, an increase of 50 basis points year-on-year and 154 bps quarter-on-quarter. The software firm expects operating margin to remain 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," 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. "Our new bookings of $4 billion this quarter is at an all-time high, driven by a standout mega deal," Vijayakumar says.

The HCLTech CEO, however, says the first half of the ongoing fiscal has been soft. “We expect a very strong second half. The discretionary spend 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 will deliver solid growth in Q3 and Q4," says Vijayakumar.

The IT firm 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. Headcount decreased by 1% on a sequential basis. “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.

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

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