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IT services player HCL Technologies reported satisfactory numbers in Q1 FY22 aided by a slew of new deals in the cloud and business transformation services segments. The company also reported renewed demand for its major areas of engagement that include software services, business process outsourcing and tech-infrastructure services.

HCL Technologies reported a 9.4% rise in consolidated net profit to Rs 3,213 crore in the June quarter. A year ago, the IT firm had reported a net profit of Rs 2,935 crore. On a quarterly basis, profit rose 8.5%.

Overall revenue from operations was reported at Rs 20,068 crore which is up from the corresponding quarter in the previous year where the revenue from operations was reported at Rs 17,842 crore. This is however only a 2.2% rise quarter-on-quarter.

The board of the company sanctioned an interim dividend of Rs 6 per share.

HCL Technologies stock closed 0.48% down at Rs 1,000.20 on Monday, July 19, 2021.

Hits

  • Margin expanded to 19.6% from 16.70% q-o-q
  • EBIT rose 20% to Rs 3,934 crore q-o-q
  • Net income was up 12.8% in dollar terms at $43 million in June 2021 quarter
  • Revenue was higher by 15.5% at $2,719.6 million in the quarter in comparison to the year-ago
  • The deal book grew 37% y-o-y to almost $1.66 billion with eight large service deals underway
  • Attrition was down marginally to 11.8% from 14.6% in the previous year

Misses

  • The company missed street estimates for revenue at Rs 20,346 crore and profit at Rs 3,245 crore.
  • The revenue increased by a meager 0.7% in constant currency terms for the quarter, whereas analysts had anticipated a growth between 2-2.5% for the quarter.‘Constant currency terms’ is an expression used to eliminate the impact of currency exchange fluctuations on a company’s financial performance. For companies that earn in different currencies, sometimes there might be a disparity in true income just because of increases or decreases in the currency exchange rate. Constant currency terms, thus, helps investors understand how the company has truly performed, independent of any movement in currency exchange rates.
  • EBIT margin was down 80 basis points q-o-q due to covid related expenses.

Segment-Wise Revenue

  • IT and Business services – Rs 14,370 crores
  • Engineering and R&D services – Rs 3,076 crores
  • Products and Platforms – Rs 2,627 crores

Company Statement

HCL Technologies CEO C Vijayakumar said that the company remains confident of a good q-o-q growth ahead for the remaining financial year which will be supported by the 37% year-on-year growth in booking and hiring of 7,500+ personnel that this quarter has witnessed.
Shiv Nadar, Chief Strategy Officer also said, “The experiences of the pandemic will foster greater adaptability and a spirit of innovation.”

HCL Technologies in News

  • Shiv Nadar resigned as the MD of HCL Tech, he will now be taking on the role of chairman Emeritus and strategic advisor to the board.
  • The company signed a five-year global agreement to provide digital transformation and managed services to The Mosaic company which is based out of the USA.

What This Means For The Investors

While the aftermath of the pandemic is visible on the results of HCL Tech’s peers too, the Q1 earnings for HCL Tech have come in at comfortable levels. The company expects to grow its business and foresees further demand for its services in the remainder of the year that is likely to lift up its financials.

The recent softness in the performance of the stock has made the valuation enticing, according to analysts. In the context of medium to long term growth perspective, the valuation is at a discount to the other peers in the same sector.

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