HCL Tech expects 2% growth for the rest of the year despite a hard knock in Q1 and no new large clients

• HCL Technologies has reported a quarterly dip of 7.2% in its revenues during the first three months of the current financial year.
• The hit to its revenue is greater than that experienced by its peers — Tata Consultancy Services (TCS), Wipro and Infosys.
• The company has issued annual guidance of 1.5% to 2.5% increase in revenue and an operating margin of between 19.5% to 20.5%.
• For the 70th consecutive quarter, it will also be rolling out a dividend of ₹2 per share to its stockholders.

HCL Technologies’ has issued annual guidance for its revenue growth and margin expansion despite much of its earnings being in the red this quarter. Revenue in constant currency terms is down 7.2% and net profits have slipped by 10.4% as compared to the previous quarter.

Even though the company has signed 11 new deals in the last three months, the number of large clients — customers bigger than $100 million — has not increased. This is on the backdrop of more than 30% of HCL Tech’s revenue coming from its top 20 clients.

The company’s fall in revenue is greater than that of its peers — Tata Consultancy Services (TCS), Wipro and Infosys — who have already shared their first-quarter results.

HCL Technologies’ outlook
Despite analysts expecting the contrary, the company has issued guidance of 1.5% to 2.5% increase in revenue for the next three quarters and an operating margin of between 19.5% to 20.5% for the year.

“HCL’s margin resilience and cash generation prowess was highlighted this quarter, despite the COVID-led impact to the top line,” said HCL Technologies’ CFO Prateek Agarwal.

The company has signed 11 new deals in the last three months led by telecommunications, financial services, manufacturing, life sciences and healthcare. “New booking total contract value (TCV) is higher compared to the last year,” said the company in its filings.

“We are seeing a robust demand environment and a strong pipeline which gives us confidence in our growth trajectory going forward,” added HCL Technologies president and CEO C Vijaykumar.

HCL Technologies has also announced a dividend of ₹2 per share marking its 70th consecutive quarter of a dividend payout.

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