HCLTech Q1 Results: Profit Jumps Nearly 7%, FY25 Guidance Maintained

HCL Technologies Ltd. on Friday affirmed its projections for revenue growth in constant currency terms and operating margin for the financial year ending March 2025.

The software services provider expects its revenue to rise by 3-5% in constant currency terms during the fiscal year 2024-25 and anticipates its EBIT margin to be 18-19% for the period, according to its statement to the exchanges.

The company's bottom line increased nearly 7% sequentially, exceeding market estimates, driven by gains on divestment. HCL reported a net profit of Rs 4,259 crore for the April-June quarter, compared to Rs 3,995 crore in the preceding quarter, according to its statement to the exchanges. Analysts tracked by Bloomberg had estimated a net profit of Rs 3,846.1 crore.

In April, the company's UK subsidiary divested its entire 49% equity in a joint venture with State Street International Holdings for $172.5 million, or approximately Rs 1,438 crore.

Revenue of the IT major fell 1.6% over the previous three months to Rs 28,057 crore in the quarter ended June. That compares with analysts' consensus estimate of Rs 28,028 crore tracked by Bloomberg.

Revenue in constant currency terms increased by 5.6% annually but declined by 1.6% sequentially. Revenue in dollar terms also decreased by 1.9% sequentially to $3,364 million.

The company shall have planned impact of State Street divestiture in the second quarter of the ongoing financial year, HCLTech's Chief Executive Officer and Managing Director C Vijayakumar said during the quarterly analysts call. "Including the impact, we remain comfortable with our full year revenue and margin guidance as clients spend on Gen AI and other emerging technologies."

• Ebit declined 4.6% to Rs 4,795 crore versus Rs 5,024 crore (estimate: Rs 4,806.4 crore)

• Margin contracted 50 basis points to 17.1% versus 17.6 (estimate:17.00%)

• Board announced dividend of Rs 12 per share.

The decline in EBIT margin due to higher onsite expenses was less than expected, reflecting a focus on improving efficiency, according to Stoxbox's Head of Research Manish Chowdhry.

Chowdhry expects growth to start showing in the numbers from September as the offshoring of State street is bound to impact the second quarter as well.

As of June, the company's total contract value for new deal wins stood at $1.96 billion.

"We are confident of decent growth in the coming quarters, positioning us well to deliver our revenue guidance for the year as clients continue to spend on GenAI and other emerging technologies," Vijayakumar said in a media statement.

Employee headcount stood at 2.19 lakh as of June, with a reduction of 8,080 employees, of which 7,390 was due to divestment. The company added 1,078 freshers.

The software major's attrition stood at 12.8% for the last 12 months, marginally higher than the 12.4% recorded in the fourth quarter of previous financial year.

The company plans to add 10,000 freshers during by March 2025 and added about 1,100 freshers during April-June period, its Chief Financial Officer Prateek Aggarwal said during the earnings call.

"Our Attrition continues to abate on LTM basis," Vijayakumar said during the analysts call.

On Friday, HCL Tech shares closed 3.19% higher at Rs 1,560.2 apiece, compared with a 0.77% advance in the benchmark Nifty 50. The quarterly results were declared after market hours.