Services business helps HCL Tech post 13% jump in Q2 revenues

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Services business helps HCL Tech post 13% jump in Q2 revenues

HCL Technologies said revenue growth in the July-September quarter was powered by services, which grew 5.2% sequentially (QoQ) and 13.1% year on year (YoY) in constant currency, although its product and platforms business remained soft, impacting profits.

Some analysts, however, said the numbers were below expectations.

The

board also approved an interim dividend of Rs 10 per share to shareholders.

The Noida-based company said on Thursday that it hopes to recover lost ground in its products and platforms business in the ongoing third quarter, which is a seasonally strong one for that business.

HCL Tech’s earnings before interest, taxes, depreciation and amortization (Ebitda) margin dropped 1.8% sequentially and 2.1% year on year, due to the ‘blip’ in the products and platforms business.

Services revenue contributes over 88% to overall revenue, while platforms and products chip in around 11.7%.

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HCL said overall revenue in the quarter ended September 30 was Rs 20,655 crore, up 2.9% QoQ and 11.1% YoY, while net income was at Rs 3,265 crore, up 1.6% QoQ and 3.9% YoY.

In dollar terms, revenue came in at $2.8 billion, up 2.6% QoQ and 11.3% YoY. In constant currency terms, revenue was up 3.5% QoQ and 10.5% YoY.

The total contract value of new deals signed was $2.2 billion, a 38% YoY growth, led by 14 net new large deal wins.

HCL Tech’s board has approved a change to its existing long-term incentive (LTI) program, to include issuances of restricted stock units to nearly 3,000 senior leaders.

The company will move from 100% cash awards to a mix of 70% cash and 30% RSUs for the grants it will offer later this calendar year, it said.

“Subject to shareholder approval, the plan proposes to allocate 11.1 million shares (equal to less than 0.50% of the company’s equity shares) to almost 3,000 senior leaders. The plans will be offered as tenure-based vesting by FY2025, and the company also has proposed an option to substitute this part of the plan with RSUs that vest based on achievement of long-term performance targets,” HCL said.

The board also approved an interim dividend of Rs 10 per share to shareholders. “We continue to see strong growth momentum in the business, and we are happy to extend long term wealth creation opportunities in the form of RSUs for a greater number of senior leaders,” said CEO and managing director C Vijayakumar.

Shares ended 1.17% lower at Rs 1,250 apiece on the BSE on Thursday. “HCL Tech reported below-than-expected quarterly performance owing to a sharp decline in its product & platform business. However, the company’s order bookings, deal pipeline, net headcount addition and client addition remained strong during the quarter,” said Ashis Dash, Research Analyst, Sharekhan by BNP Paribas.

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