DBT Bureau
Bengaluru, 15 July 2024
IT major HCL Tech is likely to see growth recovery in the second half of the current financial year as current deal pipeline positions the IT firm on a good stead to accelerate revenue growth in the coming quarters.
In the first quarter ended June, HCL Tech reported a revenue of $3.36 billion, down 1.6% Quarter-on-Quarter on constant currency basis. While revenue from IT & Business Services declined 1.5% as compared to previous quarter, top line growth from engineering services segment fell 3.5% during this period. Top line from product & platform business was flat on sequential basis.
Despite the fall, HCL Tech’s top line growth was above the market expectations. Share price of HCL Tech was trading 1.31% higher at Rs 1,580.60 at 12 PM on NSE.
According to brokerage firms, revenue dip in Q1 was largely attributed to the project transitioning (BFSI) from onsite to offshore coupled with passing seasonal productivity commitment (concentrated on manufacturing).
Second quarter revenue (July-September) would again have an adverse topline impact of 80 basis points due to divestment in the joint venture.
In April, HCL Tech said that its subsidiary- HCL Investments UK has entered into a pact with US-based State Street International Holdings to divest its entire 49% stake in their JV for $172.5 million.
“Despite the fact, the management is confident of revenue growth both at consolidated level and in the services segment in Q2FY25. The management’s confidence is underpinned by earlier deal wins that have gone for executions, instead of building any optimism or constructive recovery on the discretionary spends. Additionally, the management anticipates sharp recovery within the ER&D space partly led by Q1 seasonal impact within manufacturing and partly by anticipated growth recovery within ASAP after the Q1 trough,” brokerage firm, Prabhudas Lilladher wrote in a note.
The Shiv Nadar-promoted company acquired German automotive engineering firm ASAP last year.
For the whole fiscal year, HCL Tech maintained its overall revenue growth guidance of 3-5% apart of keeping its margin guidance of 18-19%.
“On the demand front, the management indicated that it is witnessing some uptick in transformation programmes, but demand is still driven by cost efficiency programmes, indicating that overall demand scenario remains unchanged. It further indicated that many of the clients despite reporting strong results, are conservative in their spending decisions as they are waiting for the macro environment to improve,” Prabhudas Lilladher wrote in the note.
