HCL Tech Q1 profit tanks 6.6%, revenue misses estimates; maintains FY18 guidance

Software solutions provider HCL Technologies' first quarter profit fell sharply by 6.6 percent sequentially to Rs 2,171 crore, impacted by lower revenue growth and higher tax cost but better operational performance capped degrowth.

Revenue during the quarter grew by 0.8 percent to Rs 12,149 crore and dollar revenue rose by 3.7 percent to USD 1,884.2 million on sequential basis.

"We continue to propel forward on our Mode 1–2–3 growth strategy, delivering a revenue growth of 2.6 percent QoQ and 12.2 percent YoY in constant currency terms in Q1FY18," C Vijayakumar, President & CEO, HCL Technologies said.

HCL Technologies has retained its full year guidance, saying revenue in FY18 is expected to grow between 10.5-12.5 percent in constant currency and EBIT margin guidance maintained at 19.5-20.5 percent.

Numbers barring revenue were ahead of estimates. Profit was estimated at Rs 2,043 crore on revenue of Rs 12,191 crore and dollar revenue at USD 1,890 million for the quarter, according to average of estimates of analysts polled by CNBC-TV18.

Consolidated earnings before interest and tax (EBIT) increased 1.16 percent quarter-on-quarter to Rs 2,444 crore and margin expanded 6 basis points to 20.1 percent in the quarter ended June 2017, which both were ahead of estimates of Rs 2,383 crore and 19.5 percent.

Vijayakumar said, "We expanded EBIT margins through continued superior execution in our core business, integration and assimilation of the acquired entities, as well as IP investments."

During the quarter, HCL extended its IP–partnership agreement with IBM, marking its expansion into business solutions in the marketing automation area, which complements HCL's Digital and Analytics offerings. It has invested around USD 140 million in the extended partnership in Q1.

The company added 12 clients in USD 5 million category, 8 clients in USD 10 million, 6 in USD 20 million, 3 in USD 40 million, 5 in USD 50 million and 1 in USD 100 million category.

"HCL signed 13 transformational deals, representing a well–balanced mode 1–2–3 services mix. The deal wins are led by US and Europe, followed by Rest of World, ranging across financial services, manufacturing, consumer services, lifesciences and healthcare," it said.

Attrition in IT services business (last twelve months) dropped significantly to 16.2 percent in Q1 from 16.9 percent in previous quarter.

Blended utilisation (including trainees) improved sequentially to 86 percent from 85.7 percent.

Foreign exchange gains more than doubled to Rs 107 crore from Rs 48 crore and tax expenses during the quarter increased 79.2 percent to Rs 543 crore on sequential basis.

Source for images: HCL Tech