Forex fluctuations to impact next quarter: HCL Tech

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Forex fluctuations to impact next quarter: HCL Tech

Vineet Nayyar, CEO HCL Technologies said that engineering, enterprise application besides emerging verticals healthcare and retail have contributed significantly to the growth.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Prabhudas Lilladher says HCL Tech to outperform ahead HCL Tech rises 5% on good Q4 results HCL Tech Q4 net profit at Rs 342 cr, beats estimates ALSO READ See latest News about HCL Tech See previous management interviews See what other Experts & Brokerages are saying about HCL Tech

Q: Want to talk about employee addition which has been very strong at HCL Tech this time around. Can you take us through what kind of utilisation levels you expect to be working at and also throw some light on attrition level, which has been pretty high for the entire industry this quarter?

Nayyar: Our emphasis was 1) in just in time hiring, 2) in lateral hiring and not fresher hiring. So couple of interesting points, which has emerged in this quarter; one, we have demonstrated that a gross hiring of about 11,000 people, a net hiring of 6,500 people, we have the system process and attractiveness for so many lateral to come and join us and get built immediately. That one thing we have demonstrated to the industry that the lateral strategy is a right strategy for scale.

The second thing, which we have demonstrated to the industry, is that the utilisation went down only by 200 bps and that utilisation despite such a massive increase-it is the largest addition in our history-is demonstrating to a robust maturity of process. Third, the fact that the margins did not decline because we hired laterals instead of fresher, again, demonstrating that we know how to use laterals in fixed price process who can deliver higher productivity and therefore retaining the margins despite the fact that we are hiring laterals.

Your question on attrition is an interesting question. I have looked at all the attrition of all the industry and the negative factor is attrition is going up for everybody and that bound to happen predominantly because as the demand increases, the demand for employees will increase, you are not necessarily ready with all the laterals which is required to cope with the demand so that is expected.

However, HCL's situation is much below the industry average. We are third from the top in the lowest attrition; there is only one other company, which is lower in attrition compared to HCL, but that's a good position to be in.

Q: What kind of margin implications and this kind of an employee situation have? You are hiring much more, utilisation levels will shift around quite a bit; you have taken salary hikes in July. Given this kind of environment on HR that you are working with, do you expect margins to be stable or to be somewhat under pressure for the interim period?

Chanana: We are working out impact and we will be sharing it. But the important thing is what has happened is over the last two years. We have seen that the salary increase taking place in July and in October quarters and some of the margins returning back by the end of the year and we expect to see a similar trend this year as well.

Nayyar: I would say that we would be very competitive in our salary increases. We believe we need to. That would have a short-term impact on both utilisations and margins. But as historically in the other financial years-even if we look-we have only expanded margins and not diluted margin. I think from a similar period to similar period you will see no margin dilution.

Q: The 9% growth-that you are seeing in constant currency-is it largely volume driven or are you seeing any changes in realisation or pricing and generally what are your expectations on the pricing front?

Nayyar: There is no change in realisation. Our realisation has remained about the same so there is no price increase or decrease and this is whole volume growth; there is nothing other than volume growth. On the realisation front and pricing, I believe the environment is stable. I do not see the customers going back to where the price points they were paying earlier because they are used to a new price point right now.

I believe there is no reason for further pressure on pricing because the environment is not that bad. So I believe stable realisation, stable pricing environment going forward, we have to learn how to squeeze more margins out of this pricing regime.

Q: The 9% sequential growth will make the market greedy. Do you think it's sustainable?

Nayyar: We do not give guidance. All I would say is that our track record of the past, if you look at, USD 2.9 billion of incremental business was generated in the last eight quarter but the top four IT companies, we contributed USD 844 million out of that which is 30% market share in the incremental business.

That should give market some confidence in the management at HCL that we know what we are talking about.