Deal pipeline in current quarter is at all-time high, expect good sequential growth here on: HCLTech CEO

C Vijayakumar, CEO and MD, HCLTech

After reporting a disappointing set of numbers in the first quarter ended June 30, HCLTech CEO C Vijayakumar said that the performance is set to improve from here on for the country’s third largest IT services firm, driven by an “all-time high” deal pipeline, which it is accruing in the current quarter.

Vijayakumar has also maintained HCLTech’s full-year revenue growth guidance of 6-8 percent year-on-year (YoY) in constant currency (CC) terms for FY24.

Speaking to Moneycontrol, he said, “We have a very strong pipeline. From last quarter, also the pipeline increased and even in this quarter our pipeline continues to increase. It's at an all-time high. We expect it to be a good booking in this quarter, which I think will help us continue to have better growth sequentially from here on, which leads us to meet the 6-8 percent (CC revenue growth) guidance for the year.”

HCLTech’s quarterly order book for Q1 dropped to $1.56 billion, following seven consecutive quarters of maintaining $2 billion-plus in deal wins. On a YoY basis, order book plunged nearly 24 percent from $2.05 billion in the same quarter last fiscal. As of Q4FY23, the order book stood at $2.07 billion. This was due to deal ramp downs, especially in the tech and telecom segments.

The sudden decline in tech and telecom segment growth, Vijayakumar explained, was because of a few larger clients who prioritised some projects, and as a part of that the ramp downs happened.

Vijayakumar highlighted that the company’s three major verticals which account for nearly 60 percent of the total revenue, have continued to post mid-teens YoY growth.

“If you look at three of our largest verticals, financial services, manufacturing, and life sciences and healthcare. All three of them have grown in their mid-teens on a year-on-year basis in constant currency. That's a very strong growth of those three verticals,” he said.

In the previous quarter, Vijayakumar had told Moneycontrol, that in FY24 demand will be driven by areas around customers wanting to be more cost-efficient, adopt cloud and bring more automation to their operations.​

According to him, financial services grew 14.4 percent YoY in CC, manufacturing grew 16.5 percent YoY in CC basis and life sciences grew by over 13.4 percent YoY in CC.

“We had challenges in tech and telecom. A lot of our engineering services is exposed to tech and telecom verticals and we saw a reduction in discretionary spending and some ramp downs, which caused the overall decline in revenue. For us, it (the decline) was a little more than what we expected. From here on we expect to see good sequential growth. That's clearly what our forecast is,” Vijayakumar added.

HCLTech reported its Q1 earnings on July 12, missing analyst estimates for rupee revenue, net profit as well as EBIT margins.

Net profit was up by 7.6 percent YoY and stood at Rs 3,534 crore. On a sequential-quarter basis, it was down by 11.2 percent.

Consolidated revenue for the quarter grew 12 percent YoY at Rs 26,296 crore as compared to Rs 23,464 crore in the same quarter last fiscal. In constant currency (CC) terms, revenue slipped 1.3 percent QoQ.

EBIT margin came in at 16.9 percent against analyst estimates of 17.9 percent, according to a CNBC-TV18 poll.