Uncertainties in bookings remain restricted to discretionary tech spending: HCLTech CEO

C Vijayakumar, CEO and MD, HCLTech

HCLTech’s CEO and MD C Vijayakumar said uncertainties and delays in deal bookings pertaining to macro-economic headwinds remain restricted to discretionary tech spending and won’t impact overall business. HCLTech reported its full year numbers on April 20.

The third largest IT services firm clocked in deal total contract value (TCV) worth $2.07 billion in the fourth quarter ended March 31, 2022. This was an 8 percent drop on a YoY basis as compared to the same quarter last fiscal year. On a sequential quarter basis, this was a plunge of about 12 percent.

As of full year FY23, the company’s order book stood at $8.85 billion, up by 6 percent YoY, against $8.30 billion in FY22.

Deal wins came from across geographies, industries, and service lines. In terms of geographies, Europe grew the highest with 20.6% YoY in constant currency (CC) terms, Americas grew 14.4% CC while rest of the world grew 11% CC. Top performing verticals of the year were technology, telecom, and manufacturing.

“Last quarter we signed 13 large deals across products and services. We won a few large deals in Europe and the US in the financial services sector, which is a sign of our propositions in this market,” Vijayakumar said at the earnings conference call.

He added, “While there are some uncertainties in the system be it booking or ramp up deals delays, they are all on the discretionary spend side. For a lot of run-the-business tech we don’t see that much of stress. That gives us good confidence given our strengths in both transformative and operating spends.”

HCLSoftware business crossed an important milestone of earning $1 billion in annual recurring revenue (ARR).

Speaking of outlook for FY24, he said, “I believe FY24 will be a year of consolidation both on the demand and supply side… Clients had accelerated tech spends in the last many quarters, it’s now time to review and consolidate to the most efficient and impactful technologies.”

Remains bullish in financial services

As of Q4, HCLTech got about 21.6 percent of its revenue from the financial services vertical. Vijayakumar continues remain bullish on this segment despite the ongoing global banking crisis with the collapse of US regional banks like Silicon Valley Bank, Signature Bank, and Swiss bank Credit Suisse among others.

He highlighted that only one percent of the company’s revenue has exposure to banks while insurance continues to remain an important segment with financial services.

He still throws an air of caution, saying, “I do think insurance, especially in the financial services segment are under cost pressures due to inflation and they are looking at bringing more efficiencies and automation to their operations. We are well positioned to leverage the opportunity, hence outlook to the segment remains solid.”

He added, “Amidst all the volatility, I want to say our financial services vertical continues to see good opportunities…And also it’s on the strength of both cloud and hybrid cloud adoption in the financial services sector where we have a strong play and that is helping, especially in the capital and insurance markets.”

HCLTech’s financial services vertical sequentially grew 6.9 percent, on the back of large deals the company executed very well and on time to convert it into revenue, Vijayakumar said.

Scope of generative AI

As rivals Tata Consultancy Services (TCS) and Infosys spoke about their on goings and client conversations on generative artificial intelligence (AI), Vijayakumar too feels that for HCLTech, this technology could be one of the biggest opportunities where the company is trying to find the most impactful use cases for both operations and software development.

“This would also be helpful for building a lot of business use cases for our clients in different verticals.  So we have teams working across the board, building those use cases and proof points. Then we will benchmark that with the impact it would create, and clearly double on the high impact use cases,” he said.

Vijayakumar added, “I think it’s a very very strong opportunity. More than the technology itself, a lot of opportunity is there on how the technology can be applied in the real world business context. That’s what we are excited about.”

HCLTech reported its Q4FY23 numbers. Consolidated net profit for the quarter ended March 2023 stood at Rs 3,981 crore, up 10.61 percent against Rs 3,599 crore a year back.

Its revenue from operations for the period stood at Rs 26,606 crore, clocking a growth of 17.74 percent from Rs 22,597 crore.

The profit figure beat estimates but revenue lagged the projections.