HCLTech’s banking, financial services and insurance (BFSI) customers' focus on efficiency engineering and reducing costs is driving deals for the company, Srinivasan Seshadri, chief growth officer and group head, financial services, has said.
The IT services company’s BFSI vertical outperformed amid a seasonally slow December quarter.
The company posted nearly 13 percent year-on-year growth in constant currency (CC) terms in the third quarter. The numbers were in contrast to those of bigger rivals such as Tata Consultancy Services (TCS) and Infosys which continue to report a decline in the BFSI vertical due to delays in deal renewals, customers tightening tech budgets, higher furloughs and overall macroeconomic uncertainties.
On a quarter-on-quarter basis, HCLTech’s financial services’ vertical growth declined 1.3 percent in CC terms in Q3.
Speaking to Moneycontrol, Seshadri said, “Organisations still want to do efficiency engineering. Cost take out is going to be a very, very big focus area for everybody…,” he said.
Outcome orientation was another thing that analysts and advisers liked about HCLTech. “When we contractually commit to something, organisations know that we have put our money where our mouth is, and made sure that they are getting predictable reduction in costs,” he said.
“I think our ability to transform using these ecosystem partners, combined with efficiency engineering, has made sure that our pipeline is robust. We're extremely optimistic about what's coming up,” he said.
Beating peers
Seshadri, who has been HCLTech for over 21 years, said the company’s outperformance and continued increase in market share of financial services customers is driven by the "verticalisation" and infrastructure-focused approach of the company.
Over the last three-four years, HCLTech helped move large customers’ legacy infrastructure on cloud at a fast pace and building a replicable model around it. This brings confidence for the company’s future prospects in the vertical, Seshadri said.
According to Seshadri, historically, HCLTech has had an underdog kind of a journey as compared to its peers, which demanded that the now third-largest IT services company of the country, to be way more disruptive to carve out a space for itself.
“A lot of financial services firms worked with our peers over many years. We are not a y2k (Year 2000) company. We came in after and didn't have the established armies of people (unlike peers),” he said.
So when organisations were looking for their money’s worth, HCLTech managed to become a differentiated “challenge-the-status” organisation.
“We had to earn every dollar that we needed. We had to be very, very disruptive in what we did, and we needed to make sure that we demonstrated a lot of value in the money that they spent. Whether it's an infrastructure, transformation of application landscapes, we had to make sure that we demonstrate real tangible value for customers,” Seshadri said.
Even today, when Global Capability Centers (GCCs) have started coming to India and a fair share of peers’ employee base is moving there, HCLTech has seen as much lesser impact, he said.
HCLTech reported its earnings for Q3 last month, beating estimates on all three parameters of net profit, revenue and operating margins.
Net profit rose 6.23 percent YoY to Rs 4,351 crore. Consolidated revenue for the quarter grew 6.54 percent YoY at Rs 28,446 crore. Operating margins came in at 19.8 percent, surpassing its own guided range of 18-19 percent.
The company, however, cut its revenue growth guidance for full year FY24 from the previous quarter at 5-6 percent YoY in constant currency terms to now 5-5.5 percent. This is including ASAP acquisition.
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