No significant pick up in discretionary spending yet: HCLTech CEO

HCLTech CEO and MD C Vijayakumar

IT services major HCLTech’s CEO and MD C Vijayakumar on July 12 said that there hasn’t been any significant uptick in discretionary spending yet, contradicting the Street’s expectations of seeing some green shoots in tech spending for IT companies.

HCLTech’s net new deal wins in the first quarter ended June 30, 2024 came in at $1.96 billion, sequentially down from $2.29 billion reported in the previous quarter. In Q1FY24, HCLTech’s deal wins came in at $1.57 billion.

Vijayakumar highlighted that the company expects quarterly net new deal wins to come in the range of $2 billion, but due to delays in certain deal closure timelines in Q1, the total contract value was a little lower.

Speaking at the company’s Q1 earnings conference, he said, “Seasonally, Q1 is a soft quarter for HCLTech. So Sequentially our revenue declined 1.6 percent in constant currency (CC) terms and this is better than what we had expected in the beginning of the quarter.”

“We have not factored any significant pick up in discretionary spends. Our assumption is this year will be the same as last year…Though we see some actions which show things could have bottomed out, but I do not want to take a call…because there have been so many false starts in the last few quarters from where the recovery will happen. We stay with our full year guidance of 3-5% YoY growth CC,” he said.

For Q2, he said the company will grow in all geographies and verticals except financial services.

Some of the deals and partnerships won this quarter include an ER&D partnership with Olympus, a BFSI deal with ApoBank, a custom silicon chip solutions deal with UK’s Arm to name a few.

Among geographies, on a YoY basis, Americas grew 8 percent, Europe grew 3 percent and RoW (rest of the world) declined 3.6 percent in CC.

Vertical-wise, growth was driven by Telecommunications, Media, Publishing & Entertainment  which grew 69.2 percent YoY in CC terms, Retail & CPG grew 9.7 percent YoY in CC, manufacturing grew 3.5 percent.

Financial Services declined by 1.3 percent YoY in CC terms and Life Sciences and Healthcare declined by 4.1 percent YoY in CC terms.