India’s third largest software services firm by revenue now expects annual revenue growth to be in the 13.5-14% range on year, compared to 13.5-14.5% forecast earlier.
The cut in outlook, analysts said, reflected macro-economic concerns.
The company said last month it expected revenue to come in at the lower end of guidance during the fiscal year due to a challenging demand environment.
Revenue from its software services business is also forecast to grow by 16%–16.5% on year in constant currency terms, from 16-17% predicted previously.
Operating margin outlook has been trimmed to 18-18.5% from 18-19% earlier.
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The ongoing fiscal fourth quarter will be weak for its software business and will weigh on its overall numbers, HCLTech chief executive C Vijayakumar said at a press briefing on Thursday. Net profit for the October-December period stood at Rs 4,096 crore compared to Rs 3,442 crore in the corresponding quarter last year.
Revenue was up 19.6% year on year at Rs 26,700 crore.
An ET poll of analysts has estimated net profit at Rs 3,769 crore, up 9.5%, on revenue of Rs 26,109 crore, up 16.9%.
Sequentially, profit was up 17.4% while revenue grew 8.2%.
The board declared a second interim dividend of Rs 10 per share in the quarter.
Vijayakumar said total spending on technology is expected to increase despite some moderation in the enterprise spending environment and change in the deal mix.
“Overall, we are continuing to see a good demand environment, especially deals which involve IT operating model changes, cloud adoption and vendor consolidation deals where we see good traction,” he said.
The company reported a new deal total contract value (TCV) worth $2.34 billion compared to $2.38 billion last quarter.
It reported 17 large deals during the quarter, compared with 11 in the fiscal second quarter.
HCLTech expects $115 billion worth of vendor consolidation deals to come up in the next three years, with the company hoping for a good share of the pie, especially in the financial services and consumer packaged goods (CPG) segments, Vijayakumar said.
“The mix of bookings will change going forward, reducing the share of discretionary deals but the share of vendor consolidation, cost optimisation and cloud migration type of deals will increase,” he said.
Chief financial officer Prateek Aggarwal said the company had increased its guidance substantially in October. “…a lot of things changed between October and November when global tech majors came out with their results. That is what our updated guidance reiterates based on what we communicated in December.”
Shares closed 1.6% higher at Rs 1,071.90 on the BSE Thursday. The results were announced after market hours.
“The downgrade (of the guidance) was led by macro concerns, short-term demand slowdown and caution towards deal postponement in impacted markets,” said Ruchi Burde Mukhija, an analyst at brokerage Elara Capital.
In a seasonally weak quarter due to the higher number of holidays, operating margins stood at 19.6%, up 160 basis points sequentially and 60 bps on year, helped by currency tailwinds, better utilisation and lower employee costs, HCLTech said.
The company has rolled out increments in the range of 7-8% for almost 98% of its workforce during the quarter. This hurt operating margins by 70 basis points, it said.
Talent outlook
Attrition for the quarter stood at 21.7% compared to 23.8% reported last quarter, with headcount at 222,270 at the end of the period.
It hired 2,945 people versus 8,359 in the second quarter on a net basis, said Ramachandran Sundararajan, chief people officer.
The company added 5,892 freshers during the quarter. It had added 16,362 freshers in the first half ended September. The company has said previously it planned to hire 30,000 freshers during the fiscal year.
“In the first three quarters, we have hired more than 22,000 freshers. We may fall marginally below the 30,000 target. That is the moderation we will see due to better retention and encouraging attrition rates,” said Sundararajan.
The manufacturing vertical grew at 21.2% over the year in constant currency terms, followed by technology and services which grew at 19.3%. Financial services reported a 1.7% dip over the year due to holidays during the quarter, while CPG fell due to some ramp downs in projects. Among geographies, Europe led growth at 23% year on year.
On Monday, India’s top software exporter Tata Consultancy Services reported 11% on-year growth in fiscal third quarter net profit at Rs 10,846 crore, missing estimates.
Revenue came in at Rs 58,229 crore, up 19.1% on year.
TCS also saw a reduction in its total workforce for the first time in 10 quarters as it slowed down fresh hiring, indicating challenges in the global demand environment owing to economic uncertainties.
