Noida-headquartered HCL outperformed its peers – outpacing even the country’s largest IT firm TCS – with its financials boosted by the $2.1 billion Verizon deal signed in August last year.
ETtechLittle Change in Revenue Guidance
HCLTech also increased its headcount while TCS, Infosys and Wipro registered a decline. The Shiv Nadar-founded firm trimmed the upper end of its revenue guidance and maintained status quo in a nod to the prevailing weakness in demand for technology services amid inflationary concerns in the US and Europe.
“The company is very positive about its medium-term growth led by demand from engineering, research and development services,” said C Vijayakumar, CEO of HCLTech, while conceding that there has been “little change” in the overall macro environment.
Discover the stories of your interest
The recent positive commentary by the US Federal Reserve “has not translated into an uptick in client investments”, he noted, echoing similar comments on Thursday by TCS CEO K Krithivasan. “While we still don’t see an uptick in the discretionary spend, it remains pretty much similar to what it was in the last quarter. There is still a portion of technology spending that is looking resilient,” Vijaykumar said while pointing to cloud migration, SAP core and data modernisation, cybersecurity automation and advanced analytics as the “areas where we think the spend is still promising”.
Meanwhile, Wipro, which has been underperforming its peers and has seen an exodus of senior executives in the last few years, said its revenue largely remains dented with clients still opting for conservative investments as they look for efficiency, more returns on investments, and better optimisation of existing investments.
Even as the Bengaluru-headquartered company’s profit fell for the fourth consecutive quarter, chief executive Thierry Delaporte indicated there were some “green shoots” in the demand environment. In reply to queries on the ongoing lawsuit filed by Wipro against its two former employees, including former CFO Jatin Dalal who jumped ship to join bigger rival Cognizant, Delaporte said, “There’s nothing personal or targeted” in the way the company is dealing with “contract obligations”. He added that the company has a “strong pipeline” of leaders and it is continuously in succession planning mode, including for the CEO’s role. Delaporte’s term expires in 2025. HCLTech announced an interim dividend of Rs 12 per equity share while Wipro’s dividend payout stood at Re 1 a share. Both HCLTech and Wipro shares ended 3.8% higher at Rs 1,543 and Rs 465.45 per share, respectively, on the BSE. The firms announced the results after market hours.
Muted Forecast
HCLTech narrowed the upper band of its revenue growth guidance to 5-5.5% from 5-6% earlier, expecting a weaker Q4 for the software business while maintaining 18-19% operating margin guidance for the fiscal year. Sequentially, its net profit grew 13.5% and revenue was up 6.7%. Its operating margin for the third quarter stood at 19.8%, a record high, up 130 bps sequentially and 20 bps higher on a YoY basis.
Wipro broadly maintained its operating margin at 16% compared with 16.1% in Q2 and 16.2% in the year-ago period. “We continue to see some softness, there is no question, largely on the BFSI and the energy and utility side of the business…We are starting to see early signs of a return to growth in consulting, as demonstrated by the double-digit growth in order bookings in our Capco business,” said Delaporte.
Decrease in Large Deal Flow
HCLTech reported new deal total contract value (TCV) worth $1.927 billion, down from $3.4 billion last quarter and $2.33 billion in Q3 of last fiscal.
In comparison, Wipro booked large deal wins at $0.9 billion, down from Q2’s $1.3 billion. Total deal bookings for Q3FY24 stood at $3.8 billion, similar to the preceding quarter. However, total deal wins declined 13.5% YoY in constant currency terms.
Wipro won 14 deals in the quarter compared with 11 in Q3FY23.
