HCL Tech: HCL Tech’s net profit rises 6.8% quarter-on-quarter to Rs 4,257 crore, beating expectations

NEW DELHI | BENGALURU: HCL Tech, India’s third-largest software exporter, reported a 6.8% rise in net profit to Rs 4,257 crore quarter-on-quarter, beating ET analysts’ estimates of Rs 3,745 crore. The increase was mainly due to a surge in non-core revenues in the June quarter amid weak demand.

Revenues and margins declined quarter-on-quarter. The company’s EBIT stood at INR 4,795 crore, down 4.4% quarter-on-quarter and up 7.5% year-on-year.

Several technology stocks surged to all-time highs on Friday, spearheading a strong performance for broader equity indexes, following the release of Tata Consultancy Services (TCS) earnings on Thursday. TCS led five technology companies, including HCL Tech, to be among the top five gainers on the Nifty.

HCL Tech’s consolidated revenue was Rs 28,057 crore, up 6.7% year-on-year and down 1.6% sequentially. The Noida-based company termed it a “seasonally weak quarter” and, like larger peer Tata Consultancy Services (TCS), suggested discretionary spending was likely to remain largely unchanged from the previous fiscal year. “Some of the behaviour indicates that the bottom may have been reached, but we do not want to make that judgement as there have been a lot of false starts in the year leading up to the recovery,” said C Vijayakumar, CEO and MD, HCL Tech.

Operating margins fell to 17.1% from 17.6% in the March quarter. HCL Tech maintained its FY25 revenue guidance of 3-5% and its margin guidance for the current fiscal at 18-19%, unchanged from FY24. Vijayakumar said the company generally sees stronger third quarter margins, which will offset the slowdown in growth seen earlier in the current fiscal, and expects to achieve its margin guidance. HCL Tech CFO Prateek Agarwal said, “Our cash flow generation remains strong with free cash flow of Rs 21,637 crore for the last 12 months, representing 133% of PAT and 88% of EBITDA.” Regarding the outlook, he said, “We expect sequential growth across all industries and geographies except Financial Services in the second quarter, and we expect growth to continue. We expect to see the planned impact of the State Street divestiture in second quarter revenue, but even including that impact, we remain comfortable with our full-year revenue and margin outlook as we continue to see some momentum in client spending on GenAI and other emerging technologies.”