HCL Tech Q4 net dips 6%, expects FY22 revenue to grow in double digits

IT services firm HCL Technologies fourth quater numbers were impacted by higer taxes and one-time bonus payment. The company reported a 64.9 per cent fall in its fourth quarter net profit at Rs 1,111 crore on a year-on-year basis. Profit was down 72 per cent on a sequential basis. The provision for tax nearly doubled sequentially in Q4 to Rs 1,191 crore. 

The fourth quarter revenue was Rs 19,642 crore, up 1.8 per cent sequentially and up 5.7 per cent on y-o-y basis. The Noida-based company expects FY22 revenue to grow in double digits in constant currency, and expects EBIT margin between 19.0 per cent and 21 per cent.

The firm also reported the highest ever new deal booking this quarter of $ 3.1 billion, a 49 per cent increase annually, with an all-time high exit pipeline.   

"Both the booking and pipeline have been very broad based, it cuts across verticals geographies service lines," CEO C Vijayakumar said. He added that both are underpinned by tremendous momentum in the digital propositions are whether it is application modernization cloud migration data analytics cybersecurity, and digital workplace, these are the big themes which drove over growth.

Including the impact of the one-time milestone bonus, the company's net profit for the March 2021 quarter was at Rs 2,387 crore.  The special bonus was paid to employees in February 2021 to mark the company reaching the $10 billion revenue milestone, amounting to approximately $90 million plus payroll taxes in some countries. This came to Rs 728 crores (Rs 575 crores net of tax) in rupee terms, the company said Friday. 

Revenue for the full year was Rs 75,379 crore, a rise of 6.7 per cent annually in rupee terms, and 1.1 per cent in constant currency, while  EBIT margin during the year was 21.4 per cent.  

"The ongoing COVID-19 pandemic has drastically changed our world – society at all levels, businesses around the globe, and our own individual lives, as well as those of families, friends, and colleagues. In the past year, we have worked relentlessly to respond to the disruption of the pandemic, a sign of the tenacity of the human spirit. Enterprises, too, have worked to adapt to and embrace the transformed business environment and ecosystems, partly through the adoption of next-generation technologies," said Shiv Nadar, Chairman & Chief Strategy Officer, HCL Technologies Ltd.

HCL Technologies will hire more than 15,000 entry level hires, not only in India but across its other geographies, including US and Canada in the coming financial year. 

The company declared a dividend of Rs 6 per share, and a special interim dividend of Rs 10 per share as a milestone to mark the company crossing the $10 billion milestone. The total interim dividend is Rs 16 per share, bringing up the total for the year to Rs 26 per share.

Last year, the Noida-based company did not provide a full year guidance given the current global uncertainty, but said it sees only a short-term impact from the Covid-19 pandemic. "The company has guided double digit growth in FY22E. This coupled with EBIT margin guidance of 19%-21.0% and winning of 19 large deal are key positives," said an ICICI Direct Research's first cut report on the company's number.

Larger rivals Tata Consultancy Services and Infosys also posted annual revenue growth that fell short of double digits in constant currency terms. Like peers, HCL Tech too saw revenues rise due to deal wins in the digial segment.

"HCL Tech has reported largely subdued 4QFY21 vs our expectations. We expect strong new deal TCV to propel double digit revenue growth FY22. Additionally, we expect the company to provide specific numerical FY22 revenue growth guidance range in 1Q-2QFY22," said Suyog Kulkarni, Senior research Analyst at Reliance Securities. 

He added that he expects the company to report "solid revenue recovery with 11.7 per cent revenue compound annual growth rate over FY21 to FY24 driven by consistent transformation deal wins, multi-decade experience in IMS/Cloud services offerings and rising share of products and platforms business.

Larger rival TCS's Q4 order book at $9.2 billion was the highest ever reported by the company in a quarter since the company started reporting this metric. 

Infosys posted a 17.5 per cent jump in net profit for the March quarter on a year-on-year (YoY) basis, even though it was down 2.3 per cent sequentially. It forecast annual revenue growth of 12 to 14 per cent in constant currency terms and operating margins in the range of 22-24 per cent for 2021-22, as demand for its digital services grows amid the Covid-19 pandemic.It reported large deal signing of $2.1 billion in the quarter.

HCL signed 19 deals in the fourth quarter. 

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