Software services firm HCL Technologies on Wednesday posted an 8.6% rise in net profit to ₹2,188 crore for the July-September quarter compared with ₹2,014 crore a year earlier on the back of growth across different business verticals.
The firm, which registered a 7.9% growth in revenue for the quarter at ₹12,434 crore, maintained its revenue growth forecast for the current fiscal at 10.5% to 12.5% in constant currency terms.
“Our growth is becoming more and more broad-based across businesses.... The broad-based nature of our portfolio is inherently helping us to do well because of the multiple service offerings. Second, our Mode 2 services have started delivering strong growth. They are bringing in significant number of deals,” C. Vijayakumar, president & CEO, HCL Technologies, told The Hindu . Under Mode 2, HCL Technologies offers services including digital and analytics, IoT, cloud and cybersecurity.
‘Traditional goes out’
Mr. Vijayakumar said customers were spending less on traditional ideas. They want more productivity, automation and [want to] reinvest the [savings] in next-generation technologies. “So, we have built a set of powerful offerings in Mode 2, which is where the clients are spending.”
In the quarter, engineering and R&D services grew 38.4%, followed by 5% growth in application services and 4.8% growth in infrastructure services. Business services saw a decline of 1.3%. America, Europe and Rest of the World grew 12.7%, 7.4% and 6.3%, respectively.
In dollar terms, net income grew 12.6% year-on-year to $339.2 million, while revenue grew 11.9% to $ 1,928 million. Sequentially, however, while infrastructure services declined 0.2%, application services remained flat.
“Both these services together had a $20 million decline from India projects. Globally (without India), the growth is 1.8% in infra and close to 1% in applications, in constant currency,” he said. He explained that in India, the company ‘continued to be selective’. “When some large projects get over, they create a decline in revenues. A couple of large programmes ended in the previous quarter, impacting revenues in this quarter.”
Asked about the bellwether status of the IT sector in the India, Mr. Vijayakumar said, “There are two dimensions, one is traditional services, in which the proposition by Indian-origin providers resonates well.”
He said that while some global players have built up large offshore capabilities, the ability of ‘India-heritage’ providers to get the onsite-offshore model to work is still a differentiator. “That is why, even though they [global players] have leveraged low-cost geographies, they are still not really viable businesses. India heritage providers do not have that problem.”
He added that, “On the new services, overall (not talking about HCL) India heritage providers are lagging behind.”
“Some of the top providers looked at the opportunity ahead of time much more strategically by creating more organic and inorganic investments and they have scaled it over multiple years, especially last four to five years, they have done that proactively. Whereas a lot of India heritage providers are looking at this when their existing model is under serious threat and disruption,” he said, adding that there is enough intellect and capability in India to bounce back and be a significant player in the new technology space.
