HCL Technologies, which on Thursday posted an increase of 24% in net profit for the January-March quarter to ₹3,172 crore, said that challenges such as slower decision making and deferral of discretionary spends due to COVID-19 outbreak will impact the company in the short term.
However, in the medium to long-term scenario, the future for technology companies looks “quite bright.”
The IT firm reported a 16.2% growth in revenue from operations to ₹18,587 crore in the quarter under review. Similar to its counterparts Wipro and Infosys, the company did not give any revenue guidance for 2020-21.
“...Because we identified the risk presented by COVID-19 much early... the impact due to the pandemic was relatively small in the last quarter. In Q4, we posted a strong constant currency growth of 0.8% sequentially, largely fuelled by our Mode-2 offerings, which is digital, cloud, cyber security and internet of things.
Our Mode-2 services grew 7.1% quarter-on-quarter, which has been an amazing performance,” said C. Vijayakumar, president and CEO, HCL Technologies.
Mr. Vijayakumar said that the company sees “some clear impact to our growth story” in the short term as it helps its clients deal with this downturn. However, the company, he said, was not in a position to quantify it at this time.
“I do think the future looks quite bright, medium and long-term prospects of a technology business like us with a very balanced portfolio is going to help us grow and emerge stronger in the medium and long term,” he said.
Cost control
He added that there were many initiatives that the company was taking from a cost-control perspective, including reduction in travel, marketing and third party spend. “... So, while we are doing all this, we’re absolutely committed to keep our employee morale high. There will be no COVID-related redundancies,” he added. HCL Technologies’ headcount stood at 1,50,423 at the end of FY20.
The company, however, has frozen hiring in general but will honour the offers rolled out to 15,000 freshers.
On the demand side, Mr. Vijayakumar said the company is seeing some issues such as volume-based billing impact, some deferral of discretionary spends, slower decision making for new projects, some price discounts and payment-term extensions. He said while sectors such as auto, aviation, entertainment, and non-grocery retail have been impacted, several verticals such as financial services, telecom and professional services have seen low impact. “Also our portfolio has certain insulated industry segments like Life Sciences and Technology Services...we are seeing some robust demand there.”
“So, in essence, we are seeing both kind of impacts -- pockets of good demand in weak verticals and weak demand in strong verticals…given our portfolio mix and strong relevant propositions, we do not see this pandemic influencing our multi-year engagements beyond the short term,” he said.
Talking about the future operating model, Mr. Vijayakumar said that it is too early to completely predict, but directionally, in the 12-18 months, 50% of the company’s employees would work from home and 50% from offices. There may be a rotation model where everybody gets to come to office for some time. “...We do see return to offices. We believe this return needs to be very well calibrated, we do not foresee more than 10% of our employees coming into offices by the end of this quarter… We are seeing significant increase in productivity in the work from home operating model. However, this is under a lockdown scenario, we need to re-evaluate how this will work out in a non lockdown scenario, and our customers have been extremely supportive of work from home in this crisis situation, but in a normal situation how will the privacy and security aspects play out is something we have to see…”
The company’s shares closed 1.50% lower on the BSE to ₹511.80 per share. The board has proposed a dividend of ₹2 per share on double the number of shares post 1:1 bonus issue.
For the full year 2019-20, the company’s net profit increased 9.3% to ₹11,057 crore, while revenue from operations grew about 17% to ₹70,676 crore from the previous financial year. In constant currency, revenue growth for the full year was up 16.7% to $9,936 million, in line with forecast outlook of 16.5-17% for the full year.
During the fiscal, HCL Technologies signed 53 transformational deals. The company said of its total global employee base, presently 96% are working from home and another 2.5% are working from offices.
