Result Analysis: HCL Technologies Limited (CMP: Rs.1110.05) Result Update: Q1FY24

HCL Technologies Limited is a global technology company, home to more than 223,438 people across 60 countries, delivering industry-leading capabilities centered around digital, engineering, cloud, and Al, powered by a broad portfolio of technology services and products. We work with clients across all major verticals, providing industry solutions for Financial Services, Manufacturing, Life Sciences and Healthcare, Technology and Services, Telecom and Media, Retail and CG, and Public Services. Consolidated revenues as of 12 months ending June 2023 totaled $ 12.8 billion.


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    Stock Details
    Market Cap. (Cr.) 301230.38
    Equity (Cr.) 542.73
    Face Value 2
    52 Wk. high/low 1203 / 876
    BSE Code 532281
    Book Value (Rs) 241.02
    Sector IT – Software
    Key Ratios
    Debt-equity: 0.11
    ROCE (%): 24.59
    ROE (%): 22.2
    EPS TTM: 54.73
    P/BV: 4.6
    P/E TTM: 20.28

    Result Highlights:

    • The company experienced a slight decrease in revenue of 1.2% QoQ to Rs.26,296 cr. and a 2.8% QoQ decline in net profit by 11.3% to Rs.3,531 cr. The primary factors contributing to this performance decline were the demand softness in large verticals, project ramp downs & reduced discretionary spending.

    • EBIT Margin of the company also declined by 130 bps QoQ in the quarter and stands at 16.9%, led by an increase in SG&A Expenses.

    • Among segments, IT and business services had strong growth in the number of new contracts signed, but the majority of these gains were offset by a decrease in discretionary spending, which resulted in flat QoQ sales in CC. Deal ramp-downs caused ER&D services to decline 5.2% on a quarterly basis. According to management, this sector has now stabilized. Software revenue was consistent in CC terms on YoY basis.

    • Across geographies, while North America (63% of revenue) improved by 0.2% QoQ, Europe (28.7% of revenue) and RoW (7.9% of revenue) degrew by 2.4% and 6.2% QoQ (in the CC terms) respectively.

    • Company won 18 new deals in Q1FY24 aggregating to $1.6bn as compared to the previous quarter of $2.1bn. The deal pipeline, which increased 26.2% YoY, is still at an all-time high. 11 large transactions in the software market and 7 large deals in services were inked.

    • In Q1, the attrition rate decreased from 19.5% in Q4FY23 to 16.3%. Although, Headcount also decreased by 2,506 employees QoQ to close at 223,438 employees.

    • HCL Tech announced an interim dividend of Rs.10 per share.

    Financial Performance:

    hcl-Financial- Performance

    Shareholding Pattern:

    Particulars (In %) Q4FY23 Q1FY22
    Promoters Group 60.72 60.72
    FIIs 18.81 18.46
    DIIs 15.91 15.54
    Public 4.19 4.88
    Others 0.4 0.4

    Management Commentary:

    Commenting on the June quarter results, C Vijayakumar, CEO and MD said, “In Q1 FY 24, our revenue and people strength sequentially moderated in line with the demand environment. We delivered a 6.3% YoY growth in CC at company level and 7,1% YoY CC for the Services business. We experienced double-digit YoY growth, in our largest verticals – Financial Services, Manufacturing, and Life Sciences and Healthcare fueled by large deals. These large deals helped offset cuts in client discretionary spend in these verticals. We are expecting other verticals to pick up as well shortly. This combined with the strength of our record-high pipeline enables us to maintain our guidance for the year.”



    HCL Technologies showed subdued performance in Q1FY24 with a further decline of 1.2% QoQ in revenue and profits by 11.3% QoQ. Because of North American uncertainty and delayed decision-making, the near-term future for IT services is still uncertain. The long-term demand environment is still solid, and the IT industry is projected to pick up steam starting in H2FY24 and moving forward. Due to its numerous long-term partnerships with top global brands, HCL Tech is well-positioned to promote growth over the long run. Richer revenue visibility provides hope for the company’s future business success. However, escalating worries about economic uncertainty in developed nations and ongoing supply-side restrictions are making it difficult for the corporation to continue growing in the future.



    Particulars (In Rs. Cr.) Q1FY24 Q4FY23 Q1FY23 QoQ%      YoY%
    Revenue from Operations 26,296 26,606 23,464 -1.2% 12.1%
    Other Income 344 453 409 -24.1% -15.9%
    Total Income 26,640 27,059 23,873 -1.5% 11.6%
    Employee Benefit Expenses 15,014 14,665 12,978 2.4% 15.7%
    Employee benefit Expenses as % of Sales 57.1% 55.1% 55.3% 200 bps 180 bps
    Purchase of stock-in-trade 468 577 355 -18.9% 31.8%
    Changes in inventories of stock-in-trade 67 -14 -9 -578.6% -844.4%
    Outsourcing costs 3,628 3,786 3,593 -4.2% 1.0%
    Depreciation & Amortisation Expense 927 1,027 983 -9.7% -5.7%
    Other Expense 1,754 1,729 1,572 1.4% 11.6%
    EBIT 4,438 4,836 3,992 -8.2% 11.2%
    EBIT Margin 16.9% 18.2% 17.0% -130 bps -10 bps
    Profit After Tax (PAT) 3,531 3,981 3,281 -11.3% 7.6%
    PATM (%) 13.4% 15.0% 14.0% 160 bps – 60 bps
    EPS (in Rs.) 13.05 14.71 12.13 -11.3% 7.6%
    Segment Revenue (In Rs. Cr.) Q1FY24 Revenue % Q4FY23 QoQ% Q1FY23 YoY%
    IT and Business services 19,642 74.7% 19,632 0.1% 17,070 15.1%
    Engineering and R&D services 4,047 15.4% 4,274 -5.3% 3,904 3.7%
    HCL Software 2,607 9.9% 2,700 -3.4% 2,490 4.7%


    Geography Revenue % Q1FY24 Q4FY23 Q1FY23 QoQ YoY
    America 64.2% 63.8% 64.5% 40 bps -30 bps
    Europe 27.8% 28.9% 28.7% -110 bps -90 bps
    Rest of the World 8.0% 7.3% 6.8% 70 bps 120 bps
    Source: Company website, EWL Research

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