HCLTech Q1FY25 results: Net profit rises 20.4% to Rs 4,257 crore

HCLTech, India’s third-largest information-technology services company, has maintained its FY25 revenue growth guidance in the range of 3-5 per cent.

Noida-headquartered HCLTech’s net profits for the first quarter of FY25 came in at Rs 4,257 crore.

Profits were up 20.4 per cent year-on-year (Y-o-Y), and grew 6.8 per cent sequentially.

Revenue for the quarter grew 6.7 per cent Y-o-Y at Rs 28,057 crore. On a sequential basis, revenue growth was down 1.6 per cent.

HCLTech’s Q1 revenue performance marginally beat Bloomberg estimates and profits were ahead of them. Bloomberg had estimated revenue to be Rs 28,024 crore and net profits Rs 3,845 crore.

Total contract value (TCV) for the first quarter came in at $1.96 billion. It was up 25 per cent Y-o-Y.

In Q1 FY24 the company signed TCVs worth $1.56 billion. However, compared to the fourth quarter TCV was down 14 per cent. TCV in Q4 FY24 was at $2.29 billion.

C Vijayakumar, chief executive officer and managing director, during the media briefing, said: “As we’ve stated in the past, seasonally Q1 is a soft quarter for HCLTech, so sequentially our revenue declined 1.6 per cent in constant currency, but this is better than what we had expected in the beginning of the quarter.”

He further said the company expected sequential growth in all verticals and geographies, except financial services.

“We expect Q2 will be a declining quarter for financial services because of the State Street divestiture revenue going up. But after that, we would expect to see growth in this vertical,” said Vijayakumar.

The company has guided for EBIT (earnings before interest and taxes) margins to be 18-19 per cent.

For Q1 FY25 the company reported EBIT margins of 17.1 per cent.

On margins, Vijayakumar said, “if you see the trajectory HCLTech has taken, usually Q1 is the lowest, Q2 we pick up, Q3 we peak, and Q4 it goes down a little bit. We expect to see a similar trend on margins like we saw in the last year, this year as well.”

The IT and business services grew 5.3 per cent Y-o-Y, but were down sequentially 1.5 per cent. The engineering and R&D (research and development) business grew 8.4 per cent Y-o-Y, but was down 3.5 per cent quarter-on-quarter.

Like its larger peer Tata Consultancy Services (TCS), HCLTech said it did not expect discretionary expenditure to go up.

“In pricing and the overall environment, my assumptions remain the same as at the beginning of the year. We do not expect discretionary spending to pick up. We think we will have a neutral discretionary spending environment. Even though we are seeing some sprinkling of growth drivers, it’s too early to call out if there is going to be a reversal in the trend. So we remain a little cautious on the discretionary spend environment at this time,” added Vijayakumar.

The growth driver for the company in terms of geographies continued to be North America and Europe. Unlike some of its larger peers which have seen US growth falling, HCLTech reported a growth rate of 8 per cent Y-o-Y. Europe grew 3 per cent, and the rest of the world declined 3.6 per cent.

Among verticals, the growth driver was telecommunications, media, publishing and entertainment at 69.2 per cent. Banking, financial services, and insurance (BFSI), one of the largest segments for the industry and the company, was down 1.3 per cent Y-o-Y.

Roshni Nadar Malhotra, chairperson, said: “With our future-ready portfolio, we are well placed to tap emerging opportunities led by GenAI. We remain committed to doing business in a sustainable manner and responsibly as we continue to supercharge progress for our clients.”

Sanjeev Hota, head of research, Sharekhan by BNP Paribas, said: “Despite the momentum on getting deals moderating sequentially, the management sounded confident of better bookings in the coming quarters, while maintaining the guidance for revenues and margin for FY25. The management indicated positive growth across all markets and verticals except financial services in Q2FY25.”