HCL Technologies: HCL Tech reports improved deal momentum, doubles quarterly dividend

ET Intelligence Group: HCL Technologies reported a bounce back in the September quarter performance after a sharp fall in the previous quarter affected by the COVID-19 pandemic. With this, the country’s top four IT companies have staged a quicker than expected recovery in operations in the second quarter. This coupled with rising business momentum amid focus on remote working and higher payout to investors in the form of dividends and share buyback would help IT stocks to continue attracting investors.

Despite a revival in the quarterly numbers and doubling of the quarterly dividend payout to Rs 4 per share, HCL Tech’s stock was under pressure after the result was declared on Friday morning. This can be attributed to its relatively less spectacular show. For instance, the country’s third largest software exporter reported a higher sequential growth of 6.4% in the dollar denominated revenue for the September quarter than the 6.1% growth of the second largest Infosys. But, this was largely due to a lower base in the form of HCL Tech’s sharper revenue drop of 7.4% in the previous quarter than the 2.4% fall reported by Infosys. In addition, on a year-on-year basis, Infosys reported 3.2% increase in the topline compared with HCL Tech’s modest 0.8% growth.

ET Bureau

On the guidance front, while HCL Tech appeared to have refrained from changing its earlier estimate of 1.5-2.5% quarterly revenue growth, the company’s CFO Prateek Aggarwal told ET that this growth is expected over and above the 4.5% constant currency growth in the second quarter. Which means, the company in fact improved its revenue guidance for FY21 to 0-0.7% growth from earlier estimate of a fall of upto 2.3%.

HCL Tech reported 110 basis point improvement in the operating margin at 21.6% in the September quarter. It was the highest quarterly margin since the December 2014 quarter when it had risen to 23.8%. The efficiency in revenue collection also improved significantly to 61 days from 65 days a quarter ago.

Like its peers, HCL Tech also reported lower employee attrition and announced to take up salary increases in the current quarter. Its attrition fell to 12.2% from 14.6% in the prior quarter.

With an emphasis on improving shareholder value, the top tier IT companies have reported a stellar comeback in the second quarter and the momentum is expected to continue given a spate of new deal wins and hiring trend.

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