HCLTech Q3 Profit Up 5.5% to Rs 4,591 Crore
HCLTech, India's third-largest software services exporter, reported a 5.5% increase in its consolidated net profit for the fiscal third quarter at Rs 4,591 crore. The company said the growth was on the back of good performance in the services segment as well as significant deal wins. Profit for the same period last year was at Rs 4,350 crore and sequentially, it registered an 8.4% rise from Rs 4,235 crore in the preceding September quarter.
Revenue for the quarter ended December grew 5.1% year-over-year (YoY) and 3.6% QoQ to Rs 29,890 crore, on services revenue, though software revenue dropped 2.1% YoY in constant currency due to issues with some deal renewals and new deals.
HCLTech raised the lower end of its fiscal 2025 revenue growth guidance in constant currency terms to 4.5-5.0% from the earlier 3.5-5%. CEO and Managing Director C Vijayakumar said that he is upbeat about the company's future performance, citing improving client demand and increased IT spending. He said that clients are focusing on innovation and efficiency, particularly in initiatives centered on generative AI and data. However, he cautioned that fourth-quarter will account for planned contractual reductions.
In contrast, Tata Consultancy Services, India's largest IT services company, reported a 5.5% YoY growth in net profit at Rs 12,380 crore on revenue of Rs 63,973 crore. TCS, however, reported a slight QoQ revenue decline of 0.44% and reduced its workforce by 5,370 employees in the December quarter.
HCLTech added 2,134 employees to its workforce in the October-December quarter, taking the headcount to 220,755. This was a reversal of the previous quarter when the company had reduced its workforce by 780 employees. Fresher hiring during the quarter stood at 2,014, lower than the September quarter's 2,932. For fiscal 2025, the company cut back its fresher hiring plans from 10,000 to 7,000, and 6,000 have been inducted already in the first nine months. Chief People Officer Ramachandran Sundararajan said the lower intake of freshers is because of low attrition and increased productivity, and this may have gone up considerably next year.
HCLTech bagged 12 deals with a total contract value of $2.10 billion during the third quarter, slightly lower than $2.22 billion reported in the previous quarter. However, this was higher compared to $1.93 billion reported from the corresponding quarter last year. ACV increased by 9% QoQ and by 23% YoY, underlining healthy deal momentum despite smaller values. Most of the new contracts were signed in key markets across the Americas and Europe, where the deal pipeline remains near an all-time high.
The operating margin for the December quarter decreased to 19.5% from 19.8% in the same period last year but increased from 18.6% in the September quarter. The increase was driven by a more favorable dollar compared to the rupee. Analysts believe that HCLTech will sustain the growth trajectory with small and mid-sized enterprise clients, mainly in North America and Europe.
HCLTech is well placed to take advantage of an expected 10-12% increase in IT spending in India, global IT growth of 6-8%, and the production phase of generative AI projects in 2025, said Biswajit Maity, senior principal analyst at Gartner. He conceded that mixed demand in late 2024, with cost-saving priorities and reduced discretionary spending, but the outlook was brighter for the new year.
In celebration of 25 years of public listing, HCLTech announced a special dividend of Rs 6 per share, bringing the total dividend for the quarter to Rs 18. For the entire fiscal year, shareholders will receive a cumulative dividend of Rs 60 per share, with the record date set as January 17.
Despite the robust financial performance, HCLTech's shares closed 0.52% lower at Rs 1,985.25 apiece on the BSE, while the benchmark Sensex declined by 1.36%. The company had announced its results after market hours.
