HCL Technologies topples Wipro to become India's third-biggest IT firm

HCL Technologies on Friday delivered an in-line performance in the first quarter ended June, but that was enough to take a lead over closest rival Wipro in revenue run rate to emerge as the third-largest company in the domestic IT services space.

The last time the pecking order in the domestic IT services industry got altered was in 2009 when HCL itself overtook the then scam-ridden Satyam to become the fourth-largest player.

In Q1 of FY18, HCL’s dollar term revenues grew 0.8 per cent to $2.05 billion, which is at least $28 million higher than Wipro’s revenue for the quarter, which stood at $2.02 billion. Given HCL has given a robust revenue growth guidance of 9.5-11.5 per cent for FY19, it is expected to maintain a clear lead over Wipro unless the latter makes any large acquisition.

In the June quarter, HCL posted a 10.7 per cent rise in its net profit at Rs 24.03 billion over the same period last year, backed by highest bookings in the quarter apart from sound growth in infrastructure services’ vertical. On a sequential quarter basis (compared with the trailing quarter), the net profit grew 5.3 per cent.

The Noida-headquartered company’s revenues at Rs 138.38 billion, witnessed a 14.2 per cent rise on year-on-year basis, while it was up 5.3 per cent sequentially. In constant-currency terms, revenue grew 9.5 per cent (YoY) during the June quarter.

"We achieved highest bookings in this quarter led by our next-generation infrastructure services as well as mode 2 offerings. Our combined mode 2 and 3 offerings contributed 26.6 per cent of our revenues and it grew 9.6 per cent QoQ,” said C Vijayakumar, president and chief executive, HCL.

The company signed 27 deals during the quarter. Operating margin improved 10 basis points sequentially to 19.7 per cent, driven by cross-currency gains that supplemented 70 basis points to the overall margin during the June quarter.

The company maintained its revenue guidance for the full fiscal at 9.5-11.5 per cent and Ebit margin forecast at 19.5-20.5 per cent. Rolling out of wage hikes in July-September period may, however, impact its operating margin levels in the second quarter. 

By the end of the June quarter, attrition level increased 80 basis points to 16.3 per cent. The firm witnessed a net addition of 4,040 employees during the quarter, with overall employee count going up to 124,121 at the end of the June quarter. The company also said it was ramping up its localisation drive, with 63 per cent of its US centres being local at the June quarter.

"HCL delivered an in-line margin performance, while constant-currency revenue growth remained marginally below our expectations. The company has won large billion dollar infra deal from Nokia during the quarter, which would drive the infra services growth rate in the coming quarters," said Sanjeev Hota, AVP, research, Sharekhan.