HCL Tech improves OPM and guidance even as Shiv Nadar steps down

HCL technologies

HCL Technologies may be the fourth major IT company to declare results but there has been a common thread. The growth has flattered, margins have been better than expectations and guidance has been robust. For the Jun-21 quarter, HCL Tech reported 12.48% yoy growth in revenues at Rs20,068cr and 2.17% growth sequentially. For the Jun-21 quarter, HCL Tech added 8 clients in the $50 million-plus category and 19 clients in $20 million-plus category. Order flows were up by 37% YoY.

While the IT & Business Services vertical contributed 72% of revenues for HCL Tech, it was the Products and Platforms vertical which reported EBIT margins of 23.5%. The big story was about margins. Operating margins at 19.6% were sharply higher in the Jun-21 quarter compared to 16.71% in the sequential Mar-21 quarter. Net margins at 15.97% were 3-times the Mar-21 net margins at 5.61%. HCL Tech guided operating margins at 19%-21% for FY22. Revenue growth guidance is at double digits for FY22. Better employee engagement and upskilling resulted in attrition rate falling sharply to 11.8% from 14.6% in the previous year.

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In the midst of the flurry of financials, another big news was Shiv Nadar stepping down as Managing Director of HCL Tech and limiting himself to play a strategic advisory role. This was on the cards as most executive responsibilities were already split between the CEO and Roshni Nadar. At 76, Nadar has decided to call it a day and appointed CEO Vijayakumar as the MD. As the baton passes, it is to the credit of Nadar that he built an organization that is robust and self-sustaining. It is likely to be business as usual at HCL Tech.

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