HCLTech Reports 11% Profit Surge in Q2 FY25 Amid Revenue Growth of 8%

HCLTech Reports 11% Profit Surge in Q2 FY25 Amid Revenue Growth of 8%
  • HCLTech’s Q2 FY25 net profit increased by 11% to Rs 4,235 crore.
  • Revenue from operations grew 8.2% YoY, reaching Rs 28,862 crore.
  • EBIT margin stood at 18.6%, marking a YoY increase of 8.7%.
  • The company narrowed its FY25 revenue growth forecast to 3.5%-5%.
  • Attrition rate dropped to 12.9%, while 2,932 freshers were added.
  • Interim dividend of Rs 12 declared, payable on October 30, 2024.

HCL Technologies Ltd (HCLTech), India’s third-largest IT services provider, reported robust financial results for the second quarter of FY25, with profit and revenue both experiencing significant growth. The company’s net profit rose by 10.52% year-on-year (YoY), reaching Rs 4,235 crore, compared to Rs 3,832 crore in the same period last year. This growth came despite a marginal sequential dip of 0.5% in profits from the previous quarter.

Revenue from operations climbed 8.21% to Rs 28,862 crore during the July-September quarter, up from Rs 26,672 crore in Q2 FY24. In terms of constant currency (CC) revenue, HCLTech achieved a 6.2% increase, with USD revenue rising by 6.8% and INR revenue by 8.2%.

Profitability and Margins Improve

HCLTech’s profitability in the second quarter was driven by its expanding EBIT (earnings before interest and taxes) margin, which stood at 18.6%, a year-on-year improvement of 8.7%. EBIT reached Rs 5,362 crore, reflecting the company’s successful efforts to optimize its operational efficiency amid a challenging macroeconomic environment. Sequentially, the EBIT margin grew by 149 basis points, showcasing the company’s ability to maintain profitability despite global economic uncertainties.

Revenue Growth Forecast Narrowed

While HCLTech has posted solid results in Q2 FY25, it has slightly narrowed its revenue growth forecast for the full fiscal year. Previously, the company had forecasted growth between 3% and 5%, but it now expects growth to fall between 3.5% and 5%. This adjustment reflects the broader industry trend of cautious optimism as companies grapple with uncertain demand in key markets.

Employee Metrics: Freshers Hired, Attrition Rate Drops

HCLTech continues to focus on talent acquisition and retention, adding 2,932 freshers in Q2 FY25 and planning to onboard 10,000 freshers by the end of the fiscal year. The company’s total headcount reached 218,621 as of September 30, 2024, with a net addition of 780 employees during the quarter. This is in contrast to some of its competitors like Infosys and Wipro, which have been reducing their workforces.

The attrition rate—a critical metric for IT companies—improved significantly, dropping to 12.9% in Q2 FY25 from 14.2% in the same period last year. This decline signals an improvement in employee retention and aligns with industry trends where companies are focusing on stabilizing workforce dynamics after periods of high turnover.

HCLTech Bucks Industry Hiring Trends

Notably, HCLTech has defied the hiring trends seen among some of its rivals. While competitors such as Tata Consultancy Services (TCS) and Infosys have been more conservative in their hiring, with net headcount reductions in recent quarters, HCLTech has maintained a net positive hiring trend. This is a testament to the company’s continued investment in building a skilled workforce, particularly in next-generation technologies.

Dividend Announcement: Rs 12 Per Share

In a move that will delight shareholders, HCLTech’s board of directors declared an interim dividend of Rs 12 per equity share for FY25. The record date for the dividend is set for October 22, 2024, with the payment to be disbursed on October 30, 2024. This marks a continuation of the company’s commitment to returning capital to shareholders and reflects its strong financial health.

Market Response to Q2 Results

Ahead of the announcement of its Q2 FY25 results, HCLTech shares closed 0.89% higher at Rs 1,856 on the Bombay Stock Exchange (BSE). This upward movement came as investors anticipated positive earnings from the IT major, a sentiment that was affirmed by the results released post-market hours.

The company’s stock has been resilient despite global economic headwinds affecting the broader IT sector. HCLTech’s focus on driving revenue through digital transformation, cloud services, and next-gen technologies has helped it weather external challenges.

Global Outlook: Focusing on Client-Centric Innovations

HCLTech has reiterated its commitment to innovation and upskilling its workforce to meet the evolving demands of its clients. According to Chairperson Roshni Nadar Malhotra, the company is focused on enabling next-generation technologies while maintaining a strong global presence.

“We remain committed to delivering business growth in a sustainable and responsible way. We have sharpened our focus on upskilling our people in next-generation technologies to continue enabling the art of the possible for our clients. Our global community engagement footprint continues to grow,” said Nadar Malhotra in a statement accompanying the Q2 results.

This vision aligns with HCLTech’s broader strategy of leveraging advanced technologies like artificial intelligence, machine learning, and cloud solutions to drive client growth and innovation.

Comparison with Rivals: TCS and Infosys

HCLTech’s Q2 performance puts it in a strong position compared to its main rivals, TCS and Infosys. While TCS reported hiring 5,726 employees in Q2 FY25 and onboarding 11,000 freshers, HCLTech’s focus on selective hiring and retaining top talent has allowed it to manage costs more effectively. Infosys, on the other hand, has seen negative headcount growth and continues to grapple with challenges in employee retention.

The broader IT services industry is navigating a complex landscape marked by inflationary pressures, client budget constraints, and rising operational costs. However, HCLTech’s diversified service offerings and global reach give it a competitive edge in capturing market opportunities.

Focus on FY25

As HCLTech progresses into the latter half of FY25, the company remains optimistic about its ability to meet its revenue and profitability targets. Its focus on digital transformation, cloud computing, and next-generation technologies positions it well to cater to the changing needs of its clients, even as global uncertainties persist.

With strong financials, a growing workforce, and a commitment to shareholder returns, HCLTech is poised for sustained growth in the coming quarters.