HCLTech had a sixer of a quarter, says chief financial officer Prateek Aggarwal

HCLTech shares rose in early trade on January 15 but were off the opening high, following the best October to December quarter result among peers. Beating CNBC-TV18 poll estimates on all fronts, the IT services giant said it had had a “sixer of a quarter.”

In an exclusive interaction with CNBC-TV18, HCLTech’s Chief Financial Officer Prateek Aggarwal said the growth in the quarter was led by three factors — solid outperformance by the software division, mega Verizon deal and German automotive engineering services company ASAP acquisition.

Aggarwal’s remarks come after the company’s software division saw a growth of 32% on a sequential basis and 5% on a year-on-year basis.

A major part of the services growth was driven by the ramp-up of the mega Verizon deal and ASAP acquisition, both of which contributed to the topline for two months in the third quarter of the financial year, Aggarwal said. He said the firm expected the Verizon deal to contribute one incremental month in the January to March 2024 quarter as well.

During the quarter under review, HCLTech recorded $3.8 billion worth of order booking with 14 large deal wins, the firm said.

Meanwhile, Aggarwal said the services business needs to deliver 1.6-3.5% growth in the March 2024 ending quarter to meet guidance. Overall, HCLTech has given revenue guidance in the range of 5.0% and 5.5%.

In the December quarter, the services revenue witnessed a growth of 3.1% quarter-on-quarter and 4.2% year-on-year. The growth was primarily driven by the telecommunications, media, publishing, and entertainment sectors.

Also, the services revenue surpassed an annual run rate of $12 billion (₹1,00,000 crore), underscoring the company's sustained momentum and strong market presence.

The HCLTech management also noted that its banking, financial services and insurance (BFSI) revenue decline in the third quarter was on account of furloughs. In the current quarter, the firm expects lower furloughs compared to the December quarter which is likely to aid growth.

Aggarwal also attributed the 50 basis points decline in the margin to wage hikes during the quarter.

HCLTech's Chief People Officer Ramachandran Sundararajan, however, added that the firm sees increases in compensation even though attrition and hiring activity have come down in the industry. As against most of its peers, HCLTech also expects increased hiring in the market given the demand uptick.

The firm foresees net headcount addition in the fourth quarter. This is in contrast to Tata Consultancy Services (TCS) management’s commentary. TCS has said they won’t be surprised if the strength sees a net reduction in the March 2024 quarter as well.