HCL Tech Q1 FY25 Highlights & Strategies

HCL Technologies (HCLTech), a leading global tech company, announced its Q1 FY2025 financial results on July 12, 2024. The company reported strong revenue growth, profitability, and cash generation, showcasing its resilience in the evolving market. The following sections, therefore, provide a detailed analysis of HCLTech’s financial performance during the quarter.

Key Financial Metrics:

Revenue:

INR Revenue: ₹28,057 Crores, down 1.6% QoQ & up 6.7% YoY
Constant Currency (CC) Revenue: down 1.6% QoQ & up 5.6% YoY
USD Revenue: $3,364M, down 1.9% QoQ & up 5.1% YoY

Profitability:

EBIT: ₹4,795 Crores (17.1% of revenue), down 4.4% QoQ & up 7.5% YoY
Net Income: ₹4,257 Crores (15.2% of revenue), up 6.8% QoQ & up 20.4% YoY

Return Metrics:

ROIC (on LTM basis) – Company at 34.6%, up 350 bps YoY; Services at 42.8%, up 476 bps YoY
OCF: $2,722M and FCF: $2,604M (on LTM basis)
FCF/NI: 133% (on LTM basis)

Bookings:

TCV (New Deal wins): $1,960M

People Metrics:

Total People Count: 219,401; Net addition: (8,080)
Reduction in headcount due to divestiture: (7,398)
Freshers Added: 1,078
LTM Attrition: 12.8% (down from 16.3% in Q1 of last year)

Significant Highlights from Financial Statements:

Income Statement:

Balance Sheet:

The company maintained a strong liquidity position, with cash and cash equivalents of ₹9,335 Crores and net cash of ₹24,891 Crores as of June 30, 2024.
The company’s total assets stood at ₹96,947 Crores, with a significant portion invested in intangible assets (₹26,837 Crores) and accounts receivables (₹18,800 Crores).
The company’s total liabilities were ₹29,694 Crores, with the majority being other current liabilities (₹19,798 Crores).
The company reported a revenue growth of 6.7% YoY in INR terms and 5.6% YoY in constant currency terms, driven by strong performance in the Services segment (up 5.8% YoY CC).
EBIT margin steady at 17.1%, net income margin up to 15.2% from 14.0%, reflecting effective cost management.
The company reported solid profitability, with EBIT and net income growing by 7.5% and 20.4% YoY, respectively, despite the challenging global environment.

Cash Flow Statement:

The company generated robust operating cash flows of ₹4,134 crores during the quarter, thereby reflecting its strong operational performance and efficient working capital management.
The company invested ₹209 Crores in purchasing property, plant, and equipment, and intangibles, resulting in a free cash flow of ₹3,925 Crores for the quarter.
The company paid dividends of ₹4,873 crores during the quarter, thus demonstrating its commitment to returning value to shareholders.

Management’s Discussion and Analysis:

The management team provided insightful commentary on the company’s performance and outlook:

C Vijayakumar, CEO & Managing Director, expressed confidence in decent growth in the coming quarters, positioning the company well to deliver on its revenue guidance for the year. He highlighted the company’s focus on tapping emerging opportunities led by Generative AI (GenAI) and other emerging technologies.
Roshni Nadar Malhotra, Chairperson, emphasized the company’s future-ready portfolio and its commitment to sustainable and responsible business practices as it continues to drive progress for its clients.
Prateek Aggarwal, Chief Financial Officer, highlighted the company’s robust cash flow generation, with LTM FCF at ₹21,637 Crores, representing 133% of PAT and 88% of EBITDA. He also highlighted the improvement in the company’s capital efficiency, with LTM ROIC for the company increasing by 350 bps YoY to 34.6% and for the Services business increasing by 476 bps YoY to 42.8%.

Market Position and Strategic Initiatives:

HCL Technologies, a leading global technology company, has a strong presence in industries like Financial Services, Manufacturing, Life Sciences, Healthcare, Technology, Telecom, Media, Retail, CPG, and Public Services. With over 219,000 employees across 60 countries, HCL delivers industry-leading capabilities in digital, engineering, cloud, and AI.

The company has been actively pursuing strategic initiatives to strengthen its market position and drive growth. Some notable initiatives include:

Focus on Generative AI: HCL Technologies invests in GenAI, securing deals in gaming review analysis, trading platforms, and content management.
Expansion of Delivery Capabilities: The company announced the opening of new offices in East Brunswick, New Jersey, and Santa Clara, California, further strengthening its footprint in North America. These offices will feature Customer Experience Centers (CECs) showcasing the company’s innovations and capabilities.
Innovation and Ideapreneurship: HCL Technologies has a strong culture of innovation and ideapreneurship. The company’s Value Creation Portal enables employees to contribute ideas and create value for the company and its clients. In Q1 FY2025, over 8,600 unique employees leveraged this platform, generating, reviewing, and approving over 2,470 ideas, with 1,040+ ideas implemented, delivering customer-signed-off value worth $150M+.
Strategic Partnerships and Acquisitions: The company has been actively pursuing strategic partnerships and acquisitions to enhance its capabilities and expand its offerings. During the quarter, HCL Technologies announced several key deal wins and partnerships with leading companies across various industries.

Risk Factors:

Macroeconomic and Geopolitical Risks: Operating globally, the company is exposed to economic downturns, trade tensions, and geopolitical uncertainties, potentially impacting its operations and financial performance.
Technological Disruptions: The technology industry is subject to rapid changes and disruptive innovations. The company’s ability to adapt to emerging technologies, such as GenAI, and stay ahead of the competition is, therefore, critical for its long-term success.
Talent Acquisition and Retention: The company’s success heavily relies on its ability to attract and retain highly skilled professionals. High attrition rates or challenges in finding the right talent could impact the company’s growth and operational efficiency.
Regulatory and Compliance Risks: Operating in multiple jurisdictions subjects the company to various regulations, potentially leading to legal and financial risks if not properly addressed.

Corporate Governance Practices:

HCL Technologies is expected to follow best practices in corporate governance. This includes maintaining a diverse, independent board, establishing robust controls and risk management, promoting transparency, and protecting stakeholders’ interests.

Overall, HCL Technologies’ Q1 FY2025 results demonstrate the company’s resilience and ability to deliver solid financial performance. Furthermore, the strategic initiatives and continuous innovation have contributed significantly to this success.

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