HCL Tech’s Q3 numbers fail to match peers Infosys, TCS

In what is perhaps a sign of slowing growth for the company, HCL Technologies on Thursday reported revenue and profit numbers for the March quarter that were lower than those reported by its larger peers Infosys and Tata Consultancy Services (TCS) and full year numbers that missed the lower end of the Nasscom industry guidance by a sliver.

HCL Tech's stock fell 4.57% down on the BSE at Rs 799.30 on a day when the benchmark Sensex was down 1.77% to end at 25,603.10 points.

The company's management remained upbeat and said that apart from some softness in the banking and the financial services sector, it is witnessing healthy growth in all service lines and geographies and has a "strong order book".

Shashi Bhusan of IDFC wrote in a post earning note that HCL Tech reported March quarter revenue below of consensus expectation and below IDFC's. "We expect stock to witness downtick of 5-8%, driven by earnings downgrade as we see multiple margin headwinds in FY17."

He added that the company reported change of +1.9% and -11.3% QoQ in repeat and new businesses respectively. Moreover, top 10-20 clients witnessed de-growth of 1.5% QoQ. "We see decline in new business to be a matter of concern," he said.

For the three months ended March 31, 2016, HCL Tech reported a 5.5% jump in net profit at $285 million which came on back of a 6.5% increase in revenues at $1.6 billion compared to the same period last year. On a sequential basis, net profit dropped 2% and revenue was up 1.3%. This was below the 1.5% sequential jump in revenues announced by TCS at $4.21 billion and 1.6% reported by Infosys at $2.45 billion.

HCL, which has realigned its financial year from April to March from the earlier July to June also announced full year revenues at $6,235 million, a constant currency growth of 11.6%.

Industry body Nasscom had earlier said that it expects the industry to grow between 12-14% FY16 and later arriving at a growth figure of 12.3%. For current fiscal, the body has trimmed the growth to 10-12% in FY17.

Anant Gupta, CEO of HCL Technologies said that spend in the BFSI space will take a few quarters before it gets better however, growth is coming from other sectors such as life sciences and healthcare; retail and CPG, and telecom and media among others

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