Even as India Inc’s earnings season has started with India’s largest IT services company TCS already declared its financial results, another IT major HCL Technologies is set to announce the results for April-June 2022 on Tuesday (July 12). Apart from revenue and profit/ loss figures, the company will also provide commentary on its product and platform business and give a margin and revenue outlook. Here’re important parameters investors need to watch out for in the results:
Profit After Tax/ Net Profit
Profit is the key metric in a company’s financial statement. HCL Tech is expected to report a decline of 7.9 per cent in its profit after tax (PAT), according to a report by ICICI Securities.
Revenue Growth
HCL Tech is likely to post a 1.4 per cent q-o-q dollar revenue growth (2.9 per cent q-q in constant currency) as strong revenue growth is offset by productivity commitments, according to a report by brokerage firm BNP Paribas.
Another brokerage firm ICICI Securities expect muted performance from HCL Tech in a seasonally weak quarter. It said that on account of 60 bps (basis points) cross-currency headwinds, HCL Tech is expected to report a 1.4 per cent quarter-on-quarter growth in the dollar terms. Rupee revenues are likely to report revenue growth of 3.7 per cent q-o-q.
FY23 Revenue and Margin Guidance
It is a key thing to watch out for as the guidance gives an idea of the company’s growth prospects going forward. HCL Tech will also give its commentary on the product and platform business. According to brokerage firm BNP Paribas, HCL Tech might maintain its FY23 guidance of 12-14 per cent constant currency revenue growth.
Large Deal Wins
The total contract value (TCV) of the company for new deal wins stood at $2,260 million for the March 2022 quarter, registering a six per cent q-o-q growth. For full-year FY22, the TCV was $8,308 million, which was a 14 per cent year-on-year growth.
Ten net new deal wins in Q4 of which services TCV at $2,216 million enabled by six net new large services deal wins; products TCV at $54 million enabled by four net new large product deal wins and a significant number of small deals.
Attrition Rate
The company’s attrition rate on LTM (last twelve month) basis during the March 2022 quarter rose to 21.9 per cent, against 19.8 per cent during the December 2021 quarter. Its total headcount was 2,08,877 with a net addition of 39,900 during the year, a 23.6 per cent jump year-on-year. The net additions during the March 2022 quarter stood at 11,100, up 5.6 percent sequentially.
For the IT sector as a whole, BNP Paribas said that in a weakening demand environment, it sees large-scale companies to outperform. “Accordingly, our top picks are Infosys and TCS. We are building in a gradual moderation in IT demand and accordingly cut our FY23-25E USD revenue growth by 0-4.5 per cent and margin estimates by 0-150 bp. We also raise our WACC assumptions to reflect the higher cost of equity. This results in our FY23-25E EPS cuts by 0-16 per cent and TP cuts by 5.9-42.1 per cent.”
Tata Consultancy Services (TCS), which announced its results on Friday, reported a consolidated net profit of Rs 9,478 crore for April-June 2022, a jump of 5.2 per cent on a year-on-year basis. The company’s revenue during the June 2022 quarter rose 16.2 per cent to Rs 52,758 crore, compared with Rs 45,411 crore in the year-ago period.
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