HCL Tech CEO C Vijayakumar said that although macroeconomic indicators have remained unchanged, he is optimistic about the IT industry’s growth prospects in the mid- to long-term.
Unlike some of its peers, HCL’s banking and financial services business emerged as its top-performing vertical, growing 2.8% sequentially and 12.1% year-on-year in constant currency in 2023-24. This growth occurred despite a muted macroeconomic environment, with no pickup in discretionary spending as clients adopted a cautious approach. Its mainstay market, the Americas, grew 4.2% sequentially and 6.8% year-on-year during the same period. “In BFSI, we have taken a few strategic initiatives. We’ve been investing in the wealth and asset management space as a capability, and we have strong partnerships to drive good momentum in that space. The second big bet was on hybrid cloud adoption in financial services. We saw some very good wins and a lot of execution that helped prop up some of these revenues. And the third is insurance. These three areas are contributing to the growth in financial services. And we are positioned as a challenger in a lot of large accounts, where we started small and are scaling up quite nicely,” he told TOI in a post-earnings interaction on Saturday. HCL added 3 clients to its $100 million portfolio, taking the total count to 22. Its annual bookings stood at $9.7 billion in the 2023-24 financial year, which is a 10.2% growth compared to the year-ago period.
Given the subdued macroeconomic indicators and pressure on the demand side, HCLTech projects its revenue growth to be between 3% and 5% in constant currency for the 2024-25 financial year. The company has set a margin guidance of 18% to 19% for the current financial year, mirroring the previous year’s figures. “We have divested the JV with State Street. So, some of that could also impact FY25 performance. So overall, I think, keeping the macro conditions to be like what it was in FY24, that’s what is in the guidance,” Vijayakumar said. However, he didn’t quantify the impact from the JV.
NYSE-listed financial services firm State Street has consolidated its operations in India, acquiring a 49% stake in State Street HCL Services, a JV between the global financial services firm and HCL UK, for $170 million. State Street has partnered with HCLTech for more than a decade. The software business grew 2.3% year-on-year in constant currency. The subscription and support revenue has grown to 83.8% in the 2023-24 financial year from 78.8% in the 2022-23 financial year. “You will see ARR (annual recurring revenue) growth slowdown on a year-on-year basis, and the drop sequentially is attributed to decisions we made to discontinue some small parts of our telecom product portfolio,” Vijayakumar said.
HCL has launched Tech AI Force, a generative AI and automation platform, to deliver better productivity, ensuring faster release timelines. “There is a lot of interest in generative AI, but the projects are still small. I think more than the projects themselves, the allied work around generative AI is where the biggest opportunity is, which will be in data and both cloud migration and private AI stacks,” he added. The company added 2,725 employees in the March quarter, bringing its total workforce to 2.2 lakh employees. HCLTech onboarded 12,000 freshers, nearing its target of approximately 15,000. For the 2024-25 financial year, the company plans to hire 12,000 freshers, with 10% of the hiring being off-campus. Its IT services voluntary attrition rate is at 12.4%, one of the lowest in the industry.
HCLTech has integrated its engineering and R&D (ERD) services sales with IT and business services sales. It has announced role changes for three leaders to amplify its ERD sales capabilities. Kalyan Kumar, who was the chief product officer for the software business and the CTO and head of ecosystems, will now focus on the HCL Software business as the chief product officer. Vijay Guntur, president of its engineering and R&D services, will be its chief technology officer and head of global ecosystems. Hari Sadarahalli will now lead the engineering services business and delivery organization in this expanded role.
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