Roshni Nadar: HCL Tech Q1 Results 2021: HCL Tech, TCS, INFOSYS, WIPRO Comparison:
Channel: Value Invest India
Date: 2020-07-19

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Roshni Nadar: HCL Tech Q1 Results 2021: HCL Tech, TCS, INFOSYS, WIPRO Comparison:

Roshni Nadar Malhotra became the first woman chairperson heading a top Indian IT company when she took charge on July 17, 2020. She takes over the role from her father Shiv Nadar, 75, who co-founded the parent company, HCL, back in 1976.

Roshni is obviously not new to the company. But she is yet to play an active role in the management of the firm, say industry watchers. Until recently she was the CEO and executive director of HCL Corporation and also vice-chairperson on the Board since 2018.

Now, what will change with her becoming the chairperson? Probably nothing, said multiple analysts and industry people Moneycontrol spoke to. At least, not right away.

“Nothing will change,” said V Balakrishnan, former CFO, Infosys. Shiv Nadar still has full control as the managing director (MD) and chief strategy officer (CSO) in making key decisions, as is the case with most promoter-driven organisations including Wipro, he added.

HCL Technologies’ Q1 results show Infosys likely to be an outlier in FY21

Revenues in dollar terms dropped 7.4% at HCL sequentially in the June quarter, even higher than the 7.1% drop at TCS. Infosys had reported a 2.4% decline in dollar revenue. But margins were better-than-expected

Now that the top four IT services firms listed in India have reported results, it’s fairly clear who has come out on top. Tata Consultancy Services Ltd (TCS) kicked off the results season with a weak set of numbers, both in terms of revenues and profit margins. Wipro Ltd followed suit with a pleasant surprise on the profit margin front, thanks to massive cost-cutting; while Infosys Ltd left the Street’s estimates far behind both on revenues and profits. What’s more, it even stuck its neck out and said revenues are likely to be either flat or grow 2% in the current financial year.

HCL Technologies Ltd was the last among the top four to report Q1 results, and they have turned out to be average, especially in comparison with Infosys.
Revenues in dollar terms dropped 7.4% at HCL sequentially in the June quarter, even higher than the 7.1% drop at TCS. Infosys had reported a 2.4% decline in dollar revenue. But margins were better-than-expected.

The sharp fall in revenues notwithstanding, HCL managed to limit the drop in margins to 40 basis points. This is far better than the Street’s estimates, and also better than the 150 basis points drop in TCS’s margins. HCL said margins were aided by higher offshoring, reduction in expenditure, notably direct costs and sales and general administration expenses.

Importantly, HCL’s operating profit in dollar terms have fallen only 6.1% in the past two quarters, much better than the 14.6% drop in TCS’s earnings post-covid. Infosys has managed to maintain operating profit at the same level as two quarters ago.

Apart from the better-than-expected margin performance, HCL Technologies also calmed investor nerves about the future outlook by saying that it expects revenues to grow 1.5-2.5% sequentially on average in each of the next three quarters.

Coming back to HCL’s results, the company said its order pipeline at the end of June is 40% higher compared to the end of March quarter, thanks to vendor consolidation, and digital and cloud modernization efforts of customers.

The company has guided for an operating profit margin of 19.5-20.5% for FY21, suggesting an improvement from the margin of 19.6% in FY20.

HCL shares are back at the pre-covid highs reached in February, which is similar to the trend in TCS shares. Infosys shares are now 13% higher compared to its pre-covid highs.

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