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HCL Technologies Ltd performed better than its larger peers Tata Consultancy Services Ltd (TCS) and Infosys Ltd in the March quarter (Q4). Revenue grew 0.8% sequentially in constant currency terms, while operating margin expanded 70 basis points to 20.9%.
In comparison, TCS and Infosys revenue declined sequentially. And while TCS recorded a marginal expansion of 10 basis points in margins, Infosys saw its margins decrease by 80 basis points.
HCL Tech management had said the covid-19 would have a limited impact on its fourth quarter performance. According to management, the relatively better performance reflects the company’s early response to covid-19, which begins in January. Consequently, the loss of revenue due to covid-19 was at least $ 10 million or less, said Prateek Aggarwal, chief financial officer at HCL Technologies.
But investors don’t seem that impressed. HCL Tech shares are down about 18% from their February highs, which is almost the same as the drop in the BSE IT index. This is simply because the company is not really immune to the impact of covid-19 on its business. “We see an impact on growth in the short term; However, we are not in a position to quantify it. Assuming things stabilize, we expect a better second half (H2 FY21), “said C. Vijayakumar, president and CEO of HCL Technologies.
For what it’s worth, the company saw record order bookings in the fourth quarter. “We had a good year in renovations and we are entering fiscal year 2011 with a strong position in the market,” said management. Digital investments led by covid-19 are projected to benefit HCL Tech’s product and platform business. Business flow has improved since April 15. additional.
But the momentum is not broad-based. Discretionary expenses differ in industrial sectors such as aerospace and automobiles. However, the impact is considered to be low on financial services and telecommunications verticals.
Still, some customers ask for price reductions. Crashes and loss of business at client companies are expected to affect HCL Tech’s revenue.
As analysts at Investec Capital Services (India) Pvt. Ltd say, high exposure to infrastructure management services can help HCL Tech capture a greater share of the current digitization wave. “Businesses around the world are aligning their networks and IT infrastructure to work from home and drive online sales in a period when physical channels are virtually closed. We believe this requires continued investment in IT infrastructure and security costs, “analysts said.
But as HCL Tech’s shares suggest, investors expect the company to be affected as much as the rest of the industry by covid-19.
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