Key highlights from HCL Technologies Ltd (HCLTECH) Q2 FY23 Earnings Concall
Management Update:
- [00:14:25] HCL remains positive of its near term growth, driven by strong bookings and pipeline numbers across segments.
Q&A Highlights:
- [00:32:10] Sandip Agarwal of Edelweiss asked is HCL seeing any kind of caution within its clients considering the macro uncertainty. C Vijayakumar CEO said that the macro uncertainty is weighing in on a number of clients. So some clients are ramping down and prioritizing some other projects.
- [00:32:58] Sandip Agarwal of Edelweiss enquired about the new development on the hyperscaler side. C Vijayakumar CEO answered that hyperscaler bookings grew significantly in the last 2-3 years. Currently, HCL is not concerned about a bit of slowdown in growth rates as it believes book capacity is what needs to be consumed by accelerating the cloud migration for clients.
- [00:38:50] Mukul Garg with Motilal Oswal asked about the drivers of 16-17% services growth guidance in a volatile environment. C Vijayakumar CEO replied that it is driven by a bit of furloughs in 3Q, and in 4Q also HCL has factored in some furloughs.
- [00:39:25] Mukul Garg with Motilal Oswal also enquired about drivers of 100 bp increase in realization on the margin side. Prateek Aggarwal CFO answered that the realization increase is driven by some renegotiations for existing customers. It’s mainly a co-operation between partners in business. Also a good portion is coming from the deals signed in last 9 months with revised rates.
- [00:43:38] Ravi Menon of Macquarie asked if there are any mega deal ramp-ups or one-offs driving high growth in manufacturing. C Vijayakumar CEO replied that it’s broad based and HCL’s engineering services has got a good exposure to manufacturing. However, one of the deals to call out is the one in France that scaled up significantly coming out of transition.
- [00:45:02] Manik Taneja from JM Financial enquired about fresher hiring strategy for 2H23. Ramachandran Sundararajan Chief People Officer replied that HCL is on track to reach the plans for FY23. The fresher hiring outlook for FY23 stands more closer to 30,000.
- [00:46:36] Mihir Manohar of Carnelian Capital asked about the drivers of good growth in Europe and how will in pan out in the next couple of quarters. C Vijayakumar CEO answered that the growth is driven by manufacturing and some of the new geographies HCL had invested in, the deals getting into execution.
- [00:50:27] Abhimanyu Kasliwal with Choice International asked about the new deal wins and margins outlook for those. C Vijayakumar CEO answered that that the company continues to win deals that are at a higher margin than in FY22. HCL added that there will be little moderation to start with and then the margins will pick up in large deals.
- [00:51:53] Chirag Kachhadiya from Ashika Institutional Equities enquired about the expectation on the attrition moderation. Ramachandran Sundararajan Chief People Officer replied that attrition of 23.8% has already stabilized and hit the peak. So in terms of managing attrition, HCL feels it’s in a good space now.
- [00:52:19] Chirag Kachhadiya from Ashika Institutional Equities also asked about the trends HCL is observing on ground checks in outsourcing cost. C Vijayakumar CEO replied that the outsourcing cost was at 15% of total revenue for 2Q23, the same as in 2Q23, but reduced over 1Q23 by 30 bps.