Shiv Nadar steps down as HCL Tech MD, Vijayakumar to take over

Shiv Nadar, the founder of HCL Technologies Ltd, and its chief strategy officer, has tendered his resignation as managing director , as well as a director, with effect from 19 July, on completing 76 years of age. Nadar will, however, continue to guide the company in the capacity of chairman emeritus and strategic adviser to the board for five years, the company said.

C. Vijayakumar, president and chief executive officer, has been appointed as the managing director for five years.

HCL Tech, during its first quarter earnings announcement on Monday, retained its guidance. It expects its revenue to grow in double digits in constant currency through FY22 , on the back of a positive demand environment and robust deal pipeline. It also expects earnings before interest and taxes (Ebit) margin to be at 19-20%.

The Noida-based IT services company posted a net profit of 3,214 crore for the June quarter, up nearly 10% annually. It is slightly below consensus Bloomberg estimates of 3,255.5 crore.

Quarterly report

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Quarterly report

The revenue for the first quarter was up 12.5% from the year-ago period to 20,068 crore, on the back of a strong performance led by its digital business or ‘Mode 2’, which grew 29% year-on-year in constant currency, and contributed 23.7% to its total revenues. Revenues were lower than consensus Bloomberg estimates of 20,402.1 crore.

The company’s dollar revenues grew 0.7% sequentially in constant currency to $2.72 billion, aided by new deals with a total contract value (TCV) of $1.67 billion across eight large services deal wins and four product wins.

“We remain confident of our growth trajectory on the back of strong bookings and hiring…We posted 11.7% y-o-y revenue growth in constant currency and 29.0% year-on-year growth in Mode 2 services in constant currency headlined by cloud and digital transformation deals,” said Vijaykumar.

The Ebit margin for the June quarter narrowed to 19.6% from 20.4% in the preceding quarter due to costs related to attrition and hiring. “We expect HCL Tech to report solid revenue recovery with 11.7% revenue CAGR over FY21-24 driven by consistent transformation deal wins, increasing focus on ER&D services, and rising share of Mode 2 business,” said Suyog Kulkarni, senior research analyst, Reliance Securities.

The attrition rate increased to 11.8% during the June quarter from 9.9% in the preceding quarter, indicating a strong demand for technology professionals in the industry. The company plans to hire 22,000 freshers this fiscal year, considering the strong demand environment, said Apparao V.V., chief human resources officer, HCL Tech. The company added 7,522 employees during the quarter taking the total headcount to 176,499 as on 30 June.

HCL Tech declared its earnings after market hours on Monday. Ahead of its results, the shares were down 0.47% to close at 1,000.20 on the BSE.

Nadar has been one of the pioneers of the computing and IT industry in India. In 1976, he founded the HCL Group, leading the computing revolution as India’s original garage startup. Under his guidance, HCL evolved from a technology hardware company to India’s third largest IT services company by revenue, surpassing the $10 billion revenue milestone in FY21. Under Nadar, HCL was credited with the first ‘Made-in-India’ IT product innovations such as the first 8-bit microprocessor-based computer in 1978, the first Relational Database Management System in 1983, client-server architecture in 1984, world’s first fine-grained multi-processor UNIX installation in 1989, among others.

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