HCLTech, one of India’s leading IT services firms, has revised its revenue guidance for the year ahead. Despite lowering its organic revenue growth projection from 6-8% to 4-5% in constant currency terms, the company expects to achieve industry-leading growth in the third and fourth quarters of the year.
The decision to cut the guidance was driven by a lack of discretionary spending from clients in the past two quarters and limited visibility on customer expenditures. However, HCLTech remains optimistic about the future, citing strong performance in terms of new project bookings and a seasonality boost in the software business.
CEO C Vijayakumar explained that the company’s robust performance in the second quarter, with a booking of $4 billion, will translate into significant revenue momentum in the coming quarters. Additionally, the software business typically peaks in December, which is expected to contribute significantly to overall growth.
HCLTech has also implemented cost efficiency measures to achieve its margin guidance of 18-19%. With services revenue growth at 1.5%, the company has managed to deliver results using existing headcount without the need for extensive recruitment. By reducing third-party subcontracting work and optimizing travel expenses, HCLTech has successfully run operations in a lean manner.
Regarding employee work arrangements, HCLTech has taken a different approach compared to its peers. While other companies have mandated a five-day office workweek, HCLTech believes that three days in the office and two days remote is sufficient. This approach allows for flexibility while also ensuring alignment with organizational objectives and better engagement with employees.
In terms of future growth, HCLTech expects the telecom sector to experience significant growth in the next few quarters. The BFSI (banking, financial services, and insurance) sector has also shown strong growth, driven by solid propositions in wealth management, hybrid cloud, and AI solutions.
The company’s pipeline also includes several large deals, ranging from $100 million to $500 million, which are expected to contribute to revenue growth. HCLTech aims to prioritize revenue quality by focusing on strategic clients and core services that add value, rather than relying on non-core pass-through services.
While this revised guidance reflects cautious optimism, HCLTech remains confident in its ability to achieve industry-leading growth in the coming quarters. The company’s strong performance, cost efficiency measures, and strategic focus on high-quality revenue streams position it well for the future.
Overall, HCLTech’s revised revenue guidance reflects the impact of the current economic climate on client spending. However, with a robust pipeline and focused growth strategies, the company expects to weather these challenges and emerge with industry-leading growth in the near future.
