HCLTech CFO highlights strong pipeline despite weak numbers; senior employee salary hikes deferred by IT firm

CFO Optimistic About Strong Pipeline Impacting Second Half Numbers

According to the CFO, the robust pipeline is anticipated to translate into improved financial results in the latter half of the current fiscal year. Despite a weaker performance in Q1, the company’s guidance remains steady at 6-8% at the company level and 6.5-8.5% for services. The CFO expressed confidence in the pipeline’s potential to generate substantial revenue during the second half of the fiscal year.

SUMMARY

• HCLTech’s Q1 FY 2023-24 results fell short of both street estimates and the company’s own earlier guidance.
• Despite this, Aggarwal, the CFO, highlighted that HCLTech currently possesses the strongest deal pipeline in its history.
• The CFO remains optimistic that the strength of this pipeline will be reflected in the company’s financial performance during the second half of the current fiscal year.

Indian IT services company HCLTech unveiled its Q1 FY 2023-24 results on Wednesday, which failed to meet both street estimates and the company’s own guidance set earlier this year. Business Today had the opportunity to speak with Chief Financial Officer Prateek Aggarwal, who provided further insights into the results.

Aggarwal acknowledged the weakness observed in the past quarter’s numbers; however, he emphasized that HCLTech currently boasts its strongest deal pipeline to date. He stated, “Despite the Q1 numbers being lackluster, the positive aspect is that our pipeline is currently at its highest level ever.

We have witnessed nearly 18 percent sequential growth and a 26 percent year-on-year growth. Moreover, some deals within the pipeline are in an advanced stage of development.

According to the CFO, the robust pipeline is expected to translate into improved financial performance in the second half of the current fiscal year.

Aggarwal stated, “Although our Q1 results were weak, we maintain our guidance of 6-8 percent for the company level and 6.5-8.5 percent for services. We have confidence in our pipeline, which is anticipated to generate substantial revenue in the second half.”

Furthermore, he attributed the weak performance in Q1 to a slowdown in deals within verticals such as Telecom, Technology, and Engineering Research and Development (ER&D).

He stated, “The weakness observed in Q1 can be primarily attributed to two verticals. Firstly, Telecom has experienced a significant decline, and secondly, Technology and Services, although smaller verticals for us, have also seen a notable decrease.”

He further explained, “Our IT and Business Services have remained stable quarter-on-quarter, while ER&D services have shown a sequential decline of 5 percent, resulting in an overall 1 percent decline in services. In terms of software, the year-on-year comparison remains flat, and sequential comparison is not accurate due to seasonal factors.”

To counter the decline in revenue, the CFO highlighted that the company is implementing proactive measures. These include deferring salary hikes for senior staff members and reducing variable pay for others.

He elaborated, “Through the measures we have announced, we are confident in regaining the 18-19 percent range. These actions involve deferring wage increments for senior staff, with a decision on junior staff increments to be made in October. Variable pay will be determined in alignment with company policies and performance results.”

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