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00:00 Amongst the biggest results conversations to have this morning is C. Vijay Kumar of
00:04 HCL Tech. The numbers of quarter four were flattish QOQ. The FY25 guidance is modest,
00:11 maybe impacted by offshoring in quarter one, but it's leading amongst the tier one names.
00:16 CVK, good morning. Thanks so much for taking the time out. Put this into perspective. We
00:20 know the situation is fluid. How fluid is it? And in such a scenario, how confident
00:27 are you about the guidance numbers that you've put out and what's leading to that kind of
00:32 growth in FY25? Of course, sum up what happened in quarter four for us.
00:37 Yeah, good morning, Neeraj. And good to talk to you again. Q4 panned out pretty much the
00:44 way we expected. We expected good growth in our services business, which has grown 3%
00:51 quarter on quarter. And software business, there was expected seasonality, which also
00:56 played out. Overall, Q4 in line with our expectations, which helped us achieve 5.4% growth year on
01:07 year in the services business and 5% overall in the total business. Now, coming to... And
01:17 all of this we delivered in a difficult environment while maintaining our operating margins, our
01:24 client pyramid has improved. We added $300 million clients. We added TCV booking of $2.3
01:30 billion in Q4, almost $10 billion in the entire year. So it's been a very satisfying year,
01:38 good performance under challenging circumstances. Now getting into next year, we've guided for
01:45 3 to 5% growth. Our assumption is the discretionary spending environment would be similar to what
01:52 it was in '24. And we will continue to win reasonably large deals, some mega deals as
02:03 well in this year. So our growth momentum continues. Of course, I remain very positive
02:10 about our growth in the mid to long term. Obviously, when there is a little constraint
02:15 in discretionary spending, the growth will be modest.
02:20 Two questions on that and I'll come to margins as well. Or actually, maybe can I just start
02:25 with that? There's two notes that I read this morning, talk about the offshoring impact
02:30 leading to intermediate dips in the margins. You, I believe, guided at 18 to 19%, which
02:36 is maybe in line with what you had guided last year as well. Is this a big deal or is
02:40 this a one quarter impact, the offshoring impact?
02:43 See, usually when there are large deals and then offshoring happens, there is some impact.
02:50 It's a normal part of the business profile. There is nothing to worry about. It is all
02:56 as per the contracted commitments.
02:59 Okay. And so therefore, despite increments and despite all the business pressures, you
03:05 believe 18 to 19% is something that is reasonably achievable, never mind what could happen in
03:12 quarter one. I mean, there are some conversations around how quarter one could see a bit of
03:15 a dip as well.
03:16 I mean, see, if you look at our seasonality, it would be somewhat similar. Quarter one
03:22 is whatever, there will be a decline and then things pick up.
03:27 Okay. Two questions, CVK. I spoke to two of your peer sets of around the same size that
03:34 you are as well. And they had to say that there are two things happening. One, in NA
03:41 in particular, a lot of clients are expressing uncertainty until the November period of elections
03:50 is behind them because they do not know which chart to take in terms of expenditure. And
03:55 two, one of the conversations or both the conversations seem to suggest that while deal
04:00 wins might be happening, client spends are not necessarily predictable within that period
04:05 as well. How are you sensing both of these things? What is your opinion on these?
04:10 See, I think one overall message is discretionary spending remains muted. That's definitely
04:19 one observation. But our own presence in North America and the verticals and the investments
04:27 that we've made and the offerings and the big bets that we've taken in different verticals,
04:32 they're playing out very, very strongly. So if you see our North America growth is the
04:37 strongest 6.8% year on year and some key verticals, largest vertical like financial services has
04:45 grown 12% year on year. So we are doing very well in North America and in financial services
04:52 in specific. Okay. And you don't foresee in client conversations,
04:57 this uncertainty or hesitancy around taking a decision on spend until the US election
05:02 is out of the way? I have not heard of any such conversations.
05:10 I think the broader discretionary softness remains and I wouldn't call out anything other
05:17 than that. Got it. See, we have one more question, just
05:20 sensing how you think about it. When you look across the world, I mean, the PMI data across
05:26 multiple geographies seems to be cranking up a bit, which is probably leading to the
05:30 central banks not going out and cutting rates as well. Is that good news for IT spends in
05:35 that if per se business activity is looking to shore up rather than come off soft landing
05:42 or whatever you call it, could that be net positive for spending?
05:46 I think so. I mean, eventually if our end clients are doing well and they will continue
05:52 to invest in various initiatives, which is good for us.
05:56 Okay. Okay. ER&D, quarter four showed a bit of a dip. You've taken a meaningful bet out
06:03 there too. You sounded positive the last time that we spoke. The company's focus entirely
06:08 on ER&D are also sounding very positive about growth and commentary. Can I hear something
06:13 from you about that? Yeah. So I think the opportunity landscape
06:16 is very big and we have a lot of exposure to the tech vertical. I do think there is
06:23 good opportunities building up and we are quite positive about how ER&D segment will
06:32 continue to pan out. Okay. But could it be, in the sense, could
06:37 it be vertical leading growth or that is not something that is possible to say right now?
06:41 Right now we are not giving anything specific to a segment and it's overall guidance of
06:48 3 to 5% will stay there and we remain quite positive on ER&D.
06:53 Okay. Fair call. My final question, Sivike, that is on employees and how you manage that
07:00 because attrition is possibly a problem of the past, but there's a lot of talk around
07:06 how not just the employee management, but the offset that you give to other third parties
07:15 for working and those costs might actually move up as well. Any thoughts there?
07:21 I think our subcontracting cost has only come down and expected to come down further. That's
07:28 really part of our overall plan. Okay. You don't foresee increase there. Almost
07:32 everybody else is talking about actually an increase being seen there. You don't foresee
07:35 that for HCI tech? I don't think.
07:38 Okay. Great. Sivike, good talking to you. Thank you so much for taking the time out
07:41 and speaking to us. All the best for FI25. Thank you, Neeraj.
07:46 Thank you. Thank you for talking to us and viewers, thanks for tuning in.
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