HCL Tech bullish on the year ahead with strong lineup of contracts: CEO Anant Gupta
HCL’s comments come at a time when larger rivals Infosys and Tata Consultancy Services have flagged the likelihood of a softer March quarter.
“In summary I would say the market is very bullish. We are bullish in the market, we see our funnels are large, pipeline is good,” Gupta said, while declining to provide any specifics on the current quarter, in an interview with ET on Monday. Noida-based HCL’s comments come at a time when larger rivals Infosys and Tata Consultancy Services have flagged the likelihood of a softer March quarter, with Infosys expecting a spillover into the first quarter of the next fiscal year.
Second-ranked Infosys has said it would end the current year with revenue growth near the lower end of its 11.5-12 per cent forecast owing to cutbacks among retail and manufacturing clients. TCS said last week that growth in the current quarter would be slower owing to seasonality in its biggest markets and continued demand volatility at home. TCS, the No. 1 Indian IT provider, remained confident that next year would be stronger.
HCL’s Gupta said the renewal market alone will be about $40-60 billion a year over the next three years, based on various industry estimates, and the company was competing for contracts for end-to-end operational engagements involving computer infrastructure, application development or “integrated deals”.
This churn in the largely run-the-business category of outsourcing deals continued to represent a strong market HCL, he said. “There is no shortage in there … the fact is, there is significant amount of churn. Analysts portray that there is 30-35 per cent churn; I would say I would tend to agree with that number.” The renewal-based opportunity was across geographies including the IT sector’s biggest markets the US, Europe and Australia, and wherever large contracts of 5-7 years had been signed in the mid-2000s era, “you have pretty much up for renewal at this point in time.”
HCL, which has cumulatively signed about $4 billion in total contract value over the last four quarters, will likely report 3.2 per cent revenue growth in dollar terms for the current quarter, analysts at Nomura, a Japanese investment bank, estimated in a report on March 21. Nomura analysts Ashwin Mehta and Pinku Pappan noted that there was a strong correlation between HCL’s incremental revenue and the total contract value it has added.
“Management outlook remains positive on both infrastructure management services (driven by deal rebids) and core software, with no vertical specific weakness highlighted except in telecom,” the analysts, who have a “buy” rating on the stock, wrote.