FY25 guidance of 3-5% good growth in current environment: HCLTech CEO

HCL Technologies' FY25 guidance of 3-5% represents a "good growth" in the current environment, CEO C Vijayakumar said, adding cloud migration and GenAI projects are gaining traction but the financial services vertical could face 'headwinds'.

Vijayakumar told PTI in an interview that HCL Technologies (HCLTech) is keen on acquisitions in areas of semiconductor, automotive, and of platforms that drive strong annuity revenues or geographies such as Japan.

He asserted that the company is poised to capitalise on generative AI opportunities, and that 50,000 people are expected to be fully trained, leveraging GenAI, this year.

The top boss of India's third largest IT services company said the discretionary spending environment "continues to be under pressure" and the situation in FY25 appears "similar" to FY24. The deal pipeline looks "very good" and the company expects to convert some large opportunities soon, which will "definitely help in delivering the growth this year".

The company reported a nearly flat year-on-year net profit for the March quarter at Rs 3,986 crore amid a global environment marred by weak client spends, geopolitical shocks, high inflation, and macroeconomic uncertainties. On a sequential basis, the net profit was down 8.4%.

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In the fourth quarter of FY24, the revenue from operations stood at Rs 28,499 crore, up 7.11% from a year ago. For the full fiscal year (FY24), the company reported a 5.7% rise in net profit to Rs 15,702 crore. The company posted Rs 1,09,913 crore in revenue in FY24, up 8.3% from the previous fiscal.

"Across the industry there is good mix of revenue, which is coming from discretionary spending patterns of clients in this environment that is subdued, which will be visible in FY25. If things change sometime you will have a much better outcome, if things remain similar to what it was in FY24 then you will have subdued growth in FY25," Vijayakumar said.

HCLTech's projected revenue growth of 3-5% for FY25 is a "good growth" in the current environment and probably the highest guidance among the tier-one providers, according to Vijayakumar.

Areas like cyber security, data, cloud migration to hyper scalers and building private AI stacks, all catalysed by GenAI are showing a good traction.

Efficiency-driven programmes are being conduced in a timely-manner both in decision-making and timelines for execution.

"But some of the transformation programmes, I think customers are either taking a slightly slower pace or they're cutting down on some, pausing them for a few quarters or a few months, and then reinitiating it," he said.

Technology, telecom and media verticals will continue to do well based on the bookings done, Vijayakumar said, but called out financial services as a space that could face some headwinds, after demonstrating a stellar growth for a couple of years.

"Financial services will have some headwinds now, because we've had a stellar growth for two years in financial services, significantly ahead of industry. So there will be some headwinds like some deals will transition to an offshore model. And then some deals like State Street...we have divested the JV...so that will have an impact on the revenue. So financial services will have these dynamics, but all other verticals will grow," he said.

HCLTech added 2,700-plus employees in the March quarter, which the top honcho said should not come as a surprise given the company's overall growth numbers.

"The headcount addition should not come as a surprise, because we had a good growth of 5.4% (for FY24) in the current environment, so that obviously needs good talent to execute, and that's why our headcount is growing. And coming to FY25, of course, a lot will depend on how the year shapes up. At this point, we've planned at least 10,000 freshers to be hired during this year," he said.

The lateral hiring numbers depend on how the year pans out.

The US accounts for 64% of the company's revenue and the company is very positive about outlook for the market.

"We've done very well. We've done 6.8% growth in the US market and it continues to be a very strong geography, with good mindshare, presence in a lot of big clients. And so we are very positive about the outlook for US," he said.

The company is well-equipped to capitalise on GenAI opportunities, and "expects things to scale up".

"In fact, we launched a platform called HCLTech AI Force. The platform helps end-to-end lifecycle of the software development and product engineering. So I think we're very well positioned," he said.

He went on to add: "We've got good talent, we have already trained a significant number of people, more than 25,000. This year, we expect at least 50,000 people will be fully trained, leveraging generative AI. We are focused on AI developer community, and already have 2,000-plus people who are focused in this area. And there are many small projects, which are all sub-USD 10 million," he said.

On acquisitions, Vijayakumar said semiconductors, automotive, or platforms that drive strong annuity revenues with clients and geographies like Japan are areas where the company continues to look for buys.

"Yes, we have a certain strategy on acquisitions in certain areas...Like we did a one in automotive a couple of quarters ago. We have some thinking in semiconductors, we have in some vertical capabilities, it will be small acquisitions...These are areas where we continue to look for acquisitions," he said.