HCL CEO eyes double-digit services growth in FY22 | Economic Times

HCL Technologies beat Street estimates to post higher revenue and profit in the third quarter, on increased demand for its services. While the IT services provider reported steady growth across business segments, president and chief executive C Vijayakumar told ET’s Ayan Pramanik and Raghu Krishnan that its investment in products is beginning to pay off. Edited excerpts: Do the results indicate that you are on track for continuous long-term growth? We exceeded the guidance with 3.5% quarterly growth on top of the 4.5% growth delivered in Q2. The highlights of the quarter are our Mode 2 and the product and platforms business. Mode 2 is all the new technologies - digital transformation, cloud adoption, Internet of Things (IoT), analytics, cyber security. These services grew (nearly) 11% QoQ and 25% year on year. So, we are seeing good traction in new projects across a cross-section of customers. The second big highlight is products and platforms. This is a sizable business that we have created over the last four years with some significant investment. So, this is already a $1.3 billion business and it is growing 9.3% on year on year in constant currency terms. This is really a validation of the hypothesis with which we made the investments and of course it is due to our relentless execution during the past 18 months. Our bookings of the new pipeline were very good in the products business and that is what is reflecting in the revenue performance. The margin came in at 22.9%, which is again the highest in six years.Are the bookings for products and platforms multi-year contracts? They are multi-year and some of the bookings are subscription-based. The bookings will eventually translate to revenue. This quarter some good revenue translation has happened. HCL Tech guided for a 2-3% revenue growth for Q4. Will this be a good base to return to double-digit growth next fiscal year?There is a lot of demand and our pipeline has been good. In the services business, we feel pretty positive about the possibility of a double-digit growth in the next year. On the products business front, it is still early days because we only completed two quarters after we finished one year of acquisition. So, we have to see more trends before we can make a directional commitment on this.ER&D services business contributes more than 15% to HCL’s revenue currently. You also talked about a strong deal pipeline in that segment. What is the typical size of such deals?It varies quite a bit. It can be $25 million; it can be $100 million depending on the nature of the programmes and different R&D projects. It can be $200 million as it also depends on the R&D budget of the company. We have won 13 transformation deals.What are the conversations with clients about the post-Covid-19 world as countries take up vaccination initiatives?Lot of customers have adapted to the new model of virtual operations. However, there are some businesses which cannot deliver their products and services online. So, they have limited presence in the offices. But we see pretty much every business is operational, some with full and some with partial capacity. They continue to look at the technology needs. There is huge emphasis on accelerating some of these transformation programmes. What do you think will be the levers for growth as you enter a new normal of doing business?None of these strategies is totally new. A lot of it, such as Mode 2 and other service offerings we thought through as part of the strategic blueprint. It is now being accelerated.HCL Tech crossed $10 billion in the 2020 calendar year. Have you set an internal target for 2021?Not yet. It is still early days. We will do the planning in the next three months and when we come back to you with the results of the fourth quarter, we will probably give you some indication. Your peers too have reported a stellar performance in Q3 after a lull in the first half of this fiscal year. Do you think this is a sign of overall recovery?I think the demand for technology services has recovered and is very high.