LTM voluntary attrition rose to 19.8%, Margins affected but strong QoQ growth | HCL Technologies Q3 FY22 Conference Call Highlights
2 min read- Witnessing lot of momentum in engineering and R&D business led by Internet of Things (IOT) and industry 4.0 semiconductor and telecom sector transformation.
- EBIT margin drop in IT services of 190bps was due to headwind of 80bps from second phase of salary hike and seasonality impacted by 65bps, ramping up of few deals impacted by 40bps, retention and attrition cost impacted by 85bps which partially offset by 60bps benefit from operating leverage and 20bps benefit from currency movement.
- Acquisition: HCL is acquiring 100% stake in Starschema, a limited liability company incorporated in Hungary for total cash consideration of US$ 42.5 mn (EV/sales of 3x). With this acquisition, HCL would enhance its capabilities and solutions in Data Engineering which will accelerate the growth of Mode 2 services in Digital Engineering, Near-shore Eastern European presence and ability to scale. The transaction is expected to be closed by March 2022.
- Strong client addition across all categories. On YoY basis, USD50mn+ clients up by 11, USD20mn+ clients up by 13, USD10mn+ clients up by 25, and USD5mn+ clients up by 34, USD1mn+ clients up by 50.
- Employee Metrics: Added net headcount of 10,143 during the quarter. Total headcount now at 197,777. Strategy is to add more freshers as part of hiring exercise. It is on track to achieve 20,000 campus hire target in FY22 as it has already hired 15,000 freshers. Intent to double the freshers hiring in coming year. Campus hire program in US is also accelerating.
- Attrition: LTM attrition up to 19.8% compared to 15.7% last quarter. Expect this to continue to go up for some more time before it moderate.
- Management is focused on growth and are ready to sacrifice 10-20 basis points from lower end of guidance if required to manage supply side pressure and drive growth.
- HCL pledges to achieve net zero emission target by 2040.
- Guidance FY22: Revenue expected to grow in double digits in constant currency for FY22
EBIT margin expected to be between 19-21% for FY22.