HCL Tech is set for high growth

IT major steadily closing gap with its bigger peers like Infosys

Bengaluru: HCL Technologies is steadily closing the gap with its bigger peers as the company crossed the $10 billion revenue mark in the calendar year 2020. Experts believe that the IT services firm is likely to clock higher growth in coming quarters as its product and platform business gained momentum.

"Digital transformation is benefitting all software services companies due to higher spending by enterprises. Apart from this factor, HCL Technologies has slightly differentiated its service offerings by betting on product and platform business. As the product business gains momentum, we believe that the company will return to industry-leading growth rate in the coming years," said Sanjeev Hota, Head of Research at Mumbai-based brokerage firm, Sharekhan by BNP Paribas.

HCL Technologies acquired select IBM software products in 2018 for $1.8 billion in its bid to push its product and platform business. Management of the company had said that around $650 million of annual revenue would accrue to its turnover post this deal.

"The IT firm has already achieved $650 million annual revenue milestone from this acquisition and the portfolio is growing strongly as seen in recent quarters. In the future, the company will be able to cross-sale these products to other clients," Hota of Sharekhan said.

The Noida-headquartered company posted revenue of $7.5 billion in the first nine months of the current financial year FY21. Taking into account the revenue guidance given for the fourth quarter (January-March), the IT services firm is expected to cross the $10 billion revenue mark in the current financial year. Its bigger peer Infosys clocked revenue of $9.95 billion in the first nine months of the current financial year. Considering its revenue growth guidance, the Bengaluru-headquartered firm is expected to end FY21 with around $14 billion of annual revenue.

Experts said though both companies are growing strongly, HCL Technologies can close the gap with Infosys in revenue terms if its 'products and platform' business sees strong momentum.

According to company filings, HCL Technologies posted CAGR (compound annual growth rate) of 11.7 percent in the last four years ended June 2020 in its revenue growth. If the IT firm maintains this growth rate, it will see faster growth than many of its peers including Tata Consultancy Services, Infosys, and Wipro among others.

Meanwhile, HCL Technologies on Monday announced a special bonus payout of around $90 million for its employees in recognition of crossing the $10 billion revenue milestone in the calendar year 2020. Employees with service of one year or more will receive a special bonus equivalent to 10 days of salary as per the announcement.