HCLTech projects growth as Indian IT industry bets on cautious recovery

India's No.3 IT services provider HCLTech reported a 6.7% rise in first-quarter revenue on Friday, and projected growth in most verticals and geographies in the current quarter.

 

The forecast follows largely upbeat results from top IT firm Tata Consultancy Services a day earlier, which sparked expectations that the worst may be over for the $254-billion industry.

Indian IT companies have grappled with sluggish demand as clients focused on cost cuts and held back on discretionary tech spending to counter higher interest rates.

"Even though we are seeing some sprinkling of growth drivers, it's too early call out if there is going to be a reversal in the trend," CEO C Vijayakumar said in an earnings call, referring to discretionary spending.

HCLTech posted first-quarter revenue of 280.57 billion rupees ($3.36 billion). Analysts had estimated revenue of 280.28 billion rupees, as per LSEG data.

Divija Parekh, an equity research associate at IDBI Capital, said the worst had bottomed out.

"As for the demand environment, if the rate cuts happen, then discretionary spend will come up and IT will grow. It will happen gradually, post the first half of the (fiscal) year," she said.

Expectations for a September rate cut by the Federal Reserve firmed up this week after U.S. consumer prices unexpectedly fell in June.

Noida-based HCLTech's net profit rose 20.57% year-on-year to 42.57 billion rupees for the quarter ended June 30. Analysts had expected a profit of 38.22 billion rupees.

New deal wins stood at $1.96 billion, compared with $1.56 billion a year earlier. During the quarter, the company announced a contract expansion valued at $278 million over 7.5 years with German bank apoBank, as well as a five-year deal with State Bank of India.

HCLTech warned revenue in the second quarter would include the impact of the divestment of its joint venture with U.S.-based State Street.