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HCL Technologies Q2FY22 Conference Call Highlights

HCL Technologies Q2FY22 Conference Call Highlights

Published on 18 October 2021 Views 79 Comments 0
  • TCV (Total Contract Value) of $2.2 billion includes 13 large services deal and one significant product deal across Telecom, Life Sciences and Healthcare, Manufacturing, and other verticals.
  • 15,000+ employees in smaller cities in India, what they call as New Vistas locations. This has helped to address talent demand as well as provide flexibility during the pandemic waves.
  • They are in the process of expanding these New Vistas footprint to Romania, Costa Rica and Philippines.
  • Dividend Payout policy: To increase the dividend payout policy now to not less than 75% of net income cumulatively over a period of five years including this fiscal '22 right up to fiscal '26.  
  • Incentive plan for employees: Evolving the existing ongoing long-term incentive plan and replacing a portion of the cash based LTI (Long term incentive) plan, with the Restricted Share Units (RSUs). So, what is currently a 100% cash award plan, will move to a mix of 70% cash which is continuing to be performance-led as usual and the 30% tenure-based will be converted to RSUs at the market price on the date of the grant. This incentive plan will need the shareholders’ approval.
  • RSUs: No dilution for the shareholders because it will be bought from the secondary market. Also, no extra cost will be incurred because it is in lieu of the cash LTI.
  • EBIT margin for services is pretty much flat on a quarter-to-quarter basis; it was 19% last quarter; it is 18.9% this quarter. Impact of 5 basis points due to the forex fluctuations.
  • Revenue guidance of double-digit and margin guidance of 19%-21% for the year.
  • Huge seasonality in the product business which is really not dependent on people and headcount. Q3 is the strongest quarter for the products business.
  • Revenue per employee affected because the realization rates at offshore are significantly lower and during the pandemic period significant onsite employees were added to offshore.
  • New licenses:  Large part gets recognized in the quarter it is booked and a small part gets converted into an annuity stream, for the same year and for the next year it will come in as a subscription revenue.
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