00:00As IT turned the corner, well, HCL Tech certainly has delivered a revenue and EBIT performance
00:12in line. Yes, the profit after tax number was higher due to one-offs as well, but
00:17the other interesting part is, and not surprising of course, that they have maintained the FY25
00:23constant currency revenue growth guidance and EBIT margin guidance as well. CVK Johnson,
00:28as usual, talk about what he thinks is in store for the next nine odd months. The street, CVK,
00:35firstly, thank you for joining in, of course, and the street seems to be now penciling in
00:40that the worst of maybe the demand outlook as well as deal win probabilities and margin numbers
00:49are behind the sector. I would love to understand how you thought of the quarter gone by because
00:54it's slightly above estimates. And what do you think about the next few quarters?
00:59Yeah, Neeraj, the quarter, as I mentioned, is planned out exactly the way we expected,
01:06maybe slightly better than what we had expected. And from a broader demand environment perspective,
01:14I do not see that the environment has changed in any meaningful way. When we planned for the year,
01:20we assumed that discretionary spend would be similar to what it was in the previous financial
01:26year. And that is the situation that we are assuming now as well. We did not see any
01:32improvement in the environment during the last three months. So it is a status quo, I would say.
01:39And for us, we continue to focus on some of the key differentiating aspects in our business,
01:48like leading in with engineering as a differentiation and looking at
01:56solutions which are more driven by GNI kind of capabilities, all of that helping us to
02:04continue to be relevant to our customers, which is the most important element to continue growing
02:12the business. Is that the reason why the deal wins? Last quarter was just such a high base
02:21that what you've done in quarter this as well is a solid number. Is that helping in the deal
02:26wins as well? And is that the nature of the deal wins? Yeah, I mean, if you see the TCV that we
02:32clocked in 1.96, roughly $2 billion, that's significantly higher than what we did in Q1
02:38of the last year, but a little lower than what we did in the Q4 of last year.
02:44I think this is the range in which we've been clocking in the deal wins, $2 billion.
02:49Ideally, we would like it to be a little higher. But at this point, a couple of deals that we
02:56expected to sign in Q1 got delayed. They got deferred to Q2. So from that perspective,
03:02we are quite comfortable with the deal win momentum that we have. And it has got a mix
03:07of small deals, large deals, large deals, which have Gen AI infused small deals, which are
03:14purely Gen AI POCs and things like that. They're all part of the overall wins.
03:20I'm curious to ask CVK, everybody's now talking about the Gen AI deal pipeline started with your
03:26peer Accenture on June 20th. I mean, are you giving out a formal number out there?
03:32Yesterday, Krithivasan also had to say some numbers there. Just trying to understand how
03:36is a large IT vendor like you recognizing Gen AI deals, the quantum thereof, and the guidance
03:42towards that? Yeah, at this point, we are not
03:46intending to call out any specific numbers. Because first of all, there are too many nuances
03:54to really classify a revenue stream or a pipeline as Gen AI, because a lot of deals are combined
04:01opportunities. So at this point, we don't intend to call out anything.
04:06Okay. The other big aspect about this deal wins as well, because I was looking at out of the four
04:12notes that I read, a couple of them may be wrongly inferred that the company's view on demand is
04:17improving. Because I just heard you say that in the last quarter, you haven't seen any kind of
04:21change there. So is, I mean, is this just trying to understand any such a large geography, a lot
04:29of CEOs and a lot of consultants are saying that until the elections are out of the way,
04:33there might be difficult to give very definitive clarity about what will happen in that geography.
04:39How are you thinking about it, Siddiqui? I mean, my position has been the same. I
04:44think the demand environment is similar to what it was in the last quarter. I don't say that it
04:50is improved. And we'll have to wait and watch, Neeraj, as to how this will evolve.
04:57Is it an election led thing, not about who's winning, but that the election uncertainty
05:02is out of the way in the NE region? I don't think so. I don't think it's
05:08related to elections, but I think it's just the broader economic indicators and confidence
05:15within the corporates to spend on new initiatives, which is possibly holding back.
05:21Okay. One quick word also on ERN, just to understand, because you've got this
05:27strong leg up out there, right, with the presence that you have in that space.
05:31This quarter showed a bit of a downtick. Is it seasonal in nature? Can it reverse some clarity
05:37there? Yeah, I mean, I did call out, we had a weakness in automotive and the medtech segment
05:43during the last quarter. We think it will recover in the coming quarter.
05:51In fact, we saw the overall tech and services vertical
05:56grow significantly in the last quarter, and we expect that momentum to continue.
06:02Got it. Just one quick thing, Siddique, a lot of focus by analysts around the change in the
06:09book-to-bill ratio, resulting in a material difference in what large IT companies could
06:17deliver in terms of revenue growth. TCS was referring to the same thing yesterday when they
06:22spoke to us as well, just trying to understand if the deal-win momentum materially changes,
06:28would it materially impact what you do in the quarter, even if you're guided to 325 right now,
06:33in the quarter, in the year, sorry? See, I mean, first of all, we call out only net new wins.
06:41We do not call out renewals and rate cards and all that. So, everybody's metric is different.
06:49So, for us, it's a new deal wins, and this new deal wins has a very high correlation to the
06:54revenue that we deliver every quarter. Usually, the deal wins happen in, let's say, in this quarter.
07:03For it to reflect in revenues, it might take anywhere between three to six months,
07:08sometimes even nine months. So, that will be dependent on the nature of the deal.
07:14So, based on that, the revenue conversions will happen, Neeraj.
07:18So, CVK, last question. Is it safe to assume that based on what you've said thus far,
07:24that the demand environment, it hasn't changed, if there is an uptick, because the street now
07:30seems to be believing that the worst is behind. If indeed the worst is behind,
07:35it will logically show only maybe in the second half, because you haven't seen
07:41too much of a change thus far, at least. That's right. If at all there is some change,
07:46it would probably be visible in the second half, not in the first.
07:53Are you wearing a veneer of classic CVK, which is under-promised and over-delivered,
07:58instead of trying to be a lot more open-slash-showing the bravado confidence?
08:06No, no. I think I am being realistic. I would say three to five percent growth we have committed,
08:13and we expect to come within the guided range, Neeraj.
08:18Okay. Well, but solid dividends yet again, CVK. As you said, high base of the last quarter,
08:24this is still an impressive number. Thank you so much for speaking to us,
08:28and such a candid conversation. Really appreciate your time.
08:31Yeah. Thank you, Neeraj. Appreciate it.
08:34And viewers, thanks for tuning in.
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