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Confident Outlook for Medium-Term Growth: Insights from HCLT CEO

Recently Kotak Institutional Equities hosted a conference meet with HCL TECH management:

  • C Vijayakumar, CEO of HCLT, shared key highlights during our London conference, highlighting a strong medium-term growth journey.

  • Despite a challenging FY2024E, double-digit growth is still possible in the medium term.

  • The competitive environment for new deals is aggressive, but HCLT has impressed with well-placed bets, improved digital competencies, and continued success in mega deals.

  • Margin aspiration of around 20% remains intact, with a projected range of 18-19% for FY2024E.

  • Significant productivity gains are expected from AI in the medium term, contributing to HCLT's growth.

  • FY2024 will be a challenging year for growth, with a guided growth range of 6.5-8.5% in the services business.

  • HCLT maintains an aspirational EBIT margin target of 20% in the medium term, but there are no significant tailwinds to margins at present.

  • AI's potential will be realized in the medium term, with productivity gains expected to reach 15-20%.

  • HCLT remains prudent in capital allocation, with no significant investments required for developing capabilities in new/existing service segments.

  • The company aims to invest in new geographies and sectors where it is under-indexed relative to revenue potential.

  • Positives: HCLT's resilience, industry-leading growth, balanced service portfolio, cost management, and high payout.


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