HCL Tech: Another Splendid Quarter in its ERS Unit

/ May 10, 2018/ Financials, HCL Tech, India

HCL Tech’s ERS unit had another splendid performance this quarter (Q4 FY18), with a CC revenue growth of +30.4%, to approximately USD 490m in revenues. Excluding the Geometric acquisition, I estimate CC/CS revenue growth was close to 20% still driven by its IP partnerships (with IBM, mostly) and by the good market conditions. HCL Tech’s ERS concluded an excellent FY18 year, and reached USD 1.8bn in revenues, and a 38% revenue growth. What a performance!

Looking ahead, ERS’s revenue growth in FY19 should be close to approximately +20%, with the impact of Geometic and Butler now gone. HCL Tech will be growing twice as fast as its best competitors Alten and Akka (at CC). Being simplistic, in FY19, ERS will get 10% of revenue growth from market conditions, and 10% form its IP partnerships. This is to be monitored further.

As always, I need to ask the same philosophical question: does it make sense for HCL Tech to move so aggressively into the ISV business? The company did not sign any IP partnership this quarter, but announced the planned acquisition of database and middleware ISV specialist Actian? HCL Tech thinks so. I may disagreed with the strategy, but I must admit HCL Tech delivers, quarter after quarter.

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