At first glance, its Q4 FY 2014 results look like another impressive quarter’s performance from HCL Technologies (HCL), with the strongest y/y topline growth since Q2 FY 12 (to 14/6%) and ongoing y/y margin improvement (to 24.1%). (See here for full details). Look more closely, however, and, while the performance is undoubtedly very strong, it tends to be concentrated in a few service lines - and also verticals. We also note the constant currency growth (13.1%) is the lowest for six quarters.

HCL’s growth in the last few years has been dominated by its IT infrastructure services business, which in two years has gone from contributing under a quarter to over a third of global revenues. In Q4 FY14, for example, IT infrastructure services accounted for (a NelsonHall estimated) 55% of the $179m in incremental y/y revenue. For FY 2014 as a whole, that contribution is over 67% of the additional $673m in revenue.

If we look at other service lines, HCL’s applications services businesses are delivering low to mid single digit growth; HCL does not appear to be responding as well as some of its Indian peers to changing market requirements in ADM and SAP services.Will we see actions in FY 2015 to revitalize its applications businesses, both for discretionary spend digital projects and also for larger milti-year legacy modernization engagements? Its engineering services business is doing a little better, but only at high single digit growth.

HCL’s only other service line which delivered double digit growth this year is BPO, culminating in a (NelsonHall estimated) growth of over 35% this quarter – but to put this into perspective, BPO represents just 4.6% of HCL’s global revenues. Nevertheless, BPO is punching above its weight, contributing over 10% of the y/y growth this quarter.

Growth this quarter was once again led by EMEA (where HCL has been winning IT infrastructure management deals in recompetes). HCL does not provide y/y revenue growth by region in constant currency terms, but sequentially, EMEA delivered an impressive 6.7% CC growth (for the company overall, it was 2.8%)

Changing our focus to verticals, growth this quarter has been absolutely dominated by the financial services sector, which we estimate contributed nearly 50% of the y/y growth (although it represents just 28.4% of global revenues). It is too early for the $400m IT outsourcing contract with Norway’s DNB Bank announced in May (where HCL ousts Evry) to kick in – but we believe the growth has come from other IT infrastructure management wins in the Nordics. We expect that financial services will continue to be a growth engine for HCL in FY 2015, and not just from the DNB win: HCL is targeting application modernization opportunities in retail banking, also in wealth management, SI opportunities around Avaloq’s range of wealth management products.

HCL is also seeing strong growth on its E&U and public sector vertical group, which accounts for just 10.1 % of global revenues but generated over 24% of the y/y growth this quarter.

In contrast, its healthcare and life sciences vertical group has had another very quiet quarter (we estimate 3.7% y/y growth); the strong growth achieved in FY 2013 has not been maintained this year, indicating that a lot of activity was project based (e.g. around ICD 10 transition).

Also, HCL’s high tech/manufacturing vertical group has had its weakest quarter of topline growth for some time. Growth has decelerated throughout FY 2014 (from an estimated 37.6% in Q1 to – a still healthy - 10.6% in Q4), as some large IT infrastructure management deals have bedded down.

So what can we expect to see in FY 2015: with three very large outsourcing wins this fiscal, the IT infrastructure services business will continue to be the major growth engine. We should also expect to see partnership announcements made this year (e.g. with CSC, Avaloq) translate into some application-services led engagements in the retail banking sector. Finally, expect to see a resumption of strong growth in the manufacturing sector.