HCL sees growth at lower-end of range amid macro challenges | The Financial Express

HCL sees growth at lower-end of range amid macro challenges

HCL Tech also highlighted that there is greater level of vendor consolidation underway right now than in the recent past not only due to challenging macro circumstances, but also due to weeding out of a few global top 10 service providers based on risks associated with them.

HCL sees growth at lower-end of range amid macro challenges
BFSI is the segment which is little bit impacted by furloughs, followed by tech companies, he said.

HCL Technologies has pegged its annual revenue growth at the lower end of its guided range for the current financial year due to the macro-economic challenges in the demand environment.

Speaking at an Investor Day event in New York on Thursday, C Vijayakumar, chief executive officer and managing director of the company, said some of the macros like furloughs and drop in discretionary spend in tech, telecom and other verticals are a little bit more than what the company had expected at the beginning of the quarter.

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In October, while announcing the company’s second quarter results, HCL Tech had raised its revenue growth guidance for FY23. It pegged 13.5-14.5% growth in revenue in constant currency against 12-14% projected earlier, citing strong order bookings and pipeline. BFSI is the segment which is little bit impacted by furloughs, followed by tech companies, he said.

HCL Tech also highlighted that there is greater level of vendor consolidation underway right now than in the recent past not only due to challenging macro circumstances, but also due to weeding out of a few global top 10 service providers based on risks associated with them.

The management’s comments saw the stock witnessing its biggest intraday fall in six months on Friday. The shares fell 6.5% to close at Rs 1,029.80 on BSE. It was the biggest loser among the 30 Sensex stocks. In comparison, Sensex was down 0.3%.

In a tweet, Sandip Sabharwal, former head of equity at SBI Mutual Fund said: “Small warnings have started. Will become bigger as we move into 2023. Avoid technology and export oriented sectors in general. You will get them cheaper over the next 6 months.”

IT stocks have seen a sharp correction this year on fears of demand slowdown for IT services amid global macro uncertainties. The Nifty IT index is down 22% this year as compared to 7% rise in broader Nifty50 index.

Many IT firms have given cautious forecasts amid the economic uncertainty globally as world’s top central banks tighten their monetary policies. TCS had earlier had said clients are taking longer to decide on bigger deals.

However, brokerages such as Kotak Institutional Equities are upbeat.

It has maintained a buy on the stock with an unchanged fair value of Rs 1,250 and said HCL’s large deal engine is firing well with more opportunities, given the rising trend in vendor consolidation and cost efficiency focused deals. “The margin profile can improve further with the easing of talent related headwinds. The attractiveness of the stock has reduced a tad following the recent rally,” Kotak said.

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First published on: 10-12-2022 at 06:05 IST