HCL Tech shares down 4% on acquisition of select IBM products for $1.8 billion

By: | Published: December 7, 2018 9:52 AM

Shares of HCL Technologies traded down nearly 4 percent Friday on its decision to acquire IBM products.

HCL Tech, HCL Tech  Q1 Net, HCL Tech, HCL Tech revenueShares of HCL Technologies traded down nearly 4 percent Friday on its decision to acquire IBM products.

Shares of HCL Technologies traded down nearly 4 percent Friday on its decision to acquire IBM products. The IT major today announced that it will acquire select IBM software products for $1.8 billion (over Rs 12,700 crore) in an all-cash deal. The transaction, subject to “completion of applicable regulatory reviews”, is expected to close by mid-2019, HCL Tech said in a statement.

The stock ended the day at Rs 1011.95 yesterday. The HCL Tech stock was trading down 37.20 points, or 3.68 percent, to Rs 974.75 on BSE at the time of reporting.

Also read: Share Market Live updates: Sensex up 200 points, Nifty above 10,650; HCL Tech shares down 4%

With this acquisition, the IT firm will get software products in areas of marketing, commerce, security and collaboration, a “highly profitable revenue stream” containing a significant annuity component, and access to over 5,000 large clients across industries and geographic markets, along with sales and marketing teams, the exchange filing said.

Further, HCL said that it expects an incremental revenue of nearly $650 million on a run-rate basis in the second year after closing this deal. However, the revenue in the first year is expected to be about $25 million lower due to transition. Besides, the EBITDA margin is expected to be about 50% on a run-rate basis.

Meanwhile, the headline indices – Sensex and Nifty – opened higher on positive global cues, following the OPEC meet and US Federal Reserve’s signal to pause rate hikes. The 30-share Sensex rallied about 200 points on open to 35,540.49 while the Nifty 50 opened above the 10,650-mark.

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