Shares of HCLTech fell by around 6.5% in intra-day trade on Monday, following weaker than expected March quarter earnings by the company on Friday after close of trading hours. This was the largest intra-day drop in nearly 17 months. On Monday, the company’s share on the BSE closed down 5.84% at Rs 1,386.25. On the NSE it closed down 5.87% at Rs 1,387.40.
HCLTech has projected a subdued guidance for FY25 of just 3-5%, down from the 5-5.5% it had forecast for FY24. The outlook reflects that the ongoing macroeconomic challenges will dampen demand throughout the fiscal year. The management said that increased offshoring pressures and ramifications from its significant deal with financial services firm State Street, could curb growth.
Brokerages commentary was a mixture of disappointment and caution. Morgan Stanley highlighted the weak guidance as particularly concerning, however, given HCLTech’s strong performance at the end of FY24 it maintained an “overweight” call but with a wary outlook. Similarly, JPMorgan noted the guidance implied potential weakness in the first half of FY25, adjusting their stance to “neutral” with a price target of Rs 1,470.
Nomura cut the target price of HCLTech stock by Rs 100 to Rs 1,400 and retained its “neutral” rating. Commenting on the margin, Nomura said, “While the company maintained its aspirational margin band of 19-20%, it noted that it is likely to take a while to reach there due to the current low growth environment”.
Kotak Institutional Equities and Nuvama Institutional Equities both revised their earnings per share estimates and price targets downward for FY25 and FY26, reflecting expectation of near-term headwinds. Despite this, Nuvama remains optimistic about HCLTech’s fundamentals, emphasising the company’s previous strong growth and improved capital allocation strategy as bases for future resilience.
C Vijayakumar, CEO of HCLTech, acknowledged the tough market conditions but expressed confidence in the company’s strategic initiatives to navigate the challenging environment. “While we are cautious about the macroeconomic headwinds, our strategic focus areas and operational efficiencies should help us manage the impacts effectively,” he said.
HCLTech on Friday posted an 8.4% sequential drop in consolidated net profit at Rs 3,986 crore in the fourth quarter ended March. This was much below the Street estimates of Rs 4,123 crore. Meanwhile, the revenue rose marginally to Rs 28,499 crore.
Further, a recent Crisil Ratings report said the Indian IT services sector will likely see a second year of subdued growth in FY25, with modest projected revenue increases of 5-7%, amid ongoing global economic challenges that have limited growth in tech spends in primary markets in the US and Europe.
