• Rajasthan

    Cong 94
    BJP 80
    RLM 0
    OTH 25
  • Madhya Pradesh

    Cong 109
    BJP 110
    BSP 6
    OTH 5
  • Chhattisgarh

    Cong 60
    BJP 21
    JCC 8
    OTH 1
  • Telangana

    TRS-AIMIM 89
    TDP-Cong 22
    BJP 2
    OTH 6
  • Mizoram

    MNF 29
    Cong 6
    BJP 1
    OTH 4

* Total Tally Reflects Leads + Wins

Target for HCL based on 15.5x FY18E EPS

By: | Published: April 5, 2016 1:06 AM

HCL Technologies (HCL Tech) has announced that it will acquire India-listed Geometric Limited, except for the 58% stake that the latter owns in 3DPLM Software Solutions, a JV with Dassault Systems.

HCL Technologies (HCL Tech) has announced that it will acquire India-listed Geometric Limited, except for the 58% stake that the latter owns in 3DPLM Software Solutions, a JV with Dassault Systems. HCL Tech will issue 10 equity shares of `2 each to Geometric shareholders for every 43 equity shares of Geometric of `2 each held by them. In total, HCL will issue 15,640,546 equity shares of `2 each, implying a dilution of 1.1%. The deal is expected to close in 4Q 2016.

HCL Tech has recently started to strengthen its engineering services portfolio (20% of revenue at present), possibly as a hedge to the slowing revenue growth in its infrastructure services segment (35% of current revenue). Geometric brings in product lifecycle management (PLM, a $40 billion market) skills and about 60 global clients, which should complement HCL Tech’s capabilities in engineering R&D. We believe this is likely to add about 2%to revenue, and likely to dilute earnings by 0.5% on a full-year basis, though the management expects it to be cash EPS accretive.

A sharp decline in IT Services spending could result in downward revision of our earnings estimates. It is extremely difficult to project the financial results of tech companies since their operating models are highly volatile and unpredictable. Finally, valuing tech stocks can prove challenging, our target price is based on 15.5x FY18E EPS.

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