HCL Tech may slip to 10x PE

CNBC-TV18’s Managing Editor, Udayan Mukherjee – Forex loss was a big surprise from HCL Tech. I don’t think people were expecting a Mark To Market (MTM) of that magnitude. HCL Tech in any case has been an underperformer in the sector if you just look at its performance versus some of the other IT leaders. It’s always been a laggard in terms of stock price performance.

The disturbing thing about HCL Tech is that while the MTM is very large at USD 75 million, they actually booked USD 9 million of cash loss. I think the market will now worry as it cuts down some of its hedges, which has started doing, it will actually have to book some of those MTMs in terms of hard cash losses that is disturbing. MTM is a different matter but booking a hard cash loss because of the winding down of the hedges is something that goes into your Profit and Loss (P&L) directly and materially.

So I know this stock is not going to perform or give you any kind of bounce in the near-term, it’s not expensive, it trades at just about 11-12 times P/E multiples, a discount to its peers. But with the kind of news flow its come up with, I would not be surprised if it drifts down to even 10 kind of P/E and it would be about a couple of Rs 100/share.