Here's what to expect from HCL Tech Q3 earnings

Moneycontrol Bureau

Software services exporter HCL Technologies is expected to clock 2-4 percent quarter-on-quarter US Dollar revenue growth in Jan-March, its third quarter, and guide for strong demand environment going ahead.

Infosys disappointed the street last week, when it forecast US Dollar revenue growth for FY2014, much lower than what industry body NASSCOM expects. However, HCL Tech, which surprised the street, beating analysts expectations at both profit and revenue levels in Oct-Dec, is expected to continue the momentum going.

"We expect revenue growth of 3.1 percent QoQ at HCL Technologies to USD 1,190 million. We expect traction in IMS to remain strong, with our
estimate of 5 percent QoQ growth to USD 344 million. We expect software services revenue of USD 794 million, implying a growth of 2.4 percent," said Ashish Chopra of Motilal Oswal.

Viju George of JP Morgan expects revenue to grow 2.5 percent, while in constant-currency terms growth is likely to be about 3 percent.

HCL Tech's margins, meanwhile are expected to decline.

"Higher manpower additions and investment in S&M to impact margins by 60bps," said Sandip Agarwal and Omkar Hadkar of Edelweiss Securities.

KEY THINGS TO WATCH

-- Management comments on current demand environment and discretionary spending by clients
-- Outlook for the fourth quarter and FY14
-- Deal wins and pricing scenario in the quarter
-- Hiring plan for next year

STOCK WATCH

HCL Tech shares closed at Rs 762.80 on NSE, down 0.3 percent on NSE on Tuesday.

The stock has gained over 23 percent since Dec-end, outperforming the wider CNX-IT index, which has gained 5 percent in the same period.

Motilal Oswal advises a "buy" on HCL Tech and it is one of the prefered tier-I IT stocks. JP Morgan is overweight on HCL Tech.