HCL Tech shares slip as UK arm to offload full stake to State Street JV

In the past three months, the stock of this IT major jumped 8.5 percent as against 5 percent rise in the benchmark Sensex

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Shares of HCL Technologies  slipped 1 percent to Rs 1,320 per share on December 5 after its UK-arm is set to offload entire 49 percent stake in US-based State Street joint venture (JV).

In the past three months, the stock of this IT major jumped 8.5 percent as against 5 percent rise in the benchmark Sensex.

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HCL Tech Investments UK, the step-down wholly-owned subsidiary of HCL Tech signed a memorandum of understanding (MoU) with its joint venture partner State Street International Holdings for selling entire 49 percent stake in the JV to State Street for $170 million plus net book value.

Analysts at Morgan Stanley shared an 'overweight' rating with a target price of Rs 1,400 per share. "The transaction is expected to complete by second quarter of fiscal year 2023-24 (Q2FY24) or Q1FY25. State Street has a revenue base of $97 million and net worth of $94 million. State Street would own 49 percent of voting rights in the JV and 100 percent of dividend rights," the brokerage firm said.

Nomura, however, shared a 'neutral' call on HCL Tech post this deal, with a target price of Rs 1,200 per share. They believe that HCL Tech would lose $97 million of revenues or 80 basis points (bps) of its current revenues post this divesture.

"As part of this divesture, HCL Tech would receive $170 million plus net book value on date of closing. The arrangement is expected to be effective from Q1FY25 onwards," analysts added.

ALSO READ: Accumulate HCL Technologies; target of Rs 1374: KR Choksey

State Street Corporation is a US-based financial services provider to institutional investors including investment servicing, investment management and investment research and trading.

"Bringing the State Street HCL Services capabilities and expertise in-house will create a more simplified model to facilitate faster decision making and a more effective and efficient experience for its clients," HCL Tech said in an exchange filing dated December 4, 2023.

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