Shares of India's third largest IT company, HCLTech plummeted over 9 percent on January 14, a day after the company released its Q3 numbers. While, the company's earnings were largely in-line, the marginal guidance upgrade hinted at a weaker exit rate for Q4, dampening sentiment.
At 09.36 am, shares of HCLTech were trading at Rs 1,804.65 on the NSE. With the dive in today's session, the stock is also set to post its biggest single-day fall in nearly 10 years.
HCLTech has updated its revenue growth guidance for fiscal year 2025, raising the lower end by 100 basis points in constant currency (CC) terms. According to CEO C Vijayakumar, the revision was capped by a planned scale-down of a significant telecom deal in Q4 and delays in ramping up some discretionary projects. With this revision, the revenue growth guidance now stands at 4.5-5 percent, compared to the previous quarter's range of 3.5-5 percent.
However, brokerages across the board pointed out that the updated guidance suggested weaker growth for Q4, which came as a disappointment, especially at a time when the management is seeing improved discretionary demand.
Brokerage firm Jefferies noted that HCLTech's revised growth guidance suggests a weak Q4 exit, despite optimistic commentary on Total Contract Value (TCV) conversion to revenue and discretionary spending.
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While the management cited planned contractual reductions as the reason for the subdued Q4 performance, MOFSL highlighted the slower ramp-up of discretionary deals in the January-March period as a concern, particularly in an environment where short-cycle deals are gaining traction.
As for quarterly earnings, HCLTech's consolidated net profit for the third quarter grew 8.4 percent on a sequential basis to Rs 4,591 crore while revenue was up 3.6 percent to Rs 29,890 crore. A Moneycontrol poll of nine brokerages pegged HCLTech's revenue at Rs 30,135 crore and consolidated net profit of Rs 4,596 crore in Q3, so the actual numbers were slightly below the estimates.
EBIT margins also expanded 93 basis points sequentially to 19.5 percent, crossing HCLTech's guidance band. Despite the revision in revenue guidance, HCLTech retained its EBIT margin guidance at 18-19 percent for the full year.
Also Read | HCLTech raises FY25 revenue guidance, planned contractual reductions in Q4 caps revision
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