Home >Markets >Mark To Market >HCL Tech down 3% as earnings continue to disappoint

IT services provider HCL Technologies Ltd missed expectations on some key earnings parameters in the June quarter.

In constant currency terms, its revenue grew 0.7% sequentially and Ebit margin stood at 19.2%. Ebit is short for earnings before interest and tax. Both these metrics were below the Street's expectations. Delayed deal closures, time taken for transition and the impact of second wave of covid weighed on the company's performance in the June quarter. Margins were impacted by one-time milestone bonus given during the quarter.

Reacting to the earnings, shares of the company fell around 3% on the National Stock Exchange in early deals on Tuesday.

One the bright side, HCL signed eight large services and four product deals across BFSI, oil & gas, and technology segments. It's new deal total contract value of $1.7 billion rose 37% year-on-year. After muted growth in nine months of FY21, deal intake improved materially in last two quarters, which augurs well for revenue acceleration, said analysts.

For FY22, the company's management reiterated its double-digit constant currency revenue growth guidance, implying around 3% compounded quarterly growth rate over Q2-Q4. The management hopes to maintain Ebit margin in the range of 19-21% for FY22, considering planned investments in Mode 2 capabilities and certain markets. Further, its management indicated that it expects FY23 to see an acceleration versus FY22.

Analysts at Nirmal Bang Securities Ltd expect HCL to deliver a strong 2QFY22 followed by a decent 2HFY22, resulting in a 12.4% organic dollar revenue growth in FY22. However, while the company may see an uptick in organic revenue growth, it is likely to be lower than that of its peers, where organic growth hierarchy will be Infosys, TCS and Wipro, the domestic brokerage house said in a report.

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