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HCL Tech shares gain 5% on strong revenue growth in June quarter



Shares of HCL Technologies gained 5 per cent to Rs 1,074 apiece on the BSE in the intra-day trade on Thursday after the company posted double-digit revenue growth in the first quarter of the financial year 2019-20 (Q1FY20). In constant currency (CC) terms, the company’s revenue grew 17 per cent year-on-year (YoY) and 7.7 per cent on sequential basis.

The information technology (IT) firm maintained its revenue guidance of 14-16 per cent in CC term and margin guidance of 18.5-19.5 per cent for the quarter under review, as it expects revenues flow from the IBM IP (intellectual property) deal from second quarter onwards.

The company’s consolidated net profit, however, declined 7.6 per cent YoY and 13.5 per cent QoQ at Rs 2,220 crore, against an average analysts’ estimate of Rs 2,344 crore.

HCL Tech has concluded acquisition of IBM IPR and expects the integration effective Q2FY20 as it made first tranche of payment of US$900 million. It expects incremental revenues of about US$ 135million, Gross margins of 50 per cent and Amortisation of 20 per cent on this new revenue stream.

Strong organic growth performance in Q1 would imply that HCL Tech would clock sector-leading growth even on organic basis which make us believe that the stock could see significant potential re-rating as it recoups its profitability, according to analysts at Dolat Capital.

Despite close of the IBM deal a month later than expected, analysts at Elara Securities raise FY20 USD revenue growth estimate to 15.8 per cent from 15.0 per cent and FY21 to 8.1 per cent from 7.8 per cent. Due to the late close of the IBM deal and investments in Mode-2, the brokerage lowered EBIT margin by 13 bps (basis points) and 26 bps for FY20 and FY21 and PAT by 2.4 per cent and 2.6 per cent for FY20 and FY21, respectively.

Motilal Oswal Financial Services (MOFSL) maintains ‘neutral’ rating on the stock despite a strong top-line performance. The brokerage firm’s EPS estimates are down by 6.5-8 per cent for FY20/21, of which 6 bps is on account of the higher effective tax rate at 24 per cent (v/s 19-20 per cent earlier), arising due to goodwill from IBM’s IP purchases. The revenue performance from IPs post the integration next quarter needs to be watched, it noted.

At 12:54 pm, HCL Tech was trading 4 per cent higher at Rs 1,067 and was the top gainer among the S&P BSE Sensex stocks. In comparison, the benchmark index was up 0.21 per cent at 36,772 levels. A combined 3.7 million shares changed hands on the BSE and NSE, till the time of writing this report.

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Market Updates

Sitharaman’s sops for NBFCs may perk up lending, ease liquidity stress



Illustration by Binay Sinha

To further ease the liquidity stress in the non-banking sector and nudge them to revive their lending activities, Finance Minister (FM) Nirmala Sitharaman on Friday announced a slew of measures for non-banking financial companies (NBFCs) and housing finance companies (HFCs). The government hopes this will result in more credit support for purchase of houses, vehicles, and consumption goods.

The government has provided additional support of Rs 20,000 crore to the stressed housing finance companies from National Housing Bank (NHB). With this, the additional liquidity support for the HFCs from NHB has gone up to Rs 30,000 crore.

In the Union Budget last month, the FM had encouraged public sector banks (PSBs) to buy high-quality pooled assets of NBFCs up to Rs 1 trillion for which the government would provide a one-time six-month partial credit guarantee for the first loss of up to 10 per cent.

The Reserve Bank of India (RBI) had also chipped in by tweaking banks’ bond-holding norms. This will allow banks to borrow an additional Rs 1.34 trillion exclusively for buying such pooled assets and giving loans to NBFCs. The FM on Friday said this partial credit guarantee scheme will be monitored at the highest level in each bank. Through this, it is expected that many of the assets will get quickly pooled and NBFCs will receive the necessary liquidity. “NHB has already settled some of the issues. NBFCs are receiving money from the banks and are moving towards funding,” said Sitharaman.

Sanjaya Gupta, managing director, PNB Housing Finance, said “This will support growth and ease the liquidity crunch. HFCs will now get an additional Rs 20,000 crore from NHB. The initiatives have potential to kick start the real estate sector.”

The government has also permitted NBFCs to use Aadhaar-authenticated bank KYC to avoid repeating the same process when a customer approaches it for credit. This has been a long-standing demand. The necessary changes in the Aadhaar regulations and Prevention of Money Laundering Act rules will be made, the FM said.

“This will streamline the process and also reduce frauds,” said Raman Aggarwal, chairman, Finance Industry Development Council.

The government has also asked PSBs and NBFCs to fast-track their collaboration to provide credit to micro, small and medium enterprises, small traders, self-help groups, and micro finance industry client borrowers.

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Market Updates

PACL Case: Sebi panel invites expression of interest for 28,974 properties




A committee headed by Justice R M Lodha has invited expression of interest (EoI) from prospective buyers for a total of 28,974 properties belonging to PACL Group.

Market regulator Sebi had set up a committee headed by former Chief Justice of India R M Lodha following a Supreme Court order to refund money to investors in the matter of PACL Group.

As per the notice issued by Sebi, the committee has divided the total 28,974 properties belonging to PACL group in four zones — east, west, north and south — with maximum properties being located in the southern zone.

Regarding PACL properties, the apex court’s order dated July 30 observed “we also leave it open to the committee to receive any further offers and to explore them after duly publishing a further notice on the website,” the notice said.

In pursuance of apex court’s order, the committee “invites Expression of Interest from prospective buyers clearly indicating therein, list of properties in each zone, its circle rate, the offer amount and other relevant details,” the Friday notice said.

“The proposal should be for properties in each zone aggregating in value not less than Rs 1,000 crore,” the notice added.

The notice further said that the last date of receipt of proposals is September 9.

PACL, also known as Pearl Group, had raised Rs 60,000 crore from public in the name of agriculture and real estate businesses and was found by Sebi to have collected these funds through illegal collective investment schemes over 18 years.

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Improved market access for domestic retail investors with Aadhaar-based kYC



Markets, Investors, Indices, Stocks

The government will allow Aadhaar-based KYC for domestic retail investors, and necessary amendments to the rules under the Prevention of Money Laundering Act will be issued.

Announcing a slew of measures to boost the economy, the government said the Depository Receipt Scheme 2014 is expected to be operationalised soon by Sebi. “This will give Indian companies increased access to foreign funds through American Depository Receipt (ADR)/ Global Depository Receipt (GDR),” she said.

In order to improve market access for the domestic retail investors, Aadhaar-based KYC will be permitted for opening of demat account and making investment in mutual funds. In this regard, necessary notification for amendments in PMLA rules would be issued.

Besides, steps would be taken with regard to offshore rupee market.

“To bring offshore rupee market to domestic stock exchanges and permit trading of USD-INR derivatives in GIFT IFSC, Ministry of Finance is working with RBI to introduce this measure shortly,” the government said.

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