HCL Tech shares hit a fresh record high as Co to acquire IT firm DWS Ltd

 Shares of HCL Technologies hit a fresh record high of Rs 835, up 3 per cent on the BSE in the early morning deals on Monday after the company announced its intent to acquire IT company DWS Limited, a leading Australian IT, business, and management consulting group, for $158.2 million (approximately Rs 1,162 crore). The acquisition is expected to be completed by December 2020. The stock surpassed its previous high of Rs 824 touched on Friday, September 18, 2020.

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“The acquisition is a step towards enhancing HCL Techs’ presence in the Australia and New Zealand region. The acquisition helps HCL expand its coverage of clients and use the acquired customer base to offer its expanded portfolio of services,” HCL Tech said in a BSE filing.

“While the detailed financials are not available, we believe HCL Tech will be able to expand its presence in Australia and New Zealand through this acquisition and will add around 2 per cent to the company's revenues,” ICICI Securities said in a note.

Meanwhile, in the past six trading days, the stock has rallied 16 per cent after the IT major raised its outlook for the September quarter in a mid-quarter update. HCL Tech, on September 14, said it expects the revenue and the operating margin for the July-September quarter (Q2FY21) to be meaningfully better than the top end of the guidance it had provided in July' 2020.

"We have seen strong execution during the quarter to date, and continue to execute to the plan this month. The revenue growth for the current quarter is expected to exceed 3.5 per cent quarter-on-quarter (QoQ) in constant currency (CC), enabled by broad-based momentum across all service lines, verticals, and geographies," HCL Technologies said.

The IT major further said the earnings before interest and tax (EBIT) margin for the current quarter is expected to be between 20.5 per cent and 21.0 per cent. Good booking momentum continues this quarter, led by life sciences & healthcare, telecom & media, and financial services verticals. The pipeline continues to look healthy across service lines, verticals, and geographies, it said.

HCL Tech enters top-10 most valued firms club; surpasses ITC in m-cap

 IT major HCL Technologies entered the list of top-10 most valuable companies in India after the stock rose nearly 4 per cent to Rs 817 on the BSE on Thursday.

At 10:36 pm, HCL Technologies recorded market capitalisation (m-cap) of Rs 2.2 trillion, and stood at 10th position in the overall ranking, BSE data show. The company surpassed cigarette major and fast moving consumer goods (FMCG) company ITC, which has the market-cap of Rs 2.19 trillion.

HCL Technologies now become the third IT company featuring in the top-10 most valuable firm in terms of market-cap. Tata Consultancy Services (TCS) is on top of the list in IT space with Rs 9.32-trillion market-cap followed by Infosys, which has Rs 4.32 trillion-market-cap.

Shares of HCL Technologies hit a fresh record high of Rs 817.45 on the BSE on Thursday after the company and Google Cloud expanded partnership to deliver accelerated business intelligence platform.

In the past four trading days, the stock has rallied 13 per cent after the IT major raised its outlook for the September quarter in a mid-quarter update.

HCL Tech, on September 14, said it expects the revenue and the operating margin for the July-September quarter (Q2FY21) to be meaningfully better than the top end of the guidance it had provided in July'2020. The stock surpassed its previous high of Rs 738.80, touched on September 8, 2020.

"We have seen strong execution during the quarter to date, and continue to execute to the plan this month. The Revenue growth for the current quarter is expected to exceed 3.5 per cent quarter on quarter in constant currency (CC), enabled by broad based momentum across all service lines, verticals and geographies," HCL Technologies said.

The IT major further said the earnings before interest and tax (EBIT) margin for the current quarter is expected to be between 20.5 per cent and 21.0 per cent. Good booking momentum continues this quarter, led by life sciences & healthcare, telecom & media and financial services verticals. The pipeline continues to look healthy across service lines, verticals and geographies, it said.

Analysts at JP Morgan have 'overweight' rating on the stock. While HCL was a leading vendor for Gen 1 infrastructure management services contracts over 2007-14, it lagged peers on application services. "Its aggressive M&A-led build-out of its products and platforms business over the past four years diluted its focus on scale DX adoption and made it a laggard despite strong cloud roots," the brokerage firm said.

Greater focus on digital transformation is returning, accompanied by success in large hybrid-cloud and DX adoption deals. This has resulted in HCLT's organic growth accelerating back to an industry-leading of more than 15 per cent over the last past three quarters. While FY21 earnings growth is likely to be mild due to Covid-19, the brokerage firm expects earnings growth to rebound sharply from FY22.

HCL Tech rallies 7%, hits record high after mid-quarter business update

 Shares of HCL Technologies rallied 7 per cent to hit a record high of Rs 768.90 on the BSE on Monday after the company said it expects the revenue and the operating margin for the July-September quarter (Q2FY21) to be meaningfully better than the top end of the guidance it had provided in July’2020. The stock surpassed its previous high of Rs 738.80, touched on September 8, 2020.

"We have seen strong execution during the quarter to date, and continue to execute to the plan this month. The Revenue growth for the current quarter is expected to exceed 3.5 per cent quarter on quarter in constant currency (CC), enabled by broad based momentum across all service lines, verticals and geographies,” HCL Technologies said in mid-quarter business update.

The IT major further said the earnings before interest and tax (EBIT) margin for the current quarter is expected to be between 20.5 per cent and 21.0 per cent.

Good booking momentum continues this quarter, led by life sciences & healthcare, telecom & media and financial services verticals. The pipeline continues to look healthy across service lines, verticals and geographies, it said.

HCL Technologies had expected CC growth of 1.5 per cent-2.5 per cent for the next three quarters, which translated to revenue decline of 0.8 per cent-3.3 per cent in FY21E. It had expected the margins to be in the range of 19.5 per cent and 20.5 per cent range.

In the past three months, the stock has outperformed the market by surging 34 per cent, as compared to 15.7 per cent rise in the S&P BSE Sensex.

“HCL Technologies is looking to defend/expand margins in FY21-an impressive thing, in our view. The management believes worst is over and is confident of good growth trajectory- confidence is based on large deals, 40 per cent higher pipeline compared to pre-Covid and stability across verticals such as financial services, healthcare, telecom and consumer packaged goods (CPG). We expect revenue decline of 2.5 per cent $ terms in FY21E. Due to strong margin performance, strong execution & strong recovery in FY22 on pent-up demand led to around 10 per cent for FY22/23”, analysts at Prabhudas Lilladher said in Q1FY21 result update.

At 10:15 am, the stock was trading 6 per cent higher at Rs 766.55 on the BSE, against 0.68 per cent rise in the S&P BSE Sensex. A combined 6.5 million equity shares have changed hands on the counter on the NSE and BSE, so far.

Fresh graduates to spearhead HCL Technologies' cyber security push

While demand for cybersecurity services continues to be strong for HCL Technologies, talent remains an area of concern. To cater to the demand, the company is employing and training fresh graduates in security roles, according to Maninder Singh, its corporate vice-president for cybersecurity.
“My view is that a lot of youngsters are realising that security is a career option. They’re coming in, but it will take a while to fill the talent gap. When you actually float a resume in security and say you want a 10 years experienced professional, it is better to cut out the zero. It is better that you look for a fresh grad who will be more exposed to current technologies which are running and understand the current security landscape,” Singh said.

HCL is working closely with universities in India, the US and Europe, and increasingly hiring locally. These are either graduates who have done cyber security as a specialised subject in Bachelor of Science (BSc) or Bachelor of Technology (BTech) or a Masters with cyber security as a specialisation.
Singh said most fresh graduates adapt well to security requirements of Cloud, hybrid models and other digital technologies. “I’m not saying that experienced talent is not important. They are required, because they have so much they can contribute from what they have seen in the last 15-20 years,” Singh added.
While agreeing that the hype around cybersecurity has slowed down, Singh said the spate of global, high profile cyberattacks in the last two years have made boardrooms across industries take cybersecurity seriously. Last year saw some high profile data breaches at some of the largest firms in the world, including Facebook, British Airways, Macy’s and so on.
According to a recent report by cybersecurity firm Kaspersky, data breaches are becoming more expensive for enterprises. In 2019, the cost has risen to $1.41 million from $1.23 million in the previous year. In response to this, large organisations are investing more on cybersecurity, with the annual average enterprise IT security budgets at $18.9 million, compared to $8.9 million in 2018.
While traditionally, banking, financial services and insurance (BFSI), retail and health care have been big spenders on cybersecurity, Singh sees opportunity in another business line as well.
“BFSI, health care and life sciences will always remain top spenders. The reason is either they deal with money or with life or the sensitivity of security is extremely high in those domains. Manufacturing was a laggard, especially industrial manufacturing,” he said.
The reason, he added, was that given the recent malware attacks like WannaCry, Petya or NotPetya, which impacted a number of companies across industries globally, the impact on manufacturing firms was huge.
“A plant (manufacturing or industrial) IT security was not run by the main IT teams. So, a lot of infections and malware penetrated into industrial equipment and actually shut down the plants (like production systems), which were allowing trucks to move in, and more was hacked and stopped. For 5-8 days, people had no manual system to support things,” he said.
There is also a lot of stress on using artificial intelligence (AI) in cybersecurity. A report by Capgemini found that businesses are increasing the pace of investment in AI systems to defend against cyberattacks. About 69 per cent of organisations surveyed said they would not be able to respond to critical threats without AI.
While agreeing that machine learning and AI will be helpful, Singh said, “I think it’s going to be human-led, AI/ML assisted.”
This implies that critical decisions will require human intelligence.
Security standpoint
Youngsters realise that security is a career option, says HCL’s corporate VP
Fresh graduates adapt well to security needs of Cloud, hybrid models, and other digital technologies
Spate of cyberattacks in last 2 years have made boardrooms across industries take security seriously, across the globe
Cost of data breaches in 2019 rose to $1.41 million from $1.23 million, says a Kaspersky report
There has also been a lot of stress, lately, on using AI in cybersecurity

HCL Tech Q4 net up 14% at Rs 2,550 cr, declares dividend of Rs 2/share

IT major HCL Technologies Thursday posted a 14.3 per cent increase in its consolidated net profit to Rs 2,550 crore for the quarter ended March 2019.
The company had registered a net profit of Rs 2,230 crore in the year-ago period as per the Indian Accounting Standards (Ind-AS), it said in a statement.

HCL Technologies saw its revenue growing 21.3 per cent to Rs 15,990 crore in the quarter under review from Rs 13,178 crore in the January-March 2018 quarter.

The company expects its 2019-20 revenues to grow between 14-16 per cent in constant currency basis.
"We once again, for the third time this year, set a new bookings' record. These numbers are an emphatic testimonial of the brilliant execution of our chosen market strategy and our ability to provide an annual guidance and deliver to it for three years in a row," HCL Technologies President and Chief Executive Officer C Vijayakumar said.
For the full year, net profit was higher by 16 per cent to Rs 10,120 crore, while revenue grew 19.4 per cent to Rs 60,427 crore from 2017-18.
In 2018-19, HCL Technologies delivered revenue growth at 11.8 per cent year-on-year in constant currency (CC) exceeding the upper end of its guided range, the statement said.
The company had given a revenue growth guidance of 9.5-11.5 per cent in constant currency basis for 2018-19.
In dollar terms, the net profit rose 5.9 per cent to $364.3 million for the March 2019 quarter, while revenue was higher by 11.8 per cent to $2.2 billion as compared to the year-ago period as per the US Generally Accepted Accounting Principles (GAAP).
HCL Technologies board has declared an interim dividend of Rs 2 per share for 2018-19.
The company added 14,249 people (gross) during the quarter to take its total head count to 1,37,965 at the end of the March 2019 quarter. Attrition in the IT services business on the past 12-month basis was 17.7 per cent.
The results were announced after trading hours. Shares of the company closed almost flat at Rs 1,132.10 apiece.

HCL Tech shows better-than-expected Q3 results, net up 19% to Rs 2,611 cr

Information technology (IT) services company HCL Technologies (HCLT) on Tuesday delivered better-than-expected financial numbers in the third quarter (Q3) ended December 31, 2018, and exuded strong faith to end the year with double-digit revenue growth.
In the quarter under review, the Noida-headquartered company’s net profit at Rs 2,611 crore grew 19 per cent on a year-on-year basis, while sequentially, growth was 2.8 per cent. Revenue in the quarter came in at Rs 15,699 crore, a rise of 22.6 per cent over the corresponding period last year and 5.6 per cent sequentially.

The sequential growth clocked by the company during the quarter was the highest among the other large industry peers. During the same period, industry leader Tata Consultancy Services posted a quarter-on-quarter revenue growth of 2.43 per cent, while for Infosys and Wipro, the number stood at 3.8 per cent and 3.6 per cent, respectively.
A Bloomberg estimate, based on consensus analysts’ poll, had expected HCLT’s net income at Rs 2,541 crore and revenue at Rs 15,514 crore.
“We had the highest bookings this quarter, driven by financial services, technology services vertical, and manufacturing vertical. This is the second quarter in this fiscal year, where we are seeing the highest bookings,” said C Vijayakumar, president and chief executive officer of HCLT.
“With the confidence in the bookings we’ve had and with the demand environment, we feel confident of delivering towards the higher end of our guidance,” added Vijayakumar.
For 2018-19 (FY19), HCLT maintained its revenue growth forecast of 9.5-11.5 per cent in constant currency terms. The company had earlier said it was expecting revenue growth for the fiscal year to come in towards the middle range of this growth forecast.
ALSO READ: HCL Technologies taking more risks over product play, say experts
In dollar terms, revenue came in at $2,202 million, up 5.6 per cent sequentially and 13 per cent annually on a constant currency basis. Net income was $364 million, up 2.1 per cent sequentially and 7 per cent over last year.
However, the operating profit margin of the company in Q3 declined 30 basis points to 19.6 per cent over the previous quarter on currency headwinds and wage hikes, though it was well within its forecast range of 19.5 per cent to 20.5 per cent.
With this, HCLT is expected to overtake the third-largest IT services firm Wipro in revenue terms in FY19. On a nine-month basis, HCLT’s revenue of $6.353 billion is already $240 million higher than that of Wipro’s.
“HCLT delivered impressive revenue growth for the quarter, with 5.9 per cent constant currency growth. However, margin performance was a tad below estimates,” said Sanjeev Hota, AVP Research at Sharekhan.
The company’s growth in Q3 was led by technology and services vertical, which grew 7.5 per cent, while manufacturing, retail and consumer packaged goods segments grew 3.9 per cent and 8.4 per cent, respectively. Revenues from financial services vertical saw a marginal decline of 0.6 per cent on a sequential quarter basis.

HCL acquiring intellectual properties from IBM a risky bet, say experts

HCL Technologies will acquire select intellectual properties (IPs) from global technology giant IBM in a deal valued at around $1.8 billion, making it the largest acquisition in the domestic IT services space.
The Shiv Nadar-owned IT major said it would buy nine IPs from IBM in areas like secure device management, marketing automation, omnichannel e-commerce, and digital experience. The all-cash deal, which is expected to be concluded by mid-2019, will largely be funded through internal accruals, along with a mix of $300 million in borrowing.
Of the $1.8 billion, around 50 per cent will be paid by the middle of next year, while the rest of the payout will happen over a period of 12 months following the closure of the deal, company executives said during an analyst call on Friday.
Graph At the end of the second quarter of 2018-19, HCL, the country’s fourth-largest IT services provider, had cash and cash equivalents of around $1.6 billion. HCL has already put in place an aggressive IP-led growth strategy, investing as much as $1.1 billion in buying product licences and IPs from companies like IBM and DXC Technology over the past couple of years.
Through the current deal, the company will also be able to reach out to around 5,000-strong enterprise clients of IBM that are currently using these products.
ALSO READ: HCL Tech to buy some IBM software assets for $1.8 bn; experts question deal
Such client base creates an opportunity for the firm to cross-sell its various offerings in the services space under Mode-1 & 2. Under the current arrangement, employees who are managing the sales of these IPs and platforms at IBM will now come on the rolls of HCL Tech.
“This will enhance our geographical reach along with creating a direct relationship with the customers. It also gives us the ability to take our services offerings to clients around these products,” said C Vijayakumar, president & CEO at HCL Technologies. “In terms of management bandwidth, we have built leadership for managing products and platforms within HCL. This is part of our long-term strategy,” he added.

ALSO READ: HCL Tech expands relationship with Barclays, to take over Lithuania centre
The Noida-headquartered firm said it would receive incremental revenues of $650 million annually from 2021 onwards. Similarly, it sees operating margins from these products to be around 50 per cent after two years of closing the deal.
ALSO READ: HCL Technologies: Street is concerned about scaling up of inorganic biz
At this valuation, the HCL-IBM deal becomes the biggest investment made by any domestic IT services player in recent years. In 2009, Tech Mahindra had acquired the then scam-ridden Satyam Computer Services for $1.2 billion, while HCL Technologies had bought Axon Group for $731 million in 2011.
Despite positive management commentary, the deal failed to enthuse the market as the company’s stock fell close to 5 per cent to Rs 961.55 on Friday, when the benchmark Sensex closed 1.02 per cent higher. Industry experts and analysts also remained divided over the prospects of the deal.
“HCL has been the canniest of the Indian majors over the last couple of years with its products strategy. It has scaled up its products business impressively, with revenues topping $1bn, of which 80 per cent is tied to IBM. Hence, this is a win-win for both firms,” said Phil Fersht, founder & CEO of HfS Research.
However, some analysts remained sceptical. “It is a bold strategic move by HCL but is a risky one for sure,” said Pareekh Jain, founder of Pareekh Consultant and analyst tracking the engineering services sector. “Globally, there are very few companies which are able to manage product and services business successfully. I think HCL has a strategy to spin off the product business as a separate entity in the future.”
Similarly, analysts are also of the opinion that the details on amortisation remain sketchy in the management commentary. “The critical amortisation aspect remains unanswered, leading to uncertainties on actual EPS (earnings per share) accretion,” said brokerage firm Edelweiss in a note.
Harit Shah, senior analyst at Reliance Securities, flagged concerns regarding the growth profile of the product portfolio being acquired. “We are concerned regarding lack of clarity on key issues including the growth profile of acquired products. Some of these products are actually growing only in single digits,” he said in a note, adding that these IPs might not provide much revenue upside to HCL in coming years.

HCL technologies to acquire select software assets from IBM for $1.8 bn

International Business Machines Corp said on Thursday it will sell some of its software products business to Indian softwareservices exporter HCL Technologies for $1.80 billion.
The software products in scope represent a total addressable market of more than $50 billion, IBM said in a statement.

The company will divest seven of its products, including its secure device management product BigFix, marketing automation product Unica and workstream collaboration product Connections.
"The products that we are acquiring are in large growing market areas like security, marketing and commerce which are strategic segments for HCL," said C Vijayakumar, Chief Executive Officer of HCL.
The transaction is expected to close by mid-2019.
IBM's software sales, which have slowed down in the past, also weighed on its latest quarterly revenue.
HCL's revenue from software services business, however, rose about 21 percent to 87.11 billion rupees, leading the company to beat its second-quarter profit.
IBM is also in the process of buying U.S. software company Red Hat Inc for $34 billion, including debt.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

HCL Tech Q2 PAT rises 5.7% QoQ to Rs 25.40 billion

Leading IT services firm HCL Technologies reported a 5.7 per cent quarter-on-quarter (Q-o-Q) rise in its consolidated net profit at Rs 25.40 billion.
Revenues for the period came in at Rs 148.61 billion, up 7.1 per cent Q-o-Q and 19.5 per cent on year-on-year (Y-o-Y) basis.

Earnings before interest & tax (EBIT) stood at Rs 29.66 billion, up 8.7 per cent on Q-o-Q basis and 21 per cent Y-o-Y.
The company said that FY19 revenues are expected to grow between 9.5 per cent to 11.5 per cent in the constant currency terms.
Revenue guidance is based on FY18 (April to March) average exchange rates The IT services firm also announced the dividend of Rs 2 per share.
“We delivered a robust performance of 10.5 per cent YoY revenue growth in constant currency and EBIT margin at 19.9 per cent, near the mid-point of our guided range. We are very happy to report that our Net Profit has crossed a milestone of Rs 100 billion on run-rate basis. At Rs 25.40 billion for the quarter, the net profit was up 5.7 per cent QoQ and 16.1 per cent YoY. Further, we successfully concluded the Buyback programme of Rs 40 billion on Oct 11th and have posted robust return on equity at 25.8 per cent on LTM basis.”, said Prateek Aggarwal, CFO, HCL Technologies.
FY19 expected operating margin (EBIT) range is from 19.5 per cent to 20.5 per cent, the company said in its press release.

HCL Technologies shareholders approve Rs 40-bn share buyback offer

IT services major HCL Technologies on Monday said its shareholders have approved a proposal to buyback shares worth Rs 40 billion (Rs 4,000 crore).
In a BSE filing, HCL Technologies said 99.59 per cent shareholders had voted in favour of the proposal.

In July, HCL Technologies had announced a Rs 40 billion (Rs 4,000 crore) buyback programme for FY19 at a price of Rs 1,100 per equity share.
The buyback is part of the company's strategy to return more than 50 per cent of the company's net income to the shareholders.
In a separate filing, the company said it has launched HCL Turbo -- an artificial intelligence (Al)-based, end-to-end testing automation platform, aimed at communication service providers.
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