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

IT major HCL Technologies joined the list of top 10 most valuable companies in India after the stock rose almost 4 per cent on Thursday to Rs 817 (US$ 11.09) on the BSE, after the company and Google Cloud expanded partnership to deliver accelerated business intelligence platform.

HCL Technologies reported a market capitalisation (m-cap) of INR 2.2 trillion (US$ 29.89 billion) at 10:36 pm and was ranked 10th in the overall ranking, BSE data shows. The company surpassed ITC, cigarette major and fast-moving consumer goods (FMCG) company, which has the market-cap of INR 2.19 trillion (US$ 29.75 billion).

With Tata Consultancy Services (TCS) on the top of the list, HCL Technologies now become the third IT company featuring in the top-10 most valuable firm in terms of market-cap. TCS has INR 9.32-trillion (US$ 126.61 billion) market-cap followed by Infosys, which a market-cap of INR 4.32 trillion (US$ 58.69 billion).

On September 14, 2020, HCL Tech stated that expects the revenue and the operating margin for the July-September quarter of FY21 to be better than the top end of the guidance it had provided in July'2020.

The company added, "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 Tech further stated that the earnings before interest and tax (EBIT) margin for the current quarter is expected to be between 20.5% and 21.0%, driven by good performance from the segments - life sciences & healthcare, telecom & media and financial services verticals. The pipeline continues to look healthy across service lines, verticals and geographies.

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.

JP Morgan analysts have a portfolio ranking of 'overweight'. Although HCL was a leading supplier of contracts for Gen 1 infrastructure management services over the period 2007-14, peers lagged on application services. Over the past four years, its aggressive M&A-led development of its goods and platforms business has blurred its emphasis on DX scale adoption and made it a laggard amid deep cloud roots, " stated the broker.

There is a r greater emphasis on digital transformation, followed by progress in major hybrid-cloud and adoption deals with DX. In the last three years, this has resulted in the organic growth of HCLT accelerating back to a market leader of more than 15 percent. Although earnings growth in FY21 is likely to be slight due to Covid-19, the brokerage company expects earnings growth to recover sharply from FY.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.