Shares of HCL Technologies slumped 15% on Thursday after the IT services firm said it expects revenues for the September quarter to be ‘tepid’, impacted by adverse currency movement and issues with a client in the public services vertical. The stock settled R124.25 or 12.65% lower at R857.90 at BSE. HCL Tech shares declined the most on MSCI Asia-Pacific Index, CNX Nifty, S&P BSE 100, S&P BSE 200, S&P BSE 500, S&P BSE IT indices.
More than 1.46 crore shares exchanged hands on BSE and NSE, nine times its three-month average daily volume. The country’s fourth-largest software services firm, which follows the July-June fiscal, will announce its earnings for the July-September 2015 quarter in the fourth week of October. “The revenue growth is likely to be tepid on account of adverse currency impact; a client specific issue and; skewness in revenue growth due to transition timelines for complex engagements particularly in Infrastructure Services,” it had said in a filing to the BSE.
For the quarter ended June 2015, the company’s revenues stood at R4,465.50 crore, while for financial year 2014-15, it was R17,153.44 crore.
HCL Tech’s red flag may lead to a sub-par performance for the third straight quarter, according to Deutsche Bank note. Consistent disappointment on revenue and profitability will lead to de-rating of stock, Deutsche Bank’s technology analyst Aniruddha Bhosale stated in a report.
The Noida-based firm said during the quarter, revenues to be reported in US dollar would have an adverse impact of 80 bps on account of sharp depreciation of multiple currencies against the greenback.
While HCL Tech shares took a beating, rival companies TCS and Infosys gained 1-2% each. Wipro ended with 0.3% gains after rising more than 2%.According to Barclays, HCL Tech’s profit warning is company specific and the guidance is unlikely to have a negative impact on the sector. The negative outlook may lead to a cut in FY16 USD revenue and EPS growth estimates by 2% and 2.5%, Barclays analysts Bhuvnesh Singh and Saurabh Mishra stated in a note.
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