Expanding hiring of freshers based on demand – HCL Tech

Expanding hiring of freshers based on demand – HCL Tech

Update on Indian Equity Markets:

Markets continued their upward momentum on Tuesday as Nifty closed the day 174 points higher at 14,659. Within the index, HINDALCO (5.1%), TATASTEEL (3.9%) and DIVISLAB (3.5%) were the highest gainers while HDFCLIFE (-3.6%), SBILIFE (-1.4%) and MARUTI (-0.9%) were few of the losers. All the sectoral indices closed in green with METAL (2.8%), PSUBANK (2.5%) and MEDIA (1.8%) leading the pack. 

Excerpts of an interview with Mr C Vijaykumar, CEO and Prateek Aggarwal, CFO, HCL Technologies Ltd (HCLTECH) with CNBC -TV18 dated 26th April 2021:

  • During the Mar-21 quarter, bookings stood at $3.1bn, led by 19 large deal wins. These deals are spread across geographies and industries. Most deals are spread across 3-5 years, of which four are integrated across service lines.
  • The Company has prepared a list of seven countries i.e. Germany, Canada, Japan, Spain, Portugal, Mexico and Brazil. These are countries witnessing a large and growing IT market where the Company is currently not present. Setting up offices in new countries is a one-time exercise.
  • The Company is also expanding hiring in the freshers space, considering the demand for the next few years. The hiring also involves certain cost elements.
  • The Company has launched HCL Now, which is the Cloud version of its acquired products. This is strengthening partnerships of HCLTECH with hyperscalers.
  • The Company is expected to deliver double-digit growth in constant currency. The management highlighted that they have provided floor price on revenue growth for next year. 
  • The products and platforms business had an impairment charge of $16mn, leading to a 60 bps impact on margins.   

Asset Multiplier Comments:

  • Backed by deal wins in both small and big pockets and continued momentum in cloud and data, the company looks set to achieve its target of double-digit growth over FY22E.
  • Setting up offices in new countries to expand the geographical presence is expected to create a revenue stream and diversify the revenue base for the Company in the long run.

Consensus Estimates (Source: market screener website):

  • The closing price of HCLTECH was ₹ 928/- as of 27-April-2021.  It traded at 18x/ 16x the consensus EPS estimate of ₹ 51.0/ 57.4 for 22E/23E respectively.
  • The consensus price target is ₹ 1,119/- which trades at 19x the EPS estimate for FY23E of ₹ 57.4/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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