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

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
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.

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