HCL Tech is expected to report 8 per cent quarter-on-quarter (QoQ) dip in dollar revenues to US$2339 million due to pressure in ER&D revenues, reduction in volume-based billing and lower product licence revenues. Rupee revenues are expected to decline 4.6 per cet QoQ to Rs 17,734 crore. EBIT margins are expected to decline 200 bps QoQ led by pricing pressure, dip in volumes, and lower revenues from high margin product business. On a YoY basis, revenues and PAT are higher due to the absence of IBM product revenues in Q1FY20. Investor Interest: Outlook on IMS revenues, product revenues, receivable days, acquisition strategy, and capital allocation policy
We are expecting HCL Tech to report a revenue decline of 8 per cent QoQ in CC terms and 3.7 per cent QoQ decline in rupee terms. We are expecting operating margins to decline by 64 bps. Key things to watch are deal TCV/ deal pipeline, pricing scenario, and outlook on growth/margins/DSO days.
Dollar revenue expected to decline by 7.9 per cent QoQ and 0.9 per cent YoY while constant currency revenues will decline by 7.5 per cent QoQ and 0.4 per cent YoY. EBIT margin is expected to reduce by 89bps QoQ to 20.0 per cent.
We forecast CC revenue decline of 7.8 per cent QoQ and cross-currency headwind of nearly 40bps. We expect earnings before interest and tax (EBIT) margin to decline by 185bps QoQ impacted by a decline in utilisation and lower product sales partly offset by rupee depreciation, lower travel cost, and cost optimisation.
Would watch for: FY21 guidance - We expect HCLT to wait for one more quarter for providing annual guidance; update on client interactions and assessment of the impact on IT spend due to Convid-19 pandemic across all verticals and for Mode 1/2/3 solutions; commentary on deal pipeline and pricing; commentary on products business for FY21; commentary on structural change in delivery model and outlook on EBIT margin, and commentary on capital allocation.