HCL Tech top Nifty loser after management revises revenue guidance lower

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Shares of the technology major HCL Technologies Ltd. fell as much as five percent in the early trade on Friday after the company said it expects revenue growth for the current financial year to be at the lower end of the 13.5-14.5 percent guidance range.

The company's management made these remarks at its analyst meeting held overnight.

HCL Tech has blamed volatile macros and the impact of higher-than-expected furloughs in the BFSI, hitech and telecom verticals during the December quarter behind the guidance.

The three verticals highlighted by HCL Tech are nearly 50 percent of the overall revenue of large IT companies.

The management during its September quarter earnings had revised its full-year revenue guidance higher to 13.5-14.5 percent from the 12-13 percent range earlier.

HCL Tech's management also hinted that price increases are now more selective than what they were six to nine months ago. According to a note from Nirmal Bang, HCL Tech also highlighted that there is a greater level of vendor consolidation underway than the recent past, not only due to challenging macros but also due to weeding out of a few global top 10 service providers based on the risks associated with them.

The management reiterated that it will persist with its services and P&P business model, adding that the latter is a long-term bet and not much unlike the bet it took on infrastructure management services when very few believed in it two decades ago.

Another note from Credit Suisse warns of HCL Tech to be the worst hit as the Indian IT companies are at a high risk for revenue cut in financial year 2024. The firm believes HCL Tech is at a high risk of a 20 percent plus valuation correction and that it would remain neutral on the stock.

Shares of HCL Technologies are trading 5.5 percent lower at Rs 1,041.60 and are the top laggards on the Nifty 50 index.