Here Is Why HCL Technologies Shares Fell 7% After Q3 Earnings

Shares of the country's leading information technology HCL Technologies fell as much as 7 per cent to hit an intraday low of Rs 1,244 on the BSE after it reported December quarter earnings post market hours on Friday. HCL Technologies' reported a net profit of Rs 3,442 crore in the quarter ended December 2021, marking an increase of 6 per cent from the profit of Rs 3,259 crore in the previous quarter. Its revenue from operations rose 8 per cent sequentially to Rs 22,331 crore, the highest in the last 12 years, HCL Technologies said in an earnings release.

HCL Technologies revenue in dollar terms came in at $2,977 million, up 6.7 per cent sequentially. In constant currency terms, revenue registered a growth of 15 per cent.

HCL Technologies: Why The Sharp Fall?

Market participants are concerned about margins as margins were flat at 19 per cent in December quarter versus 19.1 per cent in the previous quarter, Devang Bhat, IT analyst at IDBI Capital told Outlook India over phone. 

“HCL Technologies has two business the IT services business and products and platform business. In IT services business, which contributes 88 per cent of the revenue, margin dropped by 190 basis points, that was because of salary hikes, seasonal investments and retention and attrition cost and the product business which contributes 12 per cent of the revenue, saw margin increase from 19 per cent to 30 per cent, that helped offset margin fall,” Bhatt said. 

“Since products and platform business is a seasonal in which they earn maximum revenue in third and first quarter, investors are thinking that in the next quarter margins may go below the lower end of guided range of 19-21 per cent. The company has also said that IT services will take 2-3 quarters to come back to normal margin trajectory. What we believe is that the products and platform business which did not do well this year and if next year they do well this margin problem in IT service will be offset, Bhat added.

As of 11:05 am, HCL Technologies traded 5 per cent lower at Rs 1,267, underperforming the Sensex which was up 0.2 per cent. The stock was top loser in the Sensex and Nifty 50 basket of shares.