HCL Tech shares traded lower on Friday even as the company beat Street expectations on the revenue front and witnessed more than 17 percent sequential growth in net profit for the October to December 2022 period. The IT giant, however, narrowed the upper end of its full-year revenue growth and operating margin guidance.

In an exclusive interview with CNBC-TV18, HCL Tech’s management said the firm saw a strong order booking in the financial and retail sectors and has seen booking worth $1 billion in financial deals in the last couple of quarters.

C Vijayakumar, CEO & MD, and Prateek Aggarwal, Chief Financial Officer, HCL Tech, noted that the fourth quarter of the fiscal year is a seasonally weak quarter for products and, therefore, growth is likely to moderate in the March 2023 ended quarter.

Also Read: HCL Tech Q3 Results | Highest Operating margin in six quarters beats estimate, guidance band narrowed

The management noted that while it witnessed healthy services growth, it saw higher furloughs in the third quarter, some of which in the Asia Pacific in the financial sector will spill into the fourth quarter as well.

During the quarter, HCL Tech focused on returning to the 19-20 percent margin range. The management said the pipeline continues to be positive, and the firm is expected to see a strong fourth quarter with significant deal wins, though the situation in Europe remains challenging.

The firm added that hiring, which fell sharply in the third quarter, will be similar in FY24 to what it was in FY23.

Also Read: HCL Tech net hiring drops 65% to 2,945 employees and attrition rate slips to 21.7% in Q3

What do brokerage houses make of HCL Tech’s Q3 results

Analysts have mixed views about the Q3 results. However, most of them noted that HCL Tech’s beat was led by high seasonality in the products and platforms (P&P) business and pulled back by soft IT growth momentum.

CLSA has an outperform call on the tech giant’s stocks after it reported strong deal wins, and the management was optimistic about sustaining the momentum in the January to March 2023 quarter. The brokerage house believes positive management commentary should give a strong base for the 2023-2024 financial year.

It also noticed improved confidence in margin expansion over the next fiscal year. There are isolated cases of client ramp-downs and softness in parts of engineering services, CLSA added. It finds HCL Tech’s valuation modest and dividend yield attractive.

Citi, which has a neutral stance on the stock, said the tech firm’s services business reported a largely in-line quarter, while the software business surprised and tends to be volatile sequentially.

Brokerage firm Bernstein has given HCL Tech a market perform call as it believes the third quarter was a strong beat led by products, high seasonality in the P&P business and operating margin led by margin tailwinds of the product business.

JPMorgan, though has an underperform rating, called the firm’s Q3 result a solid print, with the guidance reiterating sharp moderation. It believes that Q4 guidance suggests growth to remain sluggish into the calendar year 2023.

According to the brokerage, leading indicators were negative, including overall net new deal signing and shallow hiring. It expects the company to continue to lose momentum over the current calendar year.