HCLTech will report its December quarter earnings on January 12. The management commentary on furloughs will be the key monitorable as the company had warned of those being higher-than-anticipated in BFSI, Hitech and telecom sectors.

At its analyst day on December 9, the company warned that the revenue growth for the current financial year will be at the lower end of the 13.5-14.5 percent guidance range. Interestingly, the company had revised that guidance higher only three months earlier from 12-14 percent.

HCLTech's management also hinted that price increases are now more selective than what they were six to nine months ago.

As far as numbers go, the company's US Dollar revenue growth, according to a CNBC-TV18 poll is likely to be at 3.5 percent sequentially, higher than what TCS reported in its December quarter and what Infosys is anticipated to report (1.45 percent). Revenue growth is likely to be led by a seasonally strong quarter for the company's product business.

HCLTech's EBIT margin is seen rising 80 basis points compared to the September quarter despite the wage revisions. The street is expecting no change to its full year guidance considering they issued their warning just a month earlier. The company has maintained its full year margin guidance at 18-19 percent.

On the deal win front, consensus is that the Total Contract Value of net new deal wins is likely to remain stable at $2 billion.

HCLTech had reported a strong deal win performance in the September quarter with 11 large deals. 8 were for the service business while three were won by the products business. The TCV of $2,384 million was a growth of 16 percent sequentially and 6 percent year-on-year.

Furloughs remain the key monitorable for HCLTech. The question is will they extend into the March quarter as well? In case the furloughs are higher-than-anticipated as the company has projected, it may mean lower utilisation. Therefore, the projected EBIT margin improvement of 80 basis points will mostly be driven by rupee weakness and a slight shift in revenue mix towards the higher margin business.

Another key factor to notice would be the hiring trends. HCLTech's hiring in the first half of this financial year was below average. Management commentary on this would be awaited as the company has left its guidance of hiring 30,000 freshers unchanged.

Shares of HCLTech have corrected close to 24 percent from its all-time high of Rs 1,377 which it hit on September 24, 2021.

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First Published:Jan 11, 2023 4:15 PM IST