HCL Tech and Infosys hit record high in trade

IT index top sectoral gainer in the trade as HCL Tech revised Q2 guidance upwards; Infosys announced the acquisition of GuideVision.

Key Highlights

• HCL Tech upped Revenue and Margin guidance for Q2; stock hits record high

• Infosys announces acquisition of GuideVision, strengthens nearshore delivery presence in Europe

• Nifty IT index top sectoral gainer on expectations of better Revenue and deal pipeline

Mumbai: HCL Technologies upped guidance for this quarter which led the stock to hit a record high in trade and a rub-off effect was seen on all IT stocks. Nifty IT index ended as the top sectoral gainer in trade, up nearly 4.4% with all stocks in the green. HCL Tech and Infosys both hit record high in trade.

HCL Tech was the top gainer up nearly 11% followed by Mphasis which gained close to 9%. TCS, Wipro, LT Infotech, Mindtree, Coforge and Mphasis hit 52 weeks high.

HCL Tech hit a record high on the back of the management sharing their mid-quarter update which stated that they now expect revenue and operating margin to be better than their earlier guidance shared in July.

HCL Tech said revenue growth is expected to exceed 3.5% QOQ in constant currency (CC) terms as the company is seeing broad-based momentum across service lines, verticals and geographies. The management had shared revenue guidance of 1.5% to 2.5% QOQ in CC terms in the month of July.

EBIT margin this quarter (Q2FY21) is seen between 20.5% and 21%. This is higher than the EBIT margin guidance of 19.5% to 20.5% for FY21. Good deal momentum continues this quarter with deals seen in Life sciences & Healthcare vertical, Telecom & Media and Financial services verticals. The deal pipeline remains healthy across service lines, verticals and geographies.

The stock hit record high as the timing for upping the guidance surprised the street along with a positive outlook. Urmil Shah, IT analyst at IDBI Capital said, post this guidance full-year outlook for HCL Tech will improve and the company may end up reporting positive growth for the full year. A rub off effect was seen on the IT stocks as most IT players have stated improved deal momentum and demand outlook.

Infosys hit a record high as a rub-off effect of HCL Tech. Infosys also announced the acquisition of GuideVision a leading ServiceNow Elite partner in Europe for an acquisition cost of up to Euro 30 mn in an all-cash deal.

The acquisition will augment the Infosys Cobalt portfolio of cloud services and would further strengthen the company’s nearshore delivery presence in Europe. It will have an insignificant impact on financials but certainly, enhance capability. The acquisition is expected to complete during the third quarter of FY21.

GuideVision was established in 2014, as an independent ServiceNow Elite partner in Europe. It has offerings in strategic advisory, consulting, implementations, training and support on the ServiceNow platform. CY19 revenue was at Euro 12.9 mn and has doubled from Euro 6.1 mn in CY17.