Shares of HCL Technologies experienced a sharp decline of nearly 11 percent on Tuesday, prompted by investors’ reactions to lower-than-expected guidance for FY27 and a series of analyst downgrades that followed the company’s Q4 results. The stock finished the day at ₹1,285.30, with an intraday low of ₹1,281, down from a previous close of ₹1,441.20.
The downturn followed the company’s forecast of modest revenue growth of 1 to 4 percent in constant currency for FY27, and service revenue growth anticipated at 1.5 to 4.5 percent, both figures lower than the previous year’s guidance of 2 to 5 percent growth. Management attributed these challenges to ongoing global market volatility, cuts in discretionary spending, and issues specific to certain clients.
In its financial results for the March quarter, HCL Tech reported a consolidated net profit of ₹4,488 crore, reflecting a 4.2 percent year-on-year increase from ₹4,307 crore. Revenue rose 12.3 percent to ₹33,981 crore, up from ₹30,246 crore in the same period last year. However, the company faced operational pressures, with services growth declining by 0.1 percent quarter-on-quarter in constant currency, engineering research and development (ER&D) down by 1.3 percent, and software revenues experiencing a significant drop due to seasonal factors and delays in deal closures. For the full fiscal year, net profit decreased by 4.3 percent to ₹16,642 crore, significantly impacted by a one-off charge of ₹956 crore related to new labor codes.
The FY27 guidance indicated ongoing stress from reduced discretionary spending, particularly in the telecom sector, along with declines in certain large client accounts. Management also noted a 2 to 3 percent deflationary impact from efficiencies driven by artificial intelligence and a growth headwind of approximately 50 basis points due to client-specific concerns. The annual contract value of new deal wins amounted to $9.3 billion, reflecting cautious enterprise spending amid prevailing macroeconomic uncertainties.
In response to the results and outlook, brokerages adopted a cautious stance on the stock. HDFC Securities maintained a buy rating but lowered its target price to ₹1,465, while reducing earnings estimates to account for slower growth and continued macro uncertainties. JM Financial downgraded HCL Tech to a ‘reduce’ rating, cutting its target price to ₹1,350 from ₹1,440 due to weak services momentum and limited short-term visibility. InCred also downgraded the stock to ‘reduce,’ significantly lowering its target price to ₹1,275 from ₹1,616 due to cautious management commentary and structural challenges.
Nuvama revised its rating to ‘hold’ from ‘buy,’ reducing its target price to ₹1,400 from ₹1,550, citing that the weaker outlook narrows HCL Tech’s growth premium compared to peers. HSBC maintained a ‘hold’ rating while lowering its target price to ₹1,480 from ₹1,560, expressing concerns over muted earnings growth and limited potential for robust returns. JPMorgan adopted a neutral position, cutting its target price to ₹1,370 from ₹1,419, indicating ongoing challenges in the telecom sector and disruptions related to SAP, along with increased investments in generative AI affecting margins. Nomura maintained a buy rating while reducing its target price to ₹1,600 from ₹1,700, taking into account slower growth expectations but an anticipated recovery in margins.
Additionally, the Nifty IT index faced significant selling pressure, declining by 5 percent, with HCL Tech alongside other major players such as Persistent Systems, Coforge, Tech Mahindra, Infosys, and TCS also experiencing losses.
