HCL Technologies Tumbles on Second Sales Warning in 6 Months

  • Red flag means subpar performance, Deutsche Bank says in note
  • HCL issues unlikely to affect other software exporters: IIFL

Shares of HCL Technologies Ltd. slumped to the biggest loss in more than six years after the fourth-largest Indian software exporter said currency and certain client issues are likely to hurt revenue growth in the quarter ended September.

The stock plunged 13 percent to 857.05 rupees in Mumbai, after diving as much as 15 percent earlier. Besides facing an adverse impact from the sharp depreciation of multiple currencies against the dollar, HCL is considering setting aside as much as $20 million for the quarter “as a matter of prudence” because of differences with a client over the objectives of a contract, the New Delhi-based codewriter said in a filing after market hours on Wednesday.

“Discussions are on with the customer and we are in the process of disengagement,” HCL said in the statement.

The red flag may lead to “subpar performance” for the third straight quarter, Deutsche Bank AG said in an investor note. Revenue in dollar terms will be hurt by about 80 basis points due to currency swings, HCL said. It had issued a similar warning on March 31.

“HCL margins have been weak for the last four quarters,” said Sanjiv Bhasin, executive vice president at India Infoline Ltd. “This incident may be specific to one client, so we don’t expect other software exporters to get affected. The stock is over-owned and so a sharp decline cannot be ruled out.”

Shares of HCL Technologies have risen 7.3 percent this year, compared with a 4.7 percent loss in the benchmark S&P BSE Sensex.

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