
Nuvama has downgraded HCLTech (HCLT) to ‘Hold’ from its earlier positive stance, with a revised target price of ₹2,150 (previously ₹2,125), following the company’s Q3FY25 earnings report. HCLT posted revenue of $3,553 million, representing 3.8% constant currency (CC) growth QoQ, slightly below Nuvama’s and Street expectations of 4.5% and 4.2%, respectively. EBIT margins expanded by 90 basis points to 19.5%, meeting estimates, while the total contract value (TCV) for the quarter stood at $2.1 billion, marking a 6% sequential decline but a 9% YoY increase.
Nuvama cited HCLT’s strong growth in the Retail & CPG (+11.5% QoQ) and Telecom (+2.6% QoQ) verticals, as well as solid expansion in ER&D (+5.4% QoQ). However, the firm expressed concerns about HCLT’s premium valuation of 28.5x FY26E PE compared to discretionary-focused peers like Infosys, which trade at a discount.
The brokerage highlighted that while HCLT has narrowed its FY25 revenue growth guidance to 4.5–5% CC YoY, the projected soft Q4FY25 growth (ranging from -1.3% to +0.6% QoQ) could impact FY26 growth prospects. Margins guidance for FY25 was maintained at 18–19%, and operating efficiencies partially offset the impact of wage hikes and acquisition integration.
While Nuvama remains positive on HCLT’s high free cash flow (FCF) generation, strong capital allocation, and growth in small-size deals, it sees limited upside potential due to full valuations. The brokerage has trimmed its FY25/26 earnings estimates by 0.6% and 3%, respectively, and updated its FY26/27 USD/INR assumption to 86.5.