HCLTech Surges Ahead: Q2 Profits Soar 11% as IT Giant Outshines Expectations!

HCL Technologies Ltd has announced impressive financial results for its fiscal second quarter, showcasing an 11% year-on-year increase in net profit, which reached ₹4,235 crore. This figure not only surpasses analysts' expectations but also highlights the company's resilience in a competitive market. Revenue from operations for the July-September 2025 period rose to ₹28,862 crore, marking an 8.2% increase compared to the same period last year.

Quarter-on-Quarter Analysis
Despite the robust annual growth, HCLTech experienced a slight decline in net profit of 0.5% when compared to the previous quarter. However, revenue saw a more favorable 3% increase sequentially. The earnings before interest and taxes (EBIT) margin also improved, coming in at 18.6%, a rise of 149 basis points from the previous quarter.

Comparison with Analysts' Forecasts
According to a Moneycontrol poll, analysts had predicted a modest revenue growth of 1.6% quarter-on-quarter to ₹28,517 crore, alongside a forecasted 5.5% decline in profit after tax (PAT) to ₹4,024 crore. The actual results exceeded these estimates across the board, demonstrating the company's strong performance.

Full-Year Revenue Growth Guidance
For the fiscal year 2025, HCLTech has revised its revenue growth guidance upwards in constant currency terms, increasing the lower end by 50 basis points. The new guidance now ranges from 3.5% to 5%. The company has maintained its EBIT margin guidance at 18% to 19% for the full year.

CEO's Insights on Performance
C Vijayakumar, CEO and Managing Director of HCLTech, expressed satisfaction with the company's performance, emphasizing that revenue growth of 1.6% QoQ in constant currency and an EBIT of 18.6% reflect a strong operational foundation. He noted that the growth was well-distributed across various sectors, geographies, and offerings, underscoring HCL Software's impressive 9.4% year-on-year growth.

Future Outlook and Innovations
Looking ahead, Vijayakumar highlighted a strong pipeline in areas such as Data & AI, Digital Engineering, and SAP migration. He mentioned that the company's generative AI offerings, including AI Force and AI Foundry, are resonating with clients and are expected to drive efficiency, growth, and innovation in the medium term.

New Deal Wins and Dividends Declared
In Q2, HCLTech reported net new deal wins totaling $2.21 billion, up from $1.96 billion in the previous quarter. Additionally, the company declared an interim dividend of ₹12 per share, bringing the total interim dividend for the fiscal year so far to ₹42 per share. This includes previous interim dividends of ₹18 per share in May and ₹12 per share in July.

Conclusion
HCLTech's strong Q2 performance not only surpasses market expectations but also reflects its strategic focus on innovation and operational efficiency. The company's upward revision of revenue guidance and commitment to maintaining robust EBIT margins further solidify its position as a leading player in the IT sector. With a solid pipeline and strong financial health, HCLTech appears well-equipped to navigate the challenges and opportunities ahead in the digital economy.

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Jubilant Ingrevia Shares Surge 7%, Reach 52-Week High After Key Deal with Agrochemical Firm

On October 3, 2024, Jubilant Ingrevia's stock soared by over 7%, reaching a 52-week high of ₹831.70 per share on the National Stock Exchange (NSE). The stock's sharp rise occurred after its subsidiary signed a major agreement with a leading agrochemical company, generating significant investor interest. By 10:50 AM, over 3.3 million shares of Jubilant Ingrevia had traded hands, resulting in a total turnover of ₹273.73 crore. The company's market capitalization also saw a boost, increasing to ₹13,065.83 crore.

Details of the Agreement:
The strong market response followed the company's announcement that its subsidiary, Jubilant Agro Sciences Limited (JASL), had entered into a long-term agreement with a prominent agrochemical company. Under the terms of the agreement, Jubilant Agro Sciences will produce a crucial agrochemical intermediate for the customer's key agro products.

The agreement is expected to generate revenue of over $300 million in the coming years once production begins. Jubilant Agro Sciences will also invest in building a new manufacturing facility to supply this agro intermediate. This collaboration is considered significant for Jubilant Ingrevia, reinforcing its standing in the agrochemical sector.

About the Customer:
While the specific name of the customer has not been disclosed, Jubilant Ingrevia confirmed that the agrochemical company is a multibillion-dollar firm. The customer's confidence in Jubilant Agro Sciences' capabilities highlights the latter's reputation in the agrochemical industry.

Jubilant Ingrevia's Financial Background:
Jubilant Agro Sciences is a fully owned subsidiary of Jubilant Ingrevia, a company with an annual revenue of $500 million. This deal is expected to have a positive long-term impact on Jubilant Ingrevia's financial performance, expanding its revenue stream and deepening its role in the global agrochemical supply chain.

Conclusion:
The stock market responded favorably to this strategic development, with Jubilant Ingrevia emerging as one of the top gainers in the market on October 3, 2024. The collaboration with a major agrochemical player is anticipated to bolster the company's future earnings, driving investor confidence.

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Primary Market Action Draining Liquidity from Small and Midcap Spaces: JPMorgan's Rajiv Batra

According to Rajiv Batra, Head of India, ASEAN, APAC, Ex-Japan/China Equity Strategy at JPMorgan, the current wave of initial public offerings (IPOs) and other primary market activities is depleting liquidity from the small and midcap sectors in India. Batra noted that while this might lead to a temporary cooling-off in these spaces, the situation also presents a potential opportunity for first-time and foreign investors to enter the market.

During an interview with CNBC-TV18, Batra discussed how market corrections, especially post-COVID-19, have been shorter and less severe. He encouraged retail investors not to chase rebounds, while stating that corrections provide ideal entry points for new and foreign investors who missed earlier rallies in the small and midcap sectors.

Batra highlighted India's significant outperformance in the global market, rallying nearly 660% over the past two decades compared to the U.S.'s 440%. He attributed this to India's strong earnings potential. However, he also acknowledged that the June quarter results were lackluster, and the upcoming September quarter might also underwhelm. Despite this, he expects earnings growth to rebound from the third quarter of FY25 onward.

JPMorgan forecasts a 12-15% earnings growth for Indian equities in FY25, with an uptick likely starting from Q3FY25. The central government's capital expenditure and a revival in the rural economy are seen as key contributors to this recovery. Batra also noted that the worst earnings downturn seems to have passed, based on the poor June quarter results.

Regarding the midcap sector, 52 out of 89 stocks experienced earnings downgrades in Q1FY25, while in the small-cap space, 40 out of 79 stocks faced downgrades during the same period. Despite these declines, Batra remains optimistic about the long-term growth prospects for India Inc.

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Interglobe Aviation Takes a Hit: Investec's 'Sell' Downgrade Signals 15% Slide

Shares of Interglobe Aviation, the parent company of IndiGo, fell by 2% to ₹4,784 on September 20, 2024, following a downgrade by Investec from 'hold' to 'sell.' The brokerage set a target price of ₹4,050, suggesting a potential further decline of 15% from current levels.

Concerns Over Valuation
Investec's decision stems from concerns about an "out-of-sync valuation" that overlooks significant margin risks. The firm predicts lackluster earnings growth for Interglobe over the next three years, particularly given the company's premium valuation in a highly competitive market.

Growth vs. Margin Sensitivity
While Interglobe boasts a substantial order book, which offers growth visibility, Investec emphasizes that this does not ensure earnings growth. The airline's heightened sensitivity to margins could pose challenges, impacting profitability as costs fluctuate.

Market Share Insights
Despite the downgrade, IndiGo's market share has shown resilience, growing to 62.4% in August after a dip earlier in the year. The airline flew approximately 8.19 million passengers that month, indicating strong demand despite broader market challenges.

Analyst Perspectives
In contrast to Investec, Motilal Oswal analysts provided a 'neutral' rating for Interglobe with a target price of ₹4,970. They highlight the airline's ambitious order for nearly 985 aircraft, including Airbus A350-900s, aiming to enhance operational efficiency and meet increasing demand by 2030.

Financial Performance Snapshot
In the June-ended quarter, IndiGo reported a 17.3% increase in revenue from operations, reaching ₹19,570.7 crore compared to ₹16,683.1 crore the previous year. However, the airline's profit experienced a 12% decline year-on-year in Q1 FY25, raising questions about future profitability.

Brokerage Coverage
Currently, 20 brokerages monitor Interglobe Aviation's stock. Out of these, 18 analysts recommend a 'buy,' one suggests 'hold,' and another has issued a 'sell' call, reflecting a divided outlook on the airline's future performance.

Conclusion: Caution Ahead
As Interglobe Aviation navigates through a challenging market landscape, investors should remain vigilant. The contrasting views among analysts highlight the complexity of the airline industry, where growth ambitions must be balanced against potential risks to margins and profitability.

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