The country's fifth-largest tech company, HCL Tech, has been snapping billion dollar deals in each of its last three quarters. And it is hungering for more. A weak rupee is an added advantage. HCL Tech has run up 62 per cent this year but with the momentum it has gathered, this company may still have places to go.
Why you should add HCL Tech to your portfolio?
The main driver of HCL Tech's fortunes has become its deal capturing skills. With a billion dollar deals in each of the last three quarters, HCL Tech's deal capturing skills put its ahead of its peers, Infosys and Wipro. The high cumulative value of these deals provides tremendous near term revenue visibility for the company.
The company's Infrastructure Management Services (IMS) vertical is the one that is leading the momentum. In the June 2013 quarter, this vertical reported a growth of 8.6 per cent over the immediately preceding quarter -- one of the fastest growing verticals of any large tech company in the country. IMS brings in 29 per cent of HCL Tech's revenues and reported a growth of 36 per cent in FY13.
Growth at HCL Tech though has not been restricted to IMS alone. The public services vertical grew 7.3 per cent (q-o-q), telecom 5.8 per cent, BFSI 5.8 per cent and manufacturing by 4.7 per cent.
Ebitda margins expanded 104 basis points over the preceding quarter to 23.4 per cent. HCL Tech is expected to maintain margins at 22-23 per cent for the remaining of the current financial year.
One of HCL Tech's strongest points is its ability to generate healthy cash flows. In FY13, it generated free cash flows to the tune of Rs 3,974 crore. This was more than twice the free cash flow it generated in the preceding year. With its strong deal wins in the past couple of quarters, the company is expected to generate even higher free cash flows this year.