Maruti Suzuki India Ltd Chairman R.C. Bhargava said on Tuesday the company had not renewed the contracts of 3,000 temporary employees, as the automaker battled rising inventory amid a slowdown in demand

Safety norms and higher taxes have "added substantially" to the cost of cars, affecting their affordability, Bhargava told shareholders at the company's annual general meeting.

With India's auto sales declining for the ninth straight month in July, more automotive manufacturers are laying off workers and temporarily halting production to keep costs in check, Reuters reported on Saturday.

The company is on track to meet the country's new emission norms, adding that the company will move towards manufacturing compressed natural gas (CNG) and hybrid cars.

Maruti plans to increase CNG vehicles by 50% this year, Bhargava said.

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Sudarshan Sukhani of s2analytics.com recommends buying Tata Consultancy Services with stop loss at Rs 2245 and target of Rs 2350 and Balkrishna Industries with stop loss at Rs 735 and target of Rs 770

The market rallied sharply and posted the biggest single-day gain in last three months on August 26, driven by a rally across sectors except for metals. The measures to boost the economy and possible trade talks between US-China lifted sentiment.

The BSE Sensex surged 792.96 points or 2.16 percent to 37,494.12 while the Nifty50 rose 228.50 points or 2.11 percent to close above psychological 11,000 levels, at 11,057.90 and formed bearish candle on daily charts.

The market breadth remained in favour of bulls as more than two shares advanced for every share declining on the NSE. The Nifty Midcap index was up 1.6 percent and Smallcap index gained 2.3 percent.

According to the pivot charts, key support level is placed at 10,852.77, followed by 10,647.73. If the index starts moving upward, key resistance levels to watch out for are 11,166.57 and 11,275.33.

Nifty Bank closed at 27,951.35, up 992.70 points on August 26. The important pivot level, which will act as crucial support for the index, is placed at 27,208.66, followed by 26,466.03. On the upside, key resistance levels are placed at 28,344.56 and 28,737.83.

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Bharti Airtel, is staying strong and growing and has a robust balance sheet, said broking house, Goldman Sachs

Airtel has a robust balance sheet and a "best-in-class" spectrum footprint position which favours Bharti Airtel for future network roll-outs and market share gains. With declining capex intensity and rising margins on stable revenue growth, we expect Bharti to be FCF (Free Cash Flow) positive in the financial year 2020-21, Goldman Sachs said in a report. 

The report said the telecom operator has a strong wireless business growth potential.

"We forecast a 30 per cent EBITDA growth CAGR for India wireless (46 per cent of FY19E revenue) in FY19-22E driven by market share gains, customer upgrades/better customer monetization in data, and tariff hikes. With a recovery in India wireless, steady growth in Africa, and stable non-wireless businesses, we forecast Bharti to deliver an 8 to 18 per cent revenue/EBITDA CAGR in FY19-22E", it said.

The broking house also said the telco has a solid growth outlook for Africa. "We forecast a 9 to 11 per cent revenue/EBITDA CAGR in FY19-22E for Bharti's Africa business (24 per cent of FY19E revenue) driven by data and mobile money." 

"Its valuation is at t 8.5x CY20E EV/EBITDA, Bharti trades higher than its own historical average (of 7.3x) and its Asian telco peer median (of 7.1x). However, we expect Bharti's EBITDA growth over the next two-to-three years to be more than 3x its Asian telco peers and view a higher multiple as justified; Bharti trades in line with Asian peers on CY21 EV/EBITDA. 

"Our 12-month Discounted Cash Flow-based Trading Price of Rs 415 implies 15 per cent upside; our bull/bear scenarios suggest 40 per cent upside vs. 13 per cent downside."

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The 16% fall in the shares of NTPC Ltd over the past one year has been disappointing. Not just because valuations are undemanding—with the shares trading close to their book value. The company’s fixed return earning regulated equity base has been steadily growing and is projected to grow faster

Capacity additions are projected to accelerate to 5 gigawatts (GW) per year from FY20 against the average annual addition of less than 3GW in the last two years. As a consequence, NTPC’s regulated equity is estimated to expand 15% annually from FY20 over the next three fiscal years.

The capacity ramp-up will boost the company’s finances. FY20 will mark the beginning of the reversal of the capital work in progress (CWIP) ratio. The ratio as a percentage of property, plant and equipment, and CWIP is estimated to fall from 42% in FY19 to 36% in FY20 and 24% in FY21, projects NTPC. The fall in the ratio will enhance return on equity as the equity blocked in CWIP would start generating returns.

Still, the Street is not convinced. The NTPC stock continued to fall on Thursday inching closer to its 52-week low. Why? Lack of commensurate growth in earnings. Operating earnings grew just 5% in FY19 despite a notable expansion in the installed capacity base and regulated equity.

Worse, reported profit grew just 1% last quarter and adjusted earnings lagged Street estimates by a wide margin. “Street was almost certain that 1QFY20 would mark a turnaround for NTPC with most past issues having been suitably resolved. However, 1QFY20 results sprung a surprise with higher losses on account of usage of carpet coal (low-value coal)—management highlighted the same as a one-off, and we hope that it does not recur, such that earnings profile is reflective of underlying capacity addition," said analysts at Kotak Institutional Equities in a note.

Second is the overhang of the government share sale. There is a fear that the Centre may sell hydropower producer SJVN Ltd to NTPC, similar to Oil and Natural Gas Corp. Ltd’s purchase of Hindustan Petroleum Corp. Ltd, and the Power Finance Corp. Ltd-REC Ltd deal.

Such a transaction will enhance NTPC’s regulated equity base. But it can scuttle its dividend payouts in the short term, warns an analyst. SJVN has a market capitalization of 9,500 crores. If NTPC has to buy a majority stake exhausting its close to 3,000 crore cash reserves, then its ability to maintain current dividends can be impacted, says the analyst on condition of anonymity.

Perhaps clarity from the government will help. NTPC has been one of the consistent dividend payers. In FY19, the dividend yield was more than 5%.

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The Zambian government is determined to "urgently secure" an investor for Konkola Copper Mines (KCM) once the court processes over the disputed liquidation of the mine are concluded, the mines minister said on Thursday

Vedanta Resources has been locked in a dispute with the Zambian government since May when Lusaka appointed a liquidator to run KCM, which is 20% owned by Zambia's state mining company ZCCM-IH and the rest by Vedanta.

"I would like to categorically state that, much as the Konkola Copper Mines matter is in court, government is willing to listen to any progressive talks that will facilitate an amicable exit of the investor," Minister of Mines and Minerals Development Richard Musukwa said in a statement.

"Government is determined, once the court processes are concluded to urgently secure a credible investor in an open and transparent manner."

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Lenders to DHFL may take over the troubled housing finance company as a temporary measure if the consortium fails to find new investors

Shares of Dewan Housing Finance Corporation (DHFL) fell over 8 percent intraday on August 22 amid reports that lenders of the troubled NBFC are eyeing a 51 percent stake in the company by converting a part of debt into equity.

Lenders to DHFL may take over the troubled housing finance company (HFC) as a temporary measure if the consortium fails to find new investors. However, the resolution plan would also require the approval of all regulators in order to materialize.

The scrip has been under pressure lately. On August 19, the company reported a financial repayment default worth Rs 1,571 crore regarding the issuance of bonds and commercial papers.

Reacting to the news, the stock has been trading in the red for two straight sessions.

DHFL owes Rs 80,000 crore to banks, mutual funds, insurers and pension funds. As per norms laid down by the banking regulator, lenders are required to sign an Inter-creditor Agreement (ICA) to finalize a resolution process. But the involvement of entities other than banks, in this case, has complicated the process.

Meanwhile, Wadhawan Global Capital (WGC), the parent of cash-strapped Dewan Housing Finance Corp. Ltd (DHFL), is selling its loan distribution business Andromeda Sales and Distribution Pvt. Ltd to London-based metal trading firm, Metdist Group of companies for close to Rs 150 crore, Mint reported, citing sources.

The sale of Andromeda is part of WGC’s attempts to raise capital to meet debt obligations at the group’s flagship company DHFL.

DHFL was quoting Rs 42.35, down 7.13 percent on the BSE.

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Indian shares fell on Thursday as investors fretted over the chances of a fiscal stimulus and anxiously awaited the U.S. Federal Reserve chairman's speech later this week for clues on future rate cuts

Real estate stocks were among the top losers, with the Nifty real estate index shedding 7.2%, its biggest intra-day dip since late 2016, as DLF Ltd slumped 19.6%.

A report in the Hindu BusinessLine newspaper said https://www.thehindubusinessline.com/companies/supreme-court-issues-notice-to-dlf-sebi-on-non-disclosure-of-key-information-in-qip/article29204691.ece the Supreme Court had issued a notice to the real estate developer for allegedly suppressing material information from shareholders.

The broader NSE Nifty was down 0.42% at 10,873.00 as of 0445 GMT, while the benchmark BSE Sensex was lower by 0.34% at 36,933.80.

The minutes of the Fed's July meeting showed policymakers deeply divided over rate cuts, while hopes for a fiscal stimulus dimmed as President Donald Trump said he was not looking at cutting payroll taxes.

Much now depends on how dovish Fed Chair Jerome Powell chooses to be in his speech on Friday.

MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.35%. [MKTS/GLOB]

Meanwhile, markets awaited news on an economic stimulus from the Indian government amid a bruising slowdown that has hammered industries including the crucial automotive sector, leading to production cuts and job losses.

"The disappointment factor is increasing day by day because we've not heard anything from the government," said Rusmik Oza, head of fundamental research at Kotak Securities in Mumbai. "Earnings have also been a big disappointment."

June-quarter net profits for India Inc grew at a moderate pace of 6.6% year-over-year, compared with 24.6% a year earlier, CARE Ratings said on Wednesday, based on an analysis of 2,976 companies.

The Nifty metals index fell 2.13%, with miner Vedanta Ltd declining 3.9%.

The Nifty FMCG index, which tracks manufacturers of fast-moving consumer goods, was the lone gainer with a rise of 1.17%.

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The National Company Law Appellate Tribunal (NCLAT) on Wednesday asked the Committee of Creditors of Jet Airways to file an affidavit stating whether it is ready to cooperate with the Dutch bankruptcy administrator which is also pursuing insolvency proceedings against the airline.

The appellate tribunal has directed the CoC to file the affidavit within a week's time.

The debt-ridden Jet Airways is facing insolvency proceedings in The Netherlands too. It was declared bankrupt thereafter it had failed to pay two European creditors. The Dutch court subsequently appointed a bankruptcy administrator.

The three-judge bench headed by NCLAT Chairman S.J. Mukhopadhaya will next hear the matter on September 4.

Jet Airways on April 17 announced a temporary suspension of all flight services as it failed to secure interim funding from lenders to maintain even bare minimum operations.

Currently, Jet is under the insolvency process, under which a committee of creditors has invited expressions of interest (EoI) from potential bidders.

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Reliance Jio has added 44 million active subscribers over the past six months, while Bharti Airtel and Vodafone Idea have lost 20 million and 68 million clients, respectively, most likely due to the introduction of minimum recharge plans, said a report from broking firm CLSA.

While Jio leads with 52 per cent share among 3G/4G users, Bharti's share has been stable at 23 per cent. But Bharti's incremental market share in 3G/4G additions during January-June has been much higher at 38 per cent. 

The Insurance Regulatory and Development Authority (IRDA) of India had reported that in June, mobile subscriber base increased by 4 million to 1,165 million, yet the active subscriber base declined by 6 million to 984 million. 

According to the CLSA report, over the past year, Jio gained 10 ppt active subscriber market share to 28 per cent. While Vodafone Idea lost 8 ppt to 33 per cent, Bharti has lost a mere 2 ppt to 32 per cent.

However, the divergence between active and reported subscribers remains high for both Jio and Vodafone Idea at 16 per cent against 1 per cent for Bharti Airtel.

With bundled (voice+data) plan tariffs 35 per cent higher than the blended average revenue per user (ARPU) and twice of voice ARPU, the adoption of bundled plans will drive ARPU recovery. 

"With India mobile phone mart headed to a 2-3 player market and a recovery in sector revenues, driven by stability in tariffs and rising data adoption, we remain positive on Jio and Bharti Airtel has given strong market-share defence and inevitable turn in revenues," CLSA said.

However, Vodafone Idea's out-of-control gearing also remains a key concern, CLSA said.

The report says the 3G/4G penetration is at 50 per cent and Vodafone Idea is lagging on this. In June, the sector added 13 million 3G/4G clients, taking the subscriber base to 576 million. 3G/4G subscribers now form 49 per cent of the reported mobile subscriber base.

The report also dwells on the low mobile number portability (MNP) requests, yet a decline in active subscribers irony.

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The share touched its 52-week high Rs 234.90 and 52-week low Rs 104.05 on 30 May 2019 and 16 August 2018

Shares of IOL Chemicals and Pharmaceuticals rose nearly 4 percent intraday on August 21 as the company made pre-payment of its term loan.

The company has made the pre-payment of the term loan of Rs 9.52 crore due to banks in addition to scheduled repayment, as per BSE release.

The company has made the pre-payment of the term loan of Rs 107.70 crore till date to reduce the term debt, which remains at Rs 123.45 crore as on date.

IOL Chemicals and Pharmaceuticals was quoting at Rs 189.75, up to Rs 5.65, or 3.07 percent on the BSE.

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Parle Products Pvt Ltd, India's largest biscuit maker, may be forced to lay off up to 10,000 workers if a bruising consumption slowdown persists, the Economic Times daily reported on Wednesday.

The news comes as a slowdown in Asia's third-largest economy has hit demand for everything from automobiles to retail products, forcing companies to curtail production and recruitment while raising hopes that the Indian government would unveil an economic stimulus to revive growth.

"We have sought a reduction in the goods and services tax ... but if the government doesn't provide that stimulus, then we have no choice but to let go of 8,000-10,000 people," the Economic Times quoted Mayank Shah, category head at Parle Products, as saying.

A representative for Parle did not respond immediately to Reuters' request for comment.

Parle, popular for its Parle-G and Marie brand of biscuits, is not the only food product company to have flagged a slowing demand.

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Eleven years ago, college students Sagar Daryani and Binod Homagai invested Rs 30,000 to start in Jadavpur a small venture selling an Indianised version of the Tibetan delight, momos

With 274 kiosks, small and medium-size outlets and big eating joints spread over 13 Indian cities that employ 2,200 people, their projected turnover by the current fiscal end would be around Rs 200 crore.

Daryani and Homagai now plan to come up with fully automated machines to prepare their delicacy, which would tumble out of conveyor belts beyond Indian shores.

That, in short, is the fascinating tale of the humble past, present growth and likely technology-driven future of the quick-service restaurant chain Wow! Momo.

Headquartered at Jadavpur, where it all started in 2008 with a kitchen, two cooks and a table, Wow Momo Foods Private Limited today fully owns and operates 271 outlets. The rest three in Kerala are franchises.

"We were both greenhorns in business, though Sagar's father had a shop. We were the final year B.Com students. Before the results were out, we had launched our business. We thought it was worth taking the risk. If it doesn't work, we'd go for jobs," 34-year-old Homagai, the company's Chief Operating Officer, told IANS.

"I'm a Nepali, we make momos at home. So we thought of this food because we could see the culture of momos developing in Kolkata," he added.

The first store opened in Gachhtala area of Tollygunge in Spencer's Retail hypermarket, where the momos were supplied from the base kitchen in Jadavpur.

Sales touched Rs 2,000 a day. While Homagai managed the store, with two part-time chefs, Daryani stood outside, distributing leaflets, talking to the customers, giving them free samples.

"We ran an offer every 15 days -- buy three, get one free. The offer boosted the sales by 45 to 50 per cent, thereby covering the salaries of the two chefs," he said.

Impressed with their success, the hypermarket chain gave them another store. And very soon they got the third one in the swanky South City Mall, "which made us a brand".

"The part-time cooks now became full-time. And we also started hiring front end staff," he said.

From then on, there was no looking back. They were opening a store every month, and the speed accelerated as time went by. In 2011, Daryani and Homagai decided to expand beyond Kolkata, by setting up a store in Bengaluru.

Till 2015, they had 44 stores and the only bank loan was of Rs 25 lakh. But that year, they roped in IAN, world's leading horizontal seed-stage platform, to invest Rs 10 crore. "With that money, we started building a good management team."

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The company said it plans to conduct a detailed forensic investigation to establish the accountability of wrongdoings

Shares of CG Power and Industrial Solutions were locked at 20 percent lower circuit intraday on August 20 after the company recognised irregularities in its financial statements. unauthorised transactions

The scrip has hit a new 52-week low of Rs 14.75.

The company in a regulatory filing on August 19 said that an internal probe has uncovered some irregularities in the financial statements of the company.

"While working on one of its priority tasks of seeking refinancing of certain facilities and as a part of conducting financial analysis in this regard, the Operations Committee was made aware of some unauthorised transactions by certain employees of the company," the BSE filing said.

An independent legal firm appointed by the board of directors to probe financial wrongdoings pointed out certain misrepresentation in financial statements of the company and unauthorized financial transactions.

The company plans to conduct a detailed forensic investigation to establish the accountability of wrongdoings and will take requisite legal actions to protect its interest.

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HCL will acquire 90 acres of land to add to the existing state-of-the-art 50-acre campus in MIHAN, Nagpur

Shares of HCL Technologies gained more than 1 percent intraday on August 19 after the company signed MoU with Maharashtra Airport Development Company.

As per BSE release, HCL Technologies signed a Memorandum of Understanding for expansion of its MIHAN campus in Nagpur, in-line with HCL’s plan for Tier-II cities in the country.

As part of the MoU, HCL will acquire 90 acres of land to add to the existing state-of-the-art 50-acre campus in MIHAN, Nagpur.

HCL also announced the launch of Tech Bee – HCL’s Early Career Program – a work-integrated career program for students who have completed Class XII. After completion of the program, the students will be deployed at HCL Technologies.

Sanjay Gupta, Corporate Vice President, HCL Technologies said, “At HCL, we identify the strongest capabilities in our workforce to ensure the best result for our clients. The expansion of the HCL campus in MIHAN is aligned with our strategic vision to expand and create opportunities in the emerging cities.”

HCL Technologies was quoting at Rs 1,075.00, up to Rs 13.35, or 1.26 percent on the BSE

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The Sensex gained 463.69 points to end at 37,581.91, while Nifty ended at 11,109.7, up 112.35 points last week

Indian markets ended on a positive note in the volatile week ended August 9 amid June quarter earnings, RBI monetary policy, and fresh concerns over Sino-US trade worries.

Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) reduced repo rates by another 35 basis points to 5.4 percent in the August Policy review while maintaining an accommodative stance. It now stands at the lowest level since April 2010.

The Sensex gained 463.69 points to end at 37,581.91, while Nifty ended at 11,109.7, up 112.35 points last week.

The S&P BSE Midcap index rose 1.26 percent, Smallcap Index added 1.10 percent and S&P BSE Largecap index was up 0.68 percent last week.

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In a major blow to the defaulting company IL&FS' auditors Deloitte and BSR and Associates, the Mumbai bench of the National Company Law Tribunal (NCLT) on Friday said that it has jurisdiction over these firms and the authority to ban them under the Companies Act for their alleged role in financial misappropriation

Deloitte Haskins and Sells (Deloitte) and global advisory firm KPMG arm BSR had challenged the NCLT's jurisdiction to prosecute the companies and ban them after the Corporate Affairs Ministry (MCA) had sought such a five-year ban on them. 

The tribunal said that the order is "appealable" and it was aware of the fact that the case could move ahead to the National Company Law Appellate Tribunal and the Supreme Court. 

Both the audit companies have been under the MCA's scanner after the probe by the Serious Fraud Investigation Office (SFIO) found that Deloitte had disregarded the Reserve Bank of India's (RBI) regulations and turned a blind eye to the defaulting firm IL&FS Financial Service Ltd's (IFIN) "evergreening" of loans, and never cross-checked any of the certificates used by the company to mislead lenders. 

BSR too was found to be involved in such gross negligence and violation of norms.

Reacting to Friday's order, a Deloitte spokesperson said: "The NCLT's ruling is unfortunate. While we need to review the written order before determining our further course of action, we continue to believe the NCLT lacks the jurisdictional authority to adjudicate this matter."

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Such sharp rallies are often a result of some pep talk or some relief measure which often fizzles out trapping the bulls who bought on the hopes that a new rally will begin

The Indian market snapped a four-week losing streak to close with gains of over 1 percent. The Nifty rose 1.02 percent while the S&P BSE Sensex closed with gains of 1.25 percent for the week ended August 9.

The S&P BSE Sensex is now back above 37,000 while the Nifty also managed to reclaim 11,100 levels for the first time since July 31.

The broader market performed in line with benchmark indices as the S&P BSE Midcap index rose 0.92 percent while the S&P BSE Smallcap index closed with gains of 1.62 percent for the week ended August 9.

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A slowdown in its European operations dragged down Tata Steel Ltd’s overall operating margins, which in turn took a toll on its stock price. The stock fell as much as 4.03% on Thursday, before closing 3.77% lower. Given the weak outlook, analysts have not ruled out a further derating

The double whammy of lower steel prices and higher raw material costs have been impacting steel producers. Steel prices have softened significantly in the past quarter leading to lower realizations. As a result, globally diversified firms such as Tata Steel have been hit.

Revenues from its European operations dipped by 11% year-on-year to 14,495 crores in the June quarter. Volume growth was lower than what the Street had pencilled in. Operational issues further dragged down performance. In fact, the European operations face headwinds from lower economic growth and uncertainty around Brexit.

Tata Steel’s Indian operations, though, held up somewhat, despite a slowdown in the domestic economy. Steel production rose 23% year-on-year to 4.5 million tonnes (mt), while sales increased by 18% year-on-year to 3.96 mt. As a result, domestic revenues rose by 12.7% from a year earlier. Higher operating costs, however, saw its domestic net profit shrink marginally, though subdued economic activity and liquidity issues will weigh on domestic consumption.

A rise in production could not perk up revenues because steel realizations were lower in the first quarter. Consolidated steel production rose 11% year-on-year to 7.15 mt, while sales increased 5% year-on-year to 6.34 mt. Domestic production surged 23%, while sales grew 18% from a year ago.

Nevertheless, lower realizations dragged down Tata Steel’s consolidated Ebitda (earnings before interest, tax, depreciation and amortization). Ebitda margins came in at 15%, which saw a sharp contraction of 200 basis points year-on-year.

Tata Steel has cut back on its domestic expansion plans due to slowing demand. Capital expenditure plans have been cut by 20-25%. This is also to help the company keep its deleveraging plans on course.

“Tata Steel has reiterated its deleveraging plan of $1 billion in FY20 relying on cash flows from 

a) downward revising FY20 capex by 20-25%

b) working capital release of  2,000 crores, and 

c) potential stake sale of south-east Asia business," said analysts at JM Financial Institutional Securities Ltd in a note to clients.

Still, its overleveraged balance sheet, coupled with a weak earnings outlook, could continue to weigh on the Tata Steel stock in the medium term.

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Indian shares rose marginally on Thursday, tracking gains in broader Asia, after the Reserve Bank of India's (RBI) cut interest rates by an unconventional 35 basis points, highlighting its concerns of a slowing domestic economic growth

The broader Nifty was up 0.1% at 10,866.75 as of 0407 GMT, while the benchmark BSE Sensex rose 0.11% at 36,741.69.

Asian shares rallied after China limited the fall in the yuan. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.8%.

The RBI repo rate cut to 5.4% on Wednesday also seemed to bring some cheer to investor sentiment in the local markets, which is grappling a slowdown in consumption and a credit squeeze among shadow banks.

"The expected rate cut has happened and there are signs that the regulator is clearing the NBFC  mess," said Anand James, chief market strategist at Geojit Financial Services.

"We are coming off global challenges and there are signs of things changing."

IT and auto stocks led gains among sectors.

The Nifty IT index was up about 1%, tracking the stronger dollar, after China's move to set its official yuan midpoint below the key seven to the dollar threshold for the first time since the global financial crisis.

The Nifty auto index was up 0.73% after industry executives met with government officials and sought tax cuts and easier access to funds to revive the ailing sector, which contributes 7% to the country's GDP.

Hero Motocorp rose as much as 5% to 2,629 rupees a share in early trading, its highest in more than five weeks, boosting the index the most.

HCL Technologies shares were also up 3.6%, after the IT services company guided to a constant currency revenue growth of between 14% and 16% for this financial year.

Among losers, Cipla fell 2.8% after the generic drugmaker reported a quarterly profit that missed estimates.

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Shares of HCL Technologies Ltd lost about 10% since its March quarter results, underperforming the Nifty IT index, due to concerns over growth and profitability. The June quarter results will reassure investors to some extent

Constant currency revenues grew 4.2% from the March quarter, better than the most optimistic estimate on the Street. From a year ago, they are up 17%, the highest in recent years. Excluding the benefit of a recent acquisition, sequential revenue growth stood at 3.8%, which is healthy.

However, the benefit of revenue acceleration was negated by a steep fall in profitability to 17.1%. It is down a good 1.8 percentage points from the March quarter. As a consequence, operating earnings (earnings before interest and tax ) in dollar terms fell 6.3% sequentially. “Management already guided that Q1 margins will be weak owing to IBM products acquisition led transition costs while revenues would be absent and flow only from Q2. However, the quantum of margin drop is steep," said an analyst on condition of anonymity.

Apart from IBM product acquisition-related costs, a significant part of the incremental growth last quarter is on-site dependent, which has a low margin.

Even so, the company retained the 18.5-19.5% margin guidance for the full year. “I know that there is a bit of a climb from 17.1%, but we have an action plan," said C. Vijayakumar, president and chief executive officer of HCL Technologies.

The plan involves cost rationalization and revenue generation from recent investments. The IBM products acquisition will begin generating revenues from the current quarter, covering the costs of this investment. Investments and spends in the engineering division are projected to moderate. Further, the management plans to optimize the on-site-offshore mix and rationalize several other costs.

The steps will aid HCL Technologies’ profitability. But how well the management will succeed in eking out the gains will be known only when it delivers the September quarter results. Otherwise, it is confident of delivering 14-16% constant currency revenue growth it had guided for FY20.

Deal bookings moderated a bit last quarter, but the pipeline is strong. This should help the HCL Technologies stock, especially given its undemanding valuations and recent underperformance. “Potential acceleration in revenue growth, encouraging investments in applications business and momentum of large deals have been completely ignored," Kotak Institutional Equities said in a note. “To be clear, we do not like the products strategy of HCL, but find valuations at 12 times FY2021 estimated earnings difficult to ignore."

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