Fitch expects HCLTech's revenue to grow by 8% in FY24-27, retains rating

Credit-rating agency Fitch on Monday said it expects IT services firm HCLTech's revenue to grow by 8 per cent in FY24-27 and retained the 'A-' rating with a stable outlook.

Fitch attributed HCLTech's solid market position, diversified customer base, no country ceiling constraint, and robust profitability as some of the key drivers that led the rating.
 

It has retained HCLTech's Long-Term Foreign-and Local-Currency Issuer Default Ratings at 'A-' with a stable outlook.
 

The agency forecasted the company's revenue to grow by around 8 per cent in FY24-27. It expects an annual spend of $100-200 million in FY25-27 on mergers and acquisitions.

"The company is highly FCF generative and had a net cash position of around Rs 201 billion at end-December 2023. We expect HCL to generate steadily rising annual pre-dividend FCF in FY25-FY27, which should be sufficient to fund its shareholder returns and M&A ambitions," Fitch said.
 

It further predicted the allocation of 75-80 per cent of net income as dividends or share buybacks.
 

Fitch also affirmed HCL's senior unsecured rating at 'A-', and the 'A-' rating of the $252 million outstanding 1.375 per cent notes due in 2026, issued by HCL America Inc.
 

"HCL guarantees 105 per cent of the outstanding principal on the senior notes. We consider the guarantee full and worthy as it should cover 100 per cent of principal payments plus all interest accrued up to the point at which all principal is paid," it said.