HCL Technologies: Street is concerned about scaling up of inorganic biz

The announcement of HCL Technologies that it was acquiring select products from IBM for $1.8 billion did not go down well with the Street. Despite the management’s assertion of $625-650 million incremental revenues over the next couple of years, with margins of 50 per cent, the stock shed about 5 per cent.

The Street is concerned about execution and management bandwidth to drive the product business, incremental investments required to expand the business, and the sales potential. 

Key concerns, according to analysts at ICICI Securities, are about the ability of the company to maintain margins at 50 per cent, revenue