HCL Tech to take a revenue hit as UK arm to offload entire stake to State Street JV

After the divesture, HCL Tech would lose $97 million of revenue or 80 basis points of its current revenues, said analysts at global brokerage firm Nomura.

Further, the brokerage said that HCL Tech would receive $170 million plus net book value on the date of closing, as part of this divesture. "The arrangement is expected to be effective from Q1FY25 onwards," it said.

The transaction would only impact the BPO contract; however State Street would remain among the top 15 clients, Nomura said.

The foreign brokerage has a 'Neutral' rating on the counter, with a target price of ₹1,200 per share, implying a potential downside of 8.6% from the current market levels.

Meanwhile, Morgan Stanley analysts do not believe that this transaction will have an impact on the FY24 revenue guidance. For FY25, the impact of this transaction would be 0.7% on revenue forecasts, they said.

"The transaction is expected to complete by second quarter of fiscal year 2023-24 (Q2FY24) or Q1FY25. State Street has a revenue base of $97 million and net worth of $94 million. State Street would own 49% of voting rights in the JV and 100% of dividend rights," the brokerage stated.

Morgan Stanley maintains an 'Overweight' rating on HCL Tech, with a target price of ₹1,400 per share. It suggests a further upside  of 6.6% from its current market price.