SEBI penalises eight individuals for breach of insider trading norm in Titan share trades Capital markets regulator Sebi on Wednesday imposed fines totalling Rs 8 lakh on eight individuals for violation of insider trading norms in the shares of Titan Company Ltd. The transactions were carried out between April 2018 and March 2019 when they were designated employees of Titan Company. The order came after Sebi received a letter from Titan Company Ltd (TCL), wherein the company intimated the regulator about alleged violations of Prohibition of Insider Trading (PIT) and company’s code of conduct by some of its designated persons/employees. Thereafter, the market regulator conducted an investigation in the scrip of TCL and found non-compliances of PIT rules by the individuals during the April 2018-March 2019 period. During their employment with TCL, they had transacted in the securities of the company but failed to make disclosures to the firm as required under the PIT norms, as per the Securities and Exchange Board of India (Sebi). The disclosure was mandatory as the transactions exceeded the market value of Rs 10 lakh. In a separate order, the market regulator slapped fines totalling Rs 20 lakh on four entities for indulging in fraudulent practices in the preferential allotment of Esaar India Ltd shares. The regulator imposed a fine of Rs 5 lakh each on Giriraj Kishore Agarwal, Tanu Agarwal, Saloni Agarwal and Tilak Finance Ltd.
Services miss estimates; Software better than expected: Services business grew 0.6% q-o-q cc and missed HCLT’s Q3FY23 guidance, mainly due to a 3.8% q-o-q cc decline in the ER&D segment. Growth in the IT&BS segment moderated slightly to 1.6% q-o-qcc but was in line with estimates. BFSI and Life Sciences were the key growth drivers, while communications were the drag among verticals. Growth was led by the Americas region, while Europe and ROW posted declines.
Decline in bookings reflects delays in decision-making: HCLT won 10 large deals in services and three large deals in Software with net-new deal TCV of $2.1bn, down 8% y-o-y. Deal wins were driven by the services portfolio, were centered on cost optimisation and vendor consolidation and came mainly from BFSI, manufacturing and Life Sciences verticals. Management highlighted a ramp-down in discretionary spending in Hitech and communications verticals but pointed to a strong deal pipeline.
FY24 guidance in line with expectations: HCLT has guided for 6-8% y-o-y growth for overall business and 6.5-8.5% y-o-y cc growth in services segment and 18-19% margins in FY24—all in line with our assumptions. We maintain our FY24-25 cc revenue growth and margin estimates and expect HCLT to deliver 6.5% cc revenue growth and 18.4% margins in FY24. However, we lower our earnings forecasts by 2% to factor the higher tax rate indicated by the management.
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Raise PT: HCLT has fared better in Q4, particularly in North America and BFSI, unlike its peers. However, rising demand uncertainty as a US recession nears remains a concern. HCLT’s stock at CMP trades at 17x PE and offers a 5% yield, which in our view should limit downsides and derating. Hence, we raise our target PE to 17x (16x earlier) and raise our PT to Rs 1,125, offering 8% potential upside.