T+1 settlement cycle for all F&O stocks from January: Stock exchanges To bring in operational efficiency, stock exchanges on Wednesday said that all stocks, on which derivatives contracts are available, will be transitioned to the T+1 (trade plus one day) settlement cycle from January 2023. Earlier, future and options (F&O) stocks were to be transitioned to the T+1 settlement in two batches — December 2022 and January 2023, according to a joint statement issued by market infrastructure institutions (MIIs) — stock exchanges, clearing corporations and depositories. In September last year, the Securities and Exchange Board of India (Sebi) permitted stock exchanges to introduce a T+1 settlement cycle from January 1, 2022, on any of the securities available in the equity segment. Also Read: Refund portal to be not accessible to PACL investors for 5 days due to technical issues: Sebi panel After this, all MIIs issued a joint press release concerning the roadmap for the implementation of the T+1 settlement cycle. Accordingly, all listed stocks, across stock exchanges — BSE, NSE and MSE — were ranked in descending order based on daily market capitalisation averaged for October 2021. In the first phase, the bottom 100 stocks were made available for the introduction of T+1 settlement, from the trade date of February 25, this year based on the ranking arrived. Thereafter, from March onwards, on the last Friday (trade day) of every month, the next bottom 500 stocks from the list of stocks ranked, are being made available for introduction to T+1 settlement every month till January 2023. “To bring in operational efficiency and ease for market participants, it has been now decided that all stocks on which derivatives contracts are available will be transitioned to T+1 settlement in a single batch i.e. in January 2023 instead of two separate batches,” the joint statement noted. Accordingly, the stock exchanges will revise the original schedule for the transition of stocks to the T+1 settlement.
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.