NSE F&O ban: Indiabulls Housing Finance under ban on Monday, December 26, 2022 The National Stock Exchange (NSE) banned the trading in futures and options (F&O) of only one stock/security on Monday, December 26, 2022. Indiabulls Housing Finance is the only stock/security placed on the National Stock Exchange’s futures and options (F&O) ban for trade on Monday. According to the NSE, the above-mentioned stock is prohibited in the F&O sector because it has exceeded 95% of the market-wide position limit (MWPL). During the F&O ban period, no new positions are permitted for any F&O contracts in that stock. Earlier, on Friday, the total number of contracts traded in Index futures was 4,91,697 with a turnover of Rs 46,929.33 crore; while contracts traded in stock futures were 14,64,972 with a turnover of Rs 99,841.95 crore. The stocks put on the F&O ban earlier on Friday, December 23, 2022, was Indiabulls Housing Finance. The domestic equity indices ended the previous session in red with BSE Sensex falling 980.93 points or 1.61%, settling at 59,845.29, while NSE Nifty 50 dipped 320.55 points or 1.77% to 17,806.80.
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.
Also read: MSME listing: How to migrate from NSE SME platform to main board? Check revised criteria
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.