Kotak Equities downgrades HCL Tech to reduce, says shares are fully valued

Stating that HCL Technologies shares are trading at full valuations, domestic brokerage firm Kotak Institutional Equities has downgraded the stock’s rating to 'reduce' with a target price of Rs 1,757.

“We are impressed with HCLT’s diversified portfolio of capabilities, impressive progress in applications, positioning in GenAI and strong cash generation. However, there are headwinds as well—these include the anniversary of the Verizon deal and modest deal wins over the past few quarters, leading to lesser than ideal visibility for growth in FY2026E,” said Kotak Institutional Equities in its report.

Kotak Equities said that they believe that HCL Tech can deliver consistent industry-matching or industry-leading growth, led by a balanced portfolio of services and strength in cost takeout deals. However, the stock trades at full valuations at 26X FY2026E earnings and they await a better entry point to recommend the stocks to investors.


The stock is up 5%, 22% and 35% in the past one, three and 12 months respectively, now trading at only a 9% and 4% discount to TCS and Infosys respectively. This is significantly lower than the last five-year average.

Similar to the peers, HCL is likely to benefit from a recovery in industry growth in FY2026E. The organic growth is expected to improve to 8.7% in FY2026E from 4.2% in FY2025E. However, the magnitude of growth will be a tad lower than peers such as Infosys.

Also read: Bajaj Housing Finance shares tumble 11% in 2 days. Should you buy, sell or hold?

HCL has beaten peers on growth in FY2020 (Broadcom, Xerox and others) and FY2024 (Verizon and BFSI mega deal) on the back of a ramp-up of mega deals. On the flip side, the anniversary of such deals without being backfilled by newer ones impacts growth prospects—FY2021 growth of 0.1% compared with 4.1% of Infosys after a strong FY2020.

Deal win TCV has been moderate in the past few quarters after the Verizon deal and the visibility of mega deal-driven revenue is weak for FY2026E currently and requires wins in 2HFY25,assuming no wins in 2QFY25, added Kotak.

Meanwhile, the shares of HCL Technologies were trading 0.9% lower at Rs 1,740.40 around 11:30 am on BSE.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)