HCL Technologies: revenue up 13.9%, but valuation already 1.7x above its own history

On August 10, HCL Technologies reported results for the first quarter of fiscal 2026 (April–June 2025 calendar year). Revenue grew 13.9% year on year to INR 345.8 billion, and net profit rose 20.3% to INR 46.2 billion. Given this momentum, the shares look rather attractive, but only if the market is willing to pay for growth at a multiple well above its three-year average.

Key takeaways

— Revenue for the quarter ended June 2025 grew 13.9% year on year to INR 345.8 billion, while EBITDA margin declined from 21.4% to 20.9%

— Net profit for the quarter rose 20.3% year on year to INR 46.2 billion, outpacing revenue thanks to net margin expansion from 12.7% to 13.4%

— Operating cash flow for the quarter was INR 27.4 billion – notably lower than in previous quarters, which warrants attention

— The company maintains a net cash position: at quarter-end, net debt was negative at minus INR 80.5 billion, equivalent to minus 0.57 of trailing twelve-month EBITDA

— Trailing twelve-month dividend yield stands at 4.9% – a solid argument for shareholders

— Shares trade at an EV/EBITDA multiple of 23.1 versus a three-year average of 13.6 – a premium of about 70%

— On the portal's model, the upside is +10% to the current price – the model values fair value above the market

Attractiveness

Key figures, INR bn

Revenue for the quarter ended June 2025 grew 13.9% year on year to INR 345.8 billion, while EBITDA margin declined from 21.4% to 20.9%

In the first quarter of fiscal 2026 (April–June 2025 calendar year), HCL Technologies' revenue reached INR 345.8 billion, up 13.9% year on year. This is an acceleration from the previous quarter's 12.3% growth – the top-line momentum has improved for two consecutive quarters.

EBITDA for the quarter grew 11.4% year on year to INR 72.3 billion, but slower than revenue, so the margin declined from 21.4% to 20.9%. This indicates that the company is scaling up but cannot fully offset pricing pressure or rising costs.

Net profit for the quarter rose 20.3% year on year to INR 46.2 billion, outpacing revenue thanks to net margin expansion from 12.7% to 13.4%

Net profit in the first quarter of fiscal 2026 reached INR 46.2 billion versus INR 38.4 billion a year earlier. The 20.3% growth is a notable outperformance versus revenue, driven by net margin expansion from 12.7% to 13.4%.

Operating profit for the quarter stood at INR 61.9 billion, up 14.7% year on year. The gap between operating and net profit growth points to a positive contribution from financial items, likely from interest income given the net cash position.

Operating cash flow for the quarter was INR 27.4 billion – notably lower than in previous quarters, which warrants attention

Operating cash flow in the first quarter of fiscal 2026 was INR 27.4 billion. For comparison, in the previous quarter (January–March 2025 calendar year) it was INR 39.9 billion, and a year earlier – INR 37.5 billion. The decline of almost a third quarter on quarter may reflect seasonal factors or working capital changes.

Capital expenditure for the quarter was INR 3.4 billion, slightly higher than the previous quarter's INR 3.0 billion. Free cash flow thus stood at around INR 24 billion – sufficient to cover dividend payments, but the trend in operating cash flow deserves attention in the next report.

The company maintains a net cash position: at quarter-end, net debt was negative at minus INR 80.5 billion, equivalent to minus 0.57 of trailing twelve-month EBITDA

At the end of the first quarter of fiscal 2026, HCL Technologies' net debt stood at minus INR 80.5 billion – that is, the company has a net cash position. Over the trailing twelve months, this metric improved by INR 21.2 billion (the change in net debt over that period).

The ratio of net debt to EBITDA for the trailing twelve months is minus 0.57. This means the company is financially solid and has significant headroom for investments or increased shareholder returns.

Trailing twelve-month dividend yield stands at 4.9% – a solid argument for shareholders

Over the trailing twelve months, HCL Technologies has paid dividends yielding 4.9% at the current price. This is a substantial level, especially given that India's key rate remains high and yields on bonds of major issuers are comparable.

The company has historically maintained a generous dividend policy, and with a net cash position it has the resources to continue payouts. However, the size of future dividends will depend on profitability and capital expenditure needs – in the latest quarter, capex was INR 3.4 billion, which does not create significant strain.

Shares trade at an EV/EBITDA multiple of 23.1 versus a three-year average of 13.6 – a premium of about 70%

The current EV/EBITDA multiple stands at 23.1 – significantly above the three-year average of 13.6. The 70% premium reflects market expectations that revenue and profit growth will persist, but it also leaves little room for disappointment.

The trailing twelve-month P/E is 38.4 – also a high valuation, especially for a company with profit growth of around 20% per year. Investors are paying almost 2.8% for each percentage point of expected growth, implying confidence in the long-term sustainability of current momentum.

On the portal's model, the upside is +10% to the current price – the model values fair value above the market

Our value-creation model, based on EBITDA growth and a target multiple, indicates that the fair value of the share is 10% above the current market price. This is moderate upside potential that does not fully compensate for the high valuation.

The model assumes that the company can sustain its current EBITDA growth rate, which in the latest quarter was 11.4% year on year. If growth slows, the fair value would be lower, and the current price would appear stretched.

Valuation on the latest reported figures

Bottom line

HCL Technologies reported strong revenue growth of 13.9% and net profit growth of 20.3% for the first quarter of fiscal 2026, confirming business resilience. The company maintains a net cash position and pays a dividend yield of 4.9%, which is attractive to shareholders. However, the valuation is significantly above its own history: EV/EBITDA of 23.1 versus a three-year average of 13.6, and even on the portal's model the upside is limited to +10%. Given this, the shares look rather attractive for long-term investors who believe in sustained double-digit growth, but with limited margin of safety on price.