Uptick in discretionary IT spend and recovery in the European market will boost volume growth for HCL Tech. Further, strengthening of EUR against USD will have positive near-term impact.

The strongest volume growth of 6.5% QoQ among peers in Q3FY11;

Outperformance in emerging verticals such as energy and utilities and retail;

One of the highest bookings in terms of new deals won in the recent quarter;

High growth in EAS and custom application segment driven by discretionary spend;

Higher EBIDTA margins in the near term, supported by higher offshoring and utilisation;

Absence of forex losses (cash flow hedges) supporting the bottom line.

Our revenue estimates vary from Consensus by ~2% for FY13. Our EBITDA margin forecast for FY12 is in line with consensus. Our FY12 EPS estimate is also in line with consensus.

1) Slower recovery in the US economy; 2) Appreciation of INR vs. USD; 3) Increase in tax rates after the sunset clause; 4) Higher attrition and wage increments;