Hexaware Technologies Ltd: Digitally empowered!
(BSE Code: 532129) (CMP: Rs.311.95) (FV: Rs.2)
Mumbai-based Hexaware Technologies Ltd (HTL) is an information technology (IT) company which generates over 77% of its revenue from North America and the rest from Europe (12.7%) and RoW (10.3%). It offers IT, BPO and consulting services to clients in various sectors such as Banking, Financial Services, Capital Markets, Healthcare, Insurance, Manufacturing, Retail, Education, Telecom, Professional Services, Travel, Transportation and Logistics. It has 33 global offices and a workforce of over 14,600 employees.
HTL is controlled and operated by a private equity giant - Baring Asia (currently owns over 62.79% stake) which came on-board after acquiring majority stake from erstwhile promoters and private equity titans like General Atlantic and Chrys Capital in August 2013. Other marque investors include HDFC Mutual Fund (5.97%) and T Rowe Price (4.07%). Backed by strong promoters with significant expertise and network coupled with professional management, HTL being a niche player and smaller in size, can easily become an acquisition target as consolidation has already begun from the Indian context and things like Automation, IP Lead Solutions and Digital Transformation have taken the game away from traditional businesses. Also typically, private equity players do not stick around with acquired companies for more than three years and a double-digit growth in this industry is hard to come by due to significant headwinds. Baring Asia will influence companies like Mphasis, L&T Infotech and Zensar Technologies for a potential merger as the latter are interested in pursuing both size and scale for a larger presence. During Q2FY19, HTL reported a top-line of Rs.1209 crore and bottom-line of Rs.172 crore with cash and cash equivalents of Rs.729 crore. It acquired three new clients during the quarter. Based on its financial parameters and bright outlook, we recommend this stock for a price target of Rs.400 within a year.