Hex­aware Tech­nolo­gies Ltd: Dig­i­tally em­pow­ered!

Money Times - - Stock Buzz | Expert Eye - By Subra­ma­nian Ma­hade­van

(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.

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