Hexaware Technologies IPO: Check strengths, risks, business model, competitors and other key details

Hexaware Technologies IPO: Mid-sized information technology (IT) company Hexaware Technologies Ltd will launch its ₹8,750-crore initial public offer (IPO) next week. Shares will be offered in a price band of ₹674 to ₹708 apiece. The issue will be open for subscription from February 12 to February 14.

For those considering investing in the Hexaware Technologies IPO, here’s a detailed look at the company’s business, financials, peer group and more.

The IPO price band is set at ₹674 to ₹708 per share and the minimum bid size for an application is 21 shares. Bidding for the IPO opens on February 12 and closes on February 14. The allotment of shares is expected to be finalised on February 17. Hexaware Technologies shares are scheduled to be listed on BSE and the National Stock Exchange of India (NSE) on February 19.

Kotak Mahindra Capital Co. Ltd, Citigroup Global Markets India Pvt. Ltd, J.P. Morgan India Pvt. Ltd, HSBC Securities and Capital Markets Pvt. Ltd and IIFL Securities Ltd are the book-running lead managers of the issue, while Kfin Technologies Ltd has been appointed as the registrar.

Hexaware Technologies’ business details

Hexaware Technologies is a global digital and technology services company with artificial intelligence (AI) at its core.

Hexaware is a mid-sized global IT and business process outsourcing (BPO) service provider headquartered in India. Its clientele includes 31 of the Fortune 500 organisations. Hexaware serves clients in various industries, such as financial services, healthcare and insurance, manufacturing and consumer, hi-tech and professional services, banking, and travel and transportation.

It partners with enterprises to help them build, transform, run and optimise their technology and business processes through five service lines – Design and Build, Secure and Run, Data and AI, Optimise, and Cloud– which form the foundation for its offerings.

The company has a presence in multiple geographies, including North America, Europe, and Asia-Pacific.

Strengths

• Deep domain expertise: Hexaware Technologies provides comprehensive services and solutions to customers across six industries as mentioned above, each of which is an operating segment for the company.
• Diversified customer base: The company focuses on maintaining a diversified customer base across geographies and industries. No customer contributed over 10% to its revenue from operations in the nine months ended September 2024 and the full financial years 2023, 2022 and 2021.
• Global delivery presence: Hexaware Technologies has a global delivery presence comprising 39 delivery centres supported by 16 offices spread across the Americas, Europe and APAC as of September 2024.
• Patents: As of the date of filing its red herring prospectus, the company has 20 patents granted and 119 trademarks registered in many countries, two copyrights registered in India, and 49 domain names registered worldwide. Further, it has filed applications for 45 patents and 23 trademarks.

Weaknesses

• Economic volatility in key markets: Economic fluctuations in major markets such as the US and Europe can significantly impact client budgets and IT spending, thus impacting Hexaware’s revenue streams.
• Impact of currency fluctuations: Hexaware is exposed to currency exchange rate fluctuations, which can affect profitability. Revenues are earned in foreign currencies, while expenses are incurred in the Indian rupee, which can create financial vulnerabilities.
• Increase in propensity to insource: Clients may increasingly choose to insource IT services to maintain greater control and reduce costs, posing a threat to outsourcing firms like Hexaware.
• High competitive intensity: Hexaware operates in a highly competitive sector, facing pressure from both global and local players. Larger firms, equipped with greater resources, can exert pricing pressures by offering better discounts and incentives, encouraging clients to consolidate their spending with them.

Key competitors

Hexaware’s business is broadly aligned with service providers of different sizes, but it is more closely aligned with mid-sized IT service providers such as Coforge, LTIMindtree, Mphasis and Persistent Systems, which have revenues in the range of $1-5 billion and similar scales of offerings.

Financials

Hexaware’s revenue from operations (in dollar terms) has seen a compound annual growth rate (CAGR) of 13.7% from the financial year 2021 to the financial year 2023.

Key performance indicators