Hexaware Technologies IPO Day 2 Highlights: Issue booked 15%. Check GMP, review, anchor investors details, more

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 15% on the second day of subscription today, at 17:00 IST, as per BSE data.

The initial share sale received bid for 1,38,39,483 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 6% subscription while the quota for non-institutional investors has been subscribed 3% and the qualified institutional buyers (QIBs) part is booked 39%. The employee portion has been subscribed 17%.

Continuing with the CY23 profitable growth momentum, HTL reported a 13.6% Y-o-Y rise in the consolidated revenue to Rs. 8,820cr. With the minute increase in the expenses, EBITDA and PAT margins reduced by (91)bps and (69)bps, respectively to 15.2% and 9.7% in 9M CY24, compared to 16.1% and 10.4% during 9M CY23.

• The Application Services market is projected to reach ₹32.4-33.2 trillion by 2029, with a 4.8% CAGR. Software Product Engineering Services, driven by digital transformation and advanced technologies, is expected to grow at a 13-14% CAGR.
• The global Cloud and Infrastructure Services market, projected to grow at a 7.5% CAGR from 2024 to 2029, is driven by multi-cloud strategies, cloud migration, security, AI automation, edge computing, IoT integration, and management services.

At the upper end of its price range, HTL is demanding a P/E multiple of 41.1x, based on its CY23 EPS of Rs. 17.2, and an EV/Sales multiple of 3.8x, this valuation seems to be in line with its peers. The company has marked steady growth in its top and bottom lines for the periods. Over the past few years, it has developed an expanding range of offerings, securing a leading position in global innovative solutions, therefore, well-positioned for growth in the upcoming period. However, based on its recent financial performance, the issue seems to be fully valued. Thus, we recommend a “Subscribe for Long Term” rating for this issue.

Global enterprise technology spend, including IT services, business process services, software, and hardware, is projected to grow at a 7.3% CAGR during CY2024-29E, reaching approximately ₹630.7 trillion (US$7,552.7 billion), according to Everest Group estimates.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 13% on the second day of subscription today, at 15:27 IST, as per BSE data.

The initial share sale received bid for 1,17,56,598 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 6% subscription while the quota for non-institutional investors has been subscribed 2% and the qualified institutional buyers (QIBs) part is booked 32%. The employee portion has been subscribed 16%.

The company provides services in its operating segments across six industries Financial Services, Healthcare & and; Insurance, Manufacturing & and; Consumer, Hi-Tech & and; Professional Services, Banking, and Travel & and Transportation.

The company posted a net profit of ₹997.6 crore in CY23 and ₹853.3 crore in 9M-CY24, with stable PAT margins around 9.6%-10%. The issue is priced at a P/E of 37.8-43.1x based on CY24 earnings, making it appear fully valued. Compared to peers like Persistent Systems and Coforge, Hexaware Technologies has a moderate valuation.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 10% on the second day of subscription today, at 13:42 IST, as per BSE data.

The initial share sale received bid for 94,06,866 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 6% subscription while the quota for non-institutional investors has been subscribed 2% and the qualified institutional buyers (QIBs) part is booked 24%. The employee portion has been subscribed 15%.

With a global presence spanning 39 delivery centers and 16 offices, HTL serves 31 Fortune 500 clients and has over 32,500 employees across 28 countries. 

The company has major offshore delivery centers in India (Chennai, Pune, Bengaluru, Noida, etc.) and Sri Lanka. It plans expansion into Tier 2 cities and aims to open new centers in Ahmedabad. As of September 30, 2024, the company has a global delivery presence with 39 centers and 16 offices across the Americas, Europe, and APAC.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 7% on the second day of subscription today, at 12:39 IST, as per BSE data.

The initial share sale received bid for 59,41,131 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 5% subscription while the quota for non-institutional investors has been subscribed 2% and the qualified institutional buyers (QIBs) part is booked 11%. The employee portion has been subscribed 15%.

If we attribute CY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 37.82. Based on FY24 earnings, the P/E stands at 43.12. Thus the issue appears relatively fully priced. However, according to the management, it is having dominance in the first three mega players in the segment and enjoys most preferred partner. It has outperformed most of its peers and confident of maintaining the trends going forward.

The company deliver services through AI-enabled digital platforms such as RapidX™ for digital transformation, Tensai® for AI-powered automation and Amaze® for cloud adoption. They serve a diverse range of customers, including 31 of the Fortune 500 organizations. It has 20 patents granted and 119 trademarks registered in various countries, 2 copyrights registered in India, and 49 domain names registered worldwide. Further, the company has filed applications for 45 patents and 23 trademarks.

Revenue from operations grew at a CAGR of 20.3% from Rs. 7178 crore in CY21 to Rs. 10380 crore in CY23. Operating EBITDA increased at a CAGR of 18.1% from Rs. 1133 crore in CY21 to Rs. 1581 crore in CY23, while Profit After Tax rose at a CAGR of 15.4% to Rs. 998 crore in CY23. Operating EBITDA margins remained at ~15%, with PAT margins remained at ~10%. In terms of the valuations, on the higher price band, HTL demands P/E multiple of 37.8x post issue 9MCY24 annualized EPS.

Today Hexaware operates in 6 industry verticals: Financial Services (27.2% of CY23 rev), Healthcare and Insurance (21.7% of CY23 rev), Manufacturing and Consumer (17.9% of CY23 rev), Hi-Tech and Professional Services (16.0% of CY23 rev), Banking (9.1% of CY23 rev), and Travel & Transportation (8.1% of CY23 rev).

For the Financial Year 2023, HTL’s revenue from operations was ₹103,803 million (US$1,256.4 million), representing a CAGR in USD terms of 13.7% from ₹71,777 million (US$971.2 million) in Financial Year 2021, while the global outsourced IT-BP services industry grew at a CAGR of 7.3%. The Company's revenue base is diversified across geographies and industries, helping insulate revenue from market downturns.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 4% on the second day of subscription today, at 10:18 IST, as per BSE data.

The initial share sale received bid for 35,25,039 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 4% subscription while the quota for non-institutional investors has been subscribed 2% and the qualified institutional buyers (QIBs) part is booked 4%. The employee portion has been subscribed 13%.

• Deep domain expertise delivered through comprehensive solutions across industries.
• AI-led digital capabilities and platforms built in-house with innovation as a strategic pillar.
• Long-term and embedded relationships with diversified blue-chip customer base.
• Go-to-market strategy focused on customer acquisition and expansion.
• Global, scalable, flexible delivery model with a certified and skilled talent pool.
• Track record of growth and cash generation.

The issue appears fully priced. Hexaware Technologies is on a growth trajectory, leveraging AI, automation, and cloud technologies to drive digital transformation. Looking at all the factors, risks, opportunities and valuation, investors can apply to the issue with Long term horizon.

• Onshore/offshore mix
• Utilization
• Attrition
• Employee-contractor mix
• Employee pyramid
• Tier 2 city expansion

• Analyst and Advisory Relations: Securing industry recognition with over 50 ISG endorsements across service lines in FY2023.
• Strategic Partnerships: Collaborating with industry partners like cloud service and technology providers, strengthened by dedicated resources.
• Client Alumni: Leveraging former customer contacts who become sponsors in new organizations, demonstrated by successful expansions into tax advisory and law firms.

Hexaware leveraged its domain expertise to develop three AI-enabled digital platforms that create value for customers across service offerings: RapidX for digital transformations, Tensai for AI-powered automation and Amaze for cloud adoption.

Hexaware Technologies IPO GMP or Hexaware IPO grey market premium is +3. This indicates Hexaware Technologies share price were trading at a premium of ₹3 in the grey market on Tuesday, according to investorgain.com.

Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Hexaware Technologies share price was indicated at ₹711 apiece, which is 0.42% higher than the IPO price of ₹708.

Based on the latest analysis of grey market activities, today's IPO GMP is showing a downward trend and is expected to decline further. The minimum GMP stands at ₹3, while the maximum is at ₹19, according to insights from experts at investorgain.com.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Hexaware Technologies IPO subscription status: Anand Rathi, SBI Securities, Geojit among brokerages which have given ‘subscribe’ tag to the Hexaware Technologies IPO

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 3% on the first day of subscription today, at 17:00 IST, as per BSE data.

The initial share sale received bid for 30,79,965 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 4% subscription while the quota for non-institutional investors has been subscribed 1% and the qualified institutional buyers (QIBs) part is booked 4%. The employee portion has been subscribed 11%.

We have a “Subscribe” rating on the company on account of (1) AI-led digital capabilities & platforms such as RapidX, Tensai and Amaze. (2) Hexaware’s deep domain expertise in all the verticals & service lines. (3) Long tenured relationship with Top 5/10/20 clients (15/15/12 years respectively). (4) Expected increase in outsourcing of Tech services to benefit Hexaware. (5) Management’s plan to pursue acquisitions in order to enhance services and increase geographic reach.

• Increased spending on technology to enhance digital infrastructure, streamline operations, and improve customer experiences.
• Adoption of cloud computing, artificial intelligence (AI), data, automation, and connected products.
• Digital transformation and modernization of legacy systems.
• Investment in product engineering, IoT solutions, analytics, and cybersecurity measures.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 2% on the first day of subscription today, at 16:18 IST, as per BSE data.

The initial share sale received bid for 19,27,380 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 3% subscription while the quota for non-institutional investors has been subscribed 1% and the qualified institutional buyers (QIBs) part is yet to be booked. The employee portion has been subscribed 10%.

The company derives 73.4%/71.5% of the revenue from operations from Americas and 20.5%/22.1% of the revenue from operations from Europe for the 9MCY24 and CY23, respectively.

• Continuously improved offerings and platforms
• Deepen and expand relationships with existing customers
• Acquire new customers with focus on large customers to tap high value opportunities
• Strategically expand into untapped geographies and industries
• Create and develop advanced talent and optimize cost of delivery
• Strategic M&A aimed at new capabilities and expanded geographic footprint
• Focus on operational improvement

The company leverages AI to build solutions for its clients driving improvement in productivity and gains in utilization. Hexaware’s $ revenue/rupee revenue/PAT have grown at a CAGR of 14%/20%/15% over CY21-23 with stable EBIT margin. It has a healthy cash balance of ₹1,346 cr as of Sep’24. We recommend subscribing to the issue at the cut-off price with a long-term investment horizon.

The company serves 31 Fortune 500 organizations. In FY23, 62% of revenue came from customers with over $5B in revenue, and 83% from those with over $1B. It has a diversified global presence across the Americas, Europe, APAC, the Middle East, Africa, and Latin America.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 2% on the first day of subscription today, at 14:48 IST, as per BSE data.

The initial share sale received bid for 16,36,110 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 3% subscription while the quota for non-institutional investors has been subscribed 1% and the qualified institutional buyers (QIBs) part is yet to be booked. The employee portion has been subscribed 9%.

• Economic volatility in key markets can reduce client budgets and IT spending, directly affecting Hexaware’s revenue and financial stability.
• Currency fluctuations impact profitability as revenues in foreign currencies and expenses in Indian rupees create financial risks.

With a strong market position, innovative offerings, and efficient operations, the company is well-positioned for continued expansion and profitability. The company’s strong market position and operational strengths are clear, but the delisting concerns persist, even though its P/E of 43x as of CY23 is lower than its peers, offering potential for value appreciation.

Co’s revenues and profits has grown at a CAGR of 17.9%/15% during FY21-24A in INR terms amidst challenging global demand environment. With demand environment improving and more discretionary spend opening up, experts believe Hexaware Technologies would be one of the key beneficiary.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 2% on the first day of subscription today, at 13:30 IST, as per BSE data.

The initial share sale received bid for 13,83,732 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 3% subscription while the quota for non-institutional investors has been subscribed 1% and the qualified institutional buyers (QIBs) part is yet to be booked. The employee portion has been subscribed 7%.

• Diverse Client Portfolio with Deep Domain expertise enabling end to end service offering
• Overall Positive Demand Outlook for the IT Industry 
• Stable and Good Financial Performance with good set of margins

Over a period of time, It has expanded its offerings and customer base, broadened its global delivery footprint, increased focus on innovation and technology. Shares are available at a P/E of 37.8x and EV/EBIDTA of 23.3x CY24A earnings which seems reasonable thus recommend ‘Subscribe for Long Term’ to the issue.

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 1% on the first day of subscription today, at 12:33 IST, as per BSE data.

The initial share sale received bid for 11,69,259 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 2% subscription while the quota for non-institutional investors was booked 1%, and the qualified institutional buyers (QIBs) part is yet to be booked. The employee portion has been subscribed 6%.

Hexaware's track record of robust revenue growth, improving margins, and strong cash generation positions it well for continued success, underscoring its commitment to delivering value to stakeholders. The issue is valued at a price-to-earnings (P/E) ratio of 43.1x on the upper price band based on CY23 earnings, which is relatively cheaper compared to its peers. Considering the above compelling factors, we recommend a "SUBSCRIBE" rating for this issue.

Hexaware operates within six primary industry segments: Financial Services, Healthcare and Insurance, Manufacturing and Consumer, HiTech and Professional Services, Banking, and Travel and Transportation 

According to the red herring prospectus (RHP), the company’s listed competitors include Persistent Systems Ltd (which has a P/E of 84x), Coforge Ltd (with a P/E of 64x), LTIMindtree Ltd (showing a P/E of 38x), and Mphasis Ltd (with a P/E of 34x).

• Continuously improve offerings and platforms
• Deepen and expand relationships with existing customers
• Acquire new customers with focus on large customers to tap high value opportunities
• Strategically expand into untapped geographies and industries
• Create and develop advanced talent and optimize cost of delivery
• Focus on operational improvement
• Strategic M&A aimed at new capabilities and expanded geographic footprint
   

Hexaware Technologies IPO subscription status: The initial public offer of Hexaware Technologies IPO has been subscribed 1% on the first day of subscription today, at 10:45 IST, as per BSE data.

The initial share sale received bid for 5,97,450 shares against 9,14,23,354 shares on offer, according to BSE.

The portion for retail investors received 1% subscription while the quota for non-institutional investors and the qualified institutional buyers (QIBs) part is yet to be booked. The employee portion has been subscribed 3%.

Tentatively, Hexaware Technologies IPO basis of allotment of shares will be finalised on Monday, February 17 and the company will initiate refunds on Tuesday, February 18 while the shares will be credited to the demat account of allottees on the same day following refund. Hexaware Technologies share price is likely to be listed on BSE and NSE on Wednesday, February 19.

Hexaware’s financials displays a steady track record of positive cash generation and growth. The company provides a comprehensive range of services, which include Design & Build, Secure & Run, Data & AI, Optimize, and Cloud Services. . The company aims to acquire new customers with focus on large customers to tap high value opportunities. Investors interested in the company can participate in the IPO with focus on investing for long term.

Some of the leading names like SBI MF, HDFC MF, AXIS MF, ICICI Prudential MF, Kotak Mahindra MF, Aditya Birla Sun Life MF, UTI MF, Mirae AMC, HSBC MF, Motilal Oswal AMC, Fidelity Funds, Abu Dhabi Investment Authority, Goldman Sachs Funds, J P Morgan Funds, T Rowe Price Fund, Amundi Funds, Franklin Templeton Investment Funds, Bajaj Allianz Life Insurance, ICICI Prudential Life Insurance, CLSA Global Markets, 3P India Equity Fund, Axis Max Life Insurance, Bharti Axa Life Insurance etc. were allocated shares.