Hexaware Technologies IPO Day 3 Highlights: Issue booked over 6x amid strong QIB support. Check GMP, review

Hexaware Technologies IPO was subscribed 2.66 times on the third day of the bidding process amid strong support from QIBs. The QIB portion was booked 9.09 times, the NII portion 0.20 times and the retail portion 0.11 times. The employee portion was booked 0.32 times.

• 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

Hexaware Technologies IPO was subscribed 2.65 times so far, with only the QIB segment witnessing strong buying as it garnered 9.09 times bids. The NII portion was booked 0.20 times and the retail portion was subscribed 0.10 times. Employee portion received 0.31 times bids.

Hexaware Technologies IPO Day 3 Live Updates: The following table sets forth the percentage of revenue from operations contributed by our top 5, top 10 and top 20 customers for the periods indicated

Hexaware Technologies IPO Day 3 Live Updates: At the upper price band, Hexaware is valued at a P/E of 37.8x on CY24E annualized EPS of ₹18.7. The issue has been priced at a discount of 23% on the average CY24E/FY25E P/E compared to its peers. In CY23, the company achieved an impressive RoE of 21.5%. The company has grown its Revenue/EBIT/PAT at a CAGR of 20.3%/19.5%/15.4% over CY21-23.

We have a “Subscribe” rating on the company due to:

• AI-led digital capabilities & platforms such as RapidX, Tensai, and Amaze.
• Hexaware’s deep domain expertise in all verticals & service lines.
• Long-tenured relationships with Top 5/10/20 clients (15/15/12 years respectively).
• Expected increase in the outsourcing of tech services, which will benefit Hexaware.
• Management’s plan to pursue acquisitions to enhance services and increase geographic reach.

• 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
• Experienced and tenured leadership driving a people-first and thriving organizational culture
• Track record of growth and cash generation

Hexaware Technologies IPO Day 3 Live Updates: The company serves a diverse range of customers, including 31 of the Fortune 500 organizations. According to the Everest Report, in the Financial Year 2023, approximately 62% of its revenue came from customers with over US$5,000 million in revenues, while nearly 83% was derived from clients with over US$1,000 million in revenues. 

The company boasts a diversified presence across key geographies including the Americas, Europe, and the APAC region, which also covers the Middle East, Africa, and Latin America. Additionally, it operates across various segments such as Financial Services, Healthcare and Insurance, Manufacturing and Consumer, Hi-Tech and Professional Services, Banking, and Travel and Transportation.

Hexaware Technologies IPO Day 3 Live Updates: Hexaware Technologies IPO was fully subscribed on the last day of the bidding process thanks to heavy lifting by the QIBs. 

While none of the other segments were even booked 50% of the portions allocated to them, QIB category garnered 4.11 times bids as of 1.15 pm.

The retail and NII portions were subscribed 0.08 times each. Meanwhile, the employee portion was booked 0.23%.

Hexaware Technologies IPO Day 3 Live Updates: The objects of the offer are to:

(i) Carry out the Offer for Sale, aggregating up to ₹87,500 million by the Promoter Selling Shareholder; and

(ii) Achieve the benefits of listing the Equity Shares on the Stock Exchanges.

Our Company will not receive any proceeds from the Offer, and all such proceeds will go to the Promoter Selling Shareholder, Hexaware said as per the RHP.

Hexaware Technologies IPO Day 3 Live Updates: Hexaware operates within six primary industry segments: Financial Services, Healthcare and Insurance, Manufacturing and Consumer, HiTech and Professional Services, Banking, and Travel and Transportation. Each segment benefits from the company’s tailored solutions and domain expertise.

To enhance its service delivery, Hexaware has developed proprietary platforms, including RapidX™, which facilitates digital transformation, Tensai®, an AI-powered automation tool, and Amaze®, a cloud migration platform.

“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 the potential for value appreciation. Hence, we recommend to SUBSCRIBE the issue for long-term gains,” said Canara Bank Securities.

• The company derives 73.4% of revenue from the Americas and 20.5% from Europe. Any economic downturn or regulatory change in these regions could significantly impact its financial performance.
• A large portion of revenue comes from the Financial Services and Healthcare & Insurance sectors. Any downturn, regulatory shifts, or technological disruptions in these industries could negatively affect business.
• The company’s success depends on hiring and retaining skilled IT professionals. Rising employee costs and subcontracting charges could reduce profitability. Additionally, higher attrition rates may disrupt service delivery.
• A substantial portion of revenue is generated from the top 10 clients. Losing a key client or a reduction in outsourcing budgets could impact revenue significantly.
• The company is vulnerable to cyber-attacks, ransomware, and data breaches. A significant breach could lead to financial losses, legal liabilities, and reputational damage.
• The highly competitive IT services industry forces Hexaware to compete with both global and mid-sized players. Larger firms with bundled services may lead to pricing pressures and client attrition.

Hexaware Technologies IPO Day 3 Live Updates: Hexaware Technologies IPO was subscribed 20% so far on the last day of the bidding process on Friday. The retail portion was booked 7%, the NII portion 4% and the QIB portion 54%. Meanwhile, the employee portion was subscribed 20%.

Hexaware Technologies IPO Day 3 Live Updates: The IT services and Business Process Services (“BPS”) market is projected to reach approximately ₹343.0 trillion ( ₹343,000,000 million) in CY2029, with IT services growing at a CAGR of approximately 7.2% and BPS growing at a CAGR of approximately 2.5% for the period CY2024-29E. Factors driving such growth include increased adoption of cloud, data and AI solutions, heightened cybersecurity needs, and cost optimization.

Digital is an overarching theme across all major technology segments in today’s market, with overall digital services spend set to reach approximately ₹152.7 trillion ( ₹152,700,000 million) by CY2029 (Source: Everest Report).

The bidding for the third and last day opened for Hexaware Technologies IPO. Investors can place their bids till 5 pm today. As of the second day, the public offer was booked 15%.

Hexaware Technologies IPO Day 3 Live Updates: Hexaware Technologies' business has evolved over the last decade, with a growing set of offerings, a larger and diversified customer base, a wider global delivery footprint, and a higher focus on innovation and technology.

Its expertise is further complemented by a mix of strategic and industry-focused partners, such as ServiceNow, which offers AI-powered solutions for various business functions such as human resources, IT, customer service, security, and finance, and Backbase, a banking financial technology company in the Netherlands.

At the upper price band, the company is valuing at a P/E of 43.1x with a market cap of ₹430,247 million post the issue of equity shares, and a return on net worth of 22.8%.

On the valuation front, we believe that the company is fairly priced. Thus, we recommend a “SUBSCRIBE” rating to the IPO.

Hexaware Technologies IPO GMP or Hexaware IPO grey market premium is +2. This indicates Hexaware Technologies share price were trading at a premium of ₹2 in the grey market, 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 ₹710 apiece, which is 0.28% higher than the IPO price of ₹708.

Today's IPO GMP is pointing lower and is predicted to decline further based on the grey market activity over the last nine sessions. According to experts on investorgain.com, the lowest GMP is ₹2, and the maximum is ₹19.

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

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.