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.