MUMBAI: Information Technology midcap Hexaware Technologies has said that not only have headwinds across their top accounts receded during their second quarter ended June 30, they also see signs of stability across major verticals. During post earnings call, Hexaware chief executive officer R Srikrishna told Mint that he also expects a V-shaped recovery in their deals pipeline going forward.
Hexaware Technologies reported a net profit of ₹152.5 crore in Q2, 0.7% higher than the corresponding quarter last year and down 13% quarter on quarter (QoQ). Revenues of ₹1,569.1 crore, were up 19.9% over the previous year and up 1.8% QoQ. Dollar revenue was up 10.4% at $208.5 million year on year, 11.3% higher in constant currency terms.
“We expect to go back to delivering industry leading growth as the headwind from one of our Top 3 accounts recedes fully. Our impeccable execution through covid-19 has helped us improve relationships and grow market share with our customers. Much of our improved margins are backed by sustainable initiatives," said Srikrishna.
The management said that they expect Q2 to be the bottom. Flat to small volume growth is expected in Q3 and Q4, with normal cyclical effects overlaid in Q4. One of the Top 3 accounts that has been a headwind to growth over the past three quarters, returned to growth in Q2 and they expect continued growth in this account for the foreseeable future.
“While there were some initial deferrals, clients understand that not all projects can be stopped indefinitely so they are moving to discussions on sustainable cost optimisation now. Part of it is moving the business to cloud although cloud migration has some traditional expenses involved which we will see over the next few quarters," said Srikrishna.
The company reported new deal wins worth $46 million during the quarter and said that it was seeing a ‘V’-shaped recovery along with market-share growth in many existing customers and material improvement in pipeline.
Clients are also seeking to consolidate work to reduce costs across the IT lifecycle through offshoring and automation. Hexaware sees opportunities in call centre services transformation using some of the solutions acquired through past acquisitions like Mobiquity, natural language processing and mobile applications, he said.
Europe, for the company, grew at 37.4% YoY, Americas 8.3% while Asia Pacific was down 13.1%. Among the verticals, healthcare and insurance grew at 20.9% and Hitech and professional services grew 20.2%. Travel and transportation was worst hit with 27% QoQ dip in revenue which is likely to stay troubled longer. Manufacturing and consumer vertical recovery is expected through Q3 and Q4.
Among the service lines, growth came primarily from application transformation management (21.4%) and business intelligence and analytics (13.3%). Business Process Services (BPS) remained under the weather with 9.9% QoQ decline due to supply side issues which hasn’t recovered completely. Srikrishna added however that a lot of the new deals have been coming in with strong BPS components.
The headcount reduced by almost 1,200 at the end of the quarter to 18,825, largely dropped from BPS. The company had also stopped lateral and fresher hiring during the quarter, which it has now resumed. Attrition for the quarter was 14%.