Four years after delisting, Hexaware Technologies made a comeback on the exchanges today, February 19, listing at ₹745 per share on the NSE, a 5.2% premium to the IPO price of ₹708. On the BSE, it was listed at ₹731 per share, reflecting a 3.2% premium. Following its listing, the stock gained momentum, rising another 4.4% to ₹778 per share. 

Given the decent debut, Abhishek Pandya, research analyst at StoxBox, advised investors who received allotments to hold the stock.

“Hexaware Technologies had a subdued stock market debut, listing at ₹745 per share. This represents a 5.3% premium to its issue price of ₹708, indicating moderate investor confidence. Although the response was subdued, the listing performance exceeded grey market expectations. The issue was priced at a price-to-earnings (P/E) ratio of 43.1x based on CY23 earnings, which is relatively lower than that of its peers. We had earlier assigned it a ‘Subscribe’ rating. Therefore, we recommend that investors who have received shares consider holding onto their positions for a medium- to long-term horizon,” said Abhishek Pandya.

JM Financial initiates coverage with ‘buy’ 

Domestic brokerage firm JM Financial initiated coverage on Hexaware Technologies stock with a target price of ₹820 apiece, highlighting its strong positioning as India’s eighth-largest IT services firm and second-largest Tier-2 player with USD 1.4 billion in LTM revenue. The target price implies a 7% upside from the stock’s current trading price.

The brokerage highlighted that surpassing the USD 1 billion revenue mark enables Hexaware to compete for larger outsourcing contracts, fostering a virtuous growth cycle. Over the past decade, the company has achieved a 12.5% USD revenue CAGR, primarily through organic expansion, ranking in the top quartile among peers in terms of growth and margin expansion.

Despite recent softness in its top five clients (1.4% CAGR over five years), the brokerage noted that the company maintained overall revenue growth. Its top 6-10 clients grew 14%, while non-top 10 clients surged 21%, ensuring broad-based resilience. It said that the company’s ‘Land, Ramp, and Expand’ strategy, focused on acquiring and scaling large accounts, has led to 130 new USD 1 million+ accounts since CY14, with 23 scaling beyond USD 10 million+ and 3 exceeding USD 75 million+.

Hexaware’s strong cross-sell index (4.5x in its top five clients) underscores its expanding client penetration. With a stable leadership team, the brokerage believes Hexaware has established a repeatable growth blueprint, comparable to Coforge and PSYS, and is well-positioned for double-digit growth regardless of macroeconomic challenges.

JM Financial forecasts a 12% USD revenue CAGR overCY24-27, It also forecasts 170 basis points margin expansion over the same period.

“Traditional levers – utilisation, offshoring, and pyramid – along with tapering of one-off expenses support the margin expansion rationale. These translate into a healthy 18% EPS CAGR over CY24-27E,” said the brokerage. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.