Hexaware Technologies IPO analysis

Hexaware Technologies IPO (initial public offering) will open for subscription on February 12, 2025, and close on February 14, 2025. Below is a breakdown of the IT service provider's strengths, weaknesses and growth prospects to help investors make an informed decision. Hexaware Technologies IPO in a nutshell Quality: Between 2021 and 2023, Hexaware Technologies reported a three-year average ROE and ROCE of around 24 and 26 per cent, respectively. Growth: Between 2021 and 2023, its revenue and net profit grew annually by 20 per cent and 15 per cent, respectively. Valuation: At the upper price band of Rs 708, the stock is expected to be valued at a P/E and P/B ratio of around 41 and 8 times, respectively. Overview: Hexaware Technologies stands to benefit from the steady expansion of the global IT services sector, fueled by increasing enterprise adoption of cloud computing, artificial intelligence (AI) and digital transformation. However, as a mid-sized IT services provider, it faces stiff competition from established players like Coforge , Persistent Systems , LTIMindtree and Mphasis . About Hexaware Technologies Incorporated in 1992, Hexaware Technologies assists companies in adopting digital solutions, automating processes and providing AI-driven insights for smarter decision-making. Its services span software development, IT security and management, data and AI solutions, business process optimisation and cloud adoption. Hexaware operates 39 delivery centres and 16 offices across the US, Europe and the Asia Pacific as of September 30, 2024. The company generates nearly 72 per cent of its revenue from the US and 22 per cent from Europe. The financial services sector contributes 28 per cent to its revenue, while healthcare and insurance account for 21 per cent. Strengths of Hexaware Technologies Long-standing client relationships: Hexaware's top 10 clients have been associated with the company for nearly 15 years. The company also serves 31 Fortune 500 organisations. Weaknesses of Hexaware Technologies Customer concentration risk: The company derives nearly 50 per cent of its revenue from its top 20 customers. Any loss of key clients could have an adverse effect on the business. Low barriers to entry: The IT services industry is highly competitive, with numerous players vying for market share. Additionally, low entry barriers make it easier for new competitors to enter the space, intensifying the competition. Hexaware Technologies IPO details Total IPO size (Rs cr) 8750 Offer for sale (Rs cr) 8750 Fresh issue (Rs cr) - Price band (Rs) 674 - 708 Subscription dates February 12 - 14, 2025 Purpose of issue Offer for sale Post-IPO M-cap (Rs cr) 43,025 Net worth* (Rs cr) 5,277 Promoter holding (%) 74.7 Price-to-earnings ratio (P/E) 41.1 Price-to-book ratio (P/B) 8.2 * Net worth including all the accounting reserves Financial history Key financials (Rs cr) 2Y annual growth (%) TTM September '24 CY23 CY22 CY21 Revenue 20.3 11,436 10,380 9,200 7,178 EBIT 19.5