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Unlisted shares of Hexaware Technologies Ltd are currently trading at Rs 711.5 apiece in the grey market, which is just 0.49 per cent premium over the upper IPO price of Rs 708.
Hexaware Technologies IPO.
Hexaware Technologies IPO: The initial public offer of Hexaware Technologies Ltd has been opened for public subscription on Wednesday, February 12. It will be closed on February 14. The price band of the 8,750-crore IPO has been fixed at Rs 674 to Rs 708 apiece. Till 5:00 pm on the first day of bidding, the Rs 8,750-crore IPO received a 0.04 times subscription garnering bids for 31,69,677 shares as against 8,70,25,526 shares on offer.
As the IPO begins, its GMP continues to remain dismally low at 0.49 per cent, indicating a flat or negative returns for investors.
The three-day IPO opens on Wednesday even as the domestic equities markets are down by around 1 per cent.
Hexaware’s IPO would be the largest in the country’s IT services sector since Tata Consultancy Services’ over Rs 4,700-crore initial public offering over two decades ago. Hexaware’s previous promoter, Baring Private Equity Asia, delisted the company in 2020. Almost a year after the delisting, the Carlyle Group acquired Baring Private Equity Asia’s stake in the company in October 2021.
Hexaware Technologies IPO GMP
According to market observers, unlisted shares of Hexaware Technologies Ltd are currently trading at Rs 711.5 apiece in the grey market, which is just 0.49 per cent premium over the upper IPO price of Rs 708. It indicates a flat or negative return for investors on February 19, the listing date.
The GMP is based on market sentiments and keeps changing. ‘Grey market premium’ indicates investors’ readiness to pay more than the issue price.
Hexaware Technologies IPO: Should You Apply?
Though GMP signals subdued returns for investors, most brokerage firms grant a ‘subscribe’ to the IPO for the long term. Here’s what they say:
Anand Rathi Share and Stock Brokers
Anand Rathi said Hexaware Technologies business has evolved over the last decade, with a growing set of offerings, larger and diversified customer base, wider global delivery footprint and higher focus on innovation and technology. Its expertise is further complemented by a mix of strategic and industry-focused partners, such as ServiceNow, 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 company is valuing at P/E of 43.1x with a market cap of Rs 430,247 million post issue of equity shares and return on net worth of 22.8 per cent. On the valuation front, we believe that the company is fairly priced. Thus, we recommend a ‘SUBSCRIBE’ rating to the IPO,” it added.
HDFC Securities
“The company provides comprehensive services and solutions to customers across six industries (each of which is an operating segment): Financial Services, Healthcare and Insurance, Manufacturing and Consumer, Hi-Tech and Professional Services, Banking, and Travel and Transportation,” HDFC Securities said in an IPO note.
The company leverages deep expertise across a comprehensive portfolio of services, in-depth domain knowledge, and understanding of customer requirements to contextualise the use of different technologies and to help customers develop and deploy their digital transformation strategies, it added.
Ventura
Brokerage firm Ventura in its IPO note said, “Financially, HTL has shown consistent revenue and profit growth, with a 13.7 per cent CAGR in revenue (USD terms) from FY21-23, outperforming the industry growth of 7.3 per cent. It posted a net profit of Rs 997.6 crore in CY23 and Rs 853.3 crore in 9M-CY24, with stable PAT margins around 9.6 per cent-10 per cent. 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, HTL has a moderate valuation.”
Key Concern
Hexaware operates in a highly competitive IT services industry, facing competition from large global firms as well as mid-sized players. The industry’s consolidation trend presents a challenge, as larger competitors can offer bundled services and exert pricing pressures. Economic fluctuations in key markets, particularly in the Americas and Europe, also impact client IT budgets, potentially affecting demand for Hexaware’s services. Furthermore, currency exchange rate variations pose a financial risk, as the company earns revenue in multiple currencies while incurring costs in Indian rupees, Anand Rathi said.
Hexaware Technologies IPO Key Dates
The Hexaware Technologies IPO will remain open for public subscription between February 12 and February 14. Its allotment will be finalised on February 17, while its listing will take place on both BSE and NSE on February 19.
Hexaware Technologies IPO Price & Lot Size
Its price band has been fixed at Rs 674 to Rs 708 per share. For retail investors, the minimum lot size for an application is 21. So, the minimum amount of investment required by retail investors is Rs 14,868.
The minimum lot size investment for small NII is 14 lots (294 shares), amounting to Rs 2,08,152, and for big NII, it is 68 lots (1,428 shares), amounting to Rs 10,11,024.
Hexaware Technologies IPO Quota
The company has reserved half of the issue size for qualified institutional buyers, 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors.
Hexaware Technologies IPO: More Details
At the upper-end of the price band, the company has been valued at over Rs 43,000 crore.
The initial share-sale of the Mumbai headquartered company is a complete Offer-for-Sale (OFS) of Rs 8,750 crore by promoter CA Magnum Holdings, part of Carlyle Group.
At present, CA Magnum Holdings holds 95.03 per cent stake in the IT company.
Since the entire issue is an OFS, all the proceeds from the IPO will go directly to the selling shareholder, rather than to the company.
Ahead of the IPO, Hexaware Technologies Limited raised Rs. 2,598 crore from anchor investors.
Hexaware Technologies is a global digital and technology services company with artificial intelligence (AI) at its core and having a diverse range of customers, including 31 of the Fortune 500 organizations. It serves customers across the Americas, Europe and Asia-Pacific (including India and Middle East).
For the nine months ended September 2024, the company’s net profit stood at Rs 853.3 crore and revenues at Rs 8,820 crore.
Kotak Mahindra Capital Company Ltd, Citigroup Global Markets India Private Ltd, JP Morgan India Private Ltd, HSBC Securities and Capital Markets (India) Private Ltd and IIFL Securities Ltd are the book-running lead managers responsible for managing the company’s IPO.
