Mon Feb 10 06:00:00 UTC 2025: ## Hexaware Technologies’ Return to the Stock Market: Expensive Valuation Raises Concerns

**MUMBAI, INDIA** – Hexaware Technologies is returning to the Indian stock exchanges via an ₹8,750 crore offer for sale by promoter CA Magnum Holdings, an affiliate of Carlyle private equity. Following the offering, the promoter’s stake will drop from 95% to approximately 75%. While the company’s revenue, EBITDA, and net profits have shown significant growth since CA Magnum’s acquisition in 2021, the IPO’s valuation raises concerns.

At the upper end of the IPO price band (₹674-708), Hexaware’s market capitalization would reach ₹43,000 crore, nearly double its valuation at the time of Carlyle’s acquisition. This significant increase comes amid a slowdown in the IT services industry following the post-pandemic digital boom. Hexaware’s revenue growth has decelerated from 28% in 2022 to 12-13% currently.

Although Hexaware’s growth outpaces larger companies like TCS and Infosys, its profit margins are considerably lower (9.5-10.5% compared to TCS’ 19-20%). The looming impact of Artificial Intelligence (AI) presents both opportunities and threats, potentially impacting both productivity and pricing in the IT services sector. Furthermore, the company’s significant revenue dependence on North America (73%) exposes it to potential economic slowdown risks.

Analysts point to a trailing price-to-earnings (PE) ratio of 41, even after accounting for one-off items, indicating an expensive valuation that lacks a margin of safety for new investors. While comparable listed companies have similar or even higher valuations, this does not justify the IPO’s pricing. Therefore, many suggest investors adopt a “wait-and-see” approach, believing the stock would be a better investment at a lower valuation. Upon relisting, Hexaware will become India’s eighth-largest listed IT services company by revenue, occupying a mid-sized provider niche within the industry.

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