Hexaware is a mid tier IT services company. The software services offer process-driven and cost effective solutions that help organizations operate efficiently. The Group provides turnkey Information Technology outsourcing solutions such as Application Development and Management, Enterprise Package Solutions, Infrastructure Management, Product Engineering and Independent Testing. These services are offered across multiple platforms and technologies employing practices such as Business Process Modelling and Architecture design to provide the business fit to customer needs.
Banking, financial services, and insurance (BFSI) is the largest vertical, contributing more than 40 per cent of the total revenues.

What is new?
In the calendar year ending December 2006, the company reported a growth of 40 per cent in its revenues to Rs. 848 crores from Rs. 678 crores in the previous year. The bottom line of the company increased by 99 per cent to Rs. 124.2 crores from Rs.91.5 crores in the previous year.
What made us look into the company is the vision and the order book. Even though the company has provided a visible guidance for Q1CY07, we are more interested in its long term growth prospects.
Firstly, the company has guided to a consolidated revenues from operations of USD 59 - 60 Mn. On the bottom line front, the company expects a consolidated Profit after Tax of USD 7.8 - 8 Mn at an exchange rate assumption of 1 USD = Rs 44.00. This boils down to a growth of 10-12 per cent on a QoQ basis top line growth and a 3-5.5 per cent QoQ bottom line growth for Q1CY07. As far as the entire CY07 is concerned, the company plans to add 2000 employees and expects to improve its operating margins by 150 bps.
Apart from this, during the year, the company won 49 new clients, out of which 12 were booked during the last quarter. This provides a visible order book size of an estimated USD 150 – 160 Mn.
What interests us more, is the ambition of the company to double its revenues and bottom line in another two years time frame. For this, the signs are already visible. During the CY06, the company acquired FocusFrame Inc., a US based testing services firm, ahead of schedule. The integration of operations and business with FocusFrame is expected to be going exceedingly well, and in some areas is expected to be ahead of schedule. The company is on track to realize over USD 100 Mn per annum in testing revenues within the next 3 years.
The recent performance of the company coupled with a strong order book, and a strong business environment give us in SAANS the confidence that Hexaware can double its revenues and profits within the next 8-10 quarters.

At the current market price of Rs. 174, the scrip is discounting its CY06 EPS at 17.57x. Taking the visibility of growth into consideration, we at SAANS recommend a strong buy at the current price levels.

Disclaimer: This report is prepared exclusively for Reliance Money by SAANS. The information and opinions contained in the document have been compiled from sources believed to be reliable. SAANS does not warrant its accuracy, completeness and correctness. Use of data and information contained in this report is at your own risk. This document is not, and should not be construed as, an offer to sell or solicitation to buy any securities. SAANS and its affiliates and/or their officers, directors and employees may have positions in any companies/shares mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such companies/shares (or investment).