The Hindu Business Line : Hexaware net falls on Re rise, salary hikes

Mumbai, Oct. 18 Hexaware Technologies Ltd said its consolidated net profit for the third quarter ended September 2007 fell by 22.4 per cent, impacted by the appreciating rupee, rising salary costs, and exposure to a client affected by the sub-prime mortgage crisis.

Net profit amounted to Rs 26.9 crore, down from Rs 34.7 crore a year ago.

The appreciating rupee impacted margins by 12-13 basis points, while another 3-4 basis points were shaved off because of the larger salary hikes than in the year-ago quarter, said Mr Rusi Brij, Vice-Chairman & CEO of the company.

During the quarter, the company’s overseas subsidiary FocusFrame had its revenues impacted by $1 million (around Rs 4 crore) on account of a client with exposure to the sub-prime mortgage crisis.

Revenues were up 13.2 per cent to Rs 254.6 crore, but gross margins were lower at 35.6 per cent, from 37.2 per cent. Operating profit margin was lower too at 9.7 per cent (13.6 per cent).

The company is in the process of weeding out around 20 low-margin clients. This too had its impact on revenues for the quarter under consideration, and will affect revenues for the next quarter too, said Mr Brij.

Hexaware added $100 million to its order book during the quarter. Its global headcount moved up by 1,041 to 6,767, the highest addition in any quarter.

The company will be scheduling a board meeting shortly to consider buyback of its shares from the market.

Going by orders in pipeline, it is felt that this is not adequately reflected in the share price valuation. The buy-back is basically a confidence-building measure, said Mr Brij. The company’s stock closed at Rs 112.60 on the BSE on Thursday, gaining by 3.54 per cent.

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