The post-tax earnings growth rate will come down from 80 per cent to 32 per cent (with 28 per cent at the lower end of the range and 35 per cent at the higher end)

Two factors appear to be have contributed to this revision:

This development comes on top of certain project start issues that the company faced earlier this year. In the first quarter of 2005, the senior management acknowledged that there were three major projects that did not start as expected on account of logistics and visa availability issues.

They also added that some impact of this slow start in projects would be felt in the second quarter (April- June quarter, the results of which are to be announced on July 19) also. Besides this, the revenue contribution from newer clients has also turned out to be slower than budgeted.

In addition, to some extent, Hexaware's earnings performance is also likely to be affected by two external variables. One, the impact of the visa application fees that have nearly doubled for the year will be felt on operating profits.

Two, the rupee has appreciated against the euro by over 5 per cent in the April - June quarter. Since the company derives over 25 per cent of its revenues from Europe, it will have some impact on forex earnings. Investors may consider pruning their exposures in the stock in the light of this development and contemplate re-entry at a later date.

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