Revenue visibility robust for Hexaware

K.Venkatasubramanian | Updated on July 19, 2011


Hexaware Technologies' strong deal winning streak has received a further fillip with a large, new contract signed by the company.

The contract, worth $177 million over five years, if apportioned equally over this period, accounts for over 15 per cent of the company's CY10 revenues. The deal was awarded by a US-based existing customer of the company. What is more welcome is that Hexaware has been able to bag the deal by competing effectively against multiple vendors suggesting improving execution capabilities.

Also, the present project involves delivering a range of services such as applications management, BPO, business analytics and enterprise solutions, making for a mix that could prop margins.

Extension contract

About $77 million of the present contract is an extension of an earlier project, while $100 million is incremental business, suggesting robust client-mining strategies.

The company expects the incremental business to ramp up over the next few quarters, while the extension business would show up in revenues from the third quarter of this calendar year.

Bad patch & revival

Like most other mid-cap IT companies, Hexaware had a difficult 2009 and a turbulent phase for a part of 2010, when it was faced with declining revenues or anaemic growth.

But the revival started over the last 3-4 quarters, with the company reporting strong sequential growth (6-13 percent) in revenues as deals started to flow in and new clients were signed up.

The company also increased focus on high-margin enterprise services and analytics, which has had a cascading effect on margins. The net margin has increased from single digits to 16.9 per cent in the March quarter.

Hexaware had announced a $25 million deal from a client in Europe and a $10-15 million project from a US-based client a few months back, giving the company a robust deal pipeline and lending reasonable revenue visibility.

The market has been cheering the stock over the last one year, over which period it has risen over 85 per cent.

On Monday, the share price closed at Rs 75.7, ending five per cent higher.

Published on July 19, 2011

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