Hexaware betting big on Shrink IT and Grow Digit strategies, says its CEO

PRONOY NATH BANERJI | Updated on January 18, 2018 Published on July 31, 2016

R SRIKRISHNA, CEO & Executive Director, Hexaware

IT services firm also eyeing acquisitions in healthcare and banking: R Srikrishna

Hexaware Technologies has posted robust earnings, with revenues up 12.6 per cent in the first quarter and dollar revenue seeing a healthy growth. Margins have seen steady growth as well.

Speaking to BTVI, Hexaware Executive Director and CEO R Srikrishna said the company’s two-pronged strategy of Shrink IT and Grow Digital is paying off.

While the US business looks strong, the macroeconomic conditions in Europe are of a little more concern, even as the Brexit impact is still to be fully assessed. With $47 million in cash on books, Srikrishna said, the company is seriously looking at acquisitions in the healthcare and banking space.

What has led to the strong numbers in terms of operational performance dollar revenue?

We said in the beginning of the year and end of the period of Q1 that our first quarter will be soft and we expect to have robust earnings in the rest of the year. So it was not surprising for us certainly.

And we have also said that revenue growth will lead to improvement in profitability, which also happened. And the revenue growth was pretty broad-based and growth came from all geographies, almost all verticals and almost all service lines.

Splitting it up into verticals, what is likely to lead growth in the next two quarters?

What will drive growth for us is all premised on the two-pronged strategy of Shrink IT and Grow Digital. The Shrink IT strategy will deliver growth in some service lines — application support, infrastructure, BPO and portions of testing. And Grow Digital will deliver growth for us in other service lines. From the vertical perspective, again, these strategies are vertical agnostic. What we have said is that we expect healthcare, banking & financial services and insurance to be the two segments that will do relatively better than the other two segments.

What is the operating environment looking like in Europe as well as the US, going by the Brexit uncertainties and an overall slowdown in developed economies?

The American macroeconomy looks reasonably good — it actually looks pretty strong. Especially when you compare it with Europe, it looks a really great place. It’s business as usual. There is reasonable demand in most sectors including discretionary spends. But commodity IT services will come under pressure. That is nothing to do with macroeconomics. We think that is reflective of the budget priorities of most customers. They want to save money on commodity IT and invest in digital. And our Shrink IT and Grow Digital strategies are highly aligned to these budget priorities. In Europe, clearly, the macroeconomic conditions are a little more of concern than in the US. The Brexit impact is still to be fully assessed. But our early financial assessment in the UK shows there is going to be some postponement on discretionary spending. But on the other hand, we have seen in the past that when there is macroeconomic pressure in Europe they are actually dependent on outsourcing, especially the commodity services.

You have around $47 million in cash on books. Are you looking at any acquisitions?

With lots of new leadership changes that we had about one-and-a-half years ago, we feel that we have reached a stage of stability in our journey where we feel good about looking for acquisitions seriously.

We have identified essentially two sectors — healthcare and banking — where we want to focus all our energies on.

Published on July 31, 2016
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