MOSL: THE CORNER OFFICE (HEXAWARE TECHNOLOGIES) — Demand robust-Upgrading to Neutral

THE CORNER OFFICE (Hexaware Technologies) — Demand robust; Keep a watch on supply; Upgrading to Neutral

Mr R Srikrishna, CEO & Executive Director

Mr R Srikrishna (Keech) is CEO of Hexaware Technologies. Prior to Hexaware, he served in HCL for over 20 years as President of two units – Healthcare and Lifesciences and Infrastructure Services. He was instrumental in growing these units to multibillion dollar businesses. The year 2014 marked the joining of Keech in Hexaware. Since then, he is dedicated toward delivering world-class services to customers, and ensuring employee satisfaction, thereby creating and sustaining long-term profitable growth.

 We met with Hexaware’s (HEXW) CEO Mr R Srikrishna. Key highlights:

• The demand environment for services remains robust. Even after closing two large deals within existing accounts last quarter, the pipeline of large deals remains very healthy.
• Demand-supply situation in the US local labor market is tight, with unemployment in the technology sector virtually zero – potentially creating a revenue and/or cost issue.
• Near-term benefits from a weaker INR will be short-lived. 70-80% will get reinvested into the business, while the remainder may have to be passed on to customers.
• HEXW is actively looking to acquire capabilities, especially in the area of customer experiences. These can add 3-4pp to organic revenue growth annually over the next few years.
• We are upgrading our price target for HEXW to INR460 (up from INR380), which discounts forward earnings by 18x, in line with peers. Key factors for upgrade in price target are: (1) Bottoming of client ramp downs, (2) Healthy large deal pipeline akin to two wins last quarter and (3) Supportive currency. As a result, we are changing our rating to Neutral from Sell.