An employee works on a laptop computer at the Flipkart Online Services Pvt. headquarters in Bengaluru, India. (Photographer: Dhiraj Singh/Bloomberg)

Hexaware Technologies Rallies On First Quarter Earnings, Guidance 

Hexaware Technologies Ltd.’s January-March earnings beat analyst expectations and the company maintained a double-digit growth forecast for 2017-18 despite an impact of a stronger rupee.

Net profit fell 6.3 percent to Rs 113.9 crore over to the previous quarter, but was higher than Rs 111 crore, the consensus estimate of analysts tracked by Bloomberg. Shares of the company gained as much as 4.5 percent after the earnings were announced, the most in five months.

Revenue grew 2.1 percent to Rs 960.5 crore compared to Rs 940.9 crore sequentially. Revenue in dollar terms grew 4.2 percent to $144.7 million, the company said in an exchange filing.

Earnings before interest and taxes fell 1.3 percent to Rs 146.5 crore, while EBIT margins fell 50 basis points to 15.3 percent compared to 15.8 percent in the previous quarter.

Segmental Performance

  • Revenues from the banking, financial services and insurance (BFSI) segment grew 3.6 percent sequentially to Rs 410 crore.
  • Revenues from the insurance and manufacturing segment grew 1.2 percent to Rs 269 crore.
  • Revenues from healthcare and insurance segment declined 2.8 percent to Rs 150.5 crore.
  • Revenues from travel and transportation segment grew 5.4 percent to Rs 130.9 crore.

Strong Outlook

The company said that it had bookings worth $25 million from new customers. The deals include managing customer experiences in the digital channel for a leading e-commerce company and application modernisation, support and product engineering for a global governance, risk management, and compliance software company.

We reiterate our growth guidance for the year to be in double-digits.
R Srikrishna, CEO & Executive Director, Hexaware Technologies

Stronger Rupee: Pressure On Revenues?

Over the last two months, the rupee has appreciated substantially to the U.S. dollar. When asked if this could translate to some sort of pressure on Hexaware’s revenues, Srikrishna told BloombergQuint, “It will impact our margins. Even this quarter, as well as we did, it was muted a little bit because 30 basis points we lost due to rupee appreciation. This quarter isn’t even the full impact so, from next quarter it will be little bit higher...”

Trump Effect On IT Businesses

In a bid to encourage more skilled and higher paid immigrants in the U.S., President Donald Trump signed an executive order last week to review the H-1B visa program, primarily used by Indian technology companies. Although a major chunk of Hexaware’s Americas’ revenues come from the U.S., Srikrishna said that any impact as a result of that order is a while away. In fact, he doesn’t see any impact on the business till 2019.

“It’s very simple: on April 1, we applied for a number of visas, which are getting allocated as we talk. And once they are allocated, that’s our supply chain for 2018. Our supply chain for 2017 is from the people that got allocated last year. And that 1.5 to 2 years that we have gives us enough opportunity to adjust our supply chain.”

The company plans to reduce dependence on H-1B and invest more in hiring and training workers.

The board of directors have declared a first interim dividend of Re 1 per share on equity shares of Rs 2 each. The record date has been fixed as May 8. The dividend payout would result in a cash outflow of Rs 35.67 crore, the company statement said.