Hexaware Technologies is set to launch its Initial Public Offering (IPO) on February 12, 2025, aiming to raise ₹8,750 crores through an Offer for Sale (OFS) of 123.6 million equity shares. The price band for the IPO is set between ₹674 and ₹708 per share, with a minimum lot size of 21 shares, requiring a minimum investment of ₹14,868.
Grey Market Premium (GMP) Analysis:
- Current GMP: As of February 7, 2025, Hexaware Technologies’ shares were trading at ₹727 in the grey market, indicating a premium of ₹19 or approximately 2.68% over the upper price band of ₹708.
- GMP Trends: The GMP reflects moderate demand in the grey market, suggesting that investors anticipate a slight premium upon listing. However, GMP figures can fluctuate based on market sentiment and are not definitive indicators of listing performance.
Valuation and Peer Comparison:
- Price-to-Earnings (P/E) Ratio: The IPO is priced at a P/E ratio of approximately 41x, which is higher compared to peers like Infosys and Wipro, which trade below 25x.
- Industry Position: Hexaware’s valuation suggests that the market has high expectations for its growth prospects, especially in areas like AI and cloud services.
Financial Performance:
- Revenue Growth: The company reported revenues of ₹10,389.10 crores in December 2023, up from ₹9,378.8 crores in December 2022.
- Profit Increase: Profits rose to ₹997.6 crores in December 2023 from ₹884.2 crores in the previous year.
Risk Factors:
- High Valuation: The elevated P/E ratio indicates that the stock is priced for significant growth, which may not materialize, leading to potential overvaluation.
- Offer for Sale (OFS): Since the IPO is entirely an OFS, the company will not receive any proceeds for expansion or debt reduction.
- Industry Dependence: A slowdown in the IT sector or loss of key clients could adversely affect the company’s financial performance.
Conclusion:
While Hexaware Technologies has demonstrated solid financial growth and holds a strong position in the IT services sector, the high valuation and nature of the IPO as an OFS present considerations for potential investors. The moderate GMP indicates limited immediate listing gains. Investors with a long-term perspective who are confident in the company’s strategic direction in AI and cloud services may find this IPO appealing. However, those seeking short-term gains or concerned about the high valuation may approach with caution.
