Our industry outperformance is not a 1-year story: Hexaware Tech CEO

I'm not overly concerned about daily stock price fluctuations - we are in this for the long term, said Hexaware CEO

Midcap information technology (IT) services firm Hexaware Technologies returned to public markets with the country’s largest initial public offering (IPO) by an IT services company. The firm also announced its full-year 2024 results, reporting 13.7 per cent year-on-year growth. In Mumbai, R SRIKRISHNA, chief executive officer (CEO) of Hexaware, discusses with Shivani Shinde the timing of the IPO and the company’s growth strategy. Edited excerpts:

 

The timing of Hexaware’s IPO was unusual, given that the sector is experiencing one of its slowest growth phases and market conditions are shifting. What was the rationale behind it?

 

I’m not overly concerned about daily stock price fluctuations — we are in this for the long term. Our investors have already seen strong returns. In fact, a down market presents an even better opportunity for investors to enter.

 

One way to look at it is that we were the last to go public in a challenging market. The day we listed, the market wasn’t at its best, but that didn’t deter us. The reality is that every company, regardless of industry, is striving to become a platform-driven business. There is no shortage of long-term, secular demand for our services.

 

How do you see the impact of artificial intelligence (AI) on growth?

 

There is some truth to the statement that software engineering will be compressed. If I need to write a piece of code, it’ll take me less time, but the volume of code that needs to be written is multiplying all the time.

 

The current slowdown for the sector has been the longest. How has it impacted you?

 

It depends on what one defines as a slowdown. We just announced our 2024 results. We consider January to December as the financial year. Look at any of the last four quarters — except for three companies — most firms have reported 2-4 per cent growth. We’re not seeing a slowdown. If we grow at 20-22 per cent, we will be happy to do so, and I think there’s an opportunity for us to grow faster.

 

What is driving Hexaware’s double-digit growth?

 

Our industry outperformance is not a one-year story. What is working is quality management, great teams, engineers, platforms, and highly differentiated services. Add to this our culture and how we treat our customers. We have 170 customers in the $1 million segment. However, 90 per cent of our revenue comes from 40 customers, with about 50 being strategically crucial for us.

 

But 2022-23 was single-digit growth?

 

That’s actually the lowest in our history. But even that is higher than anyone else. The only company that has consistently done better in the long term is Persistent.

 

What will be your focus areas to maintain this growth?

 

We have identified a few strategic priorities, which are a combination of services, markets, and geographies.

 

The first is legacy modernisation, which ties directly into AI. I believe using AI to make someone’s job 20 per cent faster or cheaper is useless.Legacy modernisation is one area where AI can help because humans can't decipher code written 50 years ago.

 

Second, we have been pivoting to sell more to product companies. Even the software we build for enterprises increasingly resembles what you would sell to product companies. We now have a clear focus on large product companies. There’s absolutely enough for us to go after in the pure-play large product company segment.

 

The third pivot is private equity as a channel, something Persistent does better than us. In the US, if you consider the universe of privately owned companies, their estimated market cap is about 40 per cent of that of public companies — and it’s growing.

 

The fourth pivot is expanding into new geographies, specifically West Asia and Asia. Currently, Asia contributes 6 per cent of our revenues, with India accounting for about 2 per cent. Both West Asia and India contribute under $50 million for us. I believe they can double in two to three years. In India, we are focusing on enterprises and global capability centres. Some of our clients here include HDFC Bank and IndiGo.

 

You have mentioned that consolidation is happening in clients’ tech landscapes. How is it impacting Hexaware?

 

Consolidation, conceptually, means customers are spreading their spending across a smaller number of vendors. We have spoken about two deals where we managed to retain clients, one of which is from financial services. And there are two more in discussion. The reasons for this are, of course, cost, the complexity of managing 80 different vendors, and risk.