Hexaware eyes acquisition as it plans to enter manufacturing services

The company has a cash reserve of Rs 403.5 crore for the quarter ended September 30, 2012

Mid-cap IT services and solutions provider Hexaware Technologies is scouting for acquisitions as it plans to enter new vertical.

P R Chandrasekar, CEO and Vice Chairman, Hexaware Technologies said that the company is planning to enter the manufacturing vertical and would prefer to follow an inorganic route.

“An acquisition for us could be either to strengthen the existing verticals or entering a new vertical. We have decided to enter the manufacturing sector and have initiated the process for an acquisition. We think it offers us an opportunity to grow. We would like to acquire a target that provides us capability in supply chain management,” said Chandrasekar.

Hexaware has presence in three verticals --banking and capital market (32.3%), travel and transportation (20.1%), healthcare and insurance (15.2%) and emerging segments (32.4%). So far the company has preferred to grow the company organically.

While the company did not talk about the size of the acquisition, it has a cash reserve of Rs 403.5 crore for the quarter ended September 30, 2012.

Third quarter results
Meanwhile forex losses, projects coming to an end among large clients and delay in ramp-ups impacted the company’s performance on a sequential basis.

The company reported net profit of Rs 84 crore for the third quarter numbers ended September 31, 2012, up 29.9% year-on-year basis, but was down 5.6% on sequential basis.

Forex losses of Rs 3.9 crore, increments for its onshore employees and salary hikes impacted its net profit performance. Add to this selling general and administrative cost went up by 0.8%. The firms EBIDTA margins was down to 21.6% from 22.9%.

Revenue for the quarter at Rs 507.5 crore was up 38.7% on a year on year basis from Rs 366 crore. But contracts coming to an end in the top five clients segment, delay in execution of projects and continued pressure in Europe, impacted the topline growth on a sequential basis. Revenue was up 1.5% on a quarter-on-quarter basis.

Hexaware guided for a revenue growth for the Q4 to be in the range of of $94.7 million - $96.5 million, representing a growth of 2-4%. “We could have done better. Even then our performance is ahead of peers. Though the macro environment continues to be challenging, we do see strong pipeline. I think we will manage to still do better than the Nasscom growth numbers,” added Chandrasekar.

The company added 12 clients during the quarter. The company also said that it has bagged a multi-million dollar deal with a new logo in the Financial Services domain in Europe.

Hexaware’s attrition was at an all time low of 8.4%. Utilisation for the quarter was down (including trainees) at 67.6%. The company wants to have its utilisation at 70-72%.