Hexaware's IPO: A risky gamble in uncertain times
Subscribe to enjoy similar stories. Hexaware Technologies Ltd IPO, which will be open for subscription from 12-14 February, comes at a time of prolonged uncertainty for India’s information technology services sector as clients in the US and Europe tighten discretionary spending on IT. This raises questions about investor appetite for an IPO as large as Hexaware’s.
The Indian IT services company’s initial public offering involves not a fresh issue of shares but a stake sale by existing shareholders, chiefly its promoter CA Magnum Holdings, a subsidiary of private equity firm Carlyle Group. Hexaware’s IPO aims to raise ₹8,750 crore (or about $1 billion) at a price band of ₹674-708 per share. Hexaware is returning to the public markets after it delisted in 2020.
The following year, CA Magnum Holdings acquired a 95.51% stake in Hexaware for $3 billion from Baring Private Equity Asia, which had held a majority stake in the IT service company since 2013. Now, Carlyle is set to offload nearly 20% of its Hexaware stake in the IPO, which has been slightly downsized from the initially planned ₹9,950 crore offering. Data suggests that even large IPOs can struggle.
A Mint analysis reveals that 70% of the top 10 IPOs by size in India saw subscription levels below 3%. Besides, the timing of Hexaware’s IPO is a key concern, with recent market volatility dampening investor sentiments. Will Hexaware’s share offering, even after being slightly downsized, attract sufficient investor interest? Despite a recent slowdown in the US and Europe, its key markets, Hexaware has delivered impressive growth, posting a compound annual growth rate of 20% in revenue and 15% in operating profit between FY21 and FY23.
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