Wednesday, February 29, 2012

Hexaware Sale. Why I think its not happening?

Why I think Hexaware may not get sold soon?

I think that any buy out deal on Hexaware is going to be difficult, and my reason is simple. Its peers, NIIT Technologies, Zensar, Infotech Enterprises each of which have comparable (if not higher revenues than Hexaware) are trading at less than half the valuation of Hexaware. Take NIIT Technologies for example. NIIT, like Hexaware, is focussed on niche verticals (BFSI, Travel), has been growing really well and had large deal wins announced during last year, stellar and stable margins over the past several quarters and rea venue runrate higher than Hexaware, is trading at market cap of less than 1500 Crore. While at today's market price, hexaware is close to 3500 Crore.

Any financial or strategic buyer looking to consolidate will look at this and simply baulk at the valuation gap, making the deal severly unlikely. Unless, the promoters and existing funds invested in Hexaware agree to sell at a discount to market price which is unthinkable and never done especially in India.

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