Investors should wait for higher offer price on Hexaware delisting, suggest analysts

Mumbai: The board of Hexaware Technologies will discuss a proposal on June 12 to delist shares, the mid-tier IT services provider said in a regulatory filing on Friday.

Shares surged 20% on the BSE to hit the upper circuit following the announcement and closed trading for the day at Rs 311.30 apiece.

The delisting proposal was floated by promoter HT Global IT Solutions Holdings, which owns 62.4% in Hexaware. HT Global is Baring Private Equity Asia’s investment holding vehicle.

HT Global said the delisting will “help in cost savings and allow the management to dedicate more time to and focus on the company's business.”

The indicative offer price for the delisting is Rs 285 per share.

“…the indicative offer price should in no way be construed as an obligation on the promoter/promoter group to accept any price which is lower than, equal to or higher than the indicative offer price,” it said in the filing.

Analysts, however, said investors should wait for a better price.

Madhu babu, senior IT analyst at Centrum Broking, said Hexaware’s valuations are cheap at the current market price of Rs 285.

“With annual revenues of $808 million and headcount of 20,000 and broad service mix profile with strengths in IMS/BPO and Digital, we believe Hexaware is cheap,” he said.

Centrum has set a target price of Rs 340 per share for Hexaware.

The company has struggled with cash flows compared to peers, at a time when clients are seeking discounts and deferred payments. The company did not pay dividend for the first quarter of its current fiscal year which began in January.

Manik Taneja and Monit Vyas, analysts at Emkay Global, said in a note, “We note that Hexaware has very little net cash compared to peers and its intent to defer dividend could be driven by an aim to conserve cash as clients ask for delayed payment terms along with price discounts.”

Hexaware had net cash worth Rs 400 million (Rs 40 crore) at the end of the March quarter.