Hexaware Technologies Ltd (HEXT) Annual Report Analysis & Insights

Hexaware Technologies Ltd

| Annual Report 2025-26

⬤10th Apr 26

Summary : Hexaware Technologies achieved resilient financial growth in 2025, driven by its AI-first strategy, strategic acquisitions, and strong operational performance, while navigating evolving market dynamics.

Annual Report Analysis & Insights

Financial Disclosures

Employee Benefits Expense: INR 77,938 Mn (CY25), INR 69,649 Mn (CY24).
Other Expenses: INR 37,252 Mn (CY25), INR 31,793 Mn (CY24).
Finance Costs: INR 1,005 Mn (CY25), INR 660 Mn (CY24).
Depreciation and Amortization Expense: INR 3,613 Mn (CY25), INR 2,788 Mn (CY24).
Impact of New Labour Codes (Exceptional Item): INR 1,111 Mn (CY25).
Trade receivables (billed gross): INR 15,590 Mn (CY25), INR 13,665 Mn (CY24).
Trade receivables (unbilled): INR 6,000 Mn (CY25), INR 6,841 Mn (CY24).
Days Sales Outstanding (DSO) increased to 67 days in CY25 from 65 days in CY24.
Total Revenue from Operations: INR 134,304 Mn (CY25), INR 119,744 Mn (CY24).
Revenue by Geography: Americas (75.3%), Europe (19%), Asia-Pacific (5.8%).
Revenue by Vertical: Financial Services (30.1%), Healthcare and Insurance (21.1%), Hi-Tech and Professional Services (16.2%), Manufacturing and Consumer (15.5%), Travel and Transportation (8.4%), Banking (8.7%).
Revenue by Service Type: IT Services (85%), BPS Services (12%), Others (3%).
Net Cash Generated from Operating Activities: INR 17,391 Mn (CY25), INR 15,480 Mn (CY24).
Net Cash Used in Investing Activities: (INR 9,962) Mn (CY25), (INR 6,690) Mn (CY24).
Net Cash Used in Financing Activities: (INR 8,308) Mn (CY25), (INR 6,819) Mn (CY24).
Net Decrease in Cash and Cash Equivalents: (INR 879) Mn (CY25), Increase of INR 1,971 Mn (CY24).
Disputed Income Tax liabilities (not provided for).
Claims against the Group not acknowledged as debts (Gross of tax).
Disputed amount payable to a European customer (USD 9.1 million) for which formal recovery proceedings initiated.
Alleged patent infringement and breach of contract claim (USD 500 million) by Natsoft Corporation and Updraft LLC.
Total Assets: INR 109,046 Mn (CY25), INR 89,945 Mn (CY24).
Total Equity: INR 63,126 Mn (CY25), INR 53,546 Mn (CY24).
Cash and Cash Equivalents: INR 21,324 Mn (CY25), INR 19,923 Mn (CY24).
Goodwill: INR 35,768 Mn (CY25), INR 23,871 Mn (CY24).
Total Non-current Liabilities: INR 10,817 Mn (CY25), INR 7,678 Mn (CY24).
Transactions with wholly owned subsidiaries for IT/ITES services.
Corporate Guarantee charges for borrowing by HTInc.
Investment in debentures of HTInc and interest received.
Payments to Key Management Personnel (KMP) for short-term employee benefits, post-employment benefits, and share-based payments.
Consolidated revenue (INR 134,304 Mn) is higher than standalone (INR 73,888 Mn).
Consolidated PAT (INR 13,683 Mn) is higher than standalone (INR 7,796 Mn).
Consolidated Adjusted EBITDA (INR 22,949 Mn) is higher than standalone (INR 14,338 Mn).
Consolidated balance sheet reflects broader group operations including subsidiaries.

Corporate Overview

Americas (75.3%)
Europe (19%)
Asia-Pacific (5.8%)
Rapidly evolving technology requires continuous upskilling of talent.
Maintaining consistent quality and scale across global operations.
Addressing the gap between business intent and AI/technology execution.
Managing the cost of delay in legacy modernization.
Ensuring data privacy and security in an AI-driven landscape.
Relies on partnerships with Microsoft, AWS, Google Cloud, Snowflake, Databricks, and Oracle.
Dependent on skilled talent pool in India for IT-BPM exports.
Relies on third-party software and platforms for integrated services.
Hexaware provides IT consulting, software development, business process services (BPS), data and AI, cloud, Digital IT operations, and enterprise platforms.
The company focuses on technology and business process services that sit close to clients' revenue, cost, and risk.
Their philosophy combines innovation, execution discipline, and responsible conduct.
Hexaware builds AI systems that work across entire workflows, but never unsupervised, with humans defining specifications and validating outputs.
The company aims to improve how critical systems perform and evolve, from modernizing core platforms to embedding data and AI.
The leadership emphasizes a strong commitment to responsible growth and an AI-first approach.
They highlight resilient financial performance, customer-centricity, and steady ESG progress.
The tone is confident about future growth, driven by strategic investments and execution.
Leaders stress the importance of human intelligence perfected by AI, not replaced by it.
Serves an elite clientele, including more than 30 Fortune 500 organizations.
Customers span various industries: banking, financial services, insurance, healthcare, manufacturing, retail, telecom, utilities, travel, transportation, and hospitality.
Two clients generated over USD 100 Mn in annual revenue (up from one).
Four clients generated over USD 50 Mn (up from three).
IT Services (85%)
BPS Services (12%)
Others (3%)
Financial Services (30.1%)
Healthcare and Insurance (21.1%)
Hi-Tech and Professional Services (16.2%)
Manufacturing and Consumer (15.5%)
Travel and Transportation (8.4%)
Banking (8.7%)
33,844 employees globally
90 nationalities
Operations in 34 countries
Supports 128 languages
83% renewable energy adopted across campuses
21,222 employees impacted by upskilling programs
161 average training hours per employee
Continued investment in proprietary platforms (Amaze®, RapidX®, Tensai®, Agentverse™).
Expansion of global delivery network across North America, Europe, Asia-Pacific, and newer locations like Egypt.
Acquisition of SMC Squared to strengthen Global Capability Centers (GCCs) capabilities.
Acquisition of CyberSolve to deepen cybersecurity and identity & access management (IAM) capabilities.
Investment in new development center in Pune.

Risk Factors

Cybersecurity threats remain persistent.
Geopolitical uncertainties impact operations.
Talent retention is a challenge.
AI disruption may reduce revenue.

Key Drivers

AI-first strategy drives innovation.
Strong financial performance continues.
Strategic acquisitions expand capabilities.
Deepening client relationships globally.

Auditor’s Report

Unmodified opinion on consolidated financial statements.
Unmodified opinion on standalone financial statements.
Revenue recognition for fixed-price contracts using percentage of completion method, due to inherent risk and complex nature.
Accounting for business combinations, due to complexity in determining purchase consideration and fair value of assets/liabilities.
Translation of certain financial information (P&L extract) into USD for internal reporting alignment.

Board Commentary

No material changes in the nature of business of subsidiaries.
Mr. Alok Chandra Misra appointed as Non-Executive Independent Director w.e.f. February 23, 2026.
Mr. Julius Michael Genachowski and Mr. Kapil Modi retire by rotation and seek re-appointment.
The company paid two interim dividends totaling INR 11.50 per share for 2025.
Total dividend declared and paid in 2025 amounts to INR 6,995 million.
Dividend payout ratio was 51.1% of consolidated PAT in CY25.
Risk of material foreseeable losses on long-term contracts, including derivative contracts, are assessed and provision made.
Risk of non-compliance with applicable laws and regulations is managed through robust internal financial controls.
No significant material orders passed by Regulators or Courts impacting going concern status.
Company filed FIR against seven employees for unauthorized refund transactions (INR 48 million).
Received notice for alleged patent infringement and breach of contract (USD 500 million claim), company believes claim is without merit.
Paid penalty of INR 66,000 for delay in filing Form MR-2 due to technical issues.
Paid penalty for GST ITC non-reversal and non-realization of export receipts.
Estimated amount of contracts remaining to be executed on capital account is INR 1,117 million as of December 31, 2025.

Corporate Governance

Code of Conduct for Directors and Senior Management Personnel.
Whistleblower Policy and vigil mechanism for reporting unethical behavior or fraud.
Anti-Corruption and Anti-Bribery Policy.
Policy on Related Party Transactions.
Board composition includes Executive, Non-Executive, and Independent Directors.
Four Independent Directors (36.37%) out of eleven total directors.
Independent Directors meet criteria of independence as per Companies Act and SEBI LODR.
Independent Directors have no pecuniary relationship with the company other than sitting fees and commission.
Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Corporate Social Responsibility Committee, Risk Management Committee, Environmental, Social, and Governance Committee, Cybersecurity Committee (sub-committee of Audit Committee).
One instance of fraud involving unauthorized refund transactions by employees (INR 48 million) reported to Central Government.

Management Discussion & Analysis

Future Strategy

AI-first approach: AI Led, Human Intelligence Perfected, with AI as operating backbone and human governance.
Focus on responsible growth and an AI-first approach.
Launch one new service every month, aiming for 100 customers within 90 days of launch.
Deepen domain expertise to precisely define problems in the AI era.
Build Small Language Models (SLMs) for complex, high-volume use cases to address cost and performance issues of LLMs.

Industry Overview

Global IT spending reached USD 5.54 trillion in CY25, up 10% from previous year, strongest growth in almost 30 years.
AI, cloud, and modern infrastructure moved from discussion to deployment.
GenAI workloads drove sharp increase in infrastructure demand, with spending on data center systems rising 46.8%.
Global IT spending expected to reach USD 6.08 trillion in CY26, with software, IT services, and AI infrastructure as main engines.
IT services outsourcing market valued at USD 662 Bn in CY25, projected to reach USD 1.35 trillion by CY34 (CAGR 8.2%).

Macroeconomic Outlook

Global economy held up in CY25, but underlying vulnerabilities remained.
Global growth expected to slow from 3.3% in CY24 to 3.2% in 2025 and 3.1% in 2026.
Advanced economies projected to grow around 1.5%, emerging markets by roughly 4%.
Inflation is easing overall, but pace and impact differ by country.

Operational Focus Areas

Realize full value from SMC Squared and CyberSolve acquisitions.
Deepen governance foundations as client deployments scale.
Maintain high standard of shareholder communication.
Continue building out Amaze®, Tensai®, and RapidX® platforms.
Upskill employees in next-gen technologies to keep pace with capabilities.

Performance Drivers

Strong revenue growth (12.2% in INR, 7.6% in USD) driven by volume uptake.
Improved profitability with Adjusted EBITDA margin of 17.1% (up 120 basis points).
Increased earnings per share (EPS) by 16.2% to INR 22.51.
Strong operating cash flow of INR 17,391 Mn with 75.6% cash conversion.
Deepening client relationships, with more clients crossing USD 50 Mn and USD 100 Mn revenue marks.

Risk Control Measures

Layered security controls, XDR, SASE, XSIAM, and continuous automated red teaming.
Diversified supply chains and localized operations to reduce dependency.
Expanded employee referral programs and tapping Tier-2 cities for talent.
Diversified service offerings across AI, automation, cloud, and digital transformation.
Structured compliance framework and enterprise compliance tools.

Critical Risks

Cyber security and data privacy risks, including ransomware and data breaches.
Emerging geopolitical risks, including tariffs and trade policy changes.
Talent availability and retention challenges, especially for key management personnel.
Disruption due to AI, leading to potential revenue reduction from automation.
Regulatory and compliance risks, including misstatement of financial statements.