Carlyle's dividend haul from Hexaware touches Rs 1,380 crore in three years since its acquisition

Carlyle's dividend haul from Hexaware touches Rs 1,380 crore in three years since its acquisition

Private equity firm Carlyle Group, which acquired IT services provider Hexaware Technologies for $3 billion in November 2021, has received $165 million (Rs 1,380 crore) in dividends from the Indian IT services firm, according to Hexaware's draft share sale documents filed last week.

The private equity firm financed its Hexaware acquisition with around $1 billion in offshore debt, according to media reports. This is a common private equity strategy that leverages acquired companies' cash flows to service debt and return capital to investors.

In 2022, the first full financial year after Carlyle’s acquisition, the IT company paid out a total dividend of Rs 663.7 crore — close to three times the dividend paid out in the previous year, Hexaware’s DRHP shows.

In 2023, Hexaware paid out Rs 530.8 crore as dividend, and for the six-month ended June 30, the company paid a dividend of Rs 258 crore. In total, Hexaware paid dividends worth Rs 1,452.5 crore to shareholders, including employee stock owners, since Carlyle’s acquisition.

The private equity firm owns 95.03 percent of the company, which means its share of the dividends paid out amount to around Rs 1,380 crore.

Among top 100 companies by dividend paid 

Hexaware's 2023 dividend payout of Rs 530.8 crore would rank it 34th among BSE 100 index members if it were a listed company, behind LTIMindtree's Rs 592 crore, according to Ace Equity data. Hexaware’s dividend payments surpass that of companies such as Wipro (Rs 522.4 crore), ICICI Lombard General Insurance (Rs 515.83 crore) and Godrej Consumer Products (Rs 511.41 crore).

To be sure, while Hexaware has paid out large dividends in the past, it is not indicative of the dividends that the company will pay after it starts trading on stock exchanges.

“The amounts paid as dividends in the past are not necessarily indicative of dividend amounts, if any, in the future. Investors are cautioned not to rely on past dividends as an indication of the future performance of our Company or for an investment in the Equity Shares offered in the Offer. There is no guarantee that any dividends will be declared or paid in the future,” the Hexaware DRHP states.

Also Read: Five things to know about the Hexaware IPO

The dividends paid out by Hexaware are significant not just in terms of the absolute amount but also in terms of dividend payout ratio, which indicates how much of the company’s net income is distributed as dividends. The dividend payout ratio is calculated as dividend paid per share divided by the earnings per share.

According to the company’s disclosures, Hexaware paid out Rs 22 and Rs 17.5 as dividends per share in 2022 and 2023, the earnings per share stood at Rs 14.65 and Rs 16.45 per share in these years.

Only in the six-month ended June 30, 2024, Hexaware’s dividend per share was lower (Rs 4.25) compared to its earnings per share at Rs 9.14.

Hexaware reported a profit growth of 12 percent in FY23 to Rs 1,053.2 crore, compared to a profit of Rs 940.6 crore in the previous financial year. For the six months ended June 30, it reported a profit of Rs 559.5 crore.

The IPO

The proposed IPO of Hexaware Technologies will see Carlyle sell shares worth Rs 9,950 crore. The company does not intend to raise any money for its own purposes.

Hexaware’s IPO will be the largest-ever new share sale by an IT services company in the country.