Moneycontrol
Get App
Last Updated : Feb 07, 2017 05:31 PM IST | Source: CNBC-TV18

Hexaware to grow in double digits at 10-12% in 2017: Chief

Midcap software firm Hexaware Technologies reported a 3.4 percent revenue growth in constant currency but according to the company‘s chief R Srikrishna, its profitability will stay flat in calendar year 2017 as the margin growth will be in line with the revenue growth.


Midcap software firm Hexaware Technologies reported a 3.4 percent revenue growth in constant currency but according to the company’s chief R Srikrishna, its profitability will stay flat in calendar year 2017 as the margin growth will be in line with the revenue growth but the company will grow in double digits. 

"You should expect to see growth again in 2017 over 2016. But, it tends to be lumpy. So, I would not put a quarterly run-rate," he said while speaking to CNBC-TV18 in an interview. 

In the fourth quarter, the firm ended with a constant currency growth of 13.2 percent on a year-on-year (Y-O-Y) basis and Srikrishna says that they expect a double digit growth but expect it to be on the lower end of 10-12 percent.

He also said that pushing utilisation beyond a level hampers a company's ability to service customers fast. Hence, at Hexaware, the utilisation level will be brought tad down from it current levels. 

In a surprise move, US President Donald Trump introduced in the US House of Representatives a bill which called out for more than doubling the minimum salary of H-1B visa holders to USD 130,000.

According to Srikrishna, executive action can only change things to a certain extent and most things which are material to the H1B cannot be changed by executive action. "It needs legislative action and of the two bills that are there, one represents essentially Silicon Valley interests which has a little scope to go through. The other one is bipartisan, but you should know that similar bills that have not got bipartisan broader support, have not passed, he added.

He further said if there will be changes they will be prospective and not retrospective.

"Also, if the legislative action is taken then the impact is going to be from the fourth quarter of 2018 or later as company's supply chain for calendar year 2017 is from petitions and approvals that were done in 2016," he added.

Below is the transcript of R Srikrishna’s interview to Reema Tendulkar on CNBC-TV18.

Q: Q4 has been a great quarter. You have ended with a constant currency growth of 13.2 percent on a year-on-year (Y-o-Y) basis. In your release, you have said it sets you up for a double digit growth in calendar year 2017. Is that going to be 10-12, 12-14 percent? What is the kind of visibility you have and will it come with an improvement in margins for calendar year 2017?

A: We expect it to be on the lower end so currently we are thinking 10-12 percent. We are also thinking, what we expect to do is that our margin growth will be in line with revenue growth which means our profitability will stay flat.

Q: You have managed to improve your utilisation a fair bit. It would be at a multi-quarter high at close to 78.5 percent. Can you maintain it at these levels?

A: We actually could, but we do not want to, so our goal is to reduce it a little bit.

Q: Why?

A: We want to be able to service demand well and you push the utilisation beyond a certain level then it reduces our ability to service customers fast. So, we will dial it down a tad from where it is.

Q: Let me come to the new deal wins from new clients. USD 20 million in Q2, USD 42 million in Q3 which has gone up to USD 55 million in Q4. Is that USD 50-55 million run-rate sustainable going ahead?

A: I like to think of this more on a full-year basis. Our 2015 full-year was USD 120 million. Our 2016 full-year was close to USD 153-155 million. You should expect to see growth again in 2017 over 2016. But, it tends to be lumpy. So, I would not put a quarterly run-rate.

Q: The elephant in the room is what Trump is going to do. If you could first tell us for Hexaware, what percentage of your employees in the US are on H1B visa and what would their average salary be and therefore, if there is an increase in minimum wage, as a couple of bills are proposing, what will be the margin impact as you see in the company?

A: There are five quick facts which I think are an important background before we get to that answer. First is, executive action can only change things to a certain extent. In fact, most things which are material to the H1B cannot be changed by executive action. So, it needs legislative action and of the two bills that are there, one represents essentially Silicon Valley interests which has a little scope to go through. The other one is bipartisan, but you should know that similar bills have not got bipartisan broader support, have not passed. Yet, there will be some changes, but whatever changes happen will be prospective, not retrospective. So, this whole question of impact based our current number of employees really do not come into play. The only impact is how many employees we add on an incremental basis on a Y-o-Y basis.

Q: But you will have to increase your salary for the existing employees to match. It is not fair to have some people on USD 1,00,000 salary and similar people at USD 80,000.

A: Let me quickly come to the fourth and fifth point which will address that. Legislative action, assuming it does happen, the impact is going to be from Q4, 2018 or later. Why is that? Because our supply chain for calendar year 2017 is from petitions and approvals that were done in 2016.

Exclusive offer: Use code "BUDGET2020" and get Moneycontrol Pro's Subscription for as little as Rs 333/- for the first year.

First Published on Feb 7, 2017 04:18 pm
Sections
Follow us on