ICICI Securities has downgraded Hexaware Technologies to 'HOLD', citing a cut in full-year growth guidance and ongoing client vendor consolidation. The brokerage now expects 6-7% year-on-year revenue growth in USD terms, down from its previous estimate of 7.6%.
ICICI Securities has revised its rating for Hexaware Technologies to 'HOLD' from 'Add,' citing a combination of aggressive client-side vendor consolidation and a difficult global economic environment. Despite this change, the brokerage firm has maintained its price target of ₹580 for the stock.
The downgrade follows Hexaware’s decision to lower its annual growth guidance by approximately 100 basis points. The company now projects its full-year revenue to grow by 6-7% in USD terms, a decline from its earlier forecast of 7.6%. This adjustment reflects the ongoing pressure on growth despite the company securing large-scale legacy modernization and AI-driven contracts.
Impact of AI-Led Vendor Consolidation
A primary factor influencing the brokerage's outlook is the trend of AI-led vendor consolidation. According to the report, 13 of Hexaware’s top-20 clients have consolidated their vendor lists over the last five quarters. This rate of consolidation is noted to be significantly higher than industry averages. As clients move toward AI-driven efficiency, many are reducing the number of service providers, which creates a continuous headwind for Hexaware. This deflationary pressure on contract values is expected to persist in the near term as clients focus on optimizing their IT spending.
Valuation and Market Context
Hexaware has seen its share price appreciate by 12% over the past month. This recent rise, combined with the subdued growth outlook, led analysts to move to a 'HOLD' rating. ICICI Securities continues to value the company at 20 times its estimated Earnings Per Share (EPS) of ₹29 for calendar year 2027. Investors may monitor how the company balances its ongoing deal pipeline in AI and legacy modernization against the broader trend of vendor pruning by its largest clients.
The key focus for shareholders will be the company’s ability to defend its margins and revenue growth rates in upcoming quarters. Specifically, investors may track management commentary regarding the stability of the client portfolio and whether the impact of vendor consolidation begins to stabilize or if it will continue to weigh on the company’s ability to meet its revised growth targets.