Hexaware made a small turn around the bend of profitability and this is garnering the stock the support of operators in the market.

This prompted a decent 2.53% to Rs 101.15 rise in the scrip of the software company by 11:38 IST. By that time, the scrip recorded volumes of over 10.75 lakh shares on BSE.

Operators have been impressed by the net profit the company has notched up in the first quarter of 2004 compared to a loss in the same quarter last year.

After market hours on Tuesday, Hexaware Technologies announced a net profit of Rs 0.92 crore for the first quarter ended 31 March 2003 (in line with the company's own guidance) compared to a net loss of Rs 0.28 crore in MQ 2002. Total income increased by 106.25% to Rs 31.33 crore from Rs 15.19 crore in MQ 2002.

The company's total global profit after tax and share of profit in associates stood at Rs 1.75 crore on a total global revenue of Rs 67.21 crore.

But analysts are none-too-impressed by the company's performance, as on a quarter-on-quarter basis, consolidated revenues have risen only 1.7% while profit actually declined by 90%. The decline was largely due to a dip in margins, attributed to the increase in direct costs, overseas marketing and investment in R&D activities. In spite of this, the management has reiterated its guidance for FY 2003, when it expects revenue growth of 30-35% over FY 2002. It expects consolidated net profit before taxes of over $ 5 million (including the profit of associates). Notably, to achieve its guidance of 30-35% growth in revenues, the company has to record a 12.5-15% sequential growth in revenues and almost double profits every quarter on a sequential basis. This is going to be a very difficult task for the company and analysts feel that the guidance will be revised downward in future.

The company has also said man power addition will be to the tune of 350 Nos. for the rest of the year. The company has also hiked salaries during the quarter to match industry levels, which also helped the dip in margins. The management has said that the larger impact of salary hikes would be felt in the current quarter. It added 253 people to its rolls in the quarter ending March 2003, the highest number over the last four quarters. However, additions were largely onsite taking the onsite proportion to 25%. Consequently, contribution from offshore revenues went down to 37% during the quarter from 40% in the December 2002 quarter.

The order book remains robust at over $100 million to be implemented over the next five years. Quite notably it has "bid" for new projects (prospective) worth $100 million, some of which the management remains quite hopeful of converting into client wins.

HTL focuses primarily on marketing its three technology practices - PeopleSoft services, application management solutions and e-Solutions, largely to the banking, financial services and insurance sector and transportation/airline industries in North America, Europe, Singapore, and India. In addition, the company is setting up an offshore R&D solutions practice comprising embedded software and chip development and testing. During fiscal 2003, Hexaware intends to launch several new solutions, including a dedicated service offering for HR applications, an integrated testing suite, a billing system for asset management systems and a new leasing solutions for global.

Hexaware was formed by the merger of the software division of Aptech and the Hexaware Technologies. The figures for the year ended 31 December 2001 include the training and education division of the earlier Aptech and excludes the figures in respect of the erstwhile Hexaware Technologies. Accordingly, the figures for the period ended December 2002 are not directly comparable to that of period ended December 2001.

As on 31 March 2003, promoters hold 39.07% in HTL.