Hexaware Technologies Upgraded to Hold on Improved Valuation and Financial Metrics

Valuation Improvement Spurs Upgrade

The most significant catalyst behind the rating change on 20 Feb 2026 was the shift in Hexaware’s valuation grade from fair to attractive. The company’s price-to-earnings (PE) ratio currently stands at 21.70, which is notably lower than many peers in the Computers - Software & Consulting sector, where companies like Persistent Systems and Info Edge trade at PE multiples above 44 and 51 respectively. This relative undervaluation is further supported by a price-to-book (P/B) value of 5.05, which, while elevated, is reasonable given the company’s return on equity (ROE) of 23.25% and return on capital employed (ROCE) of 30.92%.

Enterprise value multiples also reinforce the attractive valuation thesis: EV to EBIT at 19.72 and EV to EBITDA at 15.99 compare favourably within the sector, where several peers command significantly higher multiples. The PEG ratio remains at zero, indicating no expected earnings growth premium priced in, which could present upside if earnings accelerate.

Financial Trend: Flat Quarterly Performance but Positive Profit Growth

Despite the upgrade, Hexaware’s recent financial performance has been subdued. The Q3 FY25-26 results showed flat revenue and profit trends, with operating profit to net sales ratio at a low 10.86% and PBDIT at Rs 377.90 crore, the lowest in recent quarters. Profit before tax (PBT) excluding other income also declined to Rs 223 crore. However, the company’s annual profit growth remains robust, with a 24% increase over the past year, signalling underlying operational strength.

Hexaware maintains a conservative capital structure with an average debt-to-equity ratio of zero, underscoring financial stability. This low leverage supports the company’s ability to weather market volatility and invest in growth initiatives without excessive financial risk.

Quality Assessment: Strong Returns but Elevated Promoter Pledging

Hexaware’s quality metrics remain solid, with a ROE of 23.3% and ROCE of 30.9%, indicating efficient capital utilisation and profitability. The company’s market capitalisation grade is modest at 2, reflecting its mid-cap status within the IT software sector. However, a notable concern is the 100% promoter share pledge, which has doubled over the last quarter. This elevated promoter pledging poses a risk of additional downward pressure on the stock price, especially in volatile or falling markets, as pledged shares may be liquidated to meet margin calls.

Investors should weigh this risk against the company’s operational strengths and valuation appeal.

Technical Indicators and Market Performance

Technically, Hexaware’s stock price has underperformed relative to benchmarks. The share closed at ₹521.50 on 23 Feb 2026, down 3.61% on the day, with a 52-week high of ₹900.15 and a low of ₹514.35. Over the past year, the stock has delivered a negative return of -34.54%, significantly lagging the Sensex’s 9.35% gain over the same period. The one-month and year-to-date returns are also deeply negative at -26.97% and -31.79% respectively, compared to modest positive returns for the broader market.

This underperformance is compounded by the company’s flat quarterly results and the risk posed by promoter pledging, which may weigh on investor sentiment in the near term.

Comparative Industry Positioning

Within the Computers - Software & Consulting sector, Hexaware’s valuation stands out as attractive relative to peers. For instance, Persistent Systems and Info Edge are classified as very expensive, trading at PE ratios above 44 and 51 respectively, while Coforge and Mphasis are also expensive with PE multiples in the mid-20s. Swiggy, by contrast, is considered risky due to loss-making status. Hexaware’s valuation metrics suggest it may offer better risk-adjusted returns if the company can stabilise its financial performance and improve market sentiment.

Outlook and Investor Considerations

While the upgrade to Hold reflects improved valuation and stable financial metrics, Hexaware’s recent flat quarterly results and significant promoter pledging warrant caution. The stock’s underperformance relative to the Sensex and sector peers over multiple time horizons highlights the challenges the company faces in regaining investor confidence.

Investors should monitor upcoming quarterly results for signs of operational improvement and watch for any changes in promoter pledging levels. The company’s strong ROE and ROCE, combined with an attractive valuation, suggest potential upside if earnings growth resumes and market sentiment improves.

Given the mixed signals, the Hold rating is appropriate, signalling neither a strong buy nor a sell, but rather a wait-and-watch stance until clearer trends emerge.

Summary of Key Metrics

Hexaware Technologies Ltd’s key financial and valuation metrics as of February 2026 are:

• PE Ratio: 21.70
• Price to Book Value: 5.05
• EV to EBIT: 19.72
• EV to EBITDA: 15.99
• Dividend Yield: 2.20%
• ROCE: 30.92%
• ROE: 23.25%
• Debt to Equity: 0 (average)
• Promoter Shares Pledged: 100%
• Market Cap Grade: 2
• Mojo Score: 51.0 (Hold, upgraded from Sell)

These figures underpin the rationale for the recent rating upgrade, balancing valuation attractiveness against operational and market risks.

Conclusion

Hexaware Technologies Ltd’s upgrade to Hold from Sell by MarketsMOJO on 20 Feb 2026 reflects a comprehensive reassessment of its valuation, financial trends, quality, and technical outlook. The attractive valuation metrics and solid return ratios provide a foundation for cautious optimism, while flat quarterly results and high promoter pledging temper enthusiasm. Investors are advised to maintain a balanced view, recognising the stock’s potential upside alongside inherent risks in the current market environment.

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