Mphasis Finds Ongoing Geopolitical Tensions Affecting Dealmaking Pace

Mphasis Ltd. is witnessing a general improvement in its business, but the conversion of deals into commitments is slower than anticipated due to external factors, according to the company’s Chief Executive Officer Nitin Rakesh.

Speaking to NDTV Profit after announcing the second quarter financial results on Thursday, he highlighted that there has been an uptick in the volumes of small deals and those with immediate conversions.

“Conversions from sold deals to revenues have definitely picked up. That’s why we have seen an uptick in revenue, especially with BFS (banking and financial services space) coming through, which is mostly executing the deals that were sold in the previous quarters. So in general, there is an improvement, but conversion into actual commitment of deals is a little bit slower than we would like it to be,” he said.

In the second quarter of the current financial year, Mphasis’ revenue rose 3.3% to Rs 3,536 crore, against Rs 3,422 crore in the same quarter last fiscal. It reported a net profit of Rs 423 crore in Q2, up from Rs 391.9 crore in the year-ago period.

Analyst' consensus estimates compiled by Bloomberg had projected a net profit of Rs 416 crore.

Mphasis reported a total contract value of $207 million for the quarter, with three large deals inked during the period.

The top executive added that the company’s dealmaking pace is presently uncertain because of the ongoing geopolitical tensions.

“Until we get clarity on a few more variables, we will continue to see caution in committing to large programmes,” he said.

However, he pointed out that Mphasis’ dealmaking pace remained strong over the past few quarters, including Q2.

“Conversion from pipelines to TCV (total contract value) is still a bit stressed because clients are still cautious in committing to large programmes. But they are definitely looking at executing programmes that give them immediate ROI (return on investment),” he noted.

The company's Ebitda margin has improved from 15% to 15.4% and was within the target band of 14.6% to 16%.

Mphasis’ Chief Financial Officer Aravind Viswanathan explained how the company managed to sustain its margins.

“We have improved our margins by 40 bps to 15.4%. About 20 bps is due to forex and the rest 20 bps is due to various operational efficiencies,” he said.

On Thursday, shares of Mphasis rallied 6.8% to touch an intraday high of Rs 3,109 apiece against the previous close of Rs 2,911.35 on the NSE.

The stock closed the session 6.17% higher at Rs 3,090.95 a piece against benchmark Nifty 50’s decline of 0.89%.