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Informist, Friday, Jul 26, 2024

By Noel John

MUMBAI – Mphasis Ltd has reported a sequential growth in its June quarter earnings, driven by new deal wins and growth in its banking and financial services segment. However, the company's consolidated net profit and revenue came in slightly below analysts' estimates. 

The Bengaluru-based information technology and consulting services company reported a consolidated net profit of 4.05 bln rupees, up 2.9% on a sequential basis. Its revenue was up 0.3% on quarter to 34.22 bln rupees. On a year-on-year basis, net profit rose 2.1% and revenue rose 5.2%. An average of estimates from eight brokerages had pegged net profit at 4.38 bln rupees on a revenue of 34.65 bln rupees.

The growth in the company's key metrics was aided by a 1.1% sequential growth in its banking and financial services segment. The company's insurance segment rose 2.4% on quarter, while the technology, media, and telecom segments reported 0.6% revenue growth for the June quarter. On a year-on-year basis, the insurance, and technology, media, and telecom segments rose 10.7% and 10%, respectively. 

The company's pipeline growth in the top 10 accounts grew by 31% on a sequential basis, pointing to a recovery in this segment in the shortest term, the company management said in a post-earnings conference call. It reported broad-based pipeline growth across all chosen verticals, with the US pipeline rising by 27% on year. One-third of the company's pipeline is artificial intelligence-led projects, the company said in the investor presentation. 

Its banking and financial services pipeline grew 7% on quarter and 15% on year, while its non-banking, financial services pipeline grew 25% on quarter. The company expects a gradual recovery in discretionary spending going forward and sees early signs of a pickup in the mortgage business, according to its investor presentation. 

In Apr-Jun, the company won new contracts worth $319 mln, with three large deals in the quarter, including one worth over $100 mln. This is the first time in four quarters where the total contract value has risen over $300 mln. With this, the total contract value for 12 months ending Jun 30 stood at $992 mln. More than 90% of deal wins are proactive deals, the company said in its investor presentation. It said the conversion from total contract value to revenue continues to improve. 

Operating margins for the quarter rose 10 basis points to 15.8%, the company said in an investor presentation. The operating margin, excluding its merger and acquisition impact of New York-based information technology company Silverline, stood at 15%. The company said it will continue to target sustainable operating margin within the stated band of 14.6-16%. "Maintain margins in narrow band while investing for growth," it said in the investor presentation. 

Mphasis said it expects to be above industry growth in the current financial year, gaining from a technology-led and account-focused strategy. Further, the company has launched two artificial intelligence-driven software engineering and enterprise modernisation platforms, Mphasis NeoCrux and Mphasis NeoZeta.  

At 1201 IST, shares of Mphasis traded 7.7% higher at 3,063 rupees on the National Stock Exchange. End

US$1 = 83.72 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Vidhi Verma

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