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Informist, Tuesday, Jan. 20, 2026

 

By Shakshi Jain

 

MUMBAI – Mid-cap information technology services company Mphasis Ltd. is expected to post a marginal increase in its consolidated top line for the December quarter, led by growth across verticals. The top line growth was likely capped by furloughs, typical for IT companies in the December quarter. The company is also expected to report a marginal growth in its bottom line as the gains from higher operational efficiencies and the depreciation of the rupee against the dollar are likely to be offset by deal ramp-up costs, brokerages said.

 

If the IT player's results are in line with the consensus estimates, both the top line and bottom line growth for the December quarter would be slower than in the trailing quarter.

 

The company's consolidated top line is expected to rise 2.7% sequentially to INR 40.05 billion, according to the average of estimates from 14 brokerages. In the September quarter, Mphasis' revenue from operations had risen 4.5% sequentially to INR 39.02 billion. The highest revenue estimate for the December quarter is INR 40.42 billion by ICICI Securities Ltd. and the lowest is INR 39.5 billion by Prabhudas Lilladher Pvt. Ltd.

 

Mphasis' consolidated bottom line for the reporting quarter is expected to rise 2.3% sequentially to INR 4.8 billion, as per the average of estimates. In the trailing quarter, the company's net profit had risen 6.2% sequentially to INR 4.69 billion. The net profit estimates for the December quarter range from a high of INR 5.2 billion by Nomura Financial Advisory & Securities (India) Pvt. Ltd. to a low of INR 4.53 billion by HDFC Securities Ltd.

 

On a year-on-year basis, both the top line and bottom line of the company are expected to rise over 12%. For the year-ago quarter, Mphasis had reported a consolidated net profit of INR 4.28 billion on revenues of INR 35.61 billion.

 

A healthy conversion of deals to revenue along with the ramp up of some deals bagged in the first half of 2025-26 (Apr-Mar) are expected to help the company's revenue growth for the December quarter, brokerages said. The top line growth for the quarter under review would be restricted by furloughs, particularly in the banking and financial services segment and the technology, media, and telecommunications segment. Overall, analysts expect furloughs to be along past lines for the reporting quarter.

 

Mphasis is expected to report a sequential growth in all its business segments for the December quarter, an analyst from a domestic brokerage house said.

 

In the September quarter, the company's largest segment -- banking and financial services -- had recorded a 1% sequential decline in constant currency revenue and Mphasis' smallest segment -- logistics and transportation -- had posted unchanged on quarter revenues. In the post-earnings conference call, the company management had said growth is expected in the logistics vertical from the December quarter and the banking and financial services segment is likely to jump to a growth trajectory in the second half of FY26.

 

In dollar terms, the company's revenue for the December is estimated at $445.5 million, according to the average of estimates from 12 brokerages. JM Financial Services Ltd. anticipates a 10 basis-point cross-currency impact for the reporting quarter. In the December quarter, the rupee depreciated 1.2% against the dollar.

 

In constant currency, Mphasis is likely to report 1.0-1.6% revenue growth for the reporting quarter, as per the estimates from six brokerages.

 

Most brokerages expect the company to report deal wins worth around $500 million for the December quarter. Mphasis had bagged deals worth $528 million in the September quarter and $760 million in the June quarter. 

 

BOTTOM LINE SURPRISE

Mphasis' large-cap peers Tata Consultancy Services Ltd., HCL Tech Technologies Ltd., and Infosys Ltd. have reported considerable one-time costs for the December quarter due to an increase in provisions for employee benefits, prompted by the new labour codes. This impact accounted for 2.8-3.2% of their consolidated revenue and 5.0-5.5% of their employee benefit expenses for the December quarter. For Mphasis' mid-cap peer Tata Elxsi Ltd., the one-time impact from the cost of implementing the new labour codes accounted for 10% of its top line for the December quarter and 17.4% of its employee benefit expenses.

 

If Mphasis chooses to factor in the incremental impact from the implementation of the new labour codes as a one-time item in the December quarter, it could drag the company's net profit down, possibly leading to a sequential decline. Further, this impact for Mphasis as a percentage of its revenue is likely to be higher compared with its large-cap peers as smaller firms typically incur higher manpower costs relative to their revenue, an analyst said.

 

Under the new labour codes, which came into effect in November, basic pay must account for at least 50% of an employee's total cost to the company. As a result, pay-outs tied to statutory contributions such as gratuity and leave-related benefits are set to increase for companies.

 

The company's earnings before interest and tax margin is expected to remain unchanged sequentially at 15.3% for the December quarter, according to the average of estimates from 11 brokerages. This would be within the 14.75-15.75?IT margin range guidance for FY26 by the company.

 

Mphasis will announce its December-quarter earnings Thursday. Investors will watch out for management commentary on demand across verticals, volume recovery in its mortgage business, pipeline to deal conversion and deal to revenue conversion, artificial intelligence-related developments, and IT budgets of clients for calendar 2026.

 

On Tuesday, shares of Mphasis ended 2.6% lower at INR 2,815.70 on the National Stock Exchange. The stock is up nearly 2% since the company reported its September quarter earnings. The stock is down 8.5% from its 52-week high of INR 3,078.4, recorded on Jan. 24 last year.

 

Among the 12 research recommendations on Mphasis available with Informist, nine have a "buy" recommendation on the stock, while two have a "hold" and one has a "sell" recommendation. The average target price of the "buy" recommendations is INR 3,313. This is almost 18% higher than the current market price.

 

Following are the Oct-Dec earnings estimates for Mphasis from 14 brokerages in descending order of the estimate of net profit in INR million:

 

Broking Firm	Net Sales (in INR mln)	Net Profit (in INR mln)	Revenue (mln $)	?IT margin
Nomura Equity Research	40,075	5,195	450	15.3
Elara Securities (India) Pvt Ltd	39,726	4,997	446
Motilal Oswal Financial Services Ltd	40,100	4,900	450	15.3
Kotak Securities Ltd	40,228	4,885	451	15.3
JM Financial Institutional Securities Pvt Ltd	40,264	4,823
Indsec Securities and Finance Ltd	40,100	4,800	400	15.5
Dolat Capital Market Pvt Ltd	40,138	4,771	449	15.1
Nirmal Bang Equities Pvt Ltd	40,001	4,733	452	15.4
Nuvama Wealth Management Ltd	39,746	4,726.60	447	15.1
HSBC Global Research	40,068	4,717	450	15
ICICI Securities Ltd	40,419	4,706	452	15.7
Prabhudas Lilladher Pvt Ltd	39,500	4,700	447	15.2
Emkay Global Financial Services Ltd	40,130	4,699
HDFC Securities Ltd	40,240	4,530	452	15.1
Average	40,052.50	4,798.76	446.	15.27

 

End

 

US$1 = INR 90.97

 

Edited by Ashish Shirke

 

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