slowdown gripping world economies is, in fact, proving to be a blessing
in disguise for India. Lured by the advantages in terms of low-cost,
high quality of services that Indian companies offer, international
companies are increasingly looking towards Indian shores. BPO (Business
Process Outsourcing) is one among them. In this article, we talk
about MphasiS-BFL. This company has carved a niche in the BPO sphere
and is treading on its way towards a brighter future in this space.
in the year 2000 after the merger of BFL Software India with the
US-based MphasiS Corp., the company has integrated its expertise
in consultancy, software development and end-to-end business solutions.
BPO, which MphasiS offers through its fully owned subsidiary MphasiS BPO,
is targeted for clients located in the US, the UK and Canada. MphasiS BPO
offers services that cover both the ends of outsourcing services
- from basic technical help-desk services to high-end services like
Despite present services in the BPO space, the
future for MphasiS BPO seems bright. Consider the table below.
| US$ bn
|| CAGR (01-08)
for Indian companies
share of target market
share of total BPO market
from MphasiS BPO have more than tripled in the last three years (from
2% of sales in FY01, to 22% in FY03). Despite the downturn, MphasiS
was able to improve its operating margins from 11% in FY02 to 18%
in FY03. Going forward, while the company is likely to find it difficult
to negotiate hikes in billing rates, higher growth in volumes could
compensate for a decline or stagnation in billing rates.
the BPO venture has been growing at a rapid pace, how does it compare
with its competitors? In all parameters, MphasiS BPO seem to better
Wipro Spectramind, as can be seen from the table below).
MphasiS faces the risk of client concentration, as the largest client
contributed to 13% of its total revenues. More concerning is that
the largest client contributes to around 30% of MphasiS's BPO revenues.
However, as the company reaches out to more customers in the future,
this risk is likely to reduce.
the strong growth prospects of the ITES industry and the fact that
the services business is also likely to improve going forward, valuations
for MphasiS are at the lower end of the software sector (as the
graph above shows). At Rs 627, MphasiS is trading at a P/E multiple
of 16x its FY03 earnings.