The second quarter has seen software services
turning around smartly, says MphasiS Chairman Jerry Rao.
MphasiS' second quarter net profit beat most analysts'
expectations and the company has decided to stick to its annual
guidance. Chairman Jerry Rao said one of the main reasons for the
growth is the ramp-up of business from existing clients. He said
one of the highlights of the second quarter was the substantial
quarter-on-quarter, QoQ, growth in the company's software services
Despite the good results this quarter, Rao said
the company has taken a conscious decision not to give out a quarterly
guidance and stick to the annual one instead. "Unless there is a
major reason to change it, we will not do so. We will just reaffirm
our guidance. If we do better, then so be it," he said.
For FY03, MphasiS expects revenues to grow 25-30%
to Rs 387.5-403 crore (Rs 3.87-4.03 billion) and net profit to grow
60-70% to Rs 64-68 crore (Rs 640-680 million).
But Rao sees pricing pressure continuing. "We don't
see any great positive trend there. But it's not precipitously declining
either," he said.
MphasiS BFL's second quarter consolidated net profit
jumped 60.97% to Rs 16.13 crore (Rs 161.3 million), as against Rs
10.02 crore (Rs 100.2 million), in the same quarter last year. On
a QoQ basis, this is a 16.12% growth. Net sales went up 35.06% year-on-year,
YoY, to Rs 102.89 crore (Rs 1.03 billion). On a QoQ basis, it was
A CNBC India poll had estimated its consolidated
net profit to be Rs 14.19 crore (Rs 141.9 million). The poll had
estimated consolidated net sales at Rs 94.87 crore (Rs 948.7 million).
Revenues from its business process outsourcing,
BPO, venture MphasiS BPO also grew 50%. Rao said that MphasiS BPO
added three clients this quarter and is now targeting clients in
the non-financial areas too. "We have also been able to do some
good cross sales to one of our major software services customer,
who has now become a non-financial BPO customer," he said. Rao is
satisfied with the quality of MphasiS BPO 's growth.
According to Rao, MphasiS has managed to restore
its growth margins to more than 40%, because of better utilisation.
"Some of the work which had to start in the next quarter has started
this quarter," he added.
He also pointed out that the general and administrative
expenses have come down as a result of stringent controls. But he
attributes the fall in expenses from 15% of revenue to 11.5%, to
both cost control and a rising topline. "This was something we had
been planning in the last four quarters as part of our medium-term
strategy," he said.
He denied talks that MphasiS' key accounts are
not ramping up business and that MphasiS is not adding big customers.
"We have added a major bank and a major brokerage house recently.
One of our existing clients, a large courier company, has also started
ramping up," he said.
Rao is not very optimistic about the US market
and does not expect robust spending to come back before the second
half of 2003. He also ruled out chances of a 20-30% QoQ growth before
Q2 CY03. But he said that Indian companies, especially the big ones,
are benefitting as a lot of work is coming into India. He feels
MphasiS is lucky to be one of the few mid-tier companies that are
getting good business.