Mphasising Growth
India Infoline.com, April 10, 2002.

by Parul Inamdar

The group recorded consolidated revenues of Rs. 3133.5mn for FY02 as compared to Rs. 2733.4mn for FY00, an increase of 14.6%. As against this the consolidated profits have grown by 201.2% from Rs. 136.1mn to Rs. 409.9mn during the same period. Th Gross Profits on the other hand have grown by a mere 23.8% from Rs. 958mn to Rs. 1186.3mn.

For FY02 contribution by MphasiS towards total revenues, Gross profit, and Net profit have declined from 98% to 92.5%, 100.7% to 95.1%, and 131.9% to 111.2% respectively. As compared to this contribution by MphasiS BPO has increased by 5.6%, 5.6%, and 20.7% respectively during the same period.

For FY02 the GPM and NPM of MphasiS have increased by 2.9% and 9% respectively. At the same time the margins for MphasiS BPO have also improved from 12.2% to 25% and from 84.1% to 19.6% respectively.

On a sequential basis, revenues for the Q402 have increased by 4.5%, but on a Y-o-Y basis they have fallen by 0.6%. Similarly Net profits for Q402 have increased by 2.7%sequentially and by 79.2% on a Y-o-Y basis.

However on a segregated basis, the movement of Revenues and Net profit has been as follows:

Revenue Mix Q100 Q200 Q300 Q401 Q101 Q201 Q301 Q402
MphasiS 100% 99% 98% 97% 95% 93% 93% 90%
MphasiS BPO 0% 1% 2% 3% 5% 7% 7% 10%
Total 100% 100% 100% 100% 100% 100% 100% 100%

Source: Company

The change in revenue mix clearly depicts that the contribution from MphasiS BPO is rising steadily.

Latest Developments

During FY02, the company has initiated 2 more software development centres and a call centre.

MphasiS has added eleven new clients of which two have been under the MphasiS BPO group. This raises the client base for MphasiS BPO to 12, with manpower deployment of approximately 700.

Utilization rates for MphasiS for Q402 was at 74% and for MphasiS BPO was at 76%. However, this indicates that the utilization rate has remained almost flat for MphasiS.

The new client additions have been in the verticals of finance, insurance, and consultancy. To give a profile of a few of them, these are a large bank in the Middle East, a large international insurance organisation, a leading management consulting firm in the South - East Asia, a large project for web-enablement for a leading software company, as well as establishing new relationships with an existing multinational banking client in USA, Israel and Korea.

MphasiS has had a heavy client concentration. This makes the company sensitive to the revenue contribution from these few clients. However, this seems to be correcting as this reliance has been reducing.

Client Concentration Mar-01 Dec-01 Mar-02
Top 20 89% 85% 82%
Top 10 70% 65% 63%
Top 5 52% 44% 43%
Top 20% 12% 11%

Source: Company

At a price of Rs.607 the stock is currently trading at a PE of 23.5x and has an EPS of Rs. 25.8. The company has given an earnings guidance of 25% growth in the sales and a 70% growth in the profits on a consolidated basis. With the onslaught of the call centre opportunities coming up, and the earnings guidance given the stock seems to be attractively priced.

 
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