MphasiS BFL unscathed in slowdown , April 26 2001

Some of the biggest names in the IT services business have issued profits warnings and have not performed. But MphasiS BFL has bucked the trend, for now at least. The stock has a P/E ratio of 14.2 and hit a 52 week high / low of 675 and 161. The stock is currently trading at 17O levels.

MphasiS BFL Software provides e-business solutions in vertical sectors like retail banking, brokerage and telecom. Areas of technology specialization include client server and Database Solutions, Internet and E-commerce solutions, and ERP implementation. Although BFL has been in operation since 1992, the company was re-christened as MphasiS BFL in 2000, when BFL acquired MphasiS in an all-stock deal. Prior to the acquisition, BFL Software had high exposure to Y2K solutions, with 25% of its revenues coming from Y2K related work. But the MphasiS acquisition has given BFL a marketing arm and the opportunity to move up the value chain.

Abhijeet Mukherjee research analyst for commented about the acquisition made by BFL. He said, "finance and banking areas have opened up and new customer additions have been made. This helps the company in procuring higher billing rates, moving up the value chain and getting better projects."

The positive effects of the merger can seen in the figures for the latest fiscal. Total income for 2001 increased by 45% to Rs 174.6 crore (Rs 17.64 billion). Net profit also grew to Rs 20.5 crore (Rs 205 milllion) for the same fiscal. The latest quarter has also been good for MphasiS BFL. The company has registered sales of Rs 51.1 crore (Rs 511 million) in the January - March quarter of 2001.

Net profit for the quarter also showed a sharp growth, with the company clocking profits of Rs 8.8 crore (Rs 88 million). The company has been highly focussed on the telecom and banking sectors and that has reaped good results. But with the global telecom sector going through turmoil, analysts believe that MphasiS BFL needs to de-risk its business model.

Speaking about this, Mukherjee said, "the company's major focus area is finance, banking, telecom and healthcare. As far as finance, banking and telcom are concerned, these industries have suffered a slowdown world wide and the a major chunk of the company's revenues come from these verticals. Thus now, how the company plans to de-risk its business model has to be seen".

Though the company has a strong management team, and has done well in the face of the US slowdown, the company could still be affected in the coming fiscal. It also remains to be seen whether the company can adapt quickly to new business areas and technologies.