Mphasis Targets Industry-Beating Growth, Optimistic On Margin
Employees working on laptop. (Photo: Bloomberg News)

Mphasis Targets Industry-Beating Growth, Optimistic On Margin

With Blackstone Group Inc.’s commitment to stay invested removing a big overhang, Mphasis Ltd. has guided for growth in low teens for the ongoing fiscal.

Among a few information technology firms that saw revenue rise in double digits in FY21, the company prioritised growth over margins in the previous fiscal, according to Nitin Rakesh, chief executive officer at Mphasis.

Revenue from top 10 clients grew, banking vertical delivered 23% year-on-year growth, revenue from newer verticals rose and expanded to new geographies in FY21, he said. The core direct business grew 17% last fiscal and now accounts for 86% of revenue.

On the back of this growth and a record pipeline of projects after last year’s deal wins, the company expects to grow in at least in low teens in FY22, Rakesh said. “We want to make sure that we continue to grow well above industry average, and we have an upward bias on our margins.”

Manish Dugar, chief financial officer, said while there is a heightened demand for talent, internal upskilling programmes and consistent pay hikes gives the company confidence that they won’t face talent issues.

Blackstone’s commitment to increase its holding removed the threat of promoter exit. What gives Mphasis and investors comfort is that the private equity giant plans to stay invested for seven to 10 years, unlike shorter-duration private equity funds.

Continuity and growth acceleration will be key outcomes of the transaction, Rakesh said. Hundreds of clients welcomed the transaction as the primary shareholder sees the same value in Mphasis that they do, he said.

While demand markets are recovering, the supply markets are not recovering enough and may pose a challenge, according to Rakesh. Another risk is the possibility of economic action in the U.S. to control inflationary spike, he said. But the banking and financial services will get a boost if rates are increased in the U.S., he said.

Brokerage View

Prabhudas Liladhar

  • Expects 21% year-on-year dollar growth in direct channel and 29.6% decline in DXC in FY22.
  • Values Mpahsis at 22 times at estimated FY23 earnings per share of Rs 88; increases target price to Rs 1,935, implying an upside of about 10% from current levels.
  • Mpahsis currently trades at 22.7/20.3 times its EPS of Rs 79/88 on FY22/23E, respectively.


  • Will prefer to wait for better entry points despite the higher deal wins.
  • Deal wins provide strong visibility on direct-channel growth despite deteriorating DXC channel.
  • EBIT margin stood at 16.1% (down 30 basis points over the previous quarter), with Mphasis guiding to 15.5-17% margins in FY22.
  • Maintains ‘Buy’; increased 12-month target price to Rs 1,900, a potential upside of 8%, based on a valuation of 20 times its two-year forward EPS.

Watch the full interview here:

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