MphasiS Q1 net declines 18.5%, revenue up 10.8%

MphasiS has yet again disappointed the Street with a drop of almost 18.5 per cent in its net profit for the first quarter ended January. The Hewlett-Packard (HP) unit’s net for the quarter was at Rs 184.8 crore from Rs 226.7 crore on a year-on-year basis. The revenue for the quarter at Rs 1,367.2 crore was up 10.8 per cent from Rs 1,233.5 crore in the same quarter last year.

Sequentially, the Bangalore-based company’s net profit was up just one per cent and revenue was up four per cent. MphasiS’ number was impacted as revenue from HP channel continued to fall. During the quarter, HP channel business was down 7.3 per cent. HP also had a seasonal shutdown that impacted the business cycle by at least one per cent.

MphasiS CEO Ganesh Aiyyar agreed the HP business had been under pressure, as the firm was not able to see growth in its own business. “If you look at our Ebitda (earnings before interest, taxes, depreciation and amortisation), we had said it would be in the range of 18-21 per cent,” he noted. “This quarter, we have delivered a Ebitda of 18.5 per cent, an improvement of 60 basis points. We will continue to focus on profitability.”

The 2000-incorporated company has considerably increased its utilisation in the range of 79 to 80 per cent. It also kept its cost under control by renegotiating medical insurance costs in the US. Also, in India, it closed 1,450 seats to cut cost. In fact, the company said it would be “very conscious” of keeping its headcount at a lower level and push the utilisation up.

The HP direct channel business continued to be a concern, while some of the positives the company had was a strong growth in it direct business and emerging regions. Sequentially, the direct business grew 14.4 per cent (8.4 per cent on constant currency). From a regional perspective, the company saw its emerging markets grow by 28 per cent. The emerging segment saw winning 17 deals, with a majority in the infrastructure segment, where the deals range from $20-25 million.

“Emerging markets have been a bright spot for us,” he added. “Along with this, our effort to increase our revenue from non-enterprise services also shows a healthy pipeline.”

Aiyyar also noted the firm’s platform-based offering is seeing traction. During the quarter, the company signed its first client on its platform-based offering. MphasiS signed a deal with Australian low-cost airline Jetstar Airways, and will provide account system platform.