Software major MphasiS Ltd expects a jump of over 60% in its net profit this fiscal on strong outsourcing growth.
BANGALORE: Software major MphasiS Ltd expects a jump of over 60% in its net profit this fiscal on strong outsourcing growth.
“We have more demand than we are able to service,” managing director Deepak Patel said in an interview. The company, majority owned by US computer services firm Electronic Data Systems Corp (EDS), expects revenue to rise by more than half.
Patel said it aims to lift operating margin by 0.5%, although a stronger rupee remained a concern.Mid-sized MphasiS posted a consolidated net profit of Rs 180 crore ($44 million) on revenue of Rs 1,760 crore in 2006-07.
Patel said Bangalore-based MphasiS had orders worth more than $1 billion to be executed over 10 years. Also, it was poised to win more large outsourcing deals in newer markets like Australia and New Zealand by leveraging on its parent’s strength, which could cut the dependence on the US market.
“MphasiS is benefiting a lot from the business coming from EDS. I think MphasiS has good revenue visibility going forward,” said a sector analyst at a Mumbai-based brokerage firm, who did not want to be identified.
EDS owns about 61% of MphasiS. The company merged its Indian arm with MphasiS after acquiring a majority stake in it for $380 million last year.
Patel said the strong rupee was a challenge as MphasiS gets about 60% of its revenue from the American continent. “There is only one worrying factor — the currency. That is the only thing that can stem the growth,” said patel.
“If the rupee appreciates quite a bit, then it is going to be a tough, tough thing for the industry to deal with... relative to the global market place, the competitive advantage that we have on cost will no longer be there,” he added.
Patel said MphasiS was bagging more large-sized outsourcing deals in Europe and foraying into newer markets like Australia and New Zealand as it sought to bring down America’s share of revenue to about 50% in the next eight to nine months.
“I don’t think we are saying that let’s not grow in the US as much, but what we are doing is growing the other regions at faster rates. It’s naturally happening.”
According to Patel, MphasiS, which gets about 45% of its revenues from the financial services industry, had so far not been affected by the turmoil in the US subprime mortgage sector and was getting higher billing rates on new contracts.
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