Company Overview

Incorporated in 1992, Mphasis (BSE: 526299; NSE: MPHASIS) serves marquee customers across the globe including six top global banks, eleven out of fifteen top mortgage lenders, and three top global insurance companies and has about 22,000 employees across sixteen countries.¹

Blackstone Private Equity (NYSE:BX), the world's largest private equity firm acquired Hewlett Packard Enterprise's (NYSE: HPE) stake (60.5%) in Mphasis. This deal represents the largest technology investment as well as largest acquisition by Blackstone in India.

Mphasis' core reference architectures & tools, combined with strong domain expertise in Banking, Financial Services & Insurance verticals and deep relationship with marquee global customers has enabled delivery of growth above industry average in Direct International segment. Mphasis' experienced management team, board of directors and long-term commitment from company’s largest customer, HPE aid positive economic impact and long-term value for investors.

Mphasis X2C2TM formula for success, (shift anything to cloud and power everything with cognitive), drives five dimensions of business value with an integrated consumer-centric Front2BackTM (F2B) Transformation, enabling Business Operations and Technology Transformation. Mphasis applies advancements in cognitive and cloud to traditional application and infrastructure services to bring much needed efficiency and cost effectiveness.

Mphasis recently won the Alconics Award under the category of 'Best Application of Artificial Intelligence (AI) for Financial Services'; based on Mphasis DeepInsightsTM, a Cognitive Intelligence platform, which enables enterprises to have faster and more effective access to insights from data. DeepInsightsTM has been developed by NEXTlabs, the research and innovation hub of Mphasis where Mphasis is working on cutting edge innovations and industry relevant solutions.

As on 31 March 2020, the company has subsidiaries in Australia, Belgium, Canada, France, Germany, India, Ireland, Mauritius, Netherlands, People’s Republic of China, Philippines, Poland, Singapore, the United Kingdom and the United States of America.

Services

• Application Services
• Business Process Services
• Cloud
• Cognitive
• DevOps
• Digital
• Governance, Risk & Compliances
• Infrastructure Services
• Product Engineering
• Enterprise Automation

Industry Overview

The global IT industry is on pace to reach $5.2 trillion in 2020, according to the research consultancy IDC. The United States is the largest tech market in the world, representing 32% of the total, or approximately $1.7 trillion for 2020. In the U.S., as well as in many other countries, the tech sector accounts for a significant portion of economic activity. Despite the size of the U.S. market, the majority of technology spending (68%) occurs outside the U.S. Among global regions, western Europe remains a significant contributor, accounting for approximately 20% of technology spent worldwide. China has also established itself as a major player in the global tech market.²

According to the IBEF (India Brand Equity Foundation) figures, the Indian IT industry is set to touch $225 billion by 2020. Industry experts and NASSCOM predict the Indian IT workforce will touch 30 million by 2020, becoming the highest sector employer. India is amongst the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entirely new scale of opportunities for top IT firms in India. Export revenue of the industry is expected to grow 7-9 percent year-on-year to $ 135-137 billion in FY19. Indian IT services companies are synchronizing with demand and have brought the revolution within themselves to take advantage of the changing scenario. India has become one of the major hubs of digital capabilities with around 75% of global digital talent present in the country. Digital transformation business expected to be over one-third of total business revenue (39%) in 2020, up 10% from 29% in 2017 as per Gartner. It develops a productive relationship between business and IT roles, which is the key to sustaining digital business success. Next-Gen Technologies such as Industrial Automation, Robotics & Drones, Cloud, Internet of things (IoT), Augmented & Virtual reality (AR/VR technologies), Big Data and Analytics, AI and Blockchain are the key technologies driving the digital transformation business.

Financial Overview

Revenues

Mphasis has continued the growth momentum in FY 2020 and have registered consecutive year of double-digit growth. Reported Net revenue in FY20 was Rs 88,435 million representing a growth of 14.4% FY19. During the year rupee depreciated 1.8% against USD. Adjusting for the rupee depreciation, net revenue grew 13.3% in FY20.

Overall gross revenue grew 12.8% in FY20 to Rs 88,238 million. On a constant currency basis, overall gross revenue grew 11.7% in FY20. Direct International revenue grew 15.4% on a reported basis and 13.8% in constant currency basis in FY20 to Rs 61,553 million. Direct Core, which constitutes 83% of FY20 Direct International revenue, grew 16.9% in FY20 on a reported basis and 15.4% in constant currency basis. The growth has been broad based across its three key portfolios of existing strategic accounts, Blackstone portfolio companies and new accounts. Revenue from New Gen services, which is one of its key focus areas, grew 35% in FY20. New Gen Services contributed 53.1% of Direct Core revenues for the year ended March 2020.

Revenue from DXC/HP business continued to witness significant growth momentum at a reported growth rate of 7.7% in FY20. Revenue grew 7.5% on a constant currency basis in FY20. Revenue from DXC/HP was Rs 23,829 million in FY20 and constituted 27% of the gross revenue

Expenses

Selling expenses for the year ended March 2020 was Rs 4,912 million representing 5.6% of revenues against 6.2% of revenues in the previous year.

General and administrative expenses for the year ended March 2020 was Rs 4,238 million representing 4.8% of revenues against 4.7% of revenues in the previous year.

Profit

Net profit for FY20 grew 10.4% over FY19 to Rs 11,848 million. Net margin for FY20 was 13.4% as against 13.9% for FY19.

Earnings per share grew from Rs 56.1 for the year ended March 2019 to Rs 63.6 for the year ended March 2020, which represents a growth of 13.4%.

Outlook

Technology companies globally have spent the past few years advising businesses to pivot their strategy to be ‘Digital first’. As the ever-changing demand of consumers, powered by their new expectations through use of smart phones, increase pressure on businesses; the only way enterprises can count on surviving and thriving is by being agile, nimble and disruptive. However, what the world did not anticipate is a pandemic, that is literally, a bolt from the blue; causing economies to grind to a halt. This has impacted global supply chains, financial markets, international and domestic travel, crude oil prices, retail and consumer businesses among others. The latest Global Financial Stability Report shows that the financial system has already felt a significant impact, and a further spiralling of the crisis could affect global financial constancy.

As the company step into the ‘New Abnormal’, universally the company will undoubtedly witness short to medium term impact, including spike in volatility, deterioration in market liquidity, stress in funding markets, surge in public borrowings and plummeting of the asset prices all leading to a shrinking economy. However, monetary, fiscal and financial policies by various economies will work to cushion the impact of the pandemic shock and to ensure a steady, sustainable recovery once the virus is under control. The pandemic, although extensive in its impact on industry, is not indicative of a structural change; it does not signal a break in the system. It is a pause, and growth will return and markets will self-correct.

What is most critical for organizations to action in the new abnormal is to think ahead and strategize on two core aspects. In the short term - how to manage a gradually re-opening of business, focusing on key products and services, restructuring their priorities as well as employee and customer initiatives. Once this starts to take root, enterprise focus is likely to very quickly pivot to focusing on how to trigger the next wave of business growth. Going by the imperative that the pandemic has occasioned to virtualize nearly every industry, undoubtedly harnessing technology in all its forms is going to be a deciding factor for how companies survive and stay ahead. While the tsunami of exponential technological advancements continues to stack over one another, both in scale and impact; the technology industry will continue to write the operating system for digital global economy, one thing becomes more certain: digital adoption will accelerate exponentially. Even the most tightly regulated industries, including banking, insurance and healthcare will accelerate transforming business operations with urgency seamlessly and at scale. While it is tempting to backburner digital strategy, organizations need to rapidly rethink business models with digital first approach by embracing all forms of modernization and digital transformation to shorten time scales thus enabling end-to-end digital transaction and integration to emerge stronger than before and survive these testing times

Recent developments

August 12, 2020, Mphasis Awarded U.S. Patent for its Artificial Intelligence (AI) System for Data extraction, aggregation & analysis³

Mphasis announced on Wednesday it has recently been granted a US patent for its artificial intelligence system for tracking, managing and analysing data from unstructured data sources. The patent relates to optimised data aggregation and analytics across physical and digital data sources, the Bengaluru-headquartered company said in a statement.

"The patented system enables enterprises to draw actionable insights at real-time from enterprise data sources such as e-mails, call centre transcripts, insurance policy documents, broker submissions, bank statements and customer complaints among others," the statement said.

August 20 2020; Mphasis Javelina and Comm100 partner to disrupt the healthcare industry⁴

Mphasis,  announces a strategic partnership with Comm100, enabling customers to accelerate their digital omnichannel communications strategy via the integrated Mphasis Javelina® and Comm100 offering.

The offering was facilitated through Mphasis Sparkle Innovative Program, which curates new and disruptive technologies to build futuristic solutions for enterprises faster and at lower cost and risk. Comm100 was identified for its award-winning platform, and support model.

Javelina® , Mphasis’ technology-forward benefits management platform, is known in the healthcare industry for its business configuration capabilities and real-time integrations with key industry ecosystem partners. Now Javelina® , powered by Comm100, possesses a unified digital omnichannel communications platform, transforming customer engagement efforts, improving customer satisfaction through live chat, chatbots, email, SMS, and social media.

“It is its passionate goal to enable its customers in creating the most genuine, personalized and impactful member experience possible in the healthcare industry today,” said Sally Else, President, Mphasis Javelina® . “To do this, Mphasis has selected Comm100 to power intelligent digital exchanges which will put members in control of their data and time as they interact with healthcare organizations. Moving into the new normal requires sensitivities to security and personalization which will create the confidence members deserve in today’s world. Comm100 and Mphasis Javelina® create this foundation.

Mphasis has provided seamless capabilities to immediately utilize Comm100 with Javelina® , via a plug-and-play integration Comm100 can also connect with any core admin system. The Comm100 platform helps healthcare organizations take advantage of both synchronous and asynchronous digital communication, with human agents and NLP-powered chatbots working together seamlessly.

MphasiS Consolidated December 2020 Net Sales at Rs 2,474.39 crore, up 8.68% Y-o-Y ⁵

January 22, 2021; Reported Consolidated quarterly numbers for MphasiS are:

• Net Sales at Rs 2,474.39 crore in December 2020 up 8.68% from Rs. 2,276.72 crore in December 2019.
• Quarterly Net Profit at Rs. 325.53 crore in December 2020 up 10.87% from Rs. 293.60 crore in December 2019.
• EBITDA stands at Rs. 502.08 crore in December 2020 up 8.42% from Rs. 463.09 crore in December 2019.
• MphasiS EPS has increased to Rs. 17.44 in December 2020 from Rs. 15.75 in December 2019.

References

1. ^ https://www.mphasis.com/home/corporate/investors.html
2. ^ https://www.mphasis.com/content/dam/mphasis-com/global/en/investors/annual-reports/Mphasis-Annual-Report-2020.pdf
3. ^ https://www.mphasis.com/content/dam/mphasis-com/global/en/news/news_articles/mphasis-awarded-us-patent-for-its-artificial-intelligence-coverage-report.pdf
4. ^ https://www.mphasis.com/content/dam/mphasis-com/global/en/news/press_releases/200814-pr-mphasis-javelina-comm-100.pdf
5. ^ https://www.moneycontrol.com/news/business/earnings/mphasis-consolidated-december-2020-net-sales-at-rs-2474-39-crore-up-8-68-y-o-y-6382961.html