Mphasis sales growth beats street expectations for second quarter

BANGALORE: Software services exporter Mphasis reported revenues that came in above street expectations for its second quarter, even as profits fell due to acquisition costs, higher tax and dividend pay outs.

Mphasis, in which computer-maker Hewlett-Packard owns around 60%, said its revenues during three months to April 30 grew 11.8% from the previous quarter to Rs 1,405 crore. Analysts expected the Bangalore-based company to report a 9% sequential growth in sales.

The quarter also saw Mphasis's revenues from parent firm HP fall below 50% for the first time. At the end of the quarter, the company got 46% of its revenues from the troubled PC maker compared to 52% in the last quarter. Rest came from the direct-channel- Mphasis's own clients- which has reached $572 million in annual revenues.

Mphasis chief executive officer Ganesh Ayyar said the mid-sized IT firm has a robust deal pipeline of technology contracts from clients in the direct channel business in the United States. "We are enthused by growth prospects going forward," he said in a statement on Wendesday.

The company's net profits for the period fell 4.3% to Rs 177 crore on greater outgo on account of the acquisition of US-based Digital Risk which it bought in December last year. Higher tax expense in India, and expiry of some tax-holidays it enjoyed in the so-called special economic zones were also a drag on profits.

Mphasis has been struggling to grow its revenues over the past few quarters as parent firm HP reported losses and announced job cuts of about 27,000 employees over the next two years as part of a restructuring exercise to realign costs. There have been media reports about the possibility of HP selling its stake in Mphasis.

Mphasis, which added 21 new clients during the quarter, said it won a $60 million services contract from a banking and financial services client.

Clients in Americas contributed 72% of Mphasis's second quarter revenues, while clients in Europe, Middle East and Africa contributed 13%. The company received 8% of its total revenues from India. Revenues from banking and capital market customers grew 61% during the three month period.