Mphasis stock falls after disappointing Q1 show
The stock of MphasiS lost 4% of its value on Friday. This follows the company's announcement of a sequential drop in revenue in the January quarter.
By Ranjit Shinde, | Updated:
MUMBAI: The stock of MphasiS lost 4% of its value during the morning session on Friday. This follows the company's announcement on late Thursday of a sequential drop in revenue in the January quarter. It reported client ramp-downs and sluggish business from its parent HP during the quarter.
The Bengaluru based IT services provider, which is also the sixth largest IT exporter in India, has been facing a higher volatility on bourses unlike some of its larger peers who have reported significant gains over the past few months. After gaining as much as 7.7% within a day on March 5, the stock of MphasiS has lost 10% since then.
The underperformance of Mphasis relative to its peers is on account of its difficulty in steering the business ahead amidst growing competition and changing nature of the IT outsourcing solutions from a pure play applications development and maintenance gamut to a broader segment of business transformation solutions.
During the January 2014 quarter, revenue of MphasiS fell sequentially by 3.2% and by 1.9% net of foreign exchange adjustments to Rs 1,588,8 crore. Operating profit dropped by 3.9% to Rs 234 crore and net profit decreased by 5% to Rs 180.6 crore. Majority of its bigger peers reported improved sales and profits during the December 2013 quarter on a sequential basis.
On the positive side, the strategy to reduce dependence on HP appears to be on track. Now two-thirds of the revenue is generated through non-HP or direct sales channel compared to a half a year ago. In addition, of the 11 new clients during the January quarter, 10 were from the direct channel. The company has been aggressively expanding its sales team. It has gradually taken the count of sales force to 379 at the end of the January quarter from 328 a year ago.
However, the impact of the strategy to improve direct channel revenue is yet to be felt on its financials. A greater challenge will be to wade its way through tough competitive environment by realigning its service deliverables to match client expectations. Until such time, the stock will continue to face turbulence.
The Bengaluru based IT services provider, which is also the sixth largest IT exporter in India, has been facing a higher volatility on bourses unlike some of its larger peers who have reported significant gains over the past few months. After gaining as much as 7.7% within a day on March 5, the stock of MphasiS has lost 10% since then.
The underperformance of Mphasis relative to its peers is on account of its difficulty in steering the business ahead amidst growing competition and changing nature of the IT outsourcing solutions from a pure play applications development and maintenance gamut to a broader segment of business transformation solutions.
During the January 2014 quarter, revenue of MphasiS fell sequentially by 3.2% and by 1.9% net of foreign exchange adjustments to Rs 1,588,8 crore. Operating profit dropped by 3.9% to Rs 234 crore and net profit decreased by 5% to Rs 180.6 crore. Majority of its bigger peers reported improved sales and profits during the December 2013 quarter on a sequential basis.
On the positive side, the strategy to reduce dependence on HP appears to be on track. Now two-thirds of the revenue is generated through non-HP or direct sales channel compared to a half a year ago. In addition, of the 11 new clients during the January quarter, 10 were from the direct channel. The company has been aggressively expanding its sales team. It has gradually taken the count of sales force to 379 at the end of the January quarter from 328 a year ago.
However, the impact of the strategy to improve direct channel revenue is yet to be felt on its financials. A greater challenge will be to wade its way through tough competitive environment by realigning its service deliverables to match client expectations. Until such time, the stock will continue to face turbulence.
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