MPHASIS - Mphasis Limited Share Price

Management provided a positive outlook for Mphasis Limited, emphasizing their commitment to client-centricity and technology-led transformation. They predict that for FY26, the company expects to achieve growth at approximately twice the industry rate, supported by robust deal wins and effective conversion from TCV to revenue. The target EBIT operating margin is projected to remain within a band of 14.75% to 15.75%.

Key forward-looking points from management include:

1. Record Deal Wins: Mphasis reported a record Total Contract Value (TCV) win of $760 million in Q1 FY26, with 68% of these wins being AI-led. This includes four large deals, three of which exceeded $100 million.

2. Pipeline Growth: The deal pipeline has grown by 16% quarter-over-quarter and 84% year-over-year, signaling strong future revenue potential.

3. Vertical Performance: The BFS, Insurance, and Technology, Media, and Telecommunications (TMT) verticals exhibited robust growth, with all three delivering over 20% year-over-year growth in constant currency.

4. Investment in AI: Mphasis continues to amplify its AI-led offerings, with a focus on technology innovations that address specific client needs and enhance operational efficiency.

5. Client Acquisition: The company is expanding its client base, having added one new client in the $100 million+ category and several others across multiple bands.

Overall, Mphasis is positioned to leverage its technological advancements and client trust to navigate current uncertainties and drive significant growth throughout FY26.

Q: With the current good order intake, do you think Mphasis can converge with the growth rates of similar-sized peers?

A: The direction is indeed positive, and we've recovered from previous headwinds. While uncertainties remain, we're pleased with our current trajectory. I can't predict the next three quarters definitively, but if our execution continues effectively, we might find ourselves in a better place. It's crucial for us to maintain rigor in our approach to drive confident outcomes.

Q: Are there any weak spots in BFS, Insurance, or TMT due to macro uncertainties?

A: No, currently, we do not see any weak spots in our portfolio. We've focused on overcoming challenges by creating opportunities through tailored solutions. As of now, nothing appears to be imminent that could lead to slippage in performance.

Q: Is there any sign of fatigue in deal bookings, especially in BFS, Insurance, and Tech?

A: We don't see fatigue in our deal-making. The pipeline remains active, and we've confirmed our growth due to qualified deal origination across sectors including Logistics and Healthcare. We're committed to diligently working through our pipeline, which saw a 16% increase sequentially.

Q: Can you explain the sharp increase in other assets during the quarter?

A: The increase is primarily due to fixed-price projects under IFRS 15, where deliverables not yet accepted are recorded as contract costs. Additionally, large deals required initial savings that count as contract acquisition costs, contributing to this rise. Much of it should convert to unbilled revenue in Q2.

Q: What drove the growth in BFS and Insurance, and what are the structural changes resulting in solid deal wins?

A: Our growth stemmed from effective deal closures stemming from previous momentum. We've been able to bundle technical expertise, which has enhanced our proposition to clients. Over the past few years, investing in specialized technology solutions and an account-based focus helped us drive significant change and deal wins.

Q: Given margin stability despite declines in Logistics, what contributed to this?

A: While we saw gross margin declines in Logistics due to investments, other verticals improved, which helped stabilize our overall margins. There were no one-off impacts; the growth allowed us to offset costs. Our focus has been on improving efficiency through better utilization across business units.

Q: Looking forward, what can we expect in terms of revenue conversion from the recent deal wins?

A: The ramp-up depends on the nature of each deal. We expect a balanced set of deals won during the quarter, with the potential for revenue to convert within 1-2 quarters. However, some deals require time for full transition, so our outlook remains cautious but optimistic.

Q: Is the growth goal of roughly double the industry realistic given current momentum?

A: Yes, but we're taking a measured approach due to macro uncertainties and ongoing transitions. It's essential to maintain careful execution and not stretch too far too quickly. We'll watch how the visibility improves over the next quarters before making any bold predictions.

Q: Can you clarify the nature of recent investments, including in Locate Software?

A: Our investment in Locate Software stems from a customer consolidation initiative rather than a traditional acquisition. This reflects a venture where we integrate new contracts while hiring employees previously associated with the service. This falls under interconnected operational adjustments that keep us aligned with ongoing market needs.