MPSLTD - MPS Limited Share Price

In the earnings call on May 16, 2025, management provided a favorable outlook for MPS Limited, highlighting a robust financial performance and strategic evolution. For FY '25, the company reported an impressive 32.7% increase in revenue, totaling INR 726.89 crores, and a 24.1% rise in EBITDA to INR 210.9 crores. Q4 alone exhibited a revenue of INR 182.2 crores, marking 21.69% year-on-year growth and an EBITDA margin improvement to 30.76%.

Management underscored three major forward-looking points:

1. The top 15 customers contribute to 58% of revenue, indicating reduced customer concentration.
2. Geographic diversification has improved, with North America accounting for 45% of revenue while APAC represents 30%.
3. Platforms now constitute approximately 28.56% of consolidated revenue, showcasing enhanced revenue quality.

The Content Solutions segment delivered a notable 30.5% growth in Q4, while eLearning margins rose to 20.93%. The Platform business, particularly through the acquisition of AJE, exhibited a staggering 67.4% revenue growth in FY '25.

Management also indicated confidence in future growth, anticipating a 20% revenue expansion in Q2 FY '26. Additionally, a final dividend of INR 50 per equity share was recommended, reflecting the Board's commitment to shareholder returns. The management's enabling resolution for potential fundraising suggests plans for targeted acquisitions, emphasizing disciplined capital allocation. They project an organic growth target of 10-12% moving forward, with a strategic focus on capturing significant market opportunities in the evolving digital landscape.

Major Q&A Highlights from MPS Limited Q4 FY'25 Earnings Call

Question 1: "My first question is regarding funding acquisitions. In the past, management had articulated that the acquisition should be funded by internal resources, debt, and equity in that order. How should shareholders read into the recent resolution for fundraising through QIP?"

Answer: I affirm that internal resources are our first priority for acquisitions, equity as a last resort. This QIP resolution enables us to act swiftly if an exceptional opportunity arises, potentially requiring INR 300-700 crores. While we have no immediate prospects, it positions us favorably amid market consolidation, allowing participation where we might need that extra funding to seize larger deals.

Question 2: "My second question is on margins. What could be the impact on margins in any of the verticals that you operate in the medium to long term because of AI? And have you experienced any changes in the conversations with your clients so far?"

Answer: AI has significantly enhanced margin expansion, particularly in our Research business through machine learning. Most client interactions now invariably focus on AI's benefits, which leads to increased volumes and shared financial benefits. Archana will elaborate on its impact in the eLearning sector, which shows promising gains from AI integration.

Question 3: "You mentioned so many changes in eLearning because of AI. Have you made any changes to the acquisition playbook, especially for eLearning?"

Answer: Yes, our acquisition strategy has evolved to target companies embracing AI. During due diligence, we leverage advanced AI analytics to assess opportunities carefully, ensuring that any acquisitions align with our growth vision and innovation potential. We're focusing on businesses that integrate AI, avoiding those that aren't adapting.

Question 4: "We are doing good from the acquisition standpoint, but our organic growth is still quite low. So, what are the reasons? And when we see Vision 2028, the 10% organic growth would be needed for that. So, how are we looking at it?"

Answer: Our defined GTM strategy targets research, education, and corporate markets. While Research and Education have seen strong growth, Corporate has lagged. However, we expect a turnaround, especially from Q2 FY'26, as operational efficiency improvements lead to higher organic growth, aligning with our Vision 2028 goal.

Question 5: "You mentioned a new Data and AI practice to be launched within MPS Labs. Can you provide details on its capabilities and expected contributions?"

Answer: MPS Labs will focus on product offerings in Data and AI, establishing it as a revenue-generating practice. We anticipate that the independent businesses will break even in their first year. With a workforce that includes subject matter experts and engineers, this initiative aims to enhance existing services while creating new revenue streams.

Question 6: "Could you provide clarification on cash flow concerns related to working capital and the rise in other expenses?"

Answer: While our DSO has shown improvement, working capital still reflects some anomalies due to one-off liabilities associated with the AJE acquisition. Adjustments in operating expenses primarily stem from involvement in acquisitions, but they run inline with revenue increases. We expect these conditions to stabilize going forward.

Question 7: "Can you share insights on revenue growth expectations for FY'26 and the factors influencing this?"

Answer: While we don't provide explicit forward-looking guidance for FY'26, we aim for a sustainable organic growth rate of 10%-12% year on year. We are optimistic about leveraging our recent acquisitions and operational efficiencies to enhance revenue in the coming periods.

These summaries encapsulate the questions and succinctly detail management's responses as presented in the earnings call.