MphasiS plans to use cash pile for buys

MphasiS plans to use cash pile for buys

Mumbai: Indian mid-sized outsourcer MphasiS is planning to use its roughly $325 million cash pile for further buys, a top official said on Thursday, as it seeks to move up the value chain in domain expertise.

The firm, in which Hewlett Packard Co holds a 60.52% stake, is eager for buys across banking, capital markets and emerging technologies, its chief executive officer (CEO) Ganesh Ayyar told the news agency over the telephone.

“Clearly, we want to move up the value chain in terms of our domain expertise, and hence the companies we are looking at should be able to bring in domain expertise," Ayyar said.

“With the compression of time, if we do it organically, it would take more time, and hence we are looking at somebody who can compress time to execute."

He, however, declined to name any target companies or geographies.

MphasiS’ cash excludes a packing credit and about $90 million already spent on the Wyde acquisition, Ayyar said.

Shares drag

The Bangalore-based firm posted a 25% fall in FY11 net profit at 8.2 billion after trading hours on Wednesday with shares underperforming the benchmark index in trade on Thursday.

MphasiS follows a November-October financial year.

“Disappointment was led by sustained revenue weakness from the HP channel even as rupee depreciation and aggressive cost rationalisation aided margins," Kotak Securities said in a note.

Revenue performance was impacted adversely by sharp decline in business from HP to $170 million, brokerage Emkay Global Financial Services said, adding direct business and non-enterprise business within HP grew by about 10%-16% quarter-on-quarter in dollar terms albeit on a low base.

India’s $76 billion industry gets more than 90% of its revenue from providing technology services to overseas clients and counts the US and Europe as its biggest markets.

MphasiS is looking at improving its operating margins, currently at 14.7%, and revenues in FY12, Ayyar said, but declined to provide an outlook for FY12.

The company is expecting its HP non-enterprise business to cross $100 million in FY12, its chief financial officer (CFO) Ganesh Murthy said in an investors’ conference call earlier in the day.

Trailing 12 months, the company’s attrition was at about 19% in application business, which constitutes more than 60% of its business. The headcount fall in infrastructure and ITO core business was about 22%, he said.

MphasiS, which employed close to 1,300 freshers in the last two quarters would hire in the current fiscal year “based on plan patterns and skill requirements".

The attrition rates across the industry are expected to “be down" in FY12, Ayyar added.

Shares of the company, which the street values at $1.31 billion, closed down 3.2% at 314.40 in a strong Mumbai market.