MphasiS Q3 net down 5.7%, lowers guidance

Weak growth in the IT services business has led to MphasiS BFL, a mid-tier software and BPO services firm, reporting a 5.7 per cent dip in net profit to Rs 26.8 crore for the third quarter ended December 31, 2004, compared to the corresponding quarter of 2003-04.

Following this, the company has revised downward its guidance for the current fiscal to a 25-30 per cent increase in net profit for 2004-05 from the earlier 40 per cent. The topline is now expected to cross Rs 750 crore, growing at 30 per cent and not 35 per cent as indicated earlier.

MphasiS had posted a net profit of Rs 98.5 crore on a topline of Rs 580.5 crore for 2003-04.

The total revenues for Q3FY05 has gone up by 29.1 per cent to Rs 191.8 crore as compared to Rs 148.6 crore reported for third quarter of FY04.

Said Ravi Ramu, CFO, MphasiS: "The net profit of the IT services business has taken a major hit during this quarter dipping to Rs 12.55 crore from Rs 20.95 crore reported during Q3FY04. This is because of SGA (Selling & General Administrative) expenses and lower gross profit margin in this division."

He added that "we had a demand and supply gap in terms of manpower for the IT services business which we are correcting and we have added 230 people in this business. Our order book position is also looking healthy and we hope to bounce back."

The topline of IT services business during Q3FY05 rose by 17 per cent to Rs 117.34 crore from Rs 110.31 crore during Q3FY04. The company's BPO business has shown strong growth during this quarter, salvaging the accounts somewhat. The net margin has almost doubled to Rs 14.32 crore from Rs 7.55 crore, while the topline has move up to Rs 74.48 per cent from Rs 48.32 crore, representing a 54 per cent growth.

Sequentially also, the company's net profit has dipped by 14.7 per cent to Rs 26.8 crore for Q3FY05 from Rs 31.5 crore reported during Q2FY05. The topline too has slipped to Rs 191.8 crore for Q3FY05 from Rs 192.9 crore during Q2FY05.

While BPO revenues have grown by 5.2 per cent, IT revenues have slid 4 per cent. However, in dollar terms, IT revenues have remained flat over the previous quarter, the decline in rupee terms being on account of an appreciation in the rupee by almost 4 per cent.

Said Ramu: "The growth in BPO services has been mainly from ramp up of existing clients and also from a few new clients. The group derived revenues from nine new clients in IT services and four new clients in BPO during current year."

Jerry Rao, chairman and CEO, said "The group has had a steady quarter with the overall staff numbers exceeding 8,000 people, representing an increase of 821 in the current quarter. The BPO business continues to show steady growth and increasing profitability. We have had some good client acquisitions in both our IT and BPO businesses this quarter which augurs well for the next fiscal."