We are prioritising growth in direct business: Nitin Rakesh of Mphasis

In a Q&A, the executive director and CEO of the firm talks about growth drivers, demand scenario in direct business and supply side concerns

Blackstone-backed IT services player Mphasis reported a stellar Q1FY22. The company posted revenue growth in its direct business of 9.8 per cent QoQ and 32.5 per cent YoY in constant currency. It also signed a total TCV of $505 million, the highest ever for the company. Nitin Rakesh, executive director and CEO, Mphasis in an interview with Shivani Shinde spoke about growth drivers, demand scenario in direct business and supply side concerns. Edited excerpts:

What have the drivers for growth been for the Q1 numbers and how do you think FY22 growth will pan out?

This has been a stellar quarter for us. Our direct business grew 32.5 per cent YoY, the highest ever. We are seeing growth from across clients, verticals and geographies. The top five accounts have grown at 17 per cent and total top 10 accounts grew 24 per cent YoY.

Direct business is growing very well, it’s the fourth quarter in a row of double-digit growth. Our banking vertical has grown in the 20 per cent range during the past four quarters. Hi-tech business is growing in triple digit percentages. Europe for us has grown strongly, this quarter it grew 30 per cent. A large part of the growth is also led by application transformation business, which is where we are seeing significant uptick of new platforms, migration and modernisation using cloud platforms, etc. Over the $1.1 billion TCV wins we announced for FY21, in Q1 we had a total TCV of $505 million.

Q1 gives us a strong start in the financial year, which means you get the run rate benefit for the remainder of the year. For us, the direct business will have market leading growth business for the fiscal. Even at an overall level we will be top quartile. Prioritizing growth in the direct bus will be our focus.

How much of this growth is sustainable, especially when you see competition from other players?

A number of trends we are talking about are not new, these were already in play before the pandemic hit. Like customer focused tech, personalisation needs, application of agile, and shift to cloud. The pandemic crisis accelerated this. Many of our clients who were sitting on the fence are now propelled to take decisions because there is no choice but to embrace this technology shift because overnight business moved from being omni-channel to digital. Having said that, from a client perspective, it’s not trivial to make this shift too. They have been using tech in a certain way for the last 30-40 years and overnight they cannot make this shift and get it done in one or two quarters. This will be a multi-year tech transformation initiative cycle.

We are in a tech spend super cycle. And not every vendor will be able to capture this growth. Even in our industry this shift is evident, within this industry you will see growth rate vary from -5 per cent to +25per cent.

I also believe people/companies who built their business around infrastructure capex, or infrastructure management services segment will see an adverse impact because that spend is moving away from on-premise to cloud. A lot of gain for companies who made investments early on and who are prepared to hand-hold clients in their migration from on-premise to cloud.

In our own instance, our direct business has grown 32 per cent on a constant currency basis, it is 2x of the next best growth that industry peers have reported. Clearly we are gaining from the market shift.

Attrition is an industry issue. How is Mphasis ensuring that you are able to balance supply and demand scenarios?

Our industry thrives and grows because there is a dearth of talent in the global markets, so it’s a biggest headwind for us as well, as it turns out to have a tail-wind effect. We have to continue to find the supply funnel to fuel this demand. We have to do almost everything in order to manage supply side issues that includes, hiring from campuses, reskilling, lateral recruitment, opening new centres. Rather we have been expanding into newer geographies too. We identified five new markets for talent growth, so we expanded into Taiwan, Costa Rica, Mexico, Estonia and also stepped up our presence in Canada.

Last quarter you had mentioned that the new set of investors on board will also open doors for new engagements. Any new update on that?

It is still too early for that strategy to work out. This quarter's growth is more of the broad-based growth we are seeing in our geographies and verticals. However, we do have a team and strategy, we have decent activity on the pipeline. There will be some development, but nothing at present to share.