Mphasis turns ex-date for buyback; stock down 9%

The stock slipped 9% to Rs 970 on the BSE in early morning trade on Wednesday after the stock turned ex-date for the proposed buy-back.

Shares of Mphasis slipped 9% to Rs 970 per share on the BSE in early morning trade on Wednesday after the stock turned ex-date for the proposed buy-back.

The information technology (IT) company has fixed October 25, 2018, as the record date to determine the shareholders eligible to participate in the buyback, shareholders, to whom the letter of offer and tender offer form will be delivered in relation to the buyback and entitlement of equity shareholders in the buyback.

The board at its meeting held on August 7, 2018, had approved buyback at a maximum price of Rs 1,350 per share spending Rs 9.8 billion (implies 3.8% of equity can be bought at the maximum price). The proposed buyback of equity shares from all the existing shareholders of the company including promoters on a proportionate basis through the tender offer.

Post buyback announcement, the stock of Mphasis was down 9% as compared to a 10% decline in the S&P BSE Sensex till Tuesday. It touched a 52-week high of Rs 1,278 on September 3, 2018, in intra-day trade.

Meanwhile, the company announced its September quarter results (Q2FY19) on Friday, October 9, which delivered a modest disappointment on USD revenues, margins and net profit.

“Mphasis' revenue grew 3% quarter on quarter (Q-o-Q) in constant currency terms in Q2FY19. EBIT margin of 16.4% (-20bp Q-o-Q) came in below our estimate of 17.2% due to pressure in Digital Risk and costs associated with ramp-up of new deals,” Motilal Oswal Securities said in a result update.

“Strong traction in the HP channel and Direct Core business is encouraging, which, coupled with robust deal wins, provides visibility of industry leading growth. However, margin expansion will be under check because of the lack of benefits from INR depreciation. For robust growth and margin stability, the stock’s valuations are already in the top quartile, from which we see limited room for a further uptick,” the brokerage firm said with maintaining ‘neutral’ rating on the stock and target price of Rs 1,150 per share.

At 10:29 am; Mphasis was trading 5% lower at Rs 1,015 on the BSE, as compared to 0.65% rise in the S&P BSE Sensex. A combined 577,976 equity shares changed hands on the counter on the BSE and NSE so far.