>Mphasis Ltd. (ULJK Securities)

MphasiS is India’s 8th largest software company with revenues of Rs.19, 065 Mn for the period October end FY08 (7 Month Period). EDS (Electronic Data Systems) has acquired 60% stake in MphasiS after which HP has acquired EDS. Thus HP has become the parent company of MphasiS. The company’s operations have been divided mainly into three segments namely Applications, BPO and ITO services across many verticals.

• The company is maintaining its business mix ratio of 2:1:1 in its Applications, BPO and ITO services respectively. In the applications segment nearly 34% is the form application maintenance and the 66% is in the form of applications development.

• In the ITO business the back office jobs are mainly done by the MphasiS and the front office job is mainly in the hands of the EDS India Ltd.

• The acquisition from the EDS has helped MphasiS to start its ITO space. After the acquisition of EDS by HP, a major chunk of the solutions based projects are bound to go for MphasiS and the projects coming from the HP might have a major competition from the EDS and HP India.

• The main drivers of consolidation in the sector are of two reasons like cost and the better solution.

• Company has expressed its view that the vendor consolidation may increase because of this bleak economic scenario and the companies are going to reap over the wallet sharing.

• The company is increasing the sales expenses as the market is still uncertain. Thus the company is going to show a marginal increase in the SGA expenses.

• The company may see the losses in the hedging because of forex forward covers that they have done in the past period.

• From the BPO business the company is still facing high attrition rates and the absentees. But the company is trying to decrease its buffer levels in the BPO.

• As of now the company is not going to have any lay‐offs and the salary cuts. The company is mainly focusing on the productivity plans and the planning cycles.

• The currency exposure for the revenues are in the order of 8%‐9% ‐ INR, 80%‐82% ‐USD and 18‐10% from the other currencies.

• Company expressed a view that the pipeline of the order book is healthy.

• Cash in hand is $60mn and planning cycle for the Capex is larger because of the decrease in the hiring. We are positive on the stock as far its operations and the clientele list is concerned, though the near term concerns remain.

To see full report: MPHASIS