Mphasis’ growth is expected to remain strong going forward. The increasing demand for artificial intelligence, data and AI modernization will contribute to this. The company has got big deals related to GenAI and Agentic AI. This reflects the strong confidence clients have in the company’s next-gen capabilities. The company’s shares have risen about 16 percent in the last six months.
Highest growth in TMT and insurance verticals
Mphasis Has got many big deals. The company is emphasizing on increasing margins. The company is facing difficult times with full confidence. In terms of verticals, TMT (technology, media and telecom) and insurance contributed the most to growth in the September quarter. Weakness continued in the logistics and transportation segment. Growth has been flat on a quarter-to-quarter basis. But there are signs of stability in growth.
America contributes the most to growth
If seen from the point of view of geography, America had the maximum contribution in growth. America’s share in the total revenue was about 83 percent. EMEA performance has been soft for some time. But now it is showing signs of stability. In the September quarter, the company’s EBIT margin saw an improvement of 440 basis points on a quarter-on-quarter basis. The utilization level of the company remains good. Onsite utilization stood at 92 per cent, while offshore utilization (ex-trangy) increased to 87 per cent. Last year it was 76 percent.
The company estimates EBIT margin to be 14.75-15.75 percent.
The share of fixed price contracts also increased by 60 percent on year-on-year basis. Utilization remains high and there is improvement in the fixed-price mix. This is expected to keep margins stable in the short term. The company expects EBIT margin to be between 14.75-15.75 percent. The company’s performance in terms of new deals is good. It has signed a deal worth $528 million in TCV in the September quarter. BFS deals have grown by 45 per cent year-on-year, while non-BFS deals have grown by 139 per cent. This was the second consecutive quarter when TCV deals were worth more than $500 million.
Company’s growth may be double that of the industry
Mphasis is confident of growth being double that of the industry in FY26. Conversion of TCV deal into revenue may be visible in the second half. However, the company may face challenges due to furlough. Performance may remain good in BFS vertical. TMT Aurak Insurance will also benefit from the good deal it got earlier this year. The logistics vertical is also expected to show good growth on a quarter-on-quarter basis in the third quarter.
Should you invest?
On a price-to-earnings (P/E) basis, the valuation of Mphasis shares looks right. Investors can gradually increase investment in this stock. Mphasis shares have risen 4.32 percent this week. On December 5, the stock closed at Rs 2,946, up 1.31 per cent.