Conference Call      
          MPhasis
There is no exposure to HP's PC business


MPhasis held a conference call to discuss the results of Q3 FY11 addressed by Ganesh Ayyar, CEO and Ganesh Murthy, CFO.
Consolidated revenue for the quarter was Rs 1294 crore, an increase of 1.1% y-o-y and 2.9% q-o-q. Operating profit was Rs 208 crore, up 0.3% q-o-q and operating margins declined to 16% from 21.5% y-o-y and from 16.5% q-o-q. Net profit was Rs 195 crore, down 10.3% q-o-q and down 28% against Rs 271 crore y-o-y. EPS for the quarter was Rs 9.28 against Rs 12.93 y-o-y.
Volumes grew 3%, adjusted volumes grew 1.3% and forex had 0.1% negative impact.
Direct Business
Revenues from Direct channel witnessed a sequential growth of 2.9% in rupee terms as well as in US dollar terms. The revenue growth was driven by higher volumes from existing customers and revenues from customers in both mature and emerging markets.
The Company continued the trend of increasing focus on Direct channel clients with an addition of 18 clients in the Direct channel, out of the 27 clients added during the quarter.
The management is looking at 3% to 5% growth in future.
HP Business
Part of the Company's strategy is to explore opportunities beyond HP Enterprise Services (HPES) in other divisions of HP and progress in this area is encouraging. In the current quarter, revenue from non-HPES Business grew sequentially by 12.6% to touch Rs 35.8 crore and expects 50% y-o-y growth.
On an overall basis, revenues from HP channel increased by 2.8%.
Revenue for the quarter includes reversal of credit notes which are no longer required amounting of Rs 66.5 crore. Also revenue of Rs 34.6 crore was not recognized during the quarter due to incomplete documentation. After taking both these into account, net sequential reduction in HP channel revenue is 1.1%.
9 new customers were added during the quarter in the HP channel.
Overall Banking & Capital Market (BCM) revenue has come down by 5.7% and Insurance vertical revenue declined by 2.0% due to project closures in HP channel business. However, Direct channel BCM has grown by 10.3%. Direct channel Insurance has declined by 0.5%. The company added 6 clients in BCM and 1 client under Insurance vertical during the quarter.
BCM business reported total revenue of Rs 318 crore (Previous quarter – Rs 337 crore) and contributed 25% of total group revenue. 6 clients added during the quarter.
Insurance business reported total revenue of Rs 121 crore (Previous quarter – Rs 124 crore) and contributed 9% of total group revenue. 1 client into Auto insurance was added during the quarter.
Information Technology, Communication, Media & Entertainment vertical reported total revenue of Rs 384 crore (Previous quarter – Rs 327 crore) and contributed 30% of total group revenue. 7 clients were added during the quarter.
Emerging Industries vertical reported total revenue of Rs 458 crore (Previous quarter – Rs 458 crore). Contributed 36% of total group revenue. 13 clients were added during the quarter of which one is into emerging Asia markets.
During the quarter the Company entered into a definitive agreement to acquire Wyde Corporation at 2.5 -3.5 times trailing revenues of $ 30 million. Wyde is an international software vendor and creator of Wynsure – an industry leading insurance policy administration solution having gross margins of 40% and PAT margins of 14.5%. First year is expected to marginally EPS accretive and second year is expected to be significantly EPS accretive. This acquisition gives MphasiS an excellent opportunity to grow innovative services around the Wynsure platform. The acquisition is expected to close in 2 weeks.
Cash and cash equivalents have increased by Rs 165.1 crore to reach Rs 2029.3 crore. The Company generated cash of Rs 275.9 crore from operations during the quarter.
The Group reduced net headcount by 475 during the quarter, taking the headcount to 41,264.
Onsite Application billing declined marginally and Offshore ITO was up from $20/hour to $21/hour.
There is no exposure to HP' PC business.
Revenue mix for the quarter was HP channel 67% and Direct channel 33%, same as compared to the previous quarter.
Hedge position stood at 500 million @ Rs 47.15/$ and management intends to cover 70% of revenues.
There are 600 open positions in ITO.
Insurance margins declined due to forex clause in one contract with major customer and knowledge transfer wherein three months cost was absorbed. They are expected to improve in next quarter.
Added 3 SEZ's in Q3 of which 2 are in Bangalore and 1 in Pune. 23% of export revenues are from SEZ.
On a blended basis, utilization rates for Application stood same at 76%, ITO improved from 73% to 75% but BPO declined from 68% to 66%.
Tax rate is expected to be 23% to 24%.
The management is actively looking for acquisitions in Banking& Capital market or Insurance, mid-sized company having IP/domain experience and not EPS dilutive.
OCI gain stood at Rs 46.5 crore.

Conference Call      
          MPhasis
HP/Direct channel mix shifted from 67:33 to 62:38 q-o-q


MPhasis held a conference call to discuss the results of Q4 FY11 addressed by Ganesh Ayyar, CEO and Ganesh Murthy, CFO.

Revenues net of hedge grew by 1.6% in Rupee terms. After excluding the one-time credit notes amounting to Rs 66.5 crore in Q3, revenue growth, net of hedge, was 7.1% during the quarter.

Operating margin for the quarter was 14.7% as compared to 16.0% in the preceding quarter. On a normalized basis, after excluding the net one time revenues of Rs 31.9 crore and net reversal of provisions of Rs 19.7 crore in Q3, operating margin improved by over 200 basis points.

Direct Business
Direct Channel revenues witnessed QoQ growth of 18.9% in Rupee terms.

Revenue growth was driven by higher volumes from existing customers and the acquisition of Wyde, which was consummated on 29th August 2011. 14.3% organic growth was supplemented by 4.6% growth contribution from Wyde. After excluding acquisition and Rupee depreciation impact, the net growth in revenues was 8.2%.

Banking & Capital Markets (BCM) and Insurance, two key strategic verticals, grew sequentially by 7.4% and 21.6% respectively.

17 new clients in the Direct channel of the 25 clients added during the quarter. The Company added 4 clients in BCM and 2 clients in Insurance vertical.

The Company added 10 persons to the Direct channel sales headcount during the quarter.

HP Business
On an overall basis, revenues from HP channel declined by 4.4% during the quarter. However, excluding one-time revenues of Rs 66.5 crore in Q3 and excluding the impact of Rupee depreciation, HP channel revenues were flat as compared to the preceding quarter.

HP non-Enterprise Services business is gaining traction and grew sequentially by 24.9%, as the Company continued to explore further opportunities outside its traditional HP relationships.

HP/Direct channel mix shifted from 67:33 (Q3) to 62:38 (Q4).

Cash and cash equivalents have increased by Rs 36.8 crore to Rs 2066.1 crore. The Company generated cash of Rs 237.1 crore from operations during the quarter, continuing the trend of adding cash reserves of over Rs 70 crore ($15 million) every month. Improvement in the Company's DSO from 91 days to 88 days also contributed to operating cash flow.

The company declared dividend of Rs 6.50 for FY 2011.
The Company successfully completed its acquisition of Wyde Corporation during the quarter.

Tax rate is expected to be around 23%.

By Service type
Application Services revenues increased by 0.8% to Rs 813.4 crore during this quarter. After excluding the one-time credit notes amounting to Rs 66.5 crore in Q3, Application Services revenue growth was 9.8% during the quarter. Application Services gross margin was 21.6% during the quarter as compared to 23% during the previous quarter. This decline was mainly due to net one-time revenues of Rs 31.9 crore during previous quarter.
Normalized gross margin was higher by 170 basis points as blended utilization improved sequentially by 200 basis points during the quarter.

ITO Services revenues grew by 9.9% to Rs 359.1 crore mainly due to growth in Direct business. Gross margin improved by 70 basis points during the quarter to 34.3%.
Blended utilization improved sequentially by 600 basis points during the quarter

BPO Services revenues increased by 2.9%. Gross margin improved from 2.5% to 15.6%. Prior quarter included one-time cost of Rs 6.9 crore, without which the margin in Q3 would have been 7.2%. Improvement in BPO Services gross margin has come from a 200 basis points sequential improvement in overall utilization.