X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
MphasiS: And miles to go… - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

MphasiS: And miles to go…

Dec 29, 2003

MphasiS BFL is one Indian software company that has been the cynosure of eyes for investors in the last one year. Point-to-point, the stock has gained over 98% since the beginning of 2003. Apart of the benefiting from the overall optimism in the Indian stock markets, MphasiS has been rewarded by investors for the improved performance that the company has turned out over the last twelve months.
Returns are calculated on Rs 100 invested on Dec 31 2002

Starting off as an off-the-block software services company, MphasiS has seen a swift move towards IT-enabled services (ITES) that now contributes to around 31% of the company’s total revenues (23% during 3QFY03). This move towards ITES cost the company on operational fronts, as was witnessed in the decline in operating margins during the earlier period of the year. Apart from pressure on billing rates, continued investments in physical and human infrastructure affected the company’s bottomline. The company has specifically seen much activity on the hiring front. For the nine months ending September 2004, MsourcE (MphasiS’ BPO arm) has already added over 1,000 people, taking its total tally to around 3,100 employees. While the pressure on operating margins has reduced in the last two quarters, MsourcE’s plans to take its human resource tally to 4,000 by the end of FY04 is likely to put further strain on overall margins.

MphasiS’ proactive management is one of the key reasons for the growth witnessed in the recent past. And the rapid move towards catering to the high-potential ITES market is an example in this regard. According to industry estimates, the ITES market globally was of the order of US$ 14 bn (Rs 662 bn) during 2000 and is expected to grow to US$ 142 bn (Rs 7,000 bn) by 2008. As per NASSCOM-McKinsey report 1999, the ITES industry can attain revenues of US$ 17 bn by 2008 and capture 12% of the market. The company’s revenues from the call centre business (MsourcE) have shown rapid growth in the last two years (see the graph above) and the potential going forward seems huge enough.

At the current price of Rs 708, the stock trades at a P/E multiple of 24.7x our FY04E earnings. While the company’s valuations are relatively less stretched than its peers in the software sector, investors need to give heed to the small-size disadvantage that MphasiS suffers from. Larger companies have better logistics and resources in place to counter difficult times like these and size plays a very key role in helping companies garner large-size contracts. Besides, though ITES is a fast-growing area, it has to be remembered that, in terms of value-addition, it is not as significant when compared with high-end software services provided by the major players. To that extent, valuations need to reflect the quality of earnings.

While it would still take some more time before MphasiS gains in size and establish its credibility as a strong player in the software services market, the potential in the form of fast growing ITES market provides the company with the right area to deploy its resources that it seems accumulating at preset.

Click here for a detailed report of MphasiS.


Equitymaster requests your view! Post a comment on "MphasiS: And miles to go…". Click here!

  

More Views on News

MPHASIS Announces Quarterly Results (4QFY19); Net Profit Up 12.0% (Quarterly Result Update)

May 30, 2019 | Updated on May 30, 2019

For the quarter ended March 2019, MPHASIS has posted a net profit of Rs 3 bn (up 12.0% YoY). Sales on the other hand came in at Rs 20 bn (up 16.1% YoY). Read on for a complete analysis of MPHASIS's quarterly results.

MPHASIS LTD Announces Quarterly Results (3QFY19); Net Profit Up 29.3% (Quarterly Result Update)

Jan 28, 2019 | Updated on Jan 28, 2019

For the quarter ended December 2018, MPHASIS LTD has posted a net profit of Rs 3 bn (up 29.3% YoY). Sales on the other hand came in at Rs 20 bn (up 18.7% YoY). Read on for a complete analysis of MPHASIS LTD's quarterly results.

Newgen Software Technologies Ltd. (IPO)

Jan 15, 2018

Should you subscribe to the IPO of Newgen Software Ltd?

Ankit Shah's First Five Insider Recommendations (The 5 Minute Wrapup)

Aug 5, 2017

How to get exclusive insider recommendations from Ankit Shah.

More Views on News

Most Popular

7 Stocks That Will Remain Evergreen in this Era of Technological Disruption(The 5 Minute Wrapup)

Jun 13, 2019

We are living in an era of disruption. Are your stocks well equipped to adapt to changes that disruption will bring along?

The Great Indian NBFC Bubble Has Burst but I Will Still Recommend These Safe NBFCs(The 5 Minute Wrapup)

Jun 11, 2019

One chart that predicted the NBFC crisis back in 2016.

Just One Stock Made Buffett Billions - And Can Make You Crores(Profit Hunter)

Jun 6, 2019

Coca Cola is arguably one of Warren Buffet's best stock picks. But did you know that small investors picked up the stock five decades before Buffet? Read on...

Kenneth Andrade Would Like Our Real Estate Stock Recommendation with Triple Digit Upside(The 5 Minute Wrapup)

Jun 12, 2019

This real estate stock recommended in Smart Money Secrets offers the most favourable upside potential.

Why Modi 2.0 Will Be Great for These 7 Stocks(Profit Hunter)

Jun 10, 2019

The government's focus on Infra, electricity, water for all will be the key factors for Sensex 1,00,000.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

MPHASIS SHARE PRICE


Jun 17, 2019 (Close)

TRACK MPHASIS

  • Track your investment in MPHASIS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COMPARE MPHASIS WITH

MARKET STATS