MphasiS has reported higher revenues for the second quarter but lower net profits, due to a combination of acquisition costs and higher taxes.
Revenues for the second quarter stood at Rs 1,405 crore, up 11.8 per cent compared with the previous quarter, and 5.8 per cent year-on-year growth, driven by acquisitions and growth in non-HP business.
The Bangalore-based outsourcing company is a part of software giant HP, acquired Digital Risk, which helped it bag an outsourcing contract valued at $60 million from a banking and financial services customer.
Net profit for the quarter declined 4.3 per cent over the previous quarter and 6.8 per cent year-on-year to Rs 177 crore due to higher tax outgo. Tax rates increased to 25.1 per cent due to higher tax rates applicable on Digital Risk profits, increase in tax surcharge in India and expiry of the initial five-year tax holiday in some of the company’s delivery centres located in Special Economic Zones, the company said.
Further, revenues coming from outside of HP, referred to as Direct channel grew by 24.8 per cent over the previous quarter and 37.7 per cent year-on-year to Rs 775 crore. The contribution of direct channel business has now crossed 50 per cent of total revenues.
According to company officials, direct versus HP business mix is at 54:46 in the second quarter. This mix was 48:52 in the first quarter, increasing the chances of HP to sell off its stake in the company.
HP holds around 60 per cent in MphasiS. Despite growth in revenues, operating margins for the second quarter were down to 14.7 per cent from 15.5 per cent in the first quarter, indicating margin pressures.
This, in turn, impacted the company cash flow and it reported that cash generated from operations during the quarter was Rs 264 crore, which went down Rs 770 crore to Rs. 2,340 crore.
venkatesh.ganesh@thehindu.co.in