Convergence of Mphasis growth with direct activities to assist with evaluation: Motilal Oswal


MUMBAI : According to a report by the brokerage firm Motilal Oswal Financial Services Ltd.

Mphasis’ second quarter performance was driven by sequential growth of 9.9% (at constant currency) in the direct businesses, while the DXC vertical (6% of revenue) again declined by 24.5%. The EBIT margin, adjusted for one-off M&A charges, remained stable. It announced a total net new business value of $ 241 million in the second quarter.

“With management reiterating its forecast for peak growth in direct business, the exceptional growth in direct business is expected to continue (34% yoy in FY22). We see a strong pipeline of next-generation deals as a testament to the strength of the demand environment. This should lead to better visibility of the medium term growth of the company, ”said Motilal Oswal.

Going forward, the brokerage firm expects the overall growth to converge with the growth of direct channels, which should drive revenue growth.

“An impressive earnings path and continued pipeline expansion would boost growth over the medium term. While the gain in DXC activity (around 6% of sales) persists, the strong traction of Direct International should continue to drive overall performance. The ability of management to defend the margin is a key positive, ”the brokerage firm said.

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