Fourth quarter results for Mphasis was phenomenal for company. The Bengaluru-based IT services provider grew 19.5 percent on a year-on-year basis and saw good growth in revenue. It was in the news recently when Blackstone Group agreed to buy out Hewlett Packard Enterprise’s (HPE) majority shareholding in the IT services provider in a deal worth up to Rs 7,071 crore.
Ganesh Ayyar, CEO and V Suryanarayanan, CFO, Mphasis spoke to CNBC-TV18 on the way forward for the company.
Ayyar said as per the contract with HPE, it has complete freedom to restructure. "This is a commercial contract," he said.
On the company's dividend policy, Ayyar said a board meeting will take a call on it.
Regarding the Blackstone deal, he said it was on track.
In FY17, he sees operating profit margins growing 13-15 percent.Adding to it, Suryanarayanan said the company has cash reserves of USD 450 million.Below is the transcript of Ganesh Ayyar and V Suryanarayanan’s interview with Rukmini Rao on CNBC-TV18.Q: On the Computer Sciences Corp (CSC) merger with Hewlett Packard Enterprise Company (HPE), what is the kind of effect that you see happening on your business?Ayyar: Our customers have the right to decide how they want to restructure the company. So, I am going to refer to it only in the context of the customer. Our contract is with HPE and HPE has the complete freedom to choose how they want to restructure. Now that contract has certain elements. There is goodwill, there is intention and there is a commercial content in the contract which will be fulfilled. It does not change the aspect of commercial value of the contract that we are signing with HPE.Q: Also, on the dividend front, there is nothing that we have heard. Want to get clarity on the dividend policy of Mphasis. What is this? Can investors in fact, expect something coming out post the entire Blackstone deal is done?Ayyar: When this deal is being done, it is a bit premature to announce dividend at this point of time. There will be another board meeting and there will be an annual general meeting (AGM), so the board will recommend based on whatever board decides and then AGM will take it up. It is not any different. This time around, we focused entirely on Q4 results when we had the board meeting yesterday and that will be discussed in the next board meeting.Q: Also, if you can give us a sense of the cash position currently and is there going to be any change in the way you are going to utilise your cash going forward post this Blackstone deal.Suryanarayanan: We have a healthy cash presence of around Rs 450 million. In respect of the cash utilisation of course, we are looking at various alternatives, it will depend post closure how is the strategy on the cash utilisation.Q: Is the closure of Blackstone deal on track and we expect the timeline that you said last time around that you could be expecting the deal to close anytime soon. Are things on track is what I want to understand.Ayyar: Yes, absolutely. They are on track and they are three big milestones. First milestone has been kind of met, two more milestones to go. We will stay tuned. There are no amber signals or red signals there.Q: Also, want to get an outlook from you for FY17.Ayyar: As I mentioned, we had said that in second half of FY16, our operating profit band would be 13 to 15 percent. Based on the work that we have done, we fell that we have to elevate it by 1 percent, both at the bottom and on top and take it to 14-16 for the first half of FY17 because a lot of good work has been done. Even the exceptional transaction that Surya spoke about will help us between 60 to 70 bps in profit improvement in the coming year. So, you will see that elevation as well.
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