Hopeful of clocking $300 mn deal-wins in FY16: Mphasis

IT services provider Mphasis matched analysts' expectations on bottomline and topline front but September quarter operational performance was ahead of estimates. Consolidated net profit grew by 18.4 percent sequentially to Rs 185 crore, boosted by operational numbers despite lower other income.The company is hopeful of USD 300 million deal wins for the year after wining around USD 166 million of total contract value (TCV) in the first half, said Ganesh Ayyar, CEO, Mphasis in an concall to CNBC-TV18’s Reema Tendulkar.The company also expects the direct international business to grow faster than the industry, said Ayyar. According to him the margins in the second half are likely to be in the range of 13-15 percent up from the 12-14 percent reported in first half.The company will also go in for salary hikes in their quarter which will seen an impact of around 170 basis points on the earnings before interest & tax (EBIT), said Ayyar.Below is the verbatim transcript of Ganesh Ayyar’s interview from a concall with Reema Tendulkar on CNBC-TV18.Q: What is the margin picture like going forward?A: It was driven by operational efficiency. Since you are discussing modeling let me give you a perspective forward. For first half I was mentioning 12 to 14 percent earnings before interest and taxes (EBIT) and Q3 onwards we have given salary increments which we will create a headwind of 170 basis points on margin. We have done lot of work up ahead. We expect the range of margin for second half to move up from 12 to 14 which was a case for first half to 13 to 15 for second half. Q: So you are increasing your margin guidance from second half of the fiscal year to 13 to 15 percent?A: The range, yes, absolutely. Q: In Q3 there will be a salary impact of 170 basis points in the EBIT level?A: That is right. In Q3 and Q4 because Q3 we give this salary increment.Q: Your deal wins stand at USD 90 million which is higher than your past run rate. Can we assume that to be the new deal win run rate?A: The challenge is to compare it quarter on quarter. It is a difficult one because it depends on whether you are able to clock some good deals. However, we have been hovering clearly in the USD 75 million range. If you take last full year we did USD 270 million. Right now we are gearing towards the exceeding USD 300 million for the year. So, there is an upward trajectory but please don’t expect USD 90 million every quarter. Q: For the whole year it should be USD 300 million?A: At least the trajectory, if you look at first two quarters we have done USD 166 million of TCV. So, that will tell you that we would be well on our way to touching USD 300 million.Q: On HP it has been another quarter that the revenues have declined. Has the pace of decline at least reduced or still no clarity on the HP business? A: Weighted impact on the overall company obviously is lower because now they stand 27 percent of our revenue. I am not able to predict that the rate of decline as a percentage of revenue has kind of topped or slowed down. If you look at last 4.5 years we have been declining. I don’t have any breakthrough to report. So, if you extrapolate the data it will tell you that the decline is going to continue and we cannot assume that it is going to slow down. Q: Could you give us some clarity on the digital risk? You told us Direct International has gone by 7.9 percent quarter-on-quarter. What has been the growth at digital risk and whether that will continue? A: Direct International sphere includes Digital Risk, and Digital Risk is actually is growing very handsomely. It is above 7.9 percent because we don’t disclose specific numbers to Digital Risk. For their quarter-on-quarter growth was more than 7.9 percent. In other orders they lifted the overall average for Direct International. Q: In your first point when you said that the company’s growth rate will be better than industry did you only mean it for Direct International or do you have the confidence to say for the consolidated basis the growth rate could be higher?A: I was referring to only Direct International because HP decline has put pressure on overall numbers. Obviously with weightage coming down the impact is less and less. However, when I said we are going to grow faster than the market I was referring to Direct International. Even the USD 90 million of TCV wins that I mentioned is in Direct International space. So, the focus is on growing Direct International.Q: Some of your peers have alluded to a soft second half of the fiscal year. Apart from seasonality do you see any other factors which could affect Mphasis business in particular?A: We don’t see any softness in our business except the seasonality of Q3 holidays. So, the entire industry goes through that. Other than that we don’t have any weakness being seeing in our pipeline or our wins or our revenue trend. Q: Have you thought of anything to do with the cash on the books which stands at over USD 400 million? A: We are always thinking, but at this point at time we have nothing to report. As I mentioned, you would be one of the first one to get to know about it as and when we do something. At this point of time nothing to report.