Large deals to drive growth for Mphasis: CEO Nitin Rakesh

Mphasis signed new total contract value wins of $247 million in its Direct business, 71 percent of them in new age technologies. Direct includes new age technologies and legacy business.

In an interaction with Moneycontrol, Rakesh said that the company is seeing its average size of deals go up and they are longer than what they were a few years ago.

“Two years ago, our average large deal was about $29 million. Now it is $62 million. Not only are we doing large deals consistently, we are doing larger deals consistently,” he asserted.

This comes at the back of the need for enterprises to scale their existing business models. “Last year was about can we apply whatever short term fix we need to apply and keep our business running? Now they (clients) are saying, we know this works. But now can we make this at scale and is this the new way of doing business,” Rakesh explained.

He believes that this technology transformation is a 2-4-year journey and would be a growth driver for the company.

DXC business

However, the company’s business from DXC continues to decline. Direct accounts for about 85 percent of total revenues. Its other revenue stream DXC, in the throes of a decline, accounts for about 13 percent of the firm’s overall income.

While business from Direct grew at 23.7 percent on a YoY basis, DXCs' declined 39.2 percent.

Over the years, the revenue contribution from DXC has been declining. It was a conscious choice on Mphasis’ part to de-risk exposure to DXC, according to analysts. “A lower exposure to DXC should help lessen growth concerns on DXC and towards continuing strength in its comparable direct business,” said brokerage firm Motilal Oswal in a note.

The company, however, expects DXC’s performance to improve in the coming months. Rakesh is optimistic. “We think that a larger portion of the decline is behind us. We have stabilized,” he points out. According to him, though revenue may go up and come down a little bit quarter over quarter, he expects it to be in the 10-12 percent range for Mphasis.

Blackstone exit

Crucially for Mphasis, the company does not visualize any negative impact following reports of promoter Blackstone exiting the business. The impact on its revenues from Blackstone portfolio companies will not affect us, Rakesh stated.

Last year, ET reported that four Private Equity firms have expressed interest in acquiring Blackstone’s equity in Mphasis. According to reports, revenues from Blackstone portfolio companies account for about mid-single digit of its overall revenue.

Though Rakesh did not comment on queries about the ongoing discussion on the exit of its promoter, he said, “The reason we have been in the Blackstone channel is not because of Blackstone only. It is also because we are offering something of value as well.” To be sure, that is the case.