Target 1.5 times industry growth in FY14: MphasiS

With an aim of 16-18 percent EBIT margins in FY14, Ganesh Ayyar, chief executive officer, MphasiS says the IT services firm is aiming to grow at 1.5 times the industry.

Speaking to CNBC-TV18, Ayyar says the company will not be far too affected by the recent rupee depreciation as it has a long-term hedge against the currency volatility. The efficiency of this hedge has protected the company from steep currency movements.
IT services firm MphasiS announced its Q3 results today. Its consolidated net profit declined by 7.7 percent to Rs 192.6 crore in the third quarter ended July 31 on account of wage hikes.
Additionally, Ayyar says Hewlett-Packard, that owns the company, is likely to see further fall in its growth numbers.
“What we are trying to do is to see how we can ignite growth by going with a differentiated value proposition. We have attempted it two-three times but haven’t succeeded. The ball is in our court because like any other customer, our job is to see how we can grow HP business but at this juncture my view is that HP business unless some break through happens we would continue to see some decline,” adds Ayyar. Below is the edited transcript of Ayyar's interview to CNBC-TV18. Q: Do you see some more margin gains due to the kind of depreciation that we have seen in the currency?
A: Our focus is to grow margins but rupee depreciation or appreciation will always have muted impact on Mphasis results because we have a long-term hedge policy. Long-term hedge policy’s objective is to reduce any volatility on our revenue and margins as well as result of currency volatility. That is working, hence the expectation that rupee depreciation will have huge impact on Mphasis results maybe misplaced. Q: If you can give us some number – can it move towards 20 percent mark on EBITDA?
A: I will talk a little bit about EBITD. Our objective always has been to operate between 16 to 18 percent of EBITD. That is what we have been focused on and we will continue to stay focused. We would like to see it improving but I can’t make a projection as of now but as we look at the type of business that we are involved in or where we want to grow – we want to grow profitable business and hoping that we would be able to improve the margin from time to time. Q: It has been another quarter that HP has been a drag for the company for how many more quarters do you expect this pressure to continue?
A: This quarter they declined by about 70 basis points. What we are trying to do is to see how we can ignite growth by going with a differentiated value proposition. We have attempted it two-three times but haven’t succeeded. The ball is in our court because like any other customer, our job is to see how we can grow HP business but at this juncture my view is that HP business unless some break through happens we would continue to see some decline Q: Our peers have said that FY14 will be better than FY13 what do you think Mphasis could deliver in FY14?
A: On full year, I have always maintained that on mid-term basis we would like to grow 1.5 times the market growth and that will remain as our focus and our commitment is to deliver it to the street. Q: The pricing was stable this quarter around, the rupee has gone to 67, this quarter has seen about maximum deprecation that has given quite a bit of tailwind but would that mean that dollar realisations are going to be under a bit of a pressure?
A: The tension between customers wanting better rates in terms of reduction and service provider wanting better rates in terms of increase has always been there. This is an added ammunition for our customers. At this point of time, we haven’t experienced anything but I wouldn’t be surprised if they come back and start asking for reduction. Q: If that happens can you give us some colour on the kind of decline that may lead to in terms of realisations?
A: I wouldn’t know because it will be part of the discussion. Ultimately, our commitment is to remain profitable and generate profitable growth and we will keep that in view while we are discussing it with any customer- small, large and that will be our approach to predict that we will give so much or will we give at all is probably a bit premature. Q: What is the deal pipeline looking like? Are there any ramp ups of existing deals which can also propel revenues in the coming quarter?
A: The deal pipe is looking good especially in North America and we are working on few deals. At this point of time too premature to talk about some wins. Certainly when we come to Q4, I would be in a position to share some wins. Q: Hexaware has inked a deal but we do understand that HP was also in talks to sell its Mphasis stake – any development on that or would you like to comment on the same?
A: No comments.