Focus on getting around supply-side constraints: Mphasis CEO Nitin Rakesh

IT services company Mphasis saw its gross revenue go up by 4.5 percent sequentially and 26.8 percent on a year-on-year basis in Q1FY23. Mphasis’ total contract value (TCV) came in at $302 million during the quarter. The company’s net profit for the quarter was up by 2.5 percent QoQ and 18.3 percent YoY.

Speaking to Moneycontrol, CEO Nitin Rakesh said the demand environment is fairly robust, and that the industries and geographies the company operates in are conducive to growth.

“The constraint isn't so much the macroenvironment. There are some signs of some clients being cautious, especially in one or two industries where they are a pretty big COVID boost that's tailing off right now. The constraint isn't so much the demand but smaller supply,” he said.

CFO Manish Dugar said that in the sectors the company operates in — primarily BFSI — as well as travel, healthcare, and hi-tech, there are clients who are being cautious and trying to watch corners, but that there has not been an impact on performance.

“We don’t see a slowdown in spending at this point in time-based on the TCV wins, pipeline, or the conversation that we are having with our clients,” he said.

The trend in the IT industry pertaining to attrition continued at Mphasis as well. Rakesh said he believes that attrition is past its peak, but continues to be elevated which the company expects will tail off.“The demand-driven environment with tailing off of some of the supply pressures bodes well for the growth of the business so the rest of the year,” he said.

Mphasis added 941 billable employees (355 net addition) during the quarter. Nitin said utilisation is comfortable for the company in the core application outsourcing business.

“We didn’t need to add more people given that we had a blast of intake over the last two quarters. If we bulked up, we have to make sure that we are able to consume the capacity that is at hand and then utilisation in the 70s is still fairly comfortable. We still have room to grow,” he said.

Going forward, Rakesh said the company’s comfortable with the pipeline and the deal wins, and the focus currently is converting deal wins to revenue and getting around supply constraints.