BANGALORE: "MphasiS BFL will not revise its guidance on a quarter-on-quarter basis, but it will meet the guidance given at the beginning of the fiscal," said Jerry Rao, Chairman and Managing Director of MphasisBFL, at the conference arranged to discuss the company`s Q2 numbers announced today.

MphasiS BFL group’s net profit increased to Rs 16.13 crore for the second quarter ended September 30, 2002 from Rs 10.02 crore in the quarter ended September 30, 2001, a jump of 61 per cent year-on-year. On a sequential basis, the group’s net profit for the September quarter has increased 16.2 per cent from Rs 13.89 crore in the quarter ended June 30, 2002, in spite of a foreign exchange loss of Rs 1.2 crore.

Rao attributed the growth in the Q2 to focus on India offshore-centric model and has nothing to do with an increase in IT spending. The company expects pricing pressure to continue even as it sees growth coming from volumes. The company also expects the global IT spending to improve from the second half of 2003.

Onsite

The onsite business contributed 67 percent to the turnover during the September 2002 quarter (59% in June 2002 quarter) on the back of new projects from existing clients and projects from new clients, which will get converted into offshore projects in the subsequent quarters. The company has added 100 employees onsite, taking the total strength to 402 employees in September 2002 quarter from 319 in June 2002 quarter.

The onsite billing rate has improved by 3.1 per cent to $66 per hour from $64 per hour, while the volume has increased by 15 percent on a quarter-on-quarter basis.

Offshore

The offshore business contributed 33 per cent to the turnover during the September 2002 quarter compared to 41 per cent in September 2001. Rao attributed the fall in offshore business to flat volume growth and flat billing rate, which stood at $18 per hour on quarter-on-quarter basis.

Also, the offshore employee strength declined 20 per cent sequentially to 798 in September 2002 from 988 in June 2002, chiefly because the company sub-contracts seven to eight per cent employees, depending on the availability of the projects.

Others

The company added 14 new clients during the quarter under review. While the client attrition rate was zero, the number of dormant clients during the September 2002 quarter was nil. MphasiS added eight clients in the financial services segment.

The top five clients contributed 50 per cent to the turnover, up from 45 percent in the June quarter. The top 10 clients contributed 69 per cent to the turnover, up from 63 per cent in the June quarter.

MphasiS` debtors days outstanding has gone down, while the same has gone up for Msource, the company`s BPO venture. Msource gives 90 days credit period, while it has to hire employees, impart training and then generate revenues. This results in high working capital and a decrease in cash balance. However, the operational cash balance has increased due to the software business.

Capex

Even as the management has made no major capex allocations for MphasiS in the near term, consolidation of its Mumbai operation (Andheri) at the end of the fiscal may require funds. The capex of $10 million or Rs 50 crore has been allotted to Msource.

Rao said that MphasiS is not planning major acquisitions but may acquire companies targeting niche segment or geography. It has plans to foray into the Chinese market.

Msource – BPO venture

Msource, the BPO venture of MphasiS, added three customers in the September 2002 quarter, of which one client is committed and may result in addition of 1,000 employees in the next 18 months. Business from second clients may also result in recruitment of 200 more employees.

The billing rate of the company has improved by 8.3 per cent to $13 per hour from $12 per hour on a quarter-on-quarter basis. Explaining the financials of the BPO segment, Rao said that in BPO business, when employees are hired in a quarter, they actually start contributing to the turnover after two quarter as there is a time lag due to hiring and training processes.

The company has not given a salary hike to its employees during the quarter under review and does not plan to implement a raise for the next six months.

Source: IRIS