MphasiS bows to market pressure...Unveils new disclosures

MphasiS has decided to reveal its financial numbers under the revenue heads as it used to do in the previous quarters. IT has also decided to publish data on average realised rate that it earns for onsite and offshore work. The company, which is in the midst of a corporate governance controversy, had stopped releasing this data since the last four quarters. It may be recalled that lack of adequate disclosures by MphasiS in the first quarter's financial statements had sent the company's shares sharply lower last week. The stock fell from Rs 627 a month ago, to Rs 450 as of Thursday's close on the BSE.



MphasiS has posted a 20% fall in net profit and an 8% fall in revenue for its first quarter ended January 31, 2011. Analysts said the steep drop in the bottomline was due to discounts given to the parent company, HP. The US technology major is Mphasis' largest customer, contributing 59% to its sales. Reports suggested that MphasiS' second largest shareholder, Baring Private Equity Partners put pressure on the company to be more transparent in its financial statements. Baring holds 7% stake in the company.

"We have received requests from investors and analysts to continue to publish tower-wise results and average realisation rates. MphasiS had discontinued the practice of publishing this information in view of the revised organisation structure of MphasiS, which was effective from Q1 CY2011. In the light of analyst requests, the company will continue to publish this information for the next four quarters," Mphasis said in a statement.

The revised group financial overview published on Thursday shows that the company’s onsite average rate realisation for information technology outsourcing (ITO) in the quarter ended January 31 has fallen to US$67 per hour from US$70 per hour a year before. Its offshore average realisation rate for application services during the same period has dipped to US$19 per hour from US$23 per hour.

The figures disclosed showed that application services had the largest drop in revenue and gross profit, falling 9.5% and 28%, respectively. IT outsourcing (ITO) had the least drop, with a 6.4% fall in revenues and a 3% fall in gross profits.

MphasiS said that the 8.5% sequential decline in its dollar revenues in Q1 was 3.5% due to fewer working days in the quarter, 3% due to a milestone-related payment in its previous quarter, 1% because of currency fluctuation, and only 1% due to the pricing reduction.