Mphasis Q4: Steady Revenue and Profit Growth; Margins Remain Flat | NDTV Profit - video Dailymotion

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00:00Emphasis, it's a morning of IT company result and the reviews.

00:05The top brass is talking about Q4 earnings and more.

00:10So I think, firstly, we're very pleased with the fact that we've had a pretty decent Q4

00:17from a sequential growth perspective. We delivered two plus percent growth,

00:21led by two of our biggest verticals, BFS and TMT. And I think we've called out for banking and tech

00:27to lead the recovery in the Q4 numbers. We were focused on recovery in the back half of FY24.

00:35It took a little bit longer, but I think we are very pleased with the way we've delivered that.

00:40There is early signs of at least some discretionary spend, shorter term deals,

00:45short bursts, short duration projects. That's always very heartening to see.

00:50There are also some pickup in activity in pockets of banking that was quite muted last

00:56couple of years around capital markets. I wouldn't say that it's a rolling back to spend

01:01model yet, but definitely appetite is higher. And I think a little bit of that fatigue from

01:07overspending in 21 and 22 seems to have gone away. And early signs of capital market opening up is

01:13definitely giving them comfort. Second, I think we're very pleased with the fact that what seemed

01:20to be a very big hype area around AI and Gen AI, early part of calendar 23, is now actually

01:26converting into not just pipeline, but also deals. So opening up a lot of new pockets of spend,

01:33how do you embrace tech to take cost out? How do you embrace tech to transform operations,

01:38customer experience, developer productivity, compliance monitoring, KYC? So lots and lots

01:45of real credible, tangible deal constructs that are not just being talked about, but actually are

01:50in the pipeline and are in the winds. And I think that opens up a whole new addressable market for

01:55us. So we're very pleased with that as we go forward. The fact that these shorter term deals

02:01are showing some revival also gives us a little bit more confidence on revenue recovery, because

02:05a lot of these deals can be consumed within the year versus having a long duration deal where

02:11ramp up takes six to nine months. We've seen better conversion of previously sold TCV to

02:17revenue as well this quarter. So that also helped the overall book of business for us.

02:22I think the TCV number is a little bit muted, driven partly by the fact that there is a bunching

02:27up of deals that happened early in the year. And secondly, the zero to 10 million deal category

02:32has actually been the highest TCV number for us in a few quarters in Q4. But on the flip side,

02:38that gives us confidence from a revenue growth standpoint as well. So I think overall, pretty

02:43pleased with the way the team executed in a still tough macro environment because uncertainty

02:48creates inaction, still underplay, lots of counter-wheeling forces between macro and

02:53inflation and interest rates and geopolitics. But the focus has really been on the micro and

02:59just driven by in-account actions, wallet share gains, and moving very aggressively into these

03:05new tech areas. Also pleased with the margin performance, and Manish can talk a little bit

03:09more about that. I'll talk about margins in a minute, but let's actually, why don't you go,

03:14why don't you talk to me about margins before we go into TCVs in a little more detail?

03:18All of what Nathan said did require investments and we were able to deliver expansion in margins

03:27despite that. On a reported basis, the margins were 14.9%, but if you are just for acquisitions,

03:34that's close to 16%, which is an expansion over the last year and over the few quarters that we

03:40were reporting. Especially happy with the fact that all of this came with the ability to ensure

03:50that we continue investing in areas which will give us revenues in the future, which means

03:55investing in working with the clients, proof of concept and stuff like that. Other than the margin,

04:01I think cash is king, as they say, and we had a very strong cash generation quarter,

04:06116% of BAT. When you think from a year-on-year perspective, that's 150 million growing to 237

04:15million, more than 50% growth in the cash generation. Very happy with the cash and EBIT

04:21performance. I think the silver lining or rather even bigger news is the fact that EBITDA expanded

04:27to 18.7% from 18% last quarter. All right, noted. So, I guess no disappointments at least

04:36internally. A couple of areas I want to talk to both of you about is TCV and I'm sure both of you

04:42are expecting this to be my second question. While some of your peers have closed out at record

04:48values in TCV, with your company specifically, there's a decline in deal wins, not just as

04:54compared to your peers, but even if you compare it to your average historically. What is the reason

05:01for that? So, I do understand that conversions, there is a delay, decision-making is slow,

05:06values of deals, like you said, is also in the smaller band. But why is there a decline in the

05:14number of deals you're closing out? I wouldn't say there's a decline in the number of deals.

05:18There's definitely a softness in the overall contract value reported. So, I think the first

05:23thing to notice, we're not including any renewals in our deal numbers as we report them and that's

05:28been consistent for us for the last, you know, as many years as we reported it. So, there is no

05:33lumpiness of year-end renewals or first quarter calendar year renewals for us. Second, I think

05:39we had a pretty big bunching up of deals earlier in the financial year. We had a record quarter of

05:44700 million plus. As that pipeline got consumed, I know the rest of the pipeline obviously had to

05:50move that through the stages. Third, I think the duration of deals and zero to 10 million,

05:55you know, kind of having the highest contribution this quarter versus, I would say, the previous

06:01four quarters or six quarters also is a sign of a little bit of recovery, as I mentioned.

06:07The metric to note though is the pipeline is actually still fairly healthy. It's up 5%

06:11sequentially and it's a pretty broad-based. Even in our banking business, which was obviously a

06:16little bit stressed last 12 months, the pipeline is up almost 19% on a sequential basis. And our

06:23non-top-10 account pipeline is also up. So, I think all the leading metrics are pretty decent.

06:28We will obviously continue to focus on large deals. We had one large deal in Q4,

06:33but 15 large deals for the year. That definitely gives us a runway to consume those large deals

06:38and convert those to revenue. And hence, there is no, I wouldn't say, concern on any short-term

06:44impact on revenue growth potential because of the Q4 TCV number. So, pipeline is great. I think the

06:50conversion to pipeline, you know, yes, it's been a little bit slower because of seasonality.

06:54Client budgets were a little bit uncertain. Now, we are starting to see that pick up as well.

06:58Activity is actually very, very healthy in most of our units and in most of our markets as well

07:03from a geo perspective. So, I think that's the way to think about there are two or three nuances

07:07on the TCV front, as I just mentioned.

Mphasis Q4: Steady Revenue and Profit Growth; Margins Remain Flat | NDTV Profit

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