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In Focus: eMphasiS on Growth

EDS deal to open up opportunities for MphasiS in software services and BPO biz

MphasiS BFL has just logged on to a high-growth trajectory in the IT space. With Electronic Data Systems (EDS) acquiring a majority stake in MphasiS BFL, the latter is all set to chart an enhanced growth path. The acquisition will be beneficial for both the companies with EDS gaining from MphasiS' strength in offshoring business and getting better equipped to compete with its peers - IBM and Accenture - on offshoring as well as large application/infrastructure deals.

On the other hand, the entry of EDS is likely to open up substantial opportunities for MphasiS, both in software services and the BPO space. EDS' expertise in the BPO space will complement that of MphasiS, as the two entities operate in separate domains. While EDS operates in the areas of human resource outsourcing, CRM and public sector health care; MphasiS specialises in customer care, mainly in banking, financial services and insurance (BFSI), apart from logistics, retail and telecom. The two companies also have lined up several aggressive plans.

The company is planning to increase its headcount from 11,000 to 20,000 by the year-end to cater to the growing number of clients.

Though the merger is on a positive note, there are some areas of concern. Although, operations as a single organisation will create a force to reckon with, there can be some setback for MphasiS as it might lose some customers aligned with IBM (EDS's key competitor) and the ambiguity over management issues. MphasiS reported a revenue of Rs 940 crore in the year ended March 31, 2006, and net profit of Rs 149 crore.

Though the last two-three quarters have not been so promising for MphasiS, yet the company is likely to do healthy business in the future. One may see substantial gains in the long-term as the stock will be re-rated.