This Indian company is a part of EDS, the services arm of technology major Hewlett Packard (HP), which acquired EDS in 2008 for $14billion. So HP through EDS, as at 30^th June 2013, held 60.49% stake in Mphasis and institutional holding stands at 30.77%. For the third quarter ended 31^st July 2013 (company follows Nov – Oct year ending), the company posted much better than expected numbers with consolidated net profit coming in at Rs.176.5 crore, up sequentially by 9% but YoY, it was down 8%. This was mainly on account of the 22% rise in employee expenses at Rs.968 crore (forming 75% of the total costs) and software development charges, which forms 18% of the total expense was up 36%. Its revenues rose 11% (YoY) and 10% (QoQ) at Rs.1405 crore. But thanks to the rupee depreciation, EBIT margins, despite the hike in costs was up 110 bps (YoY) at 14.7%.

HP is Mphasis biggest client and contributes around 40% to the company’s revenue. To mitigate the risk of depending on just one major client for business, linking its fortune with entirely that of HP, the  company has been talking steps to reduce this dependence and increase non-HP business known as direct channel. This seems to be paying off as ratio of Direct to HP sales has increased from 45:55 in Q3 2012 to 59:41 in current Q3. In current Q3, direct channel business grew 18.3% (QoQ) and HP business fell 0.7%. it added 16 new clients during the quarter of which 10 were from its direct channel. 74% of the company’s revenue comes from North America. Given the rupee fall and the company making the right moves to improve direct sales channel, the outlook is good for the company in coming months.