MphasiS may hire more Americans for tax sops

will first evaluate costs and client willingness to increase onsite work

MphasiS Ltd, the Bangalore-based IT services firm that is now a part of international technology giant Hewlett-Packard, may add more Americans to its workforce to avail the tax breaks announced by US President Barack Obama on February 25.

Speaking to DNA Money, Ganesh Ayyar, chief executive officer, MphasiS Ltd, said, "The option of increasing Americans in our workforce is open to us in view of the recent announcements by US authorities. However, we will have to factor in many other things before that, like onsite cost versus margins. We also have to evaluate client willingness."

However, an analyst tracking the sector felt IT companies talking of recruiting more Americans and actually walking the talk were two different things. "Putting more people onsite will send their costs soaring. Moreover, clients might not be willing to pay that much," he said on the condition of anonymity. The analyst, however, added that MphasiS earns 94% of its revenues through time and material (T&M) contracts and so, is in the position to renegotiate contracts if onsite postings increase.

Of the 29,988 employees the company has, 1,721 work onsite, with the rest being offshore. As much as three-fourth of the company's revenues comes from offshore work, with onsite contributing the rest. MPhasiS' billing rate for onsite is about $71 per hour and for offshore, $17. The US region contributed 67% to its revenues in the first quarter (November-January) of financial year 2008-09. MphasiS follows a November to October fiscal. In Q1, Europe, India and the Middle East and Asia Pacific accounted for 22%, 7% and 4% of revenues, respectively.

Its parent Hewlett-Packard, through its acquisition of US-based EDS Corporation, contributed 45% to MphasiS' revenues in the first quarter. "This is the first time we have taken into account business from Hewlett-Packard in our books after the acquisition. We will definitely look to increase its contribution further, because the EDS-Hewlett Packard combine too has grown five times in revenues. So, the relationship holds huge potential for us," said Ayyar. MphasiS gets outsourcing and infrastructure solutions projects from Hewlett-Packard.

Meanwhile, in these times of price negotiations from clients, the company may look at increasing the work hours of employees for cost benefits. However, Ayyar said, "Nothing of that sort is in practice at the moment." MphasiS added 9 new clients in its first quarter, including six through the Hewlett-Packard relationship. The company's revenues stood at Rs 9,77.7 crore in the first quarter of FY09, compared with Rs 8,94.72 crore in the quarter before that. However, the BPO business fared badly due to project cancellations from a few clients and also due to the appreciation of rupee against the pound. MphasiS earns 43% of its revenues from the banking, financial services and insurance sector, with technology, manufacturing and retail, and telecom providing 25%, 13% and 9%, respectively.

Amit Tripathi/ DNA-Daily News & Analysis Source: 3D Syndication

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