INTERVIEW: Mphasis CEO explains why he is hiring fewer people even when a lot of employees are leaving the firm

• The midcap IT firm’s net profit grew marginally by 0.5% quarter-on-quarter to ₹341 crore in September quarter.
• The company delivered 9.8% quarter-on-quarter direct revenue growth in the quarter. It believes no other peer has given 30% organic growth in the first half of FY22.
• “I am of the school of thought that lack of supply or lack of adequate talent is as much a headwind to us as it is a tailwind,” said Nitin Rakesh, chief executive officer at Mphasis.

Bengaluru-based midcap information technology (IT) company Mphasis seems to be unaffected by the industry-wide issue of attrition, which is bothering IT giants like Tata Consultancy Services (TCS) and Infosys. Demand for digital transformation is booming and so is demand for techies.

As a result of this, a huge number of employees are leaving IT organisations for better opportunities.

On the other hand, the management of Mphasis is pretty confident of surpassing this phase without stressing much about the rising attrition rate.

"I am of the school of thought that lack of supply or lack of adequate talent is as much a headwind to us as it is a tailwind. Because, you know (when) our clients are not able to find the talent, they can't go (and) execute the project...so shortage of supply is always a good thing for our business," said Nitin Rakesh, chief executive officer at Mphasis in an interview with Business Insider.

The midcap IT company believes that their trained workforce is the reason behind successful completion of deals and they want to focus on skilling employees.

“Everybody at the same time all over the world decided that they need more tech. And, you know, unfortunately, we can't put up, you know, plants and start manufacturing people. So we have to go and find those people and create that talent. So I think we have set up our own talent factories,” said Rakesh.

Besides, Mphasis does not reveal its attrition rate like other IT firms but it mentioned the rate has increased in the September quarter from what it was last year. The company even hired a lower number of employees in the September quarter compared to the last few quarters as it was not very much worried about the attrition rate.

“We hire to demand. In fact the numbers are in line with business,” said Rakesh.

Further, Mphasis has not set a particular target for hiring a set number of employees and wishes to hire as per client demand. This is contrary to the industry trend of hiring an increasing number of employees with the growing demand for digital transformation.

The company’s strong and consistent financial performance in comparison to its peers shows why it remains so unaffected and focused towards its growth.

“Both quarters in a row, we've actually delivered market leading growth in the direct business. I don't think there is any other peer of ours that has delivered 30% plus organic growth in the first half of FY22,” said Rakesh. Mphasis’ direct segment, which caters predominantly to sectors like banking, diversified financial services and insurance accounts for 50% of its revenue. Not to forget, BFSI is a core client base for most IT firms as there is accelerated demand for cloud migration, software products for digital banking, cybersecurity and so on.

Tech investment supercycle will last for next three to five years

COVID-19 has enabled work-from-home globally and IT firms are trying hard to provide seamless customer experiences from remote locations with accelerated demand for digital transformation and cloud adoption. Undoubtedly, IT companies have benefited from this phase with IT stocks rallying more than the benchmark index.


In the September quarter, the IT firm’s revenue grew 6.6% on a quarterly basis to ₹2,869 crore while profit grew marginally by 0.5% to ₹341 crore.

Further, the company is bullish on delivering revenue from its core BFSI segment, which contributes about 50% revenue for the company.

“Almost (from) 5-8 quarters in a row, or even when our peers were actually not growing BFSI by 2% 3%, we were growing at double digits, now that they're growing at double digits, we're growing at 25%. So I think this is something that we will continue to focus on, because that is our whole market. But having said that, we also seeded new markets and new engines of growth,” Rakesh told Business Insider.

Moreover, analysts believe the company will continue with its industry leading revenue growth.

“We believe the company will report an industry-leading double-digit revenue growth rate over FY22E-FY24E [earnings in the next three financial years],” said a report by Reliance Securities.

Further analysts at Phillip Capital said that, “With a strong H1 [first half of FY21] growth, strong deal flow and pipeline, we believe direct business is well poised for industry leading growth again in FY22.”

ALSO WATCH:
SEE ALSO: IRCTC stock recovers losses as government reportedly withdraws decision on convenience fee revenue share

Shaktikanta Das to be RBI Governor for three more years till December 2024