Analysts on Friday tore into MphasiS, downgrading the stock citing disappointing January quarter results, falling governance standards and lower disclosure levels. It had the firm?s shares plunging to a 52-week low of R448.40, down 28% from the previous day?s close.
The firm?s revenues for the first quarter of fiscal year 2011 were down 8.3% sequentially at R1,233.5 crore while Ebitda margins dropped by 290 basis points primarily due to pricing cuts. Channel revenues from HP, which owns majority stake in the company, declined by 10%.
Leading brokerage firm CLSA, in a note, said that it was cutting FY11 earnings projection of the company by 25-27% but added that the firm?s financial performance was now peripheral to ?the central issue of the shocking collapse in its governance standards.? CLSA added that there could be a deterioration in MphasiS? financials since HP?s interests held priority over minority shareholder?s interest. Speaking to FE, CFO Ganesh Murthy said there was no dilution in the governance standards of the company. ?The remarks on governance standards are inaccurate. Had there been dilution in governance standards, we would not have disclosed some write-backs. The fact is that results were not good. We don?t provide any guidance which is why there was a surprise,? he said.
IDFC, in a note, said it was surprised by the 9% revenue decline especially in a buoyant economic environment. Hiring, it added, was much slower and there were reduced disclosures levels on operating metrics. The firm has stopped reporting revenues by horizontal segments ? Application, ITO and BPO ? and has started reporting by verticals. The company has also stopped reporting details like revenues by geographies and billing rates.
Advising investors to ?stay away,? Elara Securities said it was cutting the firm?s FY11 topline by 12.5% and Ebitda margins by around 300bps leading to a cut in EPS by around 21%.