The tech sector continues to be in the eye of the storm, and individual stocks have seen a sharp cut in trade today. However, Motilal Oswal has maintained a Buy rating on MphasiS with a target price of Rs 3,400, implying an upside of about 47% from the current market price of Rs 2,310. The brokerage added that while AI-led disruption is a concern, it may restrict near-term multiple re-rating rather than derail business fundamentals, and it values the stock at 26 times FY28E EPS estimates to arrive at the Rs 3,400 target.
In its company update, the brokerage said core execution remains steady despite uncertainty around artificial intelligence, and that large deal momentum, stable demand conditions, and improving visibility support growth. Motilal Oswal Financial Services stated that over the last four quarters, the company has secured around $2 billion in total contract value wins, with conversions expected to aid near-term growth.
Motilal Oswal on Mphasis: Core execution steady amid AI uncertainty
Motilal Oswal said it met the CEO of MphasiS to discuss demand trends, large deals and the balance sheet. According to the brokerage, “Management’s key message was that the current AI debate is running ahead of business reality.”
The report said that while AI is expected to change service delivery over time, it could also create new opportunities across enterprise IT services. Motilal Oswal noted that scaling AI in large enterprises requires cleaning up legacy systems, simplifying architectures and improving data readiness.
The brokerage added that conditions remain stable and are supported by continued large-deal activity. It stated that over the last four quarters, the company has secured around $2 billion of TCV wins, and recent deal conversions are expected to support near-term growth.
At the same time, Motilal Oswal cautioned that concerns around terminal value and AI-led disruption “may restrict near-term multiple re-rating.” However, it reiterated its Buy rating and maintained the target price of Rs 3,400.
Motilal Oswal on Mphasis: Brownfield realities may temper AI’s immediate impact
Motilal Oswal Financial Services said management differentiated between AI success in consumer or AI-native environments and constraints in brownfield enterprises. The report noted that “enterprise deployment cycles are elongated by integration with legacy systems, governance layers, regulatory controls, and strict security policies.”
The brokerage further said that in many large client environments, vendor AI tools cannot be independently deployed, with clients preferring sandboxed and internally governed AI instances. As a result, it said, “AI today is largely augmentative,” improving productivity and efficiency rather than immediately substituting revenue streams.
Motilal Oswal added that management drew parallels with the cloud transition post-2008. It said that initial disruption fears during that period ultimately expanded service demand through migration, modernization, security and hybrid architecture workstreams.
The brokerage indicated that AI-led changes could follow a similar path, where modernization and architecture simplification create incremental work opportunities before any material displacement occurs.
Motilal Oswal on Mphasis: Demand stable, tracking around 15% growth
According to Motilal Oswal, management described the demand environment as stable, with spending supported by cost optimization, selective transformation programs and vendor consolidation.
For the current fiscal year, the brokerage said the company is tracking around 15% growth, excluding a one-off vertical headwind in logistics.
Motilal Oswal also noted that recent large-deal wins are expected to contribute to revenue ramps in the coming quarters. However, it added that the pace of transformation-led spending remains gradual, reflecting elongated decision cycles in large enterprises.
The brokerage said that sustaining growth will depend on continued deal replenishment rather than isolated mega-deal spikes, as large deals typically provide an initial uplift followed by normalization as delivery stabilizes.
Motilal Oswal on Mphasis: Execution agility seen as mid-tier differentiator
Motilal Oswal said management emphasized that competitive advantage for mid-tier firms stems from execution agility and senior leadership involvement in large pursuits. The brokerage wrote that “Leadership engagement in $200–500m deal cycles allows flexibility in solution design and commercial structuring.”
It contrasted this with the more institutionalized and process-driven approaches typical of large-cap peers. While that model may enhance win probability in complex situations, Motilal Oswal said management acknowledged “replicability/bandwidth constraints if deal volumes accelerate materially.”
The brokerage added that leadership-driven intensity can be harder to scale if volumes rise sharply.
According to Motilal Oswal, this balance between agility and scalability will be important as the company pursues larger opportunities while maintaining execution standards.
Motilal Oswal on Mphasis: AI opens door for app modernization and run deals
Motilal Oswal said that historically, the company’s revenue skewed toward application development, with maintenance or run work forming around 40–50% of revenue.
The brokerage noted that AI capabilities are enabling entry into larger run and maintenance deals that were previously cost-intensive, which could improve revenue stability and annuity characteristics over time.
At the same time, it said scaling AI in large enterprises typically requires cleaning up legacy systems and improving data readiness, which naturally creates incremental modernization demand alongside maintenance work.
However, Motilal Oswal cautioned that margin outcomes will depend on delivery efficiency and automation capture versus pricing resets.
Motilal Oswal on Mphasis: Balance sheet and structured deal optics
Motilal Oswal said investor questions centered on rising contract liabilities and working capital movements associated with structured large deals.
Management characterized these arrangements as a measured strategy to secure long-duration revenue streams, according to the brokerage.
The CFO referenced historical industry precedents where similar approaches produced attractive returns, Motilal Oswal said.
The brokerage added that management argued the balance sheet assessment should focus on cash flow resilience and return metrics rather than absolute leverage levels in isolation.
Conclusion
Motilal Oswal has retained its Buy rating on MphasiS with a target price of Rs 3,400, implying an upside of about 47%. The brokerage’s analysis rests on steady execution, strong large-deal momentum of around $2 billion in TCV over four quarters, stable demand trends and improving revenue visibility. While it acknowledged that AI-led disruption concerns may cap near-term valuation expansion, Motilal Oswal said sustained deal wins and disciplined execution support its positive stance.