Mphasis Limited (526299) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. We will now commence the 32nd Annual General Meeting of Mphasis Limited over videoconferencing. The smooth conduct of the meeting, all the lines of the shareholders are muted. The audio and video of the speaker shareholders will be enabled once they are invited to speak at the AGM by the Chairman. The proceedings of the AGM are recorded and will be hosted on the website of the company after the AGM. Without any delay, I hand over this meeting to Mr. Davinder Singh Brar, Chairman of the Board of Directors, Mphasis Limited, for conducting the AGM proceedings. Over to you, sir.

Good morning, ladies and gentlemen. I welcome you all to the 32nd Annual General Meeting of the company, which is being conducted virtually. It's now 9 a.m., the quorum has been checked and is found to be in order and we'll commence the proceedings. With your permission, I would like to take the notice convening this Annual General Meeting as read. The members may please be informed that the statutory registers that is Register of Directors and key managerial personnel and their shareholding register of contracts or arrangements in which directors are interested, register of proxy, statutory auditors report and secretarial audit reports and certificate as required under CP Regulations 2021 and which are required to be placed at the AGM are available for inspection at the NSDL website under the tab AGM documents. I would now like to introduce the Directors present virtually for the meeting. We have Mr. Nitin Rakesh, Chief Executive Officer and Managing Director; Mr. Narayanan Kumar, Chairman of the Audit Committee; Ms. Jan Kathleen Hier, Chairperson of the Nomination and the Remuneration Committee; Mr. Marshall Jan Lux, Chairman of Risk Governance and Management Committee; Ms. Maureen Anne Erasmus; Ms. Courtney della Cava; Mr. David Lawrence Johnson; Mr. Amit Dixit; Mr. Amit Dalmia; and Mr. Kabir Mathur are present for the meeting. Mr. Pankaj Sood could not attend the meeting due to another engagement. I'm Davinder Singh Brar, Chairman of the Board and the Stakeholders Relationship Committee. I record that the authorized representatives of the statutory auditors, secretary and auditor and the scrutinizer are also virtually present in the meeting. I further record that all feasible planning and execution has been done for enabling electronic participation and voting of the members for this AGM. It is confirmed that the electronic voting is available throughout the AGM. I would now like to share with you the performance highlights of the company for the financial year '23 and the important developments. Good morning again, ladies and gentlemen. I'm delighted to welcome you to the 32nd Annual General Meeting of your company. Thank you for joining us today. Each time we have met we have had important matters to reflect on and this time, it is no different. A lot has happened in the past year but you will be happy to know that Mphasis has gone from strength to strength despite the complexities of the macroeconomic environment that we face today. Although the COVID-19 induced pandemic seems to be in the rearview, we are still dealing with the aftereffects of the disruption brought by it. Recent global events centered around persistent inflation, fiscal tightening, market volatility and geopolitical tensions signal a prolonged period of uncertainty ahead. These developments will lead to emergence of different economic realities, both for consumers and enterprises. Having fundamentally altered the way the world lives, works and interacts, the disruption has necessitated enterprises to invest in technology and embrace digital transformation. This promises to open up new market opportunities for Mphasis. With cloud and cognitive as the 2 pillars, the company has introduced and enabled the execution of a zero-cost transformation methodology, which allows the company to significantly reduce costs while accelerating digital transformation for its clients. With its Front2Back framework, the company is able to play across the entire technology value chain to deliver an integrated portfolio of consulting, design, development, with zero cost production support, along with service operations for better customer experiences, speed and agility at the reduced cost of ownership for the client. The company believes that its enterprise clients are in the early stages of an enormous technology investing super cycle, towards renovating every aspect of their technology infrastructure with cloud and data at its core, now being boosted by the use of artificial intelligence. Enterprises started their digital transformation journey about 5 years ago, when customers started demanding more. Since this is a journey that begins in the front end and that leads to the back end, the nature of spending has pivoted from maintenance and infrastructure services to transformation which enables clients to deliver superior service to their customers. While the pandemic accelerated the need and urgency for this transformation, we see currently enterprises lowering their strategic technology spends but these have not been paused in any way. The digital overhaul at enterprises is likely to continue despite the headwinds and is predicted to last for the next decade. This is indicated in global analyst reports where IT servicing spending is set to remain robust and grow over the next few years despite the short-term optimizations or hiccups in the current year. The company believes that transformation and change initiatives will continue to be the priority for clients focused around hybrid or multi-cloud infrastructure data modernization, consumer experience and cybersecurity and also, more importantly, artificial intelligence. Having made the right bets few years ago in technology-as-a-service, the company leverages this to support enterprises with its superior architecture, design and engineering capabilities to gain wallet share. While the macro uncertainty is expected to continue through the second half of 2023, tremendous opportunities are opening up with the emergence of AI to recharge the technology investing super cycle. In this scenario, the company is well placed to enable enterprises enhance their potential, maximize business outcomes and embrace a new era of innovation. I would now like to highlight the progress that we have made in financial year '23. In a dynamic environment, Mphasis continues to move forward from a position of strength. The company's varied industry solutions, marquee client base, earnings and cash flow helped to execute its growth strategy and insulate it from the market challenges. Even with the recent disruption in the U.S. banking system that impacted smaller community banks, the company's larger portfolio of clientele focused on organizations that are tightly governed remains protected from the resulting aftereffects. The clients' continued trust in the company is reflected in its annual growth numbers. The company's lead indicators are positive with strong net new deal wins at USD 1.3 billion, with 81% of them coming in new gen areas and they are broad-based across multiple verticals, including BFSI. The company has also made good progress in driving growth in newer verticals such as health care, transportation, airlines and high-tech besides strengthening its position in the banking segment. The earnings per share of the company grew at 14% for the year to INR 87.1 per share. Key strategic updates include; the company launched Mphasis.ai, a first of its kind business unit focused on transforming organizations by unlocking the potential of artificial intelligence to maximize business outcomes. This unit, one of the first in the industry seamlessly integrates AI capabilities into existing technology landscapes, enabling organizations to improve customer experience and enhance operational efficiency while minimizing disruption to the operations. With AI solutions leading the way in which enterprise clients are interacting with their end customers, the company recently announced its partnership with Kore.ai, the world's leading enterprise conversational AI platform and solutions company to bolster its offerings to transform our customer experience management and employee engagement for their enterprise clients. Mphasis has also pledged to eliminate carbon dioxide emissions from its facilities and operations to become carbon neutral by 2030. Carbon neutrality being an important driver of value creation, the company will aim to achieve its goal by implementing a well-defined energy management plan to minimize energy consumption, integrate renewable energy sources and implement energy efficient practices. The company has undertaken a high-level assessment for the potential impact of climate risk on its business and supply chain. It has also set a year-on-year target for the reduction of energy consumption by 5% and carbon footprint by 1% and is consistently working towards achieving the same. It has also established a governance mechanism to monitor and evaluate progress towards achieving the ESG objectives. Mphasis has moved up from the 69th to 75th percentile year-on-year in the S&P Global Dow Jones Sustainability Indices' Corporate Sustainability Assessment Annual Review 2022. The improvement in scores further demonstrate the impact of the company's integrated ESG efforts on sustainability. In Corporate Social Responsibility, CSR, the company's philanthropic activities are governed by the CSR Committee of the Board, which approves the CSR budget and monitors its implementation as per the CSR policy of the company. The company has committed its CSR spend towards achieving long-term societal benefit, which has been outlined in detail in the annual report. Mphasis F1 Foundation works across the focus areas of education, livelihood, inclusion and environmental sustainability. The program objectives are aligned with the United Nations Sustainable Development Goals 2030 of quality education, reduced inequalities, gender equality, climate actions, partnerships for the goals, good health and well-being to name a few. Since environmental sustainability was introduced as a key focus area within the company's CSR framework in FY '23, it partnered with United Way of Bengaluru to execute 3 projects: first, One Billion Drops, to conserve rainwater by constructing 1,200 percolation wells in the city of Bengaluru over the next 2 years. Second, Dommasandra Lake rejuvenation, the restoration of Dommasandra Lake in Bengaluru, a multiyear project that aims to improve water quality, enhance biodiversity and increase community ownership. Third forestation. A dense forest is being set up on an 11-acre plot, where 1 lakh dry deciduous tree samplings are being planted in the 228-acre Doddasagare Botanical Garden in Tumkur district of Karnataka. The company collaborated with the Indian Institute of Technology Madras, IIT Madras for short, for fundamental and applied research in quantum technologies by setting up a quantum lab. During the year, with projects under quantum computing in progress, over 200 hours of training in Quantum sciences was provided to 120 students and industry professionals, including some of the company's own employees. The Quantum centers work was showcased at a conclave at IIT Madras presided by Honorable Finance Minister Smt. Nirmala Sitharaman to foster greater industry academia collaboration. The company partnered with Museum of Art and Photography to pioneer inclusion in museums in India. This partnership includes infrastructure programs, structural work as well as interiors under the expert guidance of Diversity and Equal Opportunity Center. Under livelihood, the company focused on projects that improve employability and generate income. Magic Bus is one such partner, which trained 800 young students from underserved backgrounds in cloud computing to curriculum -- to graduate with the company's support. Currently, over 60 students have been placed in reputed companies with an average annual income of INR 3 lakhs. The company's CSR efforts underpinned by its focused approach to community and building a sustainable business remain fundamental to its strategy. The company is committed to create long-term value for its investors, stakeholders and the communities around it. Financial year 2023 was a year of growth despite the current macroeconomic environment. And I'm confident that we will continue to stay on course through financial year '24 and beyond, leveraging the opportunities that I mentioned earlier. You will be happy to know that the Board of Directors have recommended a final dividend of INR 50 per equity share for the financial year ended 31st March 2023, subject to your approval at this meeting. In the years ahead, I'm confident that Mphasis will continue to further scale, transform and stay ahead of the technology advancements and remain true to its purpose of being the driver in a driverless car. Despite the complex environment, the company has shown fortitude in not only navigating the present scenario but also planning for the path forward. I wish to thank our shareholders again for their continued trust and association with the company and also our customers for their support and confidence. Mphasis is a company with a strong heritage and a very promising future. I wish all of us the very best as we carry out our individual responsibilities in building future success together. Thank you. I now request Mr. Subramanian Narayan, Company Secretary to read the auditor's report and brief the members on the voting process to be followed at the meeting.

Thank you, Chairman. There are no qualifications, observations or comments in the auditor's reports, which are required to be read at the meeting. With the permission of the members present, I take the auditor's report as read. As per law, the company has provided electronic voting facility by means of remote e-voting. As AGM is held virtually, the option for physical voting at the AGM is not provided this time. However, the company has enabled e-voting facility during the AGM for members who have not voted through remote e-voting and are present at the AGM and are otherwise barred from doing so. The icon for e-voting is available on top of the screen under the e-voting tab, which will redirect the members to the e-voting platform of the NSDL. The e-voting facility would close after 30 minutes from the conclusion of this AGM. There will be no proposing and seconding of the resolutions as the meeting is held virtually. The shareholders who have registered themselves as speakers, will be allowed to speak at the meeting and such registered speakers may participate in the discussion on the items of business once invited by the Chairman. The query shall be answered after all allowed speaker shareholders have raised their questions. I now request the Chairman to resume the proceedings. Thank you.

We now take up item numbers 1 to 6 set forth in the notice. We will open the lines for questions from the shareholders after all the items of business are tabled at the meeting. Item #1 is to receive, consider and adopt the audited financial statements for the financial year ended 31st March 2023. Item #2 is to approve declaration of final dividend on the equity shares. Item #3 is to reelect Mr. Amit Dixit as a Director who retires by rotation and seeks reappointment. Item #4 is to reelect Mr. Marshall Jan Lux as a Director who retires by rotation and seeks reappointment. Item #5 is to reelect Mr. Kabir Mathur as a Director, who retires by rotation and seeks reappointment. Item #6 is to reappoint statutory auditors from the conclusion of this Annual General Meeting until the conclusion of the 37th Annual General Meeting and fix their remuneration. The text of the ordinary resolution along with explanatory statement wherever required is provided in the notice circulated to the members. May I request the members to treat the resolutions as read. I now invite the speaker shareholders to raise their questions they may have on the items of the business of the meeting. I request the members to confine their queries strictly to the items of business of the meeting. I also request the moderator of the meeting to enable the speaker of shareholders in the order of their registration. In the interest of time, I request the speaker shareholders to restrict their questions and views to a maximum of 3 minutes. And I now hand over the proceedings to the moderator for the speaker shareholders to raise their queries.

Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] We invite our first speaker member, [ Mr. Santosh Kumar Saraf ] to accept the prompt on your screen, unmute your audio and video and ask your question. Ladies and gentlemen, we will wait for a moment while Mr. Saraf unmutes his audio and video connection.

[Foreign Language]

We now invite our speaker #2, [ Mr. Ashok Chakravarti. ] Request you to please accept the prompt on your screen and mute your audio and video and ask your question. Mr. Chakravarti, could you please unmute your audio and video and ask your question. Ladies and gentlemen, we will wait for a moment while Mr. Chakravarti unmutes his connection. Sir, we can see you. Could you also unmute your audio, sir? Your mic is muted. We can hear you, sir. Please go ahead.

Sir, my name is S. Ashok Chakravarti. I'm speaking from Bangalore. Sir, I support all the resolutions proposed by the management and Chairman, sir. And I here also, once again, I thank the management and secretary department and Secretary for having sent the annual report to me sir in advance, sir. Sir, I'm very happy to note that our market share price has gone up nearly 30% from its low of INR 1,661 as per folio #140, sir. And thank and congratulate the management in this regard, sir. However, please inform any strategies to reach all-time high of INR 2,700. Since recession fears have gone away sir, I will be expecting more and more from the management, sir. And next point, I wish to inform you is, as per folio #100, our company reserves are nearly INR 77,464 million for a share capital of INR 1,884 million, sir. Hence, I request you please consider bonus issue, a liberal bonus issue so that the share price can reach their all-time high of INR 2,700. And more than that, sir and I'm not restricting it to INR 2,700. If the management and if the market goes up very well, as now, the market is at the all-time high, except some IT sector also, it is recovering very much in the recent past. So I wish the management to expect to do -- I am expecting management to see, consider bonus issue or at least any other rewarding measures to the shareholders, market-oriented measures so that our share price can go up to all-time high and more than that, sir. And that is why I'm not giving any infinite point, sir. One more last point, last not the least, I would have been very happy as my earlier shareholder has suggested, if the meeting had been conducted, physical-cum-video meeting, sir. So all the people can attend the meeting at the same time. As a Bangalorean, I would have met -- I would meet all of you in person, at least after several years or after many years of COVID or some very different reasons, sir. Please consider that hybrid meeting, as suggested by earlier predecessor shareholder, Mr. Santosh, sir. I wish you congratulations and wish you all the best, sir.

Thank you. Our next speaker member. [ Mr. P. Jaichand ] had registered, however, has not connected. We will, therefore, move to our speaker #4, that's Madan Lal Patni. Mr. Patni, we request you to please accept the prompt on your screen, unmute your audio and video and ask your question. Mr. Patni, we can see you have connected. Could you please unmute your video and audio?

Hello?

[Foreign Language] You may ask your question.

[Foreign Language] Sir, I'm connected with this company since public issue [indiscernible]. I met all the directors, this shareholders. [Foreign Language] He always assured you are our valued shareholders, you are the owners of the company. We will do for whatever you say. In one AGM, I requested him, [Foreign Language] sir, we cannot about this advertisement expenses. He told, no, company will be, this STD expenses expensive for the company will be, so sir [Foreign Language] I'm ready, whatever will say in sitting. [Foreign Language] Then Mr. Banerjee, Mr. Menon, Mr. Subramanian, he attended the meeting, we sort out because [Foreign Language]. It is a bread and butter. [Foreign Language]. You're the neutral. [Foreign Language]. You take the proper decision. [Foreign Language]. We're ready. [Foreign Language] SEBI has given so many options. We know it. [Foreign Language]. Only you give the order to Mr. Subramanian sir [Foreign Language] And matter was solved. It was a big, big issue. [Foreign Language]. Otherwise there is no problem. [Foreign Language]. We want, a genuine solution should come. [Foreign Language]. This is my request to Sri. Nitin Rakesh ji. [Foreign Language]. Matter is in same place, no progress. [Foreign Language]. So let it be continue. [Foreign Language]. We're ready to fight. [Foreign Language].

Mr. Patni, sorry to interrupt you. Sir, could you please finish your question a bit faster because we have to finish -- we have limited time for the Q&A session.

Any reply from management side?

Sir, they'll respond after all questions are, done, sir. The responses will be given after all the questions are completed.

Yes, I want to hear to Mr. Nitin Rakesh ji. [Foreign Language] Only 1 second.

Yes, Madan Lal ji, we will address your query once all the questions are covered. We have noted your question. We will address your query. Yes.

[Foreign Language]

[Foreign Language]

[Foreign Language] Take independent opinion. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Thank you very much, sir. Ladies and gentlemen, that was the last question. I hand the proceedings back to Chairman sir. Over to you.

Okay. Thank you, shareholders, for your question and appreciation for the company's management and the company's policies. The questions raised by Mr. Saraf pertained to technology and the impact of artificial intelligence. So the impact of artificial intelligence as we see will be profound in the business operations going forward. In this context, as early as 2019, Mphasis team recognized the potential of AI to drive significant changes in the business landscape. We developed machine learning platforms and incorporated GPT and GPT-4 into our own algorithms. This started developing into a nucleus of the future AI, the DNA of the company. The launch of business unit, Mphasis.ai is exactly focused on transforming organizations, as I said in my speech, by seamlessly integrating AI capabilities into existing tech structures and landscapes of our clients without disrupting their present operations. And this is essentially to enhance the contact of the customers with their clients and also to improving productivity and operational excellence within the system. The company is looking at areas to convert it into a business, it into a profitable business. And some of these are being examined by this unit in terms of development cycle and deployment cycle of the new cloud initiatives that the companies are undertaking, maintenance and operations and business process outsourcing. These are the 3 or 4 areas where we are going to seriously apply AI for our clients to get the outcomes that I just mentioned for the clients. We also have tied up with other companies -- leading companies such as Kore.ai which is into conversational AI business. To implement their technology and their proprietary technology with multiple clouds as we have built a reputation now and also expertise to implement the AI into the contextual landscapes of different clients. And that is the kind of service we will provide through this unit. You next question was regarding number of clients that we -- new clients that we had in the last year, that was #13, 1-3 clients were added. This information is actually regularly shared in our management discussion and analysis reports. Next was regarding women and empowerment of women and giving women the increasing foothold in the company's affairs. As at the end of March 31, we had about 9,767. That was the exact number out of a total number of 37,680, which is, 35% of the population is women employees. We have training programs, special counseling and career opportunity programs that we have in the company for empowering women. But our goal is to increase this percentage from 35% to 40% in the next 3 to 4 years. Regarding renewable energy, 51% of our consumption is sourced from solar and hydel power, so that is what we call as renewable energy. That was the question. Your last question was regarding a hybrid meeting, which was also repeated by Mr. Chakravarti later that we should have a hybrid meeting where both physically, we meet shareholders in Bangalore and also have the facility for virtual. I think it's a good idea. We'll examine how this can be implemented for the next AGM. And we were also thinking because there have been requests from various shareholders for a physical meeting. But on the contrary, many, many shareholders are now saying that virtual meeting is more accessible for many shareholders. They don't have to travel and they would prefer to continue with the virtual meeting. So the hybrid idea, let's see if we can implement next year at the AGM in Bangalore. Mr. Chakravarti mentioned about company reserves and the share capital and requested for a liberal bonus or any other reward in which the company's share price will go up because if you give bonus, I think the company's share price fundamentally will go up if we keep performing well in the marketplace. That is the core of it all but we note your request. I think the Board will deliver it, whether the company is ripe for a bonus or we also did buybacks. As you know, we have done 2 buybacks of shares. So we take your request onboard. But I think the Board of Directors will review this and then only we can communicate something more tangible. Mr. Madan Lal Patni's -- I think this case has been brought to the AGM now and it's a physical share dispute. The company had to file an interpleader case because both the parties were not coming for any settlement and we're not willing to meet either. So now both of them are in the court and the company has an interpleader case at this stage. I feel for the anguish that you expressed. The court cases take long to decide in this country. But as per SEBI regulations, there is no such provision with multiple claims for the same shares can be entertained by the company unless there is a court order. So, I mean, Mr. Rakesh will be happy to meet with you as you requested. But I think he's also -- the cases being in the court at the moment, tied in whatever else he can do. But I will request the Company Secretary and the CEO to meet with you, if that will help, whenever they are next in Bangalore together. And so that, I think was all the questions that we had. If there is anybody else who has raised a question on Mr. Jaichand is on the line because he had registered, I'd be happy to answer. Otherwise, I think we can move on with the meeting process.

Sir, Mr. Jaichand is not connected. You may proceed, sir.

Okay. So I believe now that we have answered all the queries raised by the shareholders. And if there are any further queries, they can write to the company at [email protected], which will be responded to you by the management. This concludes the business of the day and I take this opportunity to thank all the shareholders present here for their kind cooperation, support and valuable time. The combined results of the votes cast through remote e-voting and e-voting during the AGM on all the resolutions would be uploaded on the company's website and will be intimated to the stock exchanges as per SEBI listing obligation and disclosure requirements, by tomorrow. I wish the shareholders all the very best and good health and hope to meet you in person at the next available opportunity. I now declare this meeting as closed.