MUMBAI: Mid-size software services firm Mphasis is pulling back on its domestic BPO business as it looks to raise margins that have touched an all-time low, people with knowledge of the matter told ET.
Bengaluru-based Mphasis has been struggling over the last few years as its major shareholder Hewlett-Packard passes on less work to it and its mortgage transaction business slowed on weak US home loan demand.
In its latest quarter, Mphasis reported operating margins of under 15%, the lowest in the company’s history. As a part of a drive to get the margins to higher level, Mphasis is pulling back on its domestic business.
“They have been trying to exit unprofitable contracts and are not bidding aggressively for new business.They may look to exit it all together, but in the domestic sector, there is limited opportunity for a sale,” said one of the people quoted earlier.
When asked about the pullback in BPO, an Mphasis spokesperson said the company does not comment on rumour and speculation.
Though the company does not specifically break out its domestic BPO revenue, Mphasis’ results have been showing signs of the pullback in the BPO segment.
For the quarter ended December, revenue from customer service dropped to Rs 81.3 crore from Rs 85.7 crore in the previous quarter. Revenue from service and technology help desk offerings dropped to Rs 27.9 crore in the same period from Rs 43.8 crore.
“The domestic market still has challenges on the margin front and other players have rationalized. The domestic contact centre business is not their focus, their focus is IT and the transaction processing BPO. The pullback here is strategic, to focus on growing the more profitable parts of the business,” a second person said.
Mphasis joins a set of companies that have pulled back from the domestic market. BPO firms such as FirstSource and Hinduja Global Solutions had pulled back from the market citing weak profitability.
Though some of the players are now stepping back due to improving sentiment and new business areas such as e-commerce and the nascent government sector.
Source: Times of India