Mphasis deal momentum and upgraded FY27 growth guidance support Anand Rathi’s BUY thesis
Mphasis Ltd.
BUY
₹2,520
₹2,444.35
₹3,079
22.18%
Investment View and Guidance Upgrade
Anand Rathi Research’s November 8, 2026 result update on Mphasis retains a BUY rating after a strong Q2 FY27, driven by broad-based revenue growth, large-deal ramp-ups and improving deal conversion.
The broker considers Mphasis a mid-cap outlier because management upgraded FY27 revenue growth guidance to low double digits from high single digits to low double digits previously. The upgrade reflects strong H1 FY27 execution, a record pipeline and confidence that growth momentum can continue in H2 despite macroeconomic uncertainty.
Q2 FY27 Financial Performance
Mphasis reported Q2 FY27 revenue of $486 million, up 3.3 per cent QoQ in constant currency and 9.7 per cent YoY in constant currency. This was its strongest sequential growth in three years. Direct revenue rose 3.5 per cent QoQ and 11.3 per cent YoY in constant currency.
| Business segment | Revenue contribution | QoQ growth in constant currency |
|---|---|---|
| BFS | 53.3 per cent | 4.4 per cent |
| Insurance | 14.7 per cent | 1.8 per cent |
| TMT | 19.4 per cent | 9.9 per cent |
The top five, top 10 and clients ranked 11 to 20 grew 15.1 per cent, 13.0 per cent and 22.7 per cent YoY, respectively. Two clients entered the $50 million-plus revenue bracket during the quarter.
Deal Momentum and Revenue Pipeline
Net-new TCV was $466 million, down 11.7 per cent YoY but representing the sixth consecutive quarter above $400 million. AI-led engagements represented 66 per cent of quarterly TCV.
The pipeline reached a record $9.26 billion, up 4.4 per cent QoQ and 23 per cent YoY, with AI-led opportunities accounting for 71 per cent of the total. Management said shorter-cycle deals are improving revenue conversion because they produce higher annualised revenue per dollar of TCV. The sub-$20 million deal pipeline grew 35 per cent YoY and 9 per cent QoQ.
Management expects TCV to remain healthy or rise over the next two to four quarters, although large-deal closures can be lumpy.
Capturing Growth Beyond Large Caps
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Mphasis Tria: Strategic AI Opportunity
Mphasis Tria is an important strategic opportunity. Management sees enterprise AI spending shifting towards measurable business outcomes, opening budgets beyond traditional IT spending. Tria targets areas including lending origination, payments, underwriting, claims and operational transformation.
Early deployments are under way, but management describes FY27 as a foundational year and has not quantified Tria revenue, pipeline, TCV or client penetration. The broker notes that Tria-led deals could become gross-margin accretive through platform maturity and automation, but no timing has been provided.
Margins and Cash Conversion
Margins and cash conversion remain key concerns. Reported operating margin was 14.8 per cent, flat QoQ and down 50 basis points YoY, while Anand Rathi’s EBIT margin measure declined 40 basis points QoQ to 15.9 per cent.
Higher onsite delivery for short-cycle AI work, acquisition-related amortisation and investment in AI platforms, sales coverage and delivery capability are weighing on profitability. Management reiterated FY27 operating-margin guidance of 14.75 to 15.75 per cent and prioritised capturing revenue opportunities over near-term margin maximisation.
Reported operating cash flow was negative about $6 million, although normalised cash generation was $34 million after adjusting for $39.5 million of delayed collections received in October. DSO rose to 105 days from 95 days in Q1 FY27. Management targets operating cash flow to net-income conversion of about 80 per cent in FY27 and expects a return to historical conversion levels in FY28.
Earnings Estimates and Valuation
Anand Rathi revised its FY27, FY28 and FY29 dollar revenue estimates upward by 1.0 per cent, 2.5 per cent and 3.1 per cent, respectively. Adjusted EPS estimates changed by 1.7 per cent, 3.0 per cent and negative 2.1 per cent. The broker forecasts FY27 to FY29 adjusted EPS CAGR of 12.6 per cent.
| Metric | FY27 | FY28 | FY29 |
|---|---|---|---|
| Change in dollar revenue estimate | 1.0 per cent | 2.5 per cent | 3.1 per cent |
| Change in adjusted EPS estimate | 1.7 per cent | 3.0 per cent | Negative 2.1 per cent |
| P/E at report CMP | — | 18.8 times | 16.9 times |
At the report CMP, Mphasis traded at 18.8 times FY28E and 16.9 times FY29E P/E. Anand Rathi’s Rs3,079 target price implies about 22 per cent upside.
Key Risks
- A US slowdown or recession, given about 85 per cent revenue exposure.
- Sustained margin pressure.
- Delayed large-deal ramp-ups.
- Weaker operating cash flow to profit conversion.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
