Vivek Seal

New Delhi: MphasiS, a software and back-office services provider will hire less-than-expected employees in 2008, which many analysts believe is due to laggard growth in its applications business.

The Bangalore-based company said in an investor call that it has lowered the employee addition target for fiscal 2009 at 7,000-8,000 from 8,000-10,000 earlier, with “more focus on improving utilisation levels”.

Sid Pai, partner and MD at advisory firm TPI India believes slow and less hiring will be the IT industry trend, and is not specific to MphasiS.

“All IT services firms are expected to hire less, to be cautious in their approach, however, you will expect the demand to pick up from the third quarter onwards,” Pai said.

The company’s application services revenue fell by 1% in its latest fourth quarter, and the IT firm cited “delay in clients decision making process led to postponements in kickoff of new projects, especially among the US clients”.

An analyst believes MphasiS, which is majority owned by Electronic Data Systems Corp (EDS), will face challenges in the near term for at least next two quarters.

“The company doesn’t need too many people on the bench, and prefers to increase the existing utilisation of employees. It is also an indication of slowing growth,” the analyst,who has a “sell” rating on the stock, said on a condition of anonymity.

Interestingly, couple of analysts expects EDS, the technology outsourcing firm to make another open offer for MphasiS, to take over the company and delist it.

“The key upside risk to our call is the possibility of another open offer by EDS. Our past experience suggests that underperformance on results by Indian arms of MNCs is typically followed by offers to delist,” Kotak Equities analyst Kawaljeet Saluja said in a note to clients.

When MphasiS and EDS were contacted for a comment, the companies neither declined nor agreed with the issue.

“At this point of time we have a strategic relationship with EDS, who is both the single largest shareholder and customer for MphasiS. We do not comment on speculation on potential future actions,” MphasiS spokesperson told DNA Money.

EDS, which owns 60% and accounts for more than 50% of MphasiS last made an open offer at Rs 205 per share in January 2007 for the company.

“There is a possibility of an open offer by EDS, it might want to delist MphasiS,” said another analyst who covers the company, on condition of anonymity.

MphasiS provides IT services, mainly focusing on the banking,financial services, and insurance segments.

Source : DNA