Looking at the sudden dependence on technology and the push towards automation, we strongly believe IT automation would change the face of operations and manufacturing as we know it. Also considering the slumping job markets in IT with increased supply of skilled software engineers, companies find it cheaper to set up IT department in- house instead of going ahead and outsourcing IT needs to larger companies like a TCS or an INFOSYS. Hence, we have sold all our holdings in large cap IT and decided to make a switch to the mid cap/ small cap space.
MPhasis - Unleash the next (CMP- 472)
MPhasis is currently owned by HP Enterprises USA and gets a chunk of their revenues from the same. An article in the Mint highlighted Blackstone's interest in buying out HPE's 60% stake in the company.
MPhasis under the HPE regime invested in R&D and grew itself as a major player in the automation, IoT and KPO segment majorly for the BFSI market. The BFSI as an industry is fast moving and we believe Automation could have the power to transform how the finance industry once functioned. Big Data Analytics, Augmented Reality could pave ways for new financial products etc.
Blackstone being one of the world's largest startup PE investors should be looking to route a lot of business of their portfolio via MPhasis
However our entire MPhasis story is not based out of the Blackstone acquisition. We believe the HPE crisis and uncertainty about the way ahead had capped the upside movement of the company for quite some time now. Moreover were looking at a lot higher pay offs to share holders post acquisition.
Cheaper Valuations
The operating margins have moved 14% to 16%. We expect stronger order inflows in the future with a lot of past RnD expenses now paying off. Currently trading close to 17x TTM Earnings FY16 viz.- cheaper as compared to peers in Hexaware, KPIT Tech etc.
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