Mphasis Ltd Management Discussions

The global economic landscape for the financial year ending March 31, 2024, was marked by a blend of opportunities and challenges. Post the initial signs of recovery from the aftermath of the COVID-19 pandemic, uncertainties still persist, driven by geopolitical tensions, high inflation and interest rates, and varying degrees of economic growth across regions.

Risk Management Framework at Mphasis:

At Mphasis, we are committed to proactive risk management to safeguard our business interests, optimize performance and ensure sustained value creation for our stakeholders. Our risk management framework encompasses strategic, operational, and compliance dimensions, enabling us to identify, assess, mitigate, and monitor risks effectively.

Your Company has a dedicated risk management function headed by Chief Risk Officer to coordinate all risk related activities across the enterprise and periodically report the status of enterprise risks to the Board/RGMC/Audit Committee/MRMC.

At the management level, the Mphasis Risk Management Committee (MRMC), provides the required oversight for the ERM program and monitors the progress on various identified enterprise risks and periodically reviews the mitigation efforts. The MRMC is comprised of four members of the ExCo team.

To provide the appropriate governance and oversight, given the criticality of risk management and to comply with the regulatory requirements, the Company formed the Risk Governance and Management Committee (RGMC) comprising of Board Directors and Companys senior executives to assist the Board in discharging its risk governance and oversight responsibilities. This Committee reviews the details of Risk Assessments undertaken by management every quarter. Risk Intelligence: Pursuant to our larger goal of making Mphasis a Risk Intelligent Organization, this program aims to spot the ‘Black Swans and manage ‘Gray Rhinos (external risks) on the horizon and manage them proactively. Using inputs from PESTLE/GRIC (Global, Regional, Industry and Client) analysis, the Risk Intelligence framework complements the ERM program by evaluating / analyzing the external global events that are likely to have an impact on the Company, enabling management to take informed and timely decisions. Some of the important enterprise risks/concerns (covering strategic, operational, compliance risks) specific to the Company and steps taken by the Company to mitigate these risks are given below:

Strategic Risks

Risk Header	Risk Description	Mitigation
Geopolitical Risks	Heightened geopolitical tensions and disputes, including but not limited to the Russia- Ukraine War, Hamas Israel war, the recent Red Sea attacks, etc. pose a risk of disruption to our global operations, including supply chain interruptions.	There is no direct impact to your Companys business. The indirect impact in terms of rising costs, inflation and hence higher interest rates does impact the companys growth. The Company closely monitors developments to ensure we minimize impact, if any.
Technology Obsolescence	Rapidtechnologicaladvancementsmay render our existing solutions obsolete, impacting our competitiveness and market relevance.	Your Company has consistently invested in technology and R&D. The Company fosters a culture of innovation and has entered into several strategic partnerships to stay abreast of emerging technologies and market trends. The Companys unique Tribe model, created to bring the right tech capabilities across the company to stitch together the most appropriate IT and business solutions, has positioned us well to capitalize on the mainstream acceptance of emerging technologies through focus on speed to market. The recent launch of DeepInsights AI, an intelligent document processing solution, powered by Generative AI is a testament to the Companys technological capabilities and advancements.
Business Concentration	Dependency on a few key clients or markets exposes us to the risk of revenue volatility and client-specific challenges.	Your Companys business concentration is a strategic decision aligned with our goals to profoundly impact our clients technology landscape. Your company enjoys a sizeable wallet share in these set of accounts. In our journey to make the next billion dollars in revenue, the Company invests significantly in New Client Acquisitions. Further, your Companys Management has devised a client diversification strategy, targeting faster growth (in comparison to the top 10 accounts) in an identified set of accounts – Focus 20 and Next 30 accounts. This helps in strengthening relationships with a broader client base to mitigate concentration risks.
Competition and outsourcing risks	Mphasis faces a risk when the IT units or Global Innovation / Capability Centers (GICs or GCCs) of our existing and potential clients choose to build technology skills in-house instead of outsourcing to technology firms.	Your Company views this as an opportunity to work with the clients to build their in-house capabilities and assist in their operations. Further, the Companys strategy and focus on proactive deal wins helps mitigate this risk.

Operational Risks

Risk Header	Risk Description	Mitigation
Business delivery	Inefficient business delivery processes or disruptions in service delivery could lead to client dis- satisfaction and reputational damage.	Your Company has implemented robust project management practices and continuously improves them. The Company has also invested in necessary tools and technology infrastructure for enhanced scalability and reliability.
Foreign currency fluctuations	Exposure to fluctuations in foreign exchange rates may impact our financial performance and profitability.	Your Company follows a well-established hedging policy, which is undertaken to protect from the unfavorable currency movements and is periodically reviewed by the Treasury Committee of the Board of Directors of the Company.
Higher for longer inflation and interest rates	A sustained period of high inflation and elevated interest rates pose a significant threat to our US mortgage loan processing business. This risk can negatively impact our profitability, operational efficiency, and overall business sustainability.	This is an uncontrollable risk. During this period, though the volumes in our mortgage business declined, your company focused on diversification of clients and improving wallet share to benefit when the interest rates fall. Your Company also undertook several measures to optimize operational efficiency and implemented cost saving measures.
M&A Risks	Integration challenges arising from mergers and acquisitions could result in operational inefficiencies and cultural mismatches.	Your Company has developed detailed post-merger integration strategies to streamline operations and realize synergies.
Limited work visas impacting talent supply	Legislative changes that limit the availability of work visas and contribute to deglobalization can potentially impact outsourcing.	Mphasis leverages nearshore centers and offshore delivery to reduce dependency on work visas. This strategy has also helped us sustain the margin pressures.
Risk of fraud (including bribery)	Bribery or other fraudulent practices pose a significant threat to our companys ethical standing, legal compliance, and overall reputation. Offering or accepting bribes to influence business decisions can lead to severe consequences, including fines and penalties.	The Company has implemented a comprehensive Fraud Risk Management System consisting of policies and procedures, training and awareness that provide direction for ensuring anti-fraud mechanisms as a part of the fabric of the organization. In addition, the Company through various governance structures, such as internal audits, whistleblower mechanisms and an independent investigation team has built a strong framework to detect and mitigate fraud risk. Further, the Company has established appropriate mechanisms to ensure compliance to anti bribery laws such as the FCPA and the UKBA.
Regulatory Compliance	Evolving regulatory landscapes across jurisdictions pose compliance challenges, including data privacy, intellectual property, and ESG norms.	Your Company has established a robust compliance management solution to track compliance across jurisdictions. The Company also uses services of professional consultants to ensure compliance with domestic and overseas laws and regulations. The Company has implemented processes to ensure internal stakeholders of the Company are aware of statutory requirements and maintain required evidence to demonstrate that due care has been taken by the Company to ensure compliance.
Privacy	Data privacy breaches could lead to legal liability and reputational damage.	Your Company has implemented a robust Privacy Risk Management Framework to ensure that the Company complies with the relevant requirements. The Company has implemented measures to comply with stringent requirements of General Data Protection Regulation (GDPR) and all other applicable privacy regulations. These measures are periodically reviewed and reported to the RGMC. To ensure compliance to GDPR and other global privacy laws such as CCPA, Australian Data Privacy Regulations, etc., the company has implemented a Privacy Risk Assessment tool. Periodic trainings are provided and awareness mailers are sent to all the employees to sensitize on safeguarding privacy.
IP Infringement	Intellectual property infringements could lead to legal liabilities and reputational damage.	The Company has put in place mechanisms to detect and mitigate any infringement of IP rights. To ensure this, the Company has implemented technology-based solutions and has taken several steps to hone the awareness level of the employees to ensure that the Companys IP is well guarded. Mandatory trainings, knowledge sharing sessions and discussions on best practices are conducted to ensure that this risk is well mitigated. The Company has also implemented an enterprise-wide Open-Source Software (OSS) Policy and conducted training, with the objective to provide governance around harnessing the OSS regime and ensure compliance with OSS Licenses and client contracts.
Non- compliance to Sanctions Regulations	Different countries periodically announce sanctions regulations and non-compliance to such sanctions can lead to serious risks and penalties.	The Company has implemented a comprehensive Trade Sanctions Compliance framework to ensure compliance with sanctions regulations. The Company has established a ‘screening protocol for all vendors and clients to ensure that the Company does not deal with sanctioned individuals, groups, entities or countries.
Non- compliance with Immigration laws and regulations	Being in a human resource intensive industry, movement of human resources to various countries for execution of client projects is a necessity. Changes to visa regimes in countries where the Company is operating, including, in the form of increased scrutiny or rejections of visa request, pose a risk of increased cost of the operations. The industry has also seen increased scrutiny by various governments for non-compliance with immigration laws and have levied penalties on non- compliant companies.	The Company has put in place several measures such as local campus hiring and offshoring and nearshoring of onsite work. The Company is equipped with the expertise to handle the complex immigration laws in the relevant countries and has processes to ensure compliance. In addition to an internal team with the right expertise, the Company has enlisted external consultants, wherever necessary, to ensure proper compliance with these laws. Periodic immigration compliance reviews, audits, training, and awareness programs are facilitated to ensure compliance with immigration requirements.
Disrupted operations	Disruptions to operations due to extreme weather events or environmental disasters may impact business continuity and productivity.	Mphasis has implemented robust business continuity plans and has invested consistently in disaster recovery infrastructure.
Physical risks of extreme weather events	Physical risks posed by extreme weather events, such as floods, hurricanes, or wildfires, can impact direct costs and infrastructure.	Mphasis has commenced a detailed climate risk assessment and commits to investing in mitigation of physical risk exposures - be it through infrastructure upgrades or location diversification. The Companys robust BCP / DR plans assist in safeguarding employees while enabling operations to continue seamlessly.
Pollution	Environmental pollution (including from scope 3 emissions and water pollution) can lead to regulatory fines, legal liabilities, and reputational damage.	The ‘hybrid model of operations has helped in establishing sustainable practices in the business and also to minimize environmental impact as a whole. Your Company is compliant with all applicable environmental regulations and standards and is constantly working on contributing to the environment and society.
Water stress	Water scarcity or stress in regions where the company operates may disrupt operations and increase costs.	In addition to our hybrid model of working, Mphasis is addressing the risk by adopting the following practices:
		a) Water conservation initiatives and efficient water management practices.
		b) Diversification of water sources (suppliers base) and
		c) Investment in water-saving technologies.
		As part of the CSR activities, your Company is actively contributing to the environment, for e.g., Mphasis has partnered with United Way of Bengaluru (UWB), an NGO :
		a) for the afforestation program in Doddasaggare Botanical Garden in Tumkur district,
		b) in construction of percolation wells in Lalbagh Botanical Garden in Bangalore, and
		c) to improve the groundwater levels and boost greenery and bio- diversity at Yamare Lake.
Climate action failure	Failure to adapt to climate change or contribute to climate action efforts may result in a drop in demand and revenue as clients seek environmentally responsible partners.	Your Company is a responsible business player and has integrated climate change considerations into business strategy and operations.
		The Company consistently invests in renewable energy and carbon reduction initiatives. Mphasis is recognized by its clients for its proactive engagement and collaboration to develop sustainable solutions and meet shared environmental goals.
Diminishing relevance as partner	Inadequate ESG performance may erode trust and credibility with clients, leading to a diminished relevance as a preferred business partner.	Our mitigation measures include the following : a) Implementation of robust ESG policies and practices aligned with stakeholders expectations.
		b) Transparency and disclosure of ESG performance metrics to stakeholders.
		c) Continuous improvement and innovation to enhance ESG performance and value proposition.
Chronic physical risks	Chronic physical risks, such as sea- level rise or heatwaves, in locations where the company operates may pose long-term challenges to business operations and infrastructure.	Mphasis has commenced a detailed climate risk assessment and commits to investing in mitigation of physical risk exposures - be it through infrastructure upgrades or location diversification on a need basis. The scope of our assessment includes:
		a) Long-term risk assessment and scenario planning to anticipate and address chronic physical risks.
		b) Investments in climate-resilient infrastructure and adaptive measures.
		c) Collaboration with local communities and authorities to mitigate chronic physical risks.

Data and Information Security Risk

Information and cyber security threats are growing in type and magnitude particularly related to information assets and data breaches. These threats have become highly sophisticated and with the involvement of professional Cyber Criminals and Nation States these threats have increased in the recent months. Successfully managing such threats demands high end technology and processes. To mitigate these risks, your Company has implemented several measures including robust IT security frameworks, a Cyber Security Strategy and is also certified on ISO 27001, an international Information Security Management System (ISMS) standard. This certification provides a reasonable assurance to all concerned stakeholders that the Company has implemented adequate data protection and information security measures. Further, the Company has also implemented certain highly sophisticated technology security solutions to deftly ward off the threat of data breaches and cyber-attacks. Considering that some of our BPO projects process credit card data, the Company undertook a special certification for being PCI DSS compliant (Payment Card Industry Data Security Standard - a global standard). To provide high order of assurance to clients, the Company undergoes SOC 1 Type 2 and SOC 2 Type 2 audits annually, these audits are conducted by independent third-party auditors. In addition to the above measures, your Company also hires expert service professionals to test the cyber preparedness in the form of ‘Red Team assessments and mock attacks to identify gaps which your Company then appropriately mitigates. Despite several major global cyber incidents, the Company did not face any incident that impacted business operations during this period because of the fulsome measures we have taken.

The Mphasis Cyber Security Strategy (MCSS) which was developed in 2016-17 delivered on its objectives: risk reduction, business enablement, resilience and brand protection. In light of the continued growth of cyber threats, the highly sophisticated attacks and increasing regulatory scrutiny, Mphasis undertakes a comprehensive and critical review of its MCSS and the implementation of the roadmap on an ongoing basis. This review included inputs from clients, shareholders, government agencies, and our own internal risk assessments resulting in a recalibration of the MCSS to support the business for the next 2-3 years. A roadmap of initiatives has been developed with clear milestones covering people, process, and technology to ensure achievement of the rigorous MCSS.

As people remain a constant security vulnerability, in part because of social engineering attacks, your Company has created a dedicated function to drive employee security awareness and has leveraged technology solutions in addition to traditional programs to ensure we have the appropriate security culture within the organization.

Continuity and Disaster Recovery Risk

Increased disruptions due to manmade and natural calamities pose a risk to the enterprise Information Technology infrastructure and in turn to business operations. Recovery and availability of enterprise applications and infrastructure, post disruption have become critical for uninterrupted service delivery. In addition to implementing Disaster Recovery for the identified critical enterprise applications, the Company is certified on ISO 22301 which is an international standard for Business Continuity Management System (BCMS) and provides reasonable assurance of continuity of service to clients. The Company has been able to deliver services despite several city level disruptions due to manmade and natural calamities during last year. In summary, your Company remains vigilant in identifying, assessing, and mitigating risks across various dimensions to ensure sustainable business growth and resilience in a dynamic business environment. Our proactive risk management approach, coupled with strategic initiatives and robust governance practices, positions us well to navigate uncertainties and, at the same time, capitalize on emerging opportunities in the marketplace.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Global Economy

The aftermath of the US regional banking crisis of March 2023 dampened sentiments, though immediate measures were taken by global central banks to contain the impact. IMF estimates that the global economy remained more resilient than anticipated in 2023, but uncertainty about growth continues into 2024. McKinseys Global Survey on economic conditions in December 2023 noted that geopolitics continue to overshadow all other risks to global growth, and there is cautious optimism for 2024. IMF in January 2024 projected global growth at 3.1 percent in 2024 and 3.2 percent in 2025, with greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China. It is estimated that the risks to global growth are broadly balanced and a soft landing for the US economy is a possibility. However, risks continue with new commodity price spikes from geopolitical shocks and supply disruptions, and other disruptions which could also cause growth disappointments.

IT Industry Outlook

Amidst this economic backdrop, businesses continue to be focused on cutting costs and streamlining operations. Artificial intelligence (AI) is increasingly being seen as a tool to widespread implementation to help businesses achieve their short-term goals, and also potentially change how companies are structured and how they interact with customers. Gartner estimates that in the next few years GenAI will significantly alter the design and development effort for new web applications and mobile apps. Per Gartner, change fatigue impacted IT Spending in CY2023. The overall IT spending growth rate for the year was 3.3%, only a 0.3% increase from the previous year. Momentum is expected to regain in 2024, with overall IT spending increasing 6.8%. It is estimated that IT services will continue to see an increase in growth in 2024, becoming the largest segment of IT spending for the first time.

Amid global geo-political tension leading to a more cautious approach for investments and delayed decision making, Indias technology industry revenue (including hardware) is estimated to reach $254 Bn (3.8% growth over last year) in FY2024, an addition of over $9 Bn over last year. Exports are poised to touch the $200 Bn mark growing at 3.3% YoY, and the Domestic technology sector is expected to cross $54 Bn, growing at 5.9% YoY. Despite the tough market conditions, the industry continues to be a net hirer, adding 60K employees, taking the total employee base to 5.43 Mn (1.1% YoY growth). Europe, APAC, Manufacturing, Retail and Healthcare emerge as the key growth markets for the industry.

Mphasis Overview

Mphasis is an Information Technology solutions provider that applies next-generation technology to help enterprises transform businesses globally. The company was formed in June 2000 after the merger of Mphasis Corporation and BFL Software Limited. In June 2006, EDS purchased a controlling stake in this company. In August 2008, Hewlett-Packard (HP) acquired EDS. On 4 April 2016, HP entered into a definitive agreement with private equity funds managed by Blackstone to sell the shares held by it in the Company. In September 2016, Blackstone Group through its fund "Marble II PTE" completed the share purchase and the Company has become a Blackstone group of Company since then. Blackstone is one of the worlds leading investment and advisory firms with over US$880 billion in assets under management. In April 2021, Blackstone committed up to $2.8 billion to acquire controlling stake in Mphasis, along with Abu Dhabi Investment Authority (ADIA) and UC Investments (Office of the Chief Investment Officer of The Regents, University of California) and other long-term investors.

Mphasis blends deep domain expertise with cutting-edge technology, which has helped cement its position with marquee clients and build momentum for the future. Its Front2Back™ and Zero Cost Transformation are proven transformation frameworks that allow it to play across the tech value chain.

Mphasis unique tribes-led, competency-based go-to-market (GTM) and solutioning model positions it strongly in digital areas -the tribes are GTM specialists organized around high-demand tech themes that are instrumental in driving clients next-generation tech agendas. Mphasis continually creates new tribes or redesigns existing ones based on the what it sees as high-potential secular opportunities. The companys go-to-market strategy is aligned to focus on dedicated farming and strategic hunting by leveraging domain expertise aligned to key industry verticals in target markets.

At Mphasis, platforms like Talent Next encourages the implementation of learning initiatives tailored for employees, aimed at nurturing, and sustaining their thinking and judgment capabilities. These programs facilitate comprehension of AI principles, interpretation of its outcomes and enables informed decision-making. The Mphasis.AI division helps accelerate customers journey towards becoming true digital enterprises and execution of the Digital Workforce vision, as part of the broader Mphasis core Front2Back (F2B) Transformation program.

Mphasis signed a strategic partnership with Kore.ai, the worlds leading enterprise conversational AI platform and solutions company to bolster its offerings to transform customer experience management and employee engagement for their enterprise clients powered by generative AI technology. The partnership aligns into the Mphasis philosophy of being a Cloud-Native and Cognitive-First company. During the year, the company also announced its partnership with WorkFusion, a leading provider of digital workforce solutions for banking and financial services; to power conventional teams with AI-driven Digital Workers in several operational domains in financial services. Mphasis is organized around accounts, not by traditional vertical/horizontals, and hence decision-making is not weighed down by the traditional matrix structure. This means that Mphasis GTM is aligned along the customer as the basic unit and resource allocation is done at a granular level of the customer. This creates improved agility and responsiveness. The client-centric agile organization design enables Mphasis to successfully focus on account depth reflected in an improving average revenue per client. The depth over breadth positioning also means Mphasis makes more considered choices regarding its new clients by shortlisting and targeting those clients that can scale. This strategy is bearing fruit as can be seen in the resilience and scale-up of top clients over a sustained time period. The growth engine has further diversified through FY24 with the addition of 18 new clients and further clients added through the acquisition of Silverline during the year

Revenues

FY24 was a challenging year due to the macro-economic challenges faced in the banking sector and the ensuing sentiment across key clients and markets. Reported Net revenue in FY24 was Rs. 132,785 million representing a decline of 3.7% over FY23. During the year rupee depreciated 2.8% against USD. Adjusting for the rupee depreciation, net revenue declined 6.6% in FY24.

Overall gross revenue declined 3.7% in FY24 to Rs. 133,340 million. On a constant currency basis, overall gross revenue declined 6.5% in FY24.

Direct revenue declined 2.3% on a reported basis and 5.2% in constant currency basis in FY24 to Rs. 126,938 million. Revenues from mortgage business reduced significantly as compared to FY23, as mortgage rates continued to stay high. We continued to successfully execute on our strategy to de-risk DXC business, the revenues from which declined 32.2% on a reported basis in FY24. Revenue from DXC was Rs. 4,205 million in FY24 and constituted only 3.2% of the gross revenue.

	Year ended 31 Mar 2024	%	Year ended 31 Mar 2023	%
Direct	126,938	95%	129,921	94%
DXC	4,205	3%	6,204	4%
Others	2,197	2%	2,305	2%
Total	133,340		138,430

Segment Revenues

A segment analysis of revenues for the year ended March 2024 is given below:

Focus vertical of Banking and Financial Services declined 13.3% on a reported basis over FY23, with continuing weaknesses in the mortgage segment and the ripple effects of the regional banking crisis. Banking and Financial Services and Insurance segments comprise 58.5% of our overall revenue. Revenues from Technology, Media and Telecom and Others segment (including healthcare) showed strong growth in FY24.

Segment	Year ended 31 Mar 2024	%	Year ended 31 Mar 2023	%
Banking and Financial Services	63,423	47%	73,185	53%
Insurance	14,570	11%	14,010	10%
Technology Media and Telecom	21,298	16%	19,445	14%
Logistics & Transportation	18,287	14%	18,411	13%
Others	15,762	12%	13,379	10%
Total Revenues	133,340		138,430

Revenues by Geography

Regions	Year ended 31 Mar 2024	%	Year ended 31 Mar 2023	%
AMERICAS	107,167	80%	113,200	82%
EMEA	14,996	11%	13,968	10%
INDIA	7,488	6%	7,086	5%
ROW	3,689	3%	4,177	3%
Total Revenues	133,340		138,430

Americas is our prime market and this geography contributed 80% of our revenues in FY 2024. Revenues in this region declined by 5.3% in FY24 on a reported basis

Revenues by Service Type

Service Type	Year ended 31 Mar 2024	%	Year ended 31 Mar 2023	%
Application Services	94,455	71%	94,705	69%
Business Process Services	22,075	16%	26,660	19%
Infrastructure Services	16,810	13%	17,066	12%
Total Revenues	133,340		138,430

Application Services include assisting customers with design and development of customized software applications and maintenance, enhancement and testing of customers developed and third-party software. Reported revenues were flattish here in FY24 Business Process Services include customer service, transaction processing, and compliance knowledge processing including certain projects involving complete transformation and integration of processes using automation tools. Revenues from this service declined 17.2% in FY24 Infrastructure Services include end-to-end managed mobility solutions covering workplace management and other services, hosting services, data center services, payment managed solutions and help desk.

Revenues by Delivery Location

Delivery Location	Year ended 31 Mar 2024	%	Year ended 31 Mar 2023	%
Onsite	71,160	53%	77,439	56%
Offshore	62,180	47%	60,991	44%
Total Revenues	133,340		138,430

Revenues by Project Type

Project Type	Year ended 31 Mar 2024	%	Year ended 31 Mar 2023	%
Time and Material	77,666	58%	77,996	56%
Transaction Based*	13,579	10%	18,464	13%
Fixed Price	42,095	32%	41,970	31%
Total Revenues	133,340		138,430

*Transaction based revenue comprises of projects where the commercials are based on unit of Output

In FY24, the revenue from Fixed Price contracts and Transaction Based contracts declined 7.9% to Rs. 55,674 million and constituted 42% of overall revenue in FY24.

Results of Operations

	Year ended 31 Mar 2024	Year ended 31 Mar 2023	YoY Growth %
Gross Revenues	133,340	138,430	-3.7%
Profit / (loss) on cash flow hedges reclassified to revenue	(555)	(445)
Net Revenues	132,785	137,985	-3.8%
Cost of revenues	95,950	100,475	-4.5%
Gross profit	36,835	37,510	-1.8%
GM%	27.7%	27.2%	0.5%
Selling expenses	9,260	8,635	7.2%
SE %	7.0%	6.3%	0.7%
General and administrative expenses	7,461	7,788	-4.2%
GA %	5.6%	5.6%	0.0%
Operating profit	20,114	21,087	-4.6%
Operating Margin	15.1%	15.3%	-0.2%
Foreign exchange gain, net	131	452	-71.0%
Other income, net	2,046	1,165	75.7%
Interest expenses	(1,608)	(973)	65.3%
Profit before taxation	20,683	21,731	-4.8%
Income taxes	5,135	5,351	-4.0%
- Current	5,776	5,079
- Deferred	(641)	272
Net profit	15,548	16,379	-5.1%
Earning per share (par value Rs. 10)	82.4	87.1	-5.3%

Note: The figures of the previous periods have been regrouped / reclassified wherever necessary to conform to the current periods classification.

*The above classification of expenses is based on management reporting

Cost of Revenues

Cost of revenues primarily comprise of direct costs and includes direct manpower, travel, facility expenses, network and technology costs.

Consolidated cost of revenues for FY24 was at Rs. 95,950 million. Cost of revenues was 72.3% of revenues as compared to 72.8% during the previous financial year.

Selling Expenses

Selling expenses for the year ended March 2024 was Rs. 9,260 million representing 7.0% of revenues against 6.3% of revenues in the previous year.

General and administrative Expenses

General and administrative expenses for the year ended March 2024 was Rs. 7,461 million representing 5.6% of revenues, same as in the previous year.

Operating Profit

Operating profit for the year ended March 2024 was Rs. 20,114 million and declined 4.6% in FY24.

Income Taxes

Income taxes were Rs. 5,135 million for FY24 as compared to Rs. 5,351million for FY23. The effective tax rate increased from 24.6% in FY23 to 24.8% in FY24.

Net Profit

Net profit for FY24 declined 5.1% over FY23 to Rs. 15,548 million. Net margin for FY24 was 11.7% as against 11.9% for FY23.

Earnings per share

Earnings per share declined from Rs. 87.1 for the year ended March 2023 to Rs. 82.4 for the year ended March 2024, a decline of 5.3%.

Ratios

Ratios	Year ended 31 Mar 2024	Year ended 31 Mar 2023
Debtors Turnover	5.1	5.5
Current Ratio	1.6	2.1
Interest Coverage Ratio*	12.5	21.7
Debt Equity Ratio	0.2	0.0
Operating Profit Margin	15.1%	15.3%
Net Profit Margin	11.7%	11.9%
Return on Equity	18.6%	22.0%
Inventory Turnover	NA	NA

*Includes interest charges on lease

The Company has delivered returns of 18.6% this year under the challenging macro-environment and continues to generate strong operating cash flow. The Company continues to pay consistent dividends to its shareholders and maintain strong cash position as well.