Target: ₹2,660
CMP: ₹2,259.70
AI disruption unfolds differently across industries, yet Mphasis maintains a strong near- to medium-term outlook, supported by a solid deal pipeline. AI-led efficiencies have limited relevance in complex brownfield enterprise environments, and the existing services model remains viable, though pricing structures are evolving alongside a greater focus on outcome-based delivery that requires strong execution capabilities. Mphasis’s legacy modernisation deal pipeline has doubled year on year, which signifies the trend. Clients are selecting their preferred LLMs, but they need model-agnostic platforms that integrate with existing systems rather than go for full rebuilds.
AI-led deflationary pressure has impacted pricing on renewals with discounts rising from 10-20 per cent. This has led to a decline in repeat business (dipped to 80-85 per cent) and leakage has risen to 20-22 per cent. Thus, the onus to clock a double‑digit growth now depends heavily on net‑new deal wins.
Margins hinge on execution quality, though no major pressure is expected from AI investments, and hedging-related OCI losses offset gains from currency depreciation. BFSI exposure remains high but stable, logistics issues have normalised, and the strategy emphasises scaling existing accounts while leveraging a robust pipeline and AI‑first legacy modernisation programmes. We cut our earnings estimates by 4 per cent/8 per cent for FY27/28E, anticipating slower revenue conversion and stable margins. We maintain our Add rating with a target price of ₹ 2,660).
Published on February 25, 2026
