Mphasis Soars! AI Innovation Sparks Major Brokerage Upgrade, Investors Cheer Surge!

Mphasis Shares Climb on Innovation Drive and Brokerage Boost

Mphasis shares climbed on Thursday, December 3rd, as the company announced its collaboration with startups and academic institutions through its Sparkle Innovation Program. This initiative aims to rapidly co-innovate and scale transformative solutions for enterprise clients, driving positive sentiment and a noticeable uptick in the company's stock price.

Sparkle Innovation Program Amplifies Co-creation

Mphasis's Sparkle Innovation Program is central to its strategy of fostering innovation through external partnerships. The program actively engages with startups, academic bodies, and research partners. A significant aspect of this is the collaboration with US-based startups participating in Nasscom's InnoTrek program. For the 2025 edition, Mphasis has partnered with five promising startups, including Edgeable AI, Perpetuuiti Technosoft, QuoQo, and SuperBryn AI, to help them refine their offerings and connect them with global enterprise clients.

Management's Strategic Vision

Srikumar Ramanathan, Chief Solutions Officer at Mphasis, emphasized the company's balanced approach. "At Mphasis, we develop our solutions in-house while actively seeking innovative partnerships, particularly with startups that address region-specific challenges. In a world where speed and agility are crucial, this dual approach enables us to deliver faster, more effective solutions to our clients," he stated. He also expressed enthusiasm for continued collaboration with Nasscom on InnoTrek.

Stock Performance and Market Reaction

The announcement led to a positive reaction in the stock market. Mphasis's stock price rose by 2.52% to ₹2,933.10 during intraday trading on Thursday. By 1:00 PM, shares were trading at ₹2,916.20, marking a 1.93% increase from the previous day's close on the NSE. This performance was stronger than the marginal gains seen in the benchmark Nifty 50 index. A significant volume of 0.65 million equity shares, valued at ₹192 crore, traded during the day, indicating robust investor interest.

PL Capital Upgrades Mphasis to 'Buy'

Adding to the positive momentum, domestic brokerage firm PL Capital upgraded Mphasis shares to 'Buy' from 'Accumulate'. The brokerage also revised its target price upwards from ₹2,950 to ₹3,310 per share. This upgrade is attributed to Mphasis's steady and consistent performance, bolstered by an elevated deal TCV (Total Contract Value) and robust conversion rates. PL Capital highlighted an encouraging deal funnel for both BFS (+45% Y-o-Y) and non-BFS (+139% Y-o-Y) segments in Q2FY26.

Growth Projections and Valuation

PL Capital analysts forecast a Compound Annual Growth Rate (CAGR) of 9.8% for Mphasis's USD revenue and 15.2% for INR earnings between FY26 and FY28. The brokerage views the stock as attractively valued, currently trading at 25x and 21x its FY27E and FY28E earnings, respectively. They assigned a PE multiple of 27x to September 2027 estimated earnings to justify the target price of ₹3,310.

Turnaround Expected in Logistics Vertical

The brokerage report also noted a positive outlook for Mphasis's Logistics & Transportation (L&T) vertical. The difficulties faced in this segment are expected to subside, with a progressive turnaround anticipated in the second half of FY26 and into FY27, supported by focused investment in key accounts. Excluding the L&T vertical, Mphasis demonstrated strong USD revenue growth of 15.7% year-on-year in H1FY26, showcasing resilience in its core business.

Impact

• The news has a positive impact on Mphasis's stock performance, encouraging investor confidence and potentially attracting new buyers.
• The focus on co-innovation and startup partnerships could lead to the development of new, advanced solutions, strengthening Mphasis's competitive position in the IT services market.
• The upgrade by PL Capital signals strong conviction from analysts regarding Mphasis's future growth prospects and financial health.
• Impact Rating: 8/10

Difficult Terms Explained

• Co-innovate: To jointly create new ideas, products, or solutions with one or more external partners.
• Transformative solutions: Services or products that fundamentally change how businesses operate, improve efficiency, or create new value.
• Enterprise clients: Large organizations or corporations that purchase goods or services.
• InnoTrek: A program by Nasscom (National Association of Software and Service Companies) designed to connect Indian IT companies with startups, often from overseas, for innovation and business development.
• Cohort: A group of individuals or companies that share a common characteristic or start a particular program or period together.
• Deal TCV (Total Contract Value): The total revenue a company expects to receive from a client over the entire duration of a signed contract.
• Robust conversion: A high success rate in turning potential sales leads or opportunities into closed deals.
• BFS (Banking, Financial Services, and Insurance): A major industry sector encompassing banks, financial institutions, investment firms, and insurance companies.
• Non-BFS: Refers to all industry sectors outside of the Banking, Financial Services, and Insurance domain.
• CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment or revenue over a specified period, assuming profits are reinvested.
• PE multiple (Price-to-Earnings multiple): A valuation ratio that measures the current share price relative to its earnings per share. It indicates how much investors are willing to pay for each dollar of earnings.
• Vertical: A specific industry or market segment (e.g., Logistics & Transportation, Healthcare, Technology).
• CQGR (Compound Quarterly Growth Rate): The average quarterly growth rate of a metric over a defined period, compounded over time.