Mphasis, an HP-owned company, has sold a portion of its domestic back-end operations business to Karvy Data Management Service for an undisclosed sum, thereby, completely exiting its India business.

This development comes ten days after Mphasis sold off MsourcE, which used to handle another portion of its domestic business for ₹17 crore to Hinduja Global Solutions. As a part of this deal, 2,000 employees will be transferred to Karvy Data Management Service Ltd.

“Our pedigree and footprint in the country would enhance and integrate service offerings to clientele in addition to the existing voluminous transaction processing capabilities,” said V Mahesh, Managing Director, KDMSL, adding that it is optimistic about the overall business growth in India, and hence, better business volumes. On hearing this news, Mphasis stock closed at ₹404, or 2.2 per cent up when compared to the previous day's close on the BSE.

For Mphasis, this is a move to focus from non-core areas into key ones, which includes zeroing in on top 16 clients in areas such as digital technologies, global risk and compliance, mortgage processing and its newly created unit NextLabs.

Industry watchers point out the India business is a very low margin business and selling off these will not add much to the company's margins. Mphasis is grappling with margin pressures and in the year 2015, its EBITDA margins dipped to 14.8 per cent compared with 18.2 per cent in 2014.

This is largely caused due to revenues from HP coming down over the last few years. At one point in time, Mphasis used to get around 70 per cent of its business from HP, which is now estimated to be somewhere in the range of 30 per cent, according to analysts.

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