Mphasis Ltd’s record carries eight years of unqualified audit opinions and a clean regulatory history, but FY26 introduced three shifts that change the shape of the financials: receivables grew twice as fast as revenue, direct tax disputes crossed ₹3,400 crore, and the promoter’s holding fell by 9.56 percentage points.
Key findings
- Receivables are ballooning far ahead of revenue, with DSO jumping 32%
Major- Receivable days surged from 73 days to 96 days year-on-year, while net revenue grew 11.6% to ₹15,879.6 crore. The company reversed its credit-loss provision by ₹17.46 crore in FY26, compared to a charge of ₹89.21 crore in FY25, and unearned revenue more than doubled to ₹485.05 crore as at 31 March 2026. The CFO attributed part of the DSO rise to a $17 million timing issue and a shift of contract assets into trade receivables, but acknowledged that contract assets were always included in DSO. - Direct tax disputes have escalated sharply to ₹3,404 crore, with no provisions made
Major- Standalone direct tax and transfer pricing disputes not acknowledged as debts rose from ₹2,462.31 crore in FY2025 to ₹3,404.31 crore in FY2026. Two rectification orders received in 2025 halved prior demands, from ₹1,164.77 crore to ₹582.7 crore on 8 July 2025, and from ₹232.37 crore to ₹108.56 crore on 26 September 2025, but the company continues to contest the reduced amounts and has made no provisions. - The group operates through 43 subsidiaries with control-vs-ownership mismatches and long-dormant liquidations
Minor- Mrald Limited was consolidated with only 51% voting interest from FY2022 through FY2025 because the Group was entitled to 100% of economic benefits under a business venture agreement dated 23 December 2021; the remaining 49% was acquired on 16 January 2026. Three subsidiaries have been in liquidation or closure processes since 2013, 2017, and 2018 respectively, though PT. Mphasis Indonesia was finally liquidated effective 9 October 2024.
What to watch
- Unfavourable CARO remark and pending subsidiary CARO reports. Resolution of the adverse remark on one Indian subsidiary and issuance of CARO reports for the three subsidiaries whose reports were pending as of the principal auditor’s report dated 29 April 2026.
- FEMA reporting for ESOP share transfers. Completion of the pending reporting requirements noted in the secretarial audit report for the year ended 31 March 2026.
- CEO re-appointment and 7% pay cap. Vote at the 35th AGM on the re-appointment of Nitin Rakesh as CEO & MD for five years from 1 October 2026 and the proposed 7%-of-profits remuneration ceiling.
- Income Tax disputes of ₹1,106.68 crore. Resolution of disputes pending before Appellate Commissioner / ITAT as of the FY2025-26 reporting period.
- Service Tax disputes of ₹1,000.00 crore. Resolution of disputes pending before CESTAT / High Court as of the FY2025-26 reporting period.
- SEBI board-composition waiver. Outcome of the Company’s waiver application to Stock Exchanges, pending as of the FY2025-26 Annual Report.
- Sustainability of the credit-loss provision reversal. Whether the ₹17.46 crore reversal recorded in FY26 is sustained or reverses again, given the sharp rise in receivables and DSO during FY26.
Bottom line: This is a disclosed and audited record with eight years of clean opinions and no capital-markets penalties. The risk sits in the gap between reported revenue growth and the cash that backs it: receivables stretched to 96 days, and the dividend consumed 116% of free cash flow. Watch whether the DSO normalises, whether the tax disputes begin to resolve, and how shareholders vote on the CEO’s pay ceiling.