Mphasis Limited has allotted 110,719 shares under its employee incentive schemes, following approval from the ESOP Compensation Committee of the Board on February 3, 2026. The company informed stock exchanges about this development on February 4, 2026, in compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Share Allotment Details

The allotment covers shares under two distinct employee benefit plans operated by the company. The distribution reflects the exercise of Employee Stock Options and Restricted Stock Units by eligible employees.

Plan Structure and Terms

The Employee Stock Options Plan 2016 and Restricted Stock Units Plan 2021 operate under predefined terms and time periods for exercise, which have been previously submitted to the stock exchanges. Both plans are designed to provide equity-based compensation to employees as part of the company's retention and incentive strategy.

Cashless Exercise Mechanism

For employees exercising ESOPs under the Cashless Scheme, the Mphasis Employees Equity Reward Trust will deduct appropriate shares from the allotment to cover the exercise price and applicable taxes. This mechanism was approved by shareholders under Section 67 of the Companies Act, 2013, at the 33rd Annual General Meeting held on July 25, 2024.

Similarly, under RSU Plan 2021, the Mphasis Employees Benefit Trust will deduct shares to cover exercise price and taxes upon vesting or exercise of RSUs. This arrangement received shareholder approval at the 30th Annual General Meeting held on September 29, 2021.

Regulatory Compliance

The share allotment notification was sent to both BSE Limited and National Stock Exchange of India Ltd, ensuring compliance with listing regulations. The proceeds from the sale of deducted shares under both plans will be utilized by the respective trusts to repay loans from the company and cover applicable taxes.

Mphasis CEO Nitin Rakesh has issued a stark warning to IT services companies against pursuing aggressive discounting strategies as enterprises accelerate their adoption of AI-led delivery models. Speaking at the company's post-earnings press conference on January 23, Rakesh emphasized that the industry's focus should shift from cost-cutting to fundamentally rebuilding service delivery approaches.

Strategic Shift Beyond Cost Optimization

"The race to the bottom is a very risky race," Rakesh stated, cautioning against the traditional approach of simply reducing prices. "Let's cut the price is a very discreet conversation. You have to fundamentally go after redoing how you deliver the service itself." His comments reflect a broader industry transformation where customers are no longer satisfied with vendors merely optimizing people costs but are demanding reductions in the effort required to deliver outcomes.

Strong Financial Performance Amid Industry Transformation

Mphasis demonstrated solid financial performance in Q3 FY26, supporting Rakesh's strategic positioning:

Revenue Mix and Commercial Models

The company's billing structure remains largely traditional, though clients are increasingly measuring providers on productivity metrics:

AI Impact on Operations vs. Engineering

Rakesh identified a critical distinction in how AI will disrupt different aspects of IT services. He emphasized that the most significant AI-led disruption will occur in "run" operations—day-to-day IT maintenance, monitoring, and support activities—rather than in software engineering roles. "I have not seen any enterprise telling me I'm going to reduce the number of engineers," he explained. "What they are telling us is I have a backlog that goes out two years. Can I eat into the backlog faster."

Modernization Opportunities and Legacy Systems

The CEO highlighted substantial opportunities in modernization work, estimating the legacy system transformation market at "a hundred billion dollars-worth of opportunity." He noted that enterprises must rewrite extensive legacy systems to integrate with cloud, data, and AI-ready infrastructure. This modernization demand represents a significant revenue stream as organizations redirect spending from traditional "run" operations to transformation initiatives.

Client Expectations and AI-Enabled Services

Rakesh shared specific examples of how client expectations are evolving, including a high-tech client whose CIO implemented GitHub metrics to measure contractor and service provider productivity. Despite maintaining hourly billing structures, clients increasingly expect AI-powered outcomes and are using tools including Gemini's Copilot and Anthropic's Claude. "They will still pay by the hour, but they're expecting a certain outcome powered by AI," he observed, emphasizing the industry's transition toward AI-enabled rather than people-enabled service delivery models.