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Informist, Friday, Jul 19, 2024

 

--Persistent Systems Apr-Jun consol net profit 3.06 bln rupees 

--Analysts saw Persistent Systems Apr-Jun consol net profit 3.04 bln rupees 

--CONTEXT: Persistent Systems Jan-Mar consol PAT was 3.15 bln rupees 

--Persistent Systems Apr-Jun consol revenue 27.37 bln rupees 

--CONTEXT: Persistent Systems Jan-Mar consol sales was 25.91 bln rupee 

--Persistent Systems: Attrition fell in Apr-Jun, in line with industry 

--Persistent Systems: Retain margin growth view of 200-300 bps for FY25 

--Persistent Systems: See Jul-Sep margins stable even with wage hikes 

--Persistent Systems: See wage hikes offset by cost optimisation steps 

 

By Noel John

 

MUMBAI – Persistent Systems Ltd reported a 2.8% quarter-on-quarter fall in its consolidated net profit for the June quarter to 3.06 bln rupees, even as its net sales rose 5.7% sequentially to 27.37 bln rupees. While the company's topline managed to beat analysts' estimates, the bottomline was in line with the projections. 

 

Analysts had pegged the Pune-based technology services company's consolidated net profit at 3.04 bln rupees and net sales at 26.89 bln rupees. The company reported revenue growth for the 17th consecutive quarter. 

 

During the June quarter, the company faced several headwinds such as higher visa costs, wage hikes, and investment costs. As per the company's management, there was a 60 basis points impact on account of one-time visa costs and a 210 bps impact on an increase in subcontractor costs to support downside ramp-up in key accounts. 

 

In Jan-Mar, the company's consolidated net profit was 3.15 bln rupees and revenue 25.90 bln rupees. 

 

The company's earnings before interest and tax, or EBIT, margin for the quarter was 14.0%, lower than 14.5% in the March quarter and against analysts' estimates of 14.02%. "We remain committed to our margin improvement guidance of 200 to 300 basis points over the next couple of years as we scale our business," the management said in a post-earnings conference call today. 

 

The company's total expenditure for the June quarter was up 6.4% sequentially. Persistent's order book stood at $462.8 mln as of Jun 30, while analysts estimated it to remain flat at $448 mln from the March quarter. 

 

The management said its top 10 clients contributed 41.5% of the total sales for Apr-Jun, which was higher than 40% contribution in the March quarter.

 

Hi-tech, software services and emerging industries segment accounts for 42.5% of the total sales, while BFSI (banking, financial services and insurance) accounts for 30.8% and healthcare and life sciences 26.7%, the company said. The BFSI segment crossed the $100 mln revenue mark for the first time in the company's history, the management said. 

 

Geographically, North America is the biggest revenue contributor with 80.7% of the total sales, while Europe accounts for 7.8%, India 9.8% and the remaining from the rest of the world.

 

The company's utilisation for the quarter was 82.1%, while total headcount was 23,519 with the attrition rate at 11.9%. As per the management, the attrition has come down to a comfortable band in the past few quarters in line with the industry trend. Its attrition was 15.5% in Apr-Jun 2023. The attrition had gone up earlier due to multiple factors, such as a relatively stable market environment with green shoots seen for some providers, and due to talent pool optimisation, the management said. 

 

The company has started its cost optimisation programmes for 2024-25 (Apr-Mar) and the benefits are expected to be seen in the coming quarters, the management said. "However, some of the partial benefits have also accrued during the current quarter," it said. 

 

The management said that the recent plan to acquire the New Jersey-based Starfish Associates will enable them to 

significantly disrupt the domain and increase traction with their existing customers on the back of artificial intelligence-led innovations. The company earlier this month said its US-based wholly-owned subsidiary Persistent Systems Inc has entered into a stock purchase agreement to acquire entire stake in the US-based software company Starfish Associates LLC. The total consideration for the acquisition of Starfish is $20.7 mln.

 

Asked about future investment plans, the management said they have invested sufficiently in the last couple of quarters and reached a stage where growth momentum can continue without making any massive incremental investments.

 

Going forward, the company said it is confident that the various revenue enhancement as well as cost optimisation and acquisition initiatives they are working on will provide a significant boost in margins as they exit 2024-25.  

 

At 1335 IST, shares of Persistent Systems traded 6.4% lower at 4,583 rupees on the National Stock Exchange.

 

US$1 = 83.62 rupees

 

End

 

Edited by Vandana Hingorani

 

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