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Informist, Tuesday, Oct. 14, 2025

 

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--Persistent Systems: EBIT margin Q2 aided by lower software licence costs 
--CONTEXT: Persistent Systems mgmt's comments in post-earnings investor call 
--Persistent Systems: EBIT margin Q2 aided by favourable currency movement 
--Persistent Systems: FY26 effective tax rate likely to be 22.5-23.5% 
--Persistent Systems:Will invest in adding capabilities, AI needs investment 
--Persistent Systems: Early days for AI to significantly impact renewals 
--Persistent Systems:Recently rolled out increment in line with previous yrs 
--Persistent Systems: See current utilisation level continuing for 2 qtrs

 

By Rajesh Gajra and Akash Mandal

 

NEW DELHI/MUMBAI – Technology services company Persistent Systems Ltd. will invest in capabilities and growth given that it has "traversed very well" on the margin trajectory, the management said in a conference call with investors and analysts Tuesday following the announcement of its September quarter earnings. Artificial intelligence will need investments, the management said.

 

The company said it remained committed to strengthening its capabilities including infusing AI across all its offerings and proactively engaging with its customers to bring to them the latest innovations. The earnings before interest and tax of the company rose nearly 13% sequentially in the September quarter.

 

The company's EBIT margin expanded to 16.3% in the September quarter from 15.5% a quarter ago. It was the highest margin level since at least the December quarter of 2023-24 (Apr-Mar), data from the company's investor presentation showed.

 

The factors that helped the EBIT margin in the September quarter included a cost associated with software licences related to a large multi-year customer engagement that had gone to zero in the September quarter and was not expected to come back, the management said in the call. Favourable currency movement, and "planned offshoring" also helped the margin growth in the September quarter, the management said.

 

But the company also faced headwinds in its margin. Higher provision for doubtful debts, decline in utilisation rate, and increase in depreciation and amortisation expenses due to increased capex were the factors that were a drag on the margin, the management said.

 

Persistent Systems' utilisation rate, including trainees, declined to 88.2% in the September quarter from 88.7% in the trailing quarter. To an analyst's question on whether the company needs to cool down the utilisation a bit given that its margins had improved, the management said utilisation was just a factor of the demand and supply situation.

 

"At this point of time, looking at the market, looking at our ability to hire from the market and deploy it back on this level positions, I think we are very much comfortable (with the utilisation)," a senior management official said. The management anticipates the utilisation levels to remain in the current range for at least another two quarters. But over a period of time, the company expects the utilisation level to be somewhere between 83% and 85%, the management said.

 

On the increments given to global employees from Oct. 1, the management said these have been in line with the previous years. The management anticipates an impact of this wage hike on the December quarter's margin. The management said the effective tax rate for the September quarter was 23.5%, and expects the effective tax for FY26 to remain in the range of 22.5% to 23.5%.

 

To an analyst's question seeking the impact of AI on renewals of existing client contracts, the management said these are "early days for AI to be significantly impacting the renewals." The company is proactively taking AI-led propositions to clients in its existing book of business, the management said. The proactivity has helped the company, it said. "So, so far, it (AI) has not negatively hit us," the management said.

 

After market hours, Persistent Systems reported a consolidated net profit of INR 4.71 billion in the September quarter, up 11% sequentially. Its consolidated revenue increased slightly over 7% on quarter to INR 35.81 billion. On Tuesday, the stock ended at INR 5,337.90 on the National Stock Exchange, up 0.2%.  End

 

Edited by Akul Nishant Akhoury

 

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