High utilisation, new deal momentum to keep Persistent Systems on track

Synopsis

The company's CFO Vinit Teredesai told ET that while clients were taking more time to roll out projects, there were so far no cancellations. "Going by the current revenue visibility, we continue to retain an aspiration to attend $2 billion in revenue by FY27," he said.

ET Intelligence Group: The stock of Persistent Systems has gained 25% over the past four weeks amid the company's resilient performance in the March quarter. Since the mid-tier software exporter has a strong products and platforms business, its exposure to discretionary client spending is limited. This augurs well at a time when clients are delaying transformational projects. The management hinted at keeping the utilisation rate high as there is no pressure to hire, which should support margins in the coming quarters.

The company's CFO Vinit Teredesai told ET that while clients were taking more time to roll out projects, there were so far no cancellations. "Going by the current revenue visibility, we continue to retain an aspiration to attend $2 billion in revenue by FY27," he said.

Despite the challenging environment, the total contract value (TCV) of the company's deal bookings including renewals and new deals increased to $2,103.4 million in FY25 compared with $1,828.7 million in the previous year. For the March 2025 quarter, the TCV moderated to $517.5 million from $594.1 million in the prior quarter where the number was boosted by renewal projects.

The company has been showing a higher traction in the deals above $5 million of TCV. The number of clients in this revenue basket increased sharply to 55 at the end of March 2025 from 40 a year ago and 34 two years ago. It has more than doubled when compared with 25 at the end of FY22.

Agencies

The software and hi-tech vertical, the largest revenue segment for the company with around 41% share in total revenue, continued to show improvement in the March quarter with 5.2% sequential growth following 3.8% growth in the previous quarter. Its growth had remained below 1% in the prior four quarters. The banking and finance vertical, which contributed nearly one-third to the revenue, continued to post above 5% growth for the fourth consecutive quarter. The healthcare vertical with 27% contribution to the revenue showed signs of consolidation. Its revenue grew by a tad 0.7% sequentially after growing at a faster rate in the previous four quarters.

The company's total revenue grew by 5.9% sequentially to ₹3,242 crore while net profit rose by 6.1% to ₹396 crore in the March quarter. The operating margin (EBIT margin) expanded by 70 basis points to 15.6%. Teredesai expects to keep margins buoyant, helped by higher employee utilisation and cost efficiency.

AT Monday's closing price of ₹5,530.4 on the BSE, the stock was traded at a trailing price-earnings (P/E) multiple of 62 compared with the three-year average multiple of 50. The premium reflects the faster growth trajectory of the company compared with the large peers.

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