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Apr 23, 2012, 09.54 PM IST | Source: CNBC-TV18

Persistent Systems to beat Nasscom's forecast of 11%-14%

Pune-based Persistent Systems CEO Anand Deshpande spoke to CNBC-TV18 about the company’s fourth-quarter results.Deshpande says that significant investments are expected in the IP-led portfolio and adds that margins were improved by increased focus on achieving a PAT higher than last year’s.

Anand Deshpande, CEO, Persistent Systems

Pune-based Persistent Systems CEO Anand Deshpande spoke to CNBC-TV18 about the company's fourth-quarter results.

Deshpande says that significant investments are expected in the IP-led portfolio and adds that margins were improved by increased focus on achieving a PAT higher than last year's.

The chief executive is gung-ho on plans to beat Nasscom's industry guidance of 11%-14%.

Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: The big improvement in margins is primarily because IP's contribution to revenue has gone up quite substantially to reach 12.1%. By how much will the IP contribution to revenue increase at the end of next fiscal?

A: We are looking at significant investments in IP-led portfolio. We aim to increase the percentage of IP revenue from the current 12% in the quarter and 8.8% for the year, to significantly higher levels. We have plans to take it to above-20% over the next 3-4 years.

Q: This time around there has been substantial improvement in your margins including sequential rise in gross margins. How much of an improvement can be expected in margins and what levers will you be utilising in the next fiscal year?

A: There has been an improvement this quarter and this year we have been able to achieve improved margins. One of the major reasons was our focus to make sure that we achieve more than last year’s PAT despite high taxes in which we have been successful.

The margins that we are operating on now are what we would like to see for next year and expect to maintain these levels.

Q: What was your volume and pricing growth in the quarter gone by?

A: The growth in volume is actually a bit complicated. Since the IP numbers have gone up, it is difficult to measure real volume growth. We plan to shift our business from resources to IP.

We have been working on improving our offerings to customers and as a consequence, our margins have improved along with our rates and a boost for our IP-led business.

Q: What can be expected in terms of volumes? Is it likely to remain subdued and or will pricing increase further?

A: There are two answers to this. One, it's important for the IT industry or even Persistent specifically, that revenues be looked at an annual basis rather than on a quarter-on-quarter basis.

There is a rise in customers making short-term decisions. This has added some volatility on a quarter-on-quarter basis. But overall, growth rates from our revised business mix has helped in improving rates. We are also going to improve our IP business, rates and the yield per person.

Q: What can we expect from the company in FY13 by way of dollar revenues and profitability?

A: Though I don't want to give you specific guidance, it has been a good year and we think we can repeat a similar performance next year as well. In general, we have been working on a certain set of levers, specifically around IP, different kinds of businesses which we think will help us in maintaining revenue, profitability and margins.

Q: So will you beat Nasscom's industry guidance of 11-14% next year?

A: Absolutely.

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