Will maintain vol expansion depite rupee fall: Persistent

Persistent Systems continue to maintain their earnings at current level despite volatility in rupee. Speaking to CNBC-TV18, the Peristent's executive director Nitin Kulkarni says they are well-hedged to protect against rupee depreciation. "We hedge on a 12-months rolling basis," Kulkarni says.

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Kulkarni says almost 17-18 percent of the company's business comes from the IT space. The company has not been impacted by the customer demand to pass on the benefits of rupee depreciation.
Meanwhile, the software services provider continues to see volume expansion going ahead. "We are hopeful that some of the acquisitions that we did towards the end of the last fiscal in our IT business will yield many more returns over the next few quarters," he adds. Below is the verbatim transcript of Nitin Kulkarni's interview on CNBC-TV18 Q: Your margins are particularly sensitive to the rupee's appreciation or depreciation. What is the industry sensitivity, what is yours and therefore, how much more money will you make this quarter or this half year?
A: The rupee has been pretty volatile over the last few weeks. Since we are in the exports business, our margins are sensitive to rupee movement. The current movement is good for us but we do not look at it from a perspective of increasing margins or decreasing margins because we also hedge some of our revenues. Overall, we have been maintaining an EBITDA of 25 percent on a profit after tax (PAT) of around 15.6 percent. We are comfortable in that range and while we will continue to adopt conservative hedging strategies, we will stay in that range. Q: First quarter is hedged, are you hedged for the whole year?
A: We hedge on a 12-months rolling basis. Q: Can you give us some numbers in terms of sensitivity to numbers in terms of rupee depreciation? How much of that is taken away by mark-to-market (MTM) losses or because of your hedging, how much is taken away?
A: Our sensitivity would be around 2-3 percent point on a margin. But since we are hedged on a 12-months rolling basis, we continue to monitor this very closely. Q: You are in an environment where currency has depreciated quite a bit, has it impacted the kind of pricing that you have seen?
A: No, we have not had any customers coming back to us and asking to pass on the benefits of the rupee depreciation. This is because one, it is in the early days right now. Also, our business is slightly different in structure.
We have almost 17-18 percent of our business coming from the IT space and then there is the other piece of business which is a platform solution. So, these kinds of deals are more of ownership and value driven deals. Hence, we are not seeing these kind of pressures coming our way at least yet. Q: How is business though, are volumes improving because there are signs of improvement in the US economy though it is always two steps forward, one step backward? Are enquiry volumes increasing?
A: Yes. From Q3 to Q4, we had a volume expansion and we continue to see that. As we are looking into the next quarter, we are seeing some interesting deals coming up. We are also hopeful that some of the acquisitions that we did towards the end of the last fiscal in our IT business will yield many more returns over the next few quarters. So, overall from a deal pipeline perspective, we are seeing interest, we are seeing enquiries and the US recovery has definitely helped.