Hope to maintain 20% PBT margins in FY15: Persistent Sys

Anand Deshpande, CMD & CEO of Persistent Systems speaking about the company’s third quarter performance said the company will try to maintain Profit before Tax (PBT) margins around 20 percent for FY15.The third quarter margins were under pressure due to some employee related expenses - some one-off benefits and gratuity payments, he said.Despite third quarter being a seasonally weak one from outsourcing point, the company reported better than expected performance on services front said Deshpande. Mid-tier IT firm Persistent Systems declared its consolidated dollar revenues grew 4.2 percent sequentially to USD 79.5 million -- a growth of 13.7 percent year-on-year, filings to the exchanges showed today. The revenue number was in line with a CNBC-TV18 poll that had forecast USD 80 million.

On the acquistion front he said there were many in the pipeline but none got finalised, however the company is looking at few more and hope to close them.

Below is the transcript of Anand Deshpande's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Let me get this future performance part out of the way. Your guidance was that you would do at least 15 percent that is better than industry - taking your Q3 performance which is 4.2 percent higher in revenues quarter-on-quarter (Q-o-Q), your asking rate for Q4 is 10 percent, can you deliver?A: It is tough but it is possible. Let me just say that, there is enough happening in the market that gives us a shot at this number but of course the required run rate is pretty high.Latha: So you are not changing your guidance, it remains at 15 percent?A: There is no point in trying to move this around, let us hope for the best. We are going to try our best to make the numbers we can.Latha: Coming to your top clients, revenues from your top clients have been declining for four straight quarters, would you count that as a pressure or is it that others are doing better?A: It is a combination of two things. Clearly, our largest customer is going through some challenges and we will see some ups and downs on that. The only thing I would say is that they have made some major changes in the organisation this year and a lot of the numbers that went down during the last year should turnaround during this quarter and the next one. They operate on a calendar fiscal and they have announced next set of things which are very promising. So in general from our standpoint we do expect that trend to change. However, it is also a fact that we are keen to make sure that other businesses grow. So mix signal here from both sides. Good news is that other customers have been growing and we do expect this large customer to also grow this year.

Sonia: The one thing that continues to worry your investors is the fact that your margins have been declining for the last many quarters? Compared to Q4 of last year when you were sitting close to 27 percent margins, now it is just at about 20 percent, what is leading to this pressure and do you expect margins to continue to move lower?A: It is a combination of reasons, if you look at the profit before tax (PBT) and profit after tax (PAT) level, we have maintained our margins for the last couple of years. If you look at the EBITDA margins, the pressures have been predominantly because of the change in mix in onsite offshore and our increase in the sales and marketing as well as part of the plan that we have. We do have some room for improving margins because this quarter we had pressure on the employee related expenses predominantly because of gratuity and some other benefits, one-time benefits.In general the sales and marketing expenses will go up a bit because we are changing into a new business line around enterprise digital transformation and the marketing expenses will go up. In general, we do expect an improvement in the EBITDA numbers as compared to this quarter but trying to suggest that we will get in to 25-27 would be a very tall order. However, we do believe that the profit numbers at the bottomline, the PAT number and the PBT number range that we are in about 20 percent can be maintained for a year.