Persistent Systems reported a 3.6 percent rise in rupee revenue to Rs 701.8 crore while its profit after tax fell 9.3 percent to Rs 73.2 crore. However, the company’s margins contracted by 80 basis points to 15.1 percent in the first quarter. Visa expenses and softer Q1 led to contraction in margins, says Anand Deshpande, MD & CEO of Persistent Systems. The demand outlook looks strong for the company especially with organisational changes made within the organistaion. Some cyclicity is expected on a quarterly basis, but year-on-year growth will be healthy, he says.Below is the verbatim transcript of Anand Deshpande’s interview to Latha Venkatesh and Sonia Shenoy. Latha: The Company has posted a dollar revenue growth of 4.3 percent. Was that in line with your expectations because it has come disappointing as far as the street is expected?
A: The numbers of 4.3 percent quarter-on-quarter (Q-o-Q) growth are actually in line with and quite better than what we had expected. So, the overall US dollar revenue was USD 104.76 million and in rupee terms it is Rs 701 crore which is again, a growth year-on-year (Y-o-Y) of 33 percent in dollar terms and 40.2 percent in rupee terms. So, they are actually in line and quite better than what we had expected. So, we are quite happy with the numbers.
Sonia: The margins though have dropped by 80 basis points to 15.1 percent sequentially. What were the reasons for that?
A: The main reasons for margin dips are of course, its Q1 which is usually the first quarter as compared to Q4. Q4 usually is a good quarter for the margins and this is one reason. Second of course, is that we had Visa expenses that came in during this quarter and again this one is on Indian Accounting Standards (Ind AS) which is different from the last year's quarter which was on Indian generally accepted accounting principles (GAAP). If you compare Indian GAAP to Indian GAAP or Ind AS to Ind AS, Q-o-Q, there is actually a positive growth on profits Q4 to Q1 which is actually fairly positive news in general.
Latha: What was that revenue contribution from the IBM Watson deal this quarter since that was a big chunk to your growth last quarter?
A: I cannot give you any specific revenue number on that one at this stage because it is not possible to reveal that, but overall I can say that last quarter to this quarter, we had a decent growth on it, it is tracking. Most of it is revenue that is going to be revenue shares, so it will not be consistent with Q-o-Q, but if you look at the yearly trajectory and compare that with what we had seen in the last year from them, we are trending much better this year on the internet of things (IoT) business than we had planned last year. So, overall, it is a good number that we have this quarter. However, these kinds of things have some cyclicity and we will see what happens in Q3, but Q4 calendar is usually the best quarter for intellectual property (IP) revenues in general for IBM.
Sonia: Many IT companies have sounded a cautious note, guidance have been cut as well. How is the demand environment shaping up for you?
A: We are quite optimistic this year about how it looks at the moment. We have made some organisational changes. We have made some changes in service lines that we are offering and this was all planned in a sense that we do know that there are challenges in terms of just IT as such because essentially, what is happening is that the effort required for the same work is going down. And that is going to shift away, the business is going to shift and we have been preparing for this for the last two years at least and we have made changes by adding more into IP and many other things. So, while we might see some cyclicity on a Q-o-Q basis, if you look at us on a Y-o-Y basis, we should have fairly good growth during the financial year this year.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
