The IT firm Persistent Systems reported consolidated net profit increase by 2.5 percent to Rs 75 crore for the quarter ended June as compared to the net profit of Rs 73.28 crore in the June quarter last fiscal. The company’s revenues grew 3.7 percent to Rs 728 crore in the quarter under review from Rs 701.77 crore in the April-June 2016 period.
The company's dollar revenue in Q1 was in-line with expectations but margins have come in below estimates. The EBIT margins for the quarter stood at 9 percent for the quarter under review compared to 12.5 percent last quarter.
The main reason for slower margins was currency impact of 120 basis points in the first quarter, said Anand Deshpande, Founder, MD & CEO, Persistent Systems, along with that there was also visa related expenses which were one-off.
Moreover, sales team was also hired in advance along with onsite hiring for fulfilling projects that started during the quarter, he added. However, all these were transient items and they will help in better revenues over the next few quarters, which will help in reducing the percentage of margin and improve overall profitability.
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The company would stick to its revenue of lower teens in FY18 and growth will be largely organic. The new acquisition of PARX will help grow European business significantly, which so far has been limited, said Deshpande. It would be premature to put the contribution of PARX in terms of numbers, he said but it would reported as part of the company’s European revenues.
When asked how the company planned to spend the cash of books of around Rs 900 crore, Deshpande said there are no specific plans of buyback, but would look at smaller acquisitions to fill in areas in terms of new technology, region expansion etc.
However, the company has announced some employee stock ownership plan (ESOP) scheme for key employees, which would require small amount of share to be bought back.
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