See significant growth in digital next quarter: Persistent

Persistent Systems reported its Q3FY17 results which met street expectations. In an interview to CNBC-TV18 Anand Deshpande, Founder, MD & CEO of the company, said margins grew better than topline for the quarter ended December.Deshpande expects digital to be the growth driver in the coming quarters. He said that the company is focussing most of its energy on Digital and IP which saw growth of 17 percent and 6.9 percent growth quarter-on-quarter (Q-o-Q) respectively.Deshpande expects potential Trump effect pertaining to Visa regulation to happen towards the year end. He, however, added nearly 50 percent of its employees in the US were already local hires, which will offset the regulation effect.Below is the verbatim transcript of Anand Deshpande's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Latha: While dollar revenue growth at 4.6 is in line or maybe a tad bit of that expectation, the margin improvement was lower than what the street wanted, can you explain what happened at the margin level, was there any one-off expense?A: Margin expectations were fairly good. Last quarter we had one-off in the context of the leave. We had to restate the leave, the expenses which had given us a positive margin impact. This quarter we did not have that. So overall the margins have grown better than the topline, this quarter. In terms of the total revenue this quarter was about 110.03 million and 4.6 percent and 22.7 percent year-on-year (Y-o-Y).Sonia: The traditional services business is now about 44 percent of your revenues, you had spoken of pruning of clients but when will it come to an end because revenues for this segment have declined for two straight quarters now?A: There are two aspects to this. One is clearly we are trying to focus a lot more on the digital business, which has been growing quite well. This quarter it grew almost 17 percent and constitutes almost 16.9 percent of our revenues. We are also focusing a lot more on the IP side as far as our business which has grown to 28 percent and 28.4 percent of our revenues which is 6.9 percent quarter-on-quarter (Q-o-Q) growth. So clearly the focus is to make sure that we are growing other lines of business where we think there are better opportunities to get on non-linearity and also better profit margins.Anuj: What is the overall outlook for Q4, what segments you think will do well and which segments will be under pressure?A: We had a fairly good end of the year. We had many of our customers commit to their next year’s Budget and plans. So by and large it all looks very good. I don’t see any specific ups or downs as such, the digital business is what we are focusing on. We should see significant growth on it next quarter. The IP business has done cyclicity. So we don’t know exactly what the Q1 will look like but I expect a digital business to grow next quarter quite significantly as compared to this quarter.Latha: Trump rule is upon us now in the event of some adverse Visa rules people are expecting sooner rather than later what is the impact on your company?A: I don’t think it is going to happen next quarter. It will see more of an impact in the latter half of the year. In terms of the two requirements that they are talking a lot about, we are nearly at 50 percent in terms of our US local hire. So we should be okay on that side. In terms of the 100k number that people are talking about, most of the people are nearly there, they are 80-85k, what our rougher average is per person. So we do expect that we will have to charge more and I think the customers will pay more because it is at the end supply and demand situation so we think we can charge better in case we have to pay more as well.