Services biz growth of 3-4% Q-o-Q sustainable: Persistent

He added that the IP-led revenues may have some swings on quarter-on-quarter basis, but overall the business is looking positive even there.

Below is the interview of Anand Deshpande, CEO & CMD, Persistent Systems with Ekta Batra & Anuj Singhal on CNBC-TV18.

Anuj: It’s been another good quarter for you but in terms of revenue growth what can we expect in FY15. Can we expect this kind of trend to continue?

A: Let me give you a recap of what is the colour on this quarter’s numbers. Yes, the revenue growth is USD 69.94 million. It’s a 2.2 percent quarter-on-quarter (QoQ) growth. This is backed by services growth of 3.8 percent and volume growth of 3.4 percent; the IP led revenue was lower by 4.9 percent.

So, in Q3, which is a December quarter in which typically the services revenue had certain pressure because of leave and other holidays but despite that the growth on the volumes during this quarter was very encouraging and that is what we think we can carry on for the next quarter as well. In addition to that we think that the IP revenue, which traditionally does well during the last quarter for us, we should see a little bit of an extra hike on that as compared to the previous quarter so the negative number that we had in this quarter should turn positive in the last quarter that we are expecting. So, overall we should see a good quarter to finish the financial year.

Anuj: The thing that the market like the most is the services business growth which was strong in a seasonably weak quarter. Do you think that is sustainable?

A: Overall our focus has been to work with software products companies and build products for them and as the new technologies have started to come up, many of our customers are starting to ask us to build for their products. We are also seeing a lot of activity in the new SMAC area, which is social, mobile, analytics and cloud computing.

We are also seeing a lot of activity around M2M, internet of things and visualisation areas and all of these are helping us in making sure that our services business can continue to keep pace with 3-4 percent growth that we had quarter on quarter for the last few quarters, is very sustainable and can be continued in the next financial year. So, that is a stable steady business growth rate. The IP lead revenues will have some swings on quarter on quarter basis but overall the business is looking positive even there.

Ekta: What happened to IP this quarter? Why was it weak this quarter and what is the target IP led revenues as a percentage of your total sales?

A: Right now we are operating at 18-19 percent in terms of percentage of revenue from IP led business. We think it will go to above 20-21 in the next year or so. Till it gets to 25, we should be comfortable and after that we will review whether we should take it further or not. There is good pipeline on those kinds of deals and now that we have done it for a couple of years, we are quite optimistic about doing more of those deals.