Persistent Systems

Stock Opportunities
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Persistent Systemsis a Pune based mid size IT company concentrating in
areas like

Cloud Computing/SaaS, Analytics, Enterprise Mobility and Enterprise Collaboration Services …etc. This debt free ,cash rich IT player performing reasonably well even in tough times of IT sector. Company having offshore development centers in Pune, Nagpur, Goa and Hyderabad. Companyas customer list includes biggies like Microsoft and Oracle.About 50% of the total income of the company is generated from independent software vendors and 25% from telecom related sectors. One of the biggest advantage of this company is that ,it is earning more than 85% income from the services delivered from India

Key Highlights: in the press release of this quarter results were

i Revenue for nine months ended December 31, 2012 was US$ 175.71 Million, representing a

Y-o-Y growth of 14.7%.

i Profit after Tax (PAT) for nine months ended December 31, 2012 was 1,357.33 Million,

representing a Y-o-Y growth of 35%.

i IP-led business constitutes 17.1% of the revenue for nine months ended December 31, 2012.

i Utilization improved Q-o-Q by 1.8% to 79.5%.

i Acquired Novaquest, a Product Lifecycle Management (PLM) and Search Based technology

solutions company thereby entering into a strategic partnership with Dassault Syst*mes to sell

and offer support, maintenance and deployment services as an authorized VAR for Dassault

Syst*mesa in the United States.

i Declared an interim dividend of 6 per share (Payout ratio 20.55%) for the Financial Year

2012-13, as against a total dividend of 6 per share (Payout ratio 19.67%) for the Financial Year.
Hitesh,ayush,donald ,is it a good buy for core long term portfolio?

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Persistent Systems Link: http://www.persistentsys.com/ is Companyas

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i Syst*mes

Syst*mesa

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Sourabh,
Happy to see a thread for Persistent.I encourage other senior boarders to share their views/opinions.This is a very good company & is on a growth path.The discussion will get enriching as more people join in

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Good to see a thread on Persistent Systems. Have been invested in the company for last one year and still adding on dips. One thing which stands out is its promoter Anand Deshpande who is a humble, low-profile man. I happened to see one of his interviews in Marathi where he narrated some his anecdotes on how he started from scratch. He is held as one of the luminaries of Maharashtrian entrepreneurship and held in very high esteem. The company being in Pune which is a tier-II city has scope for higher margins due to comparatively less compensation without compromising on talent much. Being nearly a Maharashtrian company the loyalty factor is high among the people. The company got listed in 2010 a little late compared to its existence since 1990 making it 23 years old. I guess the CEO still has many years left before he hangs his boots and should steer the company well. From FY13 results, the NPM seem to have improved to 18+ from 16+ (in FY12).

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Q1/Fy 13-14 Results out…

Total Income up 18.8% to 357.29 Cr from 300.7 Cr.
EBIDTA DOWN 3.7% to 77.69 Cr from 80.67 Cr.
Net Profit up 37.3% to 57.1 Cr from 41.58 Cr.

EBIDTA margin is 21.8% v/s 24.9% (MQ-13) and 26.8% (JQ-12)
NET Profit margin is 16% v/s 15.5% (MQ-13) and 13.8% (JQ-12)

Direct costs (including Employee Exp) to Income is 58.9% v/s 57.4% (MQ-13) and 56.1% (JQ-12)
SG&A expenses to Income is 19.4% v/s 17.8% (MQ-13) and 17.1% (JQ-12)

Tax Rate 28.9% v/s 28.1% (MQ-13) and 27.8% (JQ-12)

Forex Gain of 18.34 Cr v/s loss of 12.13 Cr Y-o-Y helped Net profit.

SEGMENTS:
Infra & Systems: Sales up 34.2%, PBIT up 16.1%, margin 40.2% v/s 38.2% (MQ-13) and 46.5% (JQ-12)
Telecom & Wireless: Sales DOWN 11.8%, PBIT DOWN 11.2%, margin 55.5% v/s 55.5% (MQ-13) and 55.1% (JQ-12)
Lifesciences & Healthcare: Sales up 10.5%, PBIT up 5.7%, margin 49% v/s 49.1% (MQ-13) and 51.2% (JQ-12)

IP-led Business contribution which has been improving from 14% year ago to around 17 - 18 - 19% Q-o-Q suddenly gone down to 15% this quarter.

EPS 14.27 v/s 10.39
Recorded TTM (sum of 4 quartr) diluted EPS: Rs. 50.78

On 29/07/2013, stock on BSE closed at Rs. 530/- up 2%.
(Results came in after market hours)

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Getting job in Persistent is considered much more prestigious for freshers than getting job in Infosys, wipro, TCS simply becauze its product oriented company.

Normal Perception:

Service Oriented Companies: Any Tom tick harry can work in it

Product Oriented Companies: Employees have strong computer science fundamentals

Q1/Fy 13-14 Results out…

SEGMENTS:
Infra & Systems:
Telecom & Wireless:
Lifesciences & Healthcare:

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For a market cap of 2000 crores, the cash and equivalents for persistent is 400 odd crores… thats interesting besides the company being in the OPD space.

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That cash may not make much sense.

Becauze as once Narayan Murthy had said, they need to keep huge cash on balance sheet becauze they have huge employee base and in worst case they want to make sure that they will pay to employees

Same is true for cash on Persistent’s balance sheet.

These Maharastrian brahmins are very conservative people and will never cheat anyon even by one rupee.

In an old interview, its promoter had said that he had phobia of bad memories of 2000 when he was seeing how people were bankrupting. So Perisstent is very very coservative comapny which may not be good from growth perspective but its strong stable buy but so are all FMCG companies :slight_smile:

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FOR IT COMPANIES, We should evaluate cash as “cash per employee”

Wiki shows Peristsnt has 6000 emplyess

So cash per employee = 400cr/6000=6.66Lakhs.

Product oriented companies like Persistent have higher avg salary that service oriented companies like Wipro, TCS, etc

so company maintains just one year salary per employee. But yes it has got huge cash flow

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Conference Call by Capital Market

Highlights of the call:
  • The Revenue grew by 7% QoQ to Rs 357.29 crore for the quarter ended June 2013 whereas PAT grew by 10% QoQ to Rs 57.01 crore for the same period.
  • In dollar terms, Revenues grew by 1.5% QoQ to USD 63.03 million for the quarter ended June 2013. The growth in sales impacted by sharp 13% QoQ fall in revenues from IP business to USD 9.49 million for the same period.
  • The delay in revenues from the HPCA Radia business had impacted the IP business during the quarter. However, it expects to pick up going forward.
  • The Core Product Engineering & Platform grew by 5% QoQ to USD 53.54 million for the quarter ended June 2013 on the back of 3% volume growth and 1.5% improvement price realizations.
  • The Offshore revenues grew by 1.5% on the back of 2.3% volume growth despite the 0.8% decline in pricing during the quarter.
  • The North America market is witnessing lot of activity and the company is bullish on opportunities. It has hired senior sales people in the region.
  • The margins during the quarter were impacted by the increased costs due to incremental H1B applications (one-off), drop in utilizations, recruiting new employees related to the HPCA Knowledge Transfer initiatives, were partly offset by the currency gain during the quarter.
  • The attrition is lower at 14.2% in Q1'FY14 compared 14.4% in Q4'FY14. However, the utilization were also lower at 70% in Q1'FY14 compared to 72% in Q4'FY14.
  • The Company gave 3.5% wage hike for the onsite employees with effective from the 01stApril 2013. However, the offshore wage hikes of 8-9% announced from 01st July 2013 will impact Q2 margins.
  • On hedging, it has outstanding forward contracts amounting to USD 106 million @ Rs 58.17.
  • The tax rate expected to be 29-29.5% for the FY'14.
  • It expects traction in the IP business in H2 and anticipates continued momentum in the rest of the business and hopes good full year
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I happened to attend Persistent’s AGM on 29th July in their campus in Pune. This was the first time I attended AGM of any company and was an interesting experience. Most of the time went into Q&A from couple of investors and passing the resolutions was quick with hardly any time spent. One of the directors Mr. P B Kulkarni retired being old age and another gentleman Dinesh Keskar (Head of Boeing India) resigned due to increased responsibility at his employer.

The AGM was mostly attended by senior citizen folks from Pune who have instilled faith in the celebrated entrepreneur Anand Deshpande and probably invested their life’s saving in this company and getting dividends as pension. The CEO and entire board exudes strong marathi identity and seemed quite humble and efficient. In fact, one of the investors even complained that board members were raising their remuneration only in 5-10% range which was quite less for which one of them replied that they don’t want to create the divide between employees and senior management.

The company is close to quarter billion dollar mark and should cross it next year. This year their dividend payout ratio was 22.3% which has risen over the years. There was some demand from senior citizen investors to increase the ratio more. In next two years they would be celebrating silver jubilee (25 years). There could be a bonanza in terms of bonus shares OR special hefty dividend. In longer term, I expect that promoters would like to take the company to billion dollar mark before the CEO hangs his boots of course unless there is fundamental change in business.

Overall, it seemed a safe, steady company to invest into.

Disc: Invested and biased to

wards the company

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Highlights of the call by Capital Market
  • In USD terms, The Revenues grew by 8.6% QoQ (14% YoY) to USD 68.45 million for the quarter ended September 2013 primarily driven by the sharp 38% QoQ growth in IP business to USD 13.10 million during the quarter.
  • Also, the revenues from Services business grew by 3.4% QoQ to USD 55.35 million for the quarter ended September 2013. The Onsite revenues grew by 5.7% QoQ on the back of 7.6% volume growth despite the 1.9% fall in billing rates. Also, the offshore revenues grew by 2.6% QoQ largely driven by the volumes during the quarter.
  • In INR terms, Revenue grew by sharp 21% QoQ to Rs 432.37 crore for the quarter ended September 2013 and EBIDTA grew by 44% QoQ to Rs 112.21 crore but PAT growth camedown to 7% QoQ to Rs 60.79 crore.
  • On IP revenues, it indicated that the acquisition of client in automation for HP in previous quarter and improvement in new clients and few good deals resulted in good growth during the quarter. However, it expects the volatility in revenues despite the good growth going forward. On services, it has good pipeline and trending in the right direction.
  • The blended utilization slightly improved to 71.7% in Q2'FY14 compared to 70% in Q1'FY13, but it was 75.2% in Q2'FY13. However, it indicated that it is not concerned about the older technologies and anxious to invest in the newer technologies and newer IP which will bring the long term growth.
  • The telecom contribution is lower (17.6% of sales in Q2'FY14 compared 20.7% in Q1'FY14) due to the delays in couple of projects during the quarter. The Life sciences growth is good little higher than company average during the quarter.
  • The Clients were showing urgency to move to the next generation technologies and newer business models.
  • In general Q3 will be weak due to higher furloughs.
  • Traditionally H2 will be good for the IP revenues.
  • The Company is investing the currency gain in the business in to the new technologies for the long-term growth. It expects EBIDTA margins will be in the range of 24-25% in the long term.
  • The long-term margins levers are 1) Utilizations (expects to improve in Q4) 2) Physical capacity â addition of people happen without facility costs 3) IP led revenues (large part will flow to the margins) 4) Operational improvements.
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broken out the level of 825-830.,on closing basis.with volumes

next resistence 889 on closing basis.

buy at 840-850on closing basis

stop loss below 820 on closing basis

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Highlights of the call by Capital Mkt:

The Revenues grew by 0.1% QoQ (30% YoY) to Rs 432.76 crore for the quarter ended December 2013 and EBIDTA grew by 6.7% QoQ to Rs 119.73 crore. However, PAT grew by 5.6% QoQ (29.7% YoY) to 64.19 crore for the same period.

In USD terms, The Revenues grew by 2.2% QoQ (up by 15% YoY) to was USD 69.94 Million for the quarter ended December 2013. The growth in sales was on the back of 3.8% QoQ growth (3.4% volume growth, 0.4% growth in pricing) from Services business despite the 4.9% fall in IP business during the quarter.

The onsite services revenues grew by 1.6% QoQ on the back increase in the billing during the quarter. The offshore services revenues grew by 4.6% QoQ on the 3.8% QoQ volume growth and 0.8% growth in the billing rates during the quarter.

The Services business growth of 3.8% QoQ, 2.25% QoQ growth from Product Engineering and the rest is from the platforms business during the quarter.

It has strong momentum in some of key accounts during the quarter. It has witnessed large win telecom during the quarter.

It refocused its business to the account led, product led and plat form led businesses.

The Product Engineering & Platform contribution is 82.2% and IP led business contribution 17.8% during the quarter.

The blended utilizations improved to 72.9% in Q3’FY14 compared to 71.7% in Q2’FY14. It helped to offset the currency impact to maintain the gross margins during the quarter. The EBIDTA margin improved on the back reduction in the SG&A expenses coupled with various cost control measures and the strong recovery process to reduce provision for debts during the quarter.

The utilizations can be taken to the 74-75%, there is opportunity to increase but want to hire people for the future growth. It added 145 employees during the quarter.

The IP grew by 38% (due to HPCA) in the Q2 in Sequential basis. The fall in IP Sales in Q3 is one-off impacted by the one of its large customer due to seasonality. However, it expects positive revenue growth in Q4. It expects the IP revenues in absolute terms in Q4 expected to be in line with the Q2. Overall it expects the good Q4 to end the FY’14. Further, it indicated that IP led revenues to be increased to 20-21% in the FY’15.

There is opportunity to improve the margins going forward. However, in the short run it is to reinvest the margin gains in to the Sales & Marketing and delivery going forward.

The Cash and Cash equivalents were at Rs 594.95 crore as on 31stDecember 2013 compared to Rs 437.39 crore as on 31stMarch 2013.

The Forward covers are at USD 82 million (@62.89) as on 31stDecember 2013.

The Company announced interim dividend of Rs 8 per share (Payout ratio 20.6%) as against Rs 6 per share in the corresponding period last fiscal.

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Highlights of the call by Capital Mkt:

In USD terms, The Revenue grew by 3.9% QoQ (17% YoY) to USD 72.64 million for the quarter ended March 2014 led by the sharp 14.4% QoQ growth in IP led business to USD 14.26 crore. Also, Revenues from the Services business grew by 1.6% QoQ to USD 58.38 million. Notably, The Revenues grew by 15.2% YoY to USD 237.82 million for the year ended March 2014.

In INR terms, The Revenues grew by 3.2% QoQ (33.8% YoY) to Rs 446.74 crore for the quarter ended March 2014 and PAT grew by 4.7% QoQ (29.5% YoY) to Rs 67.19 crore for the same period.

Also, The Revenues grew by 28.9% YoY to Rs 1669.15 crore for the year ended March 2014 and PAT grew by 33% YoY to Rs 249.3 crore for the same period.

The sharp growth in the IP is on the back of increase in momentum in the Radia business during the quarter.

The services business growth is on the back of excellent 8.4% QoQ growth in onsite revenue on the back of 9.5% volume growth during the quarter. The Offshore billing grew by 1.5% qoq but the offshore volumes was down by 2.1% during the quarter.

The Margins had headwinds from the adverse currency movement, project travel cost and lower utilizations despite the tailwinds from increase in the IP led business during the quarter.

The new customer additions were better than previous quarter.

It announced creation of its Silicon Valley-based Accelerite, a business unit which will take a portfolio of Persistent's products and related solutions to market.

It acquired CloudSquads, a company specialized in Social Community Platform offerings. It Invested in Hyginex, a hand hygiene technology startup based in California through Persistent Venture Fund.

The effective tax rate expected to be 27-28% on annualized basis.

The new Enterprise customers are to come and contribute more in the next fiscal.

The Company expects FY'15 Revenue growth to be better than the FY'14 in USD terms.

The platform services business to grow at steady pace and the IP led business to accelerate the overall growth in the short-term.

The Company is expected to invest the margin gains (such as utilizations) into the business such as newer technologies etc.

The Cash and Cash equivalents were at Rs 631.1 crore as on 31stMarch 2014 compared to Rs 594.9 crore as on 31stDecember 2014.

The Board of Directors approved Rs 48 Million towards its Annual contribution to Corporate Social Responsibility (CSR) which will be paid out in FY 2014-15.

The Company declared final dividend of Rs 4 per share thereby total dividend amounting to Rs 12 per share (Payout ratio 22.5%) as against Rs 9 per share last year (Payout ratio 22.3%)

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Highlights of the call by Capital Mkt:

In INR terms, the revenues down by 2.6% QoQ (up by 22% YoY) to Rs 434.99 crore for the quarter ended June 2014 but PAT grew by 2% QoQ (up by 21% YoY) to Rs 68.80 crore.

In USD terms, the revenues were flat at QoQ (but grew by 15.3% YoY) USD 72.66 million for the quarter ended June 2014. The Sales from the IP led business grew by 1.8% QoQ to USD 14.51 million driven by the Radia sales during the quarter. However, this was offset by the 0.4% decline core Services business to USD 58.15 million for the same period.

In Services business, the onsite revenues grew by 8.1% QoQ on the back of 4.2% growth in volumes coupled with 3.8% increase in the billing. However, the offshore revenues fell by 3.5% QoQ on the back of fall in volumes 3.5% coupled with decline in billing by 0.5% during the quarter.

The Q1 is seasonally weak quarter in comparison to the Q4. The results also impacted by the currency movement during the quarter.

The margins impacted negatively by â 1) 60 bps impact due to the currency movement 2) 150 bps due to the US visa costs and 3) 60 bps due to the lower utilizations.

The forex gain is Rs 13.3 crore as against the forex loss of 8.7 crore in the previous quarter.It added 76 customers during the quarter and 37 are the account led and platform led businesses.The Sales & Business Development increased to 202 in Q1'FY15 compared to 150 in Q4'FY14.

The new structure in the Sales team is placed. It moved to the strategy of account led, Platform led and product led models. These three models got markets models will help it to manage good growth going forward.

The large clients > USD 3 million declined to 14 in Q1'FY15 compared to 15 in Q4'FY14. However, The Company clarified that nothing to read in to this but hopes that it will get corrected by the year end.

It has given the wage hikes in July 2014 and this should be offset by the other levers such as utilization in the Q2. It gave 2-3% wage hikes to the onsite and 8-9% to the offshore people on average basis.

The shift in the onsite business is on the back of increase in the work at the customer end. However, there are two projects to start which will give increase offshore contribution going forward.

The Companies are looking for SMAC technologies particularly in the US market. These are going to grow well and these are not onetime phenomenon but the long-term phenomenon.

The pipeline is looking very strong and expects to generate good business going forward.The pipeline is good and it is IP led and platform led.It increased the CSR contribution during the quarter.The tax rate expected to be 28% for the FY'15.

The Capex is Rs 17.5 crore for the Q1'FY15 related to the new building in the Goa and acquisition of hard ware and software. The Capex expected to be Rs 100 crore for the FY'15.The Cash is at Rs 663.8 crore as on 30thJune 2014 compared to the Rs 631.1 crore as on 31stMarch 2014.The Forward covers are at USD 108 million at average rate of Rs 65.08 as on 30thJune 2014.

It expects revenue growth in FY'15 to be better than FY'14, and PBT to grow 18-20% for the FY'15. The push in utilization will improve the profitability but the focus is on revenue growth and PBT growth of 18-20% going forward.

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Highlights of the Call by Capital Mkt;

In INR terms, The Revenues grew by 6.7% QoQ (7.4% YoY) to Rs 464.17 crore for the quarter ended September 2014 and Profit after Tax (PAT) grew by 3.6% QoQ (17.3% YoY) to Rs 71.31 crore.In USD terms, The Revenue grew by 5.0% QoQ (11.5% YoY) to USD 76.32 million for the quarter ended September 2014. The growth in Sales was on the back of 5.6% QoQ growth in Services business to USD 61.40 million coupled with 2.8% QoQ growth in IP led business to USD 14.92 million.

The Services business grows on the back of 3% volume growth and 2.5% rise in billing rates during the quarter.The onsite revenue grew by 11.2% QoQ due to the 11.5% volume growth and with 0.3% drop in the billing rates during the quarter. The offshore revenues grew by 3.3% QoQ due to 2% increase in volumes and 1.2% rise in billing rates for the same period.The onsite volume growth is very strong during the quarter.The gross margins improved slightly despite wage hike during the quarter.There is impact of ~120 bps on margins due to the doubtful debts during the quarter.

The IP led revenue growth is lower than previous quarters but ahead of targets as planned during the quarter. Further, it anticipates robust growth for the full year.It added 40 customers in the account led and the platform led businesses during the quarter. The platform business continues to grow healthy during the quarter.The Product and Engineering Services product mix is changing.It expects to add 500 fresher’s during the year.

The Company expects FY’15 USD revenues to be better than FY’14.The margin levers going forward are 1) Improvement in Utilization - Comfortable at 72-73% from current 70.3% 2) Improvement in IP revenues will improve the margins 3) Gains from training, marketing and Sales process to accrue.The Capex is Rs 20.3 crore during the quarter and expected to be Rs 100 crore for the FY’15.

The Cash and cash equivalents are at Rs 693.2 crore as on 30thSeptember 2014 compared to Rs 663.8 crore as on 30thJune 2014.The Forward contracts are USD 111 million at average rate of Rs 68.05 as on 30thSeptember 2014.

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Does it have any exposure to NBFC?

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It is mentioned that they have some exposure to IL&FS here : https://www.indiainfoline.com/article/news-top-story/persistent-systems-plunges-15-on-decline-in-usd-revenue-for-q2fy19-118102200018_1.html
Instead of parking surplus cash in risky assets, may be they could have returned it to shareholders.

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@Administrator we have two discussions on Persistent Systems. Request you to merge it into one.

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