Persisting With Growth

Pune-based IT services provider, Persistent Systems, announced its second quarter results today. The company has put up a satisfactory performance during the quarter. Its dollar revenues rose by 8.6% on a quarterly basis and 14% on a yearly basis.

The company recorded a total revenue of USD 68.45 million in the September quarter against USD 56.69 million in Q1FY14. In rupee terms, its revenue stood at Rs 432.37 crore in Q2FY14 against Rs 357.29 crore in Q1FY14. In rupee terms, its revenue grew by 21% and 32.3% on quarterly and yearly basis respectively. The IP related revenue showed a good 38% growth on a quarterly basis and was 19.1% of its overall revenue.

One of the most significant factors of its performance during the September quarter was its strict control over costs. Persistent managed to control its project related travel costs well below what it had spent during the preceding quarter. It was down 19.75% on a quarterly basis. Further, the company also managed to control its Employee expenses having brought them down to almost 50% of its revenue having gone up by only 16.84% sequentially. This has helped the company to report a 44.4% sequential growth in its EBITDA to Rs 112.21 crore in Q2FY14 against Rs 77.69 crore in Q1FY14. Further, the company managed to expand its EBITDA margins by 420 basis points to 26% in Q2FY14.

The company posted exchange losses of Rs 9.96 crore this quarter against exchange gains of Rs 18.34 crore in Q1FY14. This has pulled down its net profit considerably. The net profit was up by only 6.5% on a sequential basis. It posted a net profit of Rs 60.79 crore in Q2FY14 against Rs 57.1 crore in Q1FY14. The net profit margin during this quarter stands at 14% which is 200 basis points lower than first quarter.

Persistent is facing some concerns over gaining repeat business from its existing customers. The repeat business reduced to 82.2% during this quarter against 90.4% during FY2012. However, the company managed to control its attrition rate to 14% in this quarter against 18.3% during the whole of FY12. Apart from these concerns, the company showed a decent overall performance during the second quarter. We have recently booked a profit of 50.11% in this stock. It was earlier recommended in the Diwali 2012 portfolio last year.