Persistent Systems Seen At 'Inflection Point'. Analysts Bullish

NDTV Profit Desk

26 Apr 2017, 01:06 PM IST

Persistent Systems' revenues fell 0.9 per cent against Street's estimates of growth of 1.5 per cent.

Shares of Persistent Systems rose over 2 per cent to hit intraday high of Rs 580 today after the company's management came out with positive commentary on revenue and margin outlook. The Pune-based IT company reported a minor dip of 0.4 per cent on a year-on-year basis in March quarter to Rs 72.79 crore. Persistent Systems' revenues fell 0.9 per cent against Street's estimates of growth of 1.5 per cent led by seasonal weakness in the alliance business, said Edelweiss in a research report. The report however, added that its EBITDA margin jumped 200 basis points quarter-on-quarter to 17.9 per cent.

Edelweiss says that Persistent Systems is at an 'inflection point' as the contribution of the independent software vendor business is falling from 60.3 per cent in first quarter of FY15 to 43.9 per cent and share of high-growth businesses jumping to 56 per cent.

Edelweiss in the research note says, "Management issued robust revenue and margin outlook on account of strength in alliance, digital & accelerite businesses (56 per cent of revenue) and meaningful investments being behind. Persistent has repositioned itself as a niche and fast-growing digital player versus an independent software vendor in the past 3 years."

Accelerite is a wholly owned business of Persistent Systems and its software suite of cloud, IoT solutions and advanced endpoint management make it easy for enterprises to simplify and secure today's complex, ever-evolving infrastructure.

"This transition, we believe, will lead to massive re-rating hereon. Maintain 'BUY' with target price of Rs 723," the report added.

Meanwhile, speaking to NDTV Profit Anand Deshpande, founder and CMD of Persistent Systems, said, "Revenue de-growth happened because of $3 million dip on IBM Alliance which is significant as we make $30 million."

Mr Deshpande is bullish on digital business and expects digital business to stage double-digit growth every quarter.

The $150 billion Indian It industry is going through a tough period amid visa challenges in US and growth slowdown amid changes in technological landscape.