Re rise, acquisition crimp Persistent margin, restrict Q1 net

Mid-size software firm Persistent Systems today said currency volatility and higher investment led to a margin compression in the June quarter, leading to 2.5 per cent rise in net at Rs 75 crore.
The Pune-headquartered company has also announced acquisition of Parx for 8.5 million Swiss Franc (about Rs 57.67 crore) in an all-cash deal.
Total revenues grew 3.7 per cent to Rs 728 crore in the quarter from Rs 701.77 crore a year ago, but margins got squeezed leading to a slower profit growth.
Operating profit margins came down by 2 percentage points to 14.3 per cent and were impacted by several factors, including rupee appreciation (1.20 per cent), investments (0.90 per cent) and lower utilisation (0.40 per cent), its chairman Anand Deshpande told PTI in a post-earnings concall.

He, however, expects the spreads to go up as a larger part of the revenue comes from high-margin initiatives.
"Earlier we used to do efforts-based business which is now shifting to outcome-based business where the margins are higher," Deshpande said, adding intellectual property-related work now constitutes 29 per cent of the revenue pie and 18 per cent comes from digital.

The company has staggered its wage hikes of 5-8 per cent for domestic staff and 2-4 per cent for overseas this fiscal, he said, adding that the increase will set in from October for a few employees and January next for others.

The Parx acquisition comes with 80 employees and will help the company grow in the European market, Deshpande said, adding the company had clocked a revenue of 8 million Swiss francs last year.
Persistent is carrying Rs 847 crore in cash and equivalents and will continue with its acquisition strategy looking for geographic, domain and technology footprints, Deshpande said.
The company had 9,401 employees at the end of the first quarter. Its attrition rate stood at 15.5 per cent.
The company's scrip closed 0.08 per cent down at Rs 656.50 on the BSE against 0.39 per cent gain of the benchmark Sensex.