US will be bigger growth engine than Europe for Persistent System, says CEO

Kalra is confident that North America will continue to be a growth engine for the company going forward

The US, which has continued to grow at a consistent rate for the midcap IT services and product engineering firm Persistent Systems, will be a higher growth engine than Europe and other regions, said the company’s chief executive officer Sandeep Kalra.

For Q1FY25, the company reported revenue of Rs 2,737 crore, up 17.9 per cent year-on-year and up 5.7 per cent sequentially. The company signed total contract value deals of $462.8 million, up from $447.7 million in Q4 of FY24. 

The management said that the Q1FY25 growth was the 17th consecutive quarter of growth. It said that with over 80 per cent of the company’s revenue coming from the US market, the ability of the firm to consistently grow shows its capability to compete with the largest IT players.

“From our perspective, we are seeing US/North America as a consistent growth engine and even when the markets turn, we believe that for us in our revenue portfolio - the US will be a higher growth engine than Europe and other regions,” Kalra told Business Standard. 

He stressed that even in an existing low-demand environment for the past few quarters, there were visible green shoots.

“The last few quarters have been a tepid demand environment. We have seen economic cycles come and go, but we believe there are some green shoots in terms of the rate cut discussion happening in the September quarter and so on and so forth. The discussions are looking optimistic, and that's what our customers are also hoping for,” said Kalra.

The firm reported a 2.8 per cent quarter-on-quarter decline in net profit at Rs 306.42 crore for Q1FY25, but it grew 33.9 per cent on a Y-o-Y basis.

Chief Financial Officer Vinit Teredesai attributed costs incurred in H-1B visa filing to have impacted the margins by 60 basis points in the quarter. He said that because of the company’s increased investments in sales and marketing and other such costs, its earnings were affected.

“We also invested ourselves very significantly in the last couple of quarters in terms of sales and marketing and now we think we have reached a stage where we have enough amount of investments done for the leadership part of it - in terms of the assets that need to be played. So, all that put together our investments are behind us, now we have to just look at how to get maximum out of the investment that we are making,” he added.

Teredesai said the firm aimed to improve its margins by 200 to 300 basis points in the next two to three years.