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Persistent Systems would want to acquire more: Anand Deshpande

Interview with CMD, Persistent Systems

Shivani Shinde Nadhe 

Persistent Systems' first quarter net profit was down 2.3% year-on-year and US dropped 1.8% sequentially. The company said the numbers are a reflection of the churn its customers are witnessing due to technology shift. The company, however, continued to grow its customer base and acquire three firms during the quarter. Anand Deshpande, CMD, Persistent Systems, in an interview with Shivani Shinde Nadhe talks about growth strategy, acquisition. Edited excerpts.

Though the company had alerted the Street about lower expectations for Q1, the drop in of 1.8% has come as a surprise. The pressure seems to be there for some quarters now, do you think this will bottom out?
The miss is what has impacted the other numbers. We work with large and in the last few quarters these firms have seen changes in their business strategies. This is also because several of these have seen their CEOs change, have had new strategies in place, which means several have reprioratised their business that in turn is impacting our business. This in turn means some projects getting cancelled or shelved. This is nothing new, even earlier it used to happen. It's just that in the last few quarters the momentum has gone up.

I do not think the churn has bottomed out. Turbulence in the market will continue. The good part is that despite these churns, we added 49 clients this quarter. Our enterprise business is growing well, we have been aggressively getting into this segment. This quarter we signed a multi-million deal, that spreads across IP, services and automation.

The other positive aspect is that our top customer share has gone to 18.1% of our revenue, which was 16.5% last quarter. It's heartening to see the share from our big customers coming back.

Additionally, our medium sized deals have gone up to 52. Accounts are growing, so our overall strategy is looking good.

Your acquisition activity seems to be gaining traction. This quarter you have closed three deals. Do we see more in the pipeline?
We would want to acquire more, but they take time. We have a nice formula for acquisition and we acquire them at a reasonable price. Last year we did not close any deal and this quarter we have closed three. Of this is an acqui-hire.

brings Microsoft-centric technology expertise on board. It is a $7.5 million company and this will increase our revenues from Microsoft technology over $10 million, which means we get a better chance of getting into Microsoft technology related deals.

We acquired Aepona Holdings from Intel. We acquired the company and its five subsidiaries. The deals is still pending and it will take another six to eight weeks to close.

There has been news that you have sold 26% stake in Sprint Telecom India. Can you clarify the same?

It is not done yet. This was an investment made a few years back. We have 27% stake in the company. That business has been slow. Now Sprint Nextel Corporation wants 100% stake in the company and has taken the approval from FIPB to up its stake.

How do you see the year panning out in terms of business and do you think you can meet Nasscom's growth target of 12-14%?
We are extremely optimistic about growth and we think we are growing well. We see an exciting roadmap for technology, and with our investments in IP, partnerships with market leaders coupled with the investments made in training our teams, we are confident of the future growth prospects of the company. I think we will beat Nasscom's guidance. All I would like to say is that markets will have some volatility, we will have some ups and downs but we will always be transparent to the market.

Can you give any update on Persistent's venture capital arm?
We are seeing good momentum. Persistent Ventures invested $250,000 into US-based Jocata Corporation, which develops cloud-based solutions for banks and financial institutes. We also invested in OpsDataStore, which has developed an innovative solution for managing IT operations data in a single, easily accessible, real time data store.

We would want to invest more and there is hectic activity but you need more management bandwidth.

First Published: Mon, July 27 2015. 13:53 IST
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