Persistent sees FY22 growth in double digit, aims to be $1-bn company

As part of the ambition of reaching $1 billion company, Persistent has also said that at that level Europe will be 15% of the revenue

Pune-based Persistent Systems, which reported a double digit growth in FY22, under its CEO Sandeep Kalra, is also actively pursuing merger and acquisitions to reach its target of $1 billion company in the next three to four years. 

“It is our stated goal to be a $1 billion company in 3-4 years and the cash position we have makes us actively pursue the same as well. We are looking at acquisitions in three areas—one, that makes us much stronger in the areas that we already have presence in like cloud, data, security etc. Two, that gives us a presence in Europe, either technology and industry vertical. And finally, we would look at a target that gives us good capability in a vertical in the US,” said Kalra. 

As part of the ambition of reaching $1 billion company, Persistent has also said that at that level Europe will be 15 per cent of the revenue. At present Europe contributes about 9 per cent to the revenue and the US is 80 per cent. 

The confidence of reaching this target also comes from the fact that the company has seen one of the best sets of numbers in FY21, compared to the last three years. The fourth quarter of FY21 saw the company reporting revenue of Rs 1,113 crore up 3.5 per cent sequentially and up 20.2 on a year-on-year basis. Profit for the quarter was up 13.9 per cent sequentially at Rs 137.7 crore and zoomed 64 per cent y-o-y. For the full year, the company reported revenue of Rs 3,565.8 crore representing a growth of 17.4 per cent. 

Kalra said that Q4 and the full year numbers were one of the highest growth numbers the company as seen over the last three years. “Persistent has a good genesis in the digital product development space, and if you look around every company especially in the fintech and finance space wants to look like a product and platform company. We have been able to take our tenants of product engineering and convert that into the digital engineering part and that has allowed us to work with some big names in the industry. Plus our relationship with Microsoft, AWS, Salesforce have boarded very well for us. In pandemic this accentuated for us and we have won some really large deals in the last 4-5 quarters,” said Kalra. 

The company reported a TCV of $246.5 million for the fourth quarter, of which the annual contract value is $200 million and a net new of $96.9 million. For Persistent, the Q3 has traditionally been a stronger quarter. For the third quarter of FY21 the company reported a TCV of $302 million.

Devang Bhatt of ICICI Securities in his reports post the company’s Q4 numbers said: “We believe Persistent will be a key beneficiary of secular growth in technology mainly led by its digital prowess and partnership with Red Hat, Salesforce & other hyperscalers. This coupled with increasing large deal size, focus on client mining, new client addition and acceleration in European revenues bode well for long term revenue growth.” 

When asked what has worked for Persistent, Kalra said its differentiation as a product engineering company gives it a unique position. “We are good at product engineering and we bring the same rigor of product development to application. We have started our sales force journey on this 13 years back. When we fight for such deals, we bring niche talent, expertise and focus. This has what helped us get good deal flows,” he said. 

Persistent reported attrition of 11 per cent in Q4FY21. When asked if the attrition will impact the strong growth momentum, Kalra said: “It is actually low in today’s demand environment and also if you compare with some of the larger players. I believe this is going to increase in the coming months. For a company like ours that is at the front of tech, we have to tackle this with better employment engagement programmes. From others trying to poach our associates, Persistent has been facing these tech driven waves of demand-supply for 30 years and we are confident that we will deal with this now too,” he added.