Persistent Systems confident of bagging two more large deals; margins not a worry: CFO, Vinit Teredesa

Mid-tier IT services company Persistent Systems is confident of bagging two more large deals over and above a $650-million six-year mandate won recently in the second quarter of FY27, a senior official said on Monday.

The company hired about 1,100 employees in the June quarter in preparation for the work on the large contracts that it is set to bag, its chief financial officer Vinit Teredesai told PTI, attributing this as the reason for a reduction in overall utilisation levels to 86.5 per cent at the end of June from 88% in March.

Amid investor concerns over profit margins, Teredesai said there are "no worries at all" on this aspect and the company will be able to maintain pre-tax margin at 16-17% as guided earlier despite the wage hikes from July, which alone can extract about a two percentage point impact.


Explaining the compression in margins during the June quarter, he said the decline in the operating profit margin to 16% from 16.3% in the March quarter was primarily due to an increase in headcount to 28,640 in anticipation of larger work volumes ahead, resulting in lower utilisation. At a net profit margin level, the volatile currency movements extracted a 2.3% cost, leading to an outcome at 11.2%, he added.

The $650 million deal announced in Q1 is already delivering revenues, but will ramp up in Q2 and Q3 onwards, he said, referring to the margin trajectory improvement that he sees.

"We are also expecting to sign two more large deals in Q2," the CFO said, without disclosing anything more on the new deals in the offing.

The company is currently negotiating a mixed-currency long-term financing arrangement with a syndicate of banks to fund the Euro 1.27 billion buy of German tech company Ngarro SE announced in late-June, he said.

At present, it has the ability to pay for the deal through bridge loans, but a long-term finance solution will help bring down the costs, he said, adding that the company expects the acquisition to be completed by late 2026 or early 2027 after getting all the regulatory nods.

Teredesai stressed that this is a complementary acquisition as it will give Persistent newer skillsets like those on SAP, reduce its reliance on North America for revenues to under 64% from the present 79% by increasing Europe's share to nearly a fourth and also help expand into newer markets like West Asia and Japan.

The company on Sunday reported a 13.7 per cent jump in its June quarter net profit to Rs 483 crore. Revenue grew 29% year-on-year to Rs 4,303 crore.


Persistent Systems shares closed 1.08 per cent lower at Rs 5,490 apiece on the BSE on Monday.